According to the Market — There Is No More Bad News

by Mitchell Clark, B. Comm.

I am very much amazed with the strength of the stock market. It
seems like nothing can stop this bull. According to investors, nuclear tests by one of the world’s last remaining nutbars aren’t material enough news to sell stocks. How about a GM bankruptcy? No, this is already priced in. What about the terrible performance in housing prices? Investors don’t really care.

This is a market that is ignoring bad news and is totally focused on the future — whatever that future might be. Investor sentiment is a lot stronger than I thought it was. But, the party has to end sometime. I still believe that the stock market is waiting for the right catalyst to sell. I don’t know what that catalyst will be, but, so far, no news or event has been big enough to stop investors from buying. Naturally, institutional investors are doing the buying, as they don’t want to get left behind in the performance department. If the market retrenches materially, this would likely be a very attractive new entry point for investors.

I’m convinced that one of the best ways to play the market, both for short-term trends and long-term investing, is to actually buy the index through an exchange traded fund (ETF) or iShares type of security. It doesn’t have to be your entire portfolio in equities, but it can be a solid part if you want to own stocks. It’s just so difficult to get a fund manager that consistently beats the index, especially when things go haywire, like in recent times.

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For the most part, index investing is cheap and, because there’s so much participation in the market by institutional investors, the index itself can really move. Program trading makes the gains (and losses) even more pronounced. This has been perfectly illustrated by the strength of the main stock market averages since March.

I also like index investing, especially if you want to participate in international markets. Readers of this column will know of my affinity for the iShares FTSE/Xinhua China 25 Index (NYSE/FXI). This index fund trades on the New York Stock Exchange, and it’s made up of the largest public companies in China that are available to international investors. I’ve been writing about this ETF since February, because I believe in China’s equity market recovery. Chinese stocks have been on a tear lately and this index is up over 15 points since I first starting writing about it. All this performance, with a decent yield as a bonus.

ETFs work particularly well when you develop a market view, but don’t quite know exactly how to act on it. Picking individual stocks successfully over a long period of time is a tough racket to be in. In my mind, the best equity portfolio mixes up select index funds with some attractive special situations for capital gains.

According to the Market — There Is No More Bad News
by Mitchell Clark, B. Comm.

I am very much amazed with the strength of the stock market. It
seems like nothing can stop this bull. According to investors, nuclear tests by one of the world’s last remaining nutbars aren’t material enough news to sell stocks. How about a GM bankruptcy? No, this is already priced in. What about the terrible performance in housing prices? Investors don’t really care.

This is a market that is ignoring bad news and is totally focused on the future — whatever that future might be. Investor sentiment is a lot stronger than I thought it was. But, the party has to end sometime. I still believe that the stock market is waiting for the right catalyst to sell. I don’t know what that catalyst will be, but, so far, no news or event has been big enough to stop investors from buying. Naturally, institutional investors are doing the buying, as they don’t want to get left behind in the performance department. If the market retrenches materially, this would likely be a very attractive new entry point for investors.

I’m convinced that one of the best ways to play the market, both for short-term trends and long-term investing, is to actually buy the index through an exchange traded fund (ETF) or iShares type of security. It doesn’t have to be your entire portfolio in equities, but it can be a solid part if you want to own stocks. It’s just so difficult to get a fund manager that consistently beats the index, especially when things go haywire, like in recent times.

For the most part, index investing is cheap and, because there’s so much participation in the market by institutional investors, the index itself can really move. Program trading makes the gains (and losses) even more pronounced. This has been perfectly illustrated by the strength of the main stock market averages since March.

I also like index investing, especially if you want to participate in international markets. Readers of this column will know of my affinity for the iShares FTSE/Xinhua China 25 Index (NYSE/FXI). This index fund trades on the New York Stock Exchange, and it’s made up of the largest public companies in China that are available to international investors. I’ve been writing about this ETF since February, because I believe in China’s equity market recovery. Chinese stocks have been on a tear lately and this index is up over 15 points since I first starting writing about it. All this performance, with a decent yield as a bonus.

ETFs work particularly well when you develop a market view, but don’t quite know exactly how to act on it. Picking individual stocks successfully over a long period of time is a tough racket to be in. In my mind, the best equity portfolio mixes up select index funds with some attractive special situations for capital gains.