Last Updated on November 14, 2025 by Chin Yi Xuan
Recently, a good friend of mine asked me:
“I have some extra ‘bullets‘ (cash)… but given the stock market at an all-time high (ATH), I am not sure if I should deploy them right now. Any thoughts?”
That is a valid concern.
Timing the market is extremely difficult to do – but let me share the next best thing with you:
Table of Contents
How I spot ideal risk-reward opportunities:
Personally, I have my fixed monthly investing routine. At the same time, I always have some extra ‘bullets’ ready in case the market drops.
But how much of a ‘drop‘ would it take for me to consider deploying my ‘bullets’?
The short answer: I look at past data.
It’s pretty simple – let me show you how:
The picture above shows you the annual return of the US stock market, the S&P500, over the past 45 years (1980 – 2024).
Now, I want you to focus on the red dots. These dots reveal the largest decline each year.
What can you observe from the red dots?
Here are my insights:
- Purple zone: It is common to see a decline of <20% in the S&P500 in a year. That happened in 36 of the past 45 years (80%).
- Green zone: Meanwhile, a decline of >20% only occurred in 9 of the past 45 years (20% of the time). For me, that’s the ideal risk-reward zone to deploy my bullets in the S&P500.
- Simply put, our ‘bullets’ have a higher chance of delivering more meaningful returns (relative to risk taken) the closer we get to a 20% drop.
In my opinion, using past data is one of the simplest ways to gauge if it is a good window to deploy your extra cash.
But it is not the easiest to execute in real life.
Caveat: The data shown above is specifically for the S&P500. Please gather your own data if you are curious about other markets.
Psychological Challenges:
- You might feel FOMO and deploy your bullets too early. (Confession: That was me)
- You might be too afraid to deploy your capital when the market drops >20%. By then, social media would have painted the sentiment as if it is the end of the world.
- Since big declines are rare, you might not see the drop you want. You will need to be at peace with your ‘bullets’ not being invested.
- eg. In 2023 and 2024, the largest declines in the S&P500 were only 10% and 8% respectively.
Ultimately, I’d say one will become better with more experience with stock market fluctuations.
My approach:
My biggest challenge is that I can’t stand seeing my ‘bullets’ not invested.
So these days, I do two things:
- I still invest monthly regardless of market conditions (Dollar Cost Average)
- I save my ‘bullets’ in low-risk funds to generate returns while waiting for market opportunities. That helps with my psychology.
Question: Do you have your own approach to deploy your ‘bullets’? Feel free to share with me by leaving your thoughts in the comment section!
Disclaimer:
Not buy/sell advice. Do your own due diligence before investing.
