I wanted to discuss this idea of mine with you and see if it sounds reasonable…
Currently I buy my X CHF worth of shares at the end of the month. So far so good. But there have been months where in the middle of the month Trump said something about China and there was a week long dip in the markets that I just missed every time.
Now I was wondering if it would make sense to add one month of buffer on my money and buy in potential dips. Basically always have the monthly rate on the broker and buy if there is a seemingly good occasion. If there isn’t just buy on the regular date.
What do you think?
How do you know if it’s a dip, and how deep that dip is, and for how long it’s going down?
Sounds like a discount version of market timing to me.
Yeah it probably doesn’t have much effect.
If the market goes down in the middle of the month it can go back up, parallel, or down more.
One of those cases is good, one neutral and one negative… So it averages out to neutral.
Although the chances that it drops just a bit and than comes back up a bit are maybe higher, than it dropping a lot…
the academic answer is that since you cannot predict the market and on average the market goes up, every day of not participating is a loss over the long term.
But if you instead trust in your forecasting skills, then you better go in highly leveraged every time Trump says something.
There might be a point.
You could look at the average of each of the last 12 months and compare that to the date you usually buy. In principle it should average out…but it might take more than 12 months too, or it might not matter much. Or it might be other people or institutions are doing timed transations too.
Could be worth asking your kid to pick a card from a deck…and randomise the day you buy.
What if the monthly dips now occur at the end of each month for the following 12 months?
This will avg. out. Doesn’t make sense to complicate things.
Also, you really don’t want to spend the full month reading Trump tweets to figure out which one will generate the dip you want to buy…