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You don't need Growth stock to retire, index funds and income/dividend stocks are all that's needed to retire comfortably. Individual investors should not be tr

You don't need Growth stock to retire, index funds and income/dividend stocks are all that's needed to retire comfortably. Individual investors should not be trying to pick individual growth stocks because it's highly risky.

gameswithgo 8y ago
what income ranges are you imagining is the middle class?
- jbapple 8y ago
  Over a 40-year career, assuming 4% real capital growth after inflation and a 3% safe withdrawal rate in retirement, a worker has to invest 25% of their gross income every year to have the same net income in retirement (assuming identical taxation rates). The median annual household income in the US is around $60k.
  - gameswithgo 8y ago
    That doesn't leave much left to eat and cover up from the rain with.
uiri 8y ago
You're assuming nothing like the Nikkei index from 1989 - present will ever happen to a US stock index. I agree with you but stock market growth is not a law of nature. Other tactics (e.g. dollar cost averaging) are also needed to ensure a secure retirement.
prostoalex 8y ago
> You don't need Growth stock to retire The returns in those index funds are driven primarily by growth stocks.
jbapple 8y ago
The indexes themselves might underperform an index+VC strategy though if they don't have access to high-growth companies that are staying private. Even if investors shouldn't pick stocks, it might be wise for them to invest in an index of companies that they are now prevented from investing in.
- mrep 8y ago
  Supply and demand Returns from private companies go up -> more VCs enter the market with higher returns increasing competition -> valuations get higher (meaning founders/employees get to keep more stock while investors get less) -> returns deflate and we are back at a balance. There is a reason VCs have been complaining about sky high valuations and it's because most VC's don't even beat the sp 500.
mcguire 8y ago
The point of the article seems to be that the pool of stocks available to funds, etc., is shrinking.[1] You have a good point, but it isn't addressing this specific issue. [1] I assume due to the prevalence of venture capital; that absorbs the returns of early startups.
forapurpose 8y ago
If only a fraction of investments are available to the public, it creates economic inefficiencies: Resources are not flowing to the best investments. Also, it creates a two-tiered system with self-perpetuating A and B economic classes, rather than a merit-based free market that allows social and economic mobility and opportunity. Generally, that is seen as antithetical to democracy and to American values in particular (not to exclude other countries).
ataturk 8y ago
Inflation, bro. It's a killer. You used to be able to retire without taking any risks with your money in the stock markets.
liveoneggs 8y ago
index funds are made out of stocks. If there are fewer companies offering stocks for the funds to use, they are weaker.
eanzenberg 8y ago
Thanks mom.

gameswithgo 8y ago

what income ranges are you imagining is the middle class?

jbapple 8y ago
Over a 40-year career, assuming 4% real capital growth after inflation and a 3% safe withdrawal rate in retirement, a worker has to invest 25% of their gross income every year to have the same net income in retirement (assuming identical taxation rates). The median annual household income in the US is around $60k.
- gameswithgo 8y ago
  That doesn't leave much left to eat and cover up from the rain with.

uiri 8y ago

You're assuming nothing like the Nikkei index from 1989 - present will ever happen to a US stock index. I agree with you but stock market growth is not a law of nature. Other tactics (e.g. dollar cost averaging) are also needed to ensure a secure retirement.

prostoalex 8y ago

> You don't need Growth stock to retire The returns in those index funds are driven primarily by growth stocks.

jbapple 8y ago

The indexes themselves might underperform an index+VC strategy though if they don't have access to high-growth companies that are staying private. Even if investors shouldn't pick stocks, it might be wise for them to invest in an index of companies that they are now prevented from investing in.

mrep 8y ago
Supply and demand Returns from private companies go up -> more VCs enter the market with higher returns increasing competition -> valuations get higher (meaning founders/employees get to keep more stock while investors get less) -> returns deflate and we are back at a balance. There is a reason VCs have been complaining about sky high valuations and it's because most VC's don't even beat the sp 500.

mcguire 8y ago

The point of the article seems to be that the pool of stocks available to funds, etc., is shrinking.[1] You have a good point, but it isn't addressing this specific issue. [1] I assume due to the prevalence of venture capital; that absorbs the returns of early startups.

forapurpose 8y ago

If only a fraction of investments are available to the public, it creates economic inefficiencies: Resources are not flowing to the best investments. Also, it creates a two-tiered system with self-perpetuating A and B economic classes, rather than a merit-based free market that allows social and economic mobility and opportunity. Generally, that is seen as antithetical to democracy and to American values in particular (not to exclude other countries).

ataturk 8y ago

Inflation, bro. It's a killer. You used to be able to retire without taking any risks with your money in the stock markets.

liveoneggs 8y ago

index funds are made out of stocks. If there are fewer companies offering stocks for the funds to use, they are weaker.

eanzenberg 8y ago

Thanks mom.