for me, i will advise wait for after crash then buy
I have two problems with people who say this:
#1: What if the crash never comes?
Look at the Dow in the 90s. In that decade, the index quadrupled and there was never a single pullback greater than 15%.
Imagine you're in 1988. The crash of '87 is in the rear view mirror, but the market's ticking higher already, and you're saying "oh I'll wait for the next crash, there'll inevitably be another". You'd have been sitting in cash for the next ten years and you'd have missed one of the greatest stock runs of all time.
It's totally OK - in fact it's smart - to keep some bullets in your bandolier so you can buy more stocks if there's a crash. That's the whole point of the "110-minus-your-age" portfolio and of rebalancing - if stocks crash, you rebalance and you buy them. But you don't want to be all in cash waiting for a crash that may never come.
And this leads me to my second point:
#2: When the crash comes, will you be able to buy?
Buying the dips is
hard. It feels
so wrong. You've probably seen this already. Whenever we have a pullback and I hop on here to say "if you were saying 'I'm gonna buy the dip': here's the dip, buy it", I get a torrent of replies saying "oh no this is the crash, you should go short here, everything is French-Connection-U-K-ed".
People have a thing called "recency bias" - whatever's happened most recently, we expect to happen again. Nobody remembers the 90s equity boomtime - they only remember the nonstop string of busts from the 00s and they think stocks will never go anywhere. Nobody remembers gold flatlining for two decades - they remember it screaming higher and they think it's going to go up again. That's why we hate buying the dip, and we look for any excuse to avoid it.
That's part of why automated rebalancing is such a good strategy - because it takes your emotions out of the equation. It
forces you to buy low and sell high, rather than letting you follow your instincts (which, left unchecked, will make you buy high and sell low and end up bankrupt).
But, getting back to my original point - when the crash comes, most normal people will not be buying it. They'll be panicking and selling. And unless you are a robot, it's pretty likely you'll think "oh no it's just crashed, I'll wait a bit for it to bounce back" and by the time you actually say "oh it's bounced back I'll buy some now" it'll already be above where it was when you crashed.
And don't say to me "no I'm special I'll be able to control my emotions and buy the dip". Most people can't do this. I probably couldn't do it.
Here's an example: VEA and VWO have just come off 10% in my face. They've cost me tens of thousands. If I didn't have a rebalancing strategy telling me "right, you buy these now", I'd be sorely tempted to sell them and cut my losses... but that would be exactly the wrong thing to do.
So... buying the dip is the right thing to do, but it's hard. Very hard. And sitting 100% in cash saying "I'll wait for the crash, then I'll buy" is basically impossible.
