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This analysis is flawed in two respects: 1. It neglects dividends. 2. The S&P 500 as presently constituted omits all the companies that were excluded during th
by buffaloo 7y ago
This analysis is flawed in two respects:
1. It neglects dividends.
2. The S&P 500 as presently constituted omits all the companies that were excluded during that time period (eg., went broke).
If you just buy good solid companies that pay dividends, you do ok.
- matwood 7y ago> If you just buy good solid companies that pay dividends, you do ok. What are the good, solid companies 10 years from now? 20 years? When should I dump my current good, solid companies?
- joshuamorton 7y agoEchoing this, the median amount of time a given S&P500 sits in the S&P500 is less than 20 years. This becomes a tricky problem.
- joshuamorton 7y ago> 1. It neglects dividends. True, but if I replaced S&P500 with VTSMX (a Vanguard index fund, which got marginally higher than 50% returns over the same time period) would not. > 2. The S&P 500 as presently constituted omits all the companies that were excluded during that time period (eg., went broke). The current S&P 500 does, but watching the S&P500 index over time does not. And index funds generally rebalance to take these things into account. As another user mentioned: knowing which companies are "good solid companies" is a trillion dollar industry. No simple strategy beats the market over the long term, other wise passive investors would all do it, and start beating the market.