ETF Keeps Going Higher: Stop Investing Until It Dips?

Summary

2024 has been an exceptional year for investors, with global stock markets hitting new highs. Many are questioning if now is the right time to invest in ETFs or wait for a pullback, while renewed interest in Bitcoin rises as it nears $100,000. With the ECB possibly lowering interest rates, savings accounts and money market ETFs may be affected. The speaker emphasizes the importance of long-term investing, sticking to a diversified portfolio, and carefully managing Bitcoin allocations. Despite market fluctuations, focusing on long-term financial goals and consistent investment strategies is key to success.

Takeaways

• 😀 Strong stock market performance in 2024 has led to new all-time highs, prompting many investors to reconsider their strategies.
• 😀 It's common to question whether it's the right time to invest in ETFs after a strong market rally, but timing the market is difficult and often inaccurate.
• 😀 Historical Wall Street forecasts have been incorrect by an average of 13.8%, highlighting the challenge of predicting market movements.
• 😀 Long-term investing (5-10 years) is key when investing in ETFs, as short-term market fluctuations do not significantly impact long-term returns.
• 😀 The S&P 500 has consistently set new highs, averaging 14 new highs per year since 1928, making it normal for markets to reach new peaks.
• 😀 While corrections and pullbacks are normal in the stock market, trying to time them is futile and may result in missed opportunities.
• 😀 High yield savings accounts and money market ETFs are impacted by changes in interest rates, with the European Central Bank likely to lower rates by the end of the year.
• 😀 The speaker's ETF portfolio, particularly the Invesco FTSE All-World ETF, has gained significant value in 2024, outperforming expectations.
• 😀 Bitcoin has seen exceptional performance in 2024, but it carries high risk and should only make up a small portion (up to 10%) of an investment portfolio.
• 😀 Bitcoin can be a great addition to a diversified portfolio but should not be the foundation of a retirement strategy due to its volatility.
• 😀 For Bitcoin investors, holding for at least four years, using trusted exchanges, and securing assets with hardware wallets are crucial for managing risk.

Q & A

What is the performance of the Invesco FI O World ETF in 2024?

The Invesco FI O World ETF has performed exceptionally well in 2024, finishing November up 7.11%, which is more than the average yearly return of 7%. As of December 1st, the ETF portfolio has gained €26,200 in November and $75,600 since the start of the year.

Should investors be worried about the stock market being at an all-time high?

While it's natural to feel concerned when the market reaches new highs, it's important to remember that the market has historically made new highs regularly. If you're investing with a long-term horizon (at least 5 to 10 years), short-term market movements, like corrections, won't significantly affect your overall strategy.

How often does the US stock market hit new all-time highs?

Since 1928, the US stock market has averaged 14 new all-time highs each year. This reflects the market's upward trend over time.

What is the key takeaway from Wall Street’s track record of market forecasts?

Wall Street forecasts have historically been inaccurate, missing the actual end-of-year returns by an average of 13.8% annually. This highlights the difficulty in predicting the market's movement, suggesting that investors should focus on long-term goals instead of trying to time the market.

What does the upcoming European Central Bank (ECB) meeting mean for interest rates?

The ECB's upcoming monetary policy meeting in December 2024 is expected to result in a rate cut, likely lowering interest rates to 3% by the end of the year. This will affect high-yield savings accounts and money market funds, which will see lower interest payments as a result.

What is the expected future trend of interest rates in the Eurozone?

Based on Vanguard's economic outlook, interest rates in the Eurozone may drop to as low as 1.75% by the end of 2025, suggesting that higher interest rates may not last long.

How has Bitcoin performed in 2024, and what are the risks associated with investing in it?

Bitcoin has been the best-performing investment in 2024, with a 139% increase so far. However, Bitcoin is a volatile asset, and it carries a high level of risk. It should not form the foundation of a retirement strategy and is best kept as a small percentage of a diversified portfolio.

What is the recommended allocation of Bitcoin in an investment portfolio?

The recommended allocation to Bitcoin is around 1% to 10% of an investment portfolio, depending on the investor’s risk tolerance. For most investors, Bitcoin should not exceed 10% of their total portfolio.

What is the best way to store Bitcoin securely?

For secure storage of Bitcoin, it is recommended to use a hardware wallet, such as the Trezor Safe Tree. This provides extra protection against hacking. It is important to never share the recovery phrase associated with your wallet.

How does the investor approach market corrections and the overall investment strategy?

The investor's strategy is focused on long-term investing, with 90% of their savings going into a single ETF (Invesco FI O World) each month. The remaining 10% is allocated to Bitcoin. If the market corrects, they will buy more ETF shares at a lower price, and if it rises, they are happy they didn’t wait to invest.