451–460 of 496 posts
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Given the statistics and number of investors involved, it seems like an absolute certainty that a few people would beat the index for the entirety of their lives simply by chance.
Yes some people might do it by chance. Some other people, they do it by knowledge.
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Picking the S&P500 over a world index because you think it will outperform, has the same problem as picking individual stocks over an index. You can't actually know which will outperform in the future.
Has the World Index ever outperformed the SP500 over a 40-50 year span?
https://www.pionline.com/pension-funds/nevada-public-employe...
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Yes. I contributed 50% to a bond fund, as well, but that is like, 10% of the total, nowadays.
> I contributed 50% to a bond fund, as well, but that is like, 10% of the total, nowadays. That's one of the ridiculous aspects of fixed-percentage allocations: by constructions those allocations tell you that you should get rid of the things that are making you the most money, and put it into the things which are underperforming instead. (I get that you didn't do that, I'm just got reminded of it.)
I have an inherited IRA that I am required to take mandatory withdrawals from; I keep part of it in bonds so that I don't have to sell my stock funds when they're down.
This is incredible from a stakeholder management perspective. Normally non finance people in the organisation get hoodwinked by investment sales people. Then they pressure the finance guys into perusing a complex high fee strategy.
https://www.nakedcapitalism.com/category/calpers
edit: here's a more specific article that's very related to the OP https://www.nakedcapitalism.com/2023/11/should-calpers-fire-...
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Why is this being downvoted? There are lots of great points in this post. I never considered that most of the advice that I am reading is aimed toward US people, where the labour laws and social safety net for working people is awful, compared to the rest of OECD.
Probably because of the narrative that people are routinely fired out of the blue and that there is no recourse to also suddenly having tens of thousands of dollars in medical expenses also out of the blue.
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The challenge is to beat the market in the future and put your money behind that. Not to beat the market in the past . You're giving an example of beating the market in the past, which is not useful. You can do that with blind luck.
Yep I’m just pointing out S&P. Or VTI anre not magic There are funds that beat them often. Is your claim they don’t exist? Or that you can’t find them.
When you say funds did "exactly that", the "exactly that" you're talking about is not the thing OP is asking for.
Taking on 90% of upside and 100% of downside is one way to make a convincing argument, and nobody does it.
Let's make the dice analogy. You can't make a convincing argument that you will roll a 5, even though people roll 5 all the time. Talking about people that rolled 5 in the past is proving entirely the wrong point.
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Applying optimal portfolio theory to the long history of market returns suggests that the most risk-efficient allocation is something like 60% stocks and 40% bonds. The diversification reduces volatility faster than it reduces the overall return, so equity-like returns can be regained by using leverage on the portfolio. Following this advice today is tricky thanks to the persistent yield inversion: you obviously can'…
Wouldn’t the most risk-efficient strategy both depend on a large number of factors and also, in any case, start off with a higher allocation of equities and move over time to a higher allocation of bonds? The stock market has never not outperformed bonds over a 45 year period, maybe even half that, so if you’re 20 and putting 40% of your savings in an account you can’t touch until your 65, you’re kind of just chuckin…
Not really. The most risk-efficient strategy optimizes the ratio between expected return (less the risk-free rate) and volatility (standard deviation), regardless of the absolute value of those parameters.
If that optimal allocation has too much risk, such as for the near-retiree, then the investor can keep a fraction of their portfolio in the mix and the other half in cash (money market, paying the risk-free rate). If the allocation has too little risk, then the inverse applies: borrow on margin (at approximately the risk-free rate) to invest more than 100% of net assets into the mix.
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As discussed, there is much less of a chance that you'll suddently find yourself with no income when you live in most of the EU+UK+Aus+NZ. And if you do, you're still less uncomfortable because your healthcare is not tied to your employer. Unemployment and other related aids/insurances/benefits will vary wildly between countries, but I'd still bet the majority do it easier than in most US states.
Possibly. As you say there's a lot of variance. I don't generally assume that you can get quality healthcare, housing, and food in Europe with no source of income outside of government programs. And certainly many countries have lower salaries and higher unemployment that the US does in general.
And what's the issue with government programs? If someone without employment or revenues can get healthcare or food, that's good.
> And certainly many countries have lower salaries and higher unemployment that the US does in general
Higher unemployment yes, absolutely. Lower salaries you can't really compare because you need to adjust for a lot of things (quality of life, cost of living, things like the safety cushion one needs, etc.)
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This is true. Of course, when you have many indices, with random returns, some of them will perform well, but past performance doesn't guarantee future results.
Except the performance of S&P 500 isn't random. Over a long horizon, it is explained by economic policy and resulting economic conditions. There is a reason that most EU and LatAm nation indexes have done so much worse in the last 25 years: Worse economic policy. I still have high hopes for China equities.
Is this a controversial opinion? The most I could say without feeling like a total liar is: It is probably random around some signal, and that signal is indirectly affected by economic policy in ways that are itself not perfectly deterministic. Is it I who is out of touch?