Homie if you invest 500 per month (which is very little, if you have a decent career you can invest way more than this), every month, for 10 years, you'll have more than 100,000.00. Literally one hundred thousand dollars, just by investing 500 per month. So if you start at your 20's, you'll have 100,000.00 dollars in your 30's. I dont know how can you look at this and say "nah i dont want it".
Thats not profit out of that 100k thatd be only 30k profit after 10 years, again not sure if its taxed since idk much abt this but if it is thats 15k in 10 years which is horrible since id loose out on 60k that i wouldnt be able to use, 60k of it is the amount u put in over 10 years
first of all, you are using an 8% return rate, which is virtually what you will get by using the standard strategy I mentioned. But if you are willing to take more risks and follow factor investing, you can get 10% per year easily. And with 10% per year you will have more than 100k in 10 years of investing (yes thats the total amount not the profit. In investments, people usually refer to the total amount more often when simulating investing returns), which is great. If you were expecting to become a millionaire after 10 years of investing only $500 per month, Im sorry to break it up to you but thats not possible. And if anyone tells you their investment strategy will give you these results, they are scamming you and I proved that with the academical studies I put in this thread.
The methods to get more than 10% are riskier id assume 99% of the time 8% a year is gonna be better, and my issue isnt expecting to be rich in 10 years, its that for those 10 years id be negative
Thats not how investing works. If you invest 60k and have a 30k profit, you are not "negative". You didnt "put 60k and got back only 30k". You got back 90k, because now you have the money you invested AND the profit you made, and you can have access to that 90k at any moment. Just because you didnt double the amount of money you invested yet, it doesnt mean you are "negative".
Tell me if im wrong but im 99% sure u have to keep the money in the s&p for it to keep going up… so ud be negative
Unless i missed it from what i can tell u didnt really explain what factor investing is unless i missed it, u just kinda explained how much to invest into it, which from my view is the same as someone telling me to invest into a shitcoin
Of course, for your money to keep going up you need to keep it invested. But your next statement is where you are messing it up:
You would not. Think about it in this way: You dont need to sell your stocks for your money to be yours. In the same way the money is yours if you keep it in your wallet, its also yours if you keep it invested in the stock market. If you put 10k dollars in the stock market and, after some time, your investments went up and then you had 15k, you would have made profit. You are thinking like "if I invested 10k and made a 5k profit, then this means I am negative"... No you arent, because now you have 15k (10k + the 5k profit you made). And you are acting like this is not being profitable, but it is. As long as you are making profit, you are being profitable. Got it?
Yep, I did explain what factor investing is and how it works, you probably missed it. Go back to the last section of my thread and you will understand everything about it.
Heres the thing tho the more u take out the less u make and ur situation isnt exactly correct since it being in my wallet doesnt increase or dicrease the amount i make based on what i have
Mb gave like 5 diff examples in the reply above js tryna explain the best i can why ppl would choose 60k rn instead of 90k in 10 years
Also ik ull say “just keep the money in the s&p so u can pull it out whenever and still make profit” i get that point but at that point ur investment would never build to the point of u getting enough, the only way i see this working is if u have a starting investment of like 20k since putting in 500
This is wrong, because in the simulation we are running you didnt have 60k at the start. You had $500. And after investing $500 every month, the total amount invested, after 10 years, was 60k. But you didnt invest 60k at the start, got it? This makes a huge difference, because if you invested 60k all at once, at the start, considering a reasonable 10% annual return rate, you would have more than 155k after 10 years, which is way more than 100k, which is roughly what you'd have after 10 years of investing $500 every month (considering the same 10% return rate).
It doesnt take effort and time. In fact, you will need to put zero effort into this because I already told you what you need to do, you just need to copy what I said. At this point, if you think it would take too much effort for you to do this, you're just being lazy bro.
Yes it is easy. You just need to sell the shares you have. And as these ETF's have extremely high liquidity, after you click to sell the shares you want to sell, they will be sold almost instantly. Its the easiest thing in the world.
