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If everyone buys the same index funds, then all the money chases the same stocks within those index funds. The system feeds on itself resulting in overpricing o
by cudgy 5y ago
If everyone buys the same index funds, then all the money chases the same stocks within those index funds. The system feeds on itself resulting in overpricing of the index stocks which may not work out well during a sell-off. Index funds have risks too.
- costcofries 5y agoIf more people invest in an asset, the price of the asset increases because its value also increases. This isn't overpricing, or the 'system' feeding itself, this is the value of assets increasing..
- cudgy 5y agoYou are ignoring all the other stocks in the market that are not part of an index, which should represent better investment value in the scenario. Do you really want to only invest in the peak priced assets in a market?
- costcofries 5y agoYour perceived peak is exactly that, a perceived peak. You go and try to time the market, I will continue to DCA, I know what has historically proven a more effective strategy.
- cudgy 5y agoYou missed the point entirely. It’s your money.
- SkipperCat 5y agoFair point, but you can purchase the Vanguard Total Stock Market Index Fund which has pretty much the entire stock market. That way, you're only betting on the direction of the total market. And as history shows, it will most probably creep up at 6 to 8% over the long haul.