Invest in an ETF with a lot of effort: The basic consideration is that you can benefit from the effect of compound interest and the usual return of the market for as long as possible. A concept that can generate an average return in the highest single-digit percentage range for decades.
But is now a good time to make the most of your investments? On the one hand, this is wrong thinking, but on the other hand, one would also like to exclude bad timing as far as possible. So let’s take a look at the current situation.
Is now the time for big ETF bets?
Basically we can say: We have reached correction territory, maybe even a little more. Since its all-time high, the DAX has fallen nearly 24%. The S&P 500 is somewhat less susceptible to corrections because it is not linked to the EU. However, the minus is now around 14% from the all-time high. That is not little. But not necessarily much.
So what makes the situation tricky now is this starting position: On the one hand, as an ETF investor, you don’t want to miss out on a good entry point. However, you may be afraid of missing out on this discount that is now available. Thoughts that sound familiar? So let’s look for solutions.
Basically, now might be a good time to start with a big bet on an ETF. In any case, we are in a phase where a discount is available. However, rising interest rates, the Ukraine-Russia conflict and other factors add to the uncertainty. Consequently, it can go even further downhill. However: Buying now with a discount at least protects you from having caught the worst moment. This is psychologically possibly positive, so as not to invest at the worst possible time.
spread the time!
If I now wanted to invest a high stake in an all-market index fund and ETF, at least I wouldn’t go all-in straight. No, my main focus would be spread over time. At least five or six tranches, for example through a savings plan or even individual investments, can help cut down on unlucky times. If the correction continues lower, averaging lower is also an option. This means consciously buying more when certain correction levels are reached.
However, now may be a good time to invest in an ETF with a high stake. If you want to invest for decades, you can already secure the possibility of strong, market-standard performance during this period. Feeding into the compound interest effect as soon as possible is not a wrong thing to do. Still, he would try to make the best of the situation. And when in doubt, try lowering my entry price by averaging down, but not by market timing, if opportunities arise.
The article Is Now a Good Time to Invest in a High-Stakes ETF? first appeared in The Motley Fool Germany.
Motley Fool Germany 2022