Content Editor, Dunham | 2025 ThinkAdvisor Luminary Award Winner | 2026 Wealthies Finalist — Thought Leader of the Year | Macroeconomics, markets, geopolitics & global trends
Markets can hand you a decade of gains and take half of it back in a few brutal months.
Every advisor and investor eventually faces the same two questions: "Should I get out now?" And, just as painful: "Is it finally safe to get back in?"
The honest answer — nobody knows. And that uncertainty is exactly where emotion takes over.
There's a smarter way to approach it. It's not about predicting the market. It's about having a system that turns market psychology against itself: buy fear, sell greed.
Key Takeaways:
Market timing is unreliable — even top investors like Buffett and Lynch warn against trying to predict tops and bottoms.
Fear and greed lead investors astray, often causing them to buy at highs and sell at lows.
DunhamDC’s systematic strategy eliminates emotion, buying during fear and trimming exposure during greed.
It helps deal with the Retirement Investment Paradox by balancing growth with protection against sequence risk.
Unlike traditional dollar-cost averaging, it adapts to both price and time, optimizing for long-term success.
The Problem: How Do You Identify Market Highs and Lows in Real Time?
Market timing is the siren song of investing - tempting you with whispered promises, though it almost always leads to trouble.
History is littered with investors who believed they could call the top or the bottom. In hindsight, they were either too early, too late, or just wrong.
Even some of the greatest investors of our time - like Warren Buffett, Peter Lynch, and John Bogle - warned against it. They emphasized staying calm and sticking to a strategy.
Yet one thing they all agreed on.
Buy low, sell high.
That's simple to say. Brutally hard to execute.
Because here's the real issue - how do you identify "low" and "high" when you're living through them in real time?
Hindsight makes it look easy. But when markets are crashing, how many investors truly have the conviction to buy? And when markets are soaring, how many have the discipline to sell?
So instead of trying to time the market like throwing darts in the dark, consider two simpler questions:
At a market top, would you rather own more stocks or less?
At a market bottom, would you rather own less or more?
Most investors want less exposure at the top - when risks are highest - and more at the bottom, when upside is greatest.
Why Do Investors Buy at Market Tops and Sell at Market Bottoms?
Yet human emotion leads most investors to do the exact opposite - buying at highs out of FOMO and selling at lows out of panic.
This happens because the greatest investors understand something most people overlook: market sentiment, investor psychology, and behavioral finance drive markets in the short term far more than fundamentals do.
When prices sink, fear and pessimism take hold. When prices surge, greed and euphoria run wild.
This creates a self-reinforcing emotional cycle:
Greedy sentiment fuels buying, which pushes prices higher, which fuels more greed, which pushes prices even higher.
Fearful sentiment drives selling, which pushes prices lower, which fuels more fear, which pushes prices even lower.
The key to successful investing isn't guessing highs and lows. It's having a strategy that removes emotion and capitalizes on these cycles.
Or put simply: Buy Fear, Sell Greed.
A Smarter Approach: DunhamDC is a strategy That Buys Fear, Sells Greed
Because of this, we at Dunham recognize the value of systematic, unemotional investing. That’s why we developed DunhamDC - an investment overlay that follows the core ideas that Buffett so famously articulated:1
"Be fearful when others are greedy, and greedy when others are fearful."
The Retirement Investment Paradox: How to Balance Growth & Risk in Retirement
Dunham’s Executive Vice President Salvatore M. Capizzi, CEPA developed the Retirement Investment Paradox to highlight three major risks that can derail a retiree’s financial plans:3
Inflation – The constant erosion of purchasing power.
The Paradox: The Very Thing That Helps You Can Also Hurt You
To combat inflation and longevity risk, retirees often turn to stocks - the best historical hedge for long-term growth.
But more exposure to stocks also increases the risk of devastating early losses.
If markets decline right after retirement, portfolio withdrawals amplify the damage, making recovery nearly impossible (this is sequence risk in action).
So, the very stocks retirees need to fight inflation and support longer lifespans can also be the biggest risk to their financial survival.
This is when the medicine becomes poison.
And here’s the real problem.
When markets fall, time won’t wait. Retirees can’t press pause on their expenses. They still need to pay the mortgage, buy groceries, and cover medical bills - even if their portfolio just took a 30% hit.
A younger investor can ride out the storm. But a retiree selling and withdrawing assets during a downturn to pay these expenses locks in losses permanently - depleting their nest egg faster and faster while making a comeback nearly impossible.
What Is Sequence of Returns Risk in Retirement?
Sequence of returns risk is the risk that poor investment returns early in retirement, combined with ongoing withdrawals, permanently shrink a portfolio in a way strong long-run averages can't fix. Losses taken in the first few years get locked in by withdrawals, reducing the base left to benefit from any later market recovery.
