Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Stock Market Returns Are Anything but Average

awealthofcommonsense.com

Post reply on HN
Print view View original

31–40 of 433 posts

Re: Stock Market Returns Are Anything but Average

#31

Post by EGreg »

ahelwer wrote: post #25
bryanlarsen wrote: post #22

Earlier quoted context omitted.

Or the German stock market of 1914. An 1914 investor would have had to have held for 100 years to get his investment back. The major point is that only looking at 90 years of American stock market returns is very serious cherry picking. We can get a lot more data by including non-American stock markets. The last century was a century of American ascendance. 100 years from now America still might be at the top, but I…

The ultimate point of these discussions is coming to a conclusion about "what should we do?". I can give you quite a few reasons why dumping all your money in market index funds could end in disaster. I'm not under the illusion these gains are guaranteed. But what the hell else am I going to do?

This is going to be a silly response, but how silly is it really? You asked what you would do with your money, to grow it...

This is related to the Keynsian Beauty Contest for following fads actively instead of passively taking long positions for years:

https://en.wikipedia.org/wiki/Keynesian_beauty_contest

How about hiring a person to research and buy the latest shitcoins on Uniswap and Pancakeswap? I can name several in the last month that have each been up 500% in 24 hours. For example, see these:

SAFEMOON (weeks ago)

https://coinmarketcap.com/currencies/safemoon/

SPORE finance

https://coinmarketcap.com/currencies/spore-finance/

PROMETEUS token

https://coinmarketcap.com/currencies/prometeus/

By the time you hit these links, you may be astonished to see that the assets have risen in one day nearly half of the 900% the guy says the stock market would do in 30 years.

I mean, isn’t the goal of growth investing to get the biggest returns? This seems to be that, massively accelerated.

Then retire LOL.

But seriously... the smallest cap projects in the newest industries — especially now that trading is available to anyone with no intemediaries — presents massive opportunities for huge crowds to descend on one thing or another, and if you are early to the party you make a lot. I find it a very strange aspect of capitalism, that seems to reward meme marketing and attracting crowds to fads, rather than actual value for society.

Re: Stock Market Returns Are Anything but Average

#32

Post by tut-urut-utut »

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?

Re: Stock Market Returns Are Anything but Average

#33

Post by [deleted] »

ahelwer wrote: post #14
ArtTimeInvestor wrote: post #11

The author falls for the "past equals future" fallacy. The only way to truly take the randomness out of the stock market is to have a multi-decade time horizon. He says so after looking at the data of a few decades. That makes no sense. It is like looking at 3 people and saying "People come in groups no larger than 3". The whole article is based on that premise. He has something like 90 data points and assumes the ne…

I mean yes, past performance doesn't guarantee future results. But it does waggle its eyebrows suggestively at it, when you have a phenomenon that's gone unchallenged for probably a hundred years now. It isn't guaranteed. But nobody's lost their shirt betting it'll continue yet . People always bring up Japan in these discussions, of course. The Nikkei 225 peaked on 29 December 1989, still only at half that value over…

[deleted]

Re: Stock Market Returns Are Anything but Average

#34

Post by Tangokat »

hpkuarg wrote: post #2

I mean, just look at last year, when the S&P 500 index plunged over 30%, then proceeded to nearly double from then until now, in the midst of a global pandemic that froze big chunks of the world economy. Stock market returns make no sense.

Stock market returns make sense only when you realize the currency is actually just losing value. All currency is being devalued so you don't see it in currency pairs but scarce assets go up quickly.

Re: Stock Market Returns Are Anything but Average

#35

Post by xur17 »

ycombinete wrote: post #3
hpkuarg wrote: post #2

I mean, just look at last year, when the S&P 500 index plunged over 30%, then proceeded to nearly double from then until now, in the midst of a global pandemic that froze big chunks of the world economy. Stock market returns make no sense.

I’ve made 15% on an 80/20 VWRA/IGLA split since September 2020. It scares me. It feels like too much. Like it’s going to pop.

I might agree that general stock market prices are quite high, but arguing that "they went up 15% in 6 months" doesn't seem particularly strong. That has occurred historically, and doesn't automatically mean it's overpriced.

