“I’m happier when stocks are going down because I can buy more of them with the same amount of money.” — Warren Buffett

Many long-term investors are thrilled when stock prices decline. They believe that if you’re regularly investing a fixed amount (dollar-cost averaging), a falling market means each dollar buys more shares, which lowers your average cost and can boost returns when prices recover.

However, there are a few things to keep in mind:

• Time horizon matters. This works best if you won’t need the money for many years. If you’re close to needing it, a drop hurts more than the cheaper prices help.
• Net buyer vs. net holder. Falling prices benefit you only while you’re adding money. Your existing holdings still lose value on paper, so the benefit grows the more you’re contributing relative to what you already own.
• Cheap isn’t always a bargain. Prices can fall because a company’s prospects have genuinely worsened. This logic is safest with broad, diversified funds rather than individual stocks.
• The hard part is behavioral. Many people feel the way you do in theory but freeze or sell when a downturn actually arrives. Sticking with your plan through the drops is what makes it pay off.

Warren Buffett famously stated: if you’re going to be buying groceries for years, you want prices to fall. The same rings true for stocks.

Over the past decade the Nasdaq-100 has beaten the S&P 500 by roughly 6 percentage points a year, and the S&P 500 has edged the total market, but the higher return came with more risk and a higher price tag.

Three funds dominate this debate: the Vanguard Total Stock Market ETF (VTI), the Vanguard S&P 500 ETF (VOO) and the Invesco QQQ Trust (QQQ), which tracks the Nasdaq-100. Below is how each has performed over one, three, five and ten years, what you pay for that performance, and how to judge any index ETF before you buy it.

Figures are approximate, as of early October 2026, and drawn from several data providers that differ by a point or two. VTI’s 3-, 5- and 10-year numbers are estimated from its usual gap to VOO.

How they performed

QQQ led VOO and VTI in every period, and its lead widened to about 6 points a year over ten years.

VOO has edged VTI over five and ten years, while the two were level this year.

What the extra QQQ return cost

QQQ’s lead is real, but it came with deeper losses and heavier concentration in a few stocks.

• Volatility: One analysis put annualized volatility at about 20% for QQQ versus about 15% for VOO.
• Drawdowns: In 2022 QQQ lost about 32.6% for the calendar year, versus about 18.2% for VOO. Its worst peak-to-trough fall in the last decade was about 39.6%, versus about 34% for VOO in the 2020 crash.
• Concentration: QQQ holds about 100 stocks, with its top ten near 47% of the fund. VOO’s top ten are near 38%. Technology is roughly half or more of QQQ.
• Cost: QQQ’s expense ratio is about 0.18-0.20%, against 0.03% for VTI and VOO.

VTI and VOO behave almost identically. VTI adds roughly 3,000 mid- and small-cap stocks, but its top holdings are nearly the same as VOO’s, so the 10-year return gap has rarely exceeded 0.5% in either direction. VOO has led slightly over five and ten years because large caps have beaten small caps.

Valuation and income

QQQ trades at a P/E about 30% above the other two and yields less than half as much.

Price/book figures conflict across providers because each calculates fund-level ratios differently, and I did not find a current VTI figure. VTI’s P/E comes from an older comparison, so treat it as a rough guide. QQQ’s higher multiple and lower yield fit a fund full of fast-growing companies that reinvest earnings. Part of its past outperformance came from its multiple expanding, which may not repeat.

Five metrics to validate any index ETF

These five test whether an index ETF does its job cheaply and reliably, whatever index it follows.

1. Expense ratio. The annual fee is the one cost you can predict. For broad-market index funds, about 0.03-0.10% is competitive.
2. Tracking difference and tracking error. Tracking difference is how far the fund’s return falls short of its index over time. Tracking error is how much that gap varies. A good fund trails by roughly its expense ratio.
3. Liquidity. Large assets and a bid-ask spread of a penny or so keep your trading costs low. Small, thinly traded ETFs cost more to trade and carry closure risk.
4. Concentration. Top-10 weight and number of holdings show how diversified you really are. QQQ’s top ten near 47% versus about 38% for VOO is the kind of gap to notice.
5. Valuation. P/E, with price/book or price/sales as a cross-check, shows what you pay for each dollar of earnings. It does not predict next year, but a high multiple means you are counting on strong growth.

Returns are not on the list, because past performance mostly reflects what the index did, not how well the ETF is run. Check volatility and maximum drawdown separately to judge whether you can stomach the fund.

Which one fits you

VTI or VOO works as a core holding for most investors, and QQQ works as a growth tilt on top.

• Choose VTI or VOO if you want broad, low-cost, lower-volatility exposure. They are close enough that the choice is mostly about whether you want small and mid caps included.
• Add QQQ if you want more technology and growth exposure and can tolerate drawdowns near 40%. A modest slice alongside a core fund is a common approach, and it overlaps heavily with VOO’s top holdings.
• Remember the trade-off: QQQ has led for over a decade, which does not guarantee it keeps leading.

This post is general information, not personalized financial advice. Consider your goals, time horizon and risk tolerance, or speak with a financial advisor.

Sources

Figures come from search-result summaries of these pages, which I did not open in full, so treat them as approximate.

• Total Real Returns
• FinanceCharts
• Dividend Vision
• Dividend Watch
• ETF.com
• Invesco QQQ factsheet
• Digrin: VOO
• 24/7 Wall St: QQQ vs VTI

Another major stock market crash is coming. Declines of 20% or more have happened repeatedly, and one will almost certainly happen again. The harder question is when, and on that one, history offers little help.

