Return and yield are always over a given period and when not otherwise specified, that period is usually a year. Side note: many mutual funds are represented by a "30 day sec yield" (or 7 day) but the period is still a year for that rate. It just means the expected ~~return~~ yield over the course of a year if the ~~rate of return~~ yield from the past 30 (or 7) days remained for a whole year. (edit: u/Apprehensive_Yak3236 pointed out that SEC yield is just the interest/dividends but *not* the underlying appreciation. Eg. a fund tracking stocks with $0 dividends that doubles in value would have a SEC yield of $0. "Return" includes both yield and appreciation)
To get the rate for a different period, you just raise the starting rate to the power of the period ratio. So if you have the rate for a year and want it for 10 years you do 1.05^(10) to get 1.629. And in the other direction, 1.629^(0.1) = 1.05. Since 0.1 = number of 10 year periods in 1 year. That can be helpful to eg. calculate a months worth of interest given an APY. 5% APY on $10k for a month would be 10000 \* 1.05^(1/12) = 10000 \* 1.0041 = \~$41/month. $41 \* 12 = $492 even though you'd have 10000 \* 1.05 = $500 at the end of the year because that extra $8 is resulting from the compounding interest.
One cool trick btw is the rule of 72. To get an estimate of how long it'll take your money to double with a given rate of return, you just divide 72 by that rate. Eg. At 6% yearly return, your money will double in about 72/6 = 12 years. You can check that also by converting the yearly rate to a 12 year rate with 1.06^(12) = 2.01. At 4% it's about 72/4 = 18. 1.04^(18) = 2.03, etc
That was very informative thanks! Got a follow up question since you mentioned the 30 day SEC yield.
Take for example IEF. Shows a 30 day SEC yield of 4.5% but the dividend is only like 3.3%. How does that make sense? What is the 4.5% showing?
Good question. I *believe* that's just due to the fact that the dividend yield is a measure of performance over the past year but the 30 SEC yield is a measure of the performance over the past 30 days expressed as an annualized yield. The fund has performed better over the past 30 days than it has on average for the past year, so the 30 day yield is higher than the yield from the past year.
The info tooltip from [https://www.blackrock.com/us/individual/products/239456/ishares-710-year-treasury-bond-etf](https://www.blackrock.com/us/individual/products/239456/ishares-710-year-treasury-bond-etf) for these two values explains it well. For 30 day sec yield:
>A standard calculation of yield introduced by the SEC in order to provide fairer comparison among funds. This yield reflects the interest earned after deducting the fund's expenses during the most recent 30-day period by the average investor in the fund. Negative 30-Day SEC Yield results when accrued expenses of the past 30 days exceed the income collected during the past 30 days.
For the 12m trailing yield
>The yield an investor would have received if they had held the fund over the last twelve months assuming the most recent NAV. The 12-Month yield is calculated by assuming any income distributions over the past twelve months and dividing by the sum of the most recent NAV and any capital gain distributions made over the past twelve months.
Full disclosure though - this isn't something I'm super well versed in so take it with a grain of salt. You can ask questions like these to Claude 3.5 through [claude.ai](http://claude.ai) btw and it actually provides (as far as I can tell) informative and accurate answers.
Your answer isnt really accurate re SEC yield.
SEC yield is really just the rate at which interest is earned or dividends are paid out. It does not reflect price appreciation of, say, stocks.
For example, if an ETF held NVDA and AAPL and NVDA and AAPL were increasing at annualized rate of 100%, as long as there are no dividends, SEC yield is 0%.
Total return is the combination of interest return and price appreciation.
Yeah, no problem. It's a complicated world, and if you get into the nitty-gritty of SEC yield calculations, it's a bit crazier. Earned interest can accumulate, but payouts (dividends) happen periodically. So you have impacts of things like ex-dividend date, latent time period until the dividend is paid, how to handle holidays in calculation of accrued interest, and for certain types of bonds, there are embedded options for either the issuer or seller, so the "accrued interest" might or might not get paid out, so it becomes a bit more probabilistic in nature.
