Only if you can somewhat accurately predict the bottom. If the worst case happens, entire investment firms, and their funds could go belly-up. There's literally nobody alive who remembers the last time the economy was truly bad in the US. We've been in sheltered waters for a hundred years.
I've been through all of those except the 70's. Those were only bad when compared with the essentially fantastic times we have enjoyed for such a long time. I meant actual bad economies.
Great depression.
1920's Germany
China's "great leap forward"
1930's Soviet Union famine
Those scenarios are what can happen when leadership decides to make drastic "improvements" of an economic system and causing drastic unintended consequences. If our current course isn't corrected, and soon, we could be begging for an economy as good as the savings and loan crisis. I'm taking 25%+ unemployment, food lines, hyperinflation, real societal crisis - type things.
Well if he sinks the dow down to 20,000 and you're increasing your investments now future bull runs may just lessen your massive losses rather than put you ahead. If the dow goes that low and it's back up to 30,000 in 5 years you're still fucked hard.
Dow is 40k right now. If it slides down for three years to 20k and then rises to 30k in the two years after that, and you buy in weekly, you’ll be up 14%
Not great, but your portfolio would be positive.
A better case scenario would be a fast crash from 40k to 20k within one year, and then four years climbing back to 30k. In that case you’d be up 20% at the end of five years. If you bought $100 per week over those hypothetical five years you would invest $26,000 and have an ending value of $31,263.
That’s literally the entire point of DCA instead of lump sum, and the odds of beating inflation are very good.
Obviously, if you sell everything now and perfectly know the bottom and you invest everything at the bottom you’d be up 50% but the whole point is nobody knows the bottom, so your odds of a positive return are better if you aim for the near-certain 20% instead of trying to time the 50% which hypothetically is possible by buying the correct one day out of 1,825 days (assuming an even distribution where every day is equally likely to be the bottom, which is obviously wrong but you see the point).
But obviously, only the trump team knew the top (because they caused the crash) so they’re already way out ahead of the odds we have via DCA.
6
u/Negido 4d ago
If your time horizon is 5+ years then honestly this is a great situation to buy into. I've increased my contributions since we started tanking.