DCA strategy during bear market

[Mephist0pheLes]

Both Shiny Things and iduncheckemail have merit w.r.t theirs views on market direction. For iduncheckemail, he has merit because market enters bear on average every 5 years or so. For Shiny Things, also have merit because example 2009 to 2020 bull market for 11 years. If one just sat on sidelines after 5 years, one would miss 6 years of bull run.

So, lets respect one another's view.

However, my personal conviction is that there will be a bear market this year. Based on technicals. Given this ASSUMPTION, question is how to DCA?

Shiny Things and limster has given suggestions, so thank you! iduncheckemail, any suggestion?

Iduncheckemail is making a newbie mistake that past performance will repeat itself

 

[BBCWatcher]

I agree with Shiny Things. It’s entirely possible the S&P 500 index will never revisit ~3,800. If that’s your purchase plan then you could be waiting for the equivalent of $5/bottle Dom Pérignon or 37 cent McDonald’s hamburgers. The moderate inflation we have right now makes ~3,800 even less likely.

 

[msflyer]

I agree with Shiny Things. It’s entirely possible the S&P 500 index will never revisit ~3,800. If that’s your purchase plan then you could be waiting for the equivalent of $5/bottle Dom Pérignon or 37 cent McDonald’s hamburgers. The moderate inflation we have right now makes ~3,800 even less likely.

Respect your view. Thank you. It is a risk (of missing out) I willing to take.

But your analogy is too extreme. At 3854, the PE is still about 19.4 times. Which is not cheap against historical. Hardly anywhere the "37 cent hamburger" analogy you cited.

 

[zoneguard]

But your analogy is too extreme. At 3854, the PE is still about 19.4 times. Which is not cheap against historical. Hardly anywhere the "37 cent hamburger" analogy you cited.

Just curious, you have your conviction and views already of how things will unfold. Why ask the forum then? Just go ahead and execute - it's your monies after all.

 

[sohguanh]

why must be auspicious???

First can I know you Chinese? Second Chinese has auspicious number even when choose HDB floor etc. Maybe you belong to new generation don't believe but I think limster is oldbird so asking if he believe

 

[reddevil0728]

First can I know you Chinese? Second Chinese has auspicious number even when choose HDB floor etc. Maybe you belong to new generation don't believe but I think limster is oldbird so asking if he believe

doesn't matter whether i chinese or not chinese. even people of other races can have stuff that's auspicious to them. so maybe lets not be racist about such thing.

2ndly, if limster intention is to buy more at lower prices. should it be you want it to be as inauspicious as possible so that it will drop more?

 

[sohguanh]

2ndly, if limster intention is to buy more at lower prices. should it be you want it to be as inauspicious as possible so that it will drop more?

Well I put a question mark in my post remember? I want to know from his perspective why he choose 4000. Like you say maybe pray to go down so put 4000. So let's wait for his reply.

 

[Mephist0pheLes]

Just curious, you have your conviction and views already of how things will unfold. Why ask the forum then? Just go ahead and execute - it's your monies after all.

probably need some validation on his approach.

 

[reddevil0728]

Well I put a question mark in my post remember? I want to know from his perspective why he choose 4000. Like you say maybe pray to go down so put 4000. So let's wait for his reply.

putting something racist in a question format does not make it unracist.

 

[sohguanh]

putting something racist in a question format does not make it unracist.

I never put the r word out it is you who started calling it. Ok I shall disengage and wait for limster reply why he choose 4000

 

[zoneguard]

Given this ASSUMPTION, question is how to DCA?

Is there a right answer? Nobody has a crystal ball to look into the future and everybody has their own risk appetite, time horizon and investing style.

Why don't you just do whatever you did with prior investments?

 

[reddevil0728]

I never put the r word out it is you who started calling it. Ok I shall disengage and wait for limster reply why he choose 4000

you asked about race about

 

[BBCWatcher]

But your analogy is too extreme. At 3854, the PE is still about 19.4 times. Which is not cheap against historical. Hardly anywhere the "37 cent hamburger" analogy you cited.

Ah, but you’re evidently forgetting that earnings are inflating too. By and large the corporations have great pricing power now, and the real wages they’re paying (their biggest operating costs typically) are falling quite precipitously. (Tight labor markets? Get back to us when real wages start rising even slightly.) Corporate balance sheets are great, too. I wouldn’t bank on that PE simply because the E looks like it’s doing really well. I don’t like to make such forecasts, but if pressed things look broadly quite good among the S&P 500 companies.

