4 ms·

Please show on the S&P 500 graph where buying to sell now hasn’t been a great opportunity in the last 100 years minus the last twelve months.

rocgf 4y ago
You are correct, but that doesn't mean this will hold true forever.
- SketchySeaBeast 4y ago
  Given no reliable alternatives, I don't see an option other than to bet my long term goals on long running trends.
  - Jensson 4y ago
    You cherry picked the companies though. Take the index for the top companies in some other country than USA and that investment no longer looks as secure. USA did great the past 100 years, many other countries didn't.
    - throwaway5959 4y ago
      Buy VT instead. If thirty years from now the value of every meaningful company on Earth is inflation adjusted worth less than it is now, bullets and farm land would have been the only viable investment.
    - SketchySeaBeast 4y ago
      OK, so I didn't make the original S&P market argument, I think they should go bigger and focus on globally diversified broad market funds, but, to get back to my original point, what's the alternative here?
      - tmountain 4y ago
        There isn't one. People love to spread doom and gloom without any real solutions. Real estate, gold, crypto, bonds, etc... are all either affected or soon to be affected by these economic conditions. Panic sellers will lose big and folks that don't have the means to weather the storm will suffer. Personally, I still believe in a well diversified portfolio being the best option (as do many), but the truth is, nobody really knows.
    - est31 4y ago
      Usually those indexes are not as diversified as the US index is. Take German DAX for example. It's mostly made up by chemical, car and industrial companies. The post-war German economy did really great as well, but many leading German companies are private. Furthermore, the USA is one of the biggest economies in the world, way bigger than most single countries on their own.
- pwinnski 4y ago
  The index fund approach doesn't suggest that index funds will always do really well, it suggest that it will always do better over a long period of time than individually-selected stock. Any conditions that cause index funds to do poorly seems to also cause most individual stocks to do poorly. Index funds are a risk-mitigation strategy. Of course it is possible after the fact to find collections of individual stocks that have outperformed the index fund. Trillions of dollars have been staked on trying to do so ahead of time, with little to no success. Is it possible in the future that groups of funds will somehow perform worse than the individual stocks making up those groups? It's very hard to see how that could happen over any extended period of time.
Jensson 4y ago
Main difference is that the past 10 years everyone and their mom parroted the mantra "buy index funds, it is the best place to put all your savings". That wasn't the case before, today index funds makes up a larger share of investors than ever before in history so we have never seen what an economic crash looks like when everyone invests in index funds. Maybe it wont be bad, but maybe this will be the biggest crash ever, it is unknown territory. "How could index funds crash, they correlate with the entire market!" Well, then they crash by crashing the entire market. And once the market starts crashing and people gets worried about their investments and wants to cash out their index funds, it will continue to crash.
- kasey_junk 4y ago
  Index funds just automated prior portfolio advice. Are you suggesting that the previous portfolio advice was bad, the efficiency of the automation will cause more correlated crashing or something else?
  - Jensson 4y ago
    Crashes typically happens because some part of the market was overhyped and people invested too much money in it. But what happens when the market as a whole is hyped, and people invest lots of money in that? Well, then the market as a whole becomes overvalued, and the market as a whole will crash in the next recession. You can see this being the case with the buffet indicator, stock valuations are higher relative to gdp than ever before. So instead of people pumping up some specific segment of the market that then crashes, this time people pumped up the entire market.
- SketchySeaBeast 4y ago
  Given that index funds track the most popular funds is it actually the case that money is distributed differently than before? As an index fund investor I have no illusions that the index funds are immune to dips, but I know that I'm saved from the extremes that individual stocks provide - the odds are excellent I'll never wake up ruined overnight, but by also I'll never get spontaneously rich either. Just for context, while they have grown index funds only make up 10% of the market according to vanguard[1]. [1] https://www.vanguard.ca/documents/truth-about-indexing-en.pdf https://www.vanguard.ca/documents/truth-about-indexing-en.pd...
s1artibartfast 4y ago
Surely you believe there is some P/E where a company is a bad investment?
- dcolkitt 4y ago
  Depends on discount rates. The value of a company is the net present value (NPV) of its discounted cash flow (DCF). P/E is just a kludge to simplify the much more complex DCF analysis. And it's pretty clear that interest rates have been steadily falling for 40 years[1]. Arguably 500 years[2]. Is there temporary variation around the business cycle? Sure. But in the long-term it's extremely unlikely we return to the There's strong macro evidence that interest rates are heavily influenced by demographics[3]. And despite what happens this recession, the population isn't going to stop aging. All of this to say that historical appeals to "normal" P/E ratios is extremely misguiding. We're probably never going back to a world where single digit P/E ratios are the long-term norm, because we're probably never going back to a world with 5% real interest rates are the norm. [1]https://fred.stlouisfed.org/series/REAINTRATREARAT10Y https://fred.stlouisfed.org/series/REAINTRATREARAT10Y [2]https://www.visualcapitalist.com/700-year-decline-of-interest-rates/ https://www.visualcapitalist.com/700-year-decline-of-interes... [3]https://www.frbsf.org/wp-content/uploads/sites/4/4-Thwaites-demographic-trends-and-the-real-interest-rate.pdf https://www.frbsf.org/wp-content/uploads/sites/4/4-Thwaites-...
  - _ink_ 4y ago
    In the big picture interest rates have been falling since 800 years (p. 13 [1]). [1] - https://www.bankofengland.co.uk/-/media/boe/files/working-paper/2020/eight-centuries-of-global-real-interest-rates-r-g-and-the-suprasecular-decline-1311-2018.pdf https://www.bankofengland.co.uk/-/media/boe/files/working-pa...
- roflyear 4y ago
  Not in isolation no. How would that make sense?
junofan 4y ago
True only for US stocks—possibly cherry-picking.
aluminaient 4y ago
this fairytale may help you sleep at night. But 100 years is almost no history at all, i hope you can appreciate that.
- SketchySeaBeast 4y ago
  I don't know if expanding our understanding beyond that is useful. If we looked at historical trends we'd all be looking at ways to hoard tea and salt.
  - throwaway5959 4y ago
    I love that this comment lines up with your username. Yarrrr!!!

