So the Dow was down triple digits this morning if I understand correctly because of improving economic news fueling fears of an interest rate hike. In emphasizing 401Ks, thrift savings plans and the like we probably have the largest class of people in the US that are stock holders than ever before. So have we gotten to the point where you root for bad economic news so that your stock holdings go up at the expense of the overall health of the economy?
Does this system we seem to have created make sense to anyone any more? It just seems like a house of cards.
You are familiar with the rule of sevens aren't you?
Huh? Fed starts easing?
Not sure what you are talking about. The point I made was a very simplistic one. It is better to buy stocks at $10 a share than at $20 a share.
Over a 60 year investment lifetime, the long term trendline for stock prices will be up (assuming GDP 60 years later is higher than it was 60 years earlier - and if it isn't we have a totally different and much bigger problem)... so, the trendline is going to be up.
During those 60 years, however, the year by year prices are going to fluctuate wildly and there will be times when prices are very high relative to earnings and other times when prices will be very low relative to earnings. And as a "buy and hold" investor the ups and downs of the stock market don't make any difference to you except for when you are making purchases. And for purchases, you'd like the purchases to be made on "down days". And since you aren't selling, market highs shouldn't really make you feel all that good - after all, you aren't selling and so the prices are fictional for your purposes anyway. The only price that matters to the buy and hold investor is the price when he/she finally sells during retirement - which almost certainly is going to be much, much higher than when he/she made the first purchase 40 years earlier - and hopefully more than the purchase made 10 years earlier too.
The real difference in portfolio performance for investors who have the same asset allocations and are indentical buy and holder investors, will be the luck of the market's performance over your investment lifetime and into retirement - what is known as the "sequence of returns" risk. Which is most often discussed in terms of stock returns during the initial years of retirement - but the concept applies equally well (but less discussed) over an investor's lifetime. A lucky investor is one who is fortunate enough to have had lots of market lows when he/she purchased most of his/her stocks - accumulating lots of shares - and then been fortunate enough to have the stock market go on an incredible bull run right when he/she retires (i.e. when selling those shares to live on).
Anyway - that's all I've been talking about since my first post. Pretty simple stuff. Going from there to Taleb's Black Swan is an entire different matter. One of the greatest books every written - and scary as hell (to the extent I'm truly able to comprehend his concepts).
You are familiar with the rule of sevens aren't you?
CTC, do you mean the Rule of 72?
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What happens when the fed starts easing and in interest rates go back up to 7%?
You are familiar with the rule of sevens aren't you?
CTC, do you mean the Rule of 72?
basically yes.
If interest rates remain high enough, with all else being compatible, growth, etc., it allows all to make money on their money with little risk instead of investing in the market which few can afford to.
Stimulates saving and amassing wealth.
Simplistic concept.
Quote:
In comment 12316276 ctc in ftmyers said:
Quote:
What happens when the fed starts easing and in interest rates go back up to 7%?
You are familiar with the rule of sevens aren't you?
CTC, do you mean the Rule of 72?
basically yes.
If interest rates remain high enough, with all else being compatible, growth, etc., it allows all to make money on their money with little risk instead of investing in the market which few can afford to.
Stimulates saving and amassing wealth.
Simplistic concept.
The "problem" with 7 percent interest rates is inflation is almost surely the cause of such high rates, so "real" returns are unlikely to be satisfactory from such an investment. But, I'm not sure what that has to do with stock market variations and the "sequence of returns".
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In comment 12316300 baadbill said:
Quote:
In comment 12316276 ctc in ftmyers said:
Quote:
What happens when the fed starts easing and in interest rates go back up to 7%?
You are familiar with the rule of sevens aren't you?
CTC, do you mean the Rule of 72?
basically yes.
If interest rates remain high enough, with all else being compatible, growth, etc., it allows all to make money on their money with little risk instead of investing in the market which few can afford to.
Stimulates saving and amassing wealth.
Simplistic concept.
The "problem" with 7 percent interest rates is inflation is almost surely the cause of such high rates, so "real" returns are unlikely to be satisfactory from such an investment. But, I'm not sure what that has to do with stock market variations and the "sequence of returns".
It has as much to do with this thread as your rambling on has.
Nothing.
You have already admitted that what is being discussed is above your pay grade.
Read and learn instead of painting yourself in a corner and putting blinders on to as what is actually being discussed.
sings.
I cannot even type anymore,
best post now a belly laugh
that fat lady signs, hahaha