ETFs are by far the most popular form of investment, regardless of whether you are a parent saving up for your child's college or you're a multi-millionaire/billionaire banker, a good portion of your investments will be in exchange traded funds, regardless of whether that fund is for commodities, industries or indexes.
Since their first implementation in the 1990s, they've have grown rapidly as seen in the thumbnail of this idea (
VOO
). In the words of Mr. Buffett himself, there is only one problem with index funds: "they're boring". You can't stand with your friends on the weekend at the barbecue and talk about all the trades you've made in response to crazy market action because you've got some fund manager who just holds the stock of everybody worth holding (in theory). All you do is put more money into it, or take money out of it.
However, recently I came to the realisation (like many other investors), they're becoming ludicrously priced. Not just the individual price but the overall market cap with companies like Blackrock and Vanguard holding quite conceivably hundreds of billions if not trillions of dollars within ETFs. Now there are concerns regarding a potential crash in the ETF market or at least the funds that trade through indeces. As far as the cause of such crash, I wouldn't dare attempt to make some degree of educated guess as anything could happen. One may consider me rather cynical when it comes to this topic but I'm sure I'm not the only person who has a problem with losing money.
Now there is absolutely nothing one can do about a crash but there are other solutions to minimise losses especially in a market that is trading so dangerously high. I would personally (assuming I had the financial capacity) take out around 60-75% of my overall investments in ETFs and transfer them to AAA rated state issued bonds or simply reinvest the money in stocks I already hold. Then I would continue my regular dollar cost averaging approach to investment in ETFs (or whatever the frequency is that you add money to such funds) until such a crash may occur. At a given point, (depending on the fund and how severe the crash is) I would increase the frequency and amount of money I add to such funds as the price drop should cause them to appear very attractive. Understandably, many people will disagree with this approach as you are still setting yourself up to lose money (unless you remove all your money from the funds, while you still could potentially continue earning. This results in the investor being left in some sort of dilemma. Although this is another discussion for another day) and "past performance is no indicator of future results" but this is the approach I would take.
As usual, other opinions, facts, news and comments are always welcome so comment away and stay safe!
TL;DR: ETFs are trading very high in price (dangerously) and a potential crash is luring (if you have a cynical outlook).*
*See the last paragraph on what I would do, due to such a situation being upon us.
Since their first implementation in the 1990s, they've have grown rapidly as seen in the thumbnail of this idea (
VOO
). In the words of Mr. Buffett himself, there is only one problem with index funds: "they're boring". You can't stand with your friends on the weekend at the barbecue and talk about all the trades you've made in response to crazy market action because you've got some fund manager who just holds the stock of everybody worth holding (in theory). All you do is put more money into it, or take money out of it. However, recently I came to the realisation (like many other investors), they're becoming ludicrously priced. Not just the individual price but the overall market cap with companies like Blackrock and Vanguard holding quite conceivably hundreds of billions if not trillions of dollars within ETFs. Now there are concerns regarding a potential crash in the ETF market or at least the funds that trade through indeces. As far as the cause of such crash, I wouldn't dare attempt to make some degree of educated guess as anything could happen. One may consider me rather cynical when it comes to this topic but I'm sure I'm not the only person who has a problem with losing money.
Now there is absolutely nothing one can do about a crash but there are other solutions to minimise losses especially in a market that is trading so dangerously high. I would personally (assuming I had the financial capacity) take out around 60-75% of my overall investments in ETFs and transfer them to AAA rated state issued bonds or simply reinvest the money in stocks I already hold. Then I would continue my regular dollar cost averaging approach to investment in ETFs (or whatever the frequency is that you add money to such funds) until such a crash may occur. At a given point, (depending on the fund and how severe the crash is) I would increase the frequency and amount of money I add to such funds as the price drop should cause them to appear very attractive. Understandably, many people will disagree with this approach as you are still setting yourself up to lose money (unless you remove all your money from the funds, while you still could potentially continue earning. This results in the investor being left in some sort of dilemma. Although this is another discussion for another day) and "past performance is no indicator of future results" but this is the approach I would take.
As usual, other opinions, facts, news and comments are always welcome so comment away and stay safe!
TL;DR: ETFs are trading very high in price (dangerously) and a potential crash is luring (if you have a cynical outlook).*
*See the last paragraph on what I would do, due to such a situation being upon us.