12 ms·

There are all sorts of interesting facts you can pull out of this, like how if you missed the top 10 best days in the market from 1999-2019, your return was cut

There are all sorts of interesting facts you can pull out of this, like how if you missed the top 10 best days in the market from 1999-2019, your return was cut in half. If you missed the top 20 best days, you actually lost money: https://www.fool.com/investing/2019/04/11/what-happens-when-you-miss-the-best-days-in-the-st.aspx https://www.fool.com/investing/2019/04/11/what-happens-when-... Basically never mistake annualized return over a long period of time for your expected return in a given year (or day, etc). There will be some really really good years, and a few really really bad years. If something grows consistently with low variance over a long period of time, that's a red flag! It's likely to be a "picking up pennies in front of a steamroller" type trade.

sichtlinkair 5y ago
> It's likely to be a "picking up pennies in front of a steamroller" type trade. What does that mean?
- b0afc375b5 5y ago
  I think it means doing something high risk for low reward.
  - kccqzy 5y ago
    It means doing something high risk but the risk has low probability, and for low reward. No rational mind would do anything high risk low reward, unless the risk has low probability. Then it's just like selling insurance.
- ahelwer 5y ago
  Think of a slowly advancing steamroller, with pennies scattered before it. You can run around picking up these pennies, for small but consistent gain over a long period of time. Just don't take your eye off the steamroller! The canonical example in recent times is the XIV blowup of 2018, which inversed VIX (a security tracking market volatility). So if you held XIV you basically bet that large market moves wouldn't happen - you're shorting volatility. Take a look at the graph to see how that ended up; the steamroller caught up to them! https://www.rcmalternatives.com/2018/02/why-did-xiv-implode/ https://www.rcmalternatives.com/2018/02/why-did-xiv-implode/
- bryanlarsen 5y ago
  If there's a highway made of pennies that is being maintained by a steamroller, you can make a very consistent but small profit by picking up pennies every day. Except for that one day that you get run over by a steamroller. A better example is imagine that every day you bet on coin flips. Every day you go home after you're up $1. You start off with a $1 bet, and double the bet every time you lose. So for example one day, you might lose $1, then lose $2, then win $4 for a total profit of $1. It's a foolproof strategy! You win $1 every day and you can't lose. But of course it assumes that both you and the house have an infinite stake. But if not, one day the house flips 16 heads in a row and you don't have $65536 to bet a 17th time so you go home down $65535. Kind of makes your $1 daily wins look pretty stupid now, doesn't it? There are tons of options plays available on the stock market that have a risk profile similar to the coin flip example.
  - slv77 5y ago
    This is called a martingale bet (https://en.m.wikipedia.org/wiki/Martingale_(betting_system) https://en.m.wikipedia.org/wiki/Martingale_(betting_system)). Doubling down on losses would be an example of a martingale bet.
    - jiscariot 5y ago
      I think this is also a reason why tables generally have set limits.
      - confidantlake 5y ago
        I don't think so. If you as the player make bets a series of bets, each with a negative expected value then your total expected value will also be negative. It doesn't matter if you double after every loss. The limits are mostly because the casino can't afford to take on a 20 billion dollar bet from someone like Bezos. Even if it has a positive expected value, they will still go broke the 49% of the time they lose it.
        j7ake 5y ago
- kccqzy 5y ago
  Your trades have a near-zero (probably positive) mean but very negative skewness.
- paulpauper 5y ago
  it's like shoplifitng. big penalty if caught, small reward if you get away with it, which most do until too late. asymetical payoff.
- MR4D 5y ago
  It means doing something very risky for little overall gain.
- skrtskrt 5y ago
  A good example is selling options for premium. You can sell a put option against a stock. Say the stock is $100 right now, and you sell a put option one month out for a strike price of $90. The seller of this put option essentially bets that the stock will still be above $90 in a month. The buyer of this put option is betting that the stock will be below $90 in a month. For executing this trade, you, the put seller, receive premium, say $1. The buyer pays you $1. You have a sold a very high likelihood bet and received $1 for taking on the risk. The buyer has bought a very low likelihood bet and spent $1 for the chance to win. This sounds great! In the long run, stocks tend to go up so you should win this bet the vast majority of the time, collect your $1, and make the same bet again. This is the "picking up pennies" stage. Now what is the steamroller? The steamroller is the low likelihood but very high loss scenario that this stock or ETF absolutely crashes while you are on the selling side of this open put option bet. If it crashes to $N where $N < $90, the put option buyer has the option or right to sell you the stock at $90, even if it is worth hardly anything. So you have now paid $90 for a stock worth less than $90. It could be $0, the company could be bankrupt. Your loss is -($90-N)+$1. (Note that because of your $1 premium, your breakeven on this trade is when the stock is at $89, not $90.) If you put up the collateral (the money needed to buy the stock at $90) for the bet with your own money, you are out that money. If you put up collateral on margin (borrowed money) you can be mega screwed. This is the steamroller. You picked up $1 here and and there but then you got hit with a -$20 or -$50 or -$90 steamroller when you may have not even had the money to cover it. Yes the steamroller is very low likelihood, but you have to hit pick up a LOT of pennies in a row to still come out on top after getting hit by the steamroller. It is important to note that there is a ton more nuance that can go into running this kind of strategy, but in general for the average person, buy and hold will always outperform a strategy like this for several reasons, not least of them being that the income received for premium is taxed at income rates, where gains from buy and hold will be taxed at capital gains rates. Very sophisticated investors do run this strategy with many ways to handle the tail risk, and their sophisticated strategies do not necessarily stop them from getting absolutely screwed when things go bad like during the flash crash at the beginning of coronavirus. Modeling and mitigating tail risk is hard, because terrible events are not as common as normal events and when things go terribly, they usually go terribly in a way no one has ever seen before.
- kesselvon 5y ago
  There are trades where you can make a small profit regularly, but on bad days you take huge losses. The huge losses outweigh all the potential profits by a large margin. Just like picking up pennies is a small gain while risking death to do so
  - ahelwer 5y ago
    Traders who engage in such behavior are also humorously said to "eat like chickens, shit like elephants"
tut-urut-utut 5y ago
And if you avoided the worst 10 days, your earnings double. If you avoided 20 worst days, your earning doubled again. What is the point of such trivia? That most of the profit or loss happens during the days of high volatility?
- ericmay 5y ago
  > What is the point of such trivia? That most of the profit or loss happens during the days of high volatility? Simply that you shouldn't try and time the market, but continue to "buy and hold". The likelihood of picking these exact 10 or 20 days is near 0, so it's an irrational thing to do.
  - akomtu 5y ago
    I'd politely disagree. The massive fall and recovery around March 2020 was easy to predict, so I did and made a handsome amount of money. I mean, if a small asteroid fell on an important trade route or if another serious pandemic began, would you seriously suggest to just hold the stocks?
    - ericmay 5y ago
      I did too, but I think that's besides the point.
    - egman_ekki 5y ago
      Curious to learn more, if you don't mind sharing. I wrongly assumed things would get quite a bit worse than they were at the point when sp500 turned back up. How did you know that was the bottom? Fundamental analysis? Or were you buying continuously on the way down?
      - ericmay 5y ago
        Well, I can't speak for the person you are replying to, but think about a company like this (in general) - has something changed such that the new price (usually a drop) makes sense? Take Amazon - down 15% or something. The virus is there yet, but is Amazon really worth 15% less? Won't people shop online? There's no way Amazon is going bankrupt, and there's no way that the U.S. would let companies like this fail over the virus, so is it really worth 15% less? You don't have to time the exact moment of the bottom, you just find it once you see double digit loses in extremely good and valuable companies who are pulled down with the market. Airlines? Yea probably wouldn't have been an ideal buy, though if you waited long enough you've rebounded on them. But it seemed pretty safe to buy the big tech companies, Berkshire, etc. when they were experiencing double-digit percentage market losses over a likely temporary phenomenon. Now, was it possible that things would have gotten much, much worse? Yea. So OP and myself could have been wrong, but instances like this are a bit of informed gambling, if you will.
boringg 5y ago
I think the way you should think about the stock market is similar to beating the Casino in blackjack & card counting. When you know the deck is rich ins face cards make more aggressive bets, when its low in face cards be frugal. I.e. don't put lots of money into the market when its hot & put more money in when its cold. That way you statistically have a better chance on getting a good return.
- ahelwer 5y ago
  You are making the classic mistake of confusing domains exhibiting a normal distribution of outcomes (casino games) with domains exhibiting an exponential distribution of outcomes (the market). This is the sort of thinking that traps people into believing "it went up a lot, therefore it has to revert to the mean and go down" or vice versa - there is no basis for such a belief in exponential domains.
  - EVa5I7bHFq9mnYK 5y ago
    There is also no basis for such a belief in the casino games.
    - ahelwer 5y ago
      Certainly not in the sense of the gambler's fallacy, but you can be sure that someone's fortunes from playing casino games will exhibit mean reversion in the sense that the next game is always more likely to bring their cumulative winnings closer to the house edge rather than further from it. Not so with the stock market. The stuff about card counting is basically impossible to do these days but can alter the house edge, and also doesn't apply to the market.
    - boringg 5y ago
