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Stock Market Returns Are Anything but Average

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Re: Stock Market Returns Are Anything but Average

#381

Post by imtringued »

v_london wrote: post #315
ISL wrote: post #233

Earlier quoted context omitted.

As recently as 2011, KO had a P/E of 9. https://www.macrotrends.net/stocks/charts/KO/cocacola/pe-rat... There are two ways that a P/E can return to a quasi-normal value. Either the price can go down or the earnings can increase. The mean and median values, since 1880, are about 15. "This time, it's different" https://www.multpl.com/s-p-500-pe-ratio

Stock prices are absolutely inflated, and as a small-scale investor I'm scared. However, I'm not pulling out because realistically, there's no other asset that's safer in the long run. Interest rates are close to zero so returns in bonds are low, inflation will eat away money held in cash deposits and don't even get me started on cryptocurrency, rare sneakers or other "alternative investments". I started investing in…

>So I'll keep investing in good, underhyped and stable companies and try to weather whatever storm, good or bad, will come in the next years.

This is the obvious strategy, reduce your risk tolerance and go with proven companies. Put your money (fresh from your bank account, not from your portfolio) into moonshots when you can afford to lose them, after that put the moonshot money back into your boring but relatively safe investments. There are low volatility or stable dividends ETFs that specialize in this.

Re: Stock Market Returns Are Anything but Average

#382

Post by Chirael »

aerosmile wrote: post #354

A really interesting thing happened in March 2020. The market crashed and we all remember how gloomy everything looked. Needless to say, some businesses were going to be directly affected by Covid (eg: travel, hospitality) and their stocks went down as much as 80%. But it also became clear that many stocks were just collateral damage (eg: most of the tech stocks), and that they were going to recover more quickly than…

It is also very easy to talk about all of this in hindsight.

Prior to April 2020 I had 100% of my 401K in cash/equivalents.

In April 2020 I put half of that cash into stocks.

Now, of course, I kick myself and say I should have put most/all of it into stocks back then.

But that kind of "of course!" and "that was such a recognizable pattern!" talk is a lot easier in hindsight.

It's easy to forget what it was like at the time, and that it could have easily gone down even further. At the time, the cat was both dead and alive (market recovers vs. market falls further).

Re: Stock Market Returns Are Anything but Average

#383

Post by imtringued »

BurningFrog wrote: post #190
duxup wrote: post #130

Earlier quoted context omitted.

I remember the banking crisis and the money printing after that, it was absolutely assumed inflation would follow, how much was debatable, but there wasn't much debate about the impending inflation. Didn't happen... for . Who knows what to make of the rules these days.

Some say that inflation did happen, but it ended up in real estate prices, which aren't counted in the formal inflation definition. I'm not smart enough to tell how true that is.

Evil landlord owns an apartment, he jacks up prices to the maximum possible that people can afford. Fed happens and the value of the apartment goes up. The landlord jacks up prices to maintain a stable price to rent ratio. Yet nobody can afford to rent the apartment.

It's not really inflation, it's something different. The cost of financing has gone down. If financing dries up, real estate prices will go up again.

Re: Stock Market Returns Are Anything but Average

#384

Post by qotgalaxy »

j7ake wrote: post #325
TuringNYC wrote: post #266

Earlier quoted context omitted.

>> 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? The point is -- it is hard to avoid/miss the 10 worst days since you dont know which ones they will be. It is easy to capture the 10 best days because the easiest thing to do is be invested all the time.

Isn’t it easy to miss the bad days because after it happens, you can buy stocks?

Maybe the next ten days after that are the ten worst days.

Re: Stock Market Returns Are Anything but Average

#385

Post by pwarner »

SavantIdiot wrote: post #263
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).…

How do you "miss" 10 days? Unless you are a day trader (aka gambler), "normal person investing" is about trickling cash into an account slowly over time into low-cost funds/etfs, covering the grid, and pretty much never selling until retirement. Maybe a rebalance here or there over the decades, but you're never "out" unless you're paranoid and liquidate into a cash position, but refer to point A. This is the strategy…

My old job 401K was shifting into the new job 401K, so for a week or so my $ was in a check in the mail between companies, and I think I missed like 2% gain. It's semi real $. It's annoying.

