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Investing Returns on the S&P500

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Re: Investing Returns on the S&P500

#321

Post by cryoshon »

greedo wrote: post #274
vm wrote: post #252

Earlier quoted context omitted.

A lot of companies offer retirement plans where a % of income is invested monthly, a la dollar cost averaging (e.g. 401k plans). It's really easy to set up and let ride on autopilot.

But that still skews the dollars invested. At age 22 (college grad) you might make $50K. You put in 6% and get a 3% match, for $4500 into your retirement fund. Fast forward to age 50, when you're making 200K (this is 28 years from now, so inflation and pay raises bump you very high), you're putting in the same %, but that equates to $18K/year. So even with dollar cost averaging, the majority of your money is invested…

Ahem, good comment, but:

At age 22, you make 25k and get 0% matching, and can afford 0 to put into your still-hypothetical retirement fund.

At age 50, if you're the median person, you make 50k. And you need that money to put your kid through college.

Re: Investing Returns on the S&P500

#322

Post by Cogito »

chollida1 wrote: post #116
mailshanx wrote: post #100

Earlier quoted context omitted.

I'm interested in walking the quant path. Just how high is the bar? And would there be an equivalent project that would put a prospective quant to the top of the resume pile?

I've attached two pdf's on what you should expect. The latter was the take home an old company used to give quants as a test. If you can answer the questions on teh practicum then you probably have enough math skills to start as a quant. https://drive.google.com/folderview?id=0B1iikX5PwNx4d2dKQ3FT...

Question 4 was fun :)

Not sure what technique they wanted you to use, but it was easy to work back from the desired outcome, keeping track of the current IOU balance and the bet that would leave you in the desired position. I assume the early questions illuminate the general way of doing this.

==== SPOILER ====

Create a 4 * 4 matrix BET_m,n and a 5 * 5 matrix IOU_m,n, where m and n are the number of wins for each team respectively, and each matrix encodes how much is bet and owed after that many wins.

Our initial constraints give IOU_0,0 = 0, as nothing is owed until a team wins a game. IOU_4,* = 100 and IOU_* ,4 = -100.

It's hard to see what BET_0,0 should be starting from the start, so instead lets work backwards.

If a team has 3 wins, and wins again, then the bet plus current IOU must equal 100 if it's my team winning, -100 if the other.

IOU_3,3 + BET_3,3 = IOU_4,3 = 100

IOU_3,3 - BET_3,3 = IOU_3,4 = -100

Thus BET_3,3 = 100 and IOU_3,3 = 0

Our matrices now look like

    BET = [. . . .
           . . . .
           . . . .
           . . . 100]
    IOU = [0   .   .   .   -100
           .   .   .   .   -100
           .   .   .   .   -100
           .   .   .   0   -100
           100 100 100 100 .   ]
IOU_3,2 + BET_3,2 = 100

IOU_3,2 - BET_3,2 = 0

So BET_3,2 = 50 and IOU_3,2 = 50

By symmetry BET_2,3 = 50 and IOU_2,3 = -50

Working along the m=3 and n=3 edges we get

    BET = [.    .  .  12.5
           .    .  .  25
           .    .  .  50
           12.5 25 50 100 ]
    IOU = [0    .   .   -87.5 -100
           .    .   .   -75   -100
           .    .   .   -50   -100
           87.5 75  50  0     -100
           100  100 100 100   .   ]
In general, our constraints are:

IOU_m,n + BET_m,n = IOU_m+1,n

IOU_m,n - BET_m,n = IOU_m,n+1

Filling in through the middle

    BET = [31.25 31.25 25   12.5
           31.25 37.5  37.5 25
           25    37.5  50   50
           12.5  25    50   100 ]
    IOU = [0     -31.25  -62.5 -87.5 -100
           31.25 0       -37.5 -75   -100
           62.5  37.5    0     -50   -100
           87.5  75      50    0     -100
           100   100     100   100   .   ]

Re: Investing Returns on the S&P500

#323

Post by chae »

As somewhat alluded to in the article, some of the graphs here extrapolate historical data and assume it to be a good predictor of the future. Without an understanding about the deep nuances of economics - for which someone else can supply good or bad reasons why this or that might happen - there is no reason why the future should necessarily rely on anecdotal evidence.

