Index Fund Bubble Explained - How To Invest (in Index Funds)
Channel: Value Investing with Sven Carlin, Ph.D.
Date: 2019-11-06

Index Fund Bubble Explained - How To Invest (in Index Funds) - Index Funds are per se not a bad investments. You just have to invest in index funds in a smart way. I share what matters when it comes to investing in index funds and other types of investing.

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The index fund bubble explained 

The index fund bubble can be defined only after and if it pops. If the index fund bubble doesn't pop, it is not and will never be a bubble. Your index fund investment returns will be determined by fundamentals, nothing else. 

Index fund investing – Passive better than active

Fundamentals are also crucial when deciding whether to go passive and invest in index funds or be an active investor. The key is to compare the risks and rewards of any investment opportunity so that you can see what to expect.

What to expect from index funds over the long-term

The S&P 500 index fund will probably deliver 5% yearly returns over the long-term. That is good, but it might not be linear and you can see crashes like in 2009 or 2002 of 50%. Keep that in mind and see how it fits your financial goals.

Index funds - greed and fear
Focus on fundamentals, not greed and fear - usually the biggest mistake index funds investors make. 
A good index fund investing for beginners strategy would be to invest automatically on a monthly basis. Low cost Vanguard Index funds is all you need - but you have to stick to it long-term.
Long-term outlook – Index fund risk and reward scenarios  are what matters and you have to see how various scenarios would affect you personally.

How to invest – index funds or stocks?
See how much you can put into investing, how much time and what can you take in volatility. Focus on quality, long-term sustainability and superior returns. At the moment index funds have the first two, not the third.
Investing vs Index fund compounding – 5%, 7%, 10% or more! Index funds will compound at 5%, that is good, don't expect more than 5% from the current level. But if you aim for higher and get to it, magic can be made!

#indexfunds #indexfundsbubble #stockmarket