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Investing Returns on the S&P500

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Re: Investing Returns on the S&P500

#261

Post by kerryfalk »

planteen wrote: post #219
kerryfalk wrote: post #118

Earlier quoted context omitted.

To answer your first question: be a part of it, either as a consumer or a producer. My professional life now revolves around mining. I'm confident to know who to invest in and who not to. My personal life centers around various hobbies - I'm confident I could choose a few companies in those spaces to invest in. Unfortunately, most of those are well performing private companies.

Just curious - are you worried about getting too coupled to the industry you work in? I try not to invest in tech since I work in tech. So a big downturn in tech would not only be bad for my job but also investments. Or would you possibly bet against mining?

I wouldn't put my whole portfolio in it but I'm not really worried about being too tied to the industry I work in. That might also be because it's mining. Mining is a large portion of the world's GDP (estimated to be in the range of 45-60% either directly or as a supplier to others). If mining as an industry suffers, we're all probably in a bit of trouble.

Re: Investing Returns on the S&P500

#262

Post by paganel »

mac01021 wrote: post #17
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,…

So what alternative method do you propose for predicting growth (or decline) over the next century?

A crystal ball.

Seriously now, this is like asking: What methods do you propose for building a perpetuum mobile? This Universe does not allow for the future to be predicted, like it doesn't allow for the laws of TD to be broken. All the predictions of growth/decline you read/hear from people are just educated guesses, nothing else. Some of them might get lucky with their predictions, some of them might not, but let's not foul ourselves into thinking that we can predict the future only because we can make nice-looking charts about what happened in the past

Re: Investing Returns on the S&P500

#263

Post by shostack »

mrb wrote: post #31
ozten wrote: post #11

Does the stock data used suffer from Surviver bias? That is a free download of historical data that lacks failing, delisted companies of the past.

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?

Likewise, are there bigger potential crashes for Mainstreet Investors in store as more and more of the populace shift to index funds? If there's a critical mass of people on index funds, what sorts of changes are there to overall risk and liquidity in the market?

Re: Investing Returns on the S&P500

#264

Post by tomsaffell »

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 did a similar analysis in 2008 to determine whether an n% drop in the index could be help inform an investment strategy: https://saffell.wordpress.com/2008/10/26/does-timing-the-mar...

Re: Investing Returns on the S&P500

#265

Post by cmrdporcupine »

cesarbs wrote: post #254
cmrdporcupine wrote: post #128

Earlier quoted context omitted.

Except that people didn't live under a capitalist economic system with stock exchanges, shares, and private property for the 10000 years of settled urban existence before the 18th century, so, yeah -- apparently "economics is the same" isn't true.

I suggest you read A Splendid Exchange. Although humanity didn't have the exact same economic system as today's, it's a mistake to think there weren't complex systems in place in the past.

I never said anything of the sort that there were not complex systems in place. Precisely because I can see that I can say that the system we have now is not inevitable, immutable, or eternal.

Re: Investing Returns on the S&P500

#266

Post by charlesdm »

jgalt212 wrote: post #256
charlesdm wrote: post #134

Earlier quoted context omitted.

1. Markets aren't efficient. They're full of emotion and greed. They can be irrational. Just look at Brexit - even stocks that had zero exposure to the UK (directly or indirectly) sold off significantly. 2. Why would you assume you can't do better than an analyst, in your area of expertise? Someone who understands tech well will be able to make better tech investments, than, let's say, investments in mining. That see…

Markets are efficient because you cannot effectively predict how long emotion, greed, and irrationality will drive the bus before rationality once again prevails.

That makes no sense at all to me. How does that make them efficient?

Re: Investing Returns on the S&P500

#267

Post by nradov »

This is a silly analysis in that it ignores investment costs. You can't invest in the S&P 500. You have to either buy an index mutual fund, or buy the individual component stocks. Either way the investment costs will significantly cut into long term returns, even with a fund like VFINX.

Re: Investing Returns on the S&P500

#268

Post by shostack »

Ntrails wrote: post #124
tbrooks wrote: post #82

Warren Buffett bet $1mm that S&P500 will outperform a hedge fund over a 10 year period.[1] That's good enough for me, I'll follow the oracle. [1] http://longbets.org/362/

> bet $1mm that S&P500 will outperform a hedge fund over a 10 year period. He's actually betting against a portfolio of hedge funds going as far as to include fund of funds (typically a terrible bet). I assume he is only using US Equity hedge funds too? I'd be interested to see the distribution of individual funds in his portfolio that beat the S&P vs those that didn't. In general though these numbers have huge survi…

Planet Money did a recent episode on this with the guy who bet against Buffet. Really interesting.

http://www.npr.org/sections/money/2016/03/04/469247400/episo...

Re: Investing Returns on the S&P500

#269

Post by kgwgk »

kevinpet wrote: post #259
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.

The return of the ETF is only as good as what the portfolio managers can accomplish in reality. They are very good at this, but the cost is there. It's referred to as tracking error.

The tracking error is not really "a cost", it's about variability. An ETF can have low tracking error but high cost if the returns are highly correlated with the index but systematically lower. http://www.etf.com/etf-education-center/21030-understanding-...

Re: Investing Returns on the S&P500

#270

Post by charlesdm »

planteen wrote: post #219
kerryfalk wrote: post #118

Earlier quoted context omitted.

To answer your first question: be a part of it, either as a consumer or a producer. My professional life now revolves around mining. I'm confident to know who to invest in and who not to. My personal life centers around various hobbies - I'm confident I could choose a few companies in those spaces to invest in. Unfortunately, most of those are well performing private companies.

Just curious - are you worried about getting too coupled to the industry you work in? I try not to invest in tech since I work in tech. So a big downturn in tech would not only be bad for my job but also investments. Or would you possibly bet against mining?

Tech is disrupting many existing industries, meaning ultimately more money will flow from those sectors into tech. I'm extremely bullish on tech for the next 5-10 years.
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