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0 pointsetjossem9y ago0 comments

> Probably just help verify that the stock market is a random walk with a meager trend upwards that doesn't beat inflation + trading costs.

That doesn't sound right. Let me clear that up for you. Since 1950:

  S&P 500 Annual Price Change: 7.2%
  S&P 500 Annual Div Dist: 3.6%
  S&P 500 Annual Total Return: 11.0%
  Annual Inflation: 3.8%
  Annual Real Price Change: 3.3%
  Annual Real Total Return: 7.0 %

Buying the straight S&P 500 beats inflation by seven percent, on average, every year. You're welcome!

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5 comments · 2 top-level

T-A9y ago· 2 in thread

Buying the S&P 500 in 1950 and holding 67 years does.

One sample tells you nothing about randomness. What if you buy in August 1929? What if you hold for a more realistic 20 or 30 years from peak earning years to retirement?

etjossemOP9y ago

Bought way back in August 1929:

  Annual Total Return: 9.1%
  Annual Real Total Return: 5.9%

Bought in January 1987, held for a realistic 30 years:

  Annual Total Return: 9.8%
  Annual Real Total Return: 7.0%

There's always going to be some deviation, but over any given multi-decade holding period, you will generally end up with a predictable 5-9% annualized (inflation-adjusted) return. That is more than zero. My point stands: long-term investment in the S&P 500 can be reasonably expected to gain value faster than inflation.

If you're interested, here's a simulator that looks at historic market data. You'll note that even the lowest possible percentile of 30-year holding periods will still yield a 3.43% inflation-adjusted total return: https://dqydj.com/sp-500-historical-return-calculator-popout...

T-A9y ago

You conveniently ignored half the problem by buying in 1929 and holding for 88 years, which is reasonable if you are currently about 140 years old.

If not, look at http://www.macrotrends.net/1319/dow-jones-100-year-historica...

Let's buy in August 1929 at 5338.69, and sell 20 years later, in August 1949, at 1822.87 (inflation-adjusted). Congratulations, you lost two thirds of your money.

Sell 30 years later instead? August 1959, at 5525.23. Wow, after 30 years you're up almost 3.5%!

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justonepost9y ago· 1 in thread

You don't need prophet for that.

etjossemOP9y ago

j / k navigate · click thread line to collapse