Is maintaining cash flow by putting money in low-interest investments while waiting for big dips to invest in more aggressive funds a viable strategy?
Asked 5 years ago
I'd like to get thoughts on this strategy. I have all my investments in aggressive funds. However, I recently shifted toward putting new money from each paycheck into a low-interest investment (e.g., bond index,.cash account) while waiting for big dips to invest it in the aggressive funds. That way, I have the cash available to take advantage of stock market sales. Does this make sense, or am I missing something?
Andia Rispah Igobwa
Thursday, May 27, 2021
Waiting to buy on the dip is a risky strategy. If you buy on the dip and the stock value goes up after, you'll get an excellent deal. However, should the stock lose even more value, the decision could cost you.
Instead, you can go for dollar-cost averaging, where you frequently invest a similar amount of money and are less exposed to risk.
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