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On the timescale of 30 years for gov bonds vs diversified US stocks, this is almost meaningless statement. The longer a risky asset is held, the less chance of

On the timescale of 30 years for gov bonds vs diversified US stocks, this is almost meaningless statement. The longer a risky asset is held, the less chance of loss you’ll have. Short-horizon returns are extremely volatile, but that volatility "mean-reverts" over time. This is especially true for stocks vs bonds. Because the cash flows of bonds are fixed, prolonged inflation or rate spikes can deliver a loss that stays a loss, making long-term "safety" in bonds partly an illusion. http://www.efficientfrontier.com/t4poi/Ch1.htm http://www.efficientfrontier.com/t4poi/Ch1.htm

ryandrake 1y ago
> On the timescale of 30 years for gov bonds vs diversified US stocks, this is almost meaningless statement. The longer a risky asset is held, the less chance of loss you’ll have. Short-horizon returns are extremely volatile, but that volatility "mean-reverts" over time. This is only true if you look back 30 years. What will happen in the next 30 years? Do you know for sure?
- jameslk 1y ago
  The same type of argument can be made about bonds and even cash. And if a diversified portfolio of US stocks all suddenly go bankrupt, that probably means the US is toast and therefore bonds are screwed too. Outside of catastrophic black swan events, like I said, stocks generally mean revert if you have a long enough time horizon to allow it
  - ty6853 1y ago
    Holding stocks in the nation in which you live probably isn't very smart from a hedge perspective, considering US stocks don't have a locked correlation to foreign ones. Your assets would all be in the shitter at the same time you're out the job and need to liquidate them to survive.
    - jameslk 1y ago
      Yes I agree. I was using US stocks for the sake of comparison against US bonds. Otherwise, a diversified portfolio with risk adjusted to goals is what makes sense
  - narratives1 1y ago
    This is almost the definition of technical analysis: “chart always reverted to mean so it will always revert to mean” Note that almost every exchange outside the US has been flat or negative for decades. The US has held a precious position for a few generations that’s made “chart go up” feel like a given
    - Kranar 1y ago
      >Note that almost every exchange outside the US has been flat or negative for decades. As someone who works in finance this struck me as a remarkable claim. Upon inspection it turns out to be spectacularly incorrect. After adjusting for inflation it's actually the opposite, the vast majority of countries have seen their own version of the S&P 500 grow over a 30 year period, after adjusting for inflation, not stagnation or decline. Developing countries, particularly those in Asia, have seen incredible returns over a 30 year period, albeit with a great deal of volatility involved. Our neighbor to the north, Canada, has seen gains that are slightly below the U.S., but our neighbor to the south, Mexico has seen about the same growth as our own, once again accounting for Mexico's own inflation. Europe has also experienced a great deal of growth with many European countries even growing moreso than the U.S., for example Germany. While there are examples of decline, they are in countries that are both poor and have unstable governments. Most countries that are strictly poor but don't suffer from instability have for the most part seen growth rather than stagnation. So I don't know exactly what led you to believe your claim that "almost every exchange" has been flat or negative, but it's certainly not correct.
      - narratives1 1y ago
        African, Asian, and Latam exchanges included, many of which go defunct. Japan’s has been basically flat among developed countries
        Kranar 1y ago
        I don't understand your follow up, are you still maintaining your claim that almost every other exchange in the world has been stagnant or declining? Worth noting that a stock exchange becoming defunct is not the same as the value of the index associated with the stocks listed on that exchange going to zero. For example numerous US stock exchanges also go defunct. Nevertheless the value of the stocks that traded on those exchanges remains unaffected. It's not like if NASDAQ went out of business tomorrow that Google and Microsoft would all declare bankruptcy.
  - southernplaces7 1y ago
    >that probably means the US is toast and therefore bonds are screwed too. If the US becomes toast, whatever caused it to happen, and/or the geopolitical, economic consequences of it having happened, would likely be so enormous that stock and bond prices in your portfolio would be the very least among your problems.
- jajko 1y ago
  Yeah buying Norwegian airlines stock for example would have been a brilliant idea, right. I mean country like Norway with their sovereign fund, oil, very moral population and good government etc, nothing can ever go wrong.
