Index Investing

Now is probably not a very good time to go all in on the stock market. However, for those who cannot resist the temptation, index investment is the way to go because stock market indexes will do better than the market.

This may sound strange, because indexes are supposed to reflect the market. If the stock market indexes are doing well, then the market is doing well. Right?

Wrong. Precisely because the indexes are perceived to reflect the overall market, indexes will do better than the market. Remember, central banks are directly interfering in the stock market. Their main reason for doing so is to make the market look good. What better way to do so than to buy a few stocks that weigh heavily in some index?

Central banks typically focus on a few shares to do their manipulation. We can therefore gamble and try to guess which shares they are buying. However, to be on the safe side, buying a passive index is the best strategy. It's also likely to do better than many fear in the coming downturn.

When the market heads down, central banks will make sure the downturn looks as moderate as possible. Their interference will weigh heavily in favour of the index investor.

By Vlad Lazarenko - Own work, CC BY-SA 3.0, Link