Re: Stock Market Returns Are Anything but Average

#386

Post by boringg »

snikeris wrote: post #168
boringg wrote: post #84

I'm going to add that I did a rudimentary an analysis of the S&P 500 because everyone seems to be throwing their money into passive S&P500 low vehicle investments. I looked at every hold period since inception from 1 year holds / returns up to 40 year hold and returns. Timing is crucial for good returns - depending on when you put in and take out your money the returns can be negative (even in cases where you hold up…

> Timing is crucial for good returns - 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) This is well captured in this guy's drawdown charts: https://portfoliocharts.com/portfolio/drawdowns/

This is slick.

Re: Stock Market Returns Are Anything but Average

#387

Post by blaser-waffle »

johnwheeler wrote: post #359
kevincrane wrote: post #303

Earlier quoted context omitted.

Same for the lottery, if you just know which numbers are good then you only have to buy one or two tickets ever and you're set for life.

This is a bad analogy. The stock market is not a lottery. It’s a place to buy and sell shares of a company. Most people treat it like a lottery and that can serve you rather than hurt you if you know what you’re doing.

For all the DD you do, there is no predicting the future.

Plus there is a very real incentive for companies to do shady things, e.g. Volkswagon or Enron.

Are you sure those companies you're holding aren't lying out of their ass? Can you prove that? Like, unless you're in the accounting dept. at those firms -- or someone who can otherwise get those numbers -- you can't.

At that point it's gambling. It may be akin to counting cards, where you can make probabilistic guesses, but best case is still uncertain.

Otherwise you're rocking a very special secret, or are manipulating the market. But for the rest of the us stock plebs, is effectively gambling.

Re: Stock Market Returns Are Anything but Average

#388

Post by tasuki »

thethimble wrote: post #370
nO0b wrote: post #363

Earlier quoted context omitted.

> This is the strategy myself and many of my college friends took when we graduated in the late 80's. And we're all pretty comfy right now. I wonder if your Japanese peers in a Nikkei 225 fund over the same time period would agree with your strategy. Buy-and-hold for them is still down 50% over the last few decades.

Why would expect the Nikkei 225 to provide similar returns to the S&P 500? Company quality varies greatly between these indexes.

> Why would expect the Nikkei 225 to provide similar returns to the S&P 500?

Why would you expect them to be different?

> Company quality varies greatly between these indexes.

Can you elaborate on that? Has the "company quality" differed between the two indexes 30 years ago and was the market mispricing it? Is the market pricing these indexes correctly now? Do you think the S&P 500 is going to provide better results than Nikkei 225 going forward?

Re: Stock Market Returns Are Anything but Average

#389

Post by SavantIdiot »

pwarner wrote: post #385
SavantIdiot wrote: post #263

Earlier quoted context omitted.

How do you "miss" 10 days? Unless you are a day trader (aka gambler), "normal person investing" is about trickling cash into an account slowly over time into low-cost funds/etfs, covering the grid, and pretty much never selling until retirement. Maybe a rebalance here or there over the decades, but you're never "out" unless you're paranoid and liquidate into a cash position, but refer to point A. This is the strategy…

My old job 401K was shifting into the new job 401K, so for a week or so my $ was in a check in the mail between companies, and I think I missed like 2% gain. It's semi real $. It's annoying.

The investment horizon for the average American is 45 years, 2 weeks doesn't mean diddlysquat.

Re: Stock Market Returns Are Anything but Average

#390

Post by ryandrake »

hobs wrote: post #195
ryandrake wrote: post #187

Earlier quoted context omitted.

> 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.

I think the stock market has to a large extent (but not entirely) divorced itself from having much to do with the underlying value of companies or companies' business fundamentals. I can't otherwise explain astronomical P/E ratios and meme stocks.
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