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Stock Market Returns Are Anything but Average

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Re: Stock Market Returns Are Anything but Average

#51

Post by whynotminot »

DennisP wrote: post #36
ahelwer wrote: post #25

Earlier quoted context omitted.

The ultimate point of these discussions is coming to a conclusion about "what should we do?". I can give you quite a few reasons why dumping all your money in market index funds could end in disaster. I'm not under the illusion these gains are guaranteed. But what the hell else am I going to do?

Invest globally instead of throwing it all in the S&P500, and add some other asset classes.

Do you think the globe as a whole will outperform the US market?

I don't think our collective future as a planet is any better than the US outlook, personally. If anything, the United States is probably better situated to win future dystopian contests than most, too.

Re: Stock Market Returns Are Anything but Average

#52

Post by berkes »

clomond wrote: post #29
nocommentguy wrote: post #13

Earlier quoted context omitted.

More like the value of the dollar has roughly halved due to record money-printing and this is reflected in capital assets firsts. https://fred.stlouisfed.org/graph/fredgraph.png?width=880&he... MMT apologists are the modern day petit bourgeois. Trust the experts!

The value of the dollar has not halved.... Against a basket of currencies, the US dollar index is approximately 10% lower than it was from the start of the pandemic. Pointing to the fed money supply chart as evidence is woefully misleading. Dollar index historical: https://tradingeconomics.com/united-states/currency

> Against a basket of currencies,

Counterpoint would be that against "a basket of assets" it is decreasing in value rapidly.

The EUR is probably tanking just as fast. What you are doing is like saying "shipping prices for steel have not increased, because the price to get a kilogram of steel across the ocean is hardly more than the price to get a kilogram of coal across the ocean".

Re: Stock Market Returns Are Anything but Average

#53

Post by xwdv »

bryanlarsen wrote: post #22
ahelwer wrote: post #14

Earlier quoted context omitted.

I mean yes, past performance doesn't guarantee future results. But it does waggle its eyebrows suggestively at it, when you have a phenomenon that's gone unchallenged for probably a hundred years now. It isn't guaranteed. But nobody's lost their shirt betting it'll continue yet . People always bring up Japan in these discussions, of course. The Nikkei 225 peaked on 29 December 1989, still only at half that value over…

Or the German stock market of 1914. An 1914 investor would have had to have held for 100 years to get his investment back. The major point is that only looking at 90 years of American stock market returns is very serious cherry picking. We can get a lot more data by including non-American stock markets. The last century was a century of American ascendance. 100 years from now America still might be at the top, but I…

No they would not have had to wait 100 years. Makes for a spicy headline, but no one just throws a lump sum of money into the market once and hopes for the best.

If you continue to invest regularly, your returns eventually cover your previous losses and your back to making profits sooner than later. Your portfolio balance over time is the only thing that matters, not the returns of individual investments.

It’s why you shouldn’t be scared of a big crash. Do you plan to continue investing afterward? Yes? Then you’ll be fine.

Re: Stock Market Returns Are Anything but Average

#54

Post by fnord77 »

hansor wrote: post #41

US market should NOT be used as any scientific benchmark for anything - as it does not represent "all" typical possible scenarios for the stock market. Look for example(one of many) at Japanese NIKKEI index - it was going DOWN for like 20 years! So this theory does not work! Many people in Europe also quote multiple studies based on US market - but they are usually worthless on other markets(both bonds and stocks). I…

> US market is special - as US is one of very few superpowers on Earth.

For now. Look how rapidly the USSR lost its superpower status.

What if the Capitol insurrection were successful?

Re: Stock Market Returns Are Anything but Average

#55

Post by EGreg »

bryanlarsen wrote: post #38
ahelwer wrote: post #25

Earlier quoted context omitted.

The ultimate point of these discussions is coming to a conclusion about "what should we do?". I can give you quite a few reasons why dumping all your money in market index funds could end in disaster. I'm not under the illusion these gains are guaranteed. But what the hell else am I going to do?

As long as you realize that you're choosing the least bad of a bunch of bad options. Far too many people are claiming that stocks are safe. You're right: stock picking, index funds, bonds, crypto, cash, real estate, collectibles -- they're all bad options in 2021. Myself I would recommend holding a sizable portion in cash. Unlike many, I'm not overly worried about cash holdings getting destroyed by inflation, but I d…

It’s not that stocks are safe

It’s that the options could be convex !

In other words putting 10% in the riskiest things with highest potential returns (shitcoins on DEXes for example) and 90% in the safest things would be strictly better than putting ANY money in the middle between the extremes.

Re: Stock Market Returns Are Anything but Average

#56

Post by hamilyon2 »

Tangokat wrote: post #34
hpkuarg wrote: post #2

I mean, just look at last year, when the S&P 500 index plunged over 30%, then proceeded to nearly double from then until now, in the midst of a global pandemic that froze big chunks of the world economy. Stock market returns make no sense.