If E keeps rising but P just kind of stays parked at low 4,000ish (let’s suppose), you never get in at 3,800 even while the PE falls. Has this happened before? Absolutely it has. The S&P 500 can go through long periods moving basically sideways. So if you want to make a PE argument then why don’t you have a PE-based trigger?

As far as 19.4, we haven’t seen anything even slightly lower since (briefly) late 2018/early 2019. And before that we haven’t seen anything lower since mid to late 2014, on the bull run up from the Global Financial Crisis. (And there was nothing like the GFC since the Great Depression.) The S&P 500 index ended 2018 at about 2,500. You’d be thrilled right now (I hope) if you got in at 2,500 less than 3 1/2 years ago.

Anyway, good luck to you, but I’m with Shiny. I wouldn’t bother trying to time this market and would just dollar cost average in at a reasonably expeditious pace. That’ll also work great in the scenario when the S&P 500 crosses 3,800 and continues to 3,300 over the next 3 months (let’s suppose). A 6 month DCA starting now would do very well in that scenario too.

And why the S&P 500 anyway? Just go with the MSCI or FTSE global index, e.g. VWRA or ISAC.

 

[msflyer]

Just curious, you have your conviction and views already of how things will unfold. Why ask the forum then? Just go ahead and execute - it's your monies after all.

My conviction is that will most probably cross -20%. But no idea how deep (or shallow) it will go. Also no idea how long or short will the bear market last. Hence my question about the DCA.

 

[reddevil0728]

My conviction is that will most probably cross -20%. But no idea how deep (or shallow) it will go. Also no idea how long or short will the bear market last. Hence my question about the DCA.

but nobody will know too no? so just what you think makes more sense

 

[msflyer]

Ah, but you’re evidently forgetting that earnings are inflating too. By and large the corporations have great pricing power now, and the real wages they’re paying (their biggest operating costs typically) are falling quite precipitously. (Tight labor markets? Get back to us when real wages start rising even slightly.) Corporate balance sheets are great, too. I wouldn’t bank on that PE simply because the E looks like it’s doing really well. I don’t like to make such forecasts, but if pressed things look broadly quite good among the S&P 500 companies.

If E keeps rising but P just kind of stays parked at low 4,000ish (let’s suppose), you never get in at 3,800 even while the PE falls. Has this happened before? Absolutely it has. The S&P 500 can go through long periods moving basically sideways. So if you want to make a PE argument then why don’t you have a PE-based trigger?

As far as 19.4, we haven’t seen anything even slightly lower since (briefly) late 2018/early 2019. And before that we haven’t seen anything lower since mid to late 2014, on the bull run up from the Global Financial Crisis. (And there was nothing like the GFC since the Great Depression.) The S&P 500 index ended 2018 at about 2,500. You’d be thrilled right now (I hope) if you got in at 2,500 less than 3 1/2 years ago.

Anyway, good luck to you, but I’m with Shiny. I wouldn’t bother trying to time this market and would just dollar cost average in at a reasonably expeditious pace. That’ll also work great in the scenario when the S&P 500 crosses 3,800 and continues to 3,300 over the next 3 months (let’s suppose). A 6 month DCA starting now would do very well in that scenario too.

And why the S&P 500 anyway? Just go with the MSCI or FTSE global index, e.g. VWRA or ISAC.

All good points. I am only saying that your earlier "37 cents hamburger" analogy is too extreme. One has to go all the way back to 1957 when burgers was 37 cents.

https://www.delish.com/food-news/a38411301/whopper-37-cents/
Thank you for the 3 or 6 months DCA suggestions.

 

[msflyer]

but nobody will know too no? so just what you think makes more sense

I am merely asking: if Step A comes true, what should sensible way to do Step B? Seeking opinion on Step B. But off course, if you think Step A is the wrong (or unknown) assumption, then simply ignore the question (i.e. ignore this thread).

 

[jayou8]

Just for discussion sake, have you consider other types of averaging? So far I know there is DCA, Value averaging and Martingale.

I like fellow forumer's Mephist)pheLes approach which is kind of hybrid martingale to me.

 

[msflyer]

Is there a right answer? Nobody has a crystal ball to look into the future and everybody has their own risk appetite, time horizon and investing style.

Why don't you just do whatever you did with prior investments?

Naturally more art than science. Just trying to learn from others.

 

[reddevil0728]

I am merely asking: if Step A comes true, what should sensible way to do Step B? Seeking opinion on Step B. But off course, if you think Step A is the wrong (or unknown) assumption, then simply ignore the question (i.e. ignore this thread).

instead of doing it by months, how about DCA as it goes down?

so increase the number of units you buy for every (example) 2% it goes down?

If it doesn't go down further, you can also set another trigger of DCA the normal way, by buying certain amount once a month