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Dancing with the markets - Part 1/2

Updated: May 4, 2022

In the last article I left you here:

“But Martin, I’m afraid that the market will completely collapse”. One thing is certain; it will. We already talked about how it will also regain its strength quite fast again. How you best dance with the market, I will cover in my next article - so stay tuuuuuuned..."

Now that you are tuned, let’s talk about it!

Dancing with the financial markets is a dance that only few people (professionals) should be doing. It’s a dangerous endeavor and most of us are best off simply following the long term up-trend, by being invested into the general market and slowly adding to our position. This is known as dollar-cost-averaging (DCA). “Time in the market beats timing the market”, is the saying.

Additionally, studies show that private investors who try to trade more and time the market, on average are doing worse than those who just stay in the market.

So quick conclusion; Don’t dance with the markets!

Only if you are professional, have in-depth knowledge, or look like Patrick Swayze or Jennifer Grey from Dirty Dancing, should you actively do this. Otherwise it’s best to just observe it and dance on the sideline with your friends.

“Damn it, I thought that I could beat the market”. So did I but the annoying truth is that we are emotional beings, and so we often act on our emotions when investing, which causes us to fall while dancing. You can also turn it around and say, “If I just invest for the long term, and stick to it, I’m going to beat most of my friends who are actively trading”. If the alternative was to have your money in the bank at negative returns, then what is the problem?

BUT (oh yes, of course I’m not just going to leave you hanging with the above boring buy-and-hold strategy), if you are more daring and have the interest and the time, there is one more thing you can do if absolutely want to dance with the markets. I will repeat that; if you have the interest and the time...

You can choose to buy when the dance floor is empty! How you do that and what it actually means, will be posted in the second part of this article.


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dollar cost averaging strategy | Invest with Martin

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