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Does this strategy make sense in a falling market?
ClintBarton
#1 Posted : Friday, June 08, 2018 4:08:01 PM
Rank: Hello


Joined: 5/31/2018
Posts: 8
Location: new york
Hello,

How about a variation on buying dips, DCAing, and rebalancing,whereby you engage in accelerated buying of stock the more the market drops? For example, if experience a 10% drop from peak, then a stock purchase equivalent to a 20% of the drop in your stock holdings. If the market is down 20% from peak, then buy 30% of that interval drop (stock value drop from the 10% down level), if 30% down then buy 40% of that interval drop in stock holdings and so forth.I simulated this with a $1 million stock portfolio and showed recovery to peak stock value at a stock fund share price of 17.6% below peak price, and would be even quicker if account for reinvested dividends.This way you buy an accelerating amount of stock as the market tanks and get more shares at a lower price. Also, no market timing per se is involved: simply buy an increasing mount of stock for each 10% (or even 5%) absolute drop, so you hedge your bets.

Please help

I didn't find the right solution from the Internet.

References:
https://www.bogleheads.o.../viewtopic.php?t=241029
Product Video Production Studio

Thank you
tony stark
#2 Posted : Friday, June 29, 2018 10:01:47 AM
Rank: Veteran


Joined: 7/8/2008
Posts: 947
That's great. Now try doing that with your money.

Moral hazard is such a bitch!!!!
winmak
#3 Posted : Friday, June 29, 2018 1:36:52 PM
Rank: Member


Joined: 12/1/2007
Posts: 539
Location: Nakuru
ClintBarton wrote:
Hello,

How about a variation on buying dips, DCAing, and rebalancing,whereby you engage in accelerated buying of stock the more the market drops? For example, if experience a 10% drop from peak, then a stock purchase equivalent to a 20% of the drop in your stock holdings. If the market is down 20% from peak, then buy 30% of that interval drop (stock value drop from the 10% down level), if 30% down then buy 40% of that interval drop in stock holdings and so forth.I simulated this with a $1 million stock portfolio and showed recovery to peak stock value at a stock fund share price of 17.6% below peak price, and would be even quicker if account for reinvested dividends.This way you buy an accelerating amount of stock as the market tanks and get more shares at a lower price. Also, no market timing per se is involved: simply buy an increasing mount of stock for each 10% (or even 5%) absolute drop, so you hedge your bets.

Please help

I didn't find the right solution from the Internet.

References:
https://www.bogleheads.o.../viewtopic.php?t=241029
Product Video Production Studio

Thank you


Isn’t this just a ritzy variant of averaging down?
For investors as a whole, returns decrease as motion increases ~ WB
sparkly
#4 Posted : Friday, June 29, 2018 5:27:18 PM
Rank: Elder


Joined: 9/23/2009
Posts: 8,083
Location: Enk are Nyirobi
ClintBarton wrote:
Hello,

How about a variation on buying dips, DCAing, and rebalancing,whereby you engage in accelerated buying of stock the more the market drops? For example, if experience a 10% drop from peak, then a stock purchase equivalent to a 20% of the drop in your stock holdings. If the market is down 20% from peak, then buy 30% of that interval drop (stock value drop from the 10% down level), if 30% down then buy 40% of that interval drop in stock holdings and so forth.I simulated this with a $1 million stock portfolio and showed recovery to peak stock value at a stock fund share price of 17.6% below peak price, and would be even quicker if account for reinvested dividends.This way you buy an accelerating amount of stock as the market tanks and get more shares at a lower price. Also, no market timing per se is involved: simply buy an increasing mount of stock for each 10% (or even 5%) absolute drop, so you hedge your bets.

Please help

I didn't find the right solution from the Internet.

References:
https://www.bogleheads.o.../viewtopic.php?t=241029
Product Video Production Studio

Thank you


Works if you have an endless supply of cash.
Life is short. Live passionately.
davidkenya
#5 Posted : Sunday, July 01, 2018 1:52:04 PM
Rank: Hello


Joined: 7/1/2018
Posts: 9
timing the market is impossible so its best to buy dips.the nse is a bull market so dips are welcomed.also i think in buying dips helps you gauge if the market is going to recover.and by buying in dips i mean buy in small quantities.donot fear that you will loose out when the bottoming out comes because buying these deeps in small quantities help you check if indeed the bottom has come and thus go all in.
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