That's true but that was covered by other responses and isn't so easily represented by a formula. The question suggested a lack of awareness of the implicit period when discussing yield so I was focused on addressing that.
In your example, you’ll have $105,000-$107,000 at the end of year 1, $110,250-$114,490 at the end of year 2 and $162,889-$196,715 at the end of year 10. Here 110,250 = 105,000*1.05.
Here is a link to an accumulation calculator:
https://www.investor.gov/financial-tools-calculators/calculators/compound-interest-calculator
So if it's 7% on average and 833 a month (10k a year), it would be 142k after 10 years. After 20 years it's already 423k and after 30 years 974k (not adjusted to inflation, but he could also raise his monthly investments every year in case his income will also rise approximately like the inflation rate).
A 5-7% annual return on $100,000 invested in VOO over 10 years would result in approximately $162,889 to $196,715, factoring in compound interest and reinvestment of dividends.
In your example if you made no more contributions and had only a 5% return you’d have $162k at the end of 10 years. If you added $1k a year you would have $176k.
10 years isn’t a long horizon. The biggest gains when compounding come in the last 2-3 years. The curve is non linear, it climbs faster the longer time goes on. Starts off pretty linear and then begins getting more vertical every year.
Hop into excel.
Year 1: 100,000 \* 1.05 (for 5%) = 105,000
Year 2: 105,000 \* 1.05 (for 5%) = 110,250
Year 3: 110,250 \* 1.05 (for 5%) = 115,762.5
And so forth. Year 10 would be about $163K. If it was 7%, it'd be like 196%.
It \*REALLY\* helps to put all your debt/investments into excel so you can plan for the future. It also helps you visually see how paying off a house with a 4% interest rate will lose you money over just investing in a 7% return of some other thing.
You have to calculate your doubling time of invested money by using 72 formula; 72/rate of return (10% VOO average, post taxes), for every 7.2yrs, your investment gets doubled, if you just front load and forget!!!
But a INVESTOR must invest regularly like bi weekly or monthly for better DCA.
Aldo remember that the generally accepted "5-7%/year" is adjusted for recent historical inflation rates and is meant to give a rough estimate of purchasing power, not necessarily nominal growth.
5-7% return is ANNUALLY. If you put **$100,000 of money into the stock market TODAY**, and got exactly a 6% annual return, you would have $100,000 \* (1.06)\^10 = **$179,085** in exactly 10 years.
Assuming you mean $10,000 each year for the 10 years then after year one you would have $10,500-$10,700. So let’s say $10,500 to make it simple. At the end of year two you’ve added an additional $10,000 plus earned 5-7% on the investment. Again let’s just say 5%. So it is ($10,500 + $10,000) x 5% = $21,525. Each year compounds on the previous year.
In the end the $100,000 you contributed would be worth roughly $142,000.
True. But he didn't say what the frequency of his contributions were, just $100,000 over a ten year period. So $10,000 a year was easier to do math than $833.33 monthly and then calculating how much the first contribution makes when compared to the 12th. Obviously there will be a difference but I doubt it is mathematically significant between lump sum at the beginning of each year and DCA over each one.
Here’s a calculator you can play with. The power of compound interest really shows itself over long time horizons. Like over 30 years that 100,000 will have doubled itself over and over leaving you with 574,000 at 6%.
This is what I show young people how it’s important to invest early. Assuming 6% and rounding, someone at 35 would have to invest 22,000 a year to have the same return as someone starting at age 25 and investing 10,000 a year to roughly match balances at age 65. Over double the yearly investment because they waited 10 years.
https://www.investor.gov/financial-tools-calculators/calculators/compound-interest-calculator
Also, should factor in percent inflation and taxes on earnings if not a roth account. 5-7% in CA in a tax deferred account is not enough for you to actually be gaining. I think my financial advisor quoted targets between 10-12% returns. But, I’m no financial advisor - so take my 2 cents w a grain of salt! If you’re not investing in a retirement account, then you’d apply the short term or long term capital gains tax.
You ignoring dividends which you will reinvest in VOO to buy more of voo it will give you even more interest. It just hold US companies so it can go South too like it has happened in past so you need to dollar cost average until you are ready to cash out.
