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See how a dollar would have grown over the past 94 years [pdf]

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Re: See how a dollar would have grown over the past 94 years [pdf]

#101

Post by Balgair »

marsten wrote: post #18
jihadjihad wrote: post #10

Rule of 72: time for an investment to double is roughly 72 / the interest rate [0]. Annual return on small-cap stocks: ~12% Time to double: 72/12 ~= 6 years Number of doubling periods: 99/6 ~= 16 Final investment value: ~2**16 ~= $65k ~= $64,417 Math checks out. 0: https://en.wikipedia.org/wiki/Rule_of_72

I've always found it amusing that mathematically it should be the rule of 70, but it's commonly rounded to 72 because the latter has more convenient divisors. 70 is divisible by 1, 2, 5, 7, 10, 14, 35, 70 72 is divisible by 1, 2, 3, 4, 6, 8, 9, 12, 18, 24, 36, 72

Oh gosh, 72 is way more anti-prime, I've always just used the rule of 70 in my head though.

if I have a calculator handy, I'll use [(69.3/rate) + 0.3] as that's really close to the actual numbers for rates under about 10 or so.

I'm curious as to what other methods people use.

Honestly, I should probably just memorize the 12 or so numbers.

For those interested, here's a mnemonic that I cooked up quick with chatGPT:

70 bears ate 35 lions who ate 23 tigers who ate 18 wolves who ate 14 dogs who ate 12 cats who quickly ate 10, 9, 8, 7 mice who ate 6.6 grasshoppers who ate 6.1 barleycorns

Look, I know this is not the best, but hey, it's Friday. Please help me out and make up a better one.

70, 35, 23, 18, 14, 12, 10, 9, 8, 7, 6.6, 6.1

Re: See how a dollar would have grown over the past 94 years [pdf]

#102

Post by kgwgk »

Kranar wrote: post #71
narratives1 wrote: post #65

Earlier quoted context omitted.

This is almost the definition of technical analysis: “chart always reverted to mean so it will always revert to mean” 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

>Note that almost every exchange outside the US has been flat or negative for decades. As someone who works in finance this struck me as a remarkable claim. Upon inspection it turns out to be spectacularly incorrect. After adjusting for inflation it's actually the opposite, the vast majority of countries have seen their own version of the S&P 500 grow over a 30 year period, after adjusting for inflation, not stagnati…

> Developing countries, particularly those in Asia, have seen incredible returns over a 30 year period, albeit with a great deal of volatility involved.

The level of the MSCI China index 30 years ago was HKD 70 and it's HKD 75 today. It's kind of incredible but not in a good way. Total return is less than 3% p.a. MSCI Thailand is even worse.

MSCI Korea has a total return of 7% (not bad, 4% above inflation) but it doesn't do better than developed countries.

Of course they look much better if we start right after the 1997 Asian financial crisis but, hey, it was you who talked about "a 30 year period".

Re: See how a dollar would have grown over the past 94 years [pdf]

#103

Post by sokoloff »

taeric wrote: post #100
sokoloff wrote: post #97

Earlier quoted context omitted.

I graduated in 1993 and going back through my old Quickbooks file, my 1993 IRA contribution went to a broad-based fund at Twentieth Century (now American Century). It was a half-year of working and all I could scrape together was $2000 and they accepted it to invest. I suspect making a mutual fund investment for $5000 (over $10,000 today) would have been possible three years prior.

Amusingly, for 1993, looks like you maxed out what you could even do in an IRA? Searching for "Vanguard S&P mutual fund minimum 1993" shows that many had a minimum of 3000? I'm guessing that is the same general search you were doing? I'm torn, as I want to think this isn't wrong. However, I also remember you could buy a car for 10k EASY in the early nineties. Was a pretty decent sum to make in a year. Especially if i…

Interesting that the limit was that low. I remember having to borrow money to make the $2K investment before the deadline, but didn’t realize that was maxing it out. (My dad was the one telling me to do it; I’d have been entirely clueless at that point otherwise.)

Re: See how a dollar would have grown over the past 94 years [pdf]

#104

Post by taeric »

sokoloff wrote: post #103
taeric wrote: post #100

Earlier quoted context omitted.

Amusingly, for 1993, looks like you maxed out what you could even do in an IRA? Searching for "Vanguard S&P mutual fund minimum 1993" shows that many had a minimum of 3000? I'm guessing that is the same general search you were doing? I'm torn, as I want to think this isn't wrong. However, I also remember you could buy a car for 10k EASY in the early nineties. Was a pretty decent sum to make in a year. Especially if i…

Interesting that the limit was that low. I remember having to borrow money to make the $2K investment before the deadline, but didn’t realize that was maxing it out. (My dad was the one telling me to do it; I’d have been entirely clueless at that point otherwise.)

Yeah, 2000 to invest was not a tiny amount back then. I know I felt rich to have an extra hundred or so a paycheck.

