Is now a good time to buy U.S. ETFs?

“Now is as good a time as any”

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by

From the Summer 2015 issue of the magazine.

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(Cultura Travel/WALTER ZERLA)

(Cultura Travel/WALTER ZERLA)

Q: Given the low Canadian dollar and what appears to be an inflated U.S. stock market, is now still a good time to buy U.S. ETFs? It seems to me that someday the Canadian dollar will rise and one could lose much of the value of their original purchase.

—Michael Dillon, Kelowna, B.C.

A: If you’re investing for the long haul and it isn’t a big lump sum amount, now is as good a time as any to buy U.S. ETFs. Why do I say that with such confidence? Because I’m not a market timer. I think it is almost impossible to predict where the market will move in the short term. There are those who cite the Shiller P/E to support the view that the market is inflated. And others, like Terry Shaunessy of Shaunessy Investment Counsel, who disagree. “Both the S&P 500 and large-cap international markets continue to look attractive as the companies that dominate these indexes are global companies that sell their products worldwide, such as Apple in the U.S. or Nestlé in Europe,” he says. The second issue you raise, currency risk, is surprisingly easy to manage with ETFs. The major providers, iShares and Vanguard, both have U.S. ETFs that are hedged, eliminating the effects of foreign exchange, both positive and negative.

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5 comments on “Is now a good time to buy U.S. ETFs?

  1. Umm. Normally I would agree with Bruce 100% and he makes good points but the market is in an extreme state of high prices and risk at the moment. Its too obvious to ignore. If you aren’t in the market yet, it wouldn’t hurt to wait a year. Otherwise, a new investor might get spooked from the markets for life which would be the real harm.

    And generally I think the unhedged ETFs are better long term if you have a balanced portfolio.

    Reply

    • Your ‘wait a year’ comment isn’t exactly right. If you are a long-term index investor, I would buy now otherwise you are just trying to time the market which is fruitless and that is the point Bruce is making. I have friends who have told me ‘the housing market is going to crash. I’m going to wait next year to buy a property.’ They’ve been saying that for a decade and have now missed the boat!

      I agree with your unhedged ETF comment.

      Reply

      • Reversion to the mean always prevails and we have just had a 6 year bull market. For sure, it may still go up (I can’t argue with that) but the odds are increasingly against you. Same with real estate.

        Reply

        • There are few ways to increase likelihood of increasing returns… One is to properly diversify, another is to spend as much time invested as possible. Do it now.

          Reply

  2. In an ideal world, I like to buy US stocks when the $C is a lot closer to parity. That way, when it reverts what seems to be the mean, I get an approximately (currently) 23% increase in the dividend, which more that makes up for the lack of eligible dividend credit. However, it is never an ideal world, so I am left with either investing at home, or accepting that I will pay that same 23% more in the stock price, after converting to $C. Of course, costs can be “re-claimed” on US taxes paid.

    Reply

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