Idk ig im always making money and assume i can also take out more than i invest if i need
No u just missunderstood me, i meant effort of spending the money, which is why i was asking is it as easy as spending with a card, the effort wasnt investing but taking the money out and using it
if i need 500 and i dont have 500 on me and i want to pull out 500 how much longer would it take to sell and spend that money vs spending directly from card
I think it's wise considering risk reward and the time you will save by not doing research personally>long term investing
>ETF
How can you think its better to literally keep your money in your wallet than to invest this money and make profit out of it? Thats crazy bro.
yeah I literally proved that with the research data I provided in this thread, that guy is just too close minded to see it.
npc
dont feel like reading all this rn but looks like a good thread will read when i have to shitWelcome to my megaguide on how to invest your money in the best way possible.
I’ll teach you the objectively best way to invest your money, and I’ll show PROOF that this way of investing gives you better results than the ones PROFESSIONAL INVESTING FUND MANAGERS get.
This is NOT clickbait, because there is academic research that proves that this strategy outperforms professional investors, and I will include these academic papers in this thread so that you have access to them
After learning everything that is in this thread you will be ready to be ahead of 99,9% of people when it comes to investing your money.
I hope yall enjoy this guide. Lets go.
WHERE TO INVEST?
Before talking about how to invest, we need to figure out what we should invest in. Stocks? Crypto? Dollar? Bonds? Well, the answer to this is quite simple. Take a look at the graphic below:
As we can see, when compared to other asset classes, stocks have (since 1802) outperformed basically everything consistently, by a very large margin. This would be enough for me to show you how they are obviously better and more profitable than Dollar, Gold, Bills and Bonds.
But, if you pay attention to the graphic, you’ll see that crypto is not included there. So what about crypto then? Is it better than stocks?
The answer, based on the current research, is that it is not. because of the simple fact that their expected returns are unknown. This is the general consensus in the academic investing space, as researchers couldn't figure out a way to reliably predict their returns. That means that crypto is completely unpredictable and highly speculative. Don't be a fool, yall. If the most capable people couldn’t do it, you are not gonna be the next genius to reliably predict the expected returns of investing in crypto, so it's not a reliable investing option.
Plus, the most reasonable possibility, according to the past performance of crypto in general, is that they behave in a similar way to a type of stocks called "small cap growth stocks", and these stocks are not the ones you should focus on if you want to invest in the most optimal way.
If you wanna go more in depth about why crypto is not a good investing option, check the following video linked below, from 34:37 to 51:36. This is an interview with Ben Felix, who has the CFA certification (literally the highest status investment certification in the world), and he goes deeper on why crypto is not worth it.
Ben Felix Talks Investing in Crypto, Revolutionary Tech, and Academic Research
The conclusion is: Stocks are the best investing option in the world, and in the following paragraphs, I will teach you how to invest in them in the best way possible for you to moneymax.
HOW TO INVEST IN STOCKS?
We can, initially, separate the stock market investing strategies into two groups (spoiler: one of them is completely bullshit):
Long term investing and short term investing
Long term investing works by investing in stocks basically with the goal of building your “money empire” during your lifetime.
Short term investing, as known as trading, works by buying and selling stocks in the short term, sometimes even in the same day (as known as day trading), with the goal of selling the stock by a higher price than the one you paid when you bought it.
Short term investing is 100% bullshit. This happens because EVERY. SINGLE. PIECE. OF. DATA. that we have leads to the same conclusions: it doesnt work. Here are some of the studies that prove what I am saying:
https://faculty.haas.berkeley.edu/odean/papers current versions/individual_investor_performance_final.pdf (this study found out that active traders underperformed the market average by 10.3 percent annually).
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2535636 (to summarize the findings of this study, take a look at this direct quote taken from it: “day trading is an industry that consistently and reliably loses money. From an industrial organization perspective, it is difficult to understand how such an industry survives. For people to knowingly day trade, most must either be overconfident about their prospects of success or derive non-financial utility from the activity and knowingly suffer losses as a result.”)
