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Investing Returns on the S&P500

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Re: Investing Returns on the S&P500

#301

Post by robryan »

jonknee wrote: post #246
ced wrote: post #204

Earlier quoted context omitted.

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…

Is there any data out there on variations? It would be interesting to see how other strategies compare such as buying the next 100 largest market caps outside the S&P 500, also not selling stocks that are removed.

Re: Investing Returns on the S&P500

#302

Post by maxxxxx »

Jabbles wrote: post #144
maxxxxx wrote: post #22

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…

If you're just as likely to be right as wrong, then is the only risk that your money is taken by fees (if you don't count your time as wasted)?

Nope. Because if you are wrong once and lose 50% you need to be right by 100% to get back to even. So after a number of losses you will run out of money ever if your subsequent picks will be right. Unless you have a rich dad who gives you another chance...

Re: Investing Returns on the S&P500

#303

Post by jjeaff »

gnaritas wrote: post #293
smelterdemon wrote: post #279

Earlier quoted context omitted.

Wealth is not a zero sum game.

That depends on how you generate it. When apple builds wealth, not zero sum; when a hedge fund builds wealth; zero sum. 40% of our economy is financial services now, there's a lot of zero sum wealth creation going on.

Even hedge funds aren't zero sum. They receive dividends on the investments they hold which is a return that is not zero sum.

Of course, the more active a fund is, the farther it gets from zero sum, but it would never be fully zero sum.

Additionally, financial services overall are far from zero sum. There is a great deal of efficiency and market lubrication created by financial services and if you exclude the high frequency traders, you leave a huge majority that is still quite beneficial to people on both sides of the transaction.

Re: Investing Returns on the S&P500

#304

Post by mercutio2 »

plg wrote: post #75

an oft-neglected nugget of info that has great bearing on a buy-and-hold approach, esp with mutual funds: FEES Fees can kill your returns There are many low-fee or no-fee options

To the best of my knowledge, there are no available to the general public truly no-fee options for having someone else buy a variety of stocks for you. ETFs internalize fees, so many people are not aware of them, but their fees are generally comparable to the equivalent index fund's fees.

Re: Investing Returns on the S&P500

#305

Post by tanderson92 »

plandis wrote: post #236
Steuard wrote: post #210

Earlier quoted context omitted.

Yikes! Are there really index funds with 1% expense ratios? I think my Vanguard funds are all under 0.2%, some way under. (I've got the impression that Vanguard's ETF expense ratios are similar or identical to the corresponding fund expense ratios.) Thanks for the overview. I'd heard about the constant trading difference before (I've tended not to think about it, since I'm a buy-and-hold-for-years type). Do you have…

Vanguards ETF expense ratios seem to be slightly lower than/on par with the admiral type funds from my experience.

Vanguard ETF expense ratios are almost always^* exactly equal to the corresponding admiral type funds. The reason is because Vanguard holds a patent on the dual-share class[1] idea, where the ETF and admiral share mutual fund are precisely the same fund.

*: The exceptions tend to be new-ish funds which are less liquid and have purchase costs on the mutual fund side. I haven't seen more than one or two of these recently.

[1]: http://www.ft.com/cms/s/0/3e0cc962-ec0c-11e4-b428-00144feab7...

Re: Investing Returns on the S&P500

#306

Post by tanderson92 »

whamlastxmas wrote: post #214
xyience wrote: post #170

Earlier quoted context omitted.

It depends on the mutual fund and the ETF. For Vanguard 500, the VOO ETF and the VFIAX index fund are effectively the same, they even have the same expense ratio. The latter you need $10k upfront though. (VFINX, if you only have between $3k and $10k, has a higher expense ratio.)

VFIAX is not a mutual fund, it's just the "Admiral" class of the VOO ETF. Admirals shares offer lower expense ratios in many instances, but I guess the VOO expense was already at its floor.

VFIAX is a mutual fund. Vanguard holds a patent which allows a dual share class, where the ETFs and mutual funds share the same pool of securities. This allows share conversions from mutual fund->ETF, interestingly.

http://www.ft.com/cms/s/0/3e0cc962-ec0c-11e4-b428-00144feab7...

Re: Investing Returns on the S&P500

#307

Post by clock_tower »

wernercd wrote: post #199
clock_tower wrote: post #186

Earlier quoted context omitted.

> What would a more powerful USA look like? Passenger rail; durable houses; less unemployment and more labor-force participation; a population not balkanized along political/cultural lines.

With an increase in immigration and a cheapening of robotic workers and kiosks... where is this decrease in unemployment and increase in labor-force participation going to come from? I mean, there is "always" going to be jobs for plumbers and spots for artisan made stuff... but those jobs aren't going to replace the amount of jobs that will be lost when $15 becomes more expensive than iRobot...

> With an increase in immigration and a cheapening of robotic workers and kiosks... where is this decrease in unemployment and increase in labor-force participation going to come from?

I don't know where it would come from (perhaps the same magical unicorn tooth fairy who would remove balkanization, inspire durable construction, and give us more passenger rail), but the US would look a lot stronger if it had it.

This includes politically stronger; poverty, disengagement from the labor force, and high inequality are not good for a country's political stability.

Re: Investing Returns on the S&P500

#308

Post by jomamaxx »

Redoubts wrote: post #142
JackFr wrote: post #23

Earlier quoted context omitted.

> 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.

> 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 is at 'peak' , we can roughly say this, not because of anything America is doing, but because the 'rest of the world' is coming online.

50 years ago there was 'America', the 'Soviets' and 'Europe'. Everything else was a footnote.

What we've seen with China 'coming out of nowhere' in the last 25 years is about to happen 4x with the rest of the world.

America and Europe's share of global economy is falling fast, and it simply has to do with electricity, plumbing, democracy, knowledge and productivity gains in the rest of the world.

India is coming on a little slowly, but surely.

Pakistan is 180 Million people. Nigeria almost that - and they have oil.

Africa is a billion people.

There are a lot of Asians outside of China, India and Japan.

As they start to become connected to the global economy, relative power shift will happen.

I don't see the emergence of any new 'superpower' and America will likely remain the only 'superpower' in the classical sense, but it won't be as powerful as it is today - relatively speaking.

If you look at the growth of Japan after WW2 - a period of fast growth, then slowing down as it approaches parity with the west - this is what the underdeveloped world will look like, but a little slower.

Also - a very important point - a lot of real growth is not measured in the GDP.

For example, the value that is created by governments is measured simply in 'government spending'. But $1 of gov. spending hopefully creates more value than $1!

For example, if the US Gov spent $50B and created this amazing national public transport system that everyone used, and cost next to nothing - the 'economic surplus' would be massive, but the GDP would directly be down. Why? Because the only thing that would count towards the GDP would be the $50B spent by the gov, not the $Trillion in value derived from it. Obviously, there would be indirect business benefits ... point being - the GDP is not necessarily the best way to measure things for many obvious reasons.

Re: Investing Returns on the S&P500

#310

Post by nerfhammer »

xiaoma wrote: post #300
reddytowns wrote: post #292

Earlier quoted context omitted.

Taiwan's trains are subsidized

So are Japan's. The idea isn't to get a profit off of tickets vs operating costs. The idea is to improve the efficiency of the country and economy. It's an investment. If the US had a similar political climate the east coast would already have high speed rail from New York to Miami.

Rail needs to be profitable, but roads certainly don't. For some reason.
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