rocgf 4y ago

You are correct, but that doesn't mean this will hold true forever.

SketchySeaBeast 4y ago
Given no reliable alternatives, I don't see an option other than to bet my long term goals on long running trends.
- Jensson 4y ago
  You cherry picked the companies though. Take the index for the top companies in some other country than USA and that investment no longer looks as secure. USA did great the past 100 years, many other countries didn't.
  - throwaway5959 4y ago
    Buy VT instead. If thirty years from now the value of every meaningful company on Earth is inflation adjusted worth less than it is now, bullets and farm land would have been the only viable investment.
  - SketchySeaBeast 4y ago
    OK, so I didn't make the original S&P market argument, I think they should go bigger and focus on globally diversified broad market funds, but, to get back to my original point, what's the alternative here?
    - tmountain 4y ago
      There isn't one. People love to spread doom and gloom without any real solutions. Real estate, gold, crypto, bonds, etc... are all either affected or soon to be affected by these economic conditions. Panic sellers will lose big and folks that don't have the means to weather the storm will suffer. Personally, I still believe in a well diversified portfolio being the best option (as do many), but the truth is, nobody really knows.
  - est31 4y ago
    Usually those indexes are not as diversified as the US index is. Take German DAX for example. It's mostly made up by chemical, car and industrial companies. The post-war German economy did really great as well, but many leading German companies are private. Furthermore, the USA is one of the biggest economies in the world, way bigger than most single countries on their own.
pwinnski 4y ago
The index fund approach doesn't suggest that index funds will always do really well, it suggest that it will always do better over a long period of time than individually-selected stock. Any conditions that cause index funds to do poorly seems to also cause most individual stocks to do poorly. Index funds are a risk-mitigation strategy. Of course it is possible after the fact to find collections of individual stocks that have outperformed the index fund. Trillions of dollars have been staked on trying to do so ahead of time, with little to no success. Is it possible in the future that groups of funds will somehow perform worse than the individual stocks making up those groups? It's very hard to see how that could happen over any extended period of time.