Stock market returns make sense only when you realize the currency is actually just losing value. All currency is being devalued so you don't see it in currency pairs but scarce assets go up quickly.

I think that given how vast is USD influence, currencies all over the world will lose their value with dollar. But not every currency, economies that rely on mining natural resources more should have their currencies better against USD.

This is not the case, as far as I can see.

Re: Stock Market Returns Are Anything but Average

#57

Post by bryanlarsen »

sichtlinkair wrote: post #15
ahelwer wrote: post #6

There are all sorts of interesting facts you can pull out of this, like how if you missed the top 10 best days in the market from 1999-2019, your return was cut in half. If you missed the top 20 best days, you actually lost money: https://www.fool.com/investing/2019/04/11/what-happens-when-... Basically never mistake annualized return over a long period of time for your expected return in a given year (or day, etc).…

> It's likely to be a "picking up pennies in front of a steamroller" type trade. What does that mean?

If there's a highway made of pennies that is being maintained by a steamroller, you can make a very consistent but small profit by picking up pennies every day. Except for that one day that you get run over by a steamroller.

A better example is imagine that every day you bet on coin flips. Every day you go home after you're up $1. You start off with a $1 bet, and double the bet every time you lose. So for example one day, you might lose $1, then lose $2, then win $4 for a total profit of $1.

It's a foolproof strategy! You win $1 every day and you can't lose. But of course it assumes that both you and the house have an infinite stake. But if not, one day the house flips 16 heads in a row and you don't have $65536 to bet a 17th time so you go home down $65535. Kind of makes your $1 daily wins look pretty stupid now, doesn't it?

There are tons of options plays available on the stock market that have a risk profile similar to the coin flip example.

Re: Stock Market Returns Are Anything but Average

#58

Post by Zr40 »

Someone1234 wrote: post #8
hpkuarg wrote: post #2

I mean, just look at last year, when the S&P 500 index plunged over 30%, then proceeded to nearly double from then until now, in the midst of a global pandemic that froze big chunks of the world economy. Stock market returns make no sense.

It starts to when you ask yourself: Where else are people meant to store money? Since interest rates and bond rates were at historical lows. So you have people who are looking at 10% YOY returns on one hand and 0.2%/2% on the other and making the rational decision. Does this make stocks overinflated? Yes. Is it going to suddenly pop? Unlikely, since the conditions that caused it won't suddenly change (e.g. certain bo…

> Where else are people meant to store money?

Money isn't stored in other assets. It's transferred from the buyer of an asset to the seller. It doesn't cease to exist simply because you traded it for stocks (or gold or anything else). Now the seller has to deal with the consequences of holding the money you previously held. A rational trader factors in the costs of money when they price assets, therefore one doesn't avoid those costs by trading money for other assets.

Re: Stock Market Returns Are Anything but Average

#59

Post by xwdv »

heliodor wrote: post #42
ahelwer wrote: post #25

Earlier quoted context omitted.

The ultimate point of these discussions is coming to a conclusion about "what should we do?". I can give you quite a few reasons why dumping all your money in market index funds could end in disaster. I'm not under the illusion these gains are guaranteed. But what the hell else am I going to do?

Put your money in real estate. Our political system is unable/unwilling to address housing needs. Home owners vote for whatever it takes to increase prices. Renters and young people looking to buy their first homes don't have as much political clout. The reality of the situation is sad but the results are clear!

Real estate is one of the worst asset classes right now. If anything is due for a crash it’s real estate prices. And the amount of protection that tenants have been getting during the pandemic doesn’t inspire confidence in being a landlord. On top of that, people seem to get so leveraged in real estate, it’s a recipe for bankruptcy. I never hear about people investing in stocks going bankrupt unless they do something extraordinarily stupid, but I hear about real estate investors going bankrupt all the time despite simply following best practices.

Re: Stock Market Returns Are Anything but Average

#60

Post by hourislate »

hpkuarg wrote: post #2

I mean, just look at last year, when the S&P 500 index plunged over 30%, then proceeded to nearly double from then until now, in the midst of a global pandemic that froze big chunks of the world economy. Stock market returns make no sense.

A Pandemic and multiple conflict zones were no more than a pot hole. The markets have pushed higher with no end in sight. The Fed and Treasury are making sure that if there is no one to buy stocks they will. There is no end to the support the Federal Reserve will shoulder for the markets.

With Governments around the world determined to never let the Economy fall or stay down even if it means directly sending money to the population and spending trillions at a moments notice to support Wall St there is no chance that over the long term the market will ever fall and stay down again.

Not even a WW or a natural disaster of the like we have never seen would keep the markets down. We would be naked, homeless and hungry and the market will continue to march higher. History is a perfect example of that.

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