      Actually there is a basis for it in blackjack and how to card count. That said I'm not sure what casino's are doing these days ever since the card counting was figured out.
      - 5y ago
simonbarker87 5y ago
Time in the market vs timing the market. The former is easier to do but you need to be patient, the second could give more gains but the chance of you timing the market right is basically zero
paulpauper 5y ago
>f something grows consistently with low variance over a long period of time but that is what compounded interest is, no? But I agree that this why market timing does not work, at least not for the vast majority of ppl and funds. If you miss those good days, you are screwed.
- kqr 5y ago
  Yes, and you can expect relatively steady compounding returns at the risk-free rate (the clue is in the name.) When you see return rates higher than the risk-free rates that still seem like they exhibit low variance, then one of two things are true: 1. Either you have found something that produces way too much reward for its level of risk. This is for anything publicly traded somewhat unlikely. 2. Or you have found something that's prone to rare, but incredibly big swings. The fatter the tails, the more likely it is you'll get a long, good run followed by something that completely wipes you out.
SavantIdiot 5y ago
How do you "miss" 10 days? Unless you are a day trader (aka gambler), "normal person investing" is about trickling cash into an account slowly over time into low-cost funds/etfs, covering the grid, and pretty much never selling until retirement. Maybe a rebalance here or there over the decades, but you're never "out" unless you're paranoid and liquidate into a cash position, but refer to point A. This is the strategy myself and many of my college friends took when we graduated in the late 80's. And we're all pretty comfy right now. We had a few buds that went all day-trader and they lost their shirts, with one and only one exception.
- azemetre 5y ago
  When the 2008 crashed happened the office I worked in had lots of people take their money out of their 401ks, IRAs, or brokerages for years. In hindsight it may have been irrational but from what I remember, people were scared. Some people lost their job for years (remember the various news stories about 99-week unemployment people?), you needed whatever money you could get. If that meant cashing out everything you had, so be it. There were other people that weren't fazed by it and obviously had the chance to not miss the "days." Guessing this type of anecdote may be more common than people think.
  - kqr 5y ago
    Not only more common -- that is effectively what crashes are: demand for liquidity exceeds the supply, and the way markets are set up, this condition causes an even greater demand for liquidity, in a feedback loop. Most of the time, you can get liquidity, but only at a price that really hurts. Sometimes you can't get it at all.
    - azemetre 5y ago
      That makes sense, growing up my parents never contributed or had a 401k and I myself didn't start taking investing or contributing to anything until last year.
- johnwheeler 5y ago
charwalker 5y ago
Pat of most modern economic theory around the stock market is slow and steady, sustainable growth. It's a fairly 'liberal' policy choice as you can't, say, tweet something to spike or drop a stock price and benefit (or have those in the know benefit). For example, several economists say that stagnation in the market is not necessarily a bad thing and shooting for the moon in stock pricing by chasing continual growth can lead to companies overreaching or expanding then crashing hard, hurting consumers and their employees worse than the gains created short term. https://www.wbur.org/onpoint/2020/02/12/economists-slow-economic-growth https://www.wbur.org/onpoint/2020/02/12/economists-slow-econ... This is in addition to noting the stock market is not a representation of the economy or its health. slow, continual, predictable growth is critical for planning economic and fiscal policy along with preparing for rough times, like when a pandemic shuts down global production. I often refer back to the stock market or simply inflation rate before the US went off the gold standard and instituted massive reform and regulation of markets. Some years the US would bounce back and forth between extreme negative then positive inflation rates, ex: https://tradingeconomics.com/united-states/inflation-cpi https://tradingeconomics.com/united-states/inflation-cpi Set the chart range to MAX for effect, or see a table of data here: https://inflationdata.com/Inflation/Inflation_Rate/HistoricalInflation.aspx https://inflationdata.com/Inflation/Inflation_Rate/Historica... In 1920 inflation was close to 22% in the spring but a year later was about -15%. No way that was helpful for preparing for an economic downturn like we see in the general accepted 10 year business cycle today. Image starting a company and all your initial costs are 20% higher than you planned, then once you get production up and running your goods are worth 15% less! Market stability breeds stability but not high return brokerage accounts.
deleted 5y ago
[deleted]
Der_Einzige 5y ago
Ah yes, real estate, the classic example of something "growing consistently with low variance over a long period of time", is akin to "picking up pennies in front of a steamroller". Nah, actually, I think that growing consistently with low variance over a long period of time means that the asset is objectively a good buy...
vmception 5y ago
very true but we have no other advice that works for the upwards mobility of a large population