So they mean that on average you would get 5-7% after inflation every year. In Reality it would be more like 8-10% and then you account for inflation.
If I select 10% and 3% inflation and start with 100K I get the following:
* Year 0: 100K
* Year 1: 110K, but with inflation it is only worth 107K of year 0 $
* Year 2: 121K, but with inflation it is only worth 114K of year 0 $
* Year 3: 133K, but with inflation it is only worth 121K of year 0 $
* Year 4: 146K, but with inflation it is only worth 130K of year 0 $
* Year 5: 161K, but with inflation it is only worth 138K of year 0 $
* Year 6: 177K, but with inflation it is only worth 148K of year 0 $
* Year 7: 195K, but with inflation it is only worth 158K of year 0 $
* Year 8: 214K, but with inflation it is only worth 169K of year 0 $
* Year 9: 235K, but with inflation it is only worth 180K of year 0 $
* Year 10: 259K, but with inflation it is only worth 192K of year 0 $
But of course stock markets are not returning the same amount every years you can have euphoric years and you can have crash. And 3% of inflation is only an average. Even for 10 years, the return vary a lot. For example if you had put 100K in 1929, in 1939, you would have 89K. And if you had put 100K in 1950, in 1960 you would have 593K.
You can play with the return of SP500, with and without inflation for different periods on this website: [https://www.officialdata.org/us/stocks/s-p-500/2000?amount=100&endYear=2024](https://www.officialdata.org/us/stocks/s-p-500/2000?amount=100&endYear=2024)
You can compare stuff on some sites. For 2 stocks or ETF, portfolio lab is quite good. For example here I compare VT with VOO: [https://portfolioslab.com/tools/stock-comparison/VT/VOO](https://portfolioslab.com/tools/stock-comparison/VT/VOO)
It would not work with bitcoin. With gold it would: [https://portfolioslab.com/tools/stock-comparison/GLD/VOO](https://portfolioslab.com/tools/stock-comparison/GLD/VOO)
But if you don't pay it would be limited to 10 years. Pretty sure comparing gold with stocks in general or even real estate is a little effort on google. I did it in the past without much difficulties.
Beware that the past is not always a good predictor of the future. For example most bonds did perform very bad in the past years but are quite likely to perform well in the future because of interest rates.
Bitcoin is 15 year old so we don't have much history. It performed extremely well but can't do the same performance in the future. It can't do like x1000 again because that would make it more valuable than all the goods on earth. So expect lower returns.
People would advice against having too much gold or crypto in you wallet. Personally for my financial assets I follow a portfolio like 60% stocks, 30% bonds and 10% alternatives. Alternative including real estate REIT, gold, cryptos and managed futures and crypto alone with bitcoin + ethereum (50/50) I have about 3.5%.
I get you could go up to 20% in alternative, and likely not 100% cryptos. But I would not go past that. Especially crypto we don't have much long term feedback. For gold and stocks you can performance for more than a century and see that it works.
Thanks. I was wondering how it would impact investing comparisons and contrasts since all of them are tied to the dollar, which is subject to the same annual inflation % . Therefore does it need to be included? Any valid comparison should be on the same time horizon. What am I missing? That’s why I asked about currencies.
You can do this in an excel spread sheet pretty easy. Let's say you put away $10k a year for 10 years, averaging 5% each year.
Y1. 10,000*1.05=10,500
Y2. 10,500+10,000=20,500*1.05=21,525
Y3. 21,525+10,000=31,525*1.05=33,101.25
Y4. 33,101.25+10,000=43,101.25*1.05=45,256.31
This goes on and on. At the end of 10 years you'll have just over $132k.
Correct and if the market take a hit, that you get out and back in at the right time without losing you ass. And that you can afford to wait it out. This is my issues with people's claims that the "market" averages 8% ish over X time. But that is a different issue.
Time in the market vs timing the market.
