I know the experts say you shouldn’t try to time the market, but it seems like a no-brainer that after falling 20% or so in the last couple of weeks, the Dow is bound to make larger than average gains over the next year, and even average gains have been pretty good for the last ten years or so.
So, I would like to invest some money ($50K or so) in the Dow or S&P. I’m not interested in individual stocks, I want a broad index.
What are some good options if my priorities are fund stability (no chance it will go out of business), liquidity (I can buy or sell any amount at no worse than tomorrow’s price), and low fees?
I wouldn’t necessarily bet on this. The market has always recovered, but not necessarily within a year. Don’t invest money in stocks that you need that quickly.
If your time frame is longer you can’t go wrong with Vanguard’s Total Stock Market Index Fund (VTSAX). Its average yearly gain has been 12.48% the last ten years.
VTSAX is our discretionary investment fund (not our 401 or IRA fund). We have automatic investments twice each week to take advantage of dollar cost averaging.
Seconded. Over the course of a year, you simply cannot say that the market will be higher or lower at the end of that time period with any level of confidence. If I had to put $50k on the line one way or the other, I’d guess that the S&P would be lower on 3/10/21 than it is today. According to the world’s best measure of valuation, the stock market is finally back to being valued where it was in 2008 right before the crash, ie, it is still overvalued.
You can open a Fidelity account for free, and their Total US Market fund (FZROX) has a 0.00% expense ratio, which is even more diversified than an S&P 500 fund. They have 3 other zero expense funds as well (large cap, international, and a small-to-mid cap fund).
I’m sure they have a 2040 target fund, but those typically have a larger fee. If you’re willing and able to manage your bond exposure on your own, their Total Bond Market ETF, BND, has a 0.035% expense ratio.
Their 2040 mix is a touch more complicated: Vanguard Mutual Fund Profile | Vanguard
But easily replicated, just at the cost of your time. Or you may not agree with their allocations.
Wife and I have been putting money in their S&P500 index fund for years now.
If you have less than $3K to invest, you can get VFINX “investor” shares, for which the expense ratio is 0.14%. If you have more than $3K you can get VFIAX “admiral” shares, for which the expense ratio is 0.04%.
Any money you don’t need for the next ten years goes into VTSAX, the Vanguard Total Stock Market Index Fund. When you get to be 10 years away from retirement, then you start putting money into VBTLX, the Vanguard Total Bond Market Index Fund, and when you’re two years away from retirement you start putting money into a CD ladder.
And be completely happy about the current stock market decline. People twenty years away from retirement cheering high stock market prices is like people cheering high gasoline prices because their tank is half full. Don’t they know they’re buying, not selling?
The above advice will leave the investor somewhat more heavily allocated in stocks at retirement age than is typically advised. And more heavily allocated in cash.
What do you think of investing in Berkshire Hathaway stock (BRK-B)? It’s not investing in the market as a whole, but it is diversified. And I think it’s down enough that maybe it makes sense.