02-07-2022, 11:24 PM
The “myth” of the safest/best investment - sp500
<!-- SC_OFF --><div class="md"><p>Sorry for clickbaity title but I feel like this question is almost never discussed. ETFs have become notoriously popular, to the point that any new investor is told that putting money in a safe ETF like spy is the best decision they could make. In fact even warren Buffett said that keeping 90% of your money is the best decision one could make. It seems that a lot of is based on the assumption that markets tend to go up, But zooming out it seems to be that a lot of this investment advice is based on recency bias. In fact <a href="https://www.macrotrends.net/2324/sp-500-historical-chart-data">adjusting</a> to inflation and viewed on a log scale paints a totally different picture. It seems that an unlucky investor putting their money into the 500 largest and most profitable companies at the height of the market in 1929 wouldn’t have definitively been “in the clear” all the way until 1985. It very much looks like all those gains retroactively applied to a 100-year theoretical sp500 only look good on average, but in reality you have a 60 year period with zero to no growth and then 40 year period of insane growth, which averages out to a decent 100 year growth. Going forward, it might signal to a potential investor that index fund in fact is not the best investment since a 60 year period is basically one’s lifetime and it might be your children and grandchildren who finally enjoy some profits, and that maybe dividend investing might be a much safer bet. It might also signal the past 40 years are an anomaly and normally markets don’t just always go up. Any thoughts?</p> <p>Edit: since a lot of people are picking on the fact that I chose the height of the marker before the Great Depression, I’ll clarify (which I thought was obvious just by looking at the graph), that this period is not unique. An investor investing into indexes from 1955-75 would largely see their gains eroded by stagflation. An investor in 1928-55 would also struggle as well too even with DCA.</p> </div><!-- SC_ON --> submitted by <a href="https://www.reddit.com/user/ses92"> /u/ses92 </a> <br/> <span><a href="https://www.reddit.com/r/investing/comments/smq097/the_myth_of_the_safestbest_investment_sp500/">[link]</a></span> <span><a href="https://www.reddit.com/r/investing/comments/smq097/the_myth_of_the_safestbest_investment_sp500/">[comments]</a></span>Kind Regards R
<!-- SC_OFF --><div class="md"><p>Sorry for clickbaity title but I feel like this question is almost never discussed. ETFs have become notoriously popular, to the point that any new investor is told that putting money in a safe ETF like spy is the best decision they could make. In fact even warren Buffett said that keeping 90% of your money is the best decision one could make. It seems that a lot of is based on the assumption that markets tend to go up, But zooming out it seems to be that a lot of this investment advice is based on recency bias. In fact <a href="https://www.macrotrends.net/2324/sp-500-historical-chart-data">adjusting</a> to inflation and viewed on a log scale paints a totally different picture. It seems that an unlucky investor putting their money into the 500 largest and most profitable companies at the height of the market in 1929 wouldn’t have definitively been “in the clear” all the way until 1985. It very much looks like all those gains retroactively applied to a 100-year theoretical sp500 only look good on average, but in reality you have a 60 year period with zero to no growth and then 40 year period of insane growth, which averages out to a decent 100 year growth. Going forward, it might signal to a potential investor that index fund in fact is not the best investment since a 60 year period is basically one’s lifetime and it might be your children and grandchildren who finally enjoy some profits, and that maybe dividend investing might be a much safer bet. It might also signal the past 40 years are an anomaly and normally markets don’t just always go up. Any thoughts?</p> <p>Edit: since a lot of people are picking on the fact that I chose the height of the marker before the Great Depression, I’ll clarify (which I thought was obvious just by looking at the graph), that this period is not unique. An investor investing into indexes from 1955-75 would largely see their gains eroded by stagflation. An investor in 1928-55 would also struggle as well too even with DCA.</p> </div><!-- SC_ON --> submitted by <a href="https://www.reddit.com/user/ses92"> /u/ses92 </a> <br/> <span><a href="https://www.reddit.com/r/investing/comments/smq097/the_myth_of_the_safestbest_investment_sp500/">[link]</a></span> <span><a href="https://www.reddit.com/r/investing/comments/smq097/the_myth_of_the_safestbest_investment_sp500/">[comments]</a></span>Kind Regards R