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Investing Returns on the S&P500

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Re: Investing Returns on the S&P500

#21

Post by drm237 »

yread wrote: post #7

Would be more interesting to compare it against a realistic return from a savings account instead of saying "if the index is worth the same after 20 years then you haven't lost anything". You would have almost 25% more even in a 1.1% savings account.

A 1.1% savings account would have lost money due to inflation over 20 years. The author's methodology seems to subtract each year for inflation, so if he's comparing a post-inflation number year to year, and it's the same 20 years later, you've actually done much better than a 1.1% savings account.

Re: Investing Returns on the S&P500

#22

Post by maxxxxx »

Looking at the discussions here I find it interesting that even in something as number driven as the stock market everybody argues about the meaning and the validity of the numbers. There really is no clear picture.

But somehow the regular guy is supposed to navigate his way through this jungle of conflicting, confusing or meaningless numbers. And considering the long time frames most people don't have much opportunity for leaning from mistakes and doing better. Once you realize that your strategy doesn't work you have already wasted many, many years and lots of money.

Re: Investing Returns on the S&P500

#23

Post by JackFr »

jakozaur wrote: post #12

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,…

> USA is superpower at the peak.

That remains to be seen

> Argentina used to be richest country in the world.

That is not true. In the early 20th century they were top 10, but never surpassed Britain or the US in GDP per capita.

Re: Investing Returns on the S&P500

#24

Post by _yosefk »

arbitrage wrote: post #14
yread wrote: post #7

Would be more interesting to compare it against a realistic return from a savings account instead of saying "if the index is worth the same after 20 years then you haven't lost anything". You would have almost 25% more even in a 1.1% savings account.

I haven't seen a 1.1% savings account in the better part of a decade. Perhaps that's not useful to theorize about in the modern economic wonderland we've created.

If you look at it that way, it's also hard to theorize about stocks in that modern economic wonderland "we" (they?) have created. There could be, for instance, a large wave of defaults on the plentiful debt created by low interest rates, which is probably bad for stock prices, or else the trend of rising P/E ratios due to a lack of safer ways to get a return on an investment could keep inflating stock prices.

Re: Investing Returns on the S&P500

#25

Post by rileymat2 »

HorizonXP wrote: post #2

It's funny that this is so non-intuitive. My wife continues to try to "time the market" despite me telling her that it's pointless over such a long time horizon. Maybe this will help convince her.

I do not disagree with your premise, but they are using a log scale. Over time, the returns are still vastly different, even if the graph looks compact for long horizons.

Re: Investing Returns on the S&P500

#26

Post by stevenmays »

maxxxxx wrote: post #22

Looking at the discussions here I find it interesting that even in something as number driven as the stock market everybody argues about the meaning and the validity of the numbers. There really is no clear picture. But somehow the regular guy is supposed to navigate his way through this jungle of conflicting, confusing or meaningless numbers. And considering the long time frames most people don't have much opportuni…

Most people have a financial adviser, but for the industrious I recommend: http://jlcollinsnh.com/stock-series/

And for the lazy, this is a good resource: https://www.bogleheads.org/wiki/Lazy_portfolios

Re: Investing Returns on the S&P500

#27

Post by Retric »

stevenmays wrote: post #15
jakozaur wrote: post #12

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,…

> So at Year 1, we take every point on the S&P500 curve, look at every point on the S&P500 that's one year ahead, add in dividends and subtract inflation, and record all points as a relative gain or loss for Year 1. Point #3 is wrong.

While inflation was adjusted for it was not accurately adjusted for as it ignored taxes. If your returns are 10% and inflation is 10% you get taxed on that 10% and lose money.

PS: Now if this is for 401k accounts or something that's another story.

Re: Investing Returns on the S&P500

#28

Post by lintiness »

vanderfluge wrote: post #3

I'd be curious to see results for other countries, the graph of "Chance of Losing in the Stock Market" in particular. In the case of Japan, it appears that if you'd still have significant losses if you invested 25-30 years ago: https://finance.yahoo.com/echarts?s=%5En225+Interactive#{"ra...

this is the biggest fallacy in the investing thesis. buy and hold didn't work in russia, or argetina, or many others. because we live in a country that's prospered (for a plethora of reasons), we assume the prosperity must continue unabated forever.

Re: Investing Returns on the S&P500

#29

Post by jakozaur »

mac01021 wrote: post #17
jakozaur wrote: post #12

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,…

So what alternative method do you propose for predicting growth (or decline) over the next century?

I don't have a crystal ball. However, it would be more useful if more stock indexes would be considered than just one S&P 500.

E.g. Dow Jones: http://www.macrotrends.net/1319/dow-jones-100-year-historica...

Also from other nations.

Re: Investing Returns on the S&P500

#30

Post by thedufer »

yread wrote: post #7

Would be more interesting to compare it against a realistic return from a savings account instead of saying "if the index is worth the same after 20 years then you haven't lost anything". You would have almost 25% more even in a 1.1% savings account.

The baseline is inflation, not flat. Inflation is almost always higher than savings account yield, and is a more accurate measure of "equal value".
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