sichtlinkair 5y ago

> It's likely to be a "picking up pennies in front of a steamroller" type trade. What does that mean?

b0afc375b5 5y ago
I think it means doing something high risk for low reward.
- kccqzy 5y ago
  It means doing something high risk but the risk has low probability, and for low reward. No rational mind would do anything high risk low reward, unless the risk has low probability. Then it's just like selling insurance.
ahelwer 5y ago
Think of a slowly advancing steamroller, with pennies scattered before it. You can run around picking up these pennies, for small but consistent gain over a long period of time. Just don't take your eye off the steamroller! The canonical example in recent times is the XIV blowup of 2018, which inversed VIX (a security tracking market volatility). So if you held XIV you basically bet that large market moves wouldn't happen - you're shorting volatility. Take a look at the graph to see how that ended up; the steamroller caught up to them! https://www.rcmalternatives.com/2018/02/why-did-xiv-implode/ https://www.rcmalternatives.com/2018/02/why-did-xiv-implode/
bryanlarsen 5y ago
If there's a highway made of pennies that is being maintained by a steamroller, you can make a very consistent but small profit by picking up pennies every day. Except for that one day that you get run over by a steamroller. A better example is imagine that every day you bet on coin flips. Every day you go home after you're up $1. You start off with a $1 bet, and double the bet every time you lose. So for example one day, you might lose $1, then lose $2, then win $4 for a total profit of $1. It's a foolproof strategy! You win $1 every day and you can't lose. But of course it assumes that both you and the house have an infinite stake. But if not, one day the house flips 16 heads in a row and you don't have $65536 to bet a 17th time so you go home down $65535. Kind of makes your $1 daily wins look pretty stupid now, doesn't it? There are tons of options plays available on the stock market that have a risk profile similar to the coin flip example.
- slv77 5y ago
  This is called a martingale bet (https://en.m.wikipedia.org/wiki/Martingale_(betting_system) https://en.m.wikipedia.org/wiki/Martingale_(betting_system)). Doubling down on losses would be an example of a martingale bet.
  - jiscariot 5y ago
    I think this is also a reason why tables generally have set limits.
    - confidantlake 5y ago
      I don't think so. If you as the player make bets a series of bets, each with a negative expected value then your total expected value will also be negative. It doesn't matter if you double after every loss. The limits are mostly because the casino can't afford to take on a 20 billion dollar bet from someone like Bezos. Even if it has a positive expected value, they will still go broke the 49% of the time they lose it.
      - j7ake 5y ago
kccqzy 5y ago
Your trades have a near-zero (probably positive) mean but very negative skewness.
paulpauper 5y ago
it's like shoplifitng. big penalty if caught, small reward if you get away with it, which most do until too late. asymetical payoff.
MR4D 5y ago
It means doing something very risky for little overall gain.
skrtskrt 5y ago
A good example is selling options for premium. You can sell a put option against a stock. Say the stock is $100 right now, and you sell a put option one month out for a strike price of $90. The seller of this put option essentially bets that the stock will still be above $90 in a month. The buyer of this put option is betting that the stock will be below $90 in a month. For executing this trade, you, the put seller, receive premium, say $1. The buyer pays you $1. You have a sold a very high likelihood bet and received $1 for taking on the risk. The buyer has bought a very low likelihood bet and spent $1 for the chance to win. This sounds great! In the long run, stocks tend to go up so you should win this bet the vast majority of the time, collect your $1, and make the same bet again. This is the "picking up pennies" stage. Now what is the steamroller? The steamroller is the low likelihood but very high loss scenario that this stock or ETF absolutely crashes while you are on the selling side of this open put option bet. If it crashes to $N where $N < $90, the put option buyer has the option or right to sell you the stock at $90, even if it is worth hardly anything. So you have now paid $90 for a stock worth less than $90. It could be $0, the company could be bankrupt. Your loss is -($90-N)+$1. (Note that because of your $1 premium, your breakeven on this trade is when the stock is at $89, not $90.) If you put up the collateral (the money needed to buy the stock at $90) for the bet with your own money, you are out that money. If you put up collateral on margin (borrowed money) you can be mega screwed. This is the steamroller. You picked up $1 here and and there but then you got hit with a -$20 or -$50 or -$90 steamroller when you may have not even had the money to cover it. Yes the steamroller is very low likelihood, but you have to hit pick up a LOT of pennies in a row to still come out on top after getting hit by the steamroller. It is important to note that there is a ton more nuance that can go into running this kind of strategy, but in general for the average person, buy and hold will always outperform a strategy like this for several reasons, not least of them being that the income received for premium is taxed at income rates, where gains from buy and hold will be taxed at capital gains rates. Very sophisticated investors do run this strategy with many ways to handle the tail risk, and their sophisticated strategies do not necessarily stop them from getting absolutely screwed when things go bad like during the flash crash at the beginning of coronavirus. Modeling and mitigating tail risk is hard, because terrible events are not as common as normal events and when things go terribly, they usually go terribly in a way no one has ever seen before.
kesselvon 5y ago
There are trades where you can make a small profit regularly, but on bad days you take huge losses. The huge losses outweigh all the potential profits by a large margin. Just like picking up pennies is a small gain while risking death to do so
- ahelwer 5y ago
  Traders who engage in such behavior are also humorously said to "eat like chickens, shit like elephants"

