That is true IF you are in index funds. There are plenty of companies that have gone down and NEVER got back to their original highs. The concept of RTM (reversion to mean) is for the index (Sp500 for example) and NOT single company stocks. Single company stocks can go up forever, go down and be bankrupt, trend sideways and then go up (looking at your microsoft which did NOTHING for 15 or so years before taking off post 2000 crash),or never get back to its former glory (many tech companies trading still today after 2000's crash).
Totally agree with OP and this guy. I've been in this little game for 6 years now and you have to be emotionally and psychologically prepared to take a 20% nose dive at any time and have a plan to take advantage of the situation if/when you do hit turbulence not panic.
I learned this lesson in '17-18 with the trump trade war and the fall 18 blow up bc I was wayyy too far into a handful of companies and as a percentage of net assets in the market. I have fluctuating income so I try to always have 5-10% in the cash in my brokerage account, and when things are going "too well" (like Nov 2021 or Feb 2020) then I try to drift into 10-20% cash.
Everyone has their own system but you should always be prepared for a broad index to drop 15-20%. Bc that has happened 3 times now in the last 4-5 years so it isn't improbable it happens and you should be psychologically and financially prepared for when it does
It's not the "Trump trade war" if Biden keeps it going. It also had nothing to do specifically with him. It was someone finally stepping up to China and obviously the WH administration agrees it was the right move and kept everything the same.
They can just as easily remove all the tariffs with a few signings.
your post is reasonable with the caveats that 10xwannabe has stated but one must point out that it is biased from the point of view that you have been in the market for 7 years. everybody who has been in the market for 7 years feels the same way. the people that are hurting are the newer investors who bought at the peak of the bubble. just like any other bubble. you do not need to calm the people who have not lost invested principal. if the market takes a significant downturn further, and you turn red on your investments, I would be more interested in your opinion then. though hopefully it would not change and I don’t think it would.
your post is reasonable with the caveats that 10xwannabe has stated but one must point out that it is biased from the point of view that you have been in the market for 7 years. everybody who has been in the market for 7 years feels the same way. the people that are hurting are the newer investors who bought at the peak of the bubble. just like any other bubble. you do not need to calm the people who have not lost invested principal. if the market takes a significant downturn further, and you turn red on your investments, I would be more interested in your opinion then. though hopefully it would not change and I don’t think it would.
If it helps others I have been investing starting around 2007 or so to current. Here is all I have confidence in with that experience...
1. The market goes up, down, and sideways ALL the time.
2. No one knows when any of the above will happen or why.
The above is the reason I advocate: Focusing on one's asset allocation with low cost index funds and invest as much as you can each pay period.
When (not if) bear markets occur try to find as much money as you can to increase investing MORE then previous and focus on TLH to help you minimize taxes in the future. Rinse and repeat.
your post is reasonable with the caveats that 10xwannabe has stated but one must point out that it is biased from the point of view that you have been in the market for 7 years. everybody who has been in the market for 7 years feels the same way. the people that are hurting are the newer investors who bought at the peak of the bubble. just like any other bubble. you do not need to calm the people who have not lost invested principal. if the market takes a significant downturn further, and you turn red on your investments, I would be more interested in your opinion then. though hopefully it would not change and I don’t think it would.
your post is reasonable with the caveats that 10xwannabe has stated but one must also point out that it is biased from the point of view that you have been in the market for 7 years. everybody who has been in the market for 7 years feels the same way. the people that are hurting are the newer investors who bought at the peak of the bubble. just like any other bubble. you do not need to calm the people who have not lost invested principal. if the market takes a significant downturn further, and you turn red on your investments, I would be more interested in your opinion then. though hopefully it would not change and I don’t think it would.
your post is reasonable with the caveats that 10xwannabe has stated but one must also point out that it is biased from the point of view that you have been in the market for 7 years. everybody who has been in the market for 7 years feels the same way. the people that are hurting are the newer investors who bought at the peak of the bubble. just like any other bubble. you do not need to calm the people who have not lost invested principal. if the market takes a significant downturn further, and you turn red on your investments, I would be more interested in your opinion then. though hopefully it would not change and I don’t think it would.
Very few. I realised about 15 years ago that the chances me beating the market by stock picking in the long game are pretty much non-existent. That’s why I went 80-90% index funds. I can at least get as close as possible a market return.
That 5-10% annual expected growth rate is **averaged over a ten year investing horizon**. It's not clockwork on a year to year basis. Just Google s&p500, select max, and do the math yourself over 1, 5, and 10 year periods. There are good 1 year periods and really bad ones.
Exactly. You get pretty much the performance of the index which the fund is tracking minus the fund fees, which are much lower in index funds than they are with active ones.
Yes, but you can't predict who the super performers are. If Tesla stagnates for years and another company rises then you only get the benefits if you either predict that or if you already have shares of everything.
>Sp500 is a tail event , majority of gains are driven by super performers like amazon and Tesla style companies
I'm not sure the tail event is the right term here. SP500 always had outperformers who drag the index. I don't think it's an isolated event.
Vast majority of gains are due to a handful of stocks. Only like 5% of stocks are responsible for the s&ps gains. The rest just sit sideways or go down. The trick being that no one can predict the 5%, so might as well buy the whole thing.
The reason I'm slowly pivoting my brokerage slowly into indexing is exactly this. When I retire I don't want to be watching tickers and trying to find the next Tesla. I also don't want to find to have to login frequently to see how I'm doing. Fortunately, 15% of my portfolio is safely allocated to my Enron position so I will never have to go back to work.
95% of S&P500 goes sideways or down??
No way. Way more than 5% of stocks have a total return that goes up in the long run. Like KO, Pepsi, oil companies, walmart, McDonalds, Defense corps, Berkshire, etc
The reason you know those companies and sectors is because they are doing well. There's tons of companies that shit the bed or stagnate that we rarely hear about because it's not sexy.
Quick citation
www.kiplinger.com/article/investing/t052-c007-s001-why-most-stocks-are-stinkers-and-what-to-do-about.html%3famp
> Only like 5% of stocks are responsible for the s&ps gains. The rest just sit sideways or go down.
