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Old 05-08-2013, 11:50 AM
 
Location: Los Angeles
460 posts, read 980,262 times
Reputation: 299

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Compounding interest does not apply to equities. You grow 20K into 40K and reinvest that into the stock market. It's a different kind of compounding - "it takes money to make money".

I am sitting on the sidelines waiting for the stock markets to crash and then buy in. I had too little work experience back in 2009 to take advantage of the crash.

I love this market valuation site and shows we are almost as overvalued as the peak in 2007:
The percent of total market cap relative to Gross National Product?
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Old 05-08-2013, 12:58 PM
 
4,191 posts, read 6,874,702 times
Reputation: 7165
I agree it doesn't explicitly apply to equities; however I believe it was just a mix-up of terminology among the users you are referring to. They really ARE referring to the snowball effect of equity growth over the last several years and that's what I was trying to say.

We may be overvalued, but I think we'll still see growth through the end of the year. Outside of our emergency fund, I've been piling every ounce of money we have into equities for the past 3-4 years now and it's paid off handsomely. Just had good timing because I was out of school for a couple years at that point and had a good income available to invest into the market at the bottom. Not sure when to pull out (if at all for hte long term investments) but it won't be for awhile for me.
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Old 05-08-2013, 01:56 PM
 
30,876 posts, read 36,858,638 times
Reputation: 34467
Quote:
Originally Posted by AngusHsu View Post
Compounding interest does not apply to equities. You grow 20K into 40K and reinvest that into the stock market. It's a different kind of compounding - "it takes money to make money".

I am sitting on the sidelines waiting for the stock markets to crash and then buy in. I had too little work experience back in 2009 to take advantage of the crash.

I love this market valuation site and shows we are almost as overvalued as the peak in 2007:
The percent of total market cap relative to Gross National Product?
To your first point, I think people were just using "compound interest" as a simplifying term. We understand the compounding from stocks comes from dividends and capital gains...but "compound interest" is just easier to say.

To your second point, I say "Good luck with that". It's extremely difficult to time the market because you have to be right not once, but twice...when to get out and when to get back in....It's better to just own a mix of stocks and bonds from the outset...because the vast majority of people will get the timing totally wrong. We all think we are the exception to this, but very, very few of us actually are.
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Old 05-08-2013, 02:03 PM
 
Location: Los Angeles
460 posts, read 980,262 times
Reputation: 299
I did buy in late 2008 even though my career just barely started and am starting to sell those equities this year. It is impossible to time the market trough and peak. But I did gauge that sentiments were very pessimistic in late 2008 and bought in after Lehman Bros collapsed. When people start saying it's the end of the world, then it's a good time to buy. Or you can look at the market cap to GDP ratio link I provided earlier.
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Old 05-12-2013, 01:42 PM
 
30,876 posts, read 36,858,638 times
Reputation: 34467
Quote:
Originally Posted by AngusHsu View Post
I did buy in late 2008 even though my career just barely started and am starting to sell those equities this year. It is impossible to time the market trough and peak. But I did gauge that sentiments were very pessimistic in late 2008 and bought in after Lehman Bros collapsed. When people start saying it's the end of the world, then it's a good time to buy. Or you can look at the market cap to GDP ratio link I provided earlier.
I don't disagree with any of that, but the execution is very difficult, psychologically speaking.
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Old 06-29-2014, 06:21 PM
 
12 posts, read 18,042 times
Reputation: 21
Something about bragging—it is very annoying to everyone else (exception being others dying to brag too).
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Old 06-29-2014, 06:35 PM
 
12 posts, read 18,042 times
Reputation: 21
Yes, let's not loose sight of what really matters. Lots of miserable wealthy people with lives that no one envies. Money is great—you should try to save as much as you can—but it just isn't that great a marker of success.
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Old 06-29-2014, 07:07 PM
 
12 posts, read 18,042 times
Reputation: 21
It's one year later and the market has only gone up. I hope you are not still waiting for that crash. Invest some and if the market turns really ugly, you can sell and cut your loss. But to lose out on double-digit growth while waiting for a speculative crash is just a bad idea. If you are so risk-averse, you can invest a limited portion of your holdings and keep the rest in safe investments like CDs (although those might as well be returning 0% these days).
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Old 06-29-2014, 07:18 PM
 
30,876 posts, read 36,858,638 times
Reputation: 34467
Quote:
Originally Posted by lifeson22 View Post
Yes, let's not loose sight of what really matters. Lots of miserable wealthy people with lives that no one envies. Money is great—you should try to save as much as you can—but it just isn't that great a marker of success.
Eh, sounds a bit like sour grapes to me. Money alone does not create happiness, but it definitely helps. It's better to be miserable and rich than miserable & poor. At least if you're rich, you can get yourself some professional help if you are really serious about making your life better.
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Old 06-30-2014, 01:10 AM
 
1,488 posts, read 1,959,083 times
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First 100K was at around the age of 23 or 24.
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