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Investing Returns on the S&P500

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Re: Investing Returns on the S&P500

#241

Post by jonknee »

SilasX wrote: post #224
jonknee wrote: post #149

Earlier quoted context omitted.

That's not how it works, the return of the index is the actual return of the included stocks while they are in the index . There will be winners and losers, but the return is actually what you get.

I don't see how that addresses the dynamic I described, beyond re-asserting the conclusion I was questioning.

> Shouldn't the index "return" thus diverge from the return of an actual index fund in practice given enough years?

That's what I am taking issue with.

Re: Investing Returns on the S&P500

#242

Post by bduerst »

dpc59 wrote: post #191
bduerst wrote: post #159

Earlier quoted context omitted.

Imperialism is alive and well today, it's just that it's less noticeable since total war has been infeasible since the atomic age.

Go tell that to people who live in Syria, Yemen, Nigeria, Palestine or Libya.

Puppet wars, not Total War. There's a difference: https://en.wikipedia.org/wiki/Total_war

We haven't experienced Total War in our lifetime (thankfully), but when referencing the imperial dynasties in history as being more noticeable, it's usually because the wars they held were total.

Re: Investing Returns on the S&P500

#243

Post by Bombthecat »

xiaoma wrote: post #184
jakozaur wrote: post #12

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,…

> "anywhere in developed world" I hate this terminology. If the US has, in fact, "finished" developing, then the future of the S&P will be bleak. I don't think that's the case at all, though. I think development has just started and we'll see fantastic advances in bio-informatics, solar power, 3D printing and a number of other fields in the upcoming decades. When I was a teenager, I pirated music. I seriously hope my…

Who will be able to buy that stuff?

I'm not seeing the end is nigh unemployment rate. But it will definitely get worse...

With the dropping off potential buyers you reduce the possibility for increased profit.

Sure you can just increase the margin ( and I think that is what we will see more ave more I future) but that growth is also limited.

New markets will emerge and make profits. But economics as a whole will shrink.

Re: Investing Returns on the S&P500

#244

Post by ygmelnikova »

disordinary wrote: post #226
Redoubts wrote: post #142

Earlier quoted context omitted.

> That remains to be seen 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.

The USA has a huge empire, probably the largest ever seen, but it's not an empire of government expansion it's an empire built by companies and culture.

Who's the emperor?

Re: Investing Returns on the S&P500

#245

Post by tunesmith »

The other reason none of these returns are realistic for an average person:

1) People don't get a lump sum at the beginning of their investment history

2) Ah, but you say, dollar-cost-averaging. The problem there is that people get more money to invest when times are good, and less when times are bad.

3) As a result, even when buying in responsibly, people are buying more when the market is high, and less when the market is low.

It distorts performance. Plus, betting on having average-or-better performance is a risky bet. Don't count on more than 2.5% / year lifetime.

Re: Investing Returns on the S&P500

#246

Post by jonknee »

ced wrote: post #204
jonknee wrote: post #149

Earlier quoted context omitted.

That's not how it works, the return of the index is the actual return of the included stocks while they are in the index . There will be winners and losers, but the return is actually what you get.

I'd appreciate if you could expand on that, because I share the same concern as GP. It seems to me that the index fund has to sell a lousy company at a low price (since it's being delisted) and buy a strong one that's being included in the index. Whereas the index, being just a number, can magically perform the swap without taking a hit.

Sometimes it's OK to sell a lousy company at a low price--it's a lousy company! The beauty of a wide index fund like the S&P is that any one company diving won't hurt you. Companies typically last in the S&P for a long time, so the potential gains of adding companies earlier or selling them at a different time average out. Even Facebook has more than doubled since being added to the S&P and that's the definition of a strong growing company. If you really like a company that is being booted from the S&P you can just go buy it directly after the announcement and you'll most likely be able to pick it up on quite a discount.

You can use different indexes if you want to have smaller companies (the Russell 2000 is a good choice), but the whole point of the S&P is that it is made up of established firms. Perhaps lower reward, but also lower risk.

Re: Investing Returns on the S&P500

#247

Post by cesarbs »

tunesmith wrote: post #211
dap wrote: post #153

The NYTimes has a great visualization of S&P 500 returns for money invested any year between 1920 and 2009 and withdrawn between 1921 and 2010: http://www.nytimes.com/interactive/2011/01/02/business/20110...

I brought up this chart as a counterpoint to the OP's graph in a separate discussion. The difference is that this one factors in "taxes and fees". In this chart, it says 1979-1999 is +8.2% per year. Using the OP's data source, 1979-1999 would be 12.464% (using https://dqydj.com/sp-500-return-calculator/ which uses the same Schiller data set). That's 4.2% per year obliterated by "taxes and fees". That seems excessive…

> and it's keeping people from investing in actually producing value for themselves and others.

What do you mean?

Re: Investing Returns on the S&P500

#249

Post by ommunist »

varjag wrote: post #180
lintiness wrote: post #28

Earlier quoted context omitted.

this is the biggest fallacy in the investing thesis. buy and hold didn't work in russia, or argetina, or many others. because we live in a country that's prospered (for a plethora of reasons), we assume the prosperity must continue unabated forever.

Would investment in a Russian market managed fund panned out any better?

If a fund manager is relatively close to Kremlin, than yes.

Re: Investing Returns on the S&P500

#250

Post by choosername »

arcticfox wrote: post #166
Redoubts wrote: post #142

Earlier quoted context omitted.

> That remains to be seen 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.

An even more wealthy USA? Imagine one of those horror scenarios where robots / automation start taking over many, many jobs and the multinationals that own them are based out of the US. Not saying it would happen but I think that's one scenario that would be even "more powerful".

With off shore holding accounts, do google et al count?
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