Buy the Dip, Buy the Rise, or Follow a Plan: Which Had the Best Return?

"Not only did the buy the dip strategy have the lowest cumulative return, it also had the highest risk. For instance, this portfolio experienced the biggest one-year decline of -33%, and had the highest standard deviation of 14%.

In the middle of the pack, the buy the rise portfolio’s worst drawdown was -14% and it had a standard deviation of 9%. Notably, its median annual return of 7% was much higher than that of the buy the dip portfolio.

Lastly, the follow a plan portfolio performed well on all fronts. Compared to the other two portfolios, it had the highest cumulative return and the lowest risk. Over the 10 year period, its worst annual performance was a decline of just -2%."

I would have called it Buy the dip, buy the rise or buy and hold. And yes, Warren Buffett has clearly demonstrated that buy and hold, like the tortoise, surely wins in the long term.

2 Likes

Agreed. Really liked how it’s represented visually in the article.

We also did a piece on this in case anybody is interested in further reading - The Case for Long Term Investing - Vested Finance.