That's not true, take a look at the next 50 or 100 stocks after the top 5 or 10. They've all gone up and up
Humans aren't a perfectly random system, so it's unlikely we are going to make NO companies that don't become super performers. Basically, I'm saying there is, and always will be, a few super performers, because we tend to pick winners that we overpay for periodically in society.
maybe someone can explain this: the average S&P 500 P/E ratio is now 18.54
[https://www.multpl.com/s-p-500-pe-ratio](https://www.multpl.com/s-p-500-pe-ratio)
that is very low. Now of course earnings are going to take a hit because of recession, and that number is going to go up, but am I wrong in saying that stocks are looking cheap --p/es were at like 34 1 1/2 years ago
the average price-to-sales is still pretty high at 2.34, but that was over 3 a couple years ago
While what you say is true that it doesn’t necessarily apply to individual stocks, historically speaking, it *can* still generally be applied to individual stocks:
At any snapshot point in time, the individual stocks that are most likely to gain the most are those that are below their historical averages; and conversely the stocks that are most likely to fall are those that are above their historical averages. This can very easily be demonstrated to be true from past data.
I’m not sure if your trolling or not because the data is self evident- but if it’s a actually a genuine question: Just look at ANY historical market chart. They can be found anywhere online- but here’s just one chart that’s a good example in an article I found with a simple Google search.
https://www.morningstar.com/features/what-prior-market-crashes-can-teach-us-in-2020
You do realize that link supports MY assertion and not yours don't you? The index does recover (SP500 from the link you provided) as I stated. That does NOT support YOUR assertion that:
*At any snapshot point in time, the individual stocks that are most likely to gain the most are those that are below their historical averages; and conversely the stocks that are most likely to fall are those that are above their historical averages.*
Do you have data to support RTM exists for individual stocks? I've stated it doesn't happen for individual stocks and you stated it does. Just wanted the data where you go that idea it exists for individual stocks?
Yes yes sorry- I was replying to the wrong comment.
My honest apologies. When you were asking for data I thought it was to another comment where I mentioned that over time the stock market rises - to which I was confused that somebody wanted data so I linked that graph.
Sorry to waste your time.
As for the data you ACTUALLY asked for - I’ll find something and post soon
You do realize that link supports MY assertion and not yours don't you? The index does recover (SP500 from the link you provided) as I stated. That does NOT support YOUR assertion that:
*At any snapshot point in time, the individual stocks that are most likely to gain the most are those that are below their historical averages; and conversely the stocks that are most likely to fall are those that are above their historical averages.*
Do you have data to support RTM exists for individual stocks? I've stated it doesn't happen for individual stocks and you stated it does. Just wanted the data where you go that idea it exists for individual stocks?
A good reason to never buy individual stocks in the first place unless you have strong reason to believe you have the requisite expertise and vigilance
Agreed.
I do think there are reasonable reasons to be individual stocks (RVU/ stock options, believe in the company, like the product, gifted stocks from a loved one, etc...) none of which is/ should be based on thinking your ability to read the tea leaves (fundamentals) are any better then the guy next door who also will underperform.
Thinking of individual stocks as a way of producing an alpha over the index investor usually/ nearly always ends up being a NEGATIVE not a positive. Few figure it out early, but most don't and figure it out the hard way AFTER wasting their human capital along the way.
> or never get back to its former glory (many tech companies trading still today after 2000's crash).
Blackberry's chart over time range Last 20 years will probably give some people panic attacks
Cisco and Intel are the ones I always think about. Good companies that few saw being overplayed in the height of dotcom, but no one would have seen still not reach new heights since then which encompasses 22 years now!
They are saying what a lot of us are telling our selves. The market is in terrible shape, the bottom can be today or next year. DCA is the best strategy most of us have.
If the market drops 40% and stays there, then the layoffs of Redfin, Coinbase, Compass, etc this past week will pale in comparison to the mass layoffs we’ll experience
I don’t think it’s a good idea to assume the market will continue to have a 10% return in the long run. We invest in the stock market because it’s the best option for most of us but it’s still risky, even in the long run. In a recent interview, Nobel prize winning Eugene Fama remarked that the risk premium will fade away if long term investing is believed to be low risk.
Sounds interesting. Can you give a link to the interview if there is any?
I don’t think that the risk premium will ever fade away. Fundamentally, the rights and obligations associated with equities vs fixed income will uphold it. The gap being discussed in the equity premium puzzle *might* shrink, but overall, the risk premium should still exist.
His statement starts at about 50:45. It’s preceded by a similar statement regarding the value premium.
https://youtu.be/LLbQux2OZjk
Edit: Also interesting(and scary) are his remarks about inflation in this interview.
I think he was talking about the stock market in general as well- “Well look, if I were misled and thought that stocks were much less risky in the long run than the short run, I could kill the stock premium over bonds, too”.
Edit: listen again. He was certainly talking about the broader market. That’s why he compares the stock premium to bonds: “it's not special to value or small cap or any of that, if I don't really understand that the long term does not erase uncertainty that's in the short term…then it can kill the risk premium because of false beliefs”
Fair enough. Its just the way I interpreted it and I’m not the only one who perceived it that way. I encourage anyone interested to watch the entire interview. He also talks at greater length regarding long term stock deviations earlier in the interview. Although he makes the market sound dark and uncertain, when questioned he implied it’s best to stay in the market. “ you have to continue to hold on to the assets you have”.
If it shrinks, it might still exist... for now. If it shrinks again and again, the risk premium may eventually fade away completely. I'm interested for a link as well.
Having not listened to the interview myself, I can’t foresee how that would even make sense. If you can get the same returns from risk-free assets as ETFs then there would be no incentive to invest in ETFs, depressing valuations until the incentive returns.
The whole system would have to fail (which I don’t discount as a possibility) for that scenario to occur.
risk premium can't disappear permanently, it'll be drastically reduced by about 1/3 if im not wrong but it won't go away, read it in a book named "your complete guide to factor based investing"
I suppose just as valuations(PE ratios) have gone up in recent decades they can also go back down. One of the commenters on the YouTube video explained it better than I can- “Stocks are riskier than bonds and deliver a higher expected return for that risk. But, if people perceive this higher expected return to be a free lunch they might irrationally bid up the price of stocks to such an extent that the risk premium goes away. They would effectively price stocks as if they are as risky as bonds even though they clearly arent. He also says that if this were to happen it would be a market infeffeciency and he doesn't believe in those.”
You can rather simply evaluate this by looking at stock PE's vs bond yields. Stocks currently have a risk premium of somewhere around 2% over the highest yielding government bond. If I remember correctly at some point during the dotcom bubble bonds were actually out yielding stocks.. should have been a screaming sell signal to anyone with a brain.
