71
votes
Accepted
How safe it is in the long run to regularly invest in the stock market?
It's not pretending to be bulletproof advice. You'll certainly lose money some of the time. That's just how it is in the stock market. "Don't try to time the market" is advice that an average Joe can'...
- 5,310
44
votes
How safe it is in the long run to regularly invest in the stock market?
An important point that is easy to miss: the chart you're showing appears to be a price index, this excludes dividends that were paid out over time. Look at the Nikkei-225 total return index (N225TR) ...
- 511
32
votes
How safe it is in the long run to regularly invest in the stock market?
Time in the market beats timing the market.
The following graphics (from personalfinanceclub, found on reddit) do a great deal in explaining why this works well when you are only planning on saving, ...
- 421
26
votes
Accepted
Why does the Nikkei 225 appear to be such a bad long-term investment?
The Japanese economy has had a unique history, with a huge bubble in the 1980s and a long unwinding afterward.
I don't see why that would result in a market that appears to have brief periods of ...
- 29.4k
24
votes
Accepted
Generally, Stocks move the index. Can index also move the stock?
The tail absolutely wags the dog in the equities markets. For a long time and this has been an active area of discussion.
More pragmatically, market microstructure - such as an index or even hedging ...
- 20.2k
23
votes
Generally, Stocks move the index. Can index also move the stock?
Per definition not - the Index is only a published number and when you add the price of certain things and report this number, the number can not change the price of the items.
Now, if you have ...
- 11.6k
20
votes
Accepted
When trading indices, what are we buying?
Indices aren't physical instruments that you can trade, no. The most common way to "trade" an index is to buy shares of a mutual fund that tracks the index. Some mutual funds can fully ...
- 131k
19
votes
Accepted
Why does VOO pay less dividends than SPY?
Do you see how VOO and SPY don't have the same price?
Say you and I both start an S&P index ETF. For sake of easy paperwork, and to discourage small customers, you sell shares at a starting value ...
16
votes
Accepted
S&P 500 constituent holdings not proportional to market cap?
The weights of S&P 500 constituents are rebalanced quarterly (every three months). In between the rebalances, the ratio of index constituent weights may differ from the ratio of their actual ...
- 16.9k
15
votes
Accepted
Understanding the past growth of an ETF
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 ...
- 29.4k
14
votes
Why don't SPY, SPX, and the e-mini s&p 500 track perfectly with each other?
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 ...
- 3,933
14
votes
Do people who buy and hold individual stocks for longer than 10+ years have a much better chance of outperforming the market?
I even tried getting rid of the obvious massive tech winners and just
relying on stocks like McDonald’s, Coca-Cola, Costco, j&j and GE
You used survivor bias to pick your stocks.
You picked ...
- 136k
13
votes
Accepted
What marks the beginning of a bear market?
You can’t determine the beginning of a bear market at the time — if you could then it would immediately become a crash, as everyone would try to sell. It can only be determined retroactively, after ...
- 22.9k
13
votes
Accepted
S&P 500 Index Value
The S&P 500 index is a float-adjusted market-cap weighted index. It’s calculated by taking the sum of the adjusted market capitalization of all S&P 500 stocks and then dividing it with an ...
- 75.7k
13
votes
How exactly does MSCI earn money?
MSCI is an "index provider". MSCI makes money from licensing its indexes. ETFs pay MSCI licensing fees based on the assets under management (AUM) and trading volumes of the fund.
It seems ...
- 16.9k
12
votes
Accepted
Understanding how an ETF works
The prices of each individual stock are 100$ (A), 10$ (B) and 1$ (C). The index weights at this moment are 60% (A), 30% (B), 10% (C).
In other words, for every 6 shares of A (initially worth $600), ...
- 16.9k
12
votes
Generally, Stocks move the index. Can index also move the stock?
The index is an average of the stocks in the index. A very simplistic index consisting of 3 stocks might be calculated as:
(share 1 price + share 2 price + share 3 price) / 3 = index price
In ...
- 1,464
11
votes
Accepted
How can you know which index is tracked by a specific index fund?
This kind of information can always be found in the Key Information Document (KID)
The KID states:
The Fund seeks to provide returns consistent with the performance of the
Bloomberg Barclays ...
- 318
10
votes
How is the Dow divisor calculated?
Have you actually read the Wikipedia article?
To calculate the DJIA, the sum of the prices of all 30 stocks is divided by a divisor, the Dow Divisor. The divisor is adjusted in case of stock splits, ...
- 8,468
10
votes
Accepted
Does an index have a currency?
From Wikipedia -
To calculate the value of the S&P 500 Index, the sum of the adjusted
market capitalization of all 500 stocks is divided by a factor,
usually referred to as the Divisor. ...
10
votes
Accepted
How are Vanguard's ETF's returns higher than the index's growth?
Repost of comment as an answer (as per Chirlu's suggestion).
The index does not take into account the dividends paid by the stocks in the index; the ETF does. So the ETF's return outperforms the ...
- 31.6k
10
votes
What marks the beginning of a bear market?
From Investopedia:
Although figures vary, a downturn of 20% or more from a peak in multiple broad market indexes, such as the Dow Jones Industrial Average (DJIA) or Standard & Poor's 500 Index (...
- 33.1k
10
votes
Accepted
Can fundamental analysis be applied to market indexes as if they were single stocks/bonds?
In theory it is possible, but very impractical. So much so that it approaches the impossible. Also this does not make much sense.
Assuming that it takes 100 hours to do proper fundamental analysis ...
- 76.1k
9
votes
Accepted
World Indexes - Variance between representation of a country's stocks and the country's proportion of world GDP
Stock market indexes are generally based on market capitalization, which is not the same as GDP. GDP includes the value of all goods and services produced in a country; this includes a large amount ...
- 24k
9
votes
Understanding the past growth of an ETF
Google's numbers:
10/01/18 $268.04
09/27/19 $271.26
That's a gain of 1.20% which is far less than the actual return because Google did not account for dividends.
During that period you would have ...
- 75.7k
8
votes
Why don't SPY, SPX, and the e-mini s&p 500 track perfectly with each other?
The S&P 500 is an index. This refers to a specific collection of securities which is held in perfect proportion. The dollar value of an index is scaled arbitrarily and is based off of an arbitrary ...
- 1,305
7
votes
How safe it is in the long run to regularly invest in the stock market?
OP asked a great question!
People've been using US stock market to justify auto-investment over market timing, passive funds over active management, etc. Well, not all markets are like this.
...
- 1,809
7
votes
Is investing in index futures better than investing in index funds?
I wrote up an article on exactly this strategy including how to execute it.
The theory is sound, the strategy should work. And additional huge benefit of doing this is avoiding the 30% dividend tax on ...
- 71
7
votes
Accepted
Is investing in index futures better than investing in index funds?
It is an interesting idea, but:
The minimum capital required for an unleveraged index futures position is prohibitive for most individual investors. For example, a single S&P 500 E-Mini contract ...
- 29.4k
Only top scored, non community-wiki answers of a minimum length are eligible