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Stock Market Returns Are Anything but Average

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Re: Stock Market Returns Are Anything but Average

#191

Post by drdec »

jerf wrote: post #102
CarelessExpert wrote: post #88

Earlier quoted context omitted.

> depending on when you put in and take out your money the returns can be negative (even in cases where you hold up to 15 years) Sorry, but unless you're talking about truly black swan circumstances like the Great Depression or the 2008 crash, I don't believe for a second that, over a 15 year timespan, holding the S&P will result in negative returns frequently enough that a typical investor has to concern themselves…

The New York Times published the same sort of analysis in 2011: http://archive.nytimes.com/www.nytimes.com/interactive/2011/... Be sure to carefully read the description of the graph. Every time I link this, someone assumes that the green & red indicates are the yearly returns, but the entire point of this graph is that it is cumulative . If it is red 20-30 years into the line, that means that money put it at the beg…

One big grain of salt to take with that NYT graphic is that they took taxes into account. If you are investing in a retirement vehicle (401k, IRA or Roth IRA), your tax obligations are going to be very different. Not to mention that tax laws have changed greatly over time.

Another think to remember is that if you are saving for retirement, you are very likely doing dollar cost averaging, i.e. making deposits on a regular basis. So you aren't buying all your stocks in one year, you are buying them across a multitude of years. That greatly mitigates the risk of starting at the wrong time.

For example, I started saving for retirement in 1999. It was ugly for a while but I was positive for good as of 2009, despite all the red in that graph.

Re: Stock Market Returns Are Anything but Average

#193

Post by staticman2 »

lotsofpulp wrote: post #173
staticman2 wrote: post #154

Earlier quoted context omitted.

It stinks that housing prices have gone up, but fortunately you can rent instead, which is accounted for in CPI measures of inflation. I would think we could discuss the affordabity or unaffordability of homeownership without making up terms like "asset inflation" and falling into alternative fact rabbit holes about the collapse of U.S. currency.

Renting is not owning, and I question the utility of CPI’s method of measuring it that way. My contention is increased real estate prices are affecting people’s lives in various ways, such as delaying families, not having families, moving people away from their networks, and at least allowing for a smaller portion of spending on other things in life due to a larger portion going into real estate. Personally, I would…

I don't disagree with your main points but we have terms like Housing Affordability Index we can use to discuss this. We don't need to use imprecise terms like "asset inflation" which can mean different things to different people.

Re: Stock Market Returns Are Anything but Average

#194

Post by willcipriano »

Red_Leaves_Flyy wrote: post #178
thoughtstheseus wrote: post #167

Earlier quoted context omitted.

The longer the bubble builds the bigger the bust. We’ve chosen growth over stability, fundamentals, and robustness. Once the U.S. struggles to stimulate its economy through deficit spending it’ll hit a wall. It’ll be fine for people but there will be a massive dislocation in the economy.

I understand this. I'd much rather deal with the bad decisions of yesterday today than tomorrow. I guess for people that won't be alive in twenty years this is immaterial..

Check out the ages of elected officials, most are in the "won't be alive in twenty years" camp so the lack of foresight is unsurprising.

Re: Stock Market Returns Are Anything but Average

#195

Post by hobs »

ryandrake wrote: post #187
PragmaticPulp wrote: post #124

Earlier quoted context omitted.

I think a lot of newcomers to stock investing in the past year have been given the wrong ideas about the stock market. When all of the headlines are about GameStop and Nokia and AMC and some kid who made it lost a lot of money on RobinHood, the stock market can feel like a place for gambling. Now that cryptocurrency prices are listed right next to stock prices, many people don’t even understand that stocks are owners…

> Now that cryptocurrency prices are listed right next to stock prices, many people don’t even understand that stocks are ownership shares in real businesses instead of just another ticker symbol to gamble on. This distinction is practically useless, unless you own enough shares to have even tiny sway at shareholder meetings. Owning 1/1000000000th of a company doesn't mean any extra value or power to you. The big dif…

There's a large difference, one of those is based on a pyramid scheme with no inherent value, and one is based on a company delivering value to customers.

