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Yes, one could put it in an S&P index fund and by all historical trends, they would make an average of 2 million per year (8%) without doing anything. That is a

Yes, one could put it in an S&P index fund and by all historical trends, they would make an average of 2 million per year (8%) without doing anything. That is an obscene amount of money. Or if you're more conservative, you could put it in bonds and still be making many times the average salary, still without doing anything. (And lottery participants are highly likely to be less well informed about managing money, since otherwise they wouldn't be lottery participants.)

IanDrake 9y ago
You're not factoring in market timing and drawdowns. Average is great if you're living 10 lives at 10 different moments in history, but we only get one. Put 25 million in the S&P 500 (qqq) in March of 2000 and draw 2 million a year on it. You are out of money inside of 4 years. There is no 100% safe place to stick that much money and live off of it. The world is too dynamic and it takes real skill and work to make money work for you.
- aninhumer 9y ago
  As far as I can see, QQQ seems to perform a fair bit worse than the S&P 500 itself? Maybe it's an unfair metric, or maybe it's just a fair commentary about the risks of index funds. But in any case, I said you'd make that much on average, not that you could withdraw that much every year. In reality, you would draw down a smaller fraction of that (but still an immense salary for no work). And since your capital would be growing on average, you could increase your drawdown over time accordingly.
  - IanDrake 9y ago
    Sorry, how does one invest in the SP500 with "no work" without using an index fund? I need to draw 2 million a year because my Porsche, Hummer, NetJets subscription, mansion and constant vacations are expensive and you said I'd have 2mill on average. I don't work and I need to pay these bills with my 8% average. So what do you recommend I do in 2001? I'm supposed to be living large like you promised but the market tanked. Am I now supposed to live off of 100k when you said 2 million? I already bought this stuff on a payment plan! Seriously, think about it. You have 25 million and someone tells you you'll make 8% on average, but you can't actually spend it? Try to really think what you could do with 25 million and no effort. Not much.
    - aninhumer 9y ago
      >I need to draw 2 million a year because my Porsche, Hummer, NetJets subscription, mansion and constant vacations are expensive and you said I'd have 2mill on average. I'm really not sure what point you think you're making here? Yes, if you spend too much, you'll lose your money. So don't spend too much.
      - IanDrake 9y ago
        I'm not really sure how else to explain it to you. If you were given 25 million right now what would you do? Your initial claim was you could put it in the SP500 and "make an average of 2 million per year (8%) without doing anything". But then I showed you that market timing plays a major part in how well that average will work out for you. So, what are you going to do with that money to live the rest of your life with no work and how much will you spend per year knowing that huge income volatility isn't a realistic life style? My point is, it's not nearly as easy as you've expressed.
        deleted 9y ago
        [deleted]
        IanDrake 9y ago
        @aninhumer I guess "making" money and income are somehow different in your book. You're sighting a lot of conventional wisdom that I've heard before. You won't find many success stories that followed your advise. If you ever talk to people who actually live off their wealth don't be suprized if you find that they're not sitting back on the SP500 with a 4% drawdown. They're most likely active investors working hard (not physically, as none of us do here anyway) to make money with money. Edit: this was in response to a post that has been deleted.
        aninhumer 9y ago
        Sorry, I deleted my comment because I was going to reply to another one you made with a clearer argument. >I guess "making" money and income are somehow different in your book. I guess I should say consumption or drawdown rather than income. (My point is the capital still grows by an average of 8% even if you shouldn't spend all of that.) >You won't find many success stories that followed your advise. Do you have evidence that people who are doing this are failing, or do you just mean that I won't find evidence of success?

IanDrake 9y ago

You're not factoring in market timing and drawdowns. Average is great if you're living 10 lives at 10 different moments in history, but we only get one. Put 25 million in the S&P 500 (qqq) in March of 2000 and draw 2 million a year on it. You are out of money inside of 4 years. There is no 100% safe place to stick that much money and live off of it. The world is too dynamic and it takes real skill and work to make money work for you.

aninhumer 9y ago
As far as I can see, QQQ seems to perform a fair bit worse than the S&P 500 itself? Maybe it's an unfair metric, or maybe it's just a fair commentary about the risks of index funds. But in any case, I said you'd make that much on average, not that you could withdraw that much every year. In reality, you would draw down a smaller fraction of that (but still an immense salary for no work). And since your capital would be growing on average, you could increase your drawdown over time accordingly.
- IanDrake 9y ago
  Sorry, how does one invest in the SP500 with "no work" without using an index fund? I need to draw 2 million a year because my Porsche, Hummer, NetJets subscription, mansion and constant vacations are expensive and you said I'd have 2mill on average. I don't work and I need to pay these bills with my 8% average. So what do you recommend I do in 2001? I'm supposed to be living large like you promised but the market tanked. Am I now supposed to live off of 100k when you said 2 million? I already bought this stuff on a payment plan! Seriously, think about it. You have 25 million and someone tells you you'll make 8% on average, but you can't actually spend it? Try to really think what you could do with 25 million and no effort. Not much.
  - aninhumer 9y ago
    >I need to draw 2 million a year because my Porsche, Hummer, NetJets subscription, mansion and constant vacations are expensive and you said I'd have 2mill on average. I'm really not sure what point you think you're making here? Yes, if you spend too much, you'll lose your money. So don't spend too much.
    - IanDrake 9y ago
      I'm not really sure how else to explain it to you. If you were given 25 million right now what would you do? Your initial claim was you could put it in the SP500 and "make an average of 2 million per year (8%) without doing anything". But then I showed you that market timing plays a major part in how well that average will work out for you. So, what are you going to do with that money to live the rest of your life with no work and how much will you spend per year knowing that huge income volatility isn't a realistic life style? My point is, it's not nearly as easy as you've expressed.
      - deleted 9y ago
        [deleted]
      - IanDrake 9y ago
        @aninhumer I guess "making" money and income are somehow different in your book. You're sighting a lot of conventional wisdom that I've heard before. You won't find many success stories that followed your advise. If you ever talk to people who actually live off their wealth don't be suprized if you find that they're not sitting back on the SP500 with a 4% drawdown. They're most likely active investors working hard (not physically, as none of us do here anyway) to make money with money. Edit: this was in response to a post that has been deleted.
        aninhumer 9y ago
        Sorry, I deleted my comment because I was going to reply to another one you made with a clearer argument. >I guess "making" money and income are somehow different in your book. I guess I should say consumption or drawdown rather than income. (My point is the capital still grows by an average of 8% even if you shouldn't spend all of that.) >You won't find many success stories that followed your advise. Do you have evidence that people who are doing this are failing, or do you just mean that I won't find evidence of success?