I think we can all agree this has not been an easy year.
Apart from all the uncertainty regarding the still ongoing war in Ukraine, we’re seeing record levels of inflation across Europe as well as energy & heating costs that have multiplied.
To make things worse, the euro lost about 17% in value compared to the USD within a single year and yet, stocks have been performing very poorly, even when looking at their performance in euros instead of the dollar.
As of September 26th, my own ETF portfolio, which I share with my wife, is down -12% in less than 9 months.
In light of all of everything that has been going on, it’s completely understandable if you’re either demotivated as far as investing in the stock market is concerned, or if you simply don’t have much money left over to even think about investing right now.
If however, you do have some extra funds lying around that you’ve been thinking about throwing into ETFs for the long run, then this article is for you!
Among other things, we’ll be discussing the age-old question: Buy the dip right now or wait for lower prices?
You’ll also find out what I’ve been doing with my own funds lately.
Please don’t forget that none of this is investment advice, just my personal opinion based on my own experience as an investor.
I think we first need to have a closer look at the current situation. How bad is it?
My 1-ETF investment strategy (Vanguard FTSE All-World)
As you probably know by know, my favorite way to invest into stocks is to buy a single ETF, the accumulating Vanguard FTSE All-World (VWCE, ISIN: IE00BK5BQT80).
I just love how it enables me to invest into over 3.700 companies from all across the world, without having to bet on any country or sector in particular, all via a single low-cost ETF.
I’m planning to hold this ETF for decades, ideally forever and to only sell some shares when my wife and I are retired and we need extra money.
- If you’re looking for a low-cost brokerage account, I recommend checking out Interactive Brokers, my personal favorite. Meanwhile, here are the best alternatives and how to actually use each broker to buy ETFs.
Over the long run, I’m expecting yearly returns of around 7-10% per year from my ETF investments based on their historical data, with a lot of ups and downs in between.
Well, I probably don’t have to tell you, but this year has definitely been a rough year so far.
How is our ETF portfolio doing?
As I mentioned in the intro, my own 157.870€ ETF portfolio, which I share with my highly pregnant wife, is down close to -12% or -21.476€ since the start of 2022:
Luckily we’re still up about 22.800€ in total since 2017:
If you started your ETF investing journey more recently, then your portfolio is probably looking a lot worse right now.
When looking at justETF, we can clearly see that this year has been a roller coaster ride so far:
Over the past 10 years, we haven’t seen this many months with negative returns within a single year, ouch.
The stock market is down more than you think
Remember how I mentioned that the euro lost about 17% in value vs. the USD within a single year?
Of course currency fluctuations also impact our ETF returns.
As you can see, in US dollar terms we’re down way more, close to -23% since the start of 2022!
Now you might understand why US investors have been feeling the market crash more, but then again we have plenty of other problems to deal with in Europe right now.
Buy the dip or wait for lower prices?
Still, that’s all the information we have. I don’t see the point of going into all the reasons why the market has been going down, I’m sure you can find plenty of other sources talking about that.
All we know is that the global stock market is currently down -12% when calculated in EUR and about -23% in USD since the start of 2022. If you look around you, very few people are excited about investing into stocks right now. That usually means it’s a good time to invest.
We have no idea exactly when the market is returning to its all time highs, since market timing is a fools game. But, just like every other bear market in the past, this one will pass as well.
Let’s not forget, ETFs are long-term investments anyway. You should have a time horizon of at least 5 years, ideally 10 years or more. So there’s no point in analyzing the current market situation trying to figure out if prices are going to be higher or lower next month.
All we know right now is that we’re getting some nice discounts on our investments, meaning we’re getting significantly more shares of the best stocks from all across the world compared to just 9 months ago.
Which is why my wife and I have resumed our one ETF investment strategy, now that we finally finished all the baby preparation and the work on our new apartment.
I continued buying the Vanguard FTSE All-World on IBKR
Using Interactive Brokers, I tried to buy the dip on August 23rd, September 9th, September 16th and on September 23rd:
I actually recorded my last investment on Friday, here is the relevant part of the video. It may be helpful in case you don’t know how to actually place an order on Interactive Brokers.
