General consensus is to invest using dollar cost averaging so you don't rely on timing. Invest the same amount of money each pay cycle. If stock is expensive, you'll be able to afford less stock, if stock is cheap, you'll afford more stock.
It's not exact that straight-forward. From Vanguard: > Our research indicates that it's prudent to invest a lump sum immediately. Article: https://investor.vanguard.com/investing/online-trading/inves... PDF: https://static.twentyoverten.com/5980d16bbfb1c93238ad9c24/rJ...
> depending on when you put in and take out your money the returns can be negative (even in cases where you hold up to 15 years) Sorry, but unless you're talking about truly black swan circumstances like the Great Depression or the 2008 crash, I don't believe for a second that, over a 15 year timespan, holding the S&P will result in negative returns frequently enough that a typical investor has to concern themselves…
The New York Times published the same sort of analysis in 2011: http://archive.nytimes.com/www.nytimes.com/interactive/2011/... Be sure to carefully read the description of the graph. Every time I link this, someone assumes that the green & red indicates are the yearly returns, but the entire point of this graph is that it is cumulative . If it is red 20-30 years into the line, that means that money put it at the beg…
I remember the banking crisis and the money printing after that, it was absolutely assumed inflation would follow, how much was debatable, but there wasn't much debate about the impending inflation. Didn't happen... for . Who knows what to make of the rules these days.
Some say that inflation did happen, but it ended up in real estate prices, which aren't counted in the formal inflation definition. I'm not smart enough to tell how true that is.
Yeah, I don't know how someone can look at housing prices say, 1990-2020 and say there wasn't inflation after the housing crisis. House prices dropped, but not as much as they "should" have to eradicate the evident bubble of '00-'08, despite the very public beating housing & banking took. And 2-3 years on they were shooting up again!
This is always what I think of when I think of cryptocurrencies. You're not parking your money somewhere, you're giving it to someone else. Every time you buy BTC someone else is getting paid. Money goes in circles.
Two economists are sitting at a bar, one pulls out a checkbook and writes a check for $100,000,000 then hands it to the other economist. The second economist looks at the check, smiles, then hands it back. The first economist calls the bartender over and orders a bottle of champagne. The bartender asks what the celebration is about, and the economist responds, "we just grew GDP by $200 million dollars."
Sure, fraudulent transactions exist. The difficulty is figuring out how much it matters.
The stock market is an odd duck. What to make of it now? There's both colors of swans at work in terms of the plague, excessive money printing, per Peter Turchin (cliodynamics) a peaking cycle in civic unrest, a potential loss of reserve currency status, big changes in tech that still haven't been digested, low cost of transactions. Lotsa opportunities for froth. I'm still uncomfortable with it as a store of value. N…
Recurring ,reliable revenues especially in large cap tech and payment processing (such as Visa, PayPal, MasterCard) is the main driver of the stock market and is why the market has done so well even though the economy feels weak otherwise and there is unrest. If companies can keep generating profit margins of 10-30%/a year, that is $ that must go to shareholders in the form of buybacks, dividends, or share price appreciation. This is what a lot of people get wrong about the stock market. Big companies, in tech, especial, are more profitable and dominant than ever. Never before have such companies generated so much cash.
> You could argue that the entire market is a mania. Objectively, the big publicly listed companies are growing and have stellar financials. I can think of no better place for someone to invest, other than maybe diversifying into real estate with high demand, if they already have a significant amount invested in public equity markets. Public equity market prices are also backed by the federal government, at least on…
I think a lot of newcomers to stock investing in the past year have been given the wrong ideas about the stock market. When all of the headlines are about GameStop and Nokia and AMC and some kid who made it lost a lot of money on RobinHood, the stock market can feel like a place for gambling. Now that cryptocurrency prices are listed right next to stock prices, many people don’t even understand that stocks are owners…
The problem is options/derivatives trading. That is straight up gambling. There’s a meta market where you bet on the behavior of the market...
The point of the trivia is arguing against trying to time the market. Lots of people predict crashes are coming, so shift money from equities to cash or bonds. Unless you can time it perfectly (you can't), it is better to hold because you don't know when the best or worst days are.
I agree that timing the market usually doesn't work. But it doesn't work in both ways. You are equally likely to miss or hit both good and bad days, with the same or similar impact on total return.
The good and bad days are not equally likely to be equally good/bad, though. Long-term, the market tends to rise; the good days will outnumber the bad in either quantity or quality.
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).…
>f something grows consistently with low variance over a long period of time
but that is what compounded interest is, no?
But I agree that this why market timing does not work, at least not for the vast majority of ppl and funds. If you miss those good days, you are screwed.
But the claim is often made that throwing it in for 10 or 20 years will guarantee returns.
Well obviously nothing is guaranteed, but something like 90% of 20 year windows in the last 100 years would in fact result in positive real returns. http://archive.nytimes.com/www.nytimes.com/interactive/2011/... Note that the light red color is actually still indicating a positive real return, this is particularly relevant in the 70s and early 80s when a 2% real return would be a much higher nominal return. Agreed t…
The last 100 years is only a weak predictor of the future.