I have a mutual find that last quarter, returned me 27%

Ok so explain to me how a 15% stock return is different than a 15% interest return.

Also while you're at it I'd like for you to tell me where you can get a double digit "consistent risk free" return like you used in your example.
The only way you're going to get a double digit return on a fixed income investment is if we have double digit inflation, in which case your return still isn't all that great.

Also in your example the difference between the two portfolios was a fractional one, so you basically made my case for me with that example.

Wow there are some fucking retards in this thread.

Here's a little finance concept for you called Annualized Return.

Let's Do two examples.

Example 1: Lenny Invests $1000 in small cap stocks.

Year 1: Lennys's stock investment kicks ass and soars 100%.
Year 2: Lenny's stock investment get it's ass kicked and loses 50%.

How much money does Lenny have? He started with $1000, doubled up to $2000, then got stomped down to $1000 again. Annualized Return 0%. What was his average return?

100% + -50% divided by 2 = 25%.

Wow, Lenny had a 25% average return. That guy rules.

Example 2:

Lenny invests $1000/year in small cap stocks.

Year 1 his investment gains 200%. Years 2-9 it gains nothing.

At the end of the 10 years Lenny is sitting on $12,000.

What's his average return? 200 divided by 10 = 20%.

What's his annualized return ? 4%. (the amount of money he actually gets).

If he had gotten a 20% annualized return, he'd be sitting on about $26,000, not $12,000.


Geez so why the hell does all the stock literature quote Average Return when that's not what I actually get in my pocket? Because it's always a higher number, and they want your fucking money.

The stock market is just as likely to gain 15% in a given year as it is to lose 15%. Unlike a CD where you always get X%.

There are 20 year periods of time where you could have invested money in the market and wound up with LESS money after 20 years than you started with. E.G. Look at the market between around 1954 through 1974.


Here's the thing to remember.

Average annual return sells mutual funds.
Annualized return pays your mortgage.
Annualized return is always lower than average return.

Anyone that guarantees you're going to make 15% on a stock investment over the next 20 years is so full of shit it's not even funny. Could it happen? Yes. Is it likely? No. Stocks are streaky, if you have the bad years at the start of your 20 years, and the good years towards the end you could do very good. An example would be someone who started in 1980, and pulled their money out in 2000.

However someone 25 years younger who started in 1955, and stopped in 1975 is probably living in a fucking box.


So while i agree that small cap value stocks are a good investment, and you should save money monthly, 15% is a fucktard number. Go out and buy the book The 4 pillars of Investing on Amazon and read up on Asset Allocation.

One more note

For its last 10 years Enron stock returned an average annual return of something like 17%. And that's including its plunge to zero at the end.

you guys are fucking fucked. Usury and interest are the tools of the devil, just like guilt and fear.

I'm not sure about that....

I wasn't aware it was my job to teach remedial finance to GFY

If you'd read anything I've posted that's what I have been saying the whole time. You can read right? The average investor will not usually be able to replicate those returns like I've been saying all thread. The example given was something I hotlinked to make a point.

P(0) = 1000
-10% = 900
-10% = 810
-10% = 729
-10% = 656.1
-10% = 590.49
+20% = 708.588
+20% = 850.3056
+20% = 1020.36672
+20% = 1224.440064
+20% = 1469.328077

P(0) = 1000
+10% = 1100
+10% = 1210
+10% = 1331
+10% = 1464.1
+10% = 1610.51
+10% = 1771.561
+10% = 1948.7171
+10% = 2143.58881
+10% = 2357.947691
+10% = 2593.74246


Both examples demonstrate an average market appreciation of 10% over ten years. You're right there's no difference at all. :1orglaugh Granted real life doesn't deal in such black and white examples, but I guess with some people you have to hit even the simplest of points with a sledgehammer to make it sink in.

Scrib did a great job as well demonstrating why playing with %'s is a terrible was to look at asymetrically appreciating assets as you get deceptive preformance results. Seriously there are so many better tools to analize assest appreciation.

Oh well I guess if nothing else you've managed to demonstrate why so many peoples finances are in shambles.

Or more accuratly misapplying deceptive %'s, rather than using information that is actually relevant.

15% !?!? That's way too high!

