To be able to purchase additional stock during the market having a poor sentiment, this requires you also to be out of the market in the present, in order to have that extra stock. Thus, that boils down to a market-timing mechanical process.

It is very difficult to have a successful market timing process, mostly because on average, the market moves up. The rules that take you out of the market (such as sentiment being high, for which we could use a proxy such as like RS52 of SPY exceeding a 20% rise) might produce a benefit, but they tend to over-reach their intended domain, and leave you out of the market also when it continues to climb.

Many investors stay 100% invested for this reason, and most of the really successfully ones have that record as a matter of hindsight observation. To have extra $X capital to invest when the market has low sentiment, they are required to remove $X capital out of the market earlier, which is difficult to do systemically such that the amount removed (and re-added later) has a higher return than just keeping that $X amount full invested.

- Manlobbi

Mechanical Investing FAQ

---

Contact Shrewd'm
Contact the developer of these message boards.