To Buy or Not to Buy the Dip?

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One of the hottest debate recently in the financial sphere is to buy or not to buy the dip.  The 2 groups of supporters are sharing their perspectives almost daily, from articles, to YouTube videos.  Financial YouTubers like Ken from Chicken Genius is saying not to buy the dip, as he believes there's more pain to come with Quantitative Tightening.  The removal of liquidity from the market basically removes any possible market upward trend in the near term.  On the other camp, there is Jeremy from Financial Education who supports continue buying the dip because there is no way to know where the bottom is, thus continue to buy into the market at current prices is the way to go.  Both camps have their valid points, and they have their substantiations to their arguments.  So is it time to buy, or wait?

Personally I have no crystal ball.  I do not know what is going to happen.  To me, both camps are equally correct.  I like what “Sunny”, a Chinese YouTuber has mentioned in her one of her videos.  She mentioned that everyone keeps talking about Technical Analysis (TA) and Fundamental Analysis (FA), and also constantly quoting famous phrases like “Be fearful when others are greedy, and greedy when others are fearful”.  One main thing to ponder about is, when majority of the investing community apply these principles, are these still considered “contrarian view”, or is it the reverse psychology for Market Makers to trap retail investors?

I will never have answers for any of these, and I believe no one else would as well, till in hindsight.  However, what I can do, I believe, is to combine the two perspectives to form a hybrid version that I can work with.  As stated in my previous Post, my original plan was to continue to dollar cost averaging (DCA) into the market.  However, a possible hybrid version could involve

1)    Space out the interval for DCA, probably from making monthly purchases to bimonthly or even quarterly purchases, depending on how you view the near-term macroeconomics.

2)    Lower the value of each purchase, probably from SGD 1,000.00 per purchase to SGD 500.00 per purchase, or any amount you feel comfortable with, and able to last depending on your cash holdings now.

These could possibly help to lengthen the DCA duration, so that there's time and money to hopefully capture the bottom.

No one could tell who's right and who's wrong, and I hope that the YouTubers do not attack one another online, just because others hold different views.  Just stick to your beliefs, and invest accordingly, because everyone has varying perspectives, different investing values, different strategies and different circumstances.  Just remember, you are responsible for your own money, and responsible for your own financial future.  For me, Barista FIRE, here I come...!

Comments

  1. Anonymous24 June 2022 at 05:37

    If you're DCA-ing from your monthly salary, there shouldn't need to be any changes.

    If your assets are chosen wisely -- low cost broad index funds or ETFs -- you don't need to check your accounts daily or weekly. Just do annual re-balancing.

    If you still can't sleep at night, that means your asset allocation is too high risk or volatile for your mentality / stomach. Reduce the equities portion.

    And don't increase the equities portion when the bull run comes again & stocks scream up 100%. Otherwise when the next bear market or recession comes, you'll have the same problems all over again.

    Been there, done that over past 27 years.

    ReplyDelete
    Replies
    1. BFIRE24 June 2022 at 07:53

      Thank you for the advice! I can sleep at night, because now the bulk of my portfolio is generating cashflow through dividends for me. Growth portfolio is not that big yet.

      Delete

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