I like the idea of the index funds but I also don't like relying on stock value appreciation so I would prefer something that gives a dividend so I can care less whether the stock goes up or down. Also, I feel reluctant about getting into index funds now (when they are at record highs). Does this seem unreasonable?
It's both reasonable and unreasonable, and neither of those is a bad property of what you've said. Let me explain.
First, the dividend vs appreciation is its own debate, and I won't re-iterate the whole thing here. Dividends aren't guaranteed by any stretch of the imagination, and some companies have entered into some very questionable financial situations in order to maintain paying a dividend in down times. And if you're going to re-invest the dividend anyway, why do you want it paid at a time you don't control and taxed immediately? (I have no idea how dividends and capital gains are taxed in Canada). In full disclosure, I'm one of the guys who thinks that "dividend paying stocks" is just another stock picking theory, but I'll freely acknowledge that many people have done quite well with this. There are certainly other appealing properties of dividend paying stocks, such as the regular cash flow (when they hold up). They certainly made a lot more sense in the days before online discount brokerages, when you
couldn't sell shares easily upon retirement (or other incidents).
Next, stocks are meant for a long-term investment. Yes, they go up and down; among other things, this is why you don't stay 100% in stocks (re-balancing benefits, risk control, and so on). It also
tends to increase, long-term, and has historically (not that this is necessarily predictive).
As for all time highs - it's hit all-time highs in the past, too. Many times, and many of these "all time highs" were far lower than the ones we're at now. That's not a very surprising property for an asset class that tends to increase over time, is it? There's also the question as to whether or not it actually *is* at an all-time high: it is in nominal terms, but there's been some significant inflation since the previous one, and we're not that far above that peak.
Long story short: with any investment, there are always people with reasons to tell you why they aren't invested in it - just like there are always people with reasons why they aren't saving for retirement, or why they aren't going to the gym, or starting their diet, or whatever. For all we know, this could be the low it sinks to when it drops (and it will likely drop at some point, just like it will likely rise at some point) in the future (again, no idea when it happens. Could be Monday. Could be in five years. Could be eight years. I don't know, and neither does anyone else). If the reasons make you uncomfortable,
don't invest: it's always a bad idea to invest in something you aren't comfortable with.
In my view, the risks of being out of the market are far greater than the risks of being in it -- although I do have a somewhat healthy bond allocation, too. As they say, stocks will help you eat, but bonds will help you sleep.
So, what do I mean by reasonable and unreasonable? I think the reasons you give are a good cause to look into things more - or find something else you're more comfortable with. However, I think the particular reasons are ones that, once you look into it more, you might end up thinking that they aren't such big worries after all.