My complete strategy for buying fear - the 3 bucket approach
Fear is at 29 right now and everyone's asking the same question - do I buy or do I wait? I've been through enough of these dumps to know that the answer isn't binary. You don't go all in and you don't sit on your hands. You scale in with a plan.
Here's what I do when Fear & Greed drops below 35. I call it the three bucket system. It's not fancy but it's kept me from blowing up during crashes and kept me from missing the bounce.
Bucket one is your immediate deployment - 20% of your available cash. This goes in when Fear first drops below 35. You're not trying to catch the exact bottom. You're just getting skin in the game. Right now with Fear at 29, bucket one should already be deployed. I'd be looking at NVDA after those earnings - $81.6B quarterly revenue and 85% YoY growth is not a company that stays depressed for long. Or go broader with QQQ if individual stock risk scares you.
Bucket two is 30% of your cash and it triggers when Fear drops below 25. We hit 25 two days ago so if you were watching, that was your signal. This is where you get more aggressive. Look at what's actually down for fundamental reasons, not just momentum trash like $JYD or $LICN that were down 50-60% because they were garbage to begin with. Find the quality names that got dragged down with the market. The MAG7 thread today is right - these companies outperform for a reason. Use the selloff to add to positions in companies that will still be printing money when the fear passes.
Bucket three is your reserve - the remaining 50%. This is the hardest part psychologically. You hold this no matter what. Not for catching a slightly better entry. Not because you think it might go lower. You hold it because when the market finally reverses and Fear starts climbing back toward 40-50, you'll want dry powder for the recovery play. This is also your emergency fund if life happens.
Now for risk management because none of this works without it. Every position gets a hard stop at 15% below your entry. No exceptions. No "I'll just hold a little longer." The whole point of scaling in is that your average entry is good enough to survive a 15% stop on any individual buy. If you get stopped out, you can always re-enter. Capital preservation over ego.
Position sizing matters too. No single stock position bigger than 8% of your total portfolio. Even NVDA. Even when Fear is at 20 and you're convinced it's the deal of a lifetime. Diversification isn't sexy but it's what keeps you in the game long enough to be right.
The last piece is timing. I only check my bucket deployments once per day, at market close. Not during the session when emotions are running high. I set my alerts, I wait for close, I make my decision. Takes about 15 minutes. No staring at charts, no panic selling at 10am because something dipped 3%.
This strategy isn't going to make you rich overnight. It's designed to keep you from being stupid during the exact moments when being stupid feels like the right move. Fear at 29 is uncomfortable. That's the point. The discomfort is where the opportunity lives.
Anyone else use a scaling approach or do you prefer all-in at your levels? Curious how others handle this.