Index investing was sold, hard, to investors – to the tune of $58 billion a month – as a safe, hassle-free way to ride stocks all the way to the moon.
Led by the High Priest of Indexing, John Bogle, and endorsed by Warren Buffett and other legendary investors, indexing was supposed to be the answer to all our investing goals.
"Buy a low-cost index, sit back, and let the magic happen."
But trade wars… U.S. President Donald Trump's vendetta against Amazon… North Korea… Iran… Italy… rising interest rates…. and more have all helped propel huge swings, and I suspect 2% daily swings were not what most new index investors were looking for when they made their initial investment.
It's not just volatile periods that present problems for index investors, either. It's a bad idea all the time – and here's why…
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I don’t consider a prospective P/E ratio of 16.9 (per Moringstar SPY etf as of the close on 5/31/18) as expensive in this low interest rate environment. Where do you come up with it being in the top 20%?
That’s poor advice over the long term….