Hi guys, welcome back to another episode of SingaporeanTalksMoney! Today let's talk about Index funds being at all time high and should you be buying them now?
What is an index fund? And examples
An index fund is an investment that tracks a market index and they are typically made up of stocks or bonds. Just as how the name index fund suggest, it is tracking of an index through a mutual fund or exchange traded fund. Some examples of an index tracked through a exchange traded funds are:
Local
Nikko AM STI ETF (G3B)
SPDR STI ETF (ES3)
Overseas
Tracker Fund of Hong Kong (2800)
Vanguard 500 Index Fund ETF (VOO)
Vanguard Total World Stock Index Fund ETF (VT)
In the past few weeks, index funds have been hitting all time highs.
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VT has even hit USD$100 on 9 April 2021. VOO as well is now at $378.25 hitting new highs. Many are now apprehensive in entering as the ETFs seems overvalued and buying in at such a high price, will it still guarantee a profit?
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No one really has the answer but if you pull out the charts and look at it historically, Index ETFs hit all time highs quite progressively and generally grow in value, this is because the companies in the index grow and hence valuations increases as well. For example, Apple, Tesla, Alphabet and Amazon have all grown in value since 10 years ago and hence increasing the value of both VOO and VT as they are included in the ETF.
If you are confident that the world/USA/Singapore or whatever index fund you are buying, the companies inside will continue to grow then there is no better time to invest except for NOW!
Time Horizon
If you buy index funds, you should be aware that generally holding over a long term will be profitable and for this year, the S&P 500 has grown tremendously and my portfolio (inclusive of dividends) as you can see has return about 26.87% however S&P 500 has a return of 102.66% return as of 17 April 2021 which is astonishing meaning you would have doubled your capital just by buying S&P 500 alone.
In hindsight, everyone will always say that they could have perform better if they invested otherwise. So many posts have been covering if you had invested $1000 in the S&P 500 from start of 2020 till now, your $1000 would have turned to so and so. For me, currently the only index ETF I am buying into is VT through FSMone RSP and I don't really plan on making any changes to that. The main purpose of this video is to inform and at the same time remind myself to keep myself in check. For those who think that it is too high a price to enter now, you might want to consider a DCA approach so that you are able to stay invested and as per the market movement, you can adjust the amount accordingly if you are afraid of doing a lump sum all at once. Hope you guys enjoy today's video. Be disciplined, stay invested and stay safe!
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