Should ETF Investors buy regularly or arbitraly? Which one is better?


Regularly or not?

In case the stock market fall really meets the market lows observed above, or really meets the entry criteria you set yourself; even when the stock market is usually flat. Then what should be the way to enter the procurement?

Let me start with my conclusion: it is most important to conform to your own personal situation; because each person’s capital, ability circle, loss tolerance, investment preferences, investment principles and other considerations are very complicated and cannot be generalized. Other people’s suggestions or opinions can be used as a reference, don’t blindly accept them all.

Dollar cost averaging

Investors’ friend

Dollar-cost averaging involves investing the same dollar amount at some set interval, such as monthly or quarterly. Dollar-cost averaging your way into your full position (or better yet, indefinitely, if possible) will prevent you from buying your entire stake in a stock right before a significant drop.

Brainless investing, for everyone

“Dollar cost average” is more suitable for those who do not study at all, do not intend to study, really have no time to study, or even do not want to study, and who do not know how to study. It is called no-brainer investment in English. It’s very good, and there is no derogatory taste in it at all (the American colloquialism is very direct). Therefore, for active investors (I’m not wrong, ETFs tracking broader market are suitable for everyone, including active stock-pickers), those who have closely studied the dynamics of the stock market, and are highly confident, can also choose to buy when the stock market falls deeply.

Do not stop under any market conditions

Dollar cost average investors need hold for long laul. Don’t start shrinking or stop deducting investment funds because of the sharp decline of stock market fall, or you will definitely miss the best buying opportunity when the market is at the bottom. When you see market conditions pick up, you resume deductions on a whim, but at this point the returns are really low because you may have missed out on the big payoffs of the once-in-a-decade strong trough rally.

If you stop in the middle, you lose the benefits of long-term compounding. And it will also become the investment method of choosing the time mentioned below.

Focus on long-term rewards

Don’t be fooled by the market’s average return of more than 20% per year for the past three years (2019 to 2021), because the past three years have been an anomaly in the 100-year history of global stock markets.

Time to buy

Barrier is high

This method seems to be good, but I personally do not recommend most people to adopt it, because the difficulty is too high. This method takes some time to pay close attention to the dynamics of the stock market (and therefore requires considerable time and effort), because it is necessary to choose the time point to buy. Furthermore, adopting this approach requires a high level of self-confidence and overcoming many of the struggles of human nature.

Same as active stock picking

Another point is that it took so much time and effort to find buying lows for the broader market ETFs. Such research and effort are no less than the effort of active stock selection. It is better to invest in individual stocks that you have observed for a long time in your watch list, because the effort and pressure to be endured by the two are actually the same.

I wrote an article about ETFs tracking broader market: Most investors should invest ETFs tracking broader market. Interested readers, please read this article first.

credit: Rodnae Productions

Impossible to pick the right moment

For this method, I just want to remind you: no one can guess the exact point in time, neither in the past nor in the future.

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