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interest rates can run very long cycles . it took us 40 years to complete this cycle down . it can take decades going back as well.
market cycles have been much quicker and dependable . as i said we never went 15 years with out a new high at some point .
locking in at 2.50% on a 5 year cd vs at least having open ended returns in a balanced fund is in my opinion the better choice if you want your money to grow .
5 Year CDs are about 2.30% - 2.5% right now across the country, 10 year ones are going for 3% if you dig deeper. When the Fed increases the rate (which will happen within the next year, I'm certain of it) 5 year CDs will go back to over 3% and 10 year ones should be nearing 4%. By 2018, I believe all Long Term CDs will average about 4%.
Throughout this time, the Stock Market will be experiencing a major correction as it depreciates like hell as the hot air is being let out of the balloon that's been pumped up for the last couple of years.
I found it!! I found it!!! Its real. The mythical-investing-crystal-ball is real. It's in jotucker99s closet .
Whether the long term CDs are @ 4% by 2018 is a wild-guess @ best. What do you think the fed is going too if it turns out that raising rates leads us or is leading us into another recession? Continue to raise the rates?
[quote=jotucker99;40918223]Any credible Economist will tell you that the Stock Market is extremely pricey and over-valued right now, due PRIMARILY to the Fed. But the Fed can't do anything else going forward, it's done everything it can do, so Stocks have no where else to go but down. Lol, this is common sense but Mr. I'm So Smart can't see this, but me (you know, the non-educated simpleton) can see this clearly.[quote]
While the market 'seems' overvalued when I look @ S&P500s price-to-book value its currently just below its median value. The max PB value of SP has been 5.06. Its currently @ 2.7. Going by history (remember history always repeats - whether good or bad) we still could go way higher.
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Originally Posted by jotucker99
Plus understand, once again, you said you can only track the value of the investments over at least 15 years. That's what you said. So I showed you a Balanced Stock/Bond Index Fund and it's compounding rate of return performance over the previous 15 years v.s. that of Long Term CDs over 15 years. I took YOUR MANTRA and presented it TO YOU with full detail, resources and references. And it showed that the Balanced Fund only beat the Long Term CDs (compounding) by 1% - 2% which is not worth the roller coaster ride.
No body is putting a gun to your head & forcing you to invest to get that 1-2% extra but why are you so against somebody whose comfortable in taking that risk.
So, what's your ultimate argument? CDs are better than investing in the market. So, be it. I can only assume that most of us will be happy to let you win the argument.
I don't know if you saw it yesterday before the posts were deleted by a moderator. I had apologized to you and realized I was apply bond functionality to CDs and thus I was wrong the entire time so I'm the event you didn't see it, I apologize I wasn't attempting to troll
To your question though balanced fund vs long term CDs. You are guessingm at the future long term 5% just as you criticized the equity team for but let's assume is 5% vs 6-7%
That simple 1-2% more is 20-40% higher annually which leads to 25.5%-58.8% better end result
Your calculations are totally off here. You have the average rate of return and then you have the average compounding rate of return based on that average rate.
So if you are talking 5% v.s. 7%, the CDs would have an average of 5% per year for the duration (let's say 15 years) in relation to compounding, and the Balanced Fund would have 7% per year for the duration in relation to compounding.
So in terms of $100k invested for 15 years with the CDs at 5% average compounding, you have the following:
Results Summary
Starting amount $100,000.00
Years 15 years.
Additional contributions $0.00 per year
Rate of return 5% compounded annually
Total amount you will have contributed $100,000.00
Total interest $107,892.83
Total at end of investment $207,892.83
Read more: Compound Savings Calculator
In terms of $100k invested for 15 years within the Balanced Fund, the average compounding rate should have that $100k growing to $275,903 after 15 years.
So you have a difference of about $68,000 or $4,500 a year for the 15 years.
Now, to each their own, but to Tucker99, that additional $68,000 over 15 years isn't worth the headaches. I will take the 5% and go home.
Your calculations are totally off here. You have the average rate of return and then you have the average compounding rate of return based on that average rate.
So if you are talking 5% v.s. 7%, the CDs would have an average of 5% per year for the duration (let's say 15 years) in relation to compounding, and the Balanced Fund would have 7% per year for the duration in relation to compounding.
