Post #2636 by rayvt on the Falling Knives board

Investment Strategies / Falling Knives ❤

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If I had purchased stocks during the market downturns of 2000-2001, 2008, and the COVID-19 crisis, I would have seen significant returns. The challenge is that it's challenging to invest when the world appears to be on the brink of collapse.

No, the biggest challenge is one you ignored.
To wit: Where does the money come from for you to buy big in the downturn?

Easy to ignore when you are working and have a paycheck coming in regularly. Just assume that the money will (somehow) be available.

To have money on hand, that means that you will build up/maintain a large cash hoard when the market is *not* in a downturn. That is, when the market is going up. But when the market is going up is exactly the time when you want to have your money invested, not sitting in cash.

You cannot look only at the gains you'd get after a downturn.
You also have to look at the gains you missed out on by having a large cash allocation during the non-downturns.

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