How To Face Up To Buying The Dips
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How To Face Up To Buying The Dips

Buying stocks as they drop is harder than it sounds. Here’s one strategy that might help keep you on course in turbulent times.

By Jason Zweig
Tue, May 24, 2022 3:10pmGrey Clock 3 min

All investors are the prisoners of their past, and that shapes how they face the future.

Until the past few weeks, stocks had resembled a perpetual moneymaking machine, rising smoothly for nearly all of a decade and a half. From March 2009 through the peak this January, U.S. stocks gained more than 800%. The pandemic panic of February and March 2020 lasted only five weeks.

So it’s understandable if you think the nearly 20% collapse so far this year is just a blip. Stocks will soon resume their smooth upward course, right?

I hope so.

But, for all we know, the coming years might resemble 1966 to 1974 or 1929 to 1943, long slogs when stocks kept jolting up and down but finished essentially where they started.

In that case, you will need new weapons in your psychological arsenal. Years on end of poor stock returns would torment anyone who isn’t prepared for a long grind.

One weapon to consider is called value averaging. It’s like buying the dips—purchasing more stocks as prices drop—on steroids.

At its heart, this technique combines two basic ideas: dollar-cost averaging (putting money to work automatically every month or quarter) and rebalancing (selling some of your winners and buying some of your losers).

In value averaging, you set a target amount by which you want your account to grow each period. Say you want to end each month with $1,000 more than you started with.

In periods when stocks fall, you have to add enough to your holdings to hit the target you’ve set.

If, for instance, the value of your portfolio falls $250, you would need to buy $1,250 in stocks to finish the month with $1,000 more than you had at the beginning. If your portfolio’s value drops $500, then you’d add $1,500, and so on.

In a rising market, you’d buy less than $1,000—and even sell some, if stock prices go through the roof.

Value averaging is the brainchild of Michael Edleson, ex-chief economist at the Nasdaq stock exchange and former chief risk officer for the University of Chicago’s endowment.

Most investors say they intend to buy and hold—but many end up buying high and selling low instead.

Investors who use value averaging “have precommitted to bury their demons,” Mr. Edleson says—“the greed demon that makes you buy high and the fear demon that makes you sell low.”

This technique can’t eliminate the risk of underperformance, however. “If you cherry-pick certain periods, value averaging can look horrible,” says Mr. Edleson. “Your success is always going to depend on the starting point and ending point.”

The strategy does better when volatility is high and worse when stocks move smoothly up or down. In a long, steady market, Mr. Edleson says, “there’s nothing better than buy-and-hold, just sitting on it.”

So value averaging is a kind of bet that markets won’t soon return to the abnormally smooth upward slope of, say, the mid-2010s. If you think they will, it might not be for you.

Harald Deppeler, 53 years old, a semiretired physicist in Zurich, has been using the approach since 2013. He built his own spreadsheets to do so; most financial firms aren’t set up to automate value averaging for customers.

The approach “gives you a sense of having a slight edge, but also it tests you,” Mr. Deppeler says.

As stocks rose smoothly between 2013 and 2018, his holdings in an S&P 500 fund exceeded his targets, so Mr. Deppeler had to sell roughly 8% to 12% of that position, he says. (Capital gains are not taxable in Switzerland; as a rule, U.S. investors should consider value averaging only in tax-deferred retirement accounts.)

Mr. Deppeler says he’s aware that having to sell down his holdings during a long bull market probably cost him a small fortune in forgone gains, although he hasn’t calculated that opportunity cost. “I had a pile of cash, which I just couldn’t make any use of,” he says.

On the flip side, in March 2020, value averaging compelled Mr. Deppeler to put a “six-figure amount” into his S&P 500 stock fund during a horrifying decline. “It forced me to say, ‘The market is still falling, and now I have to buy into that,” he recalls.

“At the time, I had to keep telling myself, ‘This is what the plan is actually designed for, to make you buy more when the market dips. Stick to the plan, stick to the plan,’” says Mr. Deppeler.

“If someone really can take the appropriate amount, put it in stocks and then let it ride, rebalancing from time to time but otherwise holding, I’m not going to tell them value averaging is any better,” says Mr. Edleson. “But in practice not many people can do that.”

Then again, if you don’t have the discipline to buy and hold, you might not have the extra discipline to buy even more in a down market.

Few things are harder than buying more when markets fall. That’s why discipline is an investing superpower. Value averaging could help some people stay the course—but it takes work, and it won’t work all the time. Then again, in markets nothing works all the time.



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BHUTAN LAUNCHES WORLD-FIRST NATIONAL CRYPTO PAYMENT SYSTEM FOR TOURISM

Bhutan is pioneering a new frontier in travel by allowing tourists to pay for flights, visas, hotels and even fruit stalls using cryptocurrency via Binance Pay.

By Jeni O'Dowd
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Bhutan has become the first country in the world to implement a national-level cryptocurrency payment system for tourism, marking a major milestone in digital innovation and travel.

Launched in partnership with Binance Pay and Bhutan’s fully digital DK Bank, the system enables travellers with Binance accounts to enjoy a seamless, end-to-end crypto-powered journey. More than 100 local merchants, from hotels and tour operators to small roadside vendors in remote villages, are already live on the system.

“This is more than a payment solution — it’s a commitment to innovation, inclusion, and convenience,” said Damcho Rinzin, Director of the Department of Tourism, Bhutan.

“It enables a seamless experience for travellers and empowers even small vendors in remote villages to participate in the tourism economy.”

Using supported cryptocurrencies, tourists can now pay for nearly every part of their trip, including airline tickets, visas, the Sustainable Development Fee (SDF), hotel stays, monument entry fees, local guides, and shopping, all through secure static and dynamic QR code payments.

Binance CEO Richard Teng praised the move, saying: “We are excited to partner with Bhutan as we are not only advancing the use of cryptocurrencies in travel but also setting a precedent for how technology can bridge cultures and economies. This initiative exemplifies our commitment to innovation and our belief in a future where digital finance empowers global connectivity and enriches travel experiences.”

Known as the “Kingdom of Happiness,” Bhutan has long prioritised Gross National Happiness over GDP, with a strong focus on sustainability, cultural preservation, and societal well-being. The new system aligns with these values by reducing payment friction and bringing financial inclusion to local communities.

Among the key features of the system:

  • Seamless Experience: Tourists can pay with crypto for all travel-related expenses.

  • Inclusive Reach: Small vendors, even in remote areas, can accept QR code payments.

  • Lower Fees: Transactions cost significantly less than traditional payment methods.

  • Comprehensive Support: More than 100 cryptocurrencies supported, including BNB, BTC, and USDC.

  • Secure and Instant: Real-time confirmations, 2FA, and encrypted transactions via the Binance app.

Behind the local settlement mechanism is DK Bank, Bhutan’s first fully digital bank. Licensed by the Royal Monetary Authority of Bhutan, it aims to deliver accessible financial services to all, including marginalised and unbanked communities.

The launch is being hailed as a bold step forward in integrating digital finance with global tourism — one that could set the benchmark for other nations looking to modernise the travel experience while empowering their local economies.

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