Market Highs: Invest or Wait? — Full Breakdown & Transcript

[00:04] investment portfolio that I am taking to 1 million euros and in this time there have been quite a few ups and downs, but overall it has had a very good rise. In fact, we are at all-time highs . If you look at the stock market in the MSC

[00:17] World globally—Europe, the United States, Asia—you'll see that many people , both those already investing and those considering starting, are asking themselves, "Hey, if the stock market is at record highs, what should I do now? Should I wait

[00:30] before investing? Or if I already have investments, should I adjust them slightly to adapt to the situation in case it's going to fall?" So in this video we'll look at the following four things. First, I'll show you my own portfolio, what I

[00:42] evolving. If you want more details, go watch the first videos in this series. Next, we will answer whether it matters to invest when the stock market is at its peak or not. Then we'll answer the question many of you have: if I

[00:56] want to invest but the stock market is at its peak and I have some savings, what should I do? Should I invest it all at once now, or should I do it gradually, investing a wanted to invest? Or should I wait for a crash? And then I start with whatever

[01:10] , whether it's saving all at once or step by step. And we will compare this with decision. Obviously, everyone should do what they want. This is not an investment recommendation of any kind, but I will show you what I am going to do, which is

[01:24] the fourth point we will see in this video. Let's begin. I'm in my account. I use T Republic in this case. In the cash section I have €6,000 as a safety net which I take advantage of through the interest-bearing account. I currently have a

[01:36] little more because every month I make an so that at the beginning of the following month it starts to be invested in the index funds in which I invest. So I'll show you my portfolio; at the bottom I

[01:50] invest in these five index funds: the SP500, United States, MSCI Europe, emerging markets, and Japan. We also have a gold ETF in equities , which is this one here, which is not an index fund; you can see the other

[02:05] videos. I also have Bitcoin, which is in another section, not here in the securities account, but if I click here on crypto wallet, below I can see that I have Bitcoin, which has recently fallen quite a bit , it is at -13% with respect to what

[02:17] I have invested. And if I go back to the securities account, I also have a fixed income index fund, it's the Vanguard Global Bond Index Fund below, to show anyone who wants to balance their portfolio a bit more towards

[02:29] fixed income because they don't want to invest so long-term or feel a bit more afraid of investing, they can have more fixed income. So I'm showing it as an videos if you want to see how all this is structured. In the same

[02:42] which you don't have to do, I 'm a bit of a geek about this, where I write everything down, that I have the current account, the fixed income index fund all this that I told you about stocks in the United States, Europe, Japan. When

[02:56] I say shares, I mean that it is an index fund that contains many shares. And I also have a pension plan that we started last month in the My Investor account. We see that in total I have invested €14,000, the

[03:10] initial €10,000 which I distributed, and each month I invest an additional €1,000 distributed as I explain. And in total we have a profit of 3.31%, which is these profit of 3.31%, which is these €463. And viewed in graphic form, it's only

[03:24] just a few days. I always record this at the end of the month to show you this video at the beginning of the following month, so in these 4 months and the fifth month as well we can see that so far it's going fantastically. Sure, the stock market

[03:37] next section. Okay, so let's talk about the elephant in the room, which is this MSC World chart, the entire stock market in general, which we see is at its peak. And look, I understand the fear, I really do. Seeing the stock market at all-

[03:51] time highs and putting money into it is dizzying. It seems like you're buying at the worst possible time, but there's something that changes everything when you understand it: today's highs are tomorrow's lows if you invest for the

[04:04] long term. The key here is whether you're going to invest long-term or not. If you're only investing for 5 years for a down payment on an apartment or something like that. In that case, then, don't invest so much in equities, but instead do some

[04:17] savings account, where there is no risk, bigger and within what you invest in the stock market, make it 50% fixed income, 50% variable income, for example. But for those of you who are following my portfolio a bit more closely and we have a

[04:31] large weighting in marketable income, like 90% or more, or 80%, we are seeing these highs, which it is true that can be a little scary and make you want to try to guess the market and think that you are able to

[04:45] predict whether it is going to go down now or not. and how much it will go down and when it will start to rise again. And that's the problem, thinking you can predict it. Then at the end of the video I'll tell you an anecdote about

[04:57] we invest in index funds and not in actively managed funds , which are those where there are people behind them trying to choose better what to invest in and when to beat the market, beat the MSC World and

[05:11] get more returns. There are some well- known studies, the espiba reports, which analyze actively managed funds versus passively managed funds. It shows you how these actively managed funds

[05:26] all the regions, but as you can see, the vast majority didn't even manage to match the market and on top of that they charge you more fees. And this is just for one year, but if you consider 3 years, 5, 10 or even 15, it becomes less and less likely that

[05:41] actively managed funds will match or outperform the benchmark index, which is the S&P 500. And here you'll say, "Ah, but then there are some." Well, do it consistently over the long term that we do. But I

[05:54] wanted to show you later to help you decide what to do with our portfolio. It's just to summarize the current situation where the market is at all-time highs: many people are waiting to invest for the perfect moment and are still waiting, having already

[06:08] have been excellent, to give an example, because it always repeats itself. Every time the stock market reaches a peak, people say, "The stock market is going to fall." And yes, it happens sometimes and yes, it will continue to happen on some

[06:21] occasions, but you don't know how long it will be going down or how much it will go investing regularly every month, which is good practice, at least 're also buying from me at lower prices, so it works out to

[06:36] dollar cost averaging of investing every month, which leads us to the next block of, okay, if I wanted to invest right now , even though they're at their peak, what do I do, Ricky? Should I invest these savings I had, for example, €5,000? Should I

[06:52] invest it all at once now, or should I invest €500 each month for 10 months until I reach € 5,000, perhaps to take advantage of a possible price drop? First of all, we don't know if this is going to keep going up or down right now.

