ETF Exchange Traded Funds (ETFs) 2020

See attachment showing what happens to $100 over 2 to 30 years. Investing at least 7 years will always result in more than originally invested (notwithstanding inflation).

 

@Zenith Chaos

Did you create that yourself?

 

Yes.

 

Whenever I look at that chart, I always think a good time to buy extra VAS (or leverage up a bit) is at the end of a negative year, and do it again on a consecutive negative year. Shorter timeframes (3mth / 6mth) might work too.

 

With quarterly dividends I suspect it would be best to buy as soon as the money is available.

 

Buying opportunity coming up looking at the us market overnight. Not sure how deep this will run. Not unreasonable to think all of Jan gains will be gone.

 

Is a market correction imminent?

Heading into 2020, you could be forgiven for worrying about your investments. A strong 2019 has capped a stellar decade since the financial crisis, especially if your portfolio came close to mirroring the US’s more than 50pc share of global equity market capitalisation. With bonds and shares benefiting equally from ten years of easy money, even a more cautious balanced approach will have served you well.

There’s a short and a longer-term reason why you should be more relaxed than you probably are. First, if you step back from 2019’s rally it looks less impressive than at first glance. Over two years, markets have done OK, but nothing to make you fear a correction must be imminent. In fact, if you strip out the US, the rest of the world has had a fairly disappointing 24 months.

Since the beginning of 2018 the S&P 500 has risen by just over 20pc. That contributed to a 12pc return for the MSCI World index. But the UK, Europe and China are basically where they were two years ago, while Japan’s Nikkei index is just 4pc higher. Emerging markets as a whole are 4pc lower than they were in January 2018.

The longer-term reason not to worry too much emerged as I settled down with 50 years of global stock market data and a calculator on my first day back at work last week (I know how to enjoy myself). I learned the following from half a century of MSCI World stats:

Shares have risen in 36 of 50 calendar years since the start of the 1970s. In 13 of those, the gains have exceeded 20pc. Only three times have shares fallen by more than a fifth in a calendar year and only eight times by 10pc or more. In two of those three really poor years, you would have regained your New Year investment within around two years as the market quickly bounced back.

So, to put that in human terms, if you started investing at the age of 20 in 1970, you have experienced just three really unpleasant investing years as you celebrate your 70th birthday this year. In one year in four since you left university, your investments have, as they did this year, risen by a fifth.

The £1000 you invested in the year the Beatles broke up is today worth more than £23,000. But as you sensibly lived off your salary during those years and prudently reinvested all the dividends from your shares, it is actually worth around £100,000. No wonder compounding is called the eighth wonder of the world.

So, even after the second-best year for investors since the credit crunch, the odds are stacked in your favour. You can indulge in the gambler’s fallacy of thinking that a string of heads must mean tails is on its way, but history suggests you would be wrong. Or at the least that it will matter in the long run less than you fear. And that’s before we’ve even considered the other reasons to stick with your investments in 2020.

The first of these is that a recession this year looks increasingly unlikely. The delayed impact of last year’s interest rate cuts and President Trump’s desire to support the economy and stock market in the run up to November’s election mean corporate earnings should pick up after 2019’s relative stagnation.

The second reason to be positive is that, the US apart, stock market valuations are not excessive. Even on Wall Street, a reasonable case can be made for shares to continue to trade on today’s multiple of earnings or even to become a bit more expensive yet. They certainly did at previous market peaks and sentiment is a long way from the exuberance that marked those periods.

The third reason to favour shares this year is that the decreasing effectiveness of monetary stimulus means that governments wishing to support their economies (all of them) will need to shift their focus to fiscal expansion. More public spending, with the likelihood of higher inflation as a consequence, is much better for shares than bonds so expect a lot of the money that has left equities for fixed income investments to head back the other way.

Shares, then, look like the asset class of choice this year. Bonds feel too expensive in a recovering economy under the threat of resurgent inflation at some point. The same can be said of commercial property where yields are far too low to compensate for rising risks. Unless things get really nasty in the Middle East, commodities like gold and oil will probably neither make nor lose you much this year.

Which stock markets should you focus on this year? As I’ve already hinted, the US feels like it’s priced more good news in than any other market after years of outperformance. I hesitate to step back from the world’s biggest market, because that rarely makes sense, but there’s clearly much better value elsewhere in the world at the moment

 

Careful there @Zenith Chaos it's danger territory as you're almost making a case for DRP.

 

Lump sum is proven mathematically superior to DCA over history therefore DRP will produce a better return than amassing dividends for a bigger plunge: Time in the market > timing the market.

Regardless, I still don't DRP, although I should consider starting as along with time in the market advantages it will simplify decision making. Once I FIRE keeping the dividends is more tax and investment effective than DRP and selling off parcels.

 

Cheap transport and surfing. Cool.

Although it isn't within its usual remit, I commissioned Cochrane to undertake a meta-analysis of all predictions both positive and negative over market movements for the last 30 years to ascertain which prediction group is right or which is wrong and to what extent.

I'm pleased to advise the Abstract and Summary is now available. Unfortunately it simply states "We've no frigging idea and neither does anyone else. "

 

That mother of all Elliot Waves is coming. Besides Geoff Wilson even reckons it due. The added height of the camel means I’ll see it coming before others so I can catch it first.

 

I get it.

In my case - and only because it applies to me and my circumstances - I decided to go for 50% DRP for each LIC holding. Still get cash from ETFs to decide where to allocate funds excess to needs.

Only done recently to apply from this reporting season so it will be interesting to see how I deal with it at a couple of levels.

 

DRP could increase the administration when selling. Need to keep good records.

 

Very little admin cost involved I am told. Plus no intention on my part to sell in which case my beneficiaries can deal with it. Getting it for nothing really so I'm not going to be overly upset about it. I won't be here anyway.

As for record keeping, you're right. So Right Click, Save As is my friend to income folder (twice if two divvy statements for same payment) and once to relevant share folder for company, eg ARG yyyy_mm_dd DRP/Buy etc. Max of three actions. Bit overwhelming for this aged has been I think.

 

What about the spreadsheet entry?

 

Checked my tax returns. Cost all up an additional $150. Not an amount I personally sweat over.

Picky, picky, picky. But OK. Five seconds to launch Excel and open the spreadsheet. Max of ten seconds to update number of shares and total purchase cost of number of shares held. That's all of 15 seconds of my life I'll never get back.

Took longer to type this.

 

Hopefully you find yourself some more free time in the near future, that was a fantastic post!

 

No excuse. Full disclosure mandatory here, unless your name starts with Geoff.