On May 22, 2022, from Alberta dentist Drew
I love the Q and A!
I was looking at VFV or SPY to track the S&P 500.
After the market fell 10 percent, I put in another 1/3 of the cash from my 50/50 asset allocation. But now, with it down between 15 and 20, I wasn’t sure if I was supposed to wait until the 20 percent drop to put in the other 2/3rds or if I could start hammering in some more cash into the ETF? Maybe another 1/3rd at 15 percent drop?
Waiting for the S&P 500 to drop by 20% in order to put in the rest of your cash is an example of variable asset allocation.
That 20% decline is an approximation. You can put the rest of your cash in anytime now and you can hammer in some more cash into into the ETF.
This approach is aggressive. It recommends borrowing to invest if the S&P 500 drops a further 10%.
No financial advisor would recommend borrowing to invest. However, renowned dentist L.D. Pankey made a lot of money in the stock market using this approach.
It is essential not to invest money which you will need in the next three years or so. Through a market cycle (peak to trough to peak), this is an effective way to invest.
We all need to invest. Saving alone will not buy us a comfortable retirement. However, no one needs to invest this aggressively. Simply maintaining our personal asset allocation will get us the results we want.
With the habits of the Monday morning program, luck hardly matters.