Jensson 4y ago

Main difference is that the past 10 years everyone and their mom parroted the mantra "buy index funds, it is the best place to put all your savings". That wasn't the case before, today index funds makes up a larger share of investors than ever before in history so we have never seen what an economic crash looks like when everyone invests in index funds. Maybe it wont be bad, but maybe this will be the biggest crash ever, it is unknown territory. "How could index funds crash, they correlate with the entire market!" Well, then they crash by crashing the entire market. And once the market starts crashing and people gets worried about their investments and wants to cash out their index funds, it will continue to crash.

kasey_junk 4y ago
Index funds just automated prior portfolio advice. Are you suggesting that the previous portfolio advice was bad, the efficiency of the automation will cause more correlated crashing or something else?
- Jensson 4y ago
  Crashes typically happens because some part of the market was overhyped and people invested too much money in it. But what happens when the market as a whole is hyped, and people invest lots of money in that? Well, then the market as a whole becomes overvalued, and the market as a whole will crash in the next recession. You can see this being the case with the buffet indicator, stock valuations are higher relative to gdp than ever before. So instead of people pumping up some specific segment of the market that then crashes, this time people pumped up the entire market.
SketchySeaBeast 4y ago
Given that index funds track the most popular funds is it actually the case that money is distributed differently than before? As an index fund investor I have no illusions that the index funds are immune to dips, but I know that I'm saved from the extremes that individual stocks provide - the odds are excellent I'll never wake up ruined overnight, but by also I'll never get spontaneously rich either. Just for context, while they have grown index funds only make up 10% of the market according to vanguard[1]. [1] https://www.vanguard.ca/documents/truth-about-indexing-en.pdf https://www.vanguard.ca/documents/truth-about-indexing-en.pd...

s1artibartfast 4y ago

Surely you believe there is some P/E where a company is a bad investment?

dcolkitt 4y ago
Depends on discount rates. The value of a company is the net present value (NPV) of its discounted cash flow (DCF). P/E is just a kludge to simplify the much more complex DCF analysis. And it's pretty clear that interest rates have been steadily falling for 40 years[1]. Arguably 500 years[2]. Is there temporary variation around the business cycle? Sure. But in the long-term it's extremely unlikely we return to the There's strong macro evidence that interest rates are heavily influenced by demographics[3]. And despite what happens this recession, the population isn't going to stop aging. All of this to say that historical appeals to "normal" P/E ratios is extremely misguiding. We're probably never going back to a world where single digit P/E ratios are the long-term norm, because we're probably never going back to a world with 5% real interest rates are the norm. [1]https://fred.stlouisfed.org/series/REAINTRATREARAT10Y https://fred.stlouisfed.org/series/REAINTRATREARAT10Y [2]https://www.visualcapitalist.com/700-year-decline-of-interest-rates/ https://www.visualcapitalist.com/700-year-decline-of-interes... [3]https://www.frbsf.org/wp-content/uploads/sites/4/4-Thwaites-demographic-trends-and-the-real-interest-rate.pdf https://www.frbsf.org/wp-content/uploads/sites/4/4-Thwaites-...
- _ink_ 4y ago
  In the big picture interest rates have been falling since 800 years (p. 13 [1]). [1] - https://www.bankofengland.co.uk/-/media/boe/files/working-paper/2020/eight-centuries-of-global-real-interest-rates-r-g-and-the-suprasecular-decline-1311-2018.pdf https://www.bankofengland.co.uk/-/media/boe/files/working-pa...
roflyear 4y ago
Not in isolation no. How would that make sense?

junofan 4y ago

True only for US stocks—possibly cherry-picking.

aluminaient 4y ago

this fairytale may help you sleep at night. But 100 years is almost no history at all, i hope you can appreciate that.

SketchySeaBeast 4y ago
I don't know if expanding our understanding beyond that is useful. If we looked at historical trends we'd all be looking at ways to hoard tea and salt.
- throwaway5959 4y ago
  I love that this comment lines up with your username. Yarrrr!!!