Buy the dip or dollar cost average?
Courtesy of Joshua M Brown
The feedback for this one is off the charts. The people want more Nick!
Let’s say you had the ability of a god – you could determine the exact low point of the stock market each year], in real-time, and only put your cash in at that very moment. You might assume that this ability would guarantee you could outperform all other investors.
And you’d be wrong.
Now imagine the people who expect to only buy the dip in real life. They have no such ability to know when that lowest point will be and no way to be sure they’re to buying in at the best possible time.
Investors holding back from investing because they assume they can identify a better entry point sometime in the future cannot actually do this consistently over time. What is more likely is they’ll suffer opportunity cost and frustration.
In his post, Nick Maggiulli makes this point using the historical record and some incredible charts. Nick is the data analytics manager at Ritholtz Wealth and blogs at Of Dollars and Data.
You can read his post here after watching this discussion with Josh Brown:
Even God Couldn’t Beat Dollar-Cost Averaging
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