written by reader What Indexes should one purchase in a down market

By jojoclem, June 11, 2020

Hi Everyone:
I am setting a plan to buy indexes when the market dips.
From what I read investing in the S&P and Dow and Nasdaq is not the way to go. I read Bloomberg index is a good bet.
Before I start a deep dive on research I would love to hear from others in this group.
Peace and love,
Jo

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calargy
calargy
Irregular
June 12, 2020 8:21 pm

Jo: I started ” investing ‘ at age 28 am now 81 and probably am 0 for 53 years so I am the worst person to listen to for free. The worst are the so called experts that promise the world for $ 49 then try to upgrade you to mucho $$ which may give you actual names, if not gains.

. But if you choose to listen I might be of use in the current mess. Inverse funds that bet against just about any index are very cheap now that the overall market has gone up 35% from it’s march lows. I bought some triple reverse S&P 500 [sqqq] for less than $9 on 9/11. As the S&P 500 lost about 5% they gained 15%. Next day the S&P 500 gained 2% so they lost 6%. If the S&P goes up much next week I will lose big money. But if it has a bad week I should do very well and probably sell. There are 100s of inverse funds. Pick one that is near it’s low , was far higher a month or two ago and has been around for years [ Many close suddenly and leave you with nothing] Whatever, bet small and only what you can afford to loose I think I have gained some wisdom over 53 years but promise nothing.

Travis Johnson, Stock Gumshoe
June 15, 2020 10:12 am

Not sure what you mean by “Bloomberg Index” — there are many different ETF and index providers, though most of them do a fine job of coming pretty close to approximating the overall stock market return of their chosen sector or market.

I always recommend starting small if you’re just trying to build up a stake in the market and beginning to learn, and once you get it built up then start thinking about experimenting with sectors that interest you or with individual stocks. Most providers offer very inexpensive broad-market ETFs, I’d start with the Vanguard Total Stock Market (VTI) and Vanguard Total International Stock Market (VXUS), but the results will be similar with any S&P 500 index fund.

Markets have been driven by the largest stocks this year, which is not always the case — if you want to be a bit contrarian then a bet on smaller companies (smaller than Apple and Microsoft, etc.) would be to equal-weight the index instead of weighting it by market capitalization. That would be something like the Invesco S&P 500 Equal Weight ETF (RSP) — the reason it’s contrarian is that the market has overwhelmingly been led by the Amazons and Microsofts of the world, and therefore S&P 500 index funds have soared because their largest components have outperformed. RSP has lost 5% in the past year while the S&P 500 has gained 4%…. but it also bounced back a little bit stronger than the S&P from the March lows (up 40% vs. 35%).

What the next drop and recovery looks like, nobody knows.

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rookie2294
rookie2294
Irregular
Reply to  Travis Johnson, Stock Gumshoe
June 15, 2020 10:53 am

I assume you mean “starting small” at the beginning of the second paragraph, although I have (unfortunately) taken the advice literally in the past.

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Travis Johnson, Stock Gumshoe
Reply to  rookie2294
June 15, 2020 11:38 am

Ha! Yes, sorry, will fix.

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