  - kimbernator 1y ago
    It's hardly fair to portray stock market investment in that way, though. Nobody should be investing in a single stock for 30 years. A diversified sector EFT is just as easy to buy and comes with diversification so a single failing company doesn't have that much of an impact.
- Lerc 1y ago
  I guess the questions to be asked would be Will the US economy completely collapse in the next 30 years? Will the US government completely collapse in the next 30 years. For the past century I think the answers to those questions would have been, "Almost certainly not" and "Not a chance in hell" I honestly didn't know where they stand today, but there's definitely been movement.
  - tmtvl 1y ago
    The past century, you say... wasn't there a little thing called 'the great depression' somewhere around a century ago?
    - Lerc 1y ago
      Wasn't a complete collapse. It took a significant hit, but still functioned.
- kimbernator 1y ago
  Realistically, all that actually matters is where I land relative to the population at large. Since so much of the world economy is tied to stocks, by buying into it I will remain at least at parity with my current socioeconomic status regardless of whether the market goes up or down. Nobody with real money is just holding it in cash in case the whole stock thing doesn't work out. If things go the way they have been for a while now, I'll be able to retire comfortably. If stocks don't gain or lose a penny for the next 40 years, I think society as a whole will have reframed retirement. If society collapses, it didn't matter anyways.
taeric 1y ago
I mean... the risk of risky assets is that they won't last that long. Any asset you can look back on having held for a long time, is by definition less risky than you could have been. No?
scubazealous 1y ago
Bonds are considered safer because short of the US losing WWIII there is practically no way the US bonds would not pay out or lose value. US Bonds are safe and predictable, backed up by the immense military and resources of the nation. Investing in Apple 30 years ago would net a much higher return on $5k but even Apple was considered a unsafe investment in the 90s. On the other hand, Enron was considered a safe investment by many but went bankrupt almost overnight and shares became practically worthless.
- kgwgk 1y ago
  > there is practically no way the US bonds would not pay out or lose value. Bonds can "lose value" and they did so quite strongly in 2022/23. If you bought 20-year bonds in 2020 for $100 they are worth $60 now (and were as low as $55 in 2023). Getting $1 per year is far from compensating the loss. They will recover gradually until they "pay out" $100 but right now they're underwater.
floundy 1y ago
The Nikkei 225 is still below its peak value from December of 1989. The US is an outlier in terms of historical average stock market returns and there is no guarantee this outperformance will continue into the future. Actually I'd say it's less likely, given that should it continue, the US market cap will eat the entire world stock market. The US stock market is currently 62% of the world's stock market capitalization.
- ManBeardPc 1y ago
  Only if you invested everything in the Nikkei on the height of the market though. Many US companies are pretty global and have a lot of sales outside the USA. In that sense the risk is a lot less concentrated outside of extreme political events.
  - floundy 1y ago
    Many international companies are global, and have a lot of sales to the US. But I never see anybody using that as a justification for not investing in the US. As to the Nikkei retort this seems to be hindsight bias and ignorance of historical context, the general consensus at the time (both inside and outside of Japan) was that the Japanese economy was going to take over the world.
- tokyoseb 1y ago
  The Nikkei 225 may be below its 1989 peak in price terms but you can’t ignore the dividends which an actual investment in the index would have paid during that period. On a total return basis (if you had reinvested the dividends into the index as you received them) the Nikkei passed its 1989 peak in 2021.
  - deanmoriarty 1y ago
    I struggle to understand why an educated crowd like HN routinely forgets dividends when posting any sort of financial charts. Total returns are what matters.
cortesoft 1y ago
> The longer a risky asset is held, the less chance of loss you’ll have I understand what you are trying to say here, but it really depends on what the “risky asset” is. If you hold a diversified set of risky assets, like a stock market index fund, then what you say is correct. However, there are other risky assets that don’t hold to this “a long time horizon reduces risk” statement. For example, if you put all your investment in a single stock, that is a risky asset that does not necessarily revert to the mean over time. Many companies go out of business, and the stock goes to zero and will never recover no matter how long you wait. It is important to note what kind of risk you are taking.

