61–70 of 139 posts
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I believe the first broadly diversified ETF didn't come about until a few years later, so realistically there wasn't an easy way for a retail investor to invest 5k in "the market" back then. (EDIT: Not true, see below.)
Vanguard launched an S&P 500 fund for retail investors in 1976.
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This isn't useful or correct, and ends up being a bit circular getting into the weeds. The focus should be that the normal math formula for bond valuation doesn't account for yearly real or projected inflation. Almost everyone I have met doesn't know how to modify the standard formula correctly unless they've already done it at some point in the past. Its not a trivial exercise. You have to understand the formulas we…
> This isn't useful or correct The formulas do not help you at all with the knowing. or not knowing, with being able to "predict" the past vs. being able to predict the future! They make assumptions. I would make the claim my statement is useful for what I said, which was for somebody looking back at a decision of the long ago past with hindsight knowledge. The post was not about somebody evaluating different investm…
You can't determine logical truth in a stochastic environment except after the fact when there is objective measure; and importantly there is no personal harm in doing this either, which is a direct contradiction to what you said.
You then went way out into the weeds when you started talking about pedophiles, and truth.
Any reasonable reader would throw away the vast majority of what you had to say as useless, or worse unstable.
The underlying concepts you mention indirectly, while correct in a narrow context in psychology, bad choice of example aside, also don't have anything to do with what's being said here in this topic.
Reminds me of the iPod color I bought in 2004, that, had I bought stock instead, would be worth ~$225k.
Earlier quoted context omitted.
It's logarithmic scaling. https://en.wikipedia.org/wiki/Logarithmic_scale It's helpful when dealing with investments because it shows percentage change more clearly than absolute: https://www.leekranefuss.com/2019/04/why-you-should-use-loga...
No one spends percentages. You spend dollars. Differences in annual compounding are tremendous. I would even argue logarithmic scales on charts are rarely useful. They’re inappropriately used in financial charts all the time.
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> On the timescale of 30 years for gov bonds vs diversified US stocks, this is almost meaningless statement. The longer a risky asset is held, the less chance of loss you’ll have. Short-horizon returns are extremely volatile, but that volatility "mean-reverts" over time. This is only true if you look back 30 years. What will happen in the next 30 years? Do you know for sure?
The same type of argument can be made about bonds and even cash. And if a diversified portfolio of US stocks all suddenly go bankrupt, that probably means the US is toast and therefore bonds are screwed too. Outside of catastrophic black swan events, like I said, stocks generally mean revert if you have a long enough time horizon to allow it
Note that almost every exchange outside the US has been flat or negative for decades. The US has held a precious position for a few generations that’s made “chart go up” feel like a given
Earlier quoted context omitted.
On the timescale of 30 years for gov bonds vs diversified US stocks, this is almost meaningless statement. The longer a risky asset is held, the less chance of loss you’ll have. Short-horizon returns are extremely volatile, but that volatility "mean-reverts" over time. This is especially true for stocks vs bonds. Because the cash flows of bonds are fixed, prolonged inflation or rate spikes can deliver a loss that sta…
The Nikkei 225 is still below its peak value from December of 1989. The US is an outlier in terms of historical average stock market returns and there is no guarantee this outperformance will continue into the future. Actually I'd say it's less likely, given that should it continue, the US market cap will eat the entire world stock market. The US stock market is currently 62% of the world's stock market capitalizatio…
When I was born in 1990 my grandparents spent like 5k on government bonds that my dad didn't tell me about until I was 30. It was a very nice treat, but when I did the math to see how much more it would have been if just invested in the market I gasped.
I believe the first broadly diversified ETF didn't come about until a few years later, so realistically there wasn't an easy way for a retail investor to invest 5k in "the market" back then. (EDIT: Not true, see below.)
Thanks inflation
Note that the government has huge incentives to downplay the inflation rate. Over the time period of the graph, the price of gold went up by about 100x; I would consider that a more accurate estimate of inflation than the 18x number implied by the chart. Due to the way exponentials work, you can hide a lot of inflation over 100 years by claiming the annual rate is just half a percent lower than it really is.
While not capturing the complexities of modern technology, they are available across the entire period and probably have a closer relationship to people's lives than the price of gold.