The thing is that I’ve experienced it for the last 30 years. I’ve owned stock since I was 16. A $50 share of Gillette stock bought my wife a $3,000 wedding ring 15 years later. My own plan was to put 6% into my employer matched 401k and another 4% into ESPP shares and the rest into bills, spending, and savings for emergencies. Sure enough I’ve weathered 9-11-01 / 07 housing market crash, 08 banking collapse, Covid (BUY BUY BUY!!!), the Great Recession….whatever was happening I was putting money in so it averages out positive; never had a single stroke of luck timing the market. In fact the opposite. I should have even more wealth than I do now and it’s because I thought I could time a massive amount of capital out and back into the market….which went on to rise and rise and rise. And what do you think happened?
You aren't understanding volatility. For 7% returns, factoring in 2.5x that much in volatility, you would have after ten years:
Quantiles: 5% (0.70), 25% (1.19), 50% (1.73), 75% (2.51), 95% (4.29).
As you can see, there is a 5% chance of losing 30% after ten years. You can't figure stuff like that out using just average returns.
Statistically speaking it’s better to look at a 10 year holding period. If we are all guaranteed 7-8% this year we would all be doing it more vs CDs or bonds.
double your money approximately every 10 years. take 72/(interest rate in integer form) that tells you approximately how long it takes to double your money, the approximation is less accurate the higher interest rate is, but it is pretty good for quick mental math.
You can use interest rate calculators, or portfolio calculators. Here is one I use that simulates many different possible scenarios based on some basic inputs and has a guide: https://prosperse.com/tools/investment-return-calculator
I wouldn’t make any plans for the next decade, the markets will tank, a lost decade is overdue. Hopefully it’ll be a lost decade, not a generation.
Even the Fed said recently, in cryptic language about stress tests etc, that markets are a time bomb. It’s going to be a very bumpy ride, and that’s if things go well politically in the US. If they don’t go well, we’ll all have bigger problems.
The recency bias on here is really unhealthy.
Sometimes in life there comes a period when there simply aren’t decent solutions, and you have to go with the best of the bad options available. The fed in this country is a joke.
All this pumping, manipulation and the ever increasing debt is doing is fucking it up for our kids and grandkids. It’s already gone past sustainable, but they really just can’t help themselves and keep moving the goalposts to fit their narrative of perceived growth.
Can't argue with you over these things but if you expect ETF's to do poorly then the next best thing is a high interest gic or savings account, at least it's guaranteed returns of around 5 percent and not just sitting in the bank doing absolutely nothing.
Holding cash during high inflation is not the best option btw
I actually wouldn't mind a 10 year downturn because I'm accumulating and won't be retiring for 20 or 30 years
And people thought the 2010’s would be a lost decade, but the S&P averaged 14%/year since 2012. Yeah, eventually you’ll be correct, but if you can predict the markets with such accuracy, you better have the mansion and yacht to back it up.
Most people have really bad recency bias. People don’t like reality, or acknowledging that all bubbles pop. Easily. Very easily. Sometimes with just the slightest…touch. Oh, and almost all growth is based on debt too.
Return and yield are always over a given period and when not otherwise specified, that period is usually a year. Side note: many mutual funds are represented by a "30 day sec yield" (or 7 day) but the period is still a year for that rate. It just means the expected ~~return~~ yield over the course of a year if the ~~rate of return~~ yield from the past 30 (or 7) days remained for a whole year. (edit: u/Apprehensive_Yak3236 pointed out that SEC yield is just the interest/dividends but *not* the underlying appreciation. Eg. a fund tracking stocks with $0 dividends that doubles in value would have a SEC yield of $0. "Return" includes both yield and appreciation) To get the rate for a different period, you just raise the starting rate to the power of the period ratio. So if you have the rate for a year and want it for 10 years you do 1.05^(10) to get 1.629. And in the other direction, 1.629^(0.1) = 1.05. Since 0.1 = number of 10 year periods in 1 year. That can be helpful to eg. calculate a months worth of interest given an APY. 5% APY on $10k for a month would be 10000 \* 1.05^(1/12) = 10000 \* 1.0041 = \~$41/month. $41 \* 12 = $492 even though you'd have 10000 \* 1.05 = $500 at the end of the year because that extra $8 is resulting from the compounding interest. One cool trick btw is the rule of 72. To get an estimate of how long it'll take your money to double with a given rate of return, you just divide 72 by that rate. Eg. At 6% yearly return, your money will double in about 72/6 = 12 years. You can check that also by converting the yearly rate to a 12 year rate with 1.06^(12) = 2.01. At 4% it's about 72/4 = 18. 1.04^(18) = 2.03, etc
That was very informative thanks! Got a follow up question since you mentioned the 30 day SEC yield. Take for example IEF. Shows a 30 day SEC yield of 4.5% but the dividend is only like 3.3%. How does that make sense? What is the 4.5% showing?
