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Stock Market Returns Are Anything but Average

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Re: Stock Market Returns Are Anything but Average

#241

Post by paulpauper »

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?

it's like shoplifitng. big penalty if caught, small reward if you get away with it, which most do until too late. asymetical payoff.

Re: Stock Market Returns Are Anything but Average

#242

Post by [deleted] »

highfrequency wrote: post #211
lotsofpulp wrote: post #110

Earlier quoted context omitted.

> 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…

There’s a big difference between saying that a company is growing and has stellar financials, and saying that it is a great stock to invest in. Surely the current price is relevant. Everyone can agree that Amazon is worth A Lot Of Money. The question is: is it worth $2T? or $3T? or $1T?

[deleted]

Re: Stock Market Returns Are Anything but Average

#243

Post by titzer »

thehappypm wrote: post #198
ryandrake wrote: post #187

Earlier quoted context omitted.

> Now that cryptocurrency prices are listed right next to stock prices, many people don’t even understand that stocks are ownership shares in real businesses instead of just another ticker symbol to gamble on. This distinction is practically useless, unless you own enough shares to have even tiny sway at shareholder meetings. Owning 1/1000000000th of a company doesn't mean any extra value or power to you. The big dif…

Cryptocurrencies are basically stocks in nothing.

Until you can use them for payments writ large, they aren't even currencies, just speculation bubbles.

Re: Stock Market Returns Are Anything but Average

#244

Post by eezurr »

jerf wrote: post #102
CarelessExpert wrote: post #88

Earlier quoted context omitted.

> 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…

> If it is red 20-30 years into the line, that means that money put it at the beginning had a negative cumulative return

No, this is only true if its dark red.

The way you present the data of the graph does not represent how people invest. The average person works for ~40 years, so there are 40 individual years you could track on this graph. However, that isn't useful because compounding interest is a huge factor in returns. Another variable is people dont invest the same amount every year (typically people make more money as they age, however in most cases, compounding returns beat out income gains over the long term).

Consider if year one someone places $10,000 into the stock market. 40 years later, it grows into $48,000 (real value after inflation).

If you extend the diagonal boxes to 25, 30, 40, or 50 years, which makes more sense given how long people work and how long they live after retiring, the cumulative growth is _always_ above inflation.

Re: Stock Market Returns Are Anything but Average

#245

Post by pradn »

thehappypm wrote: post #198
ryandrake wrote: post #187

Earlier quoted context omitted.

> Now that cryptocurrency prices are listed right next to stock prices, many people don’t even understand that stocks are ownership shares in real businesses instead of just another ticker symbol to gamble on. This distinction is practically useless, unless you own enough shares to have even tiny sway at shareholder meetings. Owning 1/1000000000th of a company doesn't mean any extra value or power to you. The big dif…

Cryptocurrencies are basically stocks in nothing.

Proof-of-work crypto prices are based on 1) mind-share 2) sentiment/momentum 3) institutional backing (hedge funds and companies legitimizing them) 4) price of electricity 5) cost per hash 6) hardware supply 7) legality/illegality/regulation. Proof-of-stake currencies only lack #5, cost per hash. What I'm trying to say is that there's components to the price that can drive purchase/sell decisions.

Re: Stock Market Returns Are Anything but Average

#246

Post by dasil003 »

pc86 wrote: post #133
dasil003 wrote: post #105

Earlier quoted context omitted.

Yeah so what are you going to do about it?

What kind of argumentative nonsense comment is this?

The point is that of course there are the outlier days that disproportionately affect gains/losses, that doesn't invalidate the long-term average argument though unless you have some way of identifying those periods in advance. If you could do that then you A) would not tell anyone until B) the SEC came knocking at your door to explain how you turned $1k into $1B over a very short time span.

Re: Stock Market Returns Are Anything but Average

#247

Post by undefined1 »

duxup wrote: post #130
kingsuper20 wrote: post #104

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…

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.

we have high inflation, CPI is just not a good measurement.

https://twitter.com/LynAldenContact/status/13875210431207587...

https://tradingeconomics.com/commodities

Re: Stock Market Returns Are Anything but Average

#248

Post by MR4D »

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?

It means doing something very risky for little overall gain.

Re: Stock Market Returns Are Anything but Average

#249

Post by jiscariot »

slv77 wrote: post #75
bryanlarsen wrote: post #57

Earlier quoted context omitted.

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…

This is called a martingale bet ( https://en.m.wikipedia.org/wiki/Martingale_(betting_system) ). Doubling down on losses would be an example of a martingale bet.

I think this is also a reason why tables generally have set limits.

Re: Stock Market Returns Are Anything but Average

#250

Post by DennisP »

whynotminot wrote: post #51
DennisP wrote: post #36

Earlier quoted context omitted.

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.

Do you just buy stock X because you think it will do well, or do you buy a broad ETF because you believe in passive investing and diversification?

If the latter, well, the same applies to countries and asset classes. You can take your best guess on who the winners will be, or you can just buy the market. It doesn't mean you think "the globe will outperform the US," any more than buying VTSAX means you think VTSAX will outperform Apple.

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