Please show me the corrected math with the non misapplied percentages Gigolo.

While you're at it how about explaining why sites like Morningstar.com and other financial review sites quote past performance in Annualized Return and not Average Return.

E.G. Oh look, a report on the Russell 2000 index ETF fund that quotes in term of Annualized return.

http://quicktake.morningstar.com/etf...fdtab=ret urn


Dumbass

You do realize I was agreeing with you yes? :1orglaugh Seriously reading comprehension 101

I was simply trying to clarify as my post was poorly phrased, and the edit time was up on my first post.

Dumbass.

If I remember right, Mason don't you have a degree in finance? Or maybe a broker?

$1M in 25 years will be sweet nothing... kinda like it's not even that glorious to only have 1 these days.

You have zero chance of doing 15% over a period of 25 years. During a 25 year period you are going to see some lengthy bear markets, several major corrections etc. Sure if you look at the last 5 years 15% would have been very easy but it aint going to last.

Start earlier like the Wealthy Barber says and invest for 40 years. It's only $200 a month and you only need a 10% return. :)

I have a better idea, sling porn hard every day for 10 years.

My bad, I was confusing average return with annualized return. Obviously if I made 100% in one year and then zero for the next nine I wouldn't consider that a 10% annual return.

I also agree with your statement about the stock market from 1954 to 74, during that period fixed income investments like CD's were paying much more generous rates though, and were obviously the place to put your money.

Oh so now it makes sense. :1orglaugh

Tell that to allthe people that invest in http://en.wikipedia.org/wiki/Berkshire_Hathaway during the past 25 years:winkwink:

Nah man, 15% is 15% in a tax-free account (i.e. retirement account). There are no taxes or capital gain when you sell the stocks while the investment is that account, and commission fees are tax deductible too.:thumbsup

Es-tu "chaud" à "swouaire" Alex :1orglaugh

GO HABS GO

GO HABS GO !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! !!!!!!!!!!!!!!!!!!!!!!!!

:1orglaugh :1orglaugh

non, jsuis plutot g'lé :1orglaugh

Now THAT'S funny!

Ja we know the principle behind it but the keyword is 'consistentcy'.

Will that 10% or more be consistent?

Bottom line is stash $1 mill away in something you know is stable and will get you 10% compounded. That way when you do have to retire if push comes to shove you know at a minium after taxes you've got roughly $80k to fuck with.

Retirement age is 65 now. I can assure you there are medical breakthroughs coming very, very soon that are going to make your heads swim. We may be looking at ages of 300 or more on average especially for you 20 somethings. What are you going to do when you now have to work past 100 or 200? You make your million and ride it out. Just this week we announced growing new parts for hearts using stem cells. In a year we'll be growing full heart organs and livers and lungs. When we can do that with skin you might as well call it a day. It's going to happen so long, healthy life is inevitable.

55 might seem old to you youngins but that's middle age nowadays and in 10 or 20 years it ain't gonna be that.

Bottom line is WHERE do you invest for security and consistency?

Stocks 'sound' good but stocks crash.

Regardless, the value of $1M in 25 years would be way less than its value now. That applies across the board wherever you live. It's called INFLATION.

just change the 15% down to a more reasonable 10-12% and it's a solid plan.

Ja, 10% is great! More realistic.

I mentioned to my finance guy about getting 10% and of course 'he' knows that you can get much more. I could tell by his mug that he had some dumbass risky plan and far as I'm concerned 10% with integrity and reliability is much more desirable.

10% is good if you are in it for the mid term (i.e. 5-10 years), but for a long term investment, that kind of low IMO.

I don`t find this deal very profitable,350 dollars for 25 years ? Come on...!

No it's not the best deal in town. But it's an easy plan everyone can follow without modifying their lifestyle.

risk & reward... there is a high chance of losing everything

And there is a high chance of gaining it back over a long term period.

Now if we were all Warren Buffet you might have a solid point.

No, it's better than average. Historically, since the Great Depression, the American stock market has averaged about 10-11% return for equities. I don't know if that's the market as a whole or the S&P 500, but if you average 15%, you're doing very well.

Of course, producing porn content returns more!:thumbsup :thumbsup :thumbsup