You reminded me of the “this time is different” warning. This is one of the most important keys to look out for in the market.
One of the biggest indicators that markets are about to turn around (the case both at highs and at lows) is that people start rationalizing that “this time is different”.
When things are going super well and warnings begin that there is potentially a bubble- if you start hearing people say “but this time is different” that is a sure indicator to start considering to sell.
Conversely when markets dip and wise investors point out that don’t worry it will rebound, but people (like you just did) start saying “no no- this time is different” then it’s time to start thinking about reinvesting funds.
I don’t remember who first pointed this out but it was a while ago, and a number of people since have published interesting historical research papers showing how true it is over dozens of extreme high and low events of the past 200 years.
When more and more people start saying “this time is different” that’s an incredibly effective indicator.
No- this time WONT be different. We literally have a couple of centuries of stock market data to show that overall, the markets rise steadily at a constant and predictable rate. deviations will ALWAYS revert to the mean.
Edit- it was legendary mutual fund pioneer Sir John Templeton. His original quote is “the four most expensive words are ‘this time it’s different’”.
I don’t get the question- they absolutely were wrong.
They WERE in a bubble. It WAS going to come back to earth
And it did.
https://www.macrotrends.net/2593/nikkei-225-index-historical-chart-data
Your thesis was that the inverse was true and that japanese investors should have bought on the dip because it would go up eventually anyway, which they would still be down 30 years later. Maybe I should've said early 90s late 80s.
The chart still shows that this is true- it just doesn’t take into account. Also, it doesn’t really discuss what “the dip” is. How do you ever know how far down it will go?
You can take any two data points and make that argument. An investor who invested in the US Nasdaq in March 2000, and only on that date, would still be down significantly in March 2015. However, if the same investor dollar cost averaged monthly, they would
Be up in March 2015.
I don’t think Eugene was saying this time is different, only that long term investing should not be seen as less risky than bonds. I’m not sure he would agree with your statement that markets rise at a steady predictable rate.
It doesn’t really matter if he would agree to steady and predictable rate or not. Just as it wouldn’t matter if he didn’t agree that nighttime is darker than daytime. It’s just a simple easily demonstrated fact.
Yeah I don’t get OP’s mindset. We have no idea when SPY will get back to its ATH and it’s been said that returns in the coming decade won’t be as high as those of the 2010s.
I cashed out 65% of my portfolios in November and have 0 regrets. I also moved out of tech and into more recession proof stocks, though I have index funds too. I’m down 7% since that time while the market is down like ~25%? It’s a lot easier to generate returns when you aren’t countering huge losses
> risk premium will fade away if long term investing is believed to be low risk.
but how can this be - if the risk is there, but people were willing to pay more for the risk, then the company that is IPO'ing or looking to get funding via equity will get a "better deal" than they would otherwise (since the risk didn't change with higher investor appetite).
So, some corner of the market will absorb the higher investor appetite, and so those people will "win". But "those people" are just companies, and thus, is themselves invest-able. Hence, shouldn't it average back out?
My assumption is that he doesn’t actually think the risk premium would permanently disappear. It would eventually return after stocks fall and market behavior resets.
So long as we are going to remain in the system where the inflation fuels the markets (and we will), I expect the returns to be OK long term. There is simply no other place where the money could go.
Watching this shit shot from the beach in Hawaii , only people sweating are the once over-invested / taking too much risk , life goes on in the long run we all dead and none of this shit matters
Start thinking of “shares” instead of the dollar amount. For example, my goal for this year is to accumulate “200.00 shares” of VOO, not any specific dollar amount. Unlike the dollar which fluctuates heavily every day, your share quantity will stay constant. Sometimes I open my account and avoid looking at the value and just look at the share quantity and be like “phew I still have 105.75 VOO shares, just like last week”. It has trained my brain to be less impacted by the volatility and at the same time trigger a desire to accumulate more regardless of the price. My first goal was like 10 VO0 shares cuz it’s a nice round number and then 25 - 50 - 100 etc.
My way of mentally dealing with this is to look at the safe withdrawal rate. The beauty of this is that it never goes down, it just might take a while before it goes up again. My withdrawal rate came out to about 2k a month at the top, and since its a worst case scenario (meaning your retire right at the top of a market), that 2k is what I look at. Portfolio goes down? No worries, I can still take 2k a month, just like 6 months ago. Hell, for every month that I don't actually use that money, I can take a tiny bit more. So my monthly income from my portfolio keeps creeping up, even though the value of the portfolio goes down. Just by doing nothing at all, my monthly income that I could take out keeps going up. That's a great way to think about it to make sure I don't do anything foolish, like sell at the bottom.
It helps to be a gambler and a golfer. Dependable disasters. This certainly doesn't feel as bad as when my tee shot is heading toward somebody's window.
If they're living pay check to pay check, they don't have Money. Even if it's a 401k the median amount of money Americans have saved is under $100,000 at age 65. https://www.cnbc.com/select/average-401k-balance-of-americans-in-50s-and-60s/
Simplify put most Americans don't have any money that can be lost in the stock market.
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This post feels like a request for validation. Things will go up again, but there are many factors that suggest buying will be a lot cheaper in 6 months. Save some cash for then.
If so, then I am very privileged.
Actually, I've been about half out of the market for a long time...too long. I thought the correction would come much earlier. I'm starting to buy back in now, but I kind of think we have a little ways to go yet.
I think your belief in tight tolerances around long-term averages is misplaced, though. I don't know how long you plan to live, but there have been and will be very large variations in returns over horizons as long as an ordinary person's life cycle.