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3423101 (this study found out that literally 99% of the day traders LOSE money. It's not even like they have positive but below average results. They literally lose money. 99% of them, statistically).
Clearly short term investing is not the best alternative for you. You should invest for the long term. And if you want to learn how to do it in the best way possible, pay attention to the following paragraphs, because I'm gonna teach you how to actually do it.
First of all, you need to understand what would be an average, a good and a bad stock for you to invest. Take a look at the following graphic:
This is very important for you to understand how to invest in stocks. This is the risk-return graphic, and it is very simple: the higher the risk of a certain stock, the higher the expected returns of that stock tend to be (consider “returns” as the extra money you make from investing in that stock). There is a complex reason behind why that happens, but there is no need for me to go in depth about why this happens. What you need to know is that it is true, this is basic level investing knowledge and there is literally no one in the whole investing industry that disagrees with that. The higher the risk, the higher the return.
Now, take a look at the illustration I made in the graphic (I added a red dot and a blue dot. Consider each of them as a different stock):
Which of these two stocks would you consider the better stock for you to invest in? If you said “the blue one” because it offers higher returns, you are wrong, because even though it offers higher returns, it also has a higher level of risk associated with it, and it's not necessarily better than the red one that has lower levels of risk and lower levels of return. Conservative investors that dont wanna be too risky might choose the red one. Investors that are willing to take some more risk for higher expected returns might choose the blue one. But, objectively, there is no “better” one between these two stocks, because they have the SAME RISK/RETURN RATIO.
Now, take a look at this other example:
Now, in THIS case, the blue stock is objectively better than the red one, as it offers the same levels of return, with a lower risk. This means it has a better risk/return ratio and is an objectively better stock, because by investing in this stock you would generate ALPHA. Alpha, in the stock market, is what we call a better than average risk/return ratio. These would be the stocks that really bring abnormally good results for you as an investor.
This is the type of stocks that professional fund managers (basically the most qualified people in the world to select stocks to invest in) try to find, and they do that by searching for UNDERPRICED stocks (stocks that have a price that is too low compared to the price they should have), as, in theory, an underpriced stock would have a better risk/return ratio. And there are a lot of techniques they use to find these underpriced stocks. These techniques are called valuation techniques.
There is one problem though… The data shows us that… They can't do it.
Think about it: Fund managers, when looking for underpriced stocks, tend to invest in stocks that have a lower price (obviously), and stocks with lower price (as known as value stocks) are usually associated with higher levels of risk (you are going to understand why that happens later in this thread). So, if they were being successful in finding the underpriced stocks (and generating alpha), their returns should be exceptionally higher than the stock market average, right? Well… That does not happen, and i’ll show you a study that proves that:
The study in question is called “SPIVA”, and it is directed by Standard & Poor’s (S&P) which is the same company responsible for creating the american stock market’s index. They analyzed the performance of actively managed investing funds in stock markets all over the world for more than 15 years, and the findings are surprising:
They found that, after 15 years, nearly 90% of the investing funds UNDERPERFORMED the market (had a lower than average return). Here is the part of the study that comes to this conclusion:
This is the US part of the study. But they also analyzed latin america, europe, asia, africa and australia, and the results are similar for every region of the world. Fund managers are the most intellectually capable professionals to try to do it, yet they still can't outperform the market average. here is the link to this research: https://www.spglobal.com/spdji/en/research-insights/spiva/
And what do these results mean? They mean that it's not possible to find “underpriced” stocks, because if it was possible, investing fund managers would be able to find them and outperform the stock market. But they can't. Which means that you cannot generate alpha (having higher returns with lower levels of risk) in the stock market.
This happens because of the Efficient Market Hypothesis (EMH), a investing hypothesis created by Eugene Fama (this guy won a Nobel Prize in economic sciences and is among the greatest investing geniuses to ever live by the way). I am not gonna explain everything about this hypothesis as y'all don't necessarily need to know everything about it, and also this thread would get too complex if I included that here, but I can make a thread about that in the future if yall want.