tut-urut-utut 5y ago

And if you avoided the worst 10 days, your earnings double. If you avoided 20 worst days, your earning doubled again. What is the point of such trivia? That most of the profit or loss happens during the days of high volatility?

ericmay 5y ago
> What is the point of such trivia? That most of the profit or loss happens during the days of high volatility? Simply that you shouldn't try and time the market, but continue to "buy and hold". The likelihood of picking these exact 10 or 20 days is near 0, so it's an irrational thing to do.
- akomtu 5y ago
  I'd politely disagree. The massive fall and recovery around March 2020 was easy to predict, so I did and made a handsome amount of money. I mean, if a small asteroid fell on an important trade route or if another serious pandemic began, would you seriously suggest to just hold the stocks?
  - ericmay 5y ago
    I did too, but I think that's besides the point.
  - egman_ekki 5y ago
    Curious to learn more, if you don't mind sharing. I wrongly assumed things would get quite a bit worse than they were at the point when sp500 turned back up. How did you know that was the bottom? Fundamental analysis? Or were you buying continuously on the way down?
    - ericmay 5y ago
      Well, I can't speak for the person you are replying to, but think about a company like this (in general) - has something changed such that the new price (usually a drop) makes sense? Take Amazon - down 15% or something. The virus is there yet, but is Amazon really worth 15% less? Won't people shop online? There's no way Amazon is going bankrupt, and there's no way that the U.S. would let companies like this fail over the virus, so is it really worth 15% less? You don't have to time the exact moment of the bottom, you just find it once you see double digit loses in extremely good and valuable companies who are pulled down with the market. Airlines? Yea probably wouldn't have been an ideal buy, though if you waited long enough you've rebounded on them. But it seemed pretty safe to buy the big tech companies, Berkshire, etc. when they were experiencing double-digit percentage market losses over a likely temporary phenomenon. Now, was it possible that things would have gotten much, much worse? Yea. So OP and myself could have been wrong, but instances like this are a bit of informed gambling, if you will.

boringg 5y ago

I think the way you should think about the stock market is similar to beating the Casino in blackjack & card counting. When you know the deck is rich ins face cards make more aggressive bets, when its low in face cards be frugal. I.e. don't put lots of money into the market when its hot & put more money in when its cold. That way you statistically have a better chance on getting a good return.

ahelwer 5y ago
You are making the classic mistake of confusing domains exhibiting a normal distribution of outcomes (casino games) with domains exhibiting an exponential distribution of outcomes (the market). This is the sort of thinking that traps people into believing "it went up a lot, therefore it has to revert to the mean and go down" or vice versa - there is no basis for such a belief in exponential domains.
- EVa5I7bHFq9mnYK 5y ago
  There is also no basis for such a belief in the casino games.
  - ahelwer 5y ago
    Certainly not in the sense of the gambler's fallacy, but you can be sure that someone's fortunes from playing casino games will exhibit mean reversion in the sense that the next game is always more likely to bring their cumulative winnings closer to the house edge rather than further from it. Not so with the stock market. The stuff about card counting is basically impossible to do these days but can alter the house edge, and also doesn't apply to the market.
  - boringg 5y ago
    Actually there is a basis for it in blackjack and how to card count. That said I'm not sure what casino's are doing these days ever since the card counting was figured out.
    - 5y ago

simonbarker87 5y ago

Time in the market vs timing the market. The former is easier to do but you need to be patient, the second could give more gains but the chance of you timing the market right is basically zero

paulpauper 5y ago

>f something grows consistently with low variance over a long period of time but that is what compounded interest is, no? But I agree that this why market timing does not work, at least not for the vast majority of ppl and funds. If you miss those good days, you are screwed.

