4 ms·

Presumably dividends would balance it out though.

by mvc 4y ago

O__________O 4y ago
Dividends would balance out a 65% drop during the same period, how so?
- giantg2 4y ago
  I think we'd have to look at the data, but it's possible given that drop happened over an almost 20 year period. Dividends around 2-4% annual over that time could make up for it depending on specifics.
- treis 4y ago
  By being more than a 65% drop
- teraflop 4y ago
  A 65% drop in price over 17 years is "only" about 6% per year. The S&P500 annual dividend yield during 1966-1982 was not much less than 6%, especially during the latter half of that period. If you look at an inflation-adjusted total return chart (as opposed to just price), the actual drop in investment value was much smaller. I think "flat" isn't a terrible way to describe it. https://www.multpl.com/s-p-500-dividend-yield https://www.multpl.com/s-p-500-dividend-yield http://www.simplestockinvesting.com/SP500-historical-real-total-returns.htm http://www.simplestockinvesting.com/SP500-historical-real-to...
  - jibe 4y ago
    Total return (dividends reinvested, inflation adjusted) is -13.4% for 1965-1983.
    - rdtwo 4y ago
      That’s not terrible considering there aren’t likely a lot of better investments in that environment
rufus_foreman 4y ago
With dividends reinvested you get -25.096%, https://dqydj.com/dow-jones-return-calculator/ https://dqydj.com/dow-jones-return-calculator/. S&P 500 is -3.745%.
- onlyrealcuzzo 4y ago
  So one of the worst long-term periods in history - the S&P was still ~50% better than cash. What else is a passive investor gonna do?
  - datavirtue 4y ago
    Grow some balls and start a business?
    - onlyrealcuzzo 4y ago
      What if you already have a business with enormous profits and don't want to spend them all, but invest some?
  - fny 4y ago
    Sometimes you can't beat inflation. Wealth equality is inherently inflationary. If people in developing nations start demanding the same standard of living, prices are screwed, costs go up, and certain cost changes cannot be hedged. For example, how exactly would you plan on protecting yourself against wage increases? It's not like there's a futures market for wages.
    - jsmith45 4y ago
      If people could agree on some source of unbiased data about average wages that updates frequently for a job type, then there certainly could be (cash-settlement only) futures based on that value. What seems relatively unlikely is that you will find people willing to offer physical settlement futures! The market would probably also be somewhat shallow, being more speculators than anything else. Basically only groups acting more like insurance companies would be willing to add much to the depth of the market, and obviously they would sell such futures at such a steep premium that is unlikely to be a very useful hedge.

Presumably dividends would balance it out though.

by mvc 4y ago

Presumably dividends would balance it out though.

O__________O 4y ago

Dividends would balance out a 65% drop during the same period, how so?

giantg2 4y ago
I think we'd have to look at the data, but it's possible given that drop happened over an almost 20 year period. Dividends around 2-4% annual over that time could make up for it depending on specifics.
treis 4y ago
By being more than a 65% drop
teraflop 4y ago
A 65% drop in price over 17 years is "only" about 6% per year. The S&P500 annual dividend yield during 1966-1982 was not much less than 6%, especially during the latter half of that period. If you look at an inflation-adjusted total return chart (as opposed to just price), the actual drop in investment value was much smaller. I think "flat" isn't a terrible way to describe it. https://www.multpl.com/s-p-500-dividend-yield https://www.multpl.com/s-p-500-dividend-yield http://www.simplestockinvesting.com/SP500-historical-real-total-returns.htm http://www.simplestockinvesting.com/SP500-historical-real-to...
- jibe 4y ago
  Total return (dividends reinvested, inflation adjusted) is -13.4% for 1965-1983.
  - rdtwo 4y ago
    That’s not terrible considering there aren’t likely a lot of better investments in that environment

rufus_foreman 4y ago

With dividends reinvested you get -25.096%, https://dqydj.com/dow-jones-return-calculator/ https://dqydj.com/dow-jones-return-calculator/. S&P 500 is -3.745%.

onlyrealcuzzo 4y ago
So one of the worst long-term periods in history - the S&P was still ~50% better than cash. What else is a passive investor gonna do?
- datavirtue 4y ago
  Grow some balls and start a business?
  - onlyrealcuzzo 4y ago
    What if you already have a business with enormous profits and don't want to spend them all, but invest some?
- fny 4y ago
  Sometimes you can't beat inflation. Wealth equality is inherently inflationary. If people in developing nations start demanding the same standard of living, prices are screwed, costs go up, and certain cost changes cannot be hedged. For example, how exactly would you plan on protecting yourself against wage increases? It's not like there's a futures market for wages.
  - jsmith45 4y ago
    If people could agree on some source of unbiased data about average wages that updates frequently for a job type, then there certainly could be (cash-settlement only) futures based on that value. What seems relatively unlikely is that you will find people willing to offer physical settlement futures! The market would probably also be somewhat shallow, being more speculators than anything else. Basically only groups acting more like insurance companies would be willing to add much to the depth of the market, and obviously they would sell such futures at such a steep premium that is unlikely to be a very useful hedge.