4 ms·

“Now consider if you invest that money over 30 years in some low to medium risk areas and average 10 - 15% per year” How do you do that?

Scarbutt 7y ago
vanguard funds, but the good ones I have know of require a $500k initial investment.
- tartoran 7y ago
  Why is the initial investment so high? Is there a reasoning behind it?
  - bkanber 7y ago
    He's talking about a specific class of funds that are sold generally to institutions. Think buying funds in "wholesale"; they have low fees, high minimums. Those same funds can be bought "retail" though, with normal fees and typical minimums ($3k-$10k).
- mlrtime 7y ago
  which funds require this?
  - bkanber 7y ago
    He's talking about the "Admiral" class of funds which have lower fees but higher minimums. (And most are $50k min, not 500k). Most of these funds can be bought at lower minimums too, they just have higher fees.
    - inetsee 7y ago
      I'm invested in Vanguard 500 Index Fund Admiral Shares, and the minimum investment is $3000, with fees of 0.04%. Those are pretty low minimums, and seem to me to be exceptionally low fees, and the average annual return is 13.94% over the last 10 years (before taxes).
    - zrail 7y ago
      I think OP is referring to the "Institutional" class of funds. They have much higher minimums because their target market is pension funds and large 401(k) plans that invest using pooled accounts.
- neogodless 7y ago
  Most Vanguard funds, even the Admiral ones, only require $3,000 USD minimum these days. The expense ratio is often 0.15% or less. Index funds are as low as 0.04%. https://investor.vanguard.com/mutual-funds/share-classes https://investor.vanguard.com/mutual-funds/share-classes
nfriedly 7y ago
I agree that 10-15% is a little optimistic, but even with a more realistic 4-7% you'd still have $300,000-500,000 at the end of 30 years, which is nothing to sneeze at.
- Ididntdothis 7y ago
  I just get annoyed when people throw around unrealistic numbers recklessly. Between 4-7 and 10-15 percent there is a huge difference. There is already enough bullshit and delusion going around in investing advice so let’s not add to it.
  - fjp 7y ago
    This source has average historical S&P 500 returns, including dividends, at over 12%: https://www.slickcharts.com/sp500/returns https://www.slickcharts.com/sp500/returns
krn 7y ago
> How do you do that? For the last decade, 10-15% average annual return would have required keeping 70-90% of the funds invested in Nasdaq-100[1]. Also, Vanguard 500 Index Fund (VFIAX) currently has a 10-year average of 13.52%[2]. The general advice is not to keep more than (110 - your_age)% of your retirement portfolio in these high risk / high rewards funds. Therefore, it's entirely possible to receive 10-15% annual returns until you turn 40, but as the period of time until retirement shorters, it becomes too risky. In other words, what is a "medium-risk" at 35, can be a "high-risk" at 55, because one might not have enough time to recover from an economic crisis at an older age. [1] https://www.nasdaq.com/articles/when-performance-matters%3A-nasdaq-100-vs.-sp-500-2019-07-22 https://www.nasdaq.com/articles/when-performance-matters%3A-... [2] https://investor.vanguard.com/mutual-funds/profile/overview/VFIAX https://investor.vanguard.com/mutual-funds/profile/overview/...
- mattferderer 7y ago
  Small caveat - Looking at 10 yr average right now is not a good measurement for future returns. 10 years ago stocks were just coming out of a recession. Right now they are at all time highs.
  - krn 7y ago
    That's a good point, but Nasdaq-100 had an average annual return of 13% even when counting from December 31, 2007 – which is before the beginning of the last recession.
    - Ididntdothis 7y ago
      You can’t take the absolute low point as your starting point and call it low risk.
      - krn 7y ago
        The absolute low point was in 2008, when Nasdaq-100 went down by -40.54%. The last 15 years: 2019 35.23% 2018 -3.88% 2017 28.24% 2016 7.50% 2015 5.73% 2014 13.40% 2013 38.32% 2012 15.91% 2011 -1.80% 2010 16.91% 2009 43.89% 2008 -40.54% 2007 9.81% 2006 9.52% 2005 1.37% 2004 8.59% At no point I called it low risk. It's high risk / high return. The risk of high financial exposure to such funds can only be taken until 40, because one needs to be able to not sell during the entire economic downturn.

