Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
Investing in the market is not 'gambling' if done appropriately: following a consistent long-term strategy of diversification through indexing. 'Gambling' is when people try to time the market or pick the next Apple/Google.
Stocks are a gamble regardless of your strategy. When you utilize that "consistent long-term strategy of diversification through indexing" you're doing so with the speculation that it will be a successful strategy in the future. Nothing guarantees that outcome though, its a gamble.
Quote:
Originally Posted by stoutboy
The real returns of equities over time come out ahead of all other investment options, especially after factoring inflation.
You mean in the past they have come out ahead but that doesn't mean they will in the future.
Quote:
Originally Posted by stoutboy
Pensions and s.s. are great; I hope to have both. But to put all one's eggs in those baskets is highly risky.
Social security and especially pensions represent a sizable fraction of one's compensation so many don't have a choice unless they want to live like a miser.
Quote:
Originally Posted by stoutboy
Your choice of 2000 is cherry-picking and irrelevant for an investor who will be in the market over decades, particularly for one who reinvests dividends . For that investor, the stock market has returned approximately 7% after adjusting for inflation, if we take into account the entire history of the US stock market.
Sure, I get it, when I cherry pick dates its "irrelevant" but when you do it you're making a point. But you missed the point I was making, namely, that the returns one realizes is the stock market depend greatly on one's entry and exit points regardless of the average over decades.
But what the stock market has returned doesn't tell you what it will return. Your simply gambling that this will occur, yet you think people that rely on pensions are being foolish.
historically diversified equities have always made money over 15 year periods or longer. in fact long term they HAVE been the safest investment. if thats gambling then call me a gambler because that was the surest bet every long term time frame over and over.
in fact more than likely the gamble would be betting against that happening.
there is no doubt i would sooner plan around what was ,what is and what stands a good chance of continuing then betting against equities not making money long term..
but what i do look at with a question is just what those returns will be going forward.
the averages we had in the past i think are gone and the next decade will see much slower growth . it is always easy for stocks to retrace where they were before a fall and it appears everything is going to be great going forward from the big gains in a retrace and we get fooled by it.
it took 30 years to get interest rates to reach these levels and the trip back can take a decade.
dividends and interest rates track each other pretty much. with rates so low and dividend yields quite low , with a sluggish economy i see gains at 7-8% used in projections being far to optomistic. with dividends accounting for 1/3 of all the gains in the s&p and dow the outlook is dim for a reason.
i think we may be looking at real returns in the 2-3% range .
there are many reasons this will likely be the case including the fact we are no longer the worlds prom queen when it comes to investing as we were through history.
most folks also do not stay 100% equities either for their entire lives so projecting 8% returns based on what markets did is not how real life plays out.
in real life by the time folks actually reach retirement they have already started to cut back allocations to equities as a normal reaction.
a more realistic projection may have numbers crunced with equities reduced the last 5-7 years approaching retirement.
Last edited by mathjak107; 07-06-2014 at 05:03 AM..
The recent present hasn't been all that bad either. Since 2008 my 401k balance has increased by a factor of over 8.5: this includes maxing the IRS limit each year, company match, and reinvestment of dividends. I guess I could've kept my money in a CD.
i agree , new money put in has grown nicely. i did max out our 401k's, iras, as well as re-invested money from our real estate sales and it has grown beautifully since 2009 .
but i am also concerned about the much greater sum that sat pretty much idle just retracing back to where it was more than a decade prior. my bonds have had fantastic capital gains and still are so they ran with the ball but the equities side of things basically sucked on all older money that you accumulated.
at this point i already stopped working full time as of this week and have started my early retirement exit strategy. my portfolio will be our main means of support going forward within a year.
this time frame is crucial , as where go markets the first 5 years can determine where goes your entire retirement.
if we have 5 bad years of bad sequences it can cause you to do severe damage to the goose laying those golden eggs by having to spend excessive amouns down before developing a cushion against the withdrawal rate..
i think it would be prudent to plan around lower returns in the near future and perhaps even plan around the fact they may run lower for many years to come.
there is no better feeling than planning around the worst case and getting up side surprises.
it sure beats planning around what was and coming up short.
Last edited by mathjak107; 07-06-2014 at 05:17 AM..
historically diversified equities have always made money over 15 year periods or longer. in fact long term they HAVE been the safest investment. if thats gambling then call me a gambler because that was the surest bet every long term time frame over and over.
Stocks have never been the "safest investment", you cannot judge risk by looking into the past. And yes its certainly a gamble, a gamble that the future is going to resemble the past. There is no reason why equities need to perform in the future as they have in the past. And, in fact, the factors that inflated US equities since the 1950's are unlikely to occur again.........but anything is possible.
People have such amazing faith in the US equities markets, yet have no faith in social security and pensions. Its pretty funny. I'd much rather have a pension than rely on private retirement accounts. 401(k), IRA, etc are great for saving a little extra for retirement but are a very poor vehicle for primary retirement savings.
Stocks have never been the "safest investment", you cannot judge risk by looking into the past. And yes its certainly a gamble, a gamble that the future is going to resemble the past. There is no reason why equities need to perform in the future as they have in the past. And, in fact, the factors that inflated US equities since the 1950's are unlikely to occur again.........but anything is possible.
People have such amazing faith in the US equities markets, yet have no faith in social security and pensions. Its pretty funny. I'd much rather have a pension than rely on private retirement accounts. 401(k), IRA, etc are great for saving a little extra for retirement but are a very poor vehicle for primary retirement savings.
If you can't look at history how are you going to make calls on the risk?
If you can't look at history how are you going to make calls on the risk?
You can look at history, but when you do so you're speculating that the future will resemble the past. Its strange, I think, that people think such speculations are more legitimate than other market speculations.
You can look at history, but when you do so you're speculating that the future will resemble the past. Its strange, I think, that people think such speculations are more legitimate than other market speculations.
Past performance isn't an indicator of future results. How are you basing your opinion the safety of equities?
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
