5 ms·

Ok, fine, but what kind of investments will give you a secured 7% return over that period of time?

divbzero 5y ago
That 7% default does seem rather optimistic. I would consider 5% nominal or 3% inflation-adjusted more reasonable given today’s market conditions.
- NiceWayToDoIT 5y ago
  I was hopping for list of ideas, like what kind of investment give how much return, along with the risk: - real-estate -? - rent vs flipping - pension funds - ? - mutual funds - 5-8% annual? - stock market -10%-20% over 10 years? - bank savings 2%? Strategies ? Diversification ?
- runako 5y ago
  This perspective seems common, so I’m curious where you are keeping your money that you have been seeing returns in the 5% range given that basic S&P 500 index funds have turned in a 10-year average of closer to 17%. What types of investments are you using to generate the perspective that 7% is rather optimistic?
  - divbzero 5y ago
    I was thinking US stocks. US stocks have experienced stellar returns over the past 10 years that exceed growth in underlying earnings. Returns over the next 10 years will likely be lower as the stock market reverts to the mean. The cyclically-adjusted P/E ratio (CAPE ratio)—defined as current stock price divided by average annual earnings over the past decade—is a common way of looking at mean reversion. The relevant results can be found in Figure 5 (page 10) of a 2016 study by StarCapital Research [1] or Figure 1 of a 1996 study by Robert Shiller [2]. As of Fri Dec 3 2021 the CAPE ratio for the S&P 500 was ~38 [3]. [1]: https://mebfaber.com/wp-content/uploads/2016/02/Research_2016_01_Predicting_Stock_Market_Returns_Shiller_CAPE_Keimling_1_.pdf https://mebfaber.com/wp-content/uploads/2016/02/Research_201... [2]: http://www.econ.yale.edu/~shiller/data/peratio.html http://www.econ.yale.edu/~shiller/data/peratio.html [3]: https://www.multpl.com/shiller-pe https://www.multpl.com/shiller-pe
    - runako 5y ago
      Valuations are important, thanks for raising the CAPE ratio. My intuition is to adjust every valuation concern for the extremely low level of prevailing interest rates. Fortunately, Schiller (of the CAPE ratio) already has a measure for this: excess CAPE yield[1]. Current ECY is roughly where it was in a decade ago, near the beginning of a long bull run. TL;DR; as long as interest rates stay low, equity valuations are not necessarily out of whack. Interest rate forecasting is a different beast entirely, but worth noting that we have not had "normal" interest rates for ~15 years (and then only for a couple of years), and Japan has not had "normal" rates for close to 30 years. [1]: https://www.marketwatch.com/story/sky-high-stock-prices-make-sense-robert-shiller-says-11606838599 https://www.marketwatch.com/story/sky-high-stock-prices-make... [2]: https://en.macromicro.me/charts/27100/us-shiller-ecy https://en.macromicro.me/charts/27100/us-shiller-ecy
icedchai 5y ago
You won’t get those returns without some risk, so “secured” is out. Try a total stock fund like VTSAX.
seibelj 5y ago
Interesting you bring this up, because the average assumed rate of return for pension funds is 7.7%: https://reason.org/data-visualization/public-pension-plans-need-to-put-a-year-of-good-investment-returns-in-perspective/ https://reason.org/data-visualization/public-pension-plans-n... You may have noticed various pensions being bailed out by taxpayers - assume this will continue, although the rampant and excessive inflation is also alleviating this problem (to the detriment of beneficiaries).
- redis_mlc 5y ago
  This is from memory, but here's what went down in Calif. The accountant for the public pension funds gave the numbers for 6%, 7%, and 8% returns. Obviously the 8% annual return was the least likely to be sustainable. To maintain favor from unions, 8% was selected by politicians. (Around 20%-22% of any population worldwide works for the state, so public unions easily capture their politicians.) And here we are, with every city and county in Calif. headed off a cliff. (The only exception I'm aware of is Mountain View, which owns a business park that contributes 1/3 of city revenues. Some towns further north on the peninsula are complete basket cases, with some getting fleced in the 2008 meltdown.) So if the accountant had just quietly omitted 8%, bk wouldn't be looming as certain as 7%. A former San Jose mayor tried to reign in pensions, and was vilified for even trying. The trope is, "Every town in California will have one city hall staffer to write checks, with 100% of town revenues going to public pension retirees." One town accountant said, "I felt physically ill writing pension checks to a 39 yo healthy retired firefighter." because that check stream would go on until he was probably 100 yo, contributing to bk'ing the town.
RedBeetDeadpool 5y ago
Shiba-inu coin, NFT's, and GME. Just trust me.