“Ok, 90% of professional investing fund managers couldnt outperform the market average… But what about the 10% of these professionals that could outperform the market?” The following study analyzed these fund performances, and concluded that they did not generate alpha, and that they outperformed the market because of pure luck. This is a very reasonable conclusion, since the evidence shows us that the vast majority of professionals that outperformed the market during a 10 year period tend to underperform it in the 10 years following this "lucky" period they have. If it was because they are skilled managers, they would be able to keep doing it consistently for various decades. But thats not the case. This study is linked down below:
On Persistence in Mutual Fund Performance on JSTOR
Mark M. Carhart, On Persistence in Mutual Fund Performance, The Journal of Finance, Vol. 52, No. 1 (Mar., 1997), pp. 57-82www.jstor.org
Even WARREN BUFFETT, which is widely known as the GREATEST INVESTOR OF ALL TIME, cannot significantly outperform the market average in today’s age. Look at this graphic comparing his company’s (Berkshire Hathaway) performance to the american market’s average (S&P500):
He used to outperform the market by a large margin from 1970 - 1998, thats why he is regarded as the greatest. But his performance, since 1999, has been very similar to the average.
So you might be thinking: “Well… If not even the best professional investors in the world can beat the stock market average, then what should I do?”, right? Well, fortunately, there is a pretty simple solution to that, and it's called “Passive investing"
PASSIVE INVESTING
Passive investing basically consists of investing in ETF's.
ETF stands for “Exchange-traded fund”, and its basically a fund that is negotiated in the stock market, and that, generally, invests in the same stocks that make the market index (index = a group of stocks that represent the whole stock market), thus copying the stock market’s performance. It's a passive investing fund, as it doesnt have a manager trying to "FiNd UnDeRpRiCeD sToCkS". It literally just copies the index. And do you remember how 90% of professional fund managers can’t beat the market index? That means by investing in one of these "ETFs", your performance would be better than 90% of investing managers, and even Warren Buffett, the greatest investor of all time, wouldn't be able to outperform you by a significant margin. Sounds good, doesn't it?
For investing in these ETFs, I recommend opening a brokerage account on an american broker, so that you have access to the american stock market. I am not gonna teach you how to do it because you can easily find that type of information on the internet. It's a simple process and will take you like 20 minutes. You should do it because the American stock market has way more ETF options than any other country’s stock market.
In the american stock market, you will have access to global ETFs (ETFs that copy the global stock market index), and this is great, because globally diversifying your investing portfolio is a very rational decision. Take Japan's stock market index, “Nikkei 225”, as an example: it has literally been “walking sideways” and stuck in the same position for like 30 years. How can you guarantee this won't happen to your country? You can't. But if you invest globally, this won't be a problem, because, when combining all the countries, the global stock market has never had a larger losing period than 6 years. In the long run, it's always positive. ALWAYS.
I will save you some time: The most widely known ETF that copies the global index is called “VT”. Just search up “VT ETF” and you will be able to find all the information about it. It is owned by Vanguard which is among the biggest, most popular and most reliable investing management companies in the world. By investing in it, you will, as proven before, outperform 90% of investing managers. Here is a screenshot I took from VT's performance since 2008 (dont mind the shitty quality of my screenshot, I dont know why its that bad) (also the text on the screenshot is in portuguese because I live in Brazil, just saying that so yall dont get confused lol). You can also find this graphic by just searching up "VT ETF" on google.
View attachment 3087817
See how the price of the ETF literally more than doubled since then. That means that if someone invested 1 million dollars in it in 2008, and never invested more money there, they would have more than 2 million dollars nowadays. And I'll remind you again: The studies I showed you proved that this performance is better than 90% of professional investors. Thats how good it is. And you get it by simply investing in this ETF, without having to analyze "which stock is better than the other" and all that stuff.
But you need to remember how investing works: its not something that makes you rich overnight. Remember: SHORT TERM INVESTING IS BULLSHIT, and I already proved that to you before as well. If you are going to invest in this, you should, each month, separate some money from your salary to put on this ETF. And you should KEEP YOUR MONEY THERE. Do not be selling your ETF shares because “X person said this” or “Y person said that”. Just remember how everyone sold their stocks during the covid pandemic, and how they lost a lot of money doing that.
