Ahh.... skeptics are what makes the world go round.

Alex offered a positive light in an otherwise very negatively driven message board and all any of you could think of to do was beat it down as best you could.

I'd just like to point out though, that not one single person who shunned this idea is a millionaire. Not one.

Think about that.

Sorry, but this post confused me. :)

I thought you had said that index funds would have an average return of 15%. Did I misunderstand? Or are you saying that they achieve that by the above mentioned supplemention?

Somehow I don't trust these.
 

Why would You need us? Bank can give You money with much lower % so rest % for You are much higher. If the project is that good, You'll mortage Your house, Your wife, Your kids, Your dog, Your organs and do it Yourself. There are only way You need us is:
1: You are not sure if You don't bankrupt in few months and You need to risk others money, this means it would probably end as nice SCAM.
2: You don't have any project and it's planned SCAM.


25 years? Cancer will kill You sooner.

Unless I missed something, he's speaking in general of investing in the market, and illustrating what a person could achieve by saving/investing.

most have just read The Wealthy Barber or something :)

Yep, my fault.
 

But it seemed so much like HYIP promotion ;)
Anyway, You didn't read my EDIT on the post ;))

Cya.

You are right, your edit slid right under my eyeball radar. :winkwink:

I agree with the first part, I only buy index funds from Vanguard. I also time the market and do very well. You have to know what you're doing though, it's not for everyone.

I did say the "average joe" will put their money in mutual funds, which is still alot better than a savings account. Most ppl are stuck with the funds offered by their companies' 401(k) plan. :2 cents:


This isn't true, it's too general of a statement. Small cap stocks are much more risky than blue chip stocks. So while the winners will definitely outperform the market, the losers will totally disappear, happens all the time.
There's a reason blue chips are blue. 70% of "microcap" stocks go bankrupt within 5 years.

I prefer $1 and 100%

and I can have $1 million in 21 months.

I beleive I said that index funds are better than mutual funds. To get higher return, you need to invest in low profile quality small cap stocks.

No, this is no hype and I'm not selling anything to anyone.

million bucks in 25 years wont be anything to write home about

Than continue investing that $350 per month for an extra 5 years and it will increase to more than $2,400,000 with the magic of compound interest :winkwink:

The idea is sound but IMHO it's impractical. You say the $350/mo claim is to make it appear more attractive to people, but as you gather in a larger interested crowd the chances that each will be able to consistently sustain a 15% average return diminishes remarkably.

I'm enjoying the power of compounding, but from the opposite end: we can freely deposit and withdraw extra funds to our home loan without penalty, so parking $50k cash in there for 2 years will make a significant difference to the loan term and overall interest paid, and after those 2 years we still have that cash available (which we wouldn't if it had just been absorbed as a larger deposit into the buy contract). The extra funds also mean that it's a discount on the interest charged rather than interest income, so it is also not taxed. The effective savings of about 7% p/a are roughly equivalent to a before-tax return of about 13% p/a.

Interesting strategy. Personally, I don't really consider a home an investment, and I seriously doubt "investing" in a home will yield a higher return in the long term than investing monthly in stocks. Retirement saving account are also tax free.

15%, yeah, if you can average 10% over 25 years you did damn well.

Lets run these numbers, including taxes:
http://www.dinkytown.net/java/InvestmentReturn.html

Save $4,200 a year, 15% ROI, 15% tax rate (yeah right on that one too.) Now you are at $708,000 Which is actually $330,000 after a 3% inflation adjustment.

So thats assuming a fucking low tax rate, and that you get 15% ROI. Lets be more realistic, 8% ROI, 30% tax rate. Ah yes, $230,000. Again, before inflation. Far fucking cry from a million dollars -- and thats assuming you never were tempted to dip into that to pay for an extra vacation or family emergency.

Solution -- save more money. You should be saving more than $350 a day, not a month. Unfortunately the calculator is a prick so I can only input 100k a year, that brings me to $5.4 million, $2.5 million after inflation -- thats pretty fucking modest for 25 years.

Saving money is fucking hard. Just when you think you are living far below your means tax time comes around and you realise that its actually the "upper 1%" who are getting assraped, not the lazy poor who collect government money to pay for cable TV instead of buying their kids healthy food.

No they're not, they're tax deferred. You WILL pay taxes on the money eventually, and in alot of cases you'll pay a higher tax rate than if you had invested money in a non-retirement account and simply paid capital gains taxes on the earnings, which is a lower rate for alot of people than the income tax rates they'll have to pay when they withdraw later.

sounds like a lame and long ass plan...

Invest them in intoxicating your liver instead, like me :)

I'm getting 33% return/month... :-) But my sites don't make shit. lol

55 = old and grey

:1orglaugh :1orglaugh :1orglaugh

Don't you guys have a retirement plan, like 401K in the USA or RRSP in Canada that allow you to not pay any taxes on your investment until the day you retire?

In the US you can have a Roth IRA where you don't pay ANY taxes when you retire.

ahem the return on stocks doesn't 'compound'. :rolleyes:

but whatever floats your boat

PS: what on earth gave you the idea that 15 percent is the average long term ROI on small caps

If getting 15% consistantly was oh so easy everyone would do it. When it comes to your retirement I feel taking a more realistic assesment is wise and if you happen to make 15% then that's even better. Personaly I think you be an idiot to only invest $350 a month in hopes of getting 15% every year.