[07:05] What we do know, although nothing is certain, is that—and excuse me for repeating myself—if we look at the long term, then it will go up, but what will happen in the short term, in 2 years, who knows? Okay, so let's look at a very well

[07:17] -known and famous study by Banguard where they statistically analyzed the difference, checking historical data, between investing a sum of money— in this case, $10,000 in savings—and saving it to

[07:33] make $500 each month until reaching $ 10,000, and seeing what the results are. And they were the next ones. I'll explain it to you with this graph, which is his. Here we can see three graphs, which are the following, and you can pause the video if

[07:47] you want to read this properly. But on one hand we have the red line, which is the bottom one, which is the typical DCA Dollar cost averaging of investing 500 every month for all these years, which is

[08:01] from 2012, that is, in this case 11 years, where it says here that the total return is 65% for these 11 years, which is more or less a return of almost 6% per year, which is very good, although this is taking these 11 years.

[08:17] If you invest more in the long term, the average annual return is approximately 8% per year on average. Then we have the green line, which is a one-time investment, Lamp SAM, that's what it's called in English, it's the famous Lamp

[08:30] Sam or DCA study, a one-time investment of CA, in which $10,000 is invested all at once at the beginning, the first year in 2012 and then no more is invested, you don't do that thing of contributing every month, it's just for

[08:44] comparison. And there is a third graph, which is the blue line, and it can be a while to understand it at first, which is that it does a DCA but only up to 10,000 and then it doesn't invest anymore. But we would have to see how much it invests each month

[08:58] But I don't want to confuse you now. It's another video to help you understand the concept of investing $10,000 all at once and never investing again. That's the green line that gives more profitability versus even if you have $10,000, you don't invest it all, you

[09:15] keep it in your bank, you're not invested, but each month you start the first month with $500, the second month $500 and so on every month. And look how curious it is that in this red line of the DCA, where you contribute 500 each month, you end up investing more

[09:30] money than $10,000, which is the first option, the green line, because in the green line you invest 10,000 and that's it. Whereas in the red line you invest $500 each month from the first month. In the first year you have already made $6,000. By the

[09:43] second year you have already invested $12,000. So you're investing a larger amount, investing part of it yet, you miss out on those first months and years when you don't get there. Your money is in the bank, therefore you are not getting that

[09:58] return, and the $10,000 is getting it. Well, given this, it has become clear that it is better to invest it all at once. Now, these are between the years 2012 and 2023, but what happens in the other years? What's happening

[10:12] with them now? It's not a very long time to analyze just these 12 years, but the Vanguard study has shown, they have compiled the statistics of what would happen with all the investment all at once, and it turns out that two out of three times it is

[10:26] better to invest it all at once. So statistically it's better to invest it all at once, but the statistics aren't overwhelmingly in favor of investing it all at once either. I mean, it's two-thirds, right? There's also a chance that the plan won't work out

[10:38] talking about losing money, although that could also happen, especially in the short term. We're talking about making more money, about getting more profit. Now, pay attention because this is very important, because there is a perfectly

[10:52] because there is a perfectly valid argument in favor of doing DCA and not investing what you wanted to invest all at once, and it is the following. This is statistically speaking, but we are people, not

[11:04] robots. So if you, in your case, are more of a beginner or not, but you feel a little anxious about investing all your money at once, not all your money, but I mean the money you wanted to invest, if that's going to worry you and keep you up at

[11:17] night. Or to put it another way, if you had a lot of money, would n't you buy the ability to sleep at night? Well, it's the same thing, let's not complicate things. Although statistically it's better to invest it all at

[11:29] once, but you'll be uncomfortable, it's much better to start little by little, investing whatever you can, €100 a month, € 200 a month and then you see how it goes. Yes, that's right, statistically you're not going to earn that much in returns, but you will

[11:43] gain peace of mind along your path as an investor, which is well worth it. Moreover, many people have experienced investing more than they should have, and then, at a bad time, they couldn't handle the pressure because it was

[11:55] forever, missing out on the great benefits of long-term passive investing, as we are doing in this million-dollar series. So finally the fourth block is, what am I going to do with my wallet? And the answer is

[12:09] absolutely nothing. I already have an automatic transfer scheduled, as we have seen in other videos, €125 to my pension plan and the remaining €875 to complete the €1,000 that I invest each month, as I have set it up in my

[12:23] indexed investment funds. Sometimes the hardest thing is to stay with your life. If you have more energy, then dedicate yourself to learning entrepreneurial venture. Or if you want to learn more about investing and trading or

[12:38] market analysis, go for it. But as a separate matter, you have your passive portfolio that's working, and if you're more interested, then okay, dedicate more time to it again, as a separate matter. And here's the last interesting thing I

[12:50] mentioned earlier: T Republic recently conducted a study of its clients, and it turns out that, on average, women have achieved 2% higher returns than men, simply because they weren't

[13:03] constantly moving their portfolios around as men did more. Interesting, isn't it? you enjoyed this video and let me know in the comments what you think about this whole to fall or continue rising. Thank you so much and see you in the

[13:17] Thank you so much and see you in the next video.