The Perfect Retirement. Until It’s Not.
Just imagine it’s 1999. After years of disciplined investing, your portfolio has grown significantly. You’re ready to retire.
Then, the market turns.
Between its peak in March 2000 and its low in October 2002, the S&P 500 fell roughly 49% (and when accounting for dividends reinvested, the total return decline was around 42%).
Investors relying on their equity portfolios for income were forced to withdraw at the worst possible time.
Many who retired at the peak saw their nest eggs shrink dramatically over the next few years if they held - just as they needed them most.
This is sequence risk - when the right investment strategy turns financially disastrous because of nothing more than bad timing and unfortunate luck.
Sure, the market eventually recovered - but for retirees withdrawing funds to survive, their portfolios never got the chance to recover as they bled it out from retirement expenses (or were forced out of retirement).
And the same virtuous cycles repeat more often than many may realize.
For example, some of the big ones were:
2000 (NASDAQ collapse)
2008 (Housing Crisis)
2020 (COVID Crash)
2022 (Fed Rate Hikes)
Some recoveries were faster, and some were slower. Buttiming is never within an investor’s control.
This is why retirement planning requires a delicate balance - growth to outpace inflation and longevity while managing sequence risk.
Does Dollar-Cost Averaging Remove Emotion From Investing?
Dollar-cost averaging removes timing decisions but not price risk. It buys a fixed dollar amount on a schedule regardless of valuation - so it keeps buying more expensive shares in a rising market and fewer cheap shares in a falling one, the opposite of what a fear-and-greed-based strategy targets.
Yes - to a point. But DCA has a blind spot - it ignores price.
For instance, imagine you get $10 every month to buy shares of “Burger World”, your favorite fast-food company.
Some months, the stock price is $5, so you buy 2 shares.
But other months, the stock price is $10, so you only get 1 share.
And that’s the problem. If Burger World’s stock keeps rising as markets rally into the future, you’ll keep paying more for fewer shares. Then, if it crashes, those high-priced shares lose value fast - making the downturn even worse.
This is why DunhamDC has a potential edge above traditional DCA strategies – because DunhamDC factors in both price and time.
For Advisors: A Framework That Works in the Room
For advisors, this matters most when markets are noisy. Clients don't call to discuss "sequence risk." They call because they're scared or euphoric.
Having a rules-based framework like DunhamDC gives you something concrete to point to - a process that explains why you're adding risk when headlines are screaming sell, or trimming it when everyone feels invincible.
It's not just a portfolio strategy - but a client conversation strategy.
The Bottom Line: If Emotion is the Enemy. DunhamDC Could be the Solution
As I noted from the start of this article, the greatest investors know it’s not about perfect timing.
No. It’s about having a system that minimizes guesswork, controls risk, and maximizes opportunity.
Markets will rise. Markets will crash. And fear and greed will always be there.
The question is: Will you fall victim to them? Or will you take a smarter, more disciplined approach?
Remember, you can’t control the market, but you can control how you respond to it - and that can make all the difference.
For the Call That Comes Too Late
The Client Who Calls After They've Already Decided
You've been there. The market is down. The emotion is high. And before you can say a word, you already know — they've made up their mind.
No analogy lands in that moment. No chart changes it. The window to act closed before the phone rang.
DunhamDC is built for exactly that window — the one before the call. A rules-based strategy built on the Dykmans Curve that adjusts equity exposure automatically as market conditions change. It buys fear. It sells greed. The decision is already made before the emotion arrives.
Advisors who run DunhamDC don't scramble to talk clients off the ledge. DunhamDC already adjusted — buying as fear drove prices down, trimming as greed pushed them up. By the time the call comes, the portfolio reflected reality long before the client did.
Frequently Asked Questions About Market Timing in Retirement Investing
What is sequence of returns risk in retirement? Sequence of returns risk is the risk that the order of your investment gains and losses, not just your average return, decides whether your retirement savings last. A market downturn in your first few retirement years does more damage than the same drop ten years later, because withdrawals lock in losses and shrink the pool that could otherwise recover.
Does market timing work in retirement? Rarely, and not by much. Studies looking at rolling 30-, 40-, and 50-year periods show even perfect timing only slightly beats staying fully invested the whole time. Both approaches beat waiting in cash for a better entry point. The cost of sitting out the market usually outweighs any benefit from dodging a downturn.
How is a sentiment-based rebalancing strategy different from dollar-cost averaging? Dollar-cost averaging invests a fixed amount on a fixed schedule, no matter if the asset looks cheap or expensive at the time. A sentiment-based strategy adjusts how much you buy or trim based on where fear or greed sits in the market, so it reacts to price instead of just the calendar. That's the gap DCA can't close on its own.