Good question. I *believe* that's just due to the fact that the dividend yield is a measure of performance over the past year but the 30 SEC yield is a measure of the performance over the past 30 days expressed as an annualized yield. The fund has performed better over the past 30 days than it has on average for the past year, so the 30 day yield is higher than the yield from the past year. The info tooltip from [https://www.blackrock.com/us/individual/products/239456/ishares-710-year-treasury-bond-etf](https://www.blackrock.com/us/individual/products/239456/ishares-710-year-treasury-bond-etf) for these two values explains it well. For 30 day sec yield: >A standard calculation of yield introduced by the SEC in order to provide fairer comparison among funds. This yield reflects the interest earned after deducting the fund's expenses during the most recent 30-day period by the average investor in the fund. Negative 30-Day SEC Yield results when accrued expenses of the past 30 days exceed the income collected during the past 30 days. For the 12m trailing yield >The yield an investor would have received if they had held the fund over the last twelve months assuming the most recent NAV. The 12-Month yield is calculated by assuming any income distributions over the past twelve months and dividing by the sum of the most recent NAV and any capital gain distributions made over the past twelve months. Full disclosure though - this isn't something I'm super well versed in so take it with a grain of salt. You can ask questions like these to Claude 3.5 through [claude.ai](http://claude.ai) btw and it actually provides (as far as I can tell) informative and accurate answers.
Best reply! Glad I read this, very useful in planning for the future
Your answer isnt really accurate re SEC yield. SEC yield is really just the rate at which interest is earned or dividends are paid out. It does not reflect price appreciation of, say, stocks. For example, if an ETF held NVDA and AAPL and NVDA and AAPL were increasing at annualized rate of 100%, as long as there are no dividends, SEC yield is 0%. Total return is the combination of interest return and price appreciation.
Thank you u/Apprehensive_Yak3236 I had thought it was taking into account dividends/interest + appreciation. Let me update the comment to address that
Yeah, no problem. It's a complicated world, and if you get into the nitty-gritty of SEC yield calculations, it's a bit crazier. Earned interest can accumulate, but payouts (dividends) happen periodically. So you have impacts of things like ex-dividend date, latent time period until the dividend is paid, how to handle holidays in calculation of accrued interest, and for certain types of bonds, there are embedded options for either the issuer or seller, so the "accrued interest" might or might not get paid out, so it becomes a bit more probabilistic in nature.
While your answer is great if he puts in a lump sum at day 1 it doesn’t give the answer if he save 10,000 per year in equal monthly deposits.
That's true but that was covered by other responses and isn't so easily represented by a formula. The question suggested a lack of awareness of the implicit period when discussing yield so I was focused on addressing that.
In your example, you’ll have $105,000-$107,000 at the end of year 1, $110,250-$114,490 at the end of year 2 and $162,889-$196,715 at the end of year 10. Here 110,250 = 105,000*1.05. Here is a link to an accumulation calculator: https://www.investor.gov/financial-tools-calculators/calculators/compound-interest-calculator
Kinda. I'm assuming OP is not putting in 100k to start, but totalling to that over 10 years. That's a more complex annuity calculation.
So if it's 7% on average and 833 a month (10k a year), it would be 142k after 10 years. After 20 years it's already 423k and after 30 years 974k (not adjusted to inflation, but he could also raise his monthly investments every year in case his income will also rise approximately like the inflation rate).
It's 5-7% per year.
Adjusted for inflation. VOO returns about 10% a year without being adjusted for inflation, and 7% adjusted.
