The TSX is around his all time: is it too late to invest in the index? | The Motley Fool Canada

If you have looked at the market lately, you have probably noticed that the TSX has been in a tear lately, with the index by more than 8% in the past three months and more than 14.8% years to date.

That is of course a positive sign for many Canadians with their hard -earned capital in the market. On the other hand, when the stock market floats near record levels, it is obvious that investors feel nervous to put new money to work.

So, with the TSX more than 22% in the past year and now sitting close to all time, not to mention persistent concerns about inflation, interest rates and the world economy, it may feel that today it is a recipe for bad timing.

But although the index certainly looks high in the graph, that has always been the case for long -term investors. If you zoom out, the TSX has been hitting new highlights for decades.

Each crash or correction is ultimately followed by a different record high as companies and the economy as a whole bouncing back and return stronger. That is the nature of the reason why investing and composite work in the long term, and why time in the market in essence always beats the timing of the market.

So the real question is not whether you should invest money if the TSX is a record high. Instead, you just have to consider whether your investment horizon is long enough to make the assembly work. If so, the answer is simple: it is never too late to invest.

Why the timing of the market rarely works

Although it is normal to be afraid of a market accident or correction, these events are actually normal, healthy and, more importantly, some of the best discounts for long -term investors.

Looking back on the TSX in the past 20 years, investors have confronted with every type of head wind that is conceivable. There was the financial crisis in 2008, the oil price collapsed in 2015, the Pandemie in 2020 and, most recently, the rapid rise in interest rates.

Each of those events caused considerable volatility. And yet, despite all those setbacks, the TSX won more than 170% in that period, with an annual percentage of more than 5.1%.

That is why the market tries to time by waiting for the perfect access point rarely works. You can avoid a withdrawal in the short term, but you run the risk of missing all years of profit. More often than not, sitting on the sidelines is more harmful than buying when the market feels expensive.

Moreover, even if you are bad luck and invest on a peak, history shows that continuing to invest and allow dividends and can edit their magic, ultimately yields positive results. That is why the most successful investors focus less on timing and more on consistency.

For example, Dollar costs averageWhere you are steadily investing a fixed amount at regular intervals, one of the best ways to remove emotion from the process and build riches, regardless of where the market is today.

How to invest in the TSX via ETFs

There are a lot of different ways to get exposure to the TSX, but the easiest is due to cheap exchange -related funds (ETFs) that follow the index.

For example two of the best options are Ishares Core S&P/TSX Covered Composite -Index ETF (TSX: XIC) and ISHARES S&P/TSX 60 Index ETF (TSX: XIU).

The XIC ETF is designed to better mirror the entire TSX composite index. That means that you will receive exposure to nearly 200 Canadian companies of every size and in all industries. It is the most diversified option and a simple way to capture the long -term growth of the Canadian market as a whole.

However, the XIU ETF only focuses on the 60 largest and most liquid Canadian companies. These are market leaders, such as the large banks, pipeline companies, telecoms and source giants that dominate the economy.

Because it is concentrated in lesser names, the XIU ETF is therefore less diversified than the XIC. However, it gives you direct exposure to the most stable and profitable companies in Canada.

And at the moment, with the XIU that offers a yield of approximately 2.7% and the XIC offers a yield of 2.4%, you can not only receive exposure to the TSX today, but you can also immediately start generating passive income while positioning to take advantage of the long -term growth of the index.