Its very common for people to see the price of their stocks/ETFs go down during a crisis, become desperate, and sell their shares because they are “scared to lose more money”. But by doing this they are actually missing out on the post-crisis gains. In every single crisis of the history of the world, the stock market dropped, but rapidly came back after that. Look at the world’s stock market index and see how it always comes back up after going down because of a global crisis.
(unfortunately this graphic only goes until 2019 and I couldnt find a graphic that highlights the financial crisis timeline that went past 2019. If you would like to see how this graphic goes after 2019, you can search up on google "MSCI World Index graphic" and go to "images").
So, dont be desperate. Do not sell your ETF shares. Keep holding them and buying more month by month. Each year you will have more money invested, until your expected yearly returns of 7% - 10% represent an amount of money that is large enough for you to live off it, and retire from your actual job. How much time this will take depends on how much money you make per month from your job. Investing, when done right, is a way to make you be able to retire earlier, and a way to build your financial empire during your whole lifetime. That's how every legendary investor got rich, and if anyone says something like “Invest in this magic investment for 1 year and you will suddenly become rich”, please dont listen to them, because they are 100% scamming you.
So… As I said, VT is a great ETF option for you to copy the global market index. And, referring to the money you separated to invest in the stock market, if you want to invest everything in VT, that's completely valid, because this is not a “super risky” way to invest, as you will be diversifying your money globally (also, VT has more than 9000 stocks in it, so you are not “putting all of your eggs in one basket”). Plus, remember that by investing in it your performance will be better than 90% of professional fund managers. I am being a bit repetitive on that because its for you to see how great of an investment option it is.
So, if you were to stop reading the thread right now and invested in VT, this would be a great approach to your investments.
But, if you want to get more advanced and boost your returns even more, be welcome to learn how to be a FACTOR INVESTOR. I will teach you how to do it in the next paragraphs so pay close attention.
FACTOR INVESTING
Factor investing consists on investing on stocks that have exposure to some certain "risk factors"
As we saw by the studies mentioned in this thread, it's not possible to generate alpha (higher levels of return with low levels of risk). If you want to have a higher performance, you need to take more risks. So, you might be asking yourself: “Does that mean that if we PURPOSEFULLY invest in riskier stocks, we will outperform the stock market index, as the levels of expected returns are always proportionate to the levels of risk that a stock has?”, and the answer to that is: Yes, there is a way to do this. Ladies and gentleman, I present to you the art of FACTOR INVESTING.
Do you remember when I mentioned Eugene Fama? That guy that won the Economic Sciences Nobel Prize? Well, he also dedicated a part of his career as a researcher to find out which types of stocks were riskier than others. And, to find that out, he, along with his research partner Kenneth French, developed several models. (The most famous ones were the "CAPM", the "three factor model" and the "five factor model"). These models were an attempt to try to determine which factors make a stock riskier than the others. And, with the evolution of these models, they have been able to find out several risk factors that make stocks riskier and, consequently, more profitable for the investor in the long term.
The two main factors you need to focus on are: Size and Value.
The size factor works in a way that stocks of smaller companies (in terms of market cap) tend to be riskier than stocks of big cap companies.
The value factor works in a way that value stocks (stocks with a lower price) tend to have higher levels of risk associated with them, when compared to stocks with a higher price.
(There are also other factors such as "profitability", "investment level of the company", "momentum" and "market beta", but these are all either not 100% well accepted by the current researchers we have, or not accessible in the investment options available to average investors).
So, how could we factor invest using the size and value risk factors? The good news is that there are specialized factor investing ETFs that copy indexes that are composed of value stocks and small cap stocks, thus tending to outperform the overall market index, and boost your returns even more. The bad news is that the factor investing industry is relatively new. So far, we only have high quality factor investing ETFs that target the US market, not the global market. But there is still a way for us to take advantage of this, as the US represents roughly 55% of the global stock market. So we can invest 55% of our money in a factor investing ETF that targets the US, and 45% of our money in a total market ETF that targets the rest of the world, excluding the US (yes, there are ETFs that do this).