Re: Investing Returns on the S&P500

#324

Post by reddytowns »

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.

Japan has a very low subsidy and most of its railways are private and receive none.

Re: Investing Returns on the S&P500

#325

Post by jomamaxx »

e12e wrote: post #315
jomamaxx wrote: post #308

Earlier quoted context omitted.

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…

> 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. Maybe. But the trend towards privatising military force could end up accelerating USA's slide down in terms of military power. If we are indeed moving back to the "normal" (historically speaking) "neo medieval" world were mil…

"But the trend towards privatising military force could end up accelerating USA's slide down in terms of military power. "

+ This is a very marginal thing.

" If we are indeed moving back to the "normal" (historically speaking) "neo medieval" world were military force is generally mercenary and not national standing armies"

+ This is not happening. Don't worry about it.

Listen - war is too expensive. It is only economically advantageous when the parties are not interconnected.

Some American businesses can economically from a war in Iraq by getting big contracts ... but a war with any real nation would cause massive upheaval in markets.

The moment Brexit happened - it was a big shock to markets - and that was a small thing.

90% of people and businesses 'lose' in a big war, so it's very, very unlikely that China, Russia, USA get involved directly in a war - it's just too costly for everyone. USA is China's #1 customer.

The only 'rising military power' that will make a difference is China.

Everyone else - won't matter.

It's also very, very expensive to challenge the Americans in any way, even regionally, so the only actors that will do it are non-state entities, i.e. insurgents like Al Qeda etc..

The 'big shift' over the next 50 years is that 4 billion people who are not even on the radar today are going from $2 a day, to $50 a day in terms of GDP.

Re: Investing Returns on the S&P500

#326

Post by malloryerik »

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.

Empire is the wrong term. It's misleading, it's fraught, it leads to lazy thinking, facile notions and comparisons, and can facilitate unjustified anti-Americanism on one side, cavalier adventurism on another (think Cheney, neocons, AEI), and perhaps isolationism in a current sense ("we're an empire but we shouldn't be").

"Superpower" is better.

Re: Investing Returns on the S&P500

#327

Post by Redoubts »

the_watcher wrote: post #201
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.

> I can't imagine a realistic scenario that doesn't require the implosion of other nations to embiggen America. This has happened! In the past 30 years, no less.

Yeah, but that was a surprise to quite a few people too.

Re: Investing Returns on the S&P500

#328

Post by SilasX »

jonknee wrote: post #241
SilasX wrote: post #224

Earlier quoted context omitted.

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.

That much I get. I was asking for your basis for disputing the logic; all I see so far is a reassertion of the original conclusion. If you don't understand what dynamic I was describing, please say so. As it stands, I don't see what the reason is that you're trying to give for why it is wrong.

Re: Investing Returns on the S&P500

#329

Post by jjeaff »

gnaritas wrote: post #312
jjeaff wrote: post #303

Earlier quoted context omitted.

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 fr…

> Even hedge funds aren't zero sum. They receive dividends on the investments they hold which is a return that is not zero sum. Once again, that depends on the trade, short term trades don't make their money from dividends, but from timing the market. > Additionally, financial services overall are far from zero sum. Beside the point, plenty of them are zero-sum-never said they were all zero-sum; that exception exist…

No, I didn't say there are exceptions. I said MOST financial services are NOT zero sum. The zero sum ones are the exception.

Re: Investing Returns on the S&P500

#330

Post by hrez »

soVeryTired wrote: post #52
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%),…

They're not free, all ETFs have charges. Vanguard's fees tend to be low (e.g. 13 basis points on VXUS), but to say they're free is misleading.

Vanguard ETFs are free.
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