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I'm a 21 yo with $70k to sock away who's confused as to getting a solid 7% guaranteed year over year. But obviously that's not what's stopping us from socking

I'm a 21 yo with $70k to sock away who's confused as to getting a solid 7% guaranteed year over year. But obviously that's not what's stopping us from socking away $70k at 7%.

YZF 8y ago
Stocks. Not an every year guarantee but over 20-50 years you'll be fine... If you want 40% you can apparently get Argentinian bonds at the moment ... [EDIT: This last bit is a joke, if it's not clear]
- greeneggs 8y ago
  Of course Japan's Nikkei index is still well below its peak in 1989. It isn't smart to assume that 7% will continue forever, particularly since developed economies' growth rates have all slowed, and without massive immigration slowed demographic growth makes it unlikely the rates will increase again. In any case, if you believe your charitable donations are better off invested in the stock market than being put to charitable work today, then why bother donating? That means you don't believe in the charity. It would be better to find a more effective charity!
  - YZF 8y ago
    Japan now appears to be a special case (also what about dividends reinvested?)... But by all means, diversify. I admit to not having a crystal ball. As to putting money to charity today I agree that might be a better idea. [EDIT: Even with dividends this particular time period in Japan yielded terrible returns. Investing in the stock market for long periods doesn't guarantee returns, nothing does, but it's a pretty good probability.]
- chii 8y ago
  > Not an every year guarantee but over 20-50 years you'll be fine only in the aggregate. You might hit a particularly bad spell , or some black swan event happens just as you need to liquidate the holdings. Stock needs management of some kind (even if it's index, you'd still need to decide when to liquidate, and seize the earnings while high rather than keep betting until you require the funds).
  - deleted 8y ago
    [deleted]
  - YZF 8y ago
    The whole idea of passive investment is no management and no timing. That's proven to outperform most active management. Yes, you could get unlucky, the world can collapse into chaos, humanity could get destroyed, or various other risks. Definitely owning the US stock market over the last 70 years would have had a pretty good return.
    - adrianN 8y ago
      So we just need another world war with the associated period of rebuilding and massive economic growth due to the development of integrated circuits and women joining the workforce.
      - exolymph 8y ago
        You don't think the developing world continuing to develop will have a version of that effect?
        adrianN 8y ago
        Maybe. Maybe climate change wrecks the economy. Who knows? Past performance is not a great indicator of future performance.
throwaway76543 8y ago
Nothing's guaranteed but the odds are very, very good. If you invest in a diversified index fund like VTI then 7% is a reasonable average growth estimate. Investing a lump sum is a risk -- you'd cut your fortune nearly in half if you invested in 2008. This isn't an issue for most folks who save over time. Frankly, the largest thing stopping folks from investing is financial literacy. The second largest thing is probably lack of disposable income.
- MoBattah 8y ago
  You're completely right. Grabbing some Vanguard index ETF and dollar cost averaging is definitely what I (and others) should be doing. I'd bet 7% YoY over 20 years is conservative.
  - betterworldb 8y ago
    Typically the 7% number is used for after inflation
- ryandrake 8y ago
  Thank you. Every HN thread about the stock market seems to ignore pr downplay risk. If the stock market was really risk-free everyone would be able to retire a millionaire.
  - ascorbic 8y ago
    Most people don't invest in ultra-cheap index trackers though. They pay high fees for funds that can under-perform the market.
    - exolymph 8y ago
      To be fair, index funds are a relatively new thing.
  - jjeaff 8y ago
    At least historically, there is no reason everyone couldn't. There is no 30 year period in the history of the s&p 500 that returns less than 7% if I remember correctly.
ixacto 8y ago
Put $70k into VFIAX for 40 years. That will get you $2,061,991.75 at retirement @7% interest. Maybe a little more or less but this is inflation adjusted. I’d say if you are planning a normal to frugal retirement that is all you really need to invest.

I'm a 21 yo with $70k to sock away who's confused as to getting a solid 7% guaranteed year over year. But obviously that's not what's stopping us from socking away $70k at 7%.

YZF 8y ago

Stocks. Not an every year guarantee but over 20-50 years you'll be fine... If you want 40% you can apparently get Argentinian bonds at the moment ... [EDIT: This last bit is a joke, if it's not clear]

greeneggs 8y ago
Of course Japan's Nikkei index is still well below its peak in 1989. It isn't smart to assume that 7% will continue forever, particularly since developed economies' growth rates have all slowed, and without massive immigration slowed demographic growth makes it unlikely the rates will increase again. In any case, if you believe your charitable donations are better off invested in the stock market than being put to charitable work today, then why bother donating? That means you don't believe in the charity. It would be better to find a more effective charity!
- YZF 8y ago
  Japan now appears to be a special case (also what about dividends reinvested?)... But by all means, diversify. I admit to not having a crystal ball. As to putting money to charity today I agree that might be a better idea. [EDIT: Even with dividends this particular time period in Japan yielded terrible returns. Investing in the stock market for long periods doesn't guarantee returns, nothing does, but it's a pretty good probability.]
chii 8y ago
> Not an every year guarantee but over 20-50 years you'll be fine only in the aggregate. You might hit a particularly bad spell , or some black swan event happens just as you need to liquidate the holdings. Stock needs management of some kind (even if it's index, you'd still need to decide when to liquidate, and seize the earnings while high rather than keep betting until you require the funds).
- deleted 8y ago
  [deleted]
- YZF 8y ago
  The whole idea of passive investment is no management and no timing. That's proven to outperform most active management. Yes, you could get unlucky, the world can collapse into chaos, humanity could get destroyed, or various other risks. Definitely owning the US stock market over the last 70 years would have had a pretty good return.
  - adrianN 8y ago
    So we just need another world war with the associated period of rebuilding and massive economic growth due to the development of integrated circuits and women joining the workforce.
    - exolymph 8y ago
      You don't think the developing world continuing to develop will have a version of that effect?
      - adrianN 8y ago
        Maybe. Maybe climate change wrecks the economy. Who knows? Past performance is not a great indicator of future performance.

throwaway76543 8y ago

Nothing's guaranteed but the odds are very, very good. If you invest in a diversified index fund like VTI then 7% is a reasonable average growth estimate. Investing a lump sum is a risk -- you'd cut your fortune nearly in half if you invested in 2008. This isn't an issue for most folks who save over time. Frankly, the largest thing stopping folks from investing is financial literacy. The second largest thing is probably lack of disposable income.

MoBattah 8y ago
You're completely right. Grabbing some Vanguard index ETF and dollar cost averaging is definitely what I (and others) should be doing. I'd bet 7% YoY over 20 years is conservative.
- betterworldb 8y ago
  Typically the 7% number is used for after inflation
ryandrake 8y ago
Thank you. Every HN thread about the stock market seems to ignore pr downplay risk. If the stock market was really risk-free everyone would be able to retire a millionaire.
- ascorbic 8y ago
  Most people don't invest in ultra-cheap index trackers though. They pay high fees for funds that can under-perform the market.
  - exolymph 8y ago
    To be fair, index funds are a relatively new thing.
- jjeaff 8y ago
  At least historically, there is no reason everyone couldn't. There is no 30 year period in the history of the s&p 500 that returns less than 7% if I remember correctly.

ixacto 8y ago

Put $70k into VFIAX for 40 years. That will get you $2,061,991.75 at retirement @7% interest. Maybe a little more or less but this is inflation adjusted. I’d say if you are planning a normal to frugal retirement that is all you really need to invest.