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The other reason none of these returns are realistic for an average person: 1) People don't get a lump sum at the beginning of their investment history 2) Ah,

The other reason none of these returns are realistic for an average person: 1) People don't get a lump sum at the beginning of their investment history 2) Ah, but you say, dollar-cost-averaging. The problem there is that people get more money to invest when times are good, and less when times are bad. 3) As a result, even when buying in responsibly, people are buying more when the market is high, and less when the market is low. It distorts performance. Plus, betting on having average-or-better performance is a risky bet. Don't count on more than 2.5% / year lifetime.

vm 10y ago
A lot of companies offer retirement plans where a % of income is invested monthly, a la dollar cost averaging (e.g. 401k plans). It's really easy to set up and let ride on autopilot.
- greedo 10y ago
  But that still skews the dollars invested. At age 22 (college grad) you might make $50K. You put in 6% and get a 3% match, for $4500 into your retirement fund. Fast forward to age 50, when you're making 200K (this is 28 years from now, so inflation and pay raises bump you very high), you're putting in the same %, but that equates to $18K/year. So even with dollar cost averaging, the majority of your money is invested in a small, 10 year time window when you are at peak earnings.
  - cryoshon 10y ago
    Ahem, good comment, but: At age 22, you make 25k and get 0% matching, and can afford 0 to put into your still-hypothetical retirement fund. At age 50, if you're the median person, you make 50k. And you need that money to put your kid through college.
  - dismal2 10y ago
    is your planet accepting applications?
dredmorbius 10y ago
It gets worse: people buy when times are good and sell when times are bad, if they've not held enough liquidity. This tends to amplify buying prices and depress selling prices. It's also a strong reason to maintain liquidity and keep your nut (recurring expenses) low. The dynamic turns up in a number of other areas. Natural resources markets: extractors are often pressed to provide more supply when prices fall because they've a large fixed cost structure, often loans, and the resource is all they have to sell. Monopolisation or cartelisation, or government-regulated stockpiles, are a common response (Standard Oil, the As-Is agreement, the TRO/Dept. of Interior quota program, Naval / Strategic oil reserve -- see also Tea Pot Dome scandal, Harbord list, OPEC). Farmers will double down in drought, see Ken Burns and Tim Egan on the Dust Bowl. Migrant or refugee labour (Dust Bowl and others). Economic agents -- persons, groups, firms -- face both short-term essential and long-term cost structures. They can operate, for a time, below long-term costs, but only at the cost of degrading their long-term capabilities. They'll do so because if they fail to meet short-term needs, they die. It's a tremendous market distortion. Perhaps one that drives the entire modern economy.

vm 10y ago

A lot of companies offer retirement plans where a % of income is invested monthly, a la dollar cost averaging (e.g. 401k plans). It's really easy to set up and let ride on autopilot.

greedo 10y ago
But that still skews the dollars invested. At age 22 (college grad) you might make $50K. You put in 6% and get a 3% match, for $4500 into your retirement fund. Fast forward to age 50, when you're making 200K (this is 28 years from now, so inflation and pay raises bump you very high), you're putting in the same %, but that equates to $18K/year. So even with dollar cost averaging, the majority of your money is invested in a small, 10 year time window when you are at peak earnings.
- cryoshon 10y ago
  Ahem, good comment, but: At age 22, you make 25k and get 0% matching, and can afford 0 to put into your still-hypothetical retirement fund. At age 50, if you're the median person, you make 50k. And you need that money to put your kid through college.
- dismal2 10y ago
  is your planet accepting applications?

dredmorbius 10y ago

It gets worse: people buy when times are good and sell when times are bad, if they've not held enough liquidity. This tends to amplify buying prices and depress selling prices. It's also a strong reason to maintain liquidity and keep your nut (recurring expenses) low. The dynamic turns up in a number of other areas. Natural resources markets: extractors are often pressed to provide more supply when prices fall because they've a large fixed cost structure, often loans, and the resource is all they have to sell. Monopolisation or cartelisation, or government-regulated stockpiles, are a common response (Standard Oil, the As-Is agreement, the TRO/Dept. of Interior quota program, Naval / Strategic oil reserve -- see also Tea Pot Dome scandal, Harbord list, OPEC). Farmers will double down in drought, see Ken Burns and Tim Egan on the Dust Bowl. Migrant or refugee labour (Dust Bowl and others). Economic agents -- persons, groups, firms -- face both short-term essential and long-term cost structures. They can operate, for a time, below long-term costs, but only at the cost of degrading their long-term capabilities. They'll do so because if they fail to meet short-term needs, they die. It's a tremendous market distortion. Perhaps one that drives the entire modern economy.