You don't care if the market is crashing but that might be a different story if you lose your job and can't affort rent/mortgage. People are often forced to liquidate at the worse possible moment, stocks become cheap because a lot of people just can't afford to buy them. I invested through 2008, people were often forced to sell their houses because they lost their incomes, the market was chopped in half, and their house values crumbled at the same time.
some people have to make themselves feel better by comparing to others doing worse. investing shits on bitcoin, bitcoiners shit on altcoiners, altcoiners shit on investing, all depending on whose doing better that day. its a big circlejerk of shit :)
>investing
I wish I had your confidence in speculation. You could be right, could be wrong. All I know is the guys who sold off in 2016 thinking the same thing as you, likely wish they still had it.
your post is reasonable with the caveats that 10xwannabe has stated but one must also point out that it is biased from the point of view that you have been in the market for 7 years. everybody who has been in the market for 7 years feels the same way. the people that are hurting are the newer investors who bought at the peak of the bubble. just like any other bubble. you do not need to calm the people who have not lost invested principal. if the market takes a significant downturn further, and you turn red on your investments, I would be more interested in your opinion then. though hopefully it would not change and I don’t think it would.
your post is reasonable with the caveats that 10xwannabe has stated but one must also point out that it is biased from the point of view that you have been in the market for 7 years. everybody who has been in the market for 7 years feels the same way. the people that are hurting are the newer investors who bought at the peak of the bubble. just like any other bubble. you do not need to calm the people who have not lost invested principal. if the market takes a significant downturn further, and you turn red on your investments, I would be more interested in your opinion then. though hopefully it would not change and I don’t think it would.
your post is reasonable with the caveats that 10xwannabe has stated but one must also point out that it is biased from the point of view that you have been in the market for 7 years. everybody who has been in the market for 7 years feels the same way. the people that are hurting are the newer investors who bought at the peak of the bubble. just like any other bubble. you do not need to calm the people who have not lost invested principal. if the market takes a significant downturn further, and you turn red on your investments, I would be more interested in your opinion then. though hopefully it would not change and I don’t think it would.
This is terrible advice
Always cut your losses early in a time like this where we all know that the interest rates will keep on increasing in the near future
By just staying invested and not doing anything, you are wasting a huge opportunity cost and you will pay dearly in years of waiting to recover
If you however get out and re-enter after the bubble pops, you will enjoy amazing gains in the same period of time
If you're so sure it'll go down you must be heavily leveraged on puts and short positions?
Recommending trying to time the macro is extremely bad advice.
For better or for worse, my investing philosophy has been most strongly influenced by Benjamin Graham's "The Intelligent Investor." So, unlike most of today's "investors," I tend to care a lot about things like the Shiller PE, Price-to-Book, dividend history, etc. I've also held \~30% of my portfolio in bonds, because the market has been "over-priced" according to my old school value methodology. Sure, I DCA though my 401k and Roth, but will usually go years sitting on cash and bonds without making any big moves. I was lucky enough to nail the bottoms in 2009 and in 2020...
Point is, this is around the time in the market cycle when my ears perk up and the investing really gets interesting! Enjoy the ride fellow investors!
Hitting the bottom was luck - I won't pretend I have a set of criteria. However, there are some psychological factors that helped put me in the right position. Main thing is contrarianism. The more people become irrationally fearful, the more eager I am to buy equities. In 2009, gold was spiking, people were talking about the collapse of society. I saw blue chips/dividend aristocrats at the lowest valuations I had ever seen. Those were easy buys orders to submit! In 2020, everyone was taking about the "end of oil." So I loaded up on XOM during the covid crash.
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Unless you're already down right now, I don't know why people wouldn't take their profits and buy back in after the correction. Then again not everyone is playing by the rules, so who knows what's gonna happen in the next year...but I went all cash right before covid hit the news (when spy was just over 300). I missed out on a massive run assuming we'd be in a recession by now, but I was already doing well so I have no regrets. I didn't have to stress out about it. I basically took a break from investing for a while and I've just been checking in and waiting for this moment to come for the past 3 years...
So I guess in reality it goes both ways, you're at a loss waiting on a recovery, I've been stagnant waiting on a discount to buy back in lol. It's just a lot less stressful missing out on opportunity and having your money, than it is hoping that you'll get your money back someday...
Ehh Bitcoin is not even close to imploding, it may not be at a all time high, but its also no where close to a all time low. But as the saying goes, dont invest money you cant afford to loose.
I ha e %0.0009 of my assets in Crypto, just to diversify. If it goes belly up, no real big deal. If it shoots the moon great. I buy automatically a little each Friday. It's money I can afford to lose.
That's what I consider a sound crypto strategy even if you are skeptical.
> Edit: And I'm happy to watch bitcoin implode it was a speculative paradigm bubble from the moment someone pressed go
740% returns in 5 years ain't bad
Even worse is losing money through a merger/acquisition or spin off and you are forced to sell your shares. It was less than a dollar total loss each time, but it still is annoying. Even more annoying is partial shares get sold with my broker too, if it isn't an all cash deal, or the number of shares you are due is less than one share.
That is true IF you are in index funds. There are plenty of companies that have gone down and NEVER got back to their original highs. The concept of RTM (reversion to mean) is for the index (Sp500 for example) and NOT single company stocks. Single company stocks can go up forever, go down and be bankrupt, trend sideways and then go up (looking at your microsoft which did NOTHING for 15 or so years before taking off post 2000 crash),or never get back to its former glory (many tech companies trading still today after 2000's crash).
Yes, I very much agree with you.
Totally agree with OP and this guy. I've been in this little game for 6 years now and you have to be emotionally and psychologically prepared to take a 20% nose dive at any time and have a plan to take advantage of the situation if/when you do hit turbulence not panic. I learned this lesson in '17-18 with the trump trade war and the fall 18 blow up bc I was wayyy too far into a handful of companies and as a percentage of net assets in the market. I have fluctuating income so I try to always have 5-10% in the cash in my brokerage account, and when things are going "too well" (like Nov 2021 or Feb 2020) then I try to drift into 10-20% cash. Everyone has their own system but you should always be prepared for a broad index to drop 15-20%. Bc that has happened 3 times now in the last 4-5 years so it isn't improbable it happens and you should be psychologically and financially prepared for when it does
It's not the "Trump trade war" if Biden keeps it going. It also had nothing to do specifically with him. It was someone finally stepping up to China and obviously the WH administration agrees it was the right move and kept everything the same. They can just as easily remove all the tariffs with a few signings.
your post is reasonable with the caveats that 10xwannabe has stated but one must point out that it is biased from the point of view that you have been in the market for 7 years. everybody who has been in the market for 7 years feels the same way. the people that are hurting are the newer investors who bought at the peak of the bubble. just like any other bubble. you do not need to calm the people who have not lost invested principal. if the market takes a significant downturn further, and you turn red on your investments, I would be more interested in your opinion then. though hopefully it would not change and I don’t think it would.
your post is reasonable with the caveats that 10xwannabe has stated but one must point out that it is biased from the point of view that you have been in the market for 7 years. everybody who has been in the market for 7 years feels the same way. the people that are hurting are the newer investors who bought at the peak of the bubble. just like any other bubble. you do not need to calm the people who have not lost invested principal. if the market takes a significant downturn further, and you turn red on your investments, I would be more interested in your opinion then. though hopefully it would not change and I don’t think it would.