The US factor investing ETF is called “IJS”. it targets small cap value stocks (stocks of small companies and that have a low stock price, basically investing accordingly to the value and size factors). And The global Ex-US (excluding US) ETF is called “VXUS”
So, here is a quick summary of the routes you can follow:
- If you want to just generically invest on the global stock market, you can put 100% of your money in VT.
- If you want to use factor investing to boost your returns, my suggestion is for you to invest 55% in IJS and 45% in VXUS.
Both of these options are completely valid. I, personally, am a factor investor, but I also know very intelligent people who know a lot about investments that only invest in VT as they prefer a more simplistic approach to investing, which is completely fine as well.
All of these ETFs are available in the American stock market
So, basically I gave you, for free, all the information you need to know to invest better than a professional investing fund manager. Plus I literally gave you the names of the things you should invest in. Most paid investing courses are very expensive and the methods that most of them teach don't come close to this strategy, as this is objectively the best way to invest your money in the stock market according to the data that we currently have.
You are welcome
And, if you want to learn more about investments, I suggest visiting Ben Felix’s youtube channel. As I said before, he is a CFA, which means he has the highest status investing certification in the world, and he is the one who introduced me to this investing strategy. For the most complete education possible, I suggest scrolling down to his first video and, starting from there, watching all of his videos on chronological order. Here is the link to his channel: www.youtube.com/@BenFelixCSI
If yall have any doubts, just send them here in this thread and I’ll try to answer everyone.
(BOTB Worthy?)
Some guys asked me to tag them in this thread so here ya go: @PseudoMaxxer @user123456 @ShawarmaFilth @Tylermax @oppastoppathe2nd
But I just told you that taking the money out of the stock market for you to spend it is extremely easy, I already explained that to you three times.
this can easily be solved by not keeping all your money on the stock market. No one does that. I separated a part of my money for my investments. Regarding that money, 100% of it is in the stock market. But if we are talking about all the money that I have, not all of it is in there. Of course you should only invest money that you are not going to need to spend in the near future. You can still keep some money as credit cards, put it "on your wallet", anyways thats something you'll decide. You dont need to invest literally all your money.
exactly, that should be obvious. I genuinely dont know how can he manage to not understand inflation.
you seem to harbour some animosity towards when i wasn't disagreeing with the main point of the thread, i'm just saying : it's only worth if u're saving for bimax or if u're saving a portion of a big capital and even then in the details an index fund is better than etf
Nah Im just saying the truth. I provided you proof you were wrong and you refuse to admit it. In that argument about Charles Schwab we had, I provided you the link to their official website, and the information there was proving what I was saying.
U sent it while i was still typing my reply so i didnt see
so for 10 years this would just end up being an emergency fund because it wouldnt be significant enough to matter, again back to my original point since it seems i have to keep repeating it 100x to u, this is never enough money for ppl to care, its the same concept as giving a millionaire $10 a day, no one cares abt it, AND AGAIN IVE SAID THIS 10x, this money would only start to matter when ur old AF, said this in almost every comment so far
This is js common sense and theres no way to explain it more complex since were js using examples gng
Nah Im not mad bro we good, but you said some things that didnt make sense.you seem to harbour some animosity towards when i wasn't disagreeing with the main point of the thread, i'm just saying : it's only worth if u're saving for bimax or if u're saving a portion of a big capital and even then in the details an index fund is better than etf
However, generally ETF is still a top advice
Here you are indicating you think long term investing and ETFs are a bad idea.>long term investing
>ETF
And here you seem to have changed your mindETF is still a top advice
And I already proved you wrong on this when I showed you charles schwab doesnt charge comission on ETFs. and you started saying "the official charles schwab website is wrong and Im right" and thats obviously not true, plus I invest in ETFs on my schwab account and they dont charge comission.
