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in the long run for most of history, once inflation and taxes were taken in to consideration cds were the riskiest and more often then not a loss in purchasing power over time and a negative real return
Cd's were paying good in 2000 and nobody wanted them because they believed dot com stocks would only go up. We know how that turned out.
In general, Cd's are bad because of reinvestment risk, poor returns, as well as the fact that many of them call-able. It's why I prefer long duration bonds, because the returns are better.
But we're in a similar setup to 2000, with most asset classes at high valuations. And most people don't have the mentality to buy/sell stocks in a proper fashion. So buying Cd's is the best thing for most people. A lot of the public isn't invested in anything, and doesn't know how to. But they usually have a bank, and Cd's are their best option.
Cd's were paying good in 2000 and nobody wanted them because they believed dot com stocks would only go up. We know how that turned out.
In general, Cd's are bad because of reinvestment risk, poor returns, as well as the fact that many of them call-able. It's why I prefer long duration bonds, because the returns are better.
But we're in a similar setup to 2000, with most asset classes at high valuations. And most people don't have the mentality to buy/sell stocks in a proper fashion. So buying Cd's is the best thing for most people. A lot of the public isn't invested in anything, and doesn't know how to. But they usually have a bank, and Cd's are their best option.
i don’t see high valuations a big deal …that is only one parameter
we are seeing a lot of positive things as well
Notably, rising wages, falling inflation, low unemployment and an otherwise stronger-than-expected economy have lifted the Conference Board’sConsumer Confidence Index to a two-year high.
And, importantly, there’s the so- called wealth effect. With the S&P 500 back in record territory, recovering financial markets have Americans feeling more financially confident. The most optimistic are those age 55-plus. Indeed, that demographic controls 74% of U.S. investable assets.
when investors feel confident and have extra money to invest, their behavior morphs: they tend to put more of it into riskier asset classes.
Most recently, billions of dollars have flowed into newly launched bitcoin ETFs.
But historically, a better confidence rating has resulted in larger asset flows into high-yield bonds, gold, and foreign funds, including the emerging markets as money gets more aggressive as well as equities over all.
so lots of other stuff showing more positive
Last edited by mathjak107; 02-02-2024 at 07:37 AM..
I heavily disagree with valuations not mattering. Buying and holding an index when valuations are poor leads to muted returns over many decades. Whereas if you buy in when valuations are cheap, your returns are magnified greatly. In general, it takes about 20 years for an overvaluation to correct.
Positive or negative economic news could be a complete distraction; in 2001 you had the mildest recession ever on record and the nasdaq still plunged really hard.
While buy-and-hold outperforms most everything as a strategy, valuations do matter, and ideally you are buying-and-holding things that are not grossly overvalued.
I heavily disagree with valuations not mattering. Buying and holding an index when valuations are poor leads to muted returns over many decades. Whereas if you buy in when valuations are cheap, your returns are magnified greatly. In general, it takes about 20 years for an overvaluation to correct.
Positive or negative economic news could be a complete distraction; in 2001 you had the mildest recession ever on record and the nasdaq still plunged really hard.
While buy-and-hold outperforms most everything as a strategy, valuations do matter, and ideally you are buying-and-holding things that are not grossly overvalued.
May I suggest a book for you to read? "Investing Amid Low Expected Returns: Making the Most When Markets Offer the Least".
Of course, high current valuations imply lower expected returns going forward.
I heavily disagree with valuations not mattering. Buying and holding an index when valuations are poor leads to muted returns over many decades. Whereas if you buy in when valuations are cheap, your returns are magnified greatly. In general, it takes about 20 years for an overvaluation to correct.
Positive or negative economic news could be a complete distraction; in 2001 you had the mildest recession ever on record and the nasdaq still plunged really hard.
While buy-and-hold outperforms most everything as a strategy, valuations do matter, and ideally you are buying-and-holding things that are not grossly overvalued.
i didn’t say they don’t matter , i said they are only one parameter that goes in the process .
like fund expenses matter but they don’t decide what beats what by themselves
“. My point here is we in the investment community, myself included, probably pay way too much attention to valuations.
Understanding financial market history is absolutely a prerequisite when it comes to investment success.
But becoming a slave to the data can become a liability if you don’t put it into context.
The funny thing is those historical averages we now use for comparison purposes were completely unknown to 99% of investors who came before us in the stock market.
They either didn’t have the data or the knowledge or care to understand such fundamentals. Knowing about valuations has probably lost more people money over the years than it’s made them.
I’m not saying valuations don’t matter at all. They probably matter for individual stocks more than the overall market but valuations do matter at the extremes (like 1999 for instance).
It’s just that markets rarely get to the extremes. Most of the time we’re somewhere in the middle of insanely cheap and insanely expensive.
People pay way too much attention to valuations at the stock market level.”
I heavily disagree with valuations not mattering. Buying and holding an index when valuations are poor leads to muted returns over many decades.
Show me an example where stocks had muted returns "over many decades"
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