Oh so now we're not talking about small caps anymore, but specifically 1 index of small cap value stocks. That's one specific index with fairly narrow focus. The average stock investor isn't dealing with indexes but funds or individual stocks. You also have to figure in much higher liquidity risk, even assuming for the moment that the market is actually over time really going to generate a 15% return if you hold long enough. What if you have a fiscal emergency when the market happens to be down? Small caps expose you a LOT more to market volitility, which you can't necessarilly afford with your savings.

In any event nothing you've said changes the fact that the average investor cannot realisticially replicate 15% per annum returns.

It also doesn't change the fact that the principal of compounding has nothing whatsoever with stock appreciation so I don't know why exactly you keep bringing it up. Debt compounds, not assets.

You lost me here! Isn't an index a basket of stocks!

As I stated earlier, this is a long term investment (i.e. 30 years), and you'll need to continue investing that $350 every month like you do with your car payment or rent.

And IMO, the average investor is in better position to pick quality small caps than a pro.

I wouldn't say our home is necessarily an investment (although its market value has increased by a fairly healthy 20% over 2 years), but as a family man I want the security of "owning", so I may as well make a bit of money out of it by saving on interest in the meantime. :) Obviously, this only works when you can't pay for the property with cash - the bank isn't going to start paying you interest if your loan balance goes positive...

25 years is too long to wait :(

Simplicity is a matter of perspective. Let's think about the reality of this:

Buying $350 of any sort of stock/index fund/etc will incur a commission on the purchase so you lose that right off the top.

Any time you sell a stock and move to another one, you'll owe capital gains tax. That hurts.

15% over 25 years is very, very aggressive. Unless you've got a large sum of money, you will never achieve that. If you know something I don't, I'll gladly put $30M into something that'll yield me 15% annualized over the next 25 years. In fact, I'll borrow every cent I can find to put into that investment.

You'll pay significant taxes when you cash out to use the money.

Any long term return has to factor in inflation. Places like Aflac like to "forget" little details like that.

If you look at all those considerations, you'll find that you will never reach $1M in 25 years with only $350/mo. Off the top of my head I'd say that in today's dollars you might end up with $200,000 to spend.

That said, making the decision to invest $350/mo each and every month is much smarter than blowing the $350 on crap. In 25 years you'd have some money vs some distant memories of a few moments of fun.

:1orglaugh :1orglaugh :1orglaugh

Actually the principle does apply. You may wish to call it something else but it's the same principle.

If you have $100 in stock and it goes up 10% the first year, then the 2nd year you have $110 worth of stock. If it goes up 10% then you made $11 in profit and the next year you have $121.
No different than a savings account where you reinvest the interest payments and the money "compounds".

Increases in share price and cash dividend distributions work exactly the same as interest for purposes of growing your money. :2 cents:

just prop for a poker room and you will make way more that 15% on your money, that is if you are good :) 10% then 30% than 45% for me in the last three quarters.

ouch...you nailed it

The effect of compounding in stocks is destroyed by the cyclical hits and losses. I really don't see why you people have having such a hard time understanding this. The problem is that an average return of 15% over the course of the years actually means it went up 20% one year down 5% the next etc etc etc.

In case it hasn't got through YET the principal of compounding can only truely be applied when you're dealing with a -truely- fixed rate of appreciation that won't fluxuate.

Now since you clearly don't seem to understand why this is different lemme see if I can borrow an example that might finially get through:

http://www.21stcenturyalert.com/ira/...g/image013.gif

The effects of compounding can only truly be applied when dealing with a -truely- fixed rate of appreciation, which stocks do not have. I really don't know how much more I can simplify this.

Ah, now I see where you are getting your 15% number.

The site you reference is, in turn, referencing the work of Kenneth French. I've read a lot of his papers/research. He's a hardcore numbers guy and really smart. He looked at the data from literally thousands of small-cap value companies. There is no fund which has had equal shares of all those companies, hence there is no one place you could drop your money to have received that 15.1% return. To emulate this you'd have to buy shares in a couple thousand companies, and you'd have to sell shares when the company was no longer considered a small, value stock (i.e. their BtM went down, or their market cap climbed and pushed them into the large category). Likewise, you'd have to continue to buy whenever a company made an appearance in the small value category. This buying/selling would kill you with capital gains, and you'd also lose in some cases because a particular stock might be down quite a bit when it made it's move to blended or growth (hence it's lower BtM). Value stocks are called value stocks for a reason: at the time, they have good numbers. That can change in a heartbeat. The 15.1% return quoted doesn't take into account any company that falls out of the value category, so the numbers are artificially inflated.

You can try to simplify it all you want but you're still wrong.

If you invest $1000 today into the stock market and earn an average of 15% per year over the next 25 years you'll have EXACTLY the same amount of money that you would if you invested $1000 in bonds/cd's/t-bills or any other financial instrument that paid a 15% yearly interest rate.

A 15% return is a 15% return, regardless of whether that return is interest paid or capital appreciation.

The fact that you can't wrap your head around a basic finance principal doesn't make me wrong, hate to break the news.

If you can't understand the difference between a consistant 10% return and an average rate of return of 10% when dealing with the idea of compounding you've got more problems than I can solve.

It has nothing to do with with what we're 'calling the returns'.