7 ms·

I was discussing low-load index investing with a friend, and the 7% over the last 200 years sounds great. He suggested the hypothesis that that's a reflection

by i3oi3 4y ago

I was discussing low-load index investing with a friend, and the 7% over the last 200 years sounds great. He suggested the hypothesis that that's a reflection of the rise of the United States as a superpower over the last 200 years, and if anything were to impugn the United States' status as the market of refuge, those numbers would not be predictive of consistent long-run returns in the future. That's a hard hypothesis to refute. Are there similar long-run numbers from all stable countries around the world, or is the US market unique in that aspect?

idkyall 4y ago
Here's a source referencing the UK stock market: https://globalfinancialdata.com/stocks-for-the-very-long-run-the-uk-100-and-327-years-of-british-equity-history https://globalfinancialdata.com/stocks-for-the-very-long-run... "Between 1692 and 2018, stock prices increased at an average rate of 1.87% per annum before inflation and 0.36% after inflation, and with reinvested dividends averaging 5.04% per annum, investors received a total return of 6.62% per year. £1" Now, that being said, during this time frame, clearly the UK is also a western superpower, and after a certain point in time the UK & US stock markets probably have a very strong correlation with the rise of electronic trading/risk management. For another example of an older equity market, we might look to Japan, which has had a negative rate of return: https://www.afrugaldoctor.com/home/japans-lost-decades-30-years-of-negative-returns-from-the-nikkei-225 https://www.afrugaldoctor.com/home/japans-lost-decades-30-ye... That being said, as we see in that article the monthly $833 purchase DCA still gave a positive return over 30 years.
- ericmay 4y ago
  I think it's hard to compare Japan with the US or UK or other countries because unlike those countries, Japan can't turn on what I'll call an immigration valve and just flat-out import people to grow the economy.
  - svachalek 4y ago
    Can't or won't?
    - ericmay 4y ago
      Both really. They can't because they won't, but also because they can't.
    - arrosenberg 4y ago
      Would be much harder even if they wanted to. Lots of countries teach their kids English, only one teaches their kids Japanese.
      - wahern 4y ago
        You don't need to speak the local language to live and work some place. I wouldn't be surprised if the majority of migrant workers (temporary or permanent) around the world are unable to speak the local language upon entry.
        arrosenberg 4y ago
        That works in America and the UK because there are already large immigrant communities for you to arrive into. If you arrive in Japan speaking Spanish or Hindi today, how's that going to go? It's not impossible, but it would take a lot of time and Japanese culture isn't exactly known for xenophilia.
        deleted 4y ago
        [deleted]
        skinnymuch 4y ago
        The xenophobia is the point of the reply I assume. Financial life isn’t that great for most of the world. People will go places for a better life. Language isn’t going to stop that. Xenophobia will.
        zarzavat 4y ago
  - danielscrubs 4y ago
    Don’t forget the high taxes on investments in Japan. Basically, US is good for investors but Japan is good for workers. Japan’s median wealth is higher than US.
    - shinryuu 4y ago
      Not sure I would call Japan good for workers. There is a reason for japanese having the word "karoushi", which has the meaning of a person that has died due to overwork.
dsr_ 4y ago
The US stock market is semi-unique: there are others around the world in the 20th-21st centuries that are comparable, but also correlated. https://en.wikipedia.org/wiki/List_of_stock_exchanges https://en.wikipedia.org/wiki/List_of_stock_exchanges
aeternum 4y ago
UK stock markets have returned a similar 7.5% over the last 119 years (~4.9% above inflation). MSCI China over the last 2 decades has returned over 12%.
- DOsinga 4y ago
  > MSCI China has returned over 12% Not per year: https://www.msci.com/documents/10199/aa99c3a4-d48b-44ac-8caa-49522caa9021 https://www.msci.com/documents/10199/aa99c3a4-d48b-44ac-8caa...
- staticman2 4y ago
  I tried to look up what you said about China. IShares MSCI China ETF data on portfoliovisualizer.com only goes back to 2012 and shows 4.27% returns . I don't know if your statement about MSCi China is correct but if so you are cherry picking based on an unusual start date.

by i3oi3 4y ago

idkyall 4y ago

Here's a source referencing the UK stock market: https://globalfinancialdata.com/stocks-for-the-very-long-run-the-uk-100-and-327-years-of-british-equity-history https://globalfinancialdata.com/stocks-for-the-very-long-run... "Between 1692 and 2018, stock prices increased at an average rate of 1.87% per annum before inflation and 0.36% after inflation, and with reinvested dividends averaging 5.04% per annum, investors received a total return of 6.62% per year. £1" Now, that being said, during this time frame, clearly the UK is also a western superpower, and after a certain point in time the UK & US stock markets probably have a very strong correlation with the rise of electronic trading/risk management. For another example of an older equity market, we might look to Japan, which has had a negative rate of return: https://www.afrugaldoctor.com/home/japans-lost-decades-30-years-of-negative-returns-from-the-nikkei-225 https://www.afrugaldoctor.com/home/japans-lost-decades-30-ye... That being said, as we see in that article the monthly $833 purchase DCA still gave a positive return over 30 years.

ericmay 4y ago
I think it's hard to compare Japan with the US or UK or other countries because unlike those countries, Japan can't turn on what I'll call an immigration valve and just flat-out import people to grow the economy.
- svachalek 4y ago
  Can't or won't?
  - ericmay 4y ago
    Both really. They can't because they won't, but also because they can't.
  - arrosenberg 4y ago
    Would be much harder even if they wanted to. Lots of countries teach their kids English, only one teaches their kids Japanese.
    - wahern 4y ago
      You don't need to speak the local language to live and work some place. I wouldn't be surprised if the majority of migrant workers (temporary or permanent) around the world are unable to speak the local language upon entry.
      - arrosenberg 4y ago
        That works in America and the UK because there are already large immigrant communities for you to arrive into. If you arrive in Japan speaking Spanish or Hindi today, how's that going to go? It's not impossible, but it would take a lot of time and Japanese culture isn't exactly known for xenophilia.
        deleted 4y ago
        [deleted]
        skinnymuch 4y ago
        The xenophobia is the point of the reply I assume. Financial life isn’t that great for most of the world. People will go places for a better life. Language isn’t going to stop that. Xenophobia will.
        zarzavat 4y ago
- danielscrubs 4y ago
  Don’t forget the high taxes on investments in Japan. Basically, US is good for investors but Japan is good for workers. Japan’s median wealth is higher than US.
  - shinryuu 4y ago
    Not sure I would call Japan good for workers. There is a reason for japanese having the word "karoushi", which has the meaning of a person that has died due to overwork.

dsr_ 4y ago

The US stock market is semi-unique: there are others around the world in the 20th-21st centuries that are comparable, but also correlated. https://en.wikipedia.org/wiki/List_of_stock_exchanges https://en.wikipedia.org/wiki/List_of_stock_exchanges

aeternum 4y ago

UK stock markets have returned a similar 7.5% over the last 119 years (~4.9% above inflation). MSCI China over the last 2 decades has returned over 12%.

DOsinga 4y ago
> MSCI China has returned over 12% Not per year: https://www.msci.com/documents/10199/aa99c3a4-d48b-44ac-8caa-49522caa9021 https://www.msci.com/documents/10199/aa99c3a4-d48b-44ac-8caa...
staticman2 4y ago
I tried to look up what you said about China. IShares MSCI China ETF data on portfoliovisualizer.com only goes back to 2012 and shows 4.27% returns . I don't know if your statement about MSCi China is correct but if so you are cherry picking based on an unusual start date.