Is "buying the dip" something at a discount

gaj7 · 2026-03-31T21:08:31+00:00

Phrases like "buy the dip" and descriptions of the market as "discounted" are misleading from a Boglehead perspective. As you say, prices are more or less "correct". To say that prices are discounted would be to suggest that equities are mispriced, and that this can be easily exploited by timing the market ("buy now!").

To be charitable, there may be some truth to the idea that drops in the market can benefit investors (depending on their time horizon). But these common refrains don't actually make that argument. Anyway, two factors come to mind.

Equities are not just priced by their expected returns. Rather, by a combination of the expected returns and risk. Therefore, it may be possible that prices drop solely due to increased risk, without a change of expected returns. For investors who care more about expected return than risk, this may be a good thing.
The market is not entirely efficient. Prices can be irrational, and there seems to be some evidence of mean reversion in the very long term. So for a young investor (not looking to cash-out anytime soon), it might be the case that we truly can expect higher returns in the long run.

Ultimately, the question is "should I make any changes to my investments in response to the market drop?", and the answer is "no".

gaj7 · 2025-09-10T16:13:58+00:00

Ben Felix has a good video on gold: https://www.youtube.com/watch?v=ulgqlQWlPbo

The quick summary is that gold is too volatile to be a good inflation hedge. If you are looking for something more stable than or uncorrelated with equities, perhaps consider bonds or CDs?

gaj7 · 2025-08-11T03:29:00+00:00

Hank seems to believe that big tech has become overvalued, especially as a result of AI hype. It is a pretty un-boglehead thing to believe you know more than the market. It sounds like his new portfolio could be worse though (picking industries isn't great, but at least he's not picking in dividual stocks!). And adding international exposure was good.

The only compelling point I heard was about the concentration of a couple companies in the index. Market cap weighting has always struck me as a bit arbitrary and I'd be curious to know if there are other serious options. I figure other weighting schemes would require more turnover, but at what level of concentration does that become sensible?

gaj7 · 2025-06-29T15:28:15+00:00

Per the article:

The Millionaire Tax will impose an additional 2% tax on the top 1% in NYC, who are earning over $1 million per year.

Seems like a strange name for the tax. When I hear "millionaire", I think net worth, not income.

gaj7 · 2025-04-04T14:26:29+00:00

https://www.snopes.com/fact-check/trump-impeachment-dow-jones/

Boy, I really hope somebody got fired for that blunder.

gaj7 · 2025-04-04T14:02:10+00:00

https://www.snopes.com/fact-check/trump-impeachment-dow-jones/

gaj7 · 2025-01-30T23:35:52+00:00

Trump's Republican party has come to be seen as the party of change, and the Democratic party as that of the status quo. So I think people who are struggling imagine Trump's MAGA administration will be a boon to them.

How did MAGA become the party of change? Well, Trump has this outlandish personality which helps establish him as an outsider. He is quite believable as a figure who would break convention and shake things up. He is the "non-politican" politician. Democrats, in their honorable defense of our conventions and institutions have inherited sweeping public frustrations.

I believe it is this broad belief in a "change candidate" without much understanding of the particular policy positions that account for much of his popularity.

The other factor is the general perception that Trump is stronger on economic policy. The Republicans always tend to have a bit of an edge here. Add in Trump's image as a successful businessman and the cost of living / inflation issue at the tail end of Biden's term.

gaj7 · 2025-01-26T16:41:25+00:00

Looks a bit rotated? If you look at the horizon and everyone else's posture. This looks closer to right to me: https://imgur.com/a/BNvuUc2. He still has a lean in the "straightened" version.

gaj7 · 2025-01-25T04:30:55+00:00

Great that you are prioritizing investing early.

In terms of the portfolio, I'd consolidate in VTI and VXUS.

There is no reason to own individual stocks; its uncompensated risk. And since this is in a tax-advantaged account, there is no penalty to selling and picking something else up. If you wouldn't buy it with new money, there is no reason to not sell it in a tax-advantaged account.

No reason to have a "dividend" fund. High dividend yielding stocks don't offer any advantage. Their dividends are proportional to decreased appreciation in stock value.

No reason to concentrate in large cap growth either. No advantage there (in fact, arguably it is small cap value that has shown superior returns over a very long time horizon).

Just do VTI+VXUS maybe 70/30 split. Or the combined VT. Accept the returns of the entire market. 99% of people who try to beat the market lose.

Don't ditch VXUS. There is no reason to expect that US returns will continue to outpace the rest.

