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Does Entering The Stock Market On Market Lows Provide Better Performance?

February 26, 2020

There are those who believe you should not buy into a rising stock market but rather should wait until the market declines to purchase at a lower price. Of course, that assumes you can predict when the market goes down but before it starts to rise.

Just suppose, though, looking back in time (hindsight of course is 20/20), you invested when the market declined – just before it rises? Nick Maggiulli is a market analyst.  In a recent blog post, he looked at dollar cost averaging into the market knowing in advance when the dips/rises occurred.

One study randomly purchased the Dow Jones Industrial Average (DJIA) starting in 1970. The second hypothetical example purchased the DJIA only at the low points, before a market rise starting in 1970.

The result may surprise you. Buying at the market low accounted for better return of 0.4% a year. To us, this reinforces that you can’t predict the future, time when to go into the market and a consistent ongoing investment strategy is a better approach.

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