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Investing Returns on the S&P500

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Re: Investing Returns on the S&P500

#281

Post by tempestn »

One important thing to note is that although the far right end appears to narrow, that is not because returns become more certain over very long time ranges, but rather simply due to lack of samples over those very long periods.

What's more indicative of reality is the relatively constant vertical distribution, in a log scale, across any time range up to about 90 years, when the lack of data starts to play a significant role. So, in relative terms, uncertainty remains fairly constant over time. In absolute terms it actually increases. In a sense risk still does decrease over long time horizons, as the chance of earning over any given amount does increase with time; contrary to common belief though, the distribution of possible returns (another possible definition of risk) actually increases with time - or remains roughly constant on a log scale, as mentioned.

(You can find a great many opinions surrounding this by googling "time diversification".)

Re: Investing Returns on the S&P500

#282

Post by twblalock »

malz wrote: post #198
base698 wrote: post #160

Earlier quoted context omitted.

Can confirm. Been trading options for 3 years, lose money on 90% of my trades, but still up 30% for the year. It's basic expected value, magnify your wins and minimize your loss to what you know you can lose.

So your counterparty makes money on 90% of his trades and is down 30% for the year? He must feel like a schmuck.

Why would there only be one, perfectly symmetrical, counterparty?

Re: Investing Returns on the S&P500

#283

Post by twblalock »

Inufu wrote: post #272
nradov wrote: post #267

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.

The expense ratio for VFINX is 0.16%, compared to average yearly returns of 6%. Over 30 years, that's the difference between 5.74x and 5.48x your starting capital. Noticeable, but insignificant compared to the taxes you'll pay.

It can be even cheaper than that. If you buy VOO, the ETF equivalent of VFINX (Vanguard's ETFs hold the same portfolio as their corresponding funds), the expense ratio will be only 0.05%. If you buy this ETF through Vanguard, you will not pay any commissions. It's very close to being free, and definitely the cheapest way to invest in the S&P 500.

Re: Investing Returns on the S&P500

#284

Post by twblalock »

HorizonXP wrote: post #2

It's funny that this is so non-intuitive. My wife continues to try to "time the market" despite me telling her that it's pointless over such a long time horizon. Maybe this will help convince her.

Buy her a copy of David Swensen's book for individual investors, "Unconventional Success." Anyone who still believes in market timing after reading that just can't be helped.

Re: Investing Returns on the S&P500

#285

Post by varjag »

cesarbs wrote: post #253
varjag wrote: post #180

Earlier quoted context omitted.

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

I think they're referring to the fact that the Russian stock market collapsed completely (i.e. total loss) in the beginning of the 20th century.

Clearly. But they were considering investment strategies (buy&hold vs alternatives). My point was that few if any investment policies would hedge you against market extinction events.

Re: Investing Returns on the S&P500

#286

Post by bllguo »

Very cool project, but - and I mean no offense by this - these views are taught in basic finance! There are similar graphs in standard finance texts. So it surprises me that so many people here seem to be caught off guard.

I look forward to seeing where the project will be heading next. In fact it is inspiring me to do similar analyses.

Re: Investing Returns on the S&P500

#287

Post by 8note »

pbreit wrote: post #34

I am not a financial advisor and this is not financial advice! Robinhood seems like an OK way to keep a free portfolio of ETFs approximating a Vanguard all-in-one fund. My super-unscientific portfolio is loosely based on Vanguard's LifeStrategy Growth & Moderate Growth funds with a sliver of MGK that seemed to both boost returns and moderate declines. A $5k portfolio would be 6 MGK (10%), 19 VTI (40%), 23 VXUS (20%),…

you are not a fiduciary*

you could easily be a financial advisor

Re: Investing Returns on the S&P500

#288

Post by iloveluce »

coupdetaco wrote: post #197
xiaoma wrote: post #184

Earlier quoted context omitted.

> "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…

But we live in the best of all possible worlds!

Don't be so Candid

Re: Investing Returns on the S&P500

#289

Post by dharma1 »

toomuchtodo wrote: post #275
dharma1 wrote: post #171

Earlier quoted context omitted.

As a general rule yes. But if you are thinking of sticking a large amount of cash in the stock market right now and plan to stay in long term, I would at least give it a shot in terms of trying to time it right in the cycle. Right now we are quite high in the cycle - 9 years from the last crisis, end of QE, slowing growth - so at least in my view, it's an asymmetric bet to wait and see. But what do I know.

> As a general rule yes. But if you are thinking of sticking a large amount of cash in the stock market right now and plan to stay in long term, I would at least give it a shot in terms of trying to time it right in the cycle. Vanguard says you're wrong. https://pressroom.vanguard.com/nonindexed/7.23.2012_Dollar-c...

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