Stock Market Returns Are Anything but Average • Hacker News Board

Re: Stock Market Returns Are Anything but Average

#341

Post by gnopgnip » Fri, Apr 30, 2021, 6:43 PM UTC

tarsinge wrote: post #282

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.

Owning a stock is more than just dividends. You own part of the company, if it is liquidated you are paid based on the assets of the company.

Re: Stock Market Returns Are Anything but Average

#342

Post by reilly3000 » Fri, Apr 30, 2021, 6:44 PM UTC

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.

Cryptocurrencies are currencies whose value lies in their technology and adoption. Neither the tech nor its users are 'nothing', they are in fact quite tangible.

Re: Stock Market Returns Are Anything but Average

#343

Post by Traster » Fri, Apr 30, 2021, 6:46 PM UTC

Isn't this kind of... stupid?

> So around 5% of all years since 1926 have seen average returns. In fact, there have been just as many yearly returns above 40% as returns in the 8% to 12% range.

Well yeah sure but 3 of the 5 years that saw those >40% returns were 3 consecutive years 100 years ago.

I think all we can take from this article is that there are a multitude of factors that drive the value of the stock market and if you don't think about any of them in any detail then you're going to spot lots of statistical patterns that don't mean anything.

Re: Stock Market Returns Are Anything but Average

#344

Post by boringg » Fri, Apr 30, 2021, 6:47 PM UTC

ryangittins wrote: post #326

jerf wrote: post #102

Earlier quoted context omitted.

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…

This is an interesting visualization, but if I'm understanding it correctly it does oversimplify in a big (and potentially misleading) way: This is what happens if you do all your investing in one big lump sum, e.g. putting one dollar in the market in 1970 and getting out less than a dollar (after inflation) in 1985. Outside of getting a major windfall (and not dollar-cost averaging), this isn't how investing is done…

Actually the modeling I did assume that you invest the same amount every year - its rudimentary but does account for this.

Re: Stock Market Returns Are Anything but Average

#345

Post by ericmay » Fri, Apr 30, 2021, 6:50 PM UTC

akomtu wrote: post #272

ericmay wrote: post #170

Earlier quoted context omitted.

> What is the point of such trivia? That most of the profit or loss happens during the days of high volatility? Simply that you shouldn't try and time the market, but continue to "buy and hold". The likelihood of picking these exact 10 or 20 days is near 0, so it's an irrational thing to do.

I'd politely disagree. The massive fall and recovery around March 2020 was easy to predict, so I did and made a handsome amount of money. I mean, if a small asteroid fell on an important trade route or if another serious pandemic began, would you seriously suggest to just hold the stocks?

I did too, but I think that's besides the point.

Re: Stock Market Returns Are Anything but Average

#346

Post by cableshaft » Fri, Apr 30, 2021, 6:51 PM UTC

nightski wrote: post #304

baby wrote: post #273

Earlier quoted context omitted.

I can attest. Beginning of covid: stocks are crashing, going down 10% every day, I read the paper from that uni in London that says we are going to be alternating light and heavy lockdowns for the next 12-18months. More than a year of lockdown? How can the economy survive this? I’m like: sell, sell, sell. Right when I sold the market went up like crazy and has more than recovered now.

Right and you probably do not follow the market very closely. Which is fine, that is most people. If you start watching it closely though (and I mean over several months to years) there are many patterns that emerge. I knew a lot of people that bought the dip last year. They weren't worried about how long it would take the economy to recover, or if it would go down further because they knew things were VERY cheap and…

Usually I'd say your correct. Like if I hadn't been laid off and decided to go back to school I would have had no problem buying the dip during the recession in 2008.

But last year could have gone very differently. The US (and the world in general) was tested in all sorts of ways last year in ways the people and the government are really not used to, and things probably should have gone a lot worse than it ended up going, but somehow the country made it through intact, although unfortunately with a lot of dead people and failed businesses.

It went well (for the stock market, at least) this time. Next time, maybe not, especially with climate change continuously getting worse with almost nothing being done about it.

For myself, I didn't bother selling any of my 401k (and kept putting money into it), so I didn't lose anything, but I did start putting spare money into other assets.

Re: Stock Market Returns Are Anything but Average

#347

Post by boringg » Fri, Apr 30, 2021, 6:52 PM UTC

boringg wrote: post #84

I'm going to add that I did a rudimentary an analysis of the S&P 500 because everyone seems to be throwing their money into passive S&P500 low vehicle investments. I looked at every hold period since inception from 1 year holds / returns up to 40 year hold and returns. Timing is crucial for good returns - depending on when you put in and take out your money the returns can be negative (even in cases where you hold up…

Adding some further comments since there were a lot of questions: I did a portfolio approach in which you invested the same amount each year. I determined the final returns from very outcome (i.e purchase and hold and sell every year combination) of investment over the last 40 years and did both nominal and inflation adjusted dollars.

Re: Stock Market Returns Are Anything but Average

#348

Post by fallingfrog » Fri, Apr 30, 2021, 6:53 PM UTC

He’s not taking inflation into account, which makes the whole exercise rather suspect.

Re: Stock Market Returns Are Anything but Average

#349

Post by BeetleB » Fri, Apr 30, 2021, 6:58 PM UTC

mabbo wrote: post #37

I decided to play with these numbers myself because I had some questions. I believe the data is the same as I found here[0] The average single-year return over that period was about 7.5%, not 10%- though in half of years, the market did better than 11%. But what happens if we bucketize by a larger period, like 5-year? My method was to take $1, multiply by the return for 5 years in a row, and then take the 5th root of…

~7% is after adjusting for inflation. I suspect OP did not adjust.

Re: Stock Market Returns Are Anything but Average

#350

Post by ryangittins » Fri, Apr 30, 2021, 7:00 PM UTC

boringg wrote: post #344

ryangittins wrote: post #326

Earlier quoted context omitted.

This is an interesting visualization, but if I'm understanding it correctly it does oversimplify in a big (and potentially misleading) way: This is what happens if you do all your investing in one big lump sum, e.g. putting one dollar in the market in 1970 and getting out less than a dollar (after inflation) in 1985. Outside of getting a major windfall (and not dollar-cost averaging), this isn't how investing is done…

Actually the modeling I did assume that you invest the same amount every year - its rudimentary but does account for this.

I was talking about the NYT analysis linked in the comment I was replying to, but I'd be curious to see your numbers as well if this is something you've worked out!