Part 4/7:
Nick Maggiore conducted a pivotal study comparing DCA and the Buy the Dip. The research examined two hypothetical investors: one utilizing DCA by investing $100 monthly and another applying the Buy the Dip strategy who also saves $100 a month but purchases stocks only during market dips. The analysis assumes that the Buy the Dip investor can perfectly identify market bottoms between each all-time high.
Initially, it might seem that the Buy the Dip strategy would outperform DCA since buying at the lowest point theoretically maximizes investment. However, the study revealed that DCA actually outperformed the Buy the Dip strategy over 70% of the time when considering long-term performance from 1995 to 2018.