3 ms·

If the recession is short lived compared to long term goals, would it make sense to invest more every month during that period? Or even shift capital into the m

If the recession is short lived compared to long term goals, would it make sense to invest more every month during that period? Or even shift capital into the market, expecting greater returns when the recession eventually ends?

Gibbon1 3y ago
There is a simple algorithm one can use to determine how much to put in or take out based on what the market is doing month to month. I don't remember the name of it. But if the market sector is going up you increase investment by X%. Going down decrease investment by X%. I think it works mostly because it avoids going all in at the top and all out at the bottom. Which is the strategy a lot of naive investors end up doing.
IanCal 3y ago
No, because to do that you have to have deliberately kept money out of investments, waiting for a downturn. It only works if you can predict the downturn before it happens, and how low things will go.
- barefeg 3y ago
  It may depend on the investment profile of the individual. I’m not 100% invested which means there’s always some cash available at any point.
  - IanCal 3y ago
    Yes as I say, it means having funds deliberately not invested waiting for a crash, which is timing the market and relies on you predicting the market.
  - throw0101a 3y ago
    > I’m not 100% invested which means there’s always some cash available at any point. This is sub-optimal from a returns perspective: * https://ofdollarsanddata.com/even-god-couldnt-beat-dollar-cost-averaging/ https://ofdollarsanddata.com/even-god-couldnt-beat-dollar-co...
    - deleted 3y ago
      [deleted]
- throw0101a 3y ago
  > No, because to do that you have to have deliberately kept money out of investments, waiting for a downturn. Not wrong about always being fully invested, but an argument for perhaps have some portion (10-20%) being in bonds to (a) reduce volatility which may help with preventing panic when things inevitably (temporarily) downturn, and (b) having some 'dry powder' available for rebalancing (sell high, buy low). The returns of the S&P 500 was 0% between 2000 and 2010, but if you had ~20% bonds you actually got positive returns: * https://www.forbes.com/sites/investor/2010/12/17/the-lost-decade-was-a-golden-age-if-you-rebalanced/ https://www.forbes.com/sites/investor/2010/12/17/the-lost-de... See also Japan in 1980s: having some component in (even domestic JP) bonds allowed you to rebalance out of a rising market over time. Waiting for the dip is generally sub-optimal for returns: * https://ofdollarsanddata.com/even-god-couldnt-beat-dollar-cost-averaging/ https://ofdollarsanddata.com/even-god-couldnt-beat-dollar-co...

Gibbon1 3y ago

There is a simple algorithm one can use to determine how much to put in or take out based on what the market is doing month to month. I don't remember the name of it. But if the market sector is going up you increase investment by X%. Going down decrease investment by X%. I think it works mostly because it avoids going all in at the top and all out at the bottom. Which is the strategy a lot of naive investors end up doing.

IanCal 3y ago

No, because to do that you have to have deliberately kept money out of investments, waiting for a downturn. It only works if you can predict the downturn before it happens, and how low things will go.

barefeg 3y ago
It may depend on the investment profile of the individual. I’m not 100% invested which means there’s always some cash available at any point.
- IanCal 3y ago
  Yes as I say, it means having funds deliberately not invested waiting for a crash, which is timing the market and relies on you predicting the market.
- throw0101a 3y ago
  > I’m not 100% invested which means there’s always some cash available at any point. This is sub-optimal from a returns perspective: * https://ofdollarsanddata.com/even-god-couldnt-beat-dollar-cost-averaging/ https://ofdollarsanddata.com/even-god-couldnt-beat-dollar-co...
  - deleted 3y ago
    [deleted]
throw0101a 3y ago
> No, because to do that you have to have deliberately kept money out of investments, waiting for a downturn. Not wrong about always being fully invested, but an argument for perhaps have some portion (10-20%) being in bonds to (a) reduce volatility which may help with preventing panic when things inevitably (temporarily) downturn, and (b) having some 'dry powder' available for rebalancing (sell high, buy low). The returns of the S&P 500 was 0% between 2000 and 2010, but if you had ~20% bonds you actually got positive returns: * https://www.forbes.com/sites/investor/2010/12/17/the-lost-decade-was-a-golden-age-if-you-rebalanced/ https://www.forbes.com/sites/investor/2010/12/17/the-lost-de... See also Japan in 1980s: having some component in (even domestic JP) bonds allowed you to rebalance out of a rising market over time. Waiting for the dip is generally sub-optimal for returns: * https://ofdollarsanddata.com/even-god-couldnt-beat-dollar-cost-averaging/ https://ofdollarsanddata.com/even-god-couldnt-beat-dollar-co...