You may be scratching your head about my headline. Great time to invest? The U.S. stock market is regularly touching record highs and some might say we’re overdue for a correction or even a bear market. Meanwhile, the specter of higher interest rates continues to hang over the fixed income markets. A rise in rates would depress bond fund prices. Yields on money market funds, meanwhile, are near zero.
But it’s still a great time to invest! Here’s why:
Access to information. Consider today the resources available to you to obtain information and evaluate investments. Fund websites, independent sources (e.g., Morningstar and ETF.com), and online magazines (e.g., MONEY and Kiplinger‘s) provide a plethora of insight, data, and tools to help you build and monitor your portfolio.
Access to low-cost investments. Consider today that you can own the U.S. stock market for 5 basis points—0.05% equals $5 on a $10,000 investment. Five bucks! I know folks who spend as much on their morning coffee.
When Vanguard introduced the first index mutual fund in 1976, the Vanguard 500 Index Fund had an expense ratio of 0.43% and carried a sales load of 6%.* That same $10,000 would cost you $43 in annual expenses and $600 in the form of a onetime commission. It’s hard to imagine a financial product—or any product for that matter—that has experienced such a dramatic decline in “price” or cost to purchase and own.
For do-it-yourself investors, low-cost, broad-market index funds offer an opportunity to build a long-term portfolio. For those who prefer a packaged solution, target-date funds offer similar asset class exposure (plus automatic rebalancing and a glide path) for a reasonable cost.
Access to low-cost help. Consider today the advice and guidance that are available from a financial professional at a reasonable cost. It may be worth the cost if you don’t have the time, willingness, or ability to manage your own investments. A planner can establish your goals, construct a personalized portfolio, guide you during life changes, and keep you on track during market turmoil.
The bottom line: It’s a great time to invest! With the first half year behind us, it may also be a great time to step back and assess your financial situation by asking yourself a few questions:
- How much am I putting away?
- Does my current asset allocation reflect my time horizon (how soon you will need the money you are accumulating) and risk tolerance (your fortitude with respect to possibly losing money)?
- Do I need to rebalance given that the run up in stocks may have moved me off of my target allocation?
- Have there been any changes in my life that would necessitate a change in beneficiaries?
*I rounded up. The actual sales load was 5.67% on investments under $50,000.