To The Moon

A pullback is coming. So what?

Does this mean people should sell their holdings or to continue holding?

Ultimately depends on your time horizon. If your time horizon is 30-40 years, will a 20% drawdown from a potential recession affect your investment decision? How about a time horizon of < 10 years.

Introducing "Tactical DCA". 

That would be the idea of automating your monthly investments into a broad-based index such as the $Vanguard S&P 500 ETF(VOO)$ . A more concentrated index such as $Invesco QQQ Trust-ETF(QQQ)$  is good in a bull market as gains are amplified and investors chase growth or potential future heavyweights, but picking something more diversified is better in the longer term as the exposure is better distributed, in the event of sectoral tail-risk.

The "Tactical" aspect stems from leveraging Technical Analysis to find suitable supports to average in. Consider that in downtrends, stocks tend to find support at key levels, while rejecting prior supports. Adding at prior supports, particularly st 50% or 61.8% retracements of moves from ATHs, could give us the bottom. Using channel support and resistance could also give us some ideas as to where a stock can go, although they can easily be invalidated.

Consider this:

Let's say I invest $350 into $Vanguard S&P 500 ETF(VOO)$ on a monthly basis. This is my 'baseline'. Whether the sky falls tomorrow or whether Powell says something that spikes the market, this investment continues into perpetuity. 

However, let's say the stock falls 15% in a correction. In spite of "Grand Theory" where I posit that stocks will start a long-term move down as the higher time-frames roll over, I want to be adding more on the way down. Catching a falling knife with greater size on a broad based index at significantly undervalued levels can give rise to significant upside over a longer period, rather than buying the top. To some extent, timing the market can help improve your cost basis, and it means you can buy more at discounted levels.

In other words, this approach combines time in the market, with timing the market to find suitable opportunities to add more rather than adding at the top.

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