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Investing Returns on the S&P500

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Re: Investing Returns on the S&P500

#101
post #86
post #82

Warren Buffett bet $1mm that S&P500 will outperform a hedge fund over a 10 year period.[1] That's good enough for me, I'll follow the oracle. [1] http://longbets.org/362/

This bet ends in less than 2 years. Does anybody know what would be the result if it would end now? edit: I guess it depends on the detailed terms that they haven't disclosed, but educated guesses are fine

65.67% vs. 21.87% returns so far (net after fees)

http://fortune.com/2016/05/11/warren-buffett-hedge-fund-bet/

Almost impossible for Warren to lose at this point.

Re: Investing Returns on the S&P500

#102

Is it possible to do it for dollar cost averaging? That is what happens if one didn't invest in a lumpsum but invested $1000 every month -- how does the returns look like for different time periods?

It is only over 10 years, but Vanguard has a short analysis of Dollar Cost Averaging at https://pressroom.vanguard.com/nonindexed/7.23.2012_Dollar-c...

The gist of their analysis was "since the market always goes up eventually, investing all up front will give you higher average returns but significantly higher variability"

Re: Investing Returns on the S&P500

#103

I don't think it is fair to say that next 100 years will be same as last 100 years: 1. GDP growth is not as high as it used to be anywhere in developed world: http://www.oecd.org/std/productivity-stats/oecd-compendium-o... 2. USA is superpower at the peak. Plenty of other stock market economies hasn't been so successful. E.g. Argentina used to be one of the richest country in the world. Investing in history is easy,…

[deleted]

Re: Investing Returns on the S&P500

#104
post #44

Earlier quoted context omitted.

I use robinhood even though I have a "proper" brokerage account. I would be happy to pay an $8 commission if I knew what I was getting for the money over what robinhood offered, but as far as I can tell I'd just be paying $8 to use a crappier UI to make my trades.

But as already mentioned, this entire portfolio can be constructed at Vanguard with commission-free trades. Their brokerage is better than Robinhood too (fractional shares for one, better execution)

> fractional shares for one, better execution

Thanks, this is the sort of answer I was looking for. I just added a brokerage account to my Vanguard 401k account, and I will use that for ETFs from now on.

Re: Investing Returns on the S&P500

#106

Funny how his time horizon stretches out to 150 years, where the vast majority of people don't live past 100, and have probably, what 25-35 or so years of investing time in their lives? The insanely long term is a simplified look at the stock market as some money-multiplication machine, but I don't think it is really that to most people. Given a normal person's time horizon, the difference between "did I start invest…

I'm usally more worried about having a long term investment, say for 30 years and on the 25th year another 2008 takes place, I might not have 20 years to wait by then.

Re: Investing Returns on the S&P500

#107

Earlier quoted context omitted.

100 years ago you would have probably mostly invested in the UK, French, German and Russian stock market as well as the US. So if you want to predict the next 100 years I would try to combine the performance of the UK and the US, on the assumption that US is going to behave economically like an existing power rather than an up and coming power. Also, just as some risky "foreign" markets did awesome a hundred years ag…

You would've bought Russian stock in 1916?

Not in 1916 but why not in 1890 ?

Re: Investing Returns on the S&P500

#108
By defining the probability distribution as the historical distribution of one-year returns, you're severely warping the possibility space. Imagine two experiments:

Experiment A: you flip a coin 1000 times. You estimate the probability that the coin flips heads, and use this to estimate the odds of flipping 10 heads in a row.

Experiment B: you flip a coin 10 times. You repeat that experiment 100 times. You use the results of that experiment to estimate the odds of flipping 100 heads in a row (by looking at how many times it occurred, and dividing by 100).

Assuming reasonable results and a fair coin, you'll conclude from experiment A that the probability of a heads flip is around 50%, and that the odds of getting 10 heads in a row are (1/2)^10.

In experiment B, ~90% of the time you'll conclude that it's impossible to flip 10 heads in a row, and ~10% of the time (in the cases where you did flip 10 heads in a row at least once) you'll overestimate the likelihood of doing it again by a factor of 10 (at 1%, instead of the true value, So when you only look at annual returns, you're effectively looking at an aggregate of 365 daily returns (or 365*6.5 hourly returns).

Re: Investing Returns on the S&P500

#109

I don't think it is fair to say that next 100 years will be same as last 100 years: 1. GDP growth is not as high as it used to be anywhere in developed world: http://www.oecd.org/std/productivity-stats/oecd-compendium-o... 2. USA is superpower at the peak. Plenty of other stock market economies hasn't been so successful. E.g. Argentina used to be one of the richest country in the world. Investing in history is easy,…

A tuyere is a weird, tough, heat proof, somewhat hard to make (depending on your local technological level) compressed air nozzle. If there's a steel mill blast furnace nearby, you can make a fat stack of cash making and selling tuyeres. Its kind of a specialists metalworking job in that an idiot can make one that doesn't last and falls apart at the worst possible time causing thousands of dollars of missed production, but a specialist can make a good one. If you operate a steel mill blast furnace you won't make much money without a supplier of cheap, quickly replaced, reliable tuyeres (and you also require a zillion other things...) If there's no steel mill nearby then a tuyere maker won't be in business very long.

Anyway the point is much like some agriculture analogies you plop down a steel mill next to a metal shop specializing in tuyere construction and repair, and they both thrive. Take away either, and the other eventually disappears. Going back in history there is no spontaneous generation of either blast furnaces or tuyere metalworking shops separately. They always and only develop, grow, and survive together, simultaneously.

Now lets talk about another pair of technologies that can only thrive in the presence of each other... the capitalist stock market, and early industrialization. Unlike the tuyere example, for both of these, without the other, they can exist, barely, but only a thousandth the size in the long run if required to operate alone. You can kinda industrialize without a stock market, communist style, but it doesn't work nearly as well.

The USA is in a post industrial era. Therefore soon we'll be in a post stock market era. Stock trading will still exist, just maybe a thousandth the size, volume, and importance.

Even today the decline is evident. I'd estimate a century ago "everyone" in my family and maybe in the country worked for a stock market financed industrial company, or indirectly in that all their revenue came from stock market financed industrial companies. The value of the DJIA directly influenced if the railroad expanded and therefore promoted my g-grandfather. Today? Half the population does not work (young, old, sick, unemployable, etc), my wife works for the .gov so the market means nothing to her, my sister and I work at (different) megacorporations that are so large the market cannot handle them anymore (like our employers influence the market, not the market influences our employers LOL). Many of my friends work for non-profits or privately owned/financed firms. My dad's last day at his career position in a stock market financed company was in the early 80s, and it was mostly contracting at privately owned companies for the next 20 years. I've only worked at two companies financed by the stock market and I've never had a career and probably never will. I could do pretty well without the market.

Re: Investing Returns on the S&P500

#110
post #101
post #86

Earlier quoted context omitted.

This bet ends in less than 2 years. Does anybody know what would be the result if it would end now? edit: I guess it depends on the detailed terms that they haven't disclosed, but educated guesses are fine

65.67% vs. 21.87% returns so far (net after fees) http://fortune.com/2016/05/11/warren-buffett-hedge-fund-bet/ Almost impossible for Warren to lose at this point.

Whoa, thanks. I would have definitely taken the losing side of the bet.
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