So in terms of $100k invested for 15 years with the CDs at 5% average compounding, you have the following:
Results Summary
Starting amount $100,000.00
Years 15 years.
Additional contributions $0.00 per year
Rate of return 5% compounded annually
Total amount you will have contributed $100,000.00
Total interest $107,892.83
Total at end of investment $207,892.83
Read more: Compound Savings Calculator
In terms of $100k invested for 15 years within the Balanced Fund, the average compounding rate should have that $100k growing to $275,903 after 15 years.
So you have a difference of about $68,000 or $4,500 a year for the 15 years.
Now, to each their own, but to Tucker99, that additional $68,000 over 15 years isn't worth the headaches. I will take the 5% and go home.
Compounding just made your example worse 207k vs 275k the difference is 32%, it may not be worth it to you but it's clear that the difference between 5% and 6% is a big deal over the long term, 7% makes it even worse
I found it!! I found it!!! Its real. The mythical-investing-crystal-ball is real. It's in jotucker99s closet .
So wait a minute, are you saying we shouldn't attempt to make predictions in investing? If so, why do you guys use your past performance reports to make "predictions" in investing? Do you have a crystal ball too lol?
Quote:
Whether the long term CDs are @ 4% by 2018 is a wild-guess @ best.
And whether or not the Markets will turn out the save average rate of return and compounding rate of return over the next 20 years like they did over the previous 20 years, is a wild guess at best. But you guys say that past performance predicts future performance, correct? Okay, so if you can use past reports for your Stock/Bond Market Funds, why can't I use it for Long Term CDs ?
Quote:
What do you think the fed is going too if it turns out that raising rates leads us or is leading us into another recession? Continue to raise the rates?
Put it like this, in trying to "stimulate" the economy, all the Fed has done is created two new bubbles which is the Stock Market Bubble and a Low Interest Rate Bubble. Both of which cannot continue forever but the Fed is operating like they can continue forever. Also understand, the Fed is OUT OF PLAYS. They have put just about everything on the table already that they can put on the table, so if we get into another Recession right now, there's literally nothing they can do "for the most part" as they have done everything.
Quote:
While the market 'seems' overvalued when I look @ S&P500s price-to-book value its currently just below its median value. The max PB value of SP has been 5.06. Its currently @ 2.7. Going by history (remember history always repeats - whether good or bad) we still could go way higher.
Read my response above in relation to history repeating itself, because you guys want to use that to support your theory on "invest in the Markets" but seemingly for other investments like Long Term CDs, one isn't supposed to use that lol? Talk about cherry-picking your data.
Stocks are over-valued due to primarily to actions of the Fed. Think for a minute, Savers in the Bank and people who use SHORT TERM CDs, aren't getting anything right now in terms of interest. What are the "Financial Advisers" telling them all to do? That's right, they are telling them to get off the sideways and get in on this "awesome market we have"!
When the market starts to tank, the Fed has increased rates, and CDs are back to where they were prior to the rates falling to the floor, who do you think is going to be the first to LEAVE the market?
That's what a Bubble is, it's creating a situation where you have more people than not, running into a particular sector. It's why there's a College Bubble as well.
Quote:
No body is putting a gun to your head & forcing you to invest to get that 1-2% extra but why are you so against somebody whose comfortable in taking that risk. So, what's your ultimate argument? CDs are better than investing in the market. So, be it. I can only assume that most of us will be happy to let you win the argument.
No, no, I'm not against anybody doing whatever they do. The question is why are you guys against me for NOT getting into the Market? Remember, it was YOU GUYS that continued to state I would starve in retirement, be homeless on the street and living off EBT food stamps if I didn't invest in the S&P. You guys said that lol.
Now that I have broken down the FACTS of the case, now you guys are quiet, very quiet.......
Compounding just made your example worse 207k vs 275k the difference is 32%, it may not be worth it to you but it's clear that the difference between 5% and 6% is a big deal over the long term, 7% makes it even worse
What in the world kind of math is this? For someone that keeps throwing out how "ignorant" someone else is, you keep throwing out these weird numbers. Where are you getting 8% compounding from?
Listen, we don't have to debate based on guesses or opinions, we have reports and calculators sir.