With the state of the stock market companies can and do go under, but generally those doing something for people dont magically disappear overnight (like any crypto certainly can.)

That's it; that's the difference.

Re: Stock Market Returns Are Anything but Average

#196

Post by [deleted] »

ryandrake wrote: post #187
PragmaticPulp wrote: post #124

Earlier quoted context omitted.

I think a lot of newcomers to stock investing in the past year have been given the wrong ideas about the stock market. When all of the headlines are about GameStop and Nokia and AMC and some kid who made it lost a lot of money on RobinHood, the stock market can feel like a place for gambling. Now that cryptocurrency prices are listed right next to stock prices, many people don’t even understand that stocks are owners…

> Now that cryptocurrency prices are listed right next to stock prices, many people don’t even understand that stocks are ownership shares in real businesses instead of just another ticker symbol to gamble on. This distinction is practically useless, unless you own enough shares to have even tiny sway at shareholder meetings. Owning 1/1000000000th of a company doesn't mean any extra value or power to you. The big dif…

[deleted]

Re: Stock Market Returns Are Anything but Average

#198

Post by thehappypm »

ryandrake wrote: post #187
PragmaticPulp wrote: post #124

Earlier quoted context omitted.

I think a lot of newcomers to stock investing in the past year have been given the wrong ideas about the stock market. When all of the headlines are about GameStop and Nokia and AMC and some kid who made it lost a lot of money on RobinHood, the stock market can feel like a place for gambling. Now that cryptocurrency prices are listed right next to stock prices, many people don’t even understand that stocks are owners…

> Now that cryptocurrency prices are listed right next to stock prices, many people don’t even understand that stocks are ownership shares in real businesses instead of just another ticker symbol to gamble on. This distinction is practically useless, unless you own enough shares to have even tiny sway at shareholder meetings. Owning 1/1000000000th of a company doesn't mean any extra value or power to you. The big dif…

Cryptocurrencies are basically stocks in nothing.

Re: Stock Market Returns Are Anything but Average

#199

Post by nunez »

tut-urut-utut wrote: post #32
ahelwer wrote: post #6

There are all sorts of interesting facts you can pull out of this, like how if you missed the top 10 best days in the market from 1999-2019, your return was cut in half. If you missed the top 20 best days, you actually lost money: https://www.fool.com/investing/2019/04/11/what-happens-when-... Basically never mistake annualized return over a long period of time for your expected return in a given year (or day, etc).…

And if you avoided the worst 10 days, your earnings double. If you avoided 20 worst days, your earning doubled again. What is the point of such trivia? That most of the profit or loss happens during the days of high volatility?

the point is to remind folks that if you want to invest in the market safely, use index funds...otherwise, enjoy gambling

Re: Stock Market Returns Are Anything but Average

#200

Post by thehappypm »

Zr40 wrote: post #58
Someone1234 wrote: post #8

Earlier quoted context omitted.

It starts to when you ask yourself: Where else are people meant to store money? Since interest rates and bond rates were at historical lows. So you have people who are looking at 10% YOY returns on one hand and 0.2%/2% on the other and making the rational decision. Does this make stocks overinflated? Yes. Is it going to suddenly pop? Unlikely, since the conditions that caused it won't suddenly change (e.g. certain bo…

> Where else are people meant to store money? Money isn't stored in other assets. It's transferred from the buyer of an asset to the seller. It doesn't cease to exist simply because you traded it for stocks (or gold or anything else). Now the seller has to deal with the consequences of holding the money you previously held. A rational trader factors in the costs of money when they price assets, therefore one doesn't…

This is always what I think of when I think of cryptocurrencies.

You're not parking your money somewhere, you're giving it to someone else. Every time you buy BTC someone else is getting paid. Money goes in circles.

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