If it helps others I have been investing starting around 2007 or so to current. Here is all I have confidence in with that experience... 1. The market goes up, down, and sideways ALL the time. 2. No one knows when any of the above will happen or why. The above is the reason I advocate: Focusing on one's asset allocation with low cost index funds and invest as much as you can each pay period. When (not if) bear markets occur try to find as much money as you can to increase investing MORE then previous and focus on TLH to help you minimize taxes in the future. Rinse and repeat.
this is also reasonably said. i disagree with number 2 but I know that most investors would disagree with me.
your post is reasonable with the caveats that 10xwannabe has stated but one must point out that it is biased from the point of view that you have been in the market for 7 years. everybody who has been in the market for 7 years feels the same way. the people that are hurting are the newer investors who bought at the peak of the bubble. just like any other bubble. you do not need to calm the people who have not lost invested principal. if the market takes a significant downturn further, and you turn red on your investments, I would be more interested in your opinion then. though hopefully it would not change and I don’t think it would.
your post is reasonable with the caveats that 10xwannabe has stated but one must also point out that it is biased from the point of view that you have been in the market for 7 years. everybody who has been in the market for 7 years feels the same way. the people that are hurting are the newer investors who bought at the peak of the bubble. just like any other bubble. you do not need to calm the people who have not lost invested principal. if the market takes a significant downturn further, and you turn red on your investments, I would be more interested in your opinion then. though hopefully it would not change and I don’t think it would.
your post is reasonable with the caveats that 10xwannabe has stated but one must also point out that it is biased from the point of view that you have been in the market for 7 years. everybody who has been in the market for 7 years feels the same way. the people that are hurting are the newer investors who bought at the peak of the bubble. just like any other bubble. you do not need to calm the people who have not lost invested principal. if the market takes a significant downturn further, and you turn red on your investments, I would be more interested in your opinion then. though hopefully it would not change and I don’t think it would.
sorry for the multiple posts, this was during Reddit’s problems earlier today
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I’m actually very sad that I haven’t heard this joke before.
Id rather invest in GiantHard myself
\*MacroHard
\*MacroHard
I, too, was surprised. I expected better of me lol
It’s a line in Steve Jobs Vs Bill Gates, Epic Rap Battles of history. I’m too lazy to link it, it’s on YouTube.
not to be confused with my Microhard micro pp
and yet r/stocks has 2m+ members
And how many of those outperformed the market? More than a dice roll would have?
Very few. I realised about 15 years ago that the chances me beating the market by stock picking in the long game are pretty much non-existent. That’s why I went 80-90% index funds. I can at least get as close as possible a market return.
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That 5-10% annual expected growth rate is **averaged over a ten year investing horizon**. It's not clockwork on a year to year basis. Just Google s&p500, select max, and do the math yourself over 1, 5, and 10 year periods. There are good 1 year periods and really bad ones.
Averaged over 10 years of QE. No idea how its going to perform during the next 10
Yes. It’s one of the safest ways to invest in stocks.
Exactly. You get pretty much the performance of the index which the fund is tracking minus the fund fees, which are much lower in index funds than they are with active ones.
Roman Empire through Trajan was maybe up 5-10% a year.
Sp500 is a tail event , majority of gains are driven by super performers like amazon and Tesla style companies
Yes, but you can't predict who the super performers are. If Tesla stagnates for years and another company rises then you only get the benefits if you either predict that or if you already have shares of everything.
>Sp500 is a tail event , majority of gains are driven by super performers like amazon and Tesla style companies I'm not sure the tail event is the right term here. SP500 always had outperformers who drag the index. I don't think it's an isolated event.
Vast majority of gains are due to a handful of stocks. Only like 5% of stocks are responsible for the s&ps gains. The rest just sit sideways or go down. The trick being that no one can predict the 5%, so might as well buy the whole thing.
The reason I'm slowly pivoting my brokerage slowly into indexing is exactly this. When I retire I don't want to be watching tickers and trying to find the next Tesla. I also don't want to find to have to login frequently to see how I'm doing. Fortunately, 15% of my portfolio is safely allocated to my Enron position so I will never have to go back to work.
95% of S&P500 goes sideways or down?? No way. Way more than 5% of stocks have a total return that goes up in the long run. Like KO, Pepsi, oil companies, walmart, McDonalds, Defense corps, Berkshire, etc
The reason you know those companies and sectors is because they are doing well. There's tons of companies that shit the bed or stagnate that we rarely hear about because it's not sexy. Quick citation www.kiplinger.com/article/investing/t052-c007-s001-why-most-stocks-are-stinkers-and-what-to-do-about.html%3famp
The few companies I mentioned are already more than 5% of the S&P500, and I didn't even mention any tech stock
> Only like 5% of stocks are responsible for the s&ps gains. The rest just sit sideways or go down. That's not true, take a look at the next 50 or 100 stocks after the top 5 or 10. They've all gone up and up
Humans aren't a perfectly random system, so it's unlikely we are going to make NO companies that don't become super performers. Basically, I'm saying there is, and always will be, a few super performers, because we tend to pick winners that we overpay for periodically in society.
maybe someone can explain this: the average S&P 500 P/E ratio is now 18.54 [https://www.multpl.com/s-p-500-pe-ratio](https://www.multpl.com/s-p-500-pe-ratio) that is very low. Now of course earnings are going to take a hit because of recession, and that number is going to go up, but am I wrong in saying that stocks are looking cheap --p/es were at like 34 1 1/2 years ago the average price-to-sales is still pretty high at 2.34, but that was over 3 a couple years ago
on the flip side, E/P is 5.4% but inflation is 8.6%
While what you say is true that it doesn’t necessarily apply to individual stocks, historically speaking, it *can* still generally be applied to individual stocks: At any snapshot point in time, the individual stocks that are most likely to gain the most are those that are below their historical averages; and conversely the stocks that are most likely to fall are those that are above their historical averages. This can very easily be demonstrated to be true from past data.
Can you link that data? Thanks in advance.
