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SPY is up 50% since 2019 (pre covid crash). As someone partially invested in index ETFs, this worries me. Index funds aren't supposed to be nitro, they are supp

SPY is up 50% since 2019 (pre covid crash). As someone partially invested in index ETFs, this worries me. Index funds aren't supposed to be nitro, they are supposed to be slow and plodding, and 10% annual is supposed to be huge. I think major indices should be nice, slow, inertial gains from ~6-7% annual, tops. Why? When at any point as an engineer or a scientist have you observed large exponential growth to be sustainable in any context??? EDIT: Ooops It is ~50% (258 in Jan 2019 * 1.50 = 380)

SilasX 5y ago
>SPY is up 100% since 2019 (pre covid crash). Wait, what? I don't see SPY below 250 for all of 2019. A 100% gain would be 500, but it's 406 now. (Its 2020 nadir was ~228, but it's still not up 100% from that.) https://www.google.com/finance/quote/SPY:NYSEARCA?window=5Y https://www.google.com/finance/quote/SPY:NYSEARCA?window=5Y
- SavantIdiot 5y ago
  Ah sh^t, you are right: I was looking at $258 and said 258 * 1.5 = ~400, and that is ~50%... but not 100%. Edited! Thanks!
arcticbull 5y ago
There are nitro versions of all the index funds but you usually have to buy them separately, and they come with their own fat stack of disclosures haha. For SPY see UPRO, for QQQ see TQQQ.
hexedpackets 5y ago
10% annual is not huge at all, it would actually be on the lower end of a year that had positive gains. 10% average is what you should expect for the SP500 - and that tends to be driven by lumps, years with returns >20%. 50% is high from a historical perspective but there are plausible explanations for why it's not absurd.
- mahogany 5y ago
  I remember 7% being the historic average that all the classic investing books said. I think it's after adjusting for inflation and dividends. How are you calculating 10%?
  - waheoo 5y ago
    7% is adjusted for inflation. 10% is the nominal average. An up year is commonly 10-15% with down years being more severe but less frequent.
  - SuoDuanDao 5y ago
    By my understanding, 7% is average for any given year. Average for a year with positive gains would have to be quite a bit more to balance out even the occasional negative year.
sigstoat 5y ago
> When at any point as an engineer or a scientist have you observed large exponential growth to be sustainable in any context??? what on _earth_ do you think 6-7% a year is? that's exponential growth. > SPY is up 50% since 2019 (pre covid crash). [...] Index funds aren't supposed to be nitro, they are supposed to be slow and plodding, and 10% annual is supposed to be huge. I think major indices should be nice, slow, inertial gains from ~6-7% annual, tops. you've confused long-term averages with short term behavior. the market gets its 6-10% annual by going up a lot when it does, to make up for the years where it goes down, or just moves sideways.
- boringg 5y ago
  Human population growths, mosquito populations growths. Sustainable for a certain amount of time. You need to time bound your question. Nothing is sustainability on an endless time scales - the stars burn out and collapse on themselves.
  - allendoerfer 5y ago
    The universe is pretty big. It also has 3 useful dimensions. Earth has basically only two and one very narrow one. I think we can keep going for quite some time.
    - ncallaway 5y ago
      These last two comments and replies really have a strong The Last Question vibe. https://templatetraining.princeton.edu/sites/training/files/the_last_question_-_issac_asimov.pdf https://templatetraining.princeton.edu/sites/training/files/... Really great short story
- Grustaf 5y ago
  > > When at any point as an engineer or a scientist have you observed large exponential growth to be sustainable in any context??? > what on _earth_ do you think 6-7% a year is? that's exponential growth. It's not "large" exponential growth, it's inline with the revenue growth of many large companies, so it's sustainable for quite some time.
JMTQp8lwXL 5y ago
Considering how much the money supply was increased, and the pending inflationary effects, the 50% up creates a "looks good on paper" sentiment the Fed is eyeing for to keep the economy moving: people spending money, taking on debt, etc. But the real increase (adjusted for inflation) will be less impressive. The on-paper increases pop sentiments, though, which is exactly what's needed in a potential economic crisis spawned by a pandemic.
cinntaile 5y ago
The stock market doesn't behave in an average way on a yearly basis. Some years it goes up 40-50% and some years it goes down 40-50%. http://amarginofsafety.com/2015/01/19/the-market-return-histogram-through-2014/ http://amarginofsafety.com/2015/01/19/the-market-return-hist...

