Matt Frankel

I might commit to investing $1,000 on the first day of the next five months instead of all at once.

So the way that this works is if I buy $1,000 worth on April 1st, and then the stock falls 20% before May, I'm getting my next round of shares at a nice discount.

I'm buying the dip.

If it goes up, well, my initial shares will be sitting on a nice gain and I'll be happy in that situation too.

So at the same time, I like to maintain a little bit of cash on the sidelines to be opportunistic.

So in my example, if a stock that I'm gradually buying falls by 20% with no change in the fundamentals or my investing thesis, I've been known to take some of my extra cash and make my next purchase a little bit larger to take advantage.

So to directly answer the question, I will never try to talk somebody out of setting up automatic investments, regardless of whether I think the market is cheap, expensive, whatever.

simply accumulating cash to quote buy on a dip, it more often results in missing out on a big gain.

So I clearly remember that many people thought the market was ridiculously expensive in 2015 after roughly tripling from the financial crisis lows just six years before and decided to pull some cash out, stay on the sidelines and quote wait for the next dip.

But then the S&P gained another 60% before it hit any significant correction at all.

So keep things like that in mind.

Yeah, in that study, I'll spare you the mathematics, but it essentially works out that you're investing for an additional half of a year overall in the 5.1 million case.

So that is still a form of averaging into positions like I'm talking about.

So it's just wider intervals.

You're not trying to buy the dip.

I've read that study and the biggest difference was getting your money in sooner.

Like I said, for the first year, you'd have $5,000 in the market right away versus an average of $2,500 in the market at any given point that year.

So that makes a big difference over time.

And second, I will say it's not always practical for listeners to invest in large lump sums once a year.

For many people, putting $500 a month in the market is the earliest that they can invest.