ryandrake 1y ago

> On the timescale of 30 years for gov bonds vs diversified US stocks, this is almost meaningless statement. The longer a risky asset is held, the less chance of loss you’ll have. Short-horizon returns are extremely volatile, but that volatility "mean-reverts" over time. This is only true if you look back 30 years. What will happen in the next 30 years? Do you know for sure?

jameslk 1y ago
The same type of argument can be made about bonds and even cash. And if a diversified portfolio of US stocks all suddenly go bankrupt, that probably means the US is toast and therefore bonds are screwed too. Outside of catastrophic black swan events, like I said, stocks generally mean revert if you have a long enough time horizon to allow it
- ty6853 1y ago
  Holding stocks in the nation in which you live probably isn't very smart from a hedge perspective, considering US stocks don't have a locked correlation to foreign ones. Your assets would all be in the shitter at the same time you're out the job and need to liquidate them to survive.
  - jameslk 1y ago
    Yes I agree. I was using US stocks for the sake of comparison against US bonds. Otherwise, a diversified portfolio with risk adjusted to goals is what makes sense
- narratives1 1y ago
  This is almost the definition of technical analysis: “chart always reverted to mean so it will always revert to mean” Note that almost every exchange outside the US has been flat or negative for decades. The US has held a precious position for a few generations that’s made “chart go up” feel like a given
  - Kranar 1y ago
    >Note that almost every exchange outside the US has been flat or negative for decades. As someone who works in finance this struck me as a remarkable claim. Upon inspection it turns out to be spectacularly incorrect. After adjusting for inflation it's actually the opposite, the vast majority of countries have seen their own version of the S&P 500 grow over a 30 year period, after adjusting for inflation, not stagnation or decline. Developing countries, particularly those in Asia, have seen incredible returns over a 30 year period, albeit with a great deal of volatility involved. Our neighbor to the north, Canada, has seen gains that are slightly below the U.S., but our neighbor to the south, Mexico has seen about the same growth as our own, once again accounting for Mexico's own inflation. Europe has also experienced a great deal of growth with many European countries even growing moreso than the U.S., for example Germany. While there are examples of decline, they are in countries that are both poor and have unstable governments. Most countries that are strictly poor but don't suffer from instability have for the most part seen growth rather than stagnation. So I don't know exactly what led you to believe your claim that "almost every exchange" has been flat or negative, but it's certainly not correct.
    - narratives1 1y ago
      African, Asian, and Latam exchanges included, many of which go defunct. Japan’s has been basically flat among developed countries
      - Kranar 1y ago
        I don't understand your follow up, are you still maintaining your claim that almost every other exchange in the world has been stagnant or declining? Worth noting that a stock exchange becoming defunct is not the same as the value of the index associated with the stocks listed on that exchange going to zero. For example numerous US stock exchanges also go defunct. Nevertheless the value of the stocks that traded on those exchanges remains unaffected. It's not like if NASDAQ went out of business tomorrow that Google and Microsoft would all declare bankruptcy.
- southernplaces7 1y ago
  >that probably means the US is toast and therefore bonds are screwed too. If the US becomes toast, whatever caused it to happen, and/or the geopolitical, economic consequences of it having happened, would likely be so enormous that stock and bond prices in your portfolio would be the very least among your problems.
jajko 1y ago
Yeah buying Norwegian airlines stock for example would have been a brilliant idea, right. I mean country like Norway with their sovereign fund, oil, very moral population and good government etc, nothing can ever go wrong.
- kimbernator 1y ago
  It's hardly fair to portray stock market investment in that way, though. Nobody should be investing in a single stock for 30 years. A diversified sector EFT is just as easy to buy and comes with diversification so a single failing company doesn't have that much of an impact.
Lerc 1y ago
I guess the questions to be asked would be Will the US economy completely collapse in the next 30 years? Will the US government completely collapse in the next 30 years. For the past century I think the answers to those questions would have been, "Almost certainly not" and "Not a chance in hell" I honestly didn't know where they stand today, but there's definitely been movement.
- tmtvl 1y ago
  The past century, you say... wasn't there a little thing called 'the great depression' somewhere around a century ago?
  - Lerc 1y ago
    Wasn't a complete collapse. It took a significant hit, but still functioned.
kimbernator 1y ago
Realistically, all that actually matters is where I land relative to the population at large. Since so much of the world economy is tied to stocks, by buying into it I will remain at least at parity with my current socioeconomic status regardless of whether the market goes up or down. Nobody with real money is just holding it in cash in case the whole stock thing doesn't work out. If things go the way they have been for a while now, I'll be able to retire comfortably. If stocks don't gain or lose a penny for the next 40 years, I think society as a whole will have reframed retirement. If society collapses, it didn't matter anyways.