SilasX 5y ago

>SPY is up 100% since 2019 (pre covid crash). Wait, what? I don't see SPY below 250 for all of 2019. A 100% gain would be 500, but it's 406 now. (Its 2020 nadir was ~228, but it's still not up 100% from that.) https://www.google.com/finance/quote/SPY:NYSEARCA?window=5Y https://www.google.com/finance/quote/SPY:NYSEARCA?window=5Y

SavantIdiot 5y ago
Ah sh^t, you are right: I was looking at $258 and said 258 * 1.5 = ~400, and that is ~50%... but not 100%. Edited! Thanks!

arcticbull 5y ago

There are nitro versions of all the index funds but you usually have to buy them separately, and they come with their own fat stack of disclosures haha. For SPY see UPRO, for QQQ see TQQQ.

hexedpackets 5y ago

10% annual is not huge at all, it would actually be on the lower end of a year that had positive gains. 10% average is what you should expect for the SP500 - and that tends to be driven by lumps, years with returns >20%. 50% is high from a historical perspective but there are plausible explanations for why it's not absurd.

mahogany 5y ago
I remember 7% being the historic average that all the classic investing books said. I think it's after adjusting for inflation and dividends. How are you calculating 10%?
- waheoo 5y ago
  7% is adjusted for inflation. 10% is the nominal average. An up year is commonly 10-15% with down years being more severe but less frequent.
- SuoDuanDao 5y ago
  By my understanding, 7% is average for any given year. Average for a year with positive gains would have to be quite a bit more to balance out even the occasional negative year.

sigstoat 5y ago

> When at any point as an engineer or a scientist have you observed large exponential growth to be sustainable in any context??? what on _earth_ do you think 6-7% a year is? that's exponential growth. > SPY is up 50% since 2019 (pre covid crash). [...] Index funds aren't supposed to be nitro, they are supposed to be slow and plodding, and 10% annual is supposed to be huge. I think major indices should be nice, slow, inertial gains from ~6-7% annual, tops. you've confused long-term averages with short term behavior. the market gets its 6-10% annual by going up a lot when it does, to make up for the years where it goes down, or just moves sideways.

boringg 5y ago
Human population growths, mosquito populations growths. Sustainable for a certain amount of time. You need to time bound your question. Nothing is sustainability on an endless time scales - the stars burn out and collapse on themselves.
- allendoerfer 5y ago
  The universe is pretty big. It also has 3 useful dimensions. Earth has basically only two and one very narrow one. I think we can keep going for quite some time.
  - ncallaway 5y ago
    These last two comments and replies really have a strong The Last Question vibe. https://templatetraining.princeton.edu/sites/training/files/the_last_question_-_issac_asimov.pdf https://templatetraining.princeton.edu/sites/training/files/... Really great short story
Grustaf 5y ago
> > When at any point as an engineer or a scientist have you observed large exponential growth to be sustainable in any context??? > what on _earth_ do you think 6-7% a year is? that's exponential growth. It's not "large" exponential growth, it's inline with the revenue growth of many large companies, so it's sustainable for quite some time.

JMTQp8lwXL 5y ago

Considering how much the money supply was increased, and the pending inflationary effects, the 50% up creates a "looks good on paper" sentiment the Fed is eyeing for to keep the economy moving: people spending money, taking on debt, etc. But the real increase (adjusted for inflation) will be less impressive. The on-paper increases pop sentiments, though, which is exactly what's needed in a potential economic crisis spawned by a pandemic.

cinntaile 5y ago

The stock market doesn't behave in an average way on a yearly basis. Some years it goes up 40-50% and some years it goes down 40-50%. http://amarginofsafety.com/2015/01/19/the-market-return-histogram-through-2014/ http://amarginofsafety.com/2015/01/19/the-market-return-hist...