251–260 of 260 posts
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I wonder how well dollar cost averaging is going to work in an era of rising interest rates.
You'll be buying cheaper and cheaper as rates increase. Much better than buying lump sum today.
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"Nearly guaranteed" may be a stretch. There are decades in US history where you wouldn't really come out ahead (although I'm not sure any alternatives to stock would have done better) but internationally, there are many clear examples where the stock market hasn't been a good investment on a generational basis, like Japan now. The question is how much do you believe in American exceptionalism, are US markets really i…
There's an awesome website posted to HN a while back that calculates total real returns (accounting for dividends and inflation). Here's the chart for the Vanguard S&P500 index fund: https://totalrealreturns.com/s/VFINX
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Good point, but how about for retirement portfolios? I'm trying to point out the irrationality of it - after all, I don't think people desist from liquidating only for tax/fee reasons. "I would sell everything today and DCA back in over the next year if not for those pesky taxes and fees! (shakes fist at sky)"
Having thought about it a bit more - I'm not sure what motivation I'd have to sell then immediately DCA back in, my position would end up in the same place! If at the beginning of 2022, I'd had a crystal ball saying "stocks will crash in March then rebound in December", then I have a motivation: I do want to switch to a stock-light position, hold that for a while, then move back. In that situation I'd be inclined to…
Investment in general. After the global awakening, the rest of the world doesn't want to do our work for pennies on the dollar anymore. For example, Apple won't be able to enjoy high profits on the back of indentured servants at Foxconn. Marketplaces like app stores and Amazon won't be able to skim such high percentages from the people doing the actual work of making and shipping things. Even portals like Google will…
I don’t honestly know how to answer your moral question though, i have similar thoughts.
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One way that we become twice as productive is to use half the labor. This is my fear that AI brings about—not huge gains for society, but huge gains for a small minority.
Again, unknown. If we look at history, technology that increases productivity is initially disruptive, then just frees up people to tackle bigger problems.
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Yeah, but if you have a lump sum of money it's still better to invest everything at once if you plan to hold it for decades. Vanguard has a good paper on that titled "Dollar-cost averaging just means taking risk later". And as you get close to retirement, you need to be mindful about sequence of returns risk.
No, it isn't better. There is no such knowledge whether it is better to invest $100k today or $10k per month over the next ten months. There is historical data showing that in 2/3 cases, lump sum is better. That says exactly nothing about which will be better today or tomorrow. The future is unknown.
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looking at the pullbacks in 2000 and 2008, there is a non-trivial chance that the S&P will bottom sub-1000
Do you remember the financial crisis? In 2008 Paulson was literally on his knees in front of Pelosi begging for congress to do something. I doubt we're headed there again.
¯\_(ツ)_/¯
I own no crystal ball
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Again, unknown. If we look at history, technology that increases productivity is initially disruptive, then just frees up people to tackle bigger problems.
If you look at worker productivity vs income, they have diverged sharply over the past 50 year. I have zero optimism that AI-driven productivity would improve the financial footing of the average citizen. It will likely just exacerbate existing social unrest as more jobs are automated.
It may not exactly match productivity, but more people are working and people are earning substantially more than ever before.
AI may be different, but its entirely likely that it will just continue this trend
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What others wrote was pretty much my reasoning but a bit further, over the very long run (30+ years) markets will revert to mean performance. If you have strong gains in the first half of your career then when you are in your peak earning years, investments will be more expensive at time of purchase. As a result when you are investing the most, returns on that principle will be lower.
Isn't this just the gambler's fallacy? Yes, markets over a given period of time will likely conform to a particular distribution of performance, with some below-average periods and above-average periods that average out. But that does not mean that if there is an extended time period of terrible performance now, X years from there is likely to be a very strong rebound to compensate.
Stock performance (and any investment) is driven by both cost of purchase and underlying performance. Cost is driven by human psychology as much or more than business fundamentals.
As a result, poor stock performance is in some way an indicator of future improved investment performance because it corresponds with lower purchase price but as you note, deterioration of economic performance is absolutely not an indicator of improved future economic performance.