taeric 1y ago

I mean... the risk of risky assets is that they won't last that long. Any asset you can look back on having held for a long time, is by definition less risky than you could have been. No?

scubazealous 1y ago

Bonds are considered safer because short of the US losing WWIII there is practically no way the US bonds would not pay out or lose value. US Bonds are safe and predictable, backed up by the immense military and resources of the nation. Investing in Apple 30 years ago would net a much higher return on $5k but even Apple was considered a unsafe investment in the 90s. On the other hand, Enron was considered a safe investment by many but went bankrupt almost overnight and shares became practically worthless.

kgwgk 1y ago
> there is practically no way the US bonds would not pay out or lose value. Bonds can "lose value" and they did so quite strongly in 2022/23. If you bought 20-year bonds in 2020 for $100 they are worth $60 now (and were as low as $55 in 2023). Getting $1 per year is far from compensating the loss. They will recover gradually until they "pay out" $100 but right now they're underwater.

floundy 1y ago

The Nikkei 225 is still below its peak value from December of 1989. The US is an outlier in terms of historical average stock market returns and there is no guarantee this outperformance will continue into the future. Actually I'd say it's less likely, given that should it continue, the US market cap will eat the entire world stock market. The US stock market is currently 62% of the world's stock market capitalization.

ManBeardPc 1y ago
Only if you invested everything in the Nikkei on the height of the market though. Many US companies are pretty global and have a lot of sales outside the USA. In that sense the risk is a lot less concentrated outside of extreme political events.
- floundy 1y ago
  Many international companies are global, and have a lot of sales to the US. But I never see anybody using that as a justification for not investing in the US. As to the Nikkei retort this seems to be hindsight bias and ignorance of historical context, the general consensus at the time (both inside and outside of Japan) was that the Japanese economy was going to take over the world.
tokyoseb 1y ago
The Nikkei 225 may be below its 1989 peak in price terms but you can’t ignore the dividends which an actual investment in the index would have paid during that period. On a total return basis (if you had reinvested the dividends into the index as you received them) the Nikkei passed its 1989 peak in 2021.
- deanmoriarty 1y ago
  I struggle to understand why an educated crowd like HN routinely forgets dividends when posting any sort of financial charts. Total returns are what matters.

cortesoft 1y ago

> The longer a risky asset is held, the less chance of loss you’ll have I understand what you are trying to say here, but it really depends on what the “risky asset” is. If you hold a diversified set of risky assets, like a stock market index fund, then what you say is correct. However, there are other risky assets that don’t hold to this “a long time horizon reduces risk” statement. For example, if you put all your investment in a single stock, that is a risky asset that does not necessarily revert to the mean over time. Many companies go out of business, and the stock goes to zero and will never recover no matter how long you wait. It is important to note what kind of risk you are taking.