Why buying the index as a statement sounds ridiculous to me
In my previous posts, i talked about the popular US index being dominated by Tech stocks. Take $NASDAQ(.IXIC)$ and $S&P 500(.SPX)$ , you are almost taking on a big position in the tech sector that you are better off just getting direct exposure to the shares itself. While I know that some will come in to argue that there is some diversification by riding with the index, what this diversification means is that you are subjected to the limited upside from the market boom. While people are partying with a 10% gain on direct exposure, you only enjoy a fraction of that 10% due to the diversification strategy. Of course, your downside is also limited, but in the bull market, having to pay a 'premium' for downside risk and to a fund manager seems excessive to me.
Look at the returns of the index ETF for 2025. The gains of the index while strong, depending on which index, you are looking at say 14% to 20% gains. While your direct exposure for the tech stocks could be greater, again depending on which stock. Blindly buying Nvidia would have gotten you 22%. My comparisons are from start of 2025 to today.
If we are talking about buying a shiny yellow rock (gold) you are going to outperform the index and many tech favourites. And if we are talking about buying funds that are in precious metals, you will see even better gains. Just to back my point, one of the fund that I entered in at the start of 2025, Schoder Global Gold has retuned me 170%.
My whole point? If you're planning to just buy the index to get rich, i think it's far fetch. If you're buying the index because you heard it's the best thing you can do, then maybe do more research before entering. If you're willing to put your hard earned money in something, you should at least know what you're getting into.
This isn't investment advice, just my commute to work rant. Stay safe and may the huat be with you.
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