Since August 1976 it's did an AVERAGE ANNUAL RETURN of 10.99%. You see that? The compounding rate of return usually comes out to be about 1.% - 1.5% (at least) lower than this amount.
Another way, using this calculator here: CAGR of the Stock Market: Annualized Returns of the S&P 500 just plug in the time period we are discussing which is January 1993 until December 2013, average annual return for the S&P is 11.11%, but the compounding rate is 9.26%. They provide an example saying that $1.00 starting over this period of time grows to about $6.43 at the end.
You can further confirm this 9.26% compounding rate by just checking it in another calculator, Compound Savings Calculator, enter in $1.00 starting, 21 years, 9.26% rate of return, click on VIEW REPORT, you get the same $6.40 range amount like money chimp got.
You see the AVERAGE RATE OF RETURN since 1994 is 7.80%, right? It's reasonable to assume the CAGR will come down to about the 6% range for this Fund over that period of time since 1994.
Which means (based on the calculator) $1.00 invested at the start of the Fund, would be worth about $3.40 today.
You don't have to take my opinion on it, the calculators are right there.
When it comes down to it, for ME, it's not worth investing in the Balanced Fund to get an additional 1% - 2% return per year over the period of time v.s. the Long Term CDs. For someone else, maybe they think it's worth it.
But my point was to bring this analysis to the forefront because nobody (and I mean NOBODY) on this Investing Community Forum has brought ANY of this information up EVER. Scroll through the history, NOBODY has said anything about the things I'm bringing up.
Plus, I was the first to even start discussing CAGR in a major fashion, everybody else (in terms of Market performance) has always pointed to the Average Rate of Return rather than the Compounding Rate.
Lol, this is why I call you guys The MathJak Team. You see that his numbers are totally off, but yet because he's always defending you on here, you refuse to call him out on it.
And why is his time wasted? Is it because I have posted FACTS, resources, reports, links, charts, and analysis and you have literally no comeback to it lol?
What in the world kind of math is this? For someone that keeps throwing out how "ignorant" someone else is, you keep throwing out these weird numbers. Where are you getting 8% compounding from?
Listen, we don't have to debate based on guesses or opinions, we have reports and calculators sir.
Since August 1976 it's did an AVERAGE ANNUAL RETURN of 10.99%. You see that? The compounding rate of return usually comes out to be about 1.% - 1.5% (at least) lower than this amount.
Another way, using this calculator here: CAGR of the Stock Market: Annualized Returns of the S&P 500 just plug in the time period we are discussing which is January 1993 until December 2013, average annual return for the S&P is 11.11%, but the compounding rate is 9.26%. They provide an example saying that $1.00 starting over this period of time grows to about $6.43 at the end.
You can further confirm this 9.26% compounding rate by just checking it in another calculator, Compound Savings Calculator, enter in $1.00 starting, 21 years, 9.26% rate of return, click on VIEW REPORT, you get the same $6.40 range amount like money chimp got.
You see the AVERAGE RATE OF RETURN since 1994 is 7.80%, right? It's reasonable to assume the CAGR will come down to about the 6% range for this Fund over that period of time since 1994.
Which means (based on the calculator) $1.00 invested at the start of the Fund, would be worth about $3.40 today.
You don't have to take my opinion on it, the calculators are right there.
When it comes down to it, for ME, it's not worth investing in the Balanced Fund to get an additional 1% - 2% return per year over the period of time v.s. the Long Term CDs. For someone else, maybe they think it's worth it.
But my point was to bring this analysis to the forefront because nobody (and I mean NOBODY) on this Investing Community Forum has brought ANY of this information up EVER. Scroll through the history, NOBODY has said anything about the things I'm bringing up.
Plus, I was the first to even start discussing CAGR in a major fashion, everybody else (in terms of Market performance) has always pointed to the Average Rate of Return rather than the Compounding Rate.
What don't you understand about te difference in 5% return annually for 30 years and 6-7%? It's substantial and you keep trying to downplay it
Lol, this is why I call you guys The MathJak Team. You see that his numbers are totally off, but yet because he's always defending you on here, you refuse to call him out on it.
And why is his time wasted? Is it because I have posted FACTS, resources, reports, links, charts, and analysis and you have literally no comeback to it lol?
Facts aren't applying a magic 1-1.5% reduction in returns to create a compounding rate or cagr
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