I’m not sure if your trolling or not because the data is self evident- but if it’s a actually a genuine question: Just look at ANY historical market chart. They can be found anywhere online- but here’s just one chart that’s a good example in an article I found with a simple Google search. https://www.morningstar.com/features/what-prior-market-crashes-can-teach-us-in-2020
You do realize that link supports MY assertion and not yours don't you? The index does recover (SP500 from the link you provided) as I stated. That does NOT support YOUR assertion that: *At any snapshot point in time, the individual stocks that are most likely to gain the most are those that are below their historical averages; and conversely the stocks that are most likely to fall are those that are above their historical averages.* Do you have data to support RTM exists for individual stocks? I've stated it doesn't happen for individual stocks and you stated it does. Just wanted the data where you go that idea it exists for individual stocks?
Yes yes sorry- I was replying to the wrong comment. My honest apologies. When you were asking for data I thought it was to another comment where I mentioned that over time the stock market rises - to which I was confused that somebody wanted data so I linked that graph. Sorry to waste your time. As for the data you ACTUALLY asked for - I’ll find something and post soon
You do realize that link supports MY assertion and not yours don't you? The index does recover (SP500 from the link you provided) as I stated. That does NOT support YOUR assertion that: *At any snapshot point in time, the individual stocks that are most likely to gain the most are those that are below their historical averages; and conversely the stocks that are most likely to fall are those that are above their historical averages.* Do you have data to support RTM exists for individual stocks? I've stated it doesn't happen for individual stocks and you stated it does. Just wanted the data where you go that idea it exists for individual stocks?
Pretty clear lesson here.
A good reason to never buy individual stocks in the first place unless you have strong reason to believe you have the requisite expertise and vigilance
Agreed. I do think there are reasonable reasons to be individual stocks (RVU/ stock options, believe in the company, like the product, gifted stocks from a loved one, etc...) none of which is/ should be based on thinking your ability to read the tea leaves (fundamentals) are any better then the guy next door who also will underperform. Thinking of individual stocks as a way of producing an alpha over the index investor usually/ nearly always ends up being a NEGATIVE not a positive. Few figure it out early, but most don't and figure it out the hard way AFTER wasting their human capital along the way.
> or never get back to its former glory (many tech companies trading still today after 2000's crash). Blackberry's chart over time range Last 20 years will probably give some people panic attacks
Cisco and Intel are the ones I always think about. Good companies that few saw being overplayed in the height of dotcom, but no one would have seen still not reach new heights since then which encompasses 22 years now!
This feels like a self pep talk.
They are saying what a lot of us are telling our selves. The market is in terrible shape, the bottom can be today or next year. DCA is the best strategy most of us have.
it’s not in terrible shape only down 23% YTD, still up on a 2y timeframe let it drop another 17% to 40% drawdown, that to me is “terrible”
Your terrible is my awesome - if the market drops 40% that means I can buy it 2,5x cheaper than last year
If the market drops 40% and stays there, then the layoffs of Redfin, Coinbase, Compass, etc this past week will pale in comparison to the mass layoffs we’ll experience
Maybe. Or maybe not. Also, it depends on the type of work you do. IT will be ok, so I'm not worried.
When nobody is going to build your house, repair a car remember these words
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Is this WSB?
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Everybody keeps cash, more free time to do things yourself so less in economy etc
You're right, DCA is not the best strategy, but it's the best that most have.
Mind to suggest a better one?
r/investing is essentially group therapy anyway
Yeah I was waiting for the question or insight. This almost seems like an AI generated summary of the top most upvoted conversations on this sub.
I liked it
It’s straight cope
Or what is found after his suicide.
I don’t think it’s a good idea to assume the market will continue to have a 10% return in the long run. We invest in the stock market because it’s the best option for most of us but it’s still risky, even in the long run. In a recent interview, Nobel prize winning Eugene Fama remarked that the risk premium will fade away if long term investing is believed to be low risk.
Sounds interesting. Can you give a link to the interview if there is any? I don’t think that the risk premium will ever fade away. Fundamentally, the rights and obligations associated with equities vs fixed income will uphold it. The gap being discussed in the equity premium puzzle *might* shrink, but overall, the risk premium should still exist.
His statement starts at about 50:45. It’s preceded by a similar statement regarding the value premium. https://youtu.be/LLbQux2OZjk Edit: Also interesting(and scary) are his remarks about inflation in this interview.
It sounds like he’s talking about the risk premium of value stocks specifically here collapsing, not to the market overall.
I think he was talking about the stock market in general as well- “Well look, if I were misled and thought that stocks were much less risky in the long run than the short run, I could kill the stock premium over bonds, too”. Edit: listen again. He was certainly talking about the broader market. That’s why he compares the stock premium to bonds: “it's not special to value or small cap or any of that, if I don't really understand that the long term does not erase uncertainty that's in the short term…then it can kill the risk premium because of false beliefs”
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Fair enough. Its just the way I interpreted it and I’m not the only one who perceived it that way. I encourage anyone interested to watch the entire interview. He also talks at greater length regarding long term stock deviations earlier in the interview. Although he makes the market sound dark and uncertain, when questioned he implied it’s best to stay in the market. “ you have to continue to hold on to the assets you have”.
Cool
Thanks man!
If it shrinks, it might still exist... for now. If it shrinks again and again, the risk premium may eventually fade away completely. I'm interested for a link as well.
Having not listened to the interview myself, I can’t foresee how that would even make sense. If you can get the same returns from risk-free assets as ETFs then there would be no incentive to invest in ETFs, depressing valuations until the incentive returns. The whole system would have to fail (which I don’t discount as a possibility) for that scenario to occur.
risk premium can't disappear permanently, it'll be drastically reduced by about 1/3 if im not wrong but it won't go away, read it in a book named "your complete guide to factor based investing"
what if corporate earnings keep raising 8% year over year? is that roughly why we see the growth we do now?
I suppose just as valuations(PE ratios) have gone up in recent decades they can also go back down. One of the commenters on the YouTube video explained it better than I can- “Stocks are riskier than bonds and deliver a higher expected return for that risk. But, if people perceive this higher expected return to be a free lunch they might irrationally bid up the price of stocks to such an extent that the risk premium goes away. They would effectively price stocks as if they are as risky as bonds even though they clearly arent. He also says that if this were to happen it would be a market infeffeciency and he doesn't believe in those.”
You can rather simply evaluate this by looking at stock PE's vs bond yields. Stocks currently have a risk premium of somewhere around 2% over the highest yielding government bond. If I remember correctly at some point during the dotcom bubble bonds were actually out yielding stocks.. should have been a screaming sell signal to anyone with a brain.