kqr 5y ago
Yes, and you can expect relatively steady compounding returns at the risk-free rate (the clue is in the name.) When you see return rates higher than the risk-free rates that still seem like they exhibit low variance, then one of two things are true: 1. Either you have found something that produces way too much reward for its level of risk. This is for anything publicly traded somewhat unlikely. 2. Or you have found something that's prone to rare, but incredibly big swings. The fatter the tails, the more likely it is you'll get a long, good run followed by something that completely wipes you out.

SavantIdiot 5y ago

How do you "miss" 10 days? Unless you are a day trader (aka gambler), "normal person investing" is about trickling cash into an account slowly over time into low-cost funds/etfs, covering the grid, and pretty much never selling until retirement. Maybe a rebalance here or there over the decades, but you're never "out" unless you're paranoid and liquidate into a cash position, but refer to point A. This is the strategy myself and many of my college friends took when we graduated in the late 80's. And we're all pretty comfy right now. We had a few buds that went all day-trader and they lost their shirts, with one and only one exception.

azemetre 5y ago
When the 2008 crashed happened the office I worked in had lots of people take their money out of their 401ks, IRAs, or brokerages for years. In hindsight it may have been irrational but from what I remember, people were scared. Some people lost their job for years (remember the various news stories about 99-week unemployment people?), you needed whatever money you could get. If that meant cashing out everything you had, so be it. There were other people that weren't fazed by it and obviously had the chance to not miss the "days." Guessing this type of anecdote may be more common than people think.
- kqr 5y ago
  Not only more common -- that is effectively what crashes are: demand for liquidity exceeds the supply, and the way markets are set up, this condition causes an even greater demand for liquidity, in a feedback loop. Most of the time, you can get liquidity, but only at a price that really hurts. Sometimes you can't get it at all.
  - azemetre 5y ago
    That makes sense, growing up my parents never contributed or had a 401k and I myself didn't start taking investing or contributing to anything until last year.
johnwheeler 5y ago

charwalker 5y ago

Pat of most modern economic theory around the stock market is slow and steady, sustainable growth. It's a fairly 'liberal' policy choice as you can't, say, tweet something to spike or drop a stock price and benefit (or have those in the know benefit). For example, several economists say that stagnation in the market is not necessarily a bad thing and shooting for the moon in stock pricing by chasing continual growth can lead to companies overreaching or expanding then crashing hard, hurting consumers and their employees worse than the gains created short term. https://www.wbur.org/onpoint/2020/02/12/economists-slow-economic-growth https://www.wbur.org/onpoint/2020/02/12/economists-slow-econ... This is in addition to noting the stock market is not a representation of the economy or its health. slow, continual, predictable growth is critical for planning economic and fiscal policy along with preparing for rough times, like when a pandemic shuts down global production. I often refer back to the stock market or simply inflation rate before the US went off the gold standard and instituted massive reform and regulation of markets. Some years the US would bounce back and forth between extreme negative then positive inflation rates, ex: https://tradingeconomics.com/united-states/inflation-cpi https://tradingeconomics.com/united-states/inflation-cpi Set the chart range to MAX for effect, or see a table of data here: https://inflationdata.com/Inflation/Inflation_Rate/HistoricalInflation.aspx https://inflationdata.com/Inflation/Inflation_Rate/Historica... In 1920 inflation was close to 22% in the spring but a year later was about -15%. No way that was helpful for preparing for an economic downturn like we see in the general accepted 10 year business cycle today. Image starting a company and all your initial costs are 20% higher than you planned, then once you get production up and running your goods are worth 15% less! Market stability breeds stability but not high return brokerage accounts.

deleted 5y ago

[deleted]

Der_Einzige 5y ago

Ah yes, real estate, the classic example of something "growing consistently with low variance over a long period of time", is akin to "picking up pennies in front of a steamroller". Nah, actually, I think that growing consistently with low variance over a long period of time means that the asset is objectively a good buy...

vmception 5y ago

very true but we have no other advice that works for the upwards mobility of a large population