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Keep in mind that both have the same disadvantage. It is certainly possible (and getting much easier in the last decade) to pick times when passive investing wa
by iofj 10y ago
Keep in mind that both have the same disadvantage. It is certainly possible (and getting much easier in the last decade) to pick times when passive investing was essentially a worthless proposition (e.g. Sep 2000 up to now yielded <2% per year. Doing better would have been easy, even if you got bitten by the crash. Buying and holding almost any asset would have beaten it (a house, gold, ...). By contrast, starting in March 2003 would have yielded 7.5% per year, which would be pretty hard to beat over that time period).
Truth is that the starting time of an investment determines your results far more than whether you pick active or passive investing.
Word of warning: on a long term graph, today does not look like a good time to start investing, in fact looks like a really good time to sell and stay on the sidelines. This is not affected by passive vs active investing.
- e12e 10y ago> Word of warning: on a long term graph, today does not look like a good time to start investing, in fact looks like a really good time to sell and stay on the sidelines. This is not affected by passive vs active investing. Could you expand on what you mean here? Do you mean, that for every day, "today does not look like a good time to start", or do you mean that on this May 4th, 2016, you expect that investments made today, will seem like a bad investment on May 4th 2066? (Or whatever is considered a "long term graph")?
- iofj 10y agoI mean nothing more than that if you were to put the S&P 500 graph over the last 15 years and extremely naively look at it, you'd conclude it was very high at the moment. Naively it would seem that it will see 1600 before it sees, say 2500. Also if you look at long term history you'd conclude something similar : the US has had a very long (if somewhat disappointing) economic recovery since 2008. We're due a bust. And finally, the playbook from earlier recessions does appear to be unfolding : manufacturing production has dropped by a lot, and services has flatlined. This is very much like the start of previous recessions. Next up is bad loans to commodity producers (ie. miners) and manufacturers actually going bad (meaning banks declaring losses), then a few defaults, then panic, then recovery. I would expect index investments made today will seem like bad investments in 10 years. I would never dream of predicting 50 years out. To be fair, I would have told you the same a year ago (not about the recession playbook, but probably everything else listed in this post).
- ktRolster 10y agoI mean nothing more than that if you were to put the S&P 500 graph over the last 15 years and extremely naively look at it, you'd conclude it was very high at the moment. High based on what metric? When I look at this graph, it looks like it's been relatively flat for the last half decade: http://i.imgur.com/3gIwjbh.png http://i.imgur.com/3gIwjbh.png
- sokoloff 10y agoWhat? This looks flat to you?! : http://finance.yahoo.com/echarts?s=%5EGSPC+Interactive#{"range":"5y","allowChartStacking":true} http://finance.yahoo.com/echarts?s=%5EGSPC+Interactive#{"ran... It's up 53% over that 5 year period, for a CAGR of 8.9% (excluding dividends).