That 7% default does seem rather optimistic. I would consider 5% nominal or 3% inflation-adjusted more reasonable given today’s market conditions.

NiceWayToDoIT 5y ago
I was hopping for list of ideas, like what kind of investment give how much return, along with the risk: - real-estate -? - rent vs flipping - pension funds - ? - mutual funds - 5-8% annual? - stock market -10%-20% over 10 years? - bank savings 2%? Strategies ? Diversification ?
runako 5y ago
This perspective seems common, so I’m curious where you are keeping your money that you have been seeing returns in the 5% range given that basic S&P 500 index funds have turned in a 10-year average of closer to 17%. What types of investments are you using to generate the perspective that 7% is rather optimistic?
- divbzero 5y ago
  I was thinking US stocks. US stocks have experienced stellar returns over the past 10 years that exceed growth in underlying earnings. Returns over the next 10 years will likely be lower as the stock market reverts to the mean. The cyclically-adjusted P/E ratio (CAPE ratio)—defined as current stock price divided by average annual earnings over the past decade—is a common way of looking at mean reversion. The relevant results can be found in Figure 5 (page 10) of a 2016 study by StarCapital Research [1] or Figure 1 of a 1996 study by Robert Shiller [2]. As of Fri Dec 3 2021 the CAPE ratio for the S&P 500 was ~38 [3]. [1]: https://mebfaber.com/wp-content/uploads/2016/02/Research_2016_01_Predicting_Stock_Market_Returns_Shiller_CAPE_Keimling_1_.pdf https://mebfaber.com/wp-content/uploads/2016/02/Research_201... [2]: http://www.econ.yale.edu/~shiller/data/peratio.html http://www.econ.yale.edu/~shiller/data/peratio.html [3]: https://www.multpl.com/shiller-pe https://www.multpl.com/shiller-pe
  - runako 5y ago
    Valuations are important, thanks for raising the CAPE ratio. My intuition is to adjust every valuation concern for the extremely low level of prevailing interest rates. Fortunately, Schiller (of the CAPE ratio) already has a measure for this: excess CAPE yield[1]. Current ECY is roughly where it was in a decade ago, near the beginning of a long bull run. TL;DR; as long as interest rates stay low, equity valuations are not necessarily out of whack. Interest rate forecasting is a different beast entirely, but worth noting that we have not had "normal" interest rates for ~15 years (and then only for a couple of years), and Japan has not had "normal" rates for close to 30 years. [1]: https://www.marketwatch.com/story/sky-high-stock-prices-make-sense-robert-shiller-says-11606838599 https://www.marketwatch.com/story/sky-high-stock-prices-make... [2]: https://en.macromicro.me/charts/27100/us-shiller-ecy https://en.macromicro.me/charts/27100/us-shiller-ecy

icedchai 5y ago

You won’t get those returns without some risk, so “secured” is out. Try a total stock fund like VTSAX.

seibelj 5y ago

Interesting you bring this up, because the average assumed rate of return for pension funds is 7.7%: https://reason.org/data-visualization/public-pension-plans-need-to-put-a-year-of-good-investment-returns-in-perspective/ https://reason.org/data-visualization/public-pension-plans-n... You may have noticed various pensions being bailed out by taxpayers - assume this will continue, although the rampant and excessive inflation is also alleviating this problem (to the detriment of beneficiaries).

redis_mlc 5y ago
This is from memory, but here's what went down in Calif. The accountant for the public pension funds gave the numbers for 6%, 7%, and 8% returns. Obviously the 8% annual return was the least likely to be sustainable. To maintain favor from unions, 8% was selected by politicians. (Around 20%-22% of any population worldwide works for the state, so public unions easily capture their politicians.) And here we are, with every city and county in Calif. headed off a cliff. (The only exception I'm aware of is Mountain View, which owns a business park that contributes 1/3 of city revenues. Some towns further north on the peninsula are complete basket cases, with some getting fleced in the 2008 meltdown.) So if the accountant had just quietly omitted 8%, bk wouldn't be looming as certain as 7%. A former San Jose mayor tried to reign in pensions, and was vilified for even trying. The trope is, "Every town in California will have one city hall staffer to write checks, with 100% of town revenues going to public pension retirees." One town accountant said, "I felt physically ill writing pension checks to a 39 yo healthy retired firefighter." because that check stream would go on until he was probably 100 yo, contributing to bk'ing the town.

RedBeetDeadpool 5y ago

Shiba-inu coin, NFT's, and GME. Just trust me.