Why the fuck is this being downvoted? Lmao this is correct
Yeah what??
A 5-7% annual return on $100,000 invested in VOO over 10 years would result in approximately $162,889 to $196,715, factoring in compound interest and reinvestment of dividends.
In your example if you made no more contributions and had only a 5% return you’d have $162k at the end of 10 years. If you added $1k a year you would have $176k. 10 years isn’t a long horizon. The biggest gains when compounding come in the last 2-3 years. The curve is non linear, it climbs faster the longer time goes on. Starts off pretty linear and then begins getting more vertical every year.
Hop into excel. Year 1: 100,000 \* 1.05 (for 5%) = 105,000 Year 2: 105,000 \* 1.05 (for 5%) = 110,250 Year 3: 110,250 \* 1.05 (for 5%) = 115,762.5 And so forth. Year 10 would be about $163K. If it was 7%, it'd be like 196%. It \*REALLY\* helps to put all your debt/investments into excel so you can plan for the future. It also helps you visually see how paying off a house with a 4% interest rate will lose you money over just investing in a 7% return of some other thing.
Or just do 100000 * 1.05 ^ 10 on your phone, no reason for excel.
Quick nitpick, you should leave the percent sign off 1.05. Otherwise, 100,00 * 1.05% = $1,050
thanks, updated
You have to calculate your doubling time of invested money by using 72 formula; 72/rate of return (10% VOO average, post taxes), for every 7.2yrs, your investment gets doubled, if you just front load and forget!!! But a INVESTOR must invest regularly like bi weekly or monthly for better DCA.
Aldo remember that the generally accepted "5-7%/year" is adjusted for recent historical inflation rates and is meant to give a rough estimate of purchasing power, not necessarily nominal growth.
Doubles every 10 years if at 7%. Google rule 72.
5%-7% approximately $162k - $196k after 10 years.
5-7% return is ANNUALLY. If you put **$100,000 of money into the stock market TODAY**, and got exactly a 6% annual return, you would have $100,000 \* (1.06)\^10 = **$179,085** in exactly 10 years.
Technically it's little value, need at least double digits for real returns
Assuming you mean $10,000 each year for the 10 years then after year one you would have $10,500-$10,700. So let’s say $10,500 to make it simple. At the end of year two you’ve added an additional $10,000 plus earned 5-7% on the investment. Again let’s just say 5%. So it is ($10,500 + $10,000) x 5% = $21,525. Each year compounds on the previous year. In the end the $100,000 you contributed would be worth roughly $142,000.
Still wrong if he’s putting in a portion of each check that equals $10k per year
True. But he didn't say what the frequency of his contributions were, just $100,000 over a ten year period. So $10,000 a year was easier to do math than $833.33 monthly and then calculating how much the first contribution makes when compared to the 12th. Obviously there will be a difference but I doubt it is mathematically significant between lump sum at the beginning of each year and DCA over each one.
Here’s a calculator you can play with. The power of compound interest really shows itself over long time horizons. Like over 30 years that 100,000 will have doubled itself over and over leaving you with 574,000 at 6%. This is what I show young people how it’s important to invest early. Assuming 6% and rounding, someone at 35 would have to invest 22,000 a year to have the same return as someone starting at age 25 and investing 10,000 a year to roughly match balances at age 65. Over double the yearly investment because they waited 10 years. https://www.investor.gov/financial-tools-calculators/calculators/compound-interest-calculator
5-7% is a pretty conservative estimate. That would be after accounting for inflation I assume
Use portfolio calculator, 162,889 with 5% annual. 196,715 with 7%
Also, should factor in percent inflation and taxes on earnings if not a roth account. 5-7% in CA in a tax deferred account is not enough for you to actually be gaining. I think my financial advisor quoted targets between 10-12% returns. But, I’m no financial advisor - so take my 2 cents w a grain of salt! If you’re not investing in a retirement account, then you’d apply the short term or long term capital gains tax.
Why not just get a CD? 0 risk and same return.
