3 ms·
> But the real secret to his success was catching the asset wave that Taleb mentioned. In other words: luck. The period in which he invested started with extrem
by bko 5y ago
> But the real secret to his success was catching the asset wave that Taleb mentioned. In other words: luck. The period in which he invested started with extreme undervaluations in the equity market
If anyone is curious about the actual returns of the market, I made a sheet [0] with S&P 500 returns over 10, 20 and 30 years at every possible starting point. Note that this excludes dividend yield which is about ~2% today and higher in the past, which should cover inflation for the most part.
type 10yr; 20yr; 30yr;
min -3.57%; 2.80%; 6.94%;
max 17.05%; 15.49%; 12.74%;
median 8.54%; 10.21%; 9.86%;
So for instance, if you invested over 10 years since 1929, the worst you could have possible done is a continuously compounding return of -3.57% (invested in 1927 and sold in 1937). The next worst is invest in 1938 and sold in 1938 for a 0% return. Everything else is positive.
The worse 20 year return is 1927-1947 for an annual return of 2.8%
But of course no one invests like this. They invest over time and dollar cost average. For instance you may invest $100 a month, in which case your returns would be positive and likely very high regardless of when you start, as long as you invest for long enough (more than a few years)
I don't know why a journalist would quote someone without doing 5 minutes of research as to actual stock market returns and important timing is.
I still don't understand why its so fashionable to have these garbage articles come out about how everyone working hard and saving is an idiot and everything is futile. Does the author believe this crap? What else is there to do but to work hard and save? Would you teach this stuff to your children about how they're destined to be destitute?
[0] https://docs.google.com/spreadsheets/d/1dGFQUxyUfGyBE5dnz1rcDcWWuTXgSHGdJ-2-INMk4ag/edit?usp=sharing https://docs.google.com/spreadsheets/d/1dGFQUxyUfGyBE5dnz1rc...
- mister_tee 5y agohooray for doing the math, thanks This article is from 2015 and one of the author's key points is that we're never going to see the equity market booms of the 80s, 90s, and 2010s ever again. The example is that $100 in 1979 turned into $2000 in 2015... but that's only 8.5% annual RoR. I'm not sure whether it's real or nominal; depends on whether their dollar amounts are inflation-adjusted. IMO it was tempting at that time to say the next few years are going to look different than the past few. I, not at all an economist, also thought in 2015 the top must be in because, come on, just look at the graph! And the P/E, the CAPE, the Buffet indicator! That was wrong, of course. S&P 500 is up 125% since then, for a 17% nominal RoR. Which is double that 8.5% in case it was also nominal. random statement: "the millionaire next door" in 1996 is "the $1.73-millionaire next door" in 2021. Or more: CPI numbers just came in at 5.4% an hour ago.
- sokoloff 5y agoThe CPI being that high (and being unsurprising) is supportive of the equity market continuing to do well over the next decade-plus.
- laurencerowe 5y agoHistorical S&P 500 performance with earnings and dividends: http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/spearn.htm http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/... Historical inflation: https://www.usinflationcalculator.com/inflation/current-inflation-rates/ https://www.usinflationcalculator.com/inflation/current-infl...
- redisman 5y agoHousing is the real secret. If you bought a house 30 years ago in a major metro you’re probably a millionaire
- vineyardmike 5y agoSteps to being a millionaire next door: 1. buy a house in major metro in 1985 when they're plentiful. 2. don't go broke and keep a job if needed. 3. stop anyone else from building more homes in town. 4. profit!
- fleddr 5y ago2. is easy, job qualification back then is to have a pulse.
- gruez 5y agoYou can just generalize it to: 1. buy [asset] they're plentiful. 2. don't go broke and keep a job if needed. 3. wait for [asset] to appreciate 4. profit!
- lotsofpulp 5y agoIt is the “buy asset on margin without having to worry about margin calls” with special incentives and protections from government that makes housing special.
- vineyardmike 5y agoalso the fact you can legislate away (via zoning) access to more housing in a way that is hard for the market to correct compared to exchange traded assets
- gruez 5y ago>in a major metro This is the key part, because AFAIK housing overall hasn't outpaced the s&p500.
- flowerbeater 5y agoBut there's a survivor bias in picking US blue chips. Wouldn't it make more sense to look at the rate of return for equity markets around the world? For example, the Japanese blue chip stock market has been stagnant.
- vineyardmike 5y agoFrom the Sheet: (10 yr, 20 yr, 30 yr) > median 8.54% 10.21% 9.86% Interesting that the median is lower (slightly) after 30 year than 20 year. I wonder why
- dkokelley 5y agoThey don't cover the exact same date range (20y has 10 more years of 20y returns than the 30y), plus it's a median so it could be randomness that skewed it towards a higher return vs. the 30y. (The 10.21% return happened 1 year before the first 30y return is recorded.) Interesting that if you take the mean you get: 10y, 20y, 30y :: 8.87%, 9.67%, 10.23% Increasing mean returns as you increase holding period, and the mean 30y is almost exactly the median 20y.