Hey everyone, the markets have been quite the rollercoaster lately. Fed Governor Waller recently hinted in an interview that with inflation showing signs of cooling down, they might actually shift from rate hikes to holding rates steady. We saw tech stocks and the Nasdaq pump hard initially on this news, but today the S&P 500 slipped by 0.38% and the Nasdaq dropped 0.29%.
Looking closely at the Magnificent 7 (M7), heavyweights like Microsoft, Amazon, and Google all took a hit. Personally, I think this is a solid window to slowly accumulate shares using the MAGS ETF.
I’ve been organizing my thoughts on TER (Total Expense Ratio) and distribution yields for ETFs that heavily weigh the M7, specifically for retirement accounts. A pension account isn't a quick flip; it's a lifelong asset that you build over 30 to 50 years to secure your life post-60. The lower the TER—which includes the ETF management fees and your broker's fees—the better off you are as a long-term investor.
The absolute core mechanism of compound investing is reinvesting your distributions. The S&P 500 pays out roughly 1% annually, while Nasdaq-tracking ETFs pay around 0.5%. The key is to pool that cash in your retirement account and consistently buy more shares of your S&P 500 or Nasdaq ETFs to grow your total unit count.
I actually ran a simulation using 50 years of historical US stock market data. The results were eye-opening. If you hold at least 5% of your total portfolio in an asset that pays out around a 3% yield, you can survive massive crashes. Even if the market drops -80% like it did during the dot-com bubble in 2000, that 3% distribution allows you to keep buying deeply discounted Nasdaq and S&P 500 ETFs, steadily lowering your average cost.
A quick word on leveraged ETFs: if the underlying asset drops by 80%, a 2x leveraged ETF is at a severe risk of being delisted. Instead of relying on leveraged products, simply buying double the amount of the underlying asset and holding it long-term causes way less psychological pain and makes sticking to the strategy much easier.
We also need to talk about gold as a diversifier. Gold surged over 60% heading into 2025. However, in 2026, due to blocked oil exports, Russia had no other way to generate foreign currency and dumped massive amounts of gold on the market, causing the price to drop by about 30%.
If you are looking at spot gold ETFs for your retirement account, TIGER KRX Gold and ACE KRX Gold are the two main contenders. Both track the KRX physical gold index, meaning you don't suffer from rollover costs.
The ACE ETF has a fee of 0.19%, while TIGER is slightly cheaper at 0.15%. However, ACE KRX Gold was listed in 2021, meaning its asset size is much larger and its bid-ask spread is tighter. This makes it much easier to buy and sell ACE at the exact market price without slippage compared to TIGER.
Here is a calculator tool that helps you project your long-term compound returns so you can visualize your portfolio growth.
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