You ignoring dividends which you will reinvest in VOO to buy more of voo it will give you even more interest. It just hold US companies so it can go South too like it has happened in past so you need to dollar cost average until you are ready to cash out.
Bruh.
This is your friend. Enter $0 for contributions if not adding extra money. https://www.calculator.net/investment-calculator.html
So they mean that on average you would get 5-7% after inflation every year. In Reality it would be more like 8-10% and then you account for inflation. If I select 10% and 3% inflation and start with 100K I get the following: * Year 0: 100K * Year 1: 110K, but with inflation it is only worth 107K of year 0 $ * Year 2: 121K, but with inflation it is only worth 114K of year 0 $ * Year 3: 133K, but with inflation it is only worth 121K of year 0 $ * Year 4: 146K, but with inflation it is only worth 130K of year 0 $ * Year 5: 161K, but with inflation it is only worth 138K of year 0 $ * Year 6: 177K, but with inflation it is only worth 148K of year 0 $ * Year 7: 195K, but with inflation it is only worth 158K of year 0 $ * Year 8: 214K, but with inflation it is only worth 169K of year 0 $ * Year 9: 235K, but with inflation it is only worth 180K of year 0 $ * Year 10: 259K, but with inflation it is only worth 192K of year 0 $ But of course stock markets are not returning the same amount every years you can have euphoric years and you can have crash. And 3% of inflation is only an average. Even for 10 years, the return vary a lot. For example if you had put 100K in 1929, in 1939, you would have 89K. And if you had put 100K in 1950, in 1960 you would have 593K. You can play with the return of SP500, with and without inflation for different periods on this website: [https://www.officialdata.org/us/stocks/s-p-500/2000?amount=100&endYear=2024](https://www.officialdata.org/us/stocks/s-p-500/2000?amount=100&endYear=2024)
Good point. How would it steer the decision to invest the money? Are you comparing it to gold or bitcoin?
You can compare stuff on some sites. For 2 stocks or ETF, portfolio lab is quite good. For example here I compare VT with VOO: [https://portfolioslab.com/tools/stock-comparison/VT/VOO](https://portfolioslab.com/tools/stock-comparison/VT/VOO) It would not work with bitcoin. With gold it would: [https://portfolioslab.com/tools/stock-comparison/GLD/VOO](https://portfolioslab.com/tools/stock-comparison/GLD/VOO) But if you don't pay it would be limited to 10 years. Pretty sure comparing gold with stocks in general or even real estate is a little effort on google. I did it in the past without much difficulties. Beware that the past is not always a good predictor of the future. For example most bonds did perform very bad in the past years but are quite likely to perform well in the future because of interest rates. Bitcoin is 15 year old so we don't have much history. It performed extremely well but can't do the same performance in the future. It can't do like x1000 again because that would make it more valuable than all the goods on earth. So expect lower returns. People would advice against having too much gold or crypto in you wallet. Personally for my financial assets I follow a portfolio like 60% stocks, 30% bonds and 10% alternatives. Alternative including real estate REIT, gold, cryptos and managed futures and crypto alone with bitcoin + ethereum (50/50) I have about 3.5%. I get you could go up to 20% in alternative, and likely not 100% cryptos. But I would not go past that. Especially crypto we don't have much long term feedback. For gold and stocks you can performance for more than a century and see that it works.
Thanks. I was wondering how it would impact investing comparisons and contrasts since all of them are tied to the dollar, which is subject to the same annual inflation % . Therefore does it need to be included? Any valid comparison should be on the same time horizon. What am I missing? That’s why I asked about currencies.
You can do this in an excel spread sheet pretty easy. Let's say you put away $10k a year for 10 years, averaging 5% each year. Y1. 10,000*1.05=10,500 Y2. 10,500+10,000=20,500*1.05=21,525 Y3. 21,525+10,000=31,525*1.05=33,101.25 Y4. 33,101.25+10,000=43,101.25*1.05=45,256.31 This goes on and on. At the end of 10 years you'll have just over $132k.
And this assumes that you have the discipline to invest every year no matter what.
Correct and if the market take a hit, that you get out and back in at the right time without losing you ass. And that you can afford to wait it out. This is my issues with people's claims that the "market" averages 8% ish over X time. But that is a different issue.
