Buy the Panic or Buy Every Month? What 20 Years of Data Says

1. Even a perfect bottom-picker barely beat the average investor

How much could you make if you knew exactly where the market bottomed?

Charles Schwab ran an interesting experiment. It gave five hypothetical investors $2,000 at the start of each year from 2005 through 2024 and varied only when they invested.

One bought on the lowest day of each year. Another invested on the first trading day of every year with no analysis. Another spread purchases evenly over 12 months.

Here is how they finished.

Final wealth after 20 years

Hypothetical portfolio tracking the S&P 500. $2,000 invested per year, 2005 to 2024. Source: Charles Schwab (2025).

The surprise is not the winner. It is that the gap between someone who called the bottom correctly every year for 20 years and someone who simply invested on the first day of each year was $15,522, about 9.1% of final wealth.

A 9.1% edge is not trivial. But it requires perfect timing 20 years in a row.

The investor who bought at the high every single year is more striking still. That person ended with $151,343. Despite picking the wrong moment every time, they accumulated far more than the investor who stayed in cash equivalents and kept delaying.

Schwab also analyzed 80 rolling 20-year periods starting in 1926. In 70 of them, the ranking was identical: perfect timing, immediate investing, monthly investing, worst timing, then cash.

One caveat. These results assume the money is ready at the start of each year. That is not the same as saying someone who earns a paycheck each month can invest a full year's savings in January.

2. What about using VIX FIX to target only the fear zones?

Larry Williams' Williams VIX FIX is a technical indicator that measures market fear through price.

It calculates, as a percentage, how far the day's low sits below the highest close of the past 22 trading days. A sharp rise means downside pressure has intensified relative to recent price action.

Chris Moody's widely used variant adds Bollinger Bands and percentile thresholds from past periods to flag extreme declines.

An important distinction applies here.

VIX FIX measures fear-driven price declines. It does not confirm that a bottom is in.

In a market that rebounds right after a sharp drop, it can look like an effective signal. But in an earnings downturn, a financial crisis or a long valuation reset, prices can keep falling after the first signal.

None of this means VIX FIX is useless. A good fear detector and a proven excess-return strategy are different things.

3. What does $1,000-a-month investing become in 20 years?

The example below uses a monthly contribution of 1 million won.

Assume a 10% annual return compounded evenly each month. Investing 1 million won at the end of each month for 240 months puts in 240 million won in principal and ends with about 718.26 million won.

10% effective annual return, end-of-month contributions, excluding taxes and fees. A mathematical illustration with a fixed assumed return, not a backtest on an actual index.

So the question comes down to this. Is it better to invest every month, or to hold some cash and deploy it in a crash?

The core of that question is likely not how low a price you buy at, but how much of the market's rise you give up while waiting for a low price.

4. Three reasons fear buying is not always superior

First, cash has a cost.

Say a stock rises from 100 to 140, then falls 20% to 112. The headline sounds frightening, but the price is still 12% above the entry price of someone who bought at 100. A percentage decline is not the same as a cheap price.

Second, regular buying adjusts quantity automatically.

Invest the same amount each month and you buy 10 shares when an ETF costs 10 units and 20 shares when it costs 5. You pick up more shares in a falling market without judging the bottom. This may lower your average cost. It does not guarantee against losses or promise outperformance versus the market.

Third, people tend not to invest on the day fear is highest.

While building cash, everyone says they are waiting for a crash. When it arrives, the reasons are right in front of them: recession, corporate defaults, risk to the financial system. Worry that prices will fall further makes it easy to delay deploying the cash.

For a fear-buying strategy to work, then, a good indicator is not enough. The investor also has to follow a set rule even when the signal turns out to be wrong.

Sungdong KimAuthor of the Korean book “The US Stock ETF Investing That Never Fails”. A long-term investor in U.S. stocks since 2019.