One of the tough decisions in formulating a strategy for buying common stocks, or indexes is to arrange transactions when they fall, or dip by a predetermined percentage.
The question is how much that percentage ought to be. What amount makes sense? Will it be 2% or 3% or 5%, or higher? Figuring the ideal amount isn’t easy according to past data of market trends.
But percentage is not the problem. Most price trends will show lots of small dips, so you really cannot tell if the market for the security or index has truly fallen, to warrant a strategic buy.
Studies of such activity over recent years using the S&P 500 index, and using 2% dips for adding purchases, find this isn’t a decisively winning strategy.
Rebalancing of stock/bond allocation, done by some investors on dips in stocks and bonds, require another commentary in the future. ( See the Earl J Weinreb NewsHole® comments.)
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