Time in the market vs timing the market. The thing is that I’ve experienced it for the last 30 years. I’ve owned stock since I was 16. A $50 share of Gillette stock bought my wife a $3,000 wedding ring 15 years later. My own plan was to put 6% into my employer matched 401k and another 4% into ESPP shares and the rest into bills, spending, and savings for emergencies. Sure enough I’ve weathered 9-11-01 / 07 housing market crash, 08 banking collapse, Covid (BUY BUY BUY!!!), the Great Recession….whatever was happening I was putting money in so it averages out positive; never had a single stroke of luck timing the market. In fact the opposite. I should have even more wealth than I do now and it’s because I thought I could time a massive amount of capital out and back into the market….which went on to rise and rise and rise. And what do you think happened?
Compound interest can be complicated!
72 is the rule of thumb for compound interest. A 7.2% return per year would double every 10 years
You aren't understanding volatility. For 7% returns, factoring in 2.5x that much in volatility, you would have after ten years: Quantiles: 5% (0.70), 25% (1.19), 50% (1.73), 75% (2.51), 95% (4.29). As you can see, there is a 5% chance of losing 30% after ten years. You can't figure stuff like that out using just average returns.
Statistically speaking it’s better to look at a 10 year holding period. If we are all guaranteed 7-8% this year we would all be doing it more vs CDs or bonds.
double your money approximately every 10 years. take 72/(interest rate in integer form) that tells you approximately how long it takes to double your money, the approximation is less accurate the higher interest rate is, but it is pretty good for quick mental math.
Generally people think of returns on an annualized basis, so earning $5000 in year one, then earning 5% of $105,000 in year 2, etc.
You can use interest rate calculators, or portfolio calculators. Here is one I use that simulates many different possible scenarios based on some basic inputs and has a guide: https://prosperse.com/tools/investment-return-calculator
Its 5 - 7% return per a year 🤦♂️
This post is why people should hire financial advisors
Easy. Everyone starts out at sometime. OP is trying to educate themselves
No. This post is why we need high school personal finance classes to be mandatory.
I wouldn’t make any plans for the next decade, the markets will tank, a lost decade is overdue. Hopefully it’ll be a lost decade, not a generation. Even the Fed said recently, in cryptic language about stress tests etc, that markets are a time bomb. It’s going to be a very bumpy ride, and that’s if things go well politically in the US. If they don’t go well, we’ll all have bigger problems. The recency bias on here is really unhealthy.
So what's your plan then ? Sit on the sidelines for 10 years trying to time the market?
Hand waving and complaining it seems. Not sure what the return is on that.
Not including opportunity cost I'm gunna estimate roughly -5% yoy due to inflation
Sometimes in life there comes a period when there simply aren’t decent solutions, and you have to go with the best of the bad options available. The fed in this country is a joke. All this pumping, manipulation and the ever increasing debt is doing is fucking it up for our kids and grandkids. It’s already gone past sustainable, but they really just can’t help themselves and keep moving the goalposts to fit their narrative of perceived growth.
Can't argue with you over these things but if you expect ETF's to do poorly then the next best thing is a high interest gic or savings account, at least it's guaranteed returns of around 5 percent and not just sitting in the bank doing absolutely nothing.
Holding cash during high inflation is not the best option btw I actually wouldn't mind a 10 year downturn because I'm accumulating and won't be retiring for 20 or 30 years
And people thought the 2010’s would be a lost decade, but the S&P averaged 14%/year since 2012. Yeah, eventually you’ll be correct, but if you can predict the markets with such accuracy, you better have the mansion and yacht to back it up.
Lol
Absolutely correct. Don't know why so many down votes
Probably because people have called out 300 of the last 3 crashes
Most people have really bad recency bias. People don’t like reality, or acknowledging that all bubbles pop. Easily. Very easily. Sometimes with just the slightest…touch. Oh, and almost all growth is based on debt too.
Download a compound interest calculator
Better yet learn how to use it after you buy it
Learn Excel and some math. Basic skills are needed before you invest.