By the way, I’m using the tiered pricing plan on IBKR to keep fees as low as possible. I’ve never paid more than 1,33€ (usually 1,25€) in commissions for my orders between 1.000€-2.000€ since making the switch. You can change it in your settings:
Conclusion
There you have it! I know investing feels a lot harder right now and is a lot less fun compared to 2021, so kudos to you if you’ve been sticking to your investment strategy or if you’ve been regularly buying the dip this year.
And if you’ve been waiting for the market to bottom, that’s fine as well. It’s your money and you need to sleep well at night.
Just keep in mind that trying to time the market only rarely works out and when it does, it’s mostly due to luck. There’s no way to successfully predict future prices.
Long-term, the global stock market trends upwards in price, which is why I’m once again seeing this as a discount opportunity to grow my ETF portfolio at lower prices.
Now that you know my personal opinion, I’d love to hear from you:
How are you handling the current situation?
Are you still buying the dip right now or are you waiting for something to happen before adding to your ETF positions?
And are you seeing a large difference in how much money you currently have left over due to the high inflation and the absurd energy costs?
Let me know in the comments!
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Hi Angelo, I remember reading several articles on timing the market, but in general it’s not a great idea. For instance, if someone saves money to invest more on a bear market, was the use of that capital more productive than time on the market? So in general, just keep buying as Nick Maggiulli says.
I am curious about Interative Brokers, didn’t you use to create an account via CapTrader? How come you are using now the link directly?, did you request transfer? I know behind the hood, Captrader is just a front-end for IB, but I am curious if possible to move to IB directly and if it has any benefits.
Hi Orlando, I agree!
I’m using Interactive Brokers directly since July 2021, which is when they removed inactivity fees. Since then, going straight with IBKR is a bit cheaper as far as commissions are concerned and there’s no account minimum of 2.000€ either. Yes, you should be able to de-link your account from CapTrader (to simply be a direct IBKR account holder), which is what I did.
Just fill out this PDF and send it to accountmanagement@interactivebrokers.com together with a copy of your ID/passport and ask them to delink your account from CapTrader.
– IB Account Number is the one starting with U….
– IB Account Title is your full name
– At the bottom: Put your signature under Signature of Primary Acct Holder, your full name again under Print Name and the current date next to it.
This worked for me, hopefully they haven’t changed this procedure since!
Hi Angelo, thanks a lot for the information! I Did not know that “de-link” was possible.
By the way, I think the web interface should be more or less the same with CapTrader or IB, how do you get around with it? I ask this since I think the interface rather different for instance with DeGiro…for instance, knowing with reports what a single transaction cost a month later seems difficult with IB, but maybe it’s my bad, probably need to spend more time learning the system. Did you have the same experience, any tips you might want to share?
My pleasure, Orlando! Yes, the web interface is the same – and it’s in dire need of a redesign so that even non-professionals, like myself (and most of my audience) are able to find stuff more easily.
For that, you have to click on Performance & Reports – Statements – Activity and enter the range you want to see all information from. I usually just select year-to-date for the period.
It then generates a report with all relevant info under “Trades”.
Orlando, were you able to de-link?
Hi Angelo and Orlando,
In my experience de-linking an account from Captrader is not possible.
I’ve been using Captrader for several years. Until recently, Captrader’s commision for buying ~600 EUR of VWCE has been 2 EUR. Now it increased to 4 EUR which is substantially higher than 1,25 EUR on IBKR. So naturally, I wanted to de-link. After filling the pdf form and waiting for 1 week I was notified that Captrader refuses to do this. They seem to have a deal with IBKR that allows them to do this. The only way to switch to vanilla IBKR is to close your current Captrader account, wait for 6 months and then reopen on IBKR.
I think this behviour of Captrader is unacceptable (perhaps even illegal?) because customers should have the right to freely choose their providers. Even more so if the pricing changes. Stay away from Captrader!
Orlando, were you able to de-link?
Hi Tomaz,
That sucks, sorry to hear that. I had no idea something like that could be the case, I regret ever mentioning them as a way to get into IBKR. You’re not the first one to mention those kind of issues.
Maybe there’s another option: Opening a new account directly with Interactive Brokers and transferring over your shares. If I’m not mistaken the transfer should be free as well.
Hi Tomaz and Angelo, I was not able to do this, the solution will be to open a new IBKR account, unfortunately. (Sorry for the late reply)