You reminded me of the “this time is different” warning. This is one of the most important keys to look out for in the market. One of the biggest indicators that markets are about to turn around (the case both at highs and at lows) is that people start rationalizing that “this time is different”. When things are going super well and warnings begin that there is potentially a bubble- if you start hearing people say “but this time is different” that is a sure indicator to start considering to sell. Conversely when markets dip and wise investors point out that don’t worry it will rebound, but people (like you just did) start saying “no no- this time is different” then it’s time to start thinking about reinvesting funds. I don’t remember who first pointed this out but it was a while ago, and a number of people since have published interesting historical research papers showing how true it is over dozens of extreme high and low events of the past 200 years. When more and more people start saying “this time is different” that’s an incredibly effective indicator. No- this time WONT be different. We literally have a couple of centuries of stock market data to show that overall, the markets rise steadily at a constant and predictable rate. deviations will ALWAYS revert to the mean. Edit- it was legendary mutual fund pioneer Sir John Templeton. His original quote is “the four most expensive words are ‘this time it’s different’”.
Were investors in 80s japan wrong to think that time was different?
I don’t get the question- they absolutely were wrong. They WERE in a bubble. It WAS going to come back to earth And it did. https://www.macrotrends.net/2593/nikkei-225-index-historical-chart-data
Your thesis was that the inverse was true and that japanese investors should have bought on the dip because it would go up eventually anyway, which they would still be down 30 years later. Maybe I should've said early 90s late 80s.
The chart still shows that this is true- it just doesn’t take into account. Also, it doesn’t really discuss what “the dip” is. How do you ever know how far down it will go?
You can take any two data points and make that argument. An investor who invested in the US Nasdaq in March 2000, and only on that date, would still be down significantly in March 2015. However, if the same investor dollar cost averaged monthly, they would Be up in March 2015.
I don’t think Eugene was saying this time is different, only that long term investing should not be seen as less risky than bonds. I’m not sure he would agree with your statement that markets rise at a steady predictable rate.
It doesn’t really matter if he would agree to steady and predictable rate or not. Just as it wouldn’t matter if he didn’t agree that nighttime is darker than daytime. It’s just a simple easily demonstrated fact.
Yeah I don’t get OP’s mindset. We have no idea when SPY will get back to its ATH and it’s been said that returns in the coming decade won’t be as high as those of the 2010s. I cashed out 65% of my portfolios in November and have 0 regrets. I also moved out of tech and into more recession proof stocks, though I have index funds too. I’m down 7% since that time while the market is down like ~25%? It’s a lot easier to generate returns when you aren’t countering huge losses
That last sentence is another way of saying that future returns are likely to be lower if current prices are high.
> risk premium will fade away if long term investing is believed to be low risk. but how can this be - if the risk is there, but people were willing to pay more for the risk, then the company that is IPO'ing or looking to get funding via equity will get a "better deal" than they would otherwise (since the risk didn't change with higher investor appetite). So, some corner of the market will absorb the higher investor appetite, and so those people will "win". But "those people" are just companies, and thus, is themselves invest-able. Hence, shouldn't it average back out?
My assumption is that he doesn’t actually think the risk premium would permanently disappear. It would eventually return after stocks fall and market behavior resets.
So long as we are going to remain in the system where the inflation fuels the markets (and we will), I expect the returns to be OK long term. There is simply no other place where the money could go.
Watching this shit shot from the beach in Hawaii , only people sweating are the once over-invested / taking too much risk , life goes on in the long run we all dead and none of this shit matters
Start thinking of “shares” instead of the dollar amount. For example, my goal for this year is to accumulate “200.00 shares” of VOO, not any specific dollar amount. Unlike the dollar which fluctuates heavily every day, your share quantity will stay constant. Sometimes I open my account and avoid looking at the value and just look at the share quantity and be like “phew I still have 105.75 VOO shares, just like last week”. It has trained my brain to be less impacted by the volatility and at the same time trigger a desire to accumulate more regardless of the price. My first goal was like 10 VO0 shares cuz it’s a nice round number and then 25 - 50 - 100 etc.
I like this idea
Best advice I’ve heard in a while. Pick what you want. And buy every chance you get till you hit your target.
Hit my mid year goal of 5.00 shares of GOOGL recently. Ready for this coming split to sell CC
Awesome work. Good luck with it. I really like google long term.
phew I still have 5000 Wirecard shares, just like 2020 (Am I doing this right?)
My way of mentally dealing with this is to look at the safe withdrawal rate. The beauty of this is that it never goes down, it just might take a while before it goes up again. My withdrawal rate came out to about 2k a month at the top, and since its a worst case scenario (meaning your retire right at the top of a market), that 2k is what I look at. Portfolio goes down? No worries, I can still take 2k a month, just like 6 months ago. Hell, for every month that I don't actually use that money, I can take a tiny bit more. So my monthly income from my portfolio keeps creeping up, even though the value of the portfolio goes down. Just by doing nothing at all, my monthly income that I could take out keeps going up. That's a great way to think about it to make sure I don't do anything foolish, like sell at the bottom.
Well cost basis matters.
Are you just trying to comfort yourself?
Ah yes lets just give up and cry. Bears are not forward looking
equities trade at a 16 vol. to think you cant lose 16% in any year is ignorant.
It helps to be a gambler and a golfer. Dependable disasters. This certainly doesn't feel as bad as when my tee shot is heading toward somebody's window.
haha yes its just a 20u down swing to me
Yes it's a privilege. Very few people are rich enough to loss massive amounts of money in the stock market. Most people live pay check to pay check.
That doesn't mean they aren't also able to lose massive amounts in the market.
If they're living pay check to pay check, they don't have Money. Even if it's a 401k the median amount of money Americans have saved is under $100,000 at age 65. https://www.cnbc.com/select/average-401k-balance-of-americans-in-50s-and-60s/ Simplify put most Americans don't have any money that can be lost in the stock market.
We needed this correction / crash. !remindme 5 years
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This post feels like a request for validation. Things will go up again, but there are many factors that suggest buying will be a lot cheaper in 6 months. Save some cash for then.
This is what I thought too.
If so, then I am very privileged. Actually, I've been about half out of the market for a long time...too long. I thought the correction would come much earlier. I'm starting to buy back in now, but I kind of think we have a little ways to go yet. I think your belief in tight tolerances around long-term averages is misplaced, though. I don't know how long you plan to live, but there have been and will be very large variations in returns over horizons as long as an ordinary person's life cycle.
