Stock Market Returns Are Anything but Average • Hacker News Board

Re: Stock Market Returns Are Anything but Average

#281

Post by azemetre » Fri, Apr 30, 2021, 5:14 PM UTC

SavantIdiot wrote: post #263

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).…

How do you "miss" 10 days? Unless you are a day trader (aka gambler), "normal person investing" is about trickling cash into an account slowly over time into low-cost funds/etfs, covering the grid, and pretty much never selling until retirement. Maybe a rebalance here or there over the decades, but you're never "out" unless you're paranoid and liquidate into a cash position, but refer to point A. This is the strategy…

When the 2008 crashed happened the office I worked in had lots of people take their money out of their 401ks, IRAs, or brokerages for years. In hindsight it may have been irrational but from what I remember, people were scared. Some people lost their job for years (remember the various news stories about 99-week unemployment people?), you needed whatever money you could get. If that meant cashing out everything you had, so be it.

There were other people that weren't fazed by it and obviously had the chance to not miss the "days."

Guessing this type of anecdote may be more common than people think.

Re: Stock Market Returns Are Anything but Average

#282

Post by tarsinge » Fri, Apr 30, 2021, 5:16 PM UTC

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…

This is my sentiment too. People seems to give the market far more importance than what it is in reality: an exchange for second-hand stocks, with money just circling that can never touch the company and the economy. And they also forget that if they don't invest for dividends they are just betting that they'll be able to dump the bag for a higher price in the future.

Re: Stock Market Returns Are Anything but Average

#283

Post by cryptica » Fri, Apr 30, 2021, 5:16 PM UTC

The stock market has more or less monopolized the global fiat monetary system. Politicians can decide what the returns will be in any given year because they control the currency.

The returns are only meaningful in the short term while everyone is in a trance thinking that fiat currency is worth the same as it was before... The longer everyone can stay in this trance, the more 'real' the numbers are.

However, it's my opinion that the real value creators of our economy (the backbone of all economic value) don't have much incentive to believe in the fiat numbers anymore. That's why they're moving towards Bitcoin and crypto.

The next decade is going to be interesting; we're going to find out if all the hype about 'automation' and 'big data' was genuine or if it was just moral cover for the elite to justify their monopolization of everything.

If the corporate elite have managed to automate the economy to a degree that people and non-corporate entities cannot compete with their machines, then fiat will continue to thrive. If it turns out that non-corporate entities still have the competitive upper hand, then fiat will deteriorate and Bitcoin will take over.

My PoV as a developer who has worked for many big tech companies is that the corporate sphere has been deteriorating for years and most advancements have been vaporware. I believe that apparent growth in profits and market cap are a trick of the money printers and the numbers are not grounded in real economic value; they are extremely fragile and the only reason that the stock market doesn't collapse along with fiat is because of extreme herd mentality among investors who have been primed to believe in the supremacy of fiat currencies for their entire lives.

Re: Stock Market Returns Are Anything but Average

#284

Post by confidantlake » Fri, Apr 30, 2021, 5:17 PM UTC

jiscariot wrote: post #249

slv77 wrote: post #75

Earlier quoted context omitted.

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.

I don't think so. If you as the player make bets a series of bets, each with a negative expected value then your total expected value will also be negative. It doesn't matter if you double after every loss.

The limits are mostly because the casino can't afford to take on a 20 billion dollar bet from someone like Bezos. Even if it has a positive expected value, they will still go broke the 49% of the time they lose it.

Re: Stock Market Returns Are Anything but Average

#285

Post by [deleted] » Fri, Apr 30, 2021, 5:17 PM UTC

ISL wrote: post #233

robjan wrote: post #209

Earlier quoted context omitted.

You own the stock in perpetuity, not just for a year. As long as you don't expect the company to go bust any time soon that's not a bad PE ratio.

As recently as 2011, KO had a P/E of 9. https://www.macrotrends.net/stocks/charts/KO/cocacola/pe-rat... There are two ways that a P/E can return to a quasi-normal value. Either the price can go down or the earnings can increase. The mean and median values, since 1880, are about 15. "This time, it's different" https://www.multpl.com/s-p-500-pe-ratio

[deleted]

Re: Stock Market Returns Are Anything but Average

#286

Post by johnwheeler » Fri, Apr 30, 2021, 5:19 PM UTC

SavantIdiot wrote: post #263

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).…

How do you "miss" 10 days? Unless you are a day trader (aka gambler), "normal person investing" is about trickling cash into an account slowly over time into low-cost funds/etfs, covering the grid, and pretty much never selling until retirement. Maybe a rebalance here or there over the decades, but you're never "out" unless you're paranoid and liquidate into a cash position, but refer to point A. This is the strategy…

I agree with this except I think if you know a stock or two is good, diversification is unnecessary. I’ve only had two stocks in my portfolio for the last ten years.

Re: Stock Market Returns Are Anything but Average

#287

Post by tarsinge » Fri, Apr 30, 2021, 5:19 PM UTC

lotsofpulp wrote: post #110

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…

> 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…

But what are you investing in? The probability to sell (dump) to someone in the future for a better price?

> Objectively, the big publicly listed companies are growing and have stellar financials.

If you don't invest for dividends then it doesn't give intrinsic value to the stock you own, it's just a proxy to the odds of your bet to dump it for a profit in the future.

Re: Stock Market Returns Are Anything but Average

#288

Post by mrlinx » Fri, Apr 30, 2021, 5:19 PM UTC

bryanlarsen wrote: post #69

ryanar wrote: post #61

Earlier quoted context omitted.

A war? A natural disaster? That is the point! If this happens, it doesn’t matter what you invested in, money is worthless. So outside of that, it is now safe to say invest and hold is a safe strategy for guaranteeing returns over a long time horizon (30 years).

WW2 didn't make money worthless, COVID-19 didn't make money worthless. A limited nuclear war won't make money worthless. Climate change won't happen fast enough to make money worthless.

I'd say crypto have the bigger chance. Good or bad, leave that up to the reader.

Re: Stock Market Returns Are Anything but Average

#289

Post by splithalf » Fri, Apr 30, 2021, 5:21 PM UTC

grumpwagon wrote: post #82

tut-urut-utut wrote: post #32

Earlier quoted context omitted.

And if you avoided the worst 10 days, your earnings double. If you avoided 20 worst days, your earning doubled again. What is the point of such trivia? That most of the profit or loss happens during the days of high volatility?

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.

It’s such a fundamental contradiction you see it everywhere. The quote “buy low, sell high” says we should time the market. Even the classic “percentage of bonds to stocks should be your age” requires us to time the market. And if you just buy stock when you happen to have spare cash, that too is “timing the market.”

Re: Stock Market Returns Are Anything but Average

#290

Post by kqr » Fri, Apr 30, 2021, 5:22 PM UTC

paulpauper wrote: post #239

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).…

>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.

Yes, and you can expect relatively steady compounding returns at the risk-free rate (the clue is in the name.)

When you see return rates higher than the risk-free rates that still seem like they exhibit low variance, then one of two things are true:

1. Either you have found something that produces way too much reward for its level of risk. This is for anything publicly traded somewhat unlikely.

2. Or you have found something that's prone to rare, but incredibly big swings. The fatter the tails, the more likely it is you'll get a long, good run followed by something that completely wipes you out.