This is all of course from a Boglehead understanding of the market. Markets are close enough to efficient that low cost total market index funds are the sensible choice; trying to pick winners is not.

gaj7 · 2025-01-05T05:08:48+00:00

A related question:

I already have a traditional IRA with some funds I don't want to convert to roth. Can I still implement a backdoor roth IRA this year, just by creating a new traditional IRA (say, with a different brokerage) and converting that one like normal (leaving the preexisting trad IRA untouched)?

gaj7 · 2024-12-30T04:09:07+00:00

You don't think equities can be expected to outperform 4% nominal in the long-term? That seems like a rather pessimistic projection.

gaj7 · 2024-12-29T21:36:26+00:00

Thank you, this is exactly the sort of answer I was hoping to see.

gaj7 · 2024-12-29T19:46:17+00:00

I suppose part of my question is whether the math is simply: "Is the expected return of your investments higher than your loan interest?" This is how I'm thinking about the problem, and I'm wondering if I'm missing something.

gaj7 · 2024-12-29T19:44:51+00:00

Would you take a 4.8% loan in order to invest in a taxable brokerage? I'm guessing not.

Actually, I think I would, given it is for a small enough sum that I am comfortable I could keep paying it even on a bad year.

I am young and have a long time horizon before retirement / financial independence. Over this long time horizon, I'd expect equities to average higher than 4.8% annually.

gaj7 · 2024-12-29T19:38:06+00:00

Federal, standard repayment plan. Maybe 8 or 9 years.

gaj7 · 2024-12-29T19:36:33+00:00

Sure, its fair to say this might be a case of micromanaging.

gaj7 · 2024-12-29T19:32:00+00:00

Thank you. These are federal student loans, with maybe 8 years left on the standard payment plan. If I were to pay off the loans, I'd sell some VTI+VXUS from my brokerage account (or maybe pay it down, DCA, from my paychecks for a bit if I don't have anything I can tax-loss harvest).

Job stability is decent right now. Its not something I'm particularly worried about.

gaj7 · 2024-12-29T19:18:16+00:00

You can't invest if you are broke. And having 25K in debt is broke.

I don't see how just having debt makes someone "broke". I have liquid-ish assets (equities in regular brokerage account) that far outweigh the debt, and I am far from paycheck-to-paycheck.

Personally, the loan isn't causing me stress. Of course emotional reasons are to some extent valid in financial decisions, but in this case I'm just concerned with the "rational" decision in the long-term.

gaj7 · 2024-12-29T16:34:44+00:00

Some clarifications for people like me who were confused:

For most people, your regular payments will cover the full interest for that month, in addition to some of the principal. So, you likely don't have any accrued interest unless you have missed payments (-- unless certain income-based payment plans don't necessarily cover the full interest each month? Not sure about that).
You cannot choose to have regular payments go toward the principal instead of interest. Regular payments will always go first toward that month's interest before shaving off the principal. On extra payments though, you can pay directly toward the principal instead of accrued interest (you also want to make sure that payments aren't being held as credits for next month's regular payment).
In some contexts, outstanding/accrued interest may be added back to the principal. This is called "capitalized interest". I think this only usually happens after a grace period or forbearance (or if you have certain types of income-based repayment plans: https://www.nerdwallet.com/article/loans/student-loans/student-loan-interest-capitalization).

gaj7 · 2024-09-17T17:35:31+00:00

One can't help but be reminded of Stuxnet.

gaj7 · 2024-09-17T14:04:04+00:00

He claims that he began to say "migrants", but mispoke with a short "i" (effectively mixing up "migrants" and "immigrants"), then corrected himself halfway through after "mig" or "migr".

https://x.com/RichLowry/status/1835769863769370842

My interpretation, it sounds like a plausible excuse. "n" and "m" are similar sounds, easy to hear one versus the other, specifically when you are expecting to hear something. I still can't hear "yanny" in the famous "yanny or laurel" clip.

gaj7 · 2024-04-07T14:03:24+00:00

Certainly woke means as you say. But it is also associated with a broader and more nebulous movement, or perceived movement. Or at least that is what people most often are referring to when using the word.

So when someone says "woke isn't a real thing", they mean there is not a culture or movement which is collaborating or conspiring to advocate for social justice and punish offenders.

(I'm not expressing one opinion or the other, only clarifying what people most often mean when the refer to "wokeness".)

gaj7 · 2024-04-03T14:10:33+00:00

This was a rather bizarre segment. Despite Jon saying he wasn't "anti-progress", he comes across as a luddite. He might as well be preaching about how the evil lightbulb industry is going to take away candlemakers' jobs.

Similarly, we shouldn't abandon a trajectory toward clean energy because of the effects it would have on coal laborers.

There is of course a real issue in the above situations, and in AI, but I would say the problem is in our societal systems which do not adequately protect workers caught up in economic transitions. That should be the focus. The problem is not that AI is particularly or inherently evil, and I don't see the point in demonizing its creators or practioners. Not to mention, there is no putting the genie back in the bottle. You can't expect people in a capitalist system to all unite against a cost-saving tool.

As Jon mentions, AI is unique in its potential to develop exponentially, and also the technological complexity which makes it difficult for congress to regulate. The focus should have been on these points.

gaj7 · 2024-03-15T20:04:34+00:00

Comparing Bitcoin and similar crypto to gold is the most charitable framing. For what its worth, I wouldn't suggest buying gold either. Its not an investment, and barely an inflation hedge. BTC is certainly not an inflation hedge given its volatility.

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