What did Warren Buffett mean by 'be fearful when others are greedy'? Buffett meant that crowd emotion, not actual value, drives most short-term price moves. When everyone's excited and prices climb past what the fundamentals support, that's the moment to pull back on risk. When fear pushes prices below what a company or investment is really worth, that's the moment to step in and buy.
This communication is general in nature and provided for educational and informational purposes only. It should not be considered or relied upon as legal, tax or investment advice or an investment recommendation. Any investment products or services named herein are for illustrative purposes only, and should not be considered an offer to buy or sell, or an investment recommendation for, any specific security, strategy or investment product or service. Always consult a qualified professional or your own independent financial professional for personalized advice or investment recommendations tailored to your specific goals, individual situation, and risk tolerance.
Past performance may not be indicative of future results. No investment strategy or risk management technique can guarantee returns or eliminate risk in any market environment. There may be economic times when all investments are unfavorable and depreciate in value.
DunhamDC (“DunhamDC”) is a proprietary algorithm of Dunham & Associates Investment Counsel, Inc. (“Dunham”) that seeks to mitigate sequence risk, which poses a threat to an investor's returns due to the timing of withdrawals. The algorithm employs what Dunham considers to be a pragmatic strategy, generally making incremental increases to the equity allocation when global stock market prices decrease and decreasing it when global stock prices increase. The U.S. variant of DunhamDC generally increases equity exposure as domestic stock prices decrease and reduces equity exposure when domestic stock prices increase. This approach is objective, unemotional, and systematic. Rebalancing is initiated based on the investment criteria set forth in the investors application and is further influenced by the DunhamDC algorithm.
Due to the large deviation in equity to fixed income ratio at any given time, investor participating in DunhamDC understands that a large deviation in equity to fixed income ratio can have significant implications for the risk and return profile of the account. Accordingly, during periods of strong market growth the account may underperform accounts that do not have the DunhamDC feature. Conversely, during periods of strong market declines, the account may also be underperforming, as the account continues to decline, due to the higher exposure in equities. Similarly, if the fixed income investments underperform the equity investments, it is possible that the accounts using the DunhamDC feature may underperform accounts that do not have the DunhamDC feature, even though they may have adjusted the exposure to equity investment before a decline. Therefore, the investor must be willing to accept the highest risk tolerance and investment objective the account can range for the selected strategy. Please see the Account Application for the various ranges.
DunhamDC uses an unemotional, objective, systematic approach. The algorithm does not use complex formulas and is designed to create a consistent process with limited assumptions based on historical data.
DunhamDC may make frequent purchases and redemptions at times which may result in a taxable event in the account and may cause undesired tax-related consequences.
Trade signals for DunhamDC are received at the end of each trading day with the implementation of the trades not occurring until the next business day, which means that there is a one-day lag that may result in adverse prices.
DunhamDC operates within predefined parameters and rules, some or all of which may not be available to review. While this approach can reduce emotional biases and enhance consistency, it may limit adaptability to changing market conditions, economic considerations, or unforeseen events. Extreme conditions may require deviations from the program’s prescribed approach, and such adaptability may be challenging to incorporate. The DunhamDC algorithm is programmed based on specific criteria and rules, it may not capture certain qualitative or contextual factors that can impact investment decisions or movement in the markets. Beyond the initial assumptions used to develop the algorithm, it lacks other inputs or considerations that human judgement and discretion may be necessary to evaluate. DunhamDC may utilize historical data, statistical analysis, and predefined rules. It does not make any predictions and may add to certain investments before they perform poorly or may divest from other investments before they perform well. Dunham makes no predictions, representations, or warranties as to the future performance of any account.
Accounts invested in DunhamDC are subject to a quarterly rebalance to its target allocation at the time based on DunhamDC in addition to the signals provided by DunhamDC at any given time.
Dunham makes no representation that the program will meet its intended objective. Market conditions and factors that influence investment outcomes are subject to change, and no program can fully account for all variables and events. The program requires making investment decisions based on factors and conditions that are beyond the Account Owner’s and Dunham’s control.
DunhamDC is NOT A GUARANTEE against market loss or declines in the value of the account or a timing strategy. Investor may lose money.
Asset allocation models are subject to general market risk and risks related to economic conditions.
DunhamDC has a limited track record, with an inception date of November 30, 2022.
DunhamDC US has a limited history, with an inception date of July 1, 2024.
Dunham & Associates Investment Counsel, Inc. is a Registered Investment Adviser and Broker/Dealer. Member FINRA/SIPC. Advisory services and securities offered through Dunham & Associates Investment Counsel, Inc.
