Here at the Motley Fool, we’re all about picking individual ASX shares to try and beat the market over time. In theory, this is what most investors should be doing if they are not investing in index or exchange-traded funds (ETFs).
We can easily get the market’s returns by just putting our money in an index ETF. So if an investor isn’t going on that road, they should be aiming to beat those ETFs’ returns.
But we also recognise that researching individual companies is not everyone’s forte or cup of tea. For those investors unwilling or unable to put the hard yards into building their own ASX share portfolio, ETFs are a fantastic alternative.
But for many investors, that age-old question of ‘when to invest’ is still a barrier to full participation in the wealth-generating effects of the share market. The idea of buying an ETF, only to see it fall in value in the coming weeks or months, is something many people (understandably) find terrifying.
The best time to buy an ETF? Right now…
Our own chief investment officer, Scott Phillips, has some sage advice for such a conundrum. Scott recently spoke with Gemma Dale on NABtrade’s Your Wealth podcast. When asked, “if you’ve got a bit of money left over after Christmas, where would you be going?”, here’s why Scott pointed to index ETFs as a good place to start:
For a lot of people listening, if they’re not comfortable picking individual stocks should at least make sure they invest that money in a broad index-based ETF, which is the most boring answer in the world. But put that money to work is my point.
And not because I know what’s coming next, not because I know the market’s going to jump 15% in the first six months of the year or not, just because, mathematically, the amount goes up over time – it goes up a lot over time.
So that’s why investing in ETFs right now could be a prudent choice for many investors out there.
Many investors keep some cash in the bank to deploy during a market downturn or crash. But the problem with that method is that we never know when the markets are going to tank next.
Your monetary firepower could end up sitting dormant in a bank account for years, as you wait for that ‘inevitable downturn, costing you valuable returns.
That’s why Scott told listeners that he likes to remain fully invested at all times. Here’s some of what he said about that idea:
And for my money, I’m always fully invested by the way, despite market gyrations, because I believe mathematically that makes sense.
If you look at history, being invested earlier has been better consistently than being invested late. Not every year, not every month, not every day, but over time, mathematically, you are better to be investing earlier rather than later. So at least invest the money is my point.
So if you’re waiting for an opportune time to invest in an ASX index ETF, it might just be today.