Re: Stock Market Returns Are Anything but Average

#36

Post by DennisP »

ahelwer wrote: post #25
bryanlarsen wrote: post #22

Earlier quoted context omitted.

Or the German stock market of 1914. An 1914 investor would have had to have held for 100 years to get his investment back. The major point is that only looking at 90 years of American stock market returns is very serious cherry picking. We can get a lot more data by including non-American stock markets. The last century was a century of American ascendance. 100 years from now America still might be at the top, but I…

The ultimate point of these discussions is coming to a conclusion about "what should we do?". I can give you quite a few reasons why dumping all your money in market index funds could end in disaster. I'm not under the illusion these gains are guaranteed. But what the hell else am I going to do?

Invest globally instead of throwing it all in the S&P500, and add some other asset classes.

Re: Stock Market Returns Are Anything but Average

#37

Post by mabbo »

I decided to play with these numbers myself because I had some questions. I believe the data is the same as I found here[0]

The average single-year return over that period was about 7.5%, not 10%- though in half of years, the market did better than 11%. But what happens if we bucketize by a larger period, like 5-year? My method was to take $1, multiply by the return for 5 years in a row, and then take the 5th root of the result, then convert to a percentage return per year by 5-year bucket. Overlapping 5-year buckets.

The end result is as you'd expect. There are bad years, and there are good years, but the storm is pretty tame when smoothed out. In more than 75% of 5-year periods, the average return was positive. Only 69% of 1-year periods were positive.

As a fun aside, if you invested in an S&P500 index fund the day Clinton was elected and sold it all the day Bush was elected, you'd have made close to 25% annual return on average.

[0]https://www.macrotrends.net/2526/sp-500-historical-annual-re...

Re: Stock Market Returns Are Anything but Average

#38

Post by bryanlarsen »

ahelwer wrote: post #25
bryanlarsen wrote: post #22

Earlier quoted context omitted.

Or the German stock market of 1914. An 1914 investor would have had to have held for 100 years to get his investment back. The major point is that only looking at 90 years of American stock market returns is very serious cherry picking. We can get a lot more data by including non-American stock markets. The last century was a century of American ascendance. 100 years from now America still might be at the top, but I…

The ultimate point of these discussions is coming to a conclusion about "what should we do?". I can give you quite a few reasons why dumping all your money in market index funds could end in disaster. I'm not under the illusion these gains are guaranteed. But what the hell else am I going to do?

As long as you realize that you're choosing the least bad of a bunch of bad options. Far too many people are claiming that stocks are safe.

You're right: stock picking, index funds, bonds, crypto, cash, real estate, collectibles -- they're all bad options in 2021. Myself I would recommend holding a sizable portion in cash. Unlike many, I'm not overly worried about cash holdings getting destroyed by inflation, but I do believe that coming interest rate hikes will make stocks cheaper soon.

Re: Stock Market Returns Are Anything but Average

#39

Post by mrits »

Someone1234 wrote: post #8
hpkuarg wrote: post #2

I mean, just look at last year, when the S&P 500 index plunged over 30%, then proceeded to nearly double from then until now, in the midst of a global pandemic that froze big chunks of the world economy. Stock market returns make no sense.

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…

10% return investing into a company doesn't even sound as crazy as 10% return on a savings account.

Re: Stock Market Returns Are Anything but Average

#40

Post by [deleted] »

EGreg wrote: post #31
ahelwer wrote: post #25

Earlier quoted context omitted.

The ultimate point of these discussions is coming to a conclusion about "what should we do?". I can give you quite a few reasons why dumping all your money in market index funds could end in disaster. I'm not under the illusion these gains are guaranteed. But what the hell else am I going to do?

This is going to be a silly response, but how silly is it really? You asked what you would do with your money, to grow it... This is related to the Keynsian Beauty Contest for following fads actively instead of passively taking long positions for years: https://en.wikipedia.org/wiki/Keynesian_beauty_contest How about hiring a person to research and buy the latest shitcoins on Uniswap and Pancakeswap? I can name sever…

[deleted]
Post reply on HN