Long Term Passive Investing, Buy the Dip for AMEX:SPY by MarkE

Anybody who invests with a long term outlook in mind (20 years +) needs to be able to handle significant draw down and volatility within their investment and resist the urge to increase or trim their positions. As has been observed and proven multiple times by almost every member of the trading and investing community, attempting to time the market without a clear, defined and proven strategy is a guaranteed way to loose money. For this reason if you invest based on the long term fundamental indicators of a company, index, currency, commodity etc, you need to ensure you remain in the market long enough to see the returns on your investment eventuate, unless of course the fundamental picture changes. This brings me to buying the dip. Most investors do not have the capital to make large single purchases of for example an SP500 tracking ETF such as the SPY . For this reason they will usually invest small amounts, weekly, monthly or quarterly. While this is an effective strategy and one that has proven to produce sizeable returns over the long run, its effectiveness can be improved by using simple technical indicators to concentrate your investments near the market lows rather than at random price levels as they happen to coincide with your regular investment timeline. In addition to their regular contributions it can be a useful strategy for an investor to consult an oscillator such as stochastics, rsi , williams %R , or a mean reversion indicator such as bollinger bands and allocate a percentage of their regular contribution to purchase additional equity when these indicators enter oversold levels. This is not designed to time the market as these indicators are by no means affective trading strategies on there own, but they will allow long term investors the ability to capture an extra few percentage points of ROIC by concentrating their purchases at lower price levels.

*Not a recommendation to buy or sell, simply for educational purposes*

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