DCA strategy during bear market

[msflyer]

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.

Thank you for suggestions. Exactly these are brain storming ideas that are useful. I have (am) consider them.

Though personal opinion only. If one don't use leverage, will likely end up only modestly invested if use Martingale method. Though certainly some form of hybrid is certainly useful. But yes, vest more when falls are larger.

 

[msflyer]

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

Thank you. Good suggestion.

 

[d5dude]

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?

If by bear market you refer to the technical definition of 20% decline from ATH then your target for the S&P500 should be 3855, you should only start DCA when it hits 3855 (since you are very certain that the S&P500 will hit 3855). Maybe drop 50% of your lump sum into it at 3855, then spread out the rest of your buys over a couple of months.

 

[msflyer]

If by bear market you refer to the technical definition of 20% decline from ATH then your target for the S&P500 should be 3855, you should only start DCA when it hits 3855 (since you are very certain that the S&P500 will hit 3855). Maybe drop 50% of your lump sum into it at 3855, then spread out the rest of your buys over a couple of months.

Thank you for idea

 

[andyhtc]

We still do not know how fast and high Fed will increase its interest rate to

At least wait until the 4th quarter of this year when it finishes about 3/4 of its rate hikes before buying...

 

[reddevil0728]

We still do not know how fast and high Fed will increase its interest rate to

At least wait until the 4th quarter of this year when it finishes about 3/4 of its rate hikes before buying...

stock market is forward looking leh.

 

[stanlawj]

Seek advice / opinion. Have meangingful lump sum. My conviction: S&P 500 will enter bear market in 2022. My strategy: start DCA into IWDA once S&P 500 falls 20% from high.

Q1: How long (months) to spread lump sum for DCA? Note the DCA starts only after S&P 500 falls 20%.

Q2: Simple DCA or enhanced DCA? If enhanced, what rule do you recommend?

Have you considered the possibility that SP500 continues to fall by 50% to 2200 and never recovers for another 10 years?

 

[ctan84]

stock market is forward looking leh.

The problem is stock market cannot forecast how much higher or lower inflation will go leh.

 

[andyhtc]

stock market is forward looking leh.

Rate hikes will continue into at least the 1st quarter of 2023.

Powell has been criticised by his peers/ex-colleagues that he is still underestimating inflation with the latest rate hikes.

The Russia Ukraine war is also still a big unknown. I think Russia will throw in everything, including nuclear, to secure Ukraine or at least the east side.

 

[reddevil0728]

The problem is stock market cannot forecast how much higher or lower inflation will go leh.

Yea which is not my point

 

[reddevil0728]

Rate hikes will continue into at least the 1st quarter of 2023.

Powell has been criticised by his peers/ex-colleagues that he is still underestimating inflation with the latest rate hikes.

The Russia Ukraine war is also still a big unknown. I think Russia will throw in everything, including nuclear, to secure Ukraine or at least the east side.

Uhuh. And?

 

[andyhtc]

Uhuh. And?

Don't catch the falling knives...

 

[reddevil0728]

Don't catch the falling knives...

Uhuh. I’m not saying anything against that

 

[yiron]

Omg omg omg .
every few years there will be correction , every 10+years will hav a crash.
im not Nostradamus , it’s a well known fact, TS knows this that’s why started this thread.
Predicting will rise is inherent , if you buy low you have to wait to rise then sell what.
geeezzzzz. Ok enuff explaining .

It's like in Feb/Mar 2020 everyone was expecting a severe market downturn due to Covid. Guess what happened next?

I think the point of DCA is that the (short to mid term) future is unpredictable hence DCA doesn't try to time the market, but instead spread your buys over time to take advantage of long term market appreciation.

That said, every once in a while people try to be cute with their DCA, me included. I think no big harm as long as you roughly stay the course.

 

[Mephist0pheLes]

Have you considered the possibility that SP500 continues to fall by 50% to 2200 and never recovers for another 10 years?

what is the purpose of dreaming up a random scenario? how does it help ur investment decision?
if i dream that all stock markets will crash 99% and never recover, even tho there is no data indicating such possibility, does that mean i sld nvr invest?

 

[andyhtc]

‘We are nowhere near the bottom,’ top economist says as global markets crater​

• “Now it’s time for a reappreciation of the economic fundamentals around the world in terms of growth,” Brunello Rosa, of Rosa & Roubini, told CNBC’s “Street Signs Europe” on Friday.
• “It’s hard for markets to be totally optimistic when inflation is going up, growth is going down and interest rates are rising fast across the globe,” he added.

https://www.cnbc.com/2022/05/06/now...-economist-says-as-global-markets-crater.html

 

[limster]

once CNBC gets into the fear-mongering mode, you know its time to start buying!

they'll start digging the bottom of the barrel for quotations from perma-bears like Jim Rogers, etc.....

 

[reddevil0728]

‘We are nowhere near the bottom,’ top economist says as global markets crater​

• “Now it’s time for a reappreciation of the economic fundamentals around the world in terms of growth,” Brunello Rosa, of Rosa & Roubini, told CNBC’s “Street Signs Europe” on Friday.
• “It’s hard for markets to be totally optimistic when inflation is going up, growth is going down and interest rates are rising fast across the globe,” he added.

https://www.cnbc.com/2022/05/06/now...-economist-says-as-global-markets-crater.html

Doesn’t mean anything actually.

they don’t have crystal ball

 

[stanlawj]

what is the purpose of dreaming up a random scenario? how does it help ur investment decision?
if i dream that all stock markets will crash 99% and never recover, even tho there is no data indicating such possibility, does that mean i sld nvr invest?

I didn't say never recover. 10 years to recover is the issue.

 

[reddevil0728]

I didn't say never recover. 10 years to recover is the issue.

But why random 10y?