Scarbutt 7y ago

vanguard funds, but the good ones I have know of require a $500k initial investment.

tartoran 7y ago
Why is the initial investment so high? Is there a reasoning behind it?
- bkanber 7y ago
  He's talking about a specific class of funds that are sold generally to institutions. Think buying funds in "wholesale"; they have low fees, high minimums. Those same funds can be bought "retail" though, with normal fees and typical minimums ($3k-$10k).
mlrtime 7y ago
which funds require this?
- bkanber 7y ago
  He's talking about the "Admiral" class of funds which have lower fees but higher minimums. (And most are $50k min, not 500k). Most of these funds can be bought at lower minimums too, they just have higher fees.
  - inetsee 7y ago
    I'm invested in Vanguard 500 Index Fund Admiral Shares, and the minimum investment is $3000, with fees of 0.04%. Those are pretty low minimums, and seem to me to be exceptionally low fees, and the average annual return is 13.94% over the last 10 years (before taxes).
  - zrail 7y ago
    I think OP is referring to the "Institutional" class of funds. They have much higher minimums because their target market is pension funds and large 401(k) plans that invest using pooled accounts.
neogodless 7y ago
Most Vanguard funds, even the Admiral ones, only require $3,000 USD minimum these days. The expense ratio is often 0.15% or less. Index funds are as low as 0.04%. https://investor.vanguard.com/mutual-funds/share-classes https://investor.vanguard.com/mutual-funds/share-classes

nfriedly 7y ago

I agree that 10-15% is a little optimistic, but even with a more realistic 4-7% you'd still have $300,000-500,000 at the end of 30 years, which is nothing to sneeze at.

Ididntdothis 7y ago
I just get annoyed when people throw around unrealistic numbers recklessly. Between 4-7 and 10-15 percent there is a huge difference. There is already enough bullshit and delusion going around in investing advice so let’s not add to it.
- fjp 7y ago
  This source has average historical S&P 500 returns, including dividends, at over 12%: https://www.slickcharts.com/sp500/returns https://www.slickcharts.com/sp500/returns

krn 7y ago

> How do you do that? For the last decade, 10-15% average annual return would have required keeping 70-90% of the funds invested in Nasdaq-100[1]. Also, Vanguard 500 Index Fund (VFIAX) currently has a 10-year average of 13.52%[2]. The general advice is not to keep more than (110 - your_age)% of your retirement portfolio in these high risk / high rewards funds. Therefore, it's entirely possible to receive 10-15% annual returns until you turn 40, but as the period of time until retirement shorters, it becomes too risky. In other words, what is a "medium-risk" at 35, can be a "high-risk" at 55, because one might not have enough time to recover from an economic crisis at an older age. [1] https://www.nasdaq.com/articles/when-performance-matters%3A-nasdaq-100-vs.-sp-500-2019-07-22 https://www.nasdaq.com/articles/when-performance-matters%3A-... [2] https://investor.vanguard.com/mutual-funds/profile/overview/VFIAX https://investor.vanguard.com/mutual-funds/profile/overview/...

mattferderer 7y ago
Small caveat - Looking at 10 yr average right now is not a good measurement for future returns. 10 years ago stocks were just coming out of a recession. Right now they are at all time highs.
- krn 7y ago
  That's a good point, but Nasdaq-100 had an average annual return of 13% even when counting from December 31, 2007 – which is before the beginning of the last recession.
  - Ididntdothis 7y ago
    You can’t take the absolute low point as your starting point and call it low risk.
    - krn 7y ago
      The absolute low point was in 2008, when Nasdaq-100 went down by -40.54%. The last 15 years: 2019 35.23% 2018 -3.88% 2017 28.24% 2016 7.50% 2015 5.73% 2014 13.40% 2013 38.32% 2012 15.91% 2011 -1.80% 2010 16.91% 2009 43.89% 2008 -40.54% 2007 9.81% 2006 9.52% 2005 1.37% 2004 8.59% At no point I called it low risk. It's high risk / high return. The risk of high financial exposure to such funds can only be taken until 40, because one needs to be able to not sell during the entire economic downturn.