All World Trackers - High Risk? - I Don't Think So

Adyinvestment

It seems that most view all world tracker funds as high risk, but are they really?

History tells us that up there have been times where you could lose money up to a 13 year period (worst case scenario), but I would argue that unless a global catastrophe (in which case you would not care about the money) this is unlikely to happen ever again.

From my short experience in investing it would seem that stock and shares are just getting more and more popular, with huge amounts of money pumped in through pensions that would not have been the case in years gone past.

The younger generation seem to absolutely love investing! and I can only see this increasing with time.

Playing on the stock market is no longer a game played by Wall Street that when I was young you only heard about in films and news, in these digital times it is readily available to the masses, I can easily purchase shares in 10,000's of worldwide companies in seconds!

Investing is forced upon the working population via pensions.

Investing is trendy.

Investing is easy.

People are getting richer, and want to get even more rich, the stock market is only going to get more and more invested in.

Any tracker that is covering huge amounts of the worlds companies will only ever keep going up (in my opinion) - yes there will be crashes and dips and some twitchy months/years, but with more and more money pumped into these shares all the time I would argue the risk is low.

Take the recent Covid crash, within a few months it was back to previous levels and soaring higher - in today's modern world is there really anything that can happen (barring a global catastrophe) that can keep the whole market low for years on end?

eskbanker

Adyinvestment said:

From my short experience in investing....

These are the key six words of your post!  There has been quite a bull run in recent years, with relatively shallow or quickly-recovered dips, but what makes you think that there's no fundamental reason why deeper or longer crashes won't occur in the future?

Chickereeeee

Oh-oh, looks like a 'Sell' sign......

maxsteam

Personally I expect a fund manager to beat the indices rather than just match them. Tracker funds have a place in the investment world (lots of derivatives rely on them) but any idiot can track an index.

Adyinvestment

eskbanker said

These are the key six words of your post!  There has been quite a bull run in recent years, with relatively shallow or quickly-recovered dips, but what makes you think that there's no fundamental reason why deeper or longer crashes won't occur in the future?

I realise my opinion is contrarian, and fully accept I may be proved wrong.

I just think that investing is completely different to what it used to be, it is completely acceptable for the young to be pumping more and more money into shares.

It seems to me that most people see crashes as an opportunity.

Prism

There doesn't need to be a global catastrophe to create many years of zero or negative return. There was no global catastrophe in 2000 and yet the returns were terrible for years. There was no global catastrophe in the late 1960's just a war and an oil crisis, but inflation and valuations made sure that returns were terrible for many years.

eskbanker

Adyinvestment said:

eskbanker said

These are the key six words of your post!  There has been quite a bull run in recent years, with relatively shallow or quickly-recovered dips, but what makes you think that there's no fundamental reason why deeper or longer crashes won't occur in the future?

I realise my opinion is contrarian, and fully accept I may be proved wrong.

I just think that investing is completely different to what it used to be, it is completely acceptable for the young to be pumping more and more money into shares.

It seems to me that most people see crashes as an opportunity.

Many would agree with your last point (although there are plenty of inexperienced investors who are spooked when markets drop and lose confidence, selling out at significant losses, such as this recent example), but the fact that investing is now more accessible than before shouldn't be interpreted as signifying lower risk of loss!

Linton

Twice in the past 20 years global trackers have dropped by 40%-50%.  A lot of inexperienced investors would have sold out and cystallised their loss.  That is high risk in my book.  You would have to invest in something silly or pretty niche to have done much worse.

Alexland

Prism said:

inflation and valuations made sure that returns were terrible for many years.

Totally agree it looks like the US market is now primed for another lost decade of poor returns. The rest of the world looks ok and over enough time a global tracker should still deliver more than cash or inflation but the 10% of new investors who came online this year could be due a learning experience.

Prism

Alexland said:

Prism said:

inflation and valuations made sure that returns were terrible for many years.

Totally agree it looks like the US market is now primed for another lost decade of poor returns. The rest of the world looks ok and over enough time a global tracker should still deliver more than cash or inflation but the 10% of new investors who came online this year could be due a learning experience.

Last time around Japan was the thing that kept global markets rising - I do wonder who it will be next time the developed world has a stutter. Maybe China or India but who knows.

bd10

Thing is, tell someone the story about "the stock market ever going up" who went long Nasdaq in March 2000. It took just a bit over 15 years to break even. In the first 3 years of the crash, US tech stocks lost 80% of their value. The S&P 500, FTSE 100 and Dax 30 took over 7 years to get back to the same peak levels. That's a long time and maybe an investor does not have that much time left to sit that one out. Suppose you have a 100k windfall and go long right at the peak?

Investing is easy, picking the winners a piece of cake? Where have I heard that before? Ah, yes, about 20 years back. Tech stocks and the biotech stocks went nuts and whatever you bought made you money, no skills required, pretty easy. Back then I worked in a small bank and saw the frenzy first hand. We had pensioners glued to the real time Reuters screen which we had in the lobby. They brought in their breakfast and lunch and punted like crazy. Stock tips were passed between commuters on the way from work, a granny wanted to buy tech stocks for her grand kids' savings accounts, many discovered warrants (back then you could not get easy access to Eurex), some bought calls instead of the underlying, had the ISINs mixed up, that was a few months before the party ended.