Crashes aren’t random, but they’re not predictable

Crashes tend to follow recognizable conditions: excess leverage, speculative bubbles, or a shock hitting a fragile system. Look back at any of them and the warning signs seem obvious.

That’s hindsight at work. We remember the indicators that turned out to matter and forget the many that flashed and fizzled. Drops of 20% or more arrive roughly every several years on average, but the gaps between them vary widely, which is why the pattern is no use for scheduling one.

Why warning signs fail in real time

• Stretched valuations. High CAPE ratios did precede the 2000 crash. They also signaled “danger” for years beforehand, including through large market gains.
• The inverted yield curve. It has preceded most recent recessions, but the lag runs from months to over a year, and markets sometimes rose substantially in between.
• Sudden shocks. Some crashes had no market-based warning at all. The 1987 crash and the 2020 COVID drop came from events the indicators never flagged.

Two different claims

“A crash will happen eventually” is very likely true. “I can tell you when” is a claim the evidence says almost nobody can back up reliably.

Acting on the second claim is costly. People who sold early on warnings have often missed large gains, and market timing means being right twice: when to get out and when to get back in.

The silver lining

The market has recovered from every crash so far, though the recovery time ranged from months to over a decade. That range is the real risk: not whether you’ll see a crash, but whether your plan can last through one.

So the more useful question isn’t “when will it happen?” It’s “how much of a drop could I stomach, given my timeline?” Build for that, and you won’t need to predict anything.

This is general information, not financial advice.

Compounding is one of the most useful financial ideas a person can learn, and most Americans first meet it in adulthood. I’d argue it along with basic financial literacy belongs in the curriculum by middle or high school.

“If you have a really long runway, then a low rate of compounding would still get you a big number. It’s very important in life to start that engine early.” — Mohnish Pabrai

What compounding is

Compounding means earning returns on both your original investment and the returns you’ve already earned. Reinvested earnings generate their own earnings, which creates a snowball effect: growth is slow at first, then speeds up.

Here’s a simple example. At a 7% average annual return, $10,000 grows to about $76,000 in 30 years and about $150,000 in 40. Those extra 10 years nearly double the result. That’s the value of time, and no extra money was added. (Returns are never guaranteed, and this uses a steady rate for illustration.)

A real-world example

Warren Buffett built Berkshire Hathaway’s Coca-Cola position of 400 million shares between 1988 and 1994 for about $1.3 billion. In 2022, that stake paid Berkshire $704 million in dividends, a 54% annual return on the original cost from dividends alone. The dividend has grown over decades while the cost basis stayed the same.

Why it matters

• Earnings on earnings: Growth builds on prior growth, not just your original deposit.
• Significant long-term growth: Time does much of the work.
• Regular reinvestment: More frequent compounding can speed things up.
• Flexible goals: It applies to retirement, education, and other long-term expenses.

Five rules for making compounding work

1. Start early. Time is your biggest asset, and early dollars have the longest to grow.
2. Stay consistent. Regular contributions strengthen the effect.
3. Think long-term. Withdrawals interrupt the cycle.
4. Diversify. Spreading investments reduces the risk of any single failure.
5. Be patient. Compounding rewards those who stay invested through the dips.

The key takeaway

You don’t need to be wealthy to build wealth. You need to start early and stay disciplined. Teaching that lesson to 13-year-olds would give them a lifelong advantage.

This is general education, not financial advice.

The S&P 500 has been a great ride. But three valuation measures are all flashing caution at the same time: the CAPE ratio, market concentration, and the equity risk premium.

1. CAPE: Price vs. Ten Years of Earnings

The Shiller CAPE ratio divides the index price by the average of inflation-adjusted earnings over the past decade. That smooths out recessions and one-time booms. As of July 27, 2026, it stood at 40.5. The historical mean is about 17.3. The all-time high was 44.2, set at the 2000 dot-com peak.

CAPE is a poor timing tool. The market spent most of the 1990s looking expensive by this measure while its value doubled. Its real strength is forecasting long-run returns: high starting valuations have tended to precede weaker returns over the following decade.

2. Concentration: 500 Stocks, Ten Big Bets

The top 10 companies now make up more than 40% of the index, versus roughly 27% at the 2000 peak. That weight is partly earned, since the top 10 produce about 32% of S&P 500 earnings. But it means an S&P 500 index fund behaves less like a broad market and more like a bet on a handful of tech and AI leaders.

It also affects CAPE itself. Today’s index is packed with high-margin tech firms, so some argue a higher “normal” CAPE is justified.

3. The Equity Risk Premium: What Stocks Pay Over Bonds

The equity risk premium is the S&P 500’s earnings yield minus the 10-year Treasury yield. It’s the extra return you demand for taking stock risk instead of safe bonds.

This is where it gets tight. As Treasury yields approached 5%, the premium compressed to lows, while the forward P/E fell from roughly 23x to about 19x. By my rough math, 19x earnings is an earnings yield near 5.3%, leaving only a thin cushion over bonds. One analyst puts the average premium since 2008 at 3.5%.

A thin premium isn’t a sell signal on its own. Research shows a moderate 0.51 correlation between the premium and subsequent 10-year returns, with most of the signal coming from valuations rather than rates.

What It Means for Investors

None of this predicts a crash. It points to lower expected long-term returns from today’s prices, with strong earnings growth as the main thing offsetting high valuations and high yields. Practical takeaways:

• Check your real diversification. An S&P 500 fund is more concentrated than its name suggests.
• Don’t try to time it. These measures say little about next month or next year.
• Reset expectations. Plan around modest returns rather than a repeat of the last decade.

This post is general information, not investment or financial advice.