Massive kudos to your dad for getting you to do this!

Re: See how a dollar would have grown over the past 94 years [pdf]

#105

Post by kgwgk »

Kranar wrote: post #71
narratives1 wrote: post #65

Earlier quoted context omitted.

This is almost the definition of technical analysis: “chart always reverted to mean so it will always revert to mean” 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

>Note that almost every exchange outside the US has been flat or negative for decades. As someone who works in finance this struck me as a remarkable claim. Upon inspection it turns out to be spectacularly incorrect. After adjusting for inflation it's actually the opposite, the vast majority of countries have seen their own version of the S&P 500 grow over a 30 year period, after adjusting for inflation, not stagnati…

> Europe has also experienced a great deal of growth with many European countries even growing moreso than the U.S., for example Germany.

I can't make sense of that example. Are you maybe comparing the level of the S&P 500 with the DAX which is a total return index?

Re: See how a dollar would have grown over the past 94 years [pdf]

#106

Post by BJones12 »

eweise wrote: post #89
ryandrake wrote: post #17

Earlier quoted context omitted.

Not comparing apples to apples, though. Those government bonds were, by any reasonable measurement, risk free (EDIT: as another commenter noted, not exactly, we could call them "minimal risk"), while "the market" is not. Looking back in hindsight is always risk-free, though, which can lead to faulty conclusions.

isn't the stock market risk free over a 30 year span? Maybe with the exception of the depression.

The US stock market has not had a negative return over any 30 year span. There are 30 year spans with total returns under 10%, which significantly lag what bonds returned in those spans.

Re: See how a dollar would have grown over the past 94 years [pdf]

#107

Post by kgwgk »

tjwebbnorfolk wrote: post #39
ryandrake wrote: post #17

Earlier quoted context omitted.

Not comparing apples to apples, though. Those government bonds were, by any reasonable measurement, risk free (EDIT: as another commenter noted, not exactly, we could call them "minimal risk"), while "the market" is not. Looking back in hindsight is always risk-free, though, which can lead to faulty conclusions.

"Risk-free" is a popular shorthand for "The US government won't default". But default is far from the only risk inherent in bond ownership. Risk is the chance something bad happens to you. Held for 30 years, bonds are eaten alive by inflation. That's a bad thing that happens to you if you hold bonds for a long time.

> Held for 30 years, bonds are eaten alive by inflation.

20-year and 30-year bonds yield 5% today. That's well above inflation expectations.

You can actually buy inflation-linked bonds that are going to pay you 2.5% over inflation for the next 20 or 30 years - whatever happens with inflation.

Re: See how a dollar would have grown over the past 94 years [pdf]

#108

Post by ashdksnndck »

mjburgess wrote: post #56
ashdksnndck wrote: post #33

Earlier quoted context omitted.

The title doesn’t mention owning stock on margin.

But nor does it include owning stocks in companies that go out of business, or indeed, nations.

I think that’s generally included when you compute total return of an index. For example, Enron should be part of the drop shown in 2001.

Re: See how a dollar would have grown over the past 94 years [pdf]

#109

Post by throw0101c »

narratives1 wrote: post #65
jameslk wrote: post #48

Earlier quoted context omitted.

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

This is almost the definition of technical analysis: “chart always reverted to mean so it will always revert to mean” 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

> Note that almost every exchange outside the US has been flat or negative for decades.

And the US itself was flat for over a decade, with the only thing saving a domestic investor's returns being bonds:

* https://www.forbes.com/sites/investor/2010/12/17/the-lost-de...

And as a Canadian, there are different sectors that would have given me positive gains over the years (I generally own mostly VEQT, a globally-diversified ETF):

* https://stingyinvestor.com/SC/PeriodicTableofAnnualReturns.p...

And it's perhaps looking more closely at what specifically about the US has been positive:

> Looking at this data, there are two distinct periods of extended U.S. outperformance—the late 1990s and today. And what do these two periods have in common? The rise of U.S. technology stocks. Bespoke Investment Group recently created this chart illustrating this phenomenon:

> Now that the U.S. technology sector makes up over 30% of the S&P 500 (as it did back in 2000), this begs the question: Is U.S. outperformance just a technological fad?

* https://ofdollarsanddata.com/do-you-need-to-own-internationa...

Outside of tech, how much better is the general US market than any other market?

Re: See how a dollar would have grown over the past 94 years [pdf]

#110

Post by verteu »

lesuorac wrote: post #72
d_burfoot wrote: post #69

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.

Gold is up ~40% over the past year. Are you really going to claim inflation is up 40% over that time period? I think Gold is too susceptible to price fluctuations from speculators and that you should use Copper or something that people don't hoard to re-sell.

For reference, CAGR from 1926 to today:

Milk: 2.5% (*low-quality data)

CPI: 2.9%

Copper: 3.4%

Gold: 5.2%

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