Stock Indexes are the Fed's scoreboardsteemCreated with Sketch.

in fed •  7 years ago  (edited)

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The best trade idea is to buy index tracking ETF's. The reason to buy an index tracking ETF is because the indexes are the Fed's scoreboard advertising. Especially the DOW, the S&P, and the NASDAQ. If you think about it, those three indexes are on the bottom of every news channel all over the globe, all of the time. This is a great place for the Fed/Central Bank/Govt. to get free advertisement to promote the financial market industry. This is why last week, there were more new lows than new highs in many of the top three indexes, meanwhile the index prices, themselves, were near all time highs. The tracking of the bundles of companies inside the indexes have been proven to not match the index prices themselves, because of the large ownership of the index ETF funds. So, during times of expansion, the index funds are a no lose bet, because of the financial market's need to advertise their success on the bottom of every newspaper and news channel all over the globe. It is sort of unfair and illogical the way the system is rigged, but it is how it has been proven to work. It is especially a downer for rookie investors that do not know this secret. Rookie investors always look at PE ratios and profit margin in companies and try to time the companies purchases. In reality, all most investors have to do is follow the coattails of the Federal Reserve and buy the index funds. Over time, the main goal of the Federal Reserve and the Government backed Central Banks is to create inflation. These three indexes are living proof of the inflation that the government wants and needs. The best way to track this inflation is with these three index funds. This is why SPY is such a widely held ETF by many seasoned investors. This is the #1 secret of investing. Thing is, sometimes, when the FED needs to cut down on their assets, these three indexes don't go up as much for a period of time. But, during these times, these indexes still remain as the market's scoreboard to entice rookie investors to still know their is value in their entry. But, the one thing that is certain, is that over 25 years, nothing can match the upside mixed with safety of an index tracking ETF!

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Excellent write!