Should You Buy SPDR S&P/ASX 200 Fund at This Share Price?

What happened to the STW share price?

SPDR S&P/ASX 200 Fund [ASX:STW] was down by 0.27% in early afternoon trading today. The stock was trading at $52.52 a share. The Aussie market continues to drop for the fourth day in a roll. The quarterly growth number was not much help for confidence in the market. The market is clearly in a period of correction.
This is a period where the market is more confused than it is emotional. The market is looking for solid signs of recovery. It didn’t get that. The market then looks for rate cuts. It didn’t get that either. The market is now very confused, and doesn’t know what position it wants to take.

The good thing about the market

My colleagues at Port Philip Publishing are phenomenal stock pickers. The latest program from us focuses on microcaps, which tend to give investors huge overnight jumps all the time. That is about the complete opposite of what STW is. STW tracks the 200 top companies on the Aussie index. They are not micro, small, medium or even large caps, they are the biggest caps you can get!
However, I love broad market indices. Why? Because they go up over the long run. Think about it; if the top 200 companies don’t make money then the economy would go backward and shrink into constant deflation. That is not a likely scenario because population and productivity are still expanding. In addition, the natural inflationary pressure from raw materials adds to long term inflation in the value of things.
The second reason for liking the broad index is that it is the weighted average of the entire market. Think about it this way: about half of the market is underperforming the broad index and the other half is outperforming the market. Statistically speaking, you have a 50% chance of underperforming the market. Why risk it? Just buy the index.

What should you do with STW shares now?

There are a number of ways to make money in the market. One is stock picking; that is my daily job. I search for the best emerging market stocks for my clients. They have been happy so far because my China stock picks have really paid off.
Another is active trading. There are many ways to go about trading. I prefer a quant-based approach.
Last but not least is portfolio management. This is what fund managers typically prefer. I would also recommend it to retail investors. However, it is a little bit difficult to operate qualitatively. It is largely a quantitative practise.
For all these approaches, STW should be there in your portfolio somewhere. Have you made your first million trading STW yet? If you haven’t, you really need to hear what we have to say.

Ken Wangdong
Emerging Market Analyst, New Frontier Investor

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