Bad time for index funds?

[Jeffmet3]

Barron's has a neutral position for the rest of 2007, and then a bullish position for 2008.

But, if you want to have some fun, buy 4 funds: china, india, brazil, russia.

Just be prepared to have crazy variance


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ldo ?

we are not in the recession yet... so wouldnt it be couterproductive to invest if one was coming shortly ?

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[Jeff W]

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we are not in the recession yet... so wouldnt it be couterproductive to invest if one was coming shortly ?

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Sure... in the same vein, if you're going to be mugged tomorrow, you should stay home.

[dazraf69]

Sorry I didnt mean my question to turn into a debate about whether we are in a recession or not. I was just under the impression that a recession say in the coming years would actually be good for some of us.

[Fishhead24]

[ QUOTE ]
im in the same exact spot.

I have 3k sitting around collecting dust + 2 more (in my BR) collecting dust.

I am very hesitant to put it into the US market though, mainly b/c I am a noob, and I feel putting money in @ all time highs is worse (longterm) then putting money in at lows (2000).

Problem is; you cant just sit and wait for the the stocks to fall (unless your a genius who knows what he is doing). Any advice on how to minimize risk when dealing w/ such buull markets?

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At the very least get yourself into a high yielding savings accoung.

Rates are climbing right now and you can easily find 5.25% or higher.

[gull]

It depends on your risk tolerance, frankly.

In the past 80 years, the S&P 500's worst 4-year return was -64%. Excluding the great depression, the S&P 500's worst 4-year return was -25%. Can you handle those losses?

On the other hand, the S&P 500's best 4-year return was +200%. The geometric average 4-year period returned about 50%.

So should you keep your money in a savings account? Or should you invest in index funds? Or should you do something in between, creating a low risk portfolio with bonds and TIPs and perhaps commodity funds in addition to index funds?

In my opinion, the answer is probably index funds. The money you're investing now is likely a tiny fraction of your future cumulative net worth. Your life won't be forever devastated if you do lose some percentage of it.

The expectation of index funds for four years is +50%. The worst four-year return in history was -64%. Can you handle the risk of loss in exchange for an expected return? Only you can say.


*note: I used the S&P 500, adjusted for dividends but not inflation. A total stock market fund or balanced portfolio should outperform the S&P 500. However, stock returns going into the 21st century probably won't be as high as last century, because of rising p/e ratios. Lastly, history can only tell us so much. There are risk factors that 80 years of history does not illustrate.

[Jcrew]

Sell covered calls.

[hlacheen]

lol I like that whenever I see a thread with "index" in the title I immediately think of gull.

[gull]

Thanks. [img]/images/graemlins/wink.gif[/img]