When everybody is thinking that way about capital purchases, you get a deflationary spiral...

Only until people with money decide that prices are low.

Which is only a bad thing when everyone is up to their eyeballs in debt.

> It's the same reason I save my money: for opportunities when prices are low

The problem is: how do you know if the time is right (i.e. ten years later you can say "I invested in the lowest possible price")?

Possibility A: you invest too early, stock drops further and you can't recover in a reasonably long time frame (e.g. 1 year)

Possibility B: you invest too late, and people who invested before you made more profit in retrospect

Possibility C: you invest at the right time frame and made a nice chunk of cash

Possibility D, especially likely with unicorns: either A, B or C after a year... and two more years pass by, and the company goes bust (Myspace!)

Who cares if the investment doesn't maximize potential profit? If someone invests $50 and gets $100 in return, that's great. If someone else invests $50 and gets $99.42 in return, that's great too, and who cares if someone made more 'profit' from buying and holding an imaginary financial instrument? The point is: buy "lower", sell "higher" is close enough to buy at the lowest point and sell at the highest point. But other factors come into play on why someone would sell at any time. Theoretically, ceteris paribus mutatis mutandis, if you invest in some company that happens to survive a thousand years into the future and has an annual average ROR of 7%, you should never sell it, even after your death if you want to maximize profit...buy low-ish, sell high-ish as convenient and with common sense. Theoretical perfectly maximized trades should not be the concern of the investor. Count dollars instead of pennies.

The problem you refer to is formally known as "Risk" aka Risk Capital.

The trick is, you don't invest during the downturn, hence all the cash hoarding.

You invest after it bottoms out for a while. Macro economies do not recover like a rocket, the window to invest is very large, so large that if you only recognized the bottoming out a couple years later, you still haven't missed the opportunity.

That is a really interesting point. So I've never invested in stocks before (preferring to invest in my own business) but have decided to diversify and am only seeking returns in a 5-15 year bracket (but want to minimize 1-5 year downside so it could potentially work as an extra emergency fund too).

I had assumed being 20%+ off of the highs, it'd be a good idea to start getting involved now, but.. maybe I should wait until a clear "bottom out" is showing?

So long as you don't wait forever. The market bottom of any exchange or stock is $0.00. The market, will likely never actually "bottom out". Look into DCA Dollar Cost Averaging. I personally, and professionally, manage DCA strategies with applying additional infusions during obvious lows (example: markets are down 10% in a given period). The bottom of a cycle can undulate "sideways" a bit over a period of weeks, months, years, decades with few discernible entry or exit points. Sometimes after an "event" occurs, the market/stock jumps XX% and opportunities may not occur again in the near future (goes sideways at new level). I note sideways markets/stocks and calculate the risk/reward if I deem it an opportune time. In most markets stocks don't go sideways forever.

I can only offer you my personal opinion, which could well be wrong. I can take no responsibility for what you do with your money.

That said, my opinion is this: there's far more risk than potential reward in the market right now, even after this drop. This is probably the beginning of a bear market that could last, I don't know, anywhere from maybe 6 to 18 months. I would definitely not suggest buying until it's clearly over.

EDITED to add: here's a good summary: http://seekingalpha.com/article/3825236-bear-market-phases-s...

Don't try to time the market, it's a fool's game. Do regular purchases of a broad index ETF (exchange traded fund, low fees!), AKA dollar cost averaging as another child mentions. If you are worried about downswings, keep your portfolio balanced to roughly 50% equities and 50% bonds (there are broad bond index ETFs too).

You don't know. Nobody knows. So you make your best guess, and you don't put all your eggs in one basket.

>It's the same reason I save my money: for opportunities when prices are low.

So then you buy low, and no longer have money saved for even lower opportunities. The logic of this plan doesn't make sense. You can't both be saving for and spending on opportunities, and you have no way of knowing when or what opportunities might arise.

>Most people with any kind of money think this way.

According to...?

The logic of this plan is basic and has stood the test of time in any multi-party market. You can save and spend at the same time, I do it all of the time, it's called budgeting. You are mired in theoretical perfection, absolutism, and a misunderstanding of how to profit from investing or trading. On the Street this "plan" is referred to as "Keeping the Powder dry". You don't [rationally] blow the whole keg of powder on one trade. If I have $10k to invest, I might only invest ("fire", "blow", "shoot" )$2k at a current market/stock low and keep the rest "dry". What is your investment strategy? Invest at the market/stock highs?

According to...people that have actually invested. Some positions lose money, some make money, but you'll never know what it's like until you get off the bench and put some skin in the game. Always be comfortable with losing what you invested, because you might lose it. Always be comfortable with taking a profit, because you might lose it.

>What is your investment strategy? Invest at the market/stock highs?

I try to keep in mind that markets are unpredictable, and missing out on growth while you wait for the next crash can cost you money too, even if it doesn't feel as bad as a position you hold losing value. I invest about the same amount every paycheck whether people are crying bear, bull, bubble, or apocalypse.

Succinct. Exactly. Dollar Cost Averaging. For buys and when buying call options or selling puts, I increase commitment while maintaining the core strategy. Highs and lows are arbitrary in an irrational market. Profits can be increased if buying at "relative" lows or selling at "relative" highs. If a stock that trades at its highest yet value of $100/share falls to $80/share over a week because of a lawsuit claim or other similar construct, but the company is otherwise outperforming, that may be a buying opp (it may be a total loss, but that differential is risk/opportunity). That stock, at $80/share is at a "relative" low as compared to its high of $100. That is what I meant by low and high. Perfect maximization is possible, though almost always unlikely. Which is why your DCA strategy should outperform (depending on your investment choices, of course).

>"On the Street this "plan" is referred to as "Keeping the Powder dry".

Oh, I know what it's called "On the Street". And it's bull.

>You can save and spend at the same time, I do it all of the time, it's called budgeting."

Huh?

>$2k at a current market/stock low and keep the rest "dry".

But why just $2k? That might be the bottom, and then you've missed out putting those dollars to work.

>What is your investment strategy? Invest at the market/stock highs?

I can't predict the highs or the lows, just like you can't, so it's not part of any strategy I implement.

>According to...people that have actually invested.

You mean me? I've even done it for a living, with other people's money. Imagine that.

>Always be comfortable with losing what you invested, because you might lose it.

I get it now, you're just a random spouting aphorisms you've read.

Troll, Google my "aphorisms" in quotes. I don't seem to come up with any results in google. I'm not a genius, I didn't come up with the concepts of "Keep some Powder dry", "Buy low, Sell high", or basic arithmetic. You offer exactly nothing in terms of "strategy". I'd love to see your Series 7 exam results.

"Always be comfortable with losing what you invested, because you might lose it." - Google it.

Un-invested money can still earn interest or be put into other profitable, but less risky vehicles. I do not know any professional traders or investors that put 100% of their money for investments in one trade.

>I get it now, you're just a random spouting aphorisms you've read.

Yeah, those aphorisms, with their pathetic grains of truth, what a fool I am.