Should I sell my index funds?

Canadian-Swiss Runner wrote:

I've been studying finance and investment management for a few years (chartered financial analyst designation), I worked in asset management in Canada and now work in corporate finance in Switzerland. This doesn't make me a great investor but it's given me a great view point into the behavior of investors.

What boggles my mind is that you would ask this forum. Nobody knows what the markets will do in 1 week, 1 month or 1 year. Only fraudsters report to know.

The one truth is that markets have generally gone up in the past, over the course of many years. The main problem is that they climb a long wall of worry but take the elevator down.

Investors face many biases and recency bias is the one we see most often given the financial crisis. Otherwise, the moment markets go down, people start thinking that a new financial crisis is upon us.

Market have suffered a 10% drop about once per year on average and a 20% drop once every five years on average. The one implication from this is that if you think you might need the money within a year, don't put it into stocks. That's what money market funds are for.

If you believe in capitalism, that businesses will keep on generating profits over the coming 20 years and that you won't plan on touching your money for at least 5-10 years then investing in stocks is a great way to build wealth (once again, over the long term). But if you hope to make a quick buck, then a trip to Vegas will give you the same odds.

Sorry to disappoint you, but doing what you did in the first place was not the smartest of moves. Compounding that with asking this forum was just dumber. And blaming people for given you advice on whether it's been heads or tails is probably the dumbest.

Given the biases you are prone to, your money should not have been in the market in the first place.

Sorry bud!

Ghost of Igloi wrote:

This article was originally published in Barron’s on Dec. 28, 2018. Sage advice from the great Jack Bogle, RIP:

“In case you’re thinking that it’s safe to dive back into the stock market, think again. Jack Bogle, the father of the index fund, is advocating caution. Over the past several years, index fund investors have reliably bought the dips in the stock market, expanding the valuations on growth stocks and helping push the S&P 500 higher. But that probably no longer is a savvy approach, says the founder of the Vanguard Group.

In a recent interview with Barron’s, Bogle warned that “trees don’t grow to the sky, and I see clouds on the horizon. I don’t know if and when they’ll arrive. A little extra caution should be the watchword.” Those clouds, he said, include large amounts of sovereign and corporate debt, the “great upheaval” in global trade, and “the mystery of Brexit, which will be very disruptive to the world trade system. Those things add up.”

Ghost of Igloi wrote:

This article was originally published in Barron’s on Dec. 28, 2018. Sage advice from the great Jack Bogle, RIP:

“In case you’re thinking that it’s safe to dive back into the stock market, think again. Jack Bogle, the father of the index fund, is advocating caution. Over the past several years, index fund investors have reliably bought the dips in the stock market, expanding the valuations on growth stocks and helping push the S&P 500 higher. But that probably no longer is a savvy approach, says the founder of the Vanguard Group.

In a recent interview with Barron’s, Bogle warned that “trees don’t grow to the sky, and I see clouds on the horizon. I don’t know if and when they’ll arrive. A little extra caution should be the watchword.” Those clouds, he said, include large amounts of sovereign and corporate debt, the “great upheaval” in global trade, and “the mystery of Brexit, which will be very disruptive to the world trade system. Those things add up.”

Ghost of Igloi wrote:

This article was originally published in Barron’s on Dec. 28, 2018. Sage advice from the great Jack Bogle, RIP:

“In case you’re thinking that it’s safe to dive back into the stock market, think again. Jack Bogle, the father of the index fund, is advocating caution. Over the past several years, index fund investors have reliably bought the dips in the stock market, expanding the valuations on growth stocks and helping push the S&P 500 higher. But that probably no longer is a savvy approach, says the founder of the Vanguard Group.

In a recent interview with Barron’s, Bogle warned that “trees don’t grow to the sky, and I see clouds on the horizon. I don’t know if and when they’ll arrive. A little extra caution should be the watchword.” Those clouds, he said, include large amounts of sovereign and corporate debt, the “great upheaval” in global trade, and “the mystery of Brexit, which will be very disruptive to the world trade system. Those things add up.”

SAlly V wrote:

Ghost of Igloi wrote:

This article was originally published in Barron’s on Dec. 28, 2018. Sage advice from the great Jack Bogle, RIP:

“In case you’re thinking that it’s safe to dive back into the stock market, think again. Jack Bogle, the father of the index fund, is advocating caution. Over the past several years, index fund investors have reliably bought the dips in the stock market, expanding the valuations on growth stocks and helping push the S&P 500 higher. But that probably no longer is a savvy approach, says the founder of the Vanguard Group.

In a recent interview with Barron’s, Bogle warned that “trees don’t grow to the sky, and I see clouds on the horizon. I don’t know if and when they’ll arrive. A little extra caution should be the watchword.” Those clouds, he said, include large amounts of sovereign and corporate debt, the “great upheaval” in global trade, and “the mystery of Brexit, which will be very disruptive to the world trade system. Those things add up.”

And yet the market is up 7% annually even inflation-adjusted over the last 100 years despite having years like 1978 to 1980 when inflation was up around 14% and even close to 20% 90 years ago. What other investment has even come close to that? Think about it ... 7% inflation-adjusted annually even when some years inflation was as high as 14% or even as high as 20%. You are nuts to go after any other investment over the long haul.