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I heard that the first time and understand that. Florida never brought that up as a reason. We were debating inflation because the poster brought it up....for the 4th time.
Quote:
Originally Posted by Florida2014
I'm not following you. If I'm holding a stock or stocks plural for 20 years why would I care what inflation is doing in year 2, 4, or 7? I'm not selling the stock then so it's simply on paper until the stock or stocks are sold. Whereas you buy and sell a CD in 6 months and actually regain access to those (inflation depleted) funds, it has a real, immediate effect because inflation is likely still at that inflated level. Are you saying if I buy $10,000 worth of IBM in year 2000 and sell it in 2020 for $25,000 that the inflation in 2004 had an effect on that return more so than if I bought and sold a CD in 2000?
True....but with stocks, it sometimes depends on when you invested too....
for example, take that IBM stock you mentioned ....if you bought IBM stock 10 or 11 years ago, 2012-2013.....a decade ago, which is a good length of time....you would still be a "loser".....IBM stock was in the 180-190 range back then...now only about 136.....so holding over a decade and you made no money....in fact you lost money....
yeah, stocks can do that....they are not all sure fired winners.....I've had some sh*tty stocks that I never made a dime on and kept them for way too long....in those cases a CD is looking pretty good...."bird in the hand" type of thing.....but what makes stocks enticing is you can sometimes get a huge winner ...."a ten bagger" ....
If you could have locked in that rate for 10,20 or 30 years
You can do that using zero-coupon bonds. A. Gary Shilling pounded the table for zeros for decades. A web search will no doubt dredge up some articles from the past. I haven't kept up with him since I dropped my subscription to Forbes Magazine.
I believe the investor who kept money in long-dated zeros outperformed the S&P 500 from the early 80s through the beginning of COVID, so almost 40 years. That's before taxes, though, so would only apply in an IRA or other similar account.
I've heard about how CD's used to be above 10%. My question is why would there be any money in the stock market at these rates considering CD's are almost no risk? Even at 5% now they're looking tempting over stocks.
Let's put it this way
In 1972 buy Wal Mart for $0.05
In 1982 buy Wal Mart for $0.33
Today sell Wal Mart for $158.76
Not counting any dividend paid along the way PER SHARE.
There is always someone looking for the next Wal Mart.
To have a diversified portfolio always need some stock. Whether you hold 60% or 40% or some other number is an open question.
My question was referencing CD rates at 10+% decades ago when I thought they exceeded average stock market gains.I’m not trying to say they are currently a better long term investment compared to equities.
So your question is why would a person make a certain decision not knowing the outcomes but you only question it after you know the outcomes?
I’ll repeat it a 4th time to you. The return on stocks during periods where CD’s were paying 10% were much higher than 10%, making CD’s less attractive.
Just curious, but do you have any proof to back up this claim? Because the data I'm seeing shows no correlation between CD rates and stock market returns. CD rates were very high throughout the 1970's and early 1980's, while stock market performance was very poor. CD rates declined steadily from the 1980's to the 2010's, while stock market performance was very strong most of those years. Until recently, CD rates have been near zero for more than a decade, while stock market performance was amazing. CD rates are correlated to inflation rates and interest rates, not to stock market returns.
I can provide you with a link below that illustrates this point.
My question was referencing CD rates at 10+% decades ago when I thought they exceeded average stock market gains.I’m not trying to say they are currently a better long term investment compared to equities.
I think the simple answer is that nobody can predict the future. CD rates are temporary and rarely stay above 10% for very long historically. If you buy a 12-month CD yielding 10% today, you are gambling that the S&P 500 will yield less than 10% during those 12 months. Whether your gamble pays off or not, you are forced to re-invest at the end of the 12-months either by rolling into new CD's or cashing out, resulting in a taxable event. CD rates fluctuate and may decline by then forcing you back into the stock market with diminished capital relative to where you would have been had you just purchased stocks to begin with and held them throughout.
I've heard about how CD's used to be above 10%. My question is why would there be any money in the stock market at these rates considering CD's are almost no risk? Even at 5% now they're looking tempting over stocks.
CDs are short-term investments and should be part of your savings package but only if the return is good. I owned CDs during that time but for me, they came in handy as an alternative to the high interest rates of 12% or more for a car loan.
I used my CDs as collateral and paid 2% over the interest that I received.
CDs are short-term investments and should be part of your savings package but only if the return is good. I owned CDs during that time but for me, they came in handy as an alternative to the high interest rates of 12% or more for a car loan.
I used my CDs as collateral and paid 2% over the interest that I received.
In the early 70's we did the same thing with our savings account at the bank. Never had to withdraw anything and just borrowed against it. A lot of ways of doing business and making money have changed in 50+ years but most remain the same. CDs are good for my situation, maybe it's not for others but I'm happy they're there for short term gains. Beats the rate traditional saving accounts are paying.
So your question is why would a person make a certain decision not knowing the outcomes but you only question it after you know the outcomes?
Spot on. It's like asking why would anyone not buy Amazon at its IPO?? Couldn't they have seen they'd move away from bookselling into this giant online retailer dominating the online retail space with the stock soaring into the thousands? Same premise with the CD question. There is always hope to outperform something stable and low-earning, which is why there will always be stock speculators/investors.
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