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Does MM like Index funds?

Our Q&As are emailed in our Saturday Morning Report, find the answer to this question below.

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Does MM like Index funds?

Hi James, I’m keen to work myself into a position in the future where I don’t have to keep such a close eye on the market and having looked at and invested in some managed funds it seems to me I would have done much better if I had invested instead in an ETF of one or all of the S&P 500, the Nasdaq and ASX200 indices. I appreciate that the last two years have been unique and that right now wouldn’t necessarily be the best time to put all of one’s funds into any of these, though it is easy to exit from them at any time given the liquidity of the ETFs, which adds to their appeal. I hope I am not putting you in a difficult position by asking you about this given that you are a fund manager yourself, however I would welcome your thoughts on the subject. By the way if I did put all my money into index funds I would continue to subscribe to your newsletter for your guidance as to the bigger picture as I’ve been impressed at how well you have called it in the last couple of years since I have been a subscriber including during this recent downturn. Looking forward to your response,

Answer

Hi Peter,

We are believers in the share market and by definition in index funds, I know a number of people who use them exclusively or as a large portion of their investment portfolio and they then dovetail our report to determine which markets and at times cash to carry in an  effort to create optimal returns, so not an awkward question at all!

I like the IVV for the S&P 500, I like the NDQ for the Nasdaq, we would use the A200 for the ASX – it’s the cheapest locally and if you want some exposure to a broad emerging markets ETF, have a look at the IEM.

I would caution as to the ease and low cost advantages offered by ETF’s because you don’t want to be sucked into the classic “Fear & Greed” cycle which sees many investors sell at the bottom.

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