141–150 of 357 posts
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So what alternative method do you propose for predicting growth (or decline) over the next century?
I don't have a crystal ball. However, it would be more useful if more stock indexes would be considered than just one S&P 500. E.g. Dow Jones: http://www.macrotrends.net/1319/dow-jones-100-year-historica... Also from other nations.
I don't think it is fair to say that next 100 years will be same as last 100 years: 1. GDP growth is not as high as it used to be anywhere in developed world: http://www.oecd.org/std/productivity-stats/oecd-compendium-o... 2. USA is superpower at the peak. Plenty of other stock market economies hasn't been so successful. E.g. Argentina used to be one of the richest country in the world. Investing in history is easy,…
> USA is superpower at the peak. That remains to be seen > Argentina used to be richest country in the world. That is not true. In the early 20th century they were top 10, but never surpassed Britain or the US in GDP per capita.
What would a more powerful USA look like? It doesn't appear that the country is after an empire the same way the British had one 100 years ago, so raw aggression is out. I can't imagine a realistic scenario that doesn't require the implosion of other nations to embiggen America.
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+1 for using industry knowledge. Most of my money is invested in ETFs, however, I've been able to beat the market by significant amounts when I invested in tech stocks because I understood what drives the price. There are plenty of small cap tech stocks that have doubled / tripled the last few years. Understand the market, understand the product and technology well, and you can do significantly better than any wall s…
> Understand the market, understand the product and technology well, and you can do significantly better than any wall street analyst. Don't rush into it, but do your research. Look at the numbers and the growth potential. This is very dangerous advice because it just ain't true. Under efficient markets, you can do equally well as "any wall street analyst"
I'm not saying it's not very hard to make money by trading. But be aware that you can't just assume efficient markets and have done with it.
Looking at the discussions here I find it interesting that even in something as number driven as the stock market everybody argues about the meaning and the validity of the numbers. There really is no clear picture. But somehow the regular guy is supposed to navigate his way through this jungle of conflicting, confusing or meaningless numbers. And considering the long time frames most people don't have much opportuni…
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Ignorant question: Why ETFs rather than the equivalent mutual funds (which I think are usually available)? I have some sense of the differences, but I've never taken the time to figure out the pros and cons. (I've been investing mostly in index funds for the past 15 years or so; ETFs weren't really on my radar when I started.)
ETFs are generally cheaper to own in terms of their expense ratios, something like <=1% vs 1% – 3% for mutual finds. It‘s easier to get into and out of ETFs; They trade all day just as a stock does. Mutual funds you enter into at the market‘s close at a price set at that time. Also, ETFs are bit more transparent as to their capital gains taxes costs. Less surprises when you liquidate.
I don't think it is fair to say that next 100 years will be same as last 100 years: 1. GDP growth is not as high as it used to be anywhere in developed world: http://www.oecd.org/std/productivity-stats/oecd-compendium-o... 2. USA is superpower at the peak. Plenty of other stock market economies hasn't been so successful. E.g. Argentina used to be one of the richest country in the world. Investing in history is easy,…
not just HFT, buy algo shops like PDT and Renaissance Technologies being more and more frequent players
The more interesting problem is to attempt to train an investment curve based on some normalized metric for market value, which would be superior to both the lump-sum and DCA strats. What he's not showing you is that gyrations in the market have a tremendous impact on the long-run return outlook and this is extremely detrimental to the lump-sum strategy in particular. DCA is slightly better but still not perfect. You therefore want to pool cash over certain periods of time and invest more, relatively speaking, during periods when the market is trending lower. This is a tough model to construct because there are certain subjective features (how to normalize market value properly) and more complicated variables you have to account for like a negative ROI on holding cash.
All that said, I actually built a model fitting this description a while back and it works swimmingly.
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Yes sometimes companies are delisted from the S&P500, but if you invest in an S&P500 index fund , then your investment is also automatically adjusted to remove that company. Which makes me think: with index funds becoming more and more popular, should we see bigger and bigger crashes of stocks when they are removed from an index?
And then that index fund has to take the loss that comes with having bought a stock that failed and sell at a loss, while not capturing the gains of stocks that got big enough to make it on the index. Shouldn't the index "return" thus diverge from the return of an actual index fund in practice given enough years?
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Just to point out to people who may not be aware, this leaves you open to currency risk. The FTSE 100 dropped 3% in GBP terms last week, but maybe 10% in USD terms. This cuts both ways of course: you can make money on favourable currency moves. But it's an important risk to be aware of before buying assets in a foreign currency.
You want this though. For example if you was English and invested all in uk investments you would have dropped massively USD terms. If you spread your investments in many different currencies in pound terms you would have actually gained from this crisis. Diversification also applies to currency
A US investor who bought foreign assets in 2014 and sold them today would have been hurt by the 25% USD/EUR rally in 2014-2015. The dollar rose against almost all other currencies too (besides, for example the yen).