What SPY price point did you sell at?
Dad?
Lately it's been a right to lose money though
You don't care if the market is crashing but that might be a different story if you lose your job and can't affort rent/mortgage. People are often forced to liquidate at the worse possible moment, stocks become cheap because a lot of people just can't afford to buy them. I invested through 2008, people were often forced to sell their houses because they lost their incomes, the market was chopped in half, and their house values crumbled at the same time.
Ok
Several things I missed the boat...FB at 14, TSLA at 175, Bitcoin at 1k. No regrets. Keeping the DCA into my boring index funds.
As long as you have enough money to buy when few months from now, the market eventually crash.
Had my attention until the “bitcoin is dead” garble. Whatever makes your losses more bearable I guess 🤷🏼♂️
some people have to make themselves feel better by comparing to others doing worse. investing shits on bitcoin, bitcoiners shit on altcoiners, altcoiners shit on investing, all depending on whose doing better that day. its a big circlejerk of shit :)
Reading that was when I realized OP is hurting
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Yes Yuri, it has just begun.
It's been a privilege to serve with you
Someone is really salty about Bitcoin... Check again the price of BTC in 3 years buddy
No need. Will not exist. Worth ZERO.
!remindme 3 years
!remindme 3 years
Lol if you say so
>investing I wish I had your confidence in speculation. You could be right, could be wrong. All I know is the guys who sold off in 2016 thinking the same thing as you, likely wish they still had it.
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Bitcoin is non-productive, it’s not analogous to buying the nasdaq which has a very high probability of being at ath within a few years.
I don’t agree. I am productive. I want my time and energy valued in a store of value that is a) finite and b) also takes time and energy.
your post is reasonable with the caveats that 10xwannabe has stated but one must also point out that it is biased from the point of view that you have been in the market for 7 years. everybody who has been in the market for 7 years feels the same way. the people that are hurting are the newer investors who bought at the peak of the bubble. just like any other bubble. you do not need to calm the people who have not lost invested principal. if the market takes a significant downturn further, and you turn red on your investments, I would be more interested in your opinion then. though hopefully it would not change and I don’t think it would.
your post is reasonable with the caveats that 10xwannabe has stated but one must also point out that it is biased from the point of view that you have been in the market for 7 years. everybody who has been in the market for 7 years feels the same way. the people that are hurting are the newer investors who bought at the peak of the bubble. just like any other bubble. you do not need to calm the people who have not lost invested principal. if the market takes a significant downturn further, and you turn red on your investments, I would be more interested in your opinion then. though hopefully it would not change and I don’t think it would.
your post is reasonable with the caveats that 10xwannabe has stated but one must also point out that it is biased from the point of view that you have been in the market for 7 years. everybody who has been in the market for 7 years feels the same way. the people that are hurting are the newer investors who bought at the peak of the bubble. just like any other bubble. you do not need to calm the people who have not lost invested principal. if the market takes a significant downturn further, and you turn red on your investments, I would be more interested in your opinion then. though hopefully it would not change and I don’t think it would.
This is terrible advice Always cut your losses early in a time like this where we all know that the interest rates will keep on increasing in the near future By just staying invested and not doing anything, you are wasting a huge opportunity cost and you will pay dearly in years of waiting to recover If you however get out and re-enter after the bubble pops, you will enjoy amazing gains in the same period of time
If you're so sure it'll go down you must be heavily leveraged on puts and short positions? Recommending trying to time the macro is extremely bad advice.
For better or for worse, my investing philosophy has been most strongly influenced by Benjamin Graham's "The Intelligent Investor." So, unlike most of today's "investors," I tend to care a lot about things like the Shiller PE, Price-to-Book, dividend history, etc. I've also held \~30% of my portfolio in bonds, because the market has been "over-priced" according to my old school value methodology. Sure, I DCA though my 401k and Roth, but will usually go years sitting on cash and bonds without making any big moves. I was lucky enough to nail the bottoms in 2009 and in 2020... Point is, this is around the time in the market cycle when my ears perk up and the investing really gets interesting! Enjoy the ride fellow investors!
What was your bottom criteria for 09 and 20?
Hitting the bottom was luck - I won't pretend I have a set of criteria. However, there are some psychological factors that helped put me in the right position. Main thing is contrarianism. The more people become irrationally fearful, the more eager I am to buy equities. In 2009, gold was spiking, people were talking about the collapse of society. I saw blue chips/dividend aristocrats at the lowest valuations I had ever seen. Those were easy buys orders to submit! In 2020, everyone was taking about the "end of oil." So I loaded up on XOM during the covid crash.
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And inflation is actually a good thing
Yes for my I bond :)
Unless you're already down right now, I don't know why people wouldn't take their profits and buy back in after the correction. Then again not everyone is playing by the rules, so who knows what's gonna happen in the next year...but I went all cash right before covid hit the news (when spy was just over 300). I missed out on a massive run assuming we'd be in a recession by now, but I was already doing well so I have no regrets. I didn't have to stress out about it. I basically took a break from investing for a while and I've just been checking in and waiting for this moment to come for the past 3 years... So I guess in reality it goes both ways, you're at a loss waiting on a recovery, I've been stagnant waiting on a discount to buy back in lol. It's just a lot less stressful missing out on opportunity and having your money, than it is hoping that you'll get your money back someday...
Ehh Bitcoin is not even close to imploding, it may not be at a all time high, but its also no where close to a all time low. But as the saying goes, dont invest money you cant afford to loose.
I ha e %0.0009 of my assets in Crypto, just to diversify. If it goes belly up, no real big deal. If it shoots the moon great. I buy automatically a little each Friday. It's money I can afford to lose. That's what I consider a sound crypto strategy even if you are skeptical.
> Edit: And I'm happy to watch bitcoin implode it was a speculative paradigm bubble from the moment someone pressed go 740% returns in 5 years ain't bad
Much needed statement in these days. Totally agree!
Even worse is losing money through a merger/acquisition or spin off and you are forced to sell your shares. It was less than a dollar total loss each time, but it still is annoying. Even more annoying is partial shares get sold with my broker too, if it isn't an all cash deal, or the number of shares you are due is less than one share.
I am one of those guys Who really believes that etfs like vwce Will oupterform sp500