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Stock Market Returns Are Anything but Average

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Re: Stock Market Returns Are Anything but Average

#331

Post by hmsimha »

ryandrake wrote: post #187
PragmaticPulp wrote: post #124

Earlier quoted context omitted.

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…

> 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…

Cryptocurrency staking is effectively the same as dividends for investors, though staking rewards are often more predictable.

Re: Stock Market Returns Are Anything but Average

#332

Post by jayd16 »

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…

The market can be pretty irrational but the 401k system means it can't fail. That system ensures it'll always have new dumb money poured into it. We'll bail it out one way or another because the middle class is tied to it.

What an odd system, indeed.

Re: Stock Market Returns Are Anything but Average

#333

Post by [deleted] »

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).…

[deleted]

Re: Stock Market Returns Are Anything but Average

#334

Post by BeetleB »

as_i_fall wrote: post #212
bryanlarsen wrote: post #185

Earlier quoted context omitted.

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…

Interesting: I did my own analysis[1] and did not show a loss for any 20 year period:

http://blog.nawaz.org/posts/2015/Dec/pay-down-mortgage-or-in...

Must be some differences in the data they have vs what I could find. I did include inflation and dividends, but not taxes - wondering if that brought it to the negative.

Re: Stock Market Returns Are Anything but Average

#335

Post by kesselvon »

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?

There are trades where you can make a small profit regularly, but on bad days you take huge losses. The huge losses outweigh all the potential profits by a large margin. Just like picking up pennies is a small gain while risking death to do so

Re: Stock Market Returns Are Anything but Average

#336

Post by rorykoehler »

jokethrowaway wrote: post #268
rorykoehler wrote: post #164

Earlier quoted context omitted.

Cash is being decimated by asset inflation before our very eyes.

It depends what assets you want to spend your cash on. Will home prices go up after this crisis? Will there be demand once small companies start firing people and close down and we run out of government incentives? Sure, big companies have more money, but that is likely to be hoarded or invested (and I doubt it will be in real estate, given it's a hassle to manage) - it won't go back in the economy.

It went into real estate the last time around so why not again?

Re: Stock Market Returns Are Anything but Average

#337

Post by [deleted] »

kqr wrote: post #316
Someone1234 wrote: post #8

Earlier quoted context omitted.

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…

You don't have to choose one thing. A portfolio of two assets that are sufficiently uncorrelated can provide substantial returns over either one alone. They don't even have to be cointegrated. One of them could even have net negative returns, and it still works. A split between equity and bonds still seems prudent, I think.

[deleted]

Re: Stock Market Returns Are Anything but Average

#338

Post by z2 »

tut-urut-utut wrote: post #219
grumpwagon wrote: post #82

Earlier quoted context omitted.

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.

This is a guess based on anecdotes on recent volatile periods, the general scenario could be this:

1. Market falls sharply.

2. General public panic and sell, while market timers double down.

3. Market falls further, market timers panic and sell.

4. Markets rebound sharply, with the above-mentioned people missing those good days.

The key assumption is that at least some really good days usually follow really bad days.

Re: Stock Market Returns Are Anything but Average

#339

Post by boringg »

lotsofpulp wrote: post #119
boringg wrote: post #87

Earlier quoted context omitted.

I think the way you should think about the stock market is similar to beating the Casino in blackjack & card counting. When you know the deck is rich ins face cards make more aggressive bets, when its low in face cards be frugal. I.e. don't put lots of money into the market when its hot & put more money in when its cold. That way you statistically have a better chance on getting a good return.

> I.e. don't put lots of money into the market when its hot & put more money in when its cold. That way you statistically have a better chance on getting a good return Was the market hot in 2017, 2018, 2019?

With the caveat, historical returns do not predicate future returns. If you invested in the S&P 500 from 97-99 and didn't sell before the large sell off of 2000 you would have to wait until 2010 before you saw positive inflation adjusted returns.

Re: Stock Market Returns Are Anything but Average

#340

Post by ChrisLomont »

rorykoehler wrote: post #164
bryanlarsen wrote: post #38

Earlier quoted context omitted.

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…

Cash is being decimated by asset inflation before our very eyes.

>Cash is being decimated by asset inflation before our very eyes.

Not really - 10% change in 5 years is expected.

https://fred.stlouisfed.org/series/CPILFESL

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