That’s simply called poor budgeting. Ideally a baseline of investing capital should be 50% of your income
Thanks man, Im glad I could help you with this
It seems simple because I simplified it for you here. But there are a lot of theories and complex concepts that are involved with this investing strategy. Such as the Efficient Market Hypothesis, the Random Walk Theory and some other ones. But it would probably too complex and too boring for this forum if I included all these things here tbh. And most people dont follow this strategy because it has never been the most popular one. The popular and well accepted thing to do is to "select good individual stocks to try to outperform the market", and thats why everyone that invests ends up with poor results, because the data we have shows that this does not work.
Yes but that's what I'm saying. You don't even need to be a finance genius apparently, you just need to follow the data, literal facts. I mean that's what I always do. If you're a little bit invested in this stuff you should follow actual data right? Why do people still either 1) do nothing or 2) invest in individual stocks to try to outperform the market when it literally doesn't work. I don't get that.
But you dont have to "trust me" and follow what I say just because I said its right. I wouldnt do that as well. I encourage you to do your own research, go to the youtube channel I recommended, go to other investing youtube channels, read some research papers, etc. if you dig deep enough, you will probably see that what I said in this thread is right. If you have any doubts, just hit me up and ill help you in case you need. Good luck man.
Unfortunately thats the case, people keep doing things that clearly dont work. Because 99% of people dont look at research data when trying to invest. They just go by what people say. And the media is always encouraging people to invest in the wrong way, as the news are always about the "5 best stocks for you to invest in this month!". And as people are also always following news about companies, when there is some good news about a certain company that has stocks in the stock market, people think "lets seize this opportunity and buy this stock!" And thats why they are always having poor results. The truth is that just copying the stock market's performance with ETFs is something that is not beneficial for the investing industry. What is beneficial is trying to sell you expensive programs that will "recommend you the best winning stocks every month" so the media talks about that instead of talking about investing in ETFs, even though its the most optimal way to invest.
But there are also lots of people that invest in the right way. Im not "the only one". But unfortunately, its a small part of the population.
so lets say i invest 1 million usd and i live off spending the yearly return. but the problem is this million will go to shit in like 20 years because of inflation right? basically my 10% return will value less every year. am i right?
Good question. But dont worry, the 10% return rate Im talking about is the "above inflation return rate", as known as "risk premium". So its basically inflation + 10%. The stock market protects you from inflation in the long run, so you dont need to worry about that.
really? wow that sounds too good to be true. is it calculated to the inflation of the world?
Its not too good to be true, its a known fact that stocks protect you from inflation on the long term. This is covered on the book "stocks for the long run" by Jeremy Siegel, and its a well accepted fact within the investing industry.
Each country's stock market protects you from it's level of inflation in the long term. USA stocks will protect you from the USA inflation, Brazil stocks from Brazil inflation, etc. So yes, a global ETF would protect you from the average inflation rate of all countries it invests in.
It can be mentally tough for you to do it when the market is down. But its just a mental thing, there is no rational reason for you to worry in these situations, as while there are abnormally bad years for the stock market, there are also abnormally good ones. For example, in 2018, the global stock market went down by 14%. but in 2019, it went up by 22%. On average, if you invest correctly, your average yearly return will be around 10% on the long run, so outlier years are not really relevant. What matters is the average. Got it?
There have been a lot of black swans in stock market history and none of them made this strategy ineffective. Dumb argument.
Citing studies that ignore the problem of induction whilst giving financial advice is dumb
I "deluded" myself into thinking these returns will withstand because they have withstood since 1800. Literally more than 200 years ago. You're saying there is no reason for me to think it will keep being like this just because it has been like this in the past, but there is no reason for you to think its gonna change. Plus, considering it has been like that since more than 200 years ago, investing in a way that wouldnt perform well in this scenario is just dumb.
"there is no reason for you to think its gonna change"
bro added a gif and thought that was a good argument lol. If you think the stock market's behavior, which has had the same pattern since 1800, is gonna change, then at least show your reasoning for that. I will be happy to debunk it because its surely bullshit. Go ahead. I'll wait.
