Hot answers tagged

118

You grossly miscalculated because you forgot that money has to actually be in the account to earn. You earn nothing on the £50 you haven't deposited yet. And that is the first problem: compounding isn't working for you because compounding takes time, and only 600 quid is even in there for 4 years. You're getting fleeced Adjust for the above, and the ...


57

If mean-reversion does exist, am I correct to say that timing the market is likely to reap great rewards? Sure!!! Just one problem: you can't time the market. why do so many people think it's a bad idea to invest when the market is high Because "they" think that the market will crash Real Soon Now. and a good idea to invest when the market is low? ...


50

One problem with looking at investments this way is that only £50 of your money was in the market for the whole 5 years. That last investment of £50 was only in the market for a month, and £600 of it was in for less than a year. This makes it seem like your investment isn't growing very fast. To be able to see how it might grow I tend to use a ...


45

A great deal of analysis on this question relies on misunderstandings of the market or noticing trends that happened at the same time but were not caused by each other. Without knowing your view, I'll just give the basic idea. The amount of active management is self-correcting. The reason people have moved out of actively managed funds is that the funds ...


43

One benefit of cash ETFs over a bank deposit is if you're interested in diversifying your currency holdings, they are a cheaper method than going to traditional currency exchanges. For instance, if you're in the US, and you want some of your cash holdings to be in EUR to hedge against the possibility of the dollar falling, you could exchange your dollars to ...


38

One is priced in US dollars and the other is priced in euro. The euro has appreciated against the US dollar over the past three years, hence the lower return in euro than in dollars.


34

The common expression in retort would be "Time in the market beats timing the market." Meaning: On average, the stock market rises [because on average, the global economy is expanding as outputs continue to increase] - a common rule of thumb for North American markets would be 7% / year, after factoring inflation. This general rise beats out the average ...


31

Great question! While investing in individual stocks can be very useful as a learning experience, my opinion is that concentrating an entire portfolio in a few companies' stock is a mistake for most investors, and especially for a novice for several reasons. After all, only a handful of professional investors have ever beaten the market over the long term by ...


25

You're not going to learn anything of significance by investing or trading with only $200 other than how to use the platform of your broker and you could easily do that by opening a FREE paper trading account with a broker. There are a slew of web sites that offer stock price forecasts. What makes you think that they are any good? If they could pick ...


21

You have some confusion regarding how ETFs work. N100 is traded on Indian stock exchanges so it will tick during opens hours in the Indian market. People are buying and selling it during the open market, so you should expect for prices to change. You are trading the ETF and not the underlying stocks in the index, which will tick during US market hours. But ...


20

Keep in mind, if the S&P were up 10% one day and down 10% next day, I am down 1%. But triple this, and 1.3 x .7 is .91, down 9%. This phenomenon is enough to make these 3x type ETFs not recommended for the long term. Since you are considering this strategy with your hard-earned money, I respectfully suggest this exercise. Take an X day period, 10 days, ...


19

Wow. It's clear I'm outnumbered. When I'm approached with the question (and keep in mind, it's usually a couple data points and little else) "I am getting started, with no other money do I fund a retirement or emergency account?" I often suggest they put the funds into a Roth, in a money market fund, and treat it like an emergency account. If there's in ...


18

Behind the scenes, mutual funds and ETFs are very similar. Both can vary widely in purpose and policies, which is why understanding the prospectus before investing is so important. Since both mutual funds and ETFs cover a wide range of choices, any discussion of management, assets, or expenses when discussing the differences between the two is inaccurate. ...


17

First, it's not always the case that ETFs have lower expenses than the equivalent mutual funds. For example, in the Vanguard family of funds the expense ratio for the ETF version is the same as it is for the Admiral share class in the mutual fund version. With that in mind, the main advantages of a mutual fund over an equivalent ETF are: You can buy or ...


17

I understand that they are different financial products, exchanged on different markets with different currencies. You're right, that's the difference. One is VOO, the other is VOO priced in euros on a different exchange. I do not understand why one of them has a 3 Years Annualised returns of 18.48% while the other has 13.18%. Without looking further I'...


16

No. You're lucky, maybe, but not really a successful investor. Warren Buffet is, you're not him. Sometimes it is easier to pick stocks to bid on, sometimes its harder. I got my successes too. It is easier on a raising market, especially when it is recovering after a deep fall, like now. But generally it is very hard to beat the market. You need to remember ...


16

I am mostly interested in long-term dividend-paying investments. Why only dividend stocks? The value of a stock goes down when they pay a dividend, so dividend stocks are (in my opinion) more appropriate for short-term income needs. Long-term you should be looking at total return (dividends + price growth). Plus, capital gains are taxed less if the stock ...


15

Although an ETF trades like a stock, it is really a stock mutual fund. And like all mutual funds, when you invest there are two ways that you realize a capital gain. As you mentioned, you have a capital gain when you sell a stock for more than you purchase it for, so when you finally sell this ETF, you will have a capital gain if the value of the ETF has ...


15

The currently accepted answer is incorrect. Vanguard is quoting the 1-year return as of 9/30/2019. This is calculated from the close of 9/28/2018 (the last trading day of September 2018) to the close of 9/30/2019. It is important to get the exact dates right because stock indices can easily rise or fall 1% or more in a day. Stock price fluctuations are ...


14

Patience. Five years is a very, very short period of time. The gains in long term investing are much more significant in the 50th year than the 5th. If you double your money every 10 years (a reasonable rate for many long term portfolios), you'll have less than 1.5x the original amount after 5 years. But after 50 years, you'll have 32 times your original ...


13

if you bought gold in late '79, it would have taken 30 years to break even. Of all this time it was two brief periods the returns were great, but long term, not so much. Look at the ETF GLD if you wish to buy gold, and avoid most of the buy/sell spread issues. Edit - I suggest looking at Compound Annual Growth Rate and decide whether long term gold ...


13

As Ross says, SPX is the index itself. This carries no overheads. It is defined as a capitalization-weighted mixture of the stocks of (about) 500 companies. SPY is an index fund that tries to match the performance of SPX. As an index fund it has several differences from the index: It is NOT the index in that it cannot acquire 100% of the share capital of ...


13

ETFs are legally separate from their issuer, so the money invested should (the lines can get blurry in a massive crisis) be inaccessible to any bankruptcy claims. The funds assets (its shares in S&P500 companies) are held by a custodian who also keeps these assets separate from their own book. That said, if no other institution takes over the SPY funds ...


13

If mean-reversion does not exist: It does not. Why were the returns for the 10 years following the 2008 recession unusually high? Because after the market finishes going down, it goes up. That's what it means to "finish going down". Similarly, after it finishes going up, it goes down. That's how we know when it finished going up. So it went down. Then, ...


12

Why are you saving your emergency fund in a Roth-IRA? That type of fund should be for retirement. I know you can pull out your principal but that would mean in a crisis you will be destroying your retirement fund. Remember there is an annual limit, it could take years to replenish it if you have to pay for a big repair, or period of unemployment. The ...


12

The reason diversification in general is a benefit is easily seen in your first graph. While the purple line (Betterment 100% Stock) is always below the blue line (S&P), and the blue line is the superior return over the entire period, it's a bit different if you retired in 2009, isn't it? In that case the orange line is superior: because its risk is ...


12

When you hold units of the DLR/DLR.U (TSX) ETF, you are indirectly holding U.S. dollars cash or cash equivalents. The ETF can be thought of as a container. The container gives you the convenience of holding USD in, say, CAD-denominated accounts that don't normally provide for USD cash balances. The ETF price ($12.33 and $12.12, in your example) simply ...


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