Folks-- seeing someone comment (and get awarded most helpful) that "there's literally no downside" to putting all of one's savings in TQQQ, I wanted to repost the below to see if anyone has any similar thoughts. I originally posted it a little less than a year ago (so the exact data is a little old). It garnered a couple bananas, but no comments or feedback as I would have hoped:
With Thanksgiving happening not one week ago, I had in mind a long list of things for which I am so thankful. Friends, family, job, interests, etc etc-- the list goes on and on. There is an even longer list, however, of things for which I am not nearly thankful enough-- things I take for granted, things that I don't recognize have impacted me positively that I can be happy about. That got me thinking about one thing that I, and ostensibly many other people in the US, take for granted: the historical performance of the US stock market, and the relatively business-friendly environment into which I was born, grew up, and continue to work.
I know it sounds a little silly but hear me out. I can tell that so many people take the US market for granted. I know this because I frequently hear people talking about how their retirement account or otherwise long-term investments are going to compound at an average of 10%+ annually. They cite a relatively short historical track record of the S&P500, expecting that to continue indefinitely into the future. There are others, a little more conservative and probably slightly more realistic, who expect something like 7% annually. These folks would be in for quite a surprise should they learn what citizens of many other developed nations expect out of their domestic markets.
I've had a look at a number of retirement accounts, pensions, etc from a number of different countries, and their obvious home-bias of investments has proved to be devastatingly unfortunate.
For example, if I, from the day I was born in 1996 (aka more than half of one's expected working career), invested $1 into the: [[disclaimer, I realize this is a simplistic, cherry-picked analysis that can be easily manipulated to a great magnitude should the time period be altered; I'm just using this to illustrate a point]]
US Stock Market (S&P500): I would have about $5.50. Pretty awesome! With performance like that, it's unsurprising that people expect it to keep going up, and up, and up...
UK Stock Market (UK FTSE 1000): I would have about $1.60. For those of you who did the math, that's not a particularly spectacular return over 20+ years...
Japan Stock Market (Nikkei 225): I would have about $1.30. That's even worse! Can you imagine if my grandparents set aside some money when I was born in a college fund, check that money several years later, and saw it only made 30%?
Switzerland Stock Market (Swiss Market Index): I would have about $1.80.
Iceland Stock Market (SE ICEX): I would have about $1.00. Talk about a good investment!
Now, not every non-US country has had similarly dismal performance. I believe a couple even outpaced the US. But this begs the question of what will happen in the future. While the market is an intricate and complex machine, with an uncountable number of variables imputed into it oscillations, it doesn't take a genius to determine why some countries' markets outperform others. I do wonder-- or I should say I'm scared about-- whether the US might see long periods of stagnant returns, similar to many of these other countries. Not to steer this in a political direction, but the emergence of a number of anti-free market politicians may be one of many threats to the prosperity enjoyed in America. This is merely something to think about-- those of us who have benefitted from the upward swing in the US market should be extremely grateful; however, will those who toss a couple dollars from their paychecks into some passive ETF and expect their comfortable retirement to be provided to them by a 10% annual return be disappointed? Only time will tell!
There's no question about this in the US, we're lucky. We've done pretty well in the last couple of decades through upturns and downturns. I think the last decade is where much of the difference in US markets vs, the markets you list comes from. If you saw my comment on the TQQQ post, I mentioned that if the OP was confident and wanted to go for it, might as well, I can't stop 'em. But I myself realize the possibility of markets not going up and especially possibly getting wiped out.
TQQQ certainly may not be the perfect thing to invest in going forward, especially if people think we in America have been lucky over the last decade.
That said, I think Global Equities have done well overall. If I invested $1 into MSCI All Country World Index in 2006, I'd have $2.89 today, which I would feel ok about. I think the US admittedly has powered a lot of that growth, so it may not be a perfect representative of diversification.
sub 3% GDP growth is the norm, US is a mature economy as well as our stock market. If you want strong returns invest in the BRIC nations and other developing economies
- The mainstream financial school of thought a decade ago. Lets see how that turned out.
As long as America remains the strongest free market society in the world that rewards capitalism/hard work then it will outpace global returns. But, like freedom, we shouldnt take it for granted - and should fight for it at every chance
On a similar note, if I invested $1 into MSCI Emerging Markets in 2006, I'd have $2.29
If I invested $1 into MSCI World Index (Developed Countries) in 2006, I'd have $2.95
Our government will not allow the stock market to have a sustained downturn. Stocks will only go up
How did a retard like you get in ER
Excellent question
He's got a point. The stock market was going up because during the height of COVID.
This isn’t the right attitude to have. If anything, returns will be higher in the future as people no longer accept the shitty historical returns you cite. There are also literally hundreds of millions of more people actively trading in the market and investing in the US markets. Combine that with the rise of a new asset class (crypto) and you have the opportunity for a new future.
Guess I differ from you, but I don’t take gratitude in a measly 3x 4x whatever return over a decade. It’s a pathetic crumb mentality to have. Strive for better.
Broke or rich I suppose. Odd to take the USA’s diversified stock performance over the past century for granted, especially given how much of an outlier it is historically and globally today.
can you please expand on this? I'm not sure I get your rationale/logic: "returns will be higher in the future as people no longer accept the shitty historical returns you cite"
Dude people are sick of you IAs, and the shitty returns. They want freedom it’s that simple man. Just take a look around read the room. Things are changing watch.
don't know where the hate for my profession is coming from, but if you're sick of people in my job, that's fine, I don't give a fuck about your opinion of my job, but that still doesn't address my question.
can you expand on your points?
"they want freedom it's that simple man" what do you mean by this? of course people want freedom, what does this have to do with your original quote that I'm curious about "returns will be higher in the future as people no longer accept the shitty historical returns you cite"
what do you mean by "take a look around and read the room" and "things are changing watch"
what things are changing? I don't follow the logic, you seem to be spouting out ideas without a logical if this then that thought pattern, and since I don't already know what you're talking about, I'm asking for explanation.
capiche?
VTWAX. Read stocks for the long run.
VTWAX and chill for the boomers
Sign of the times / how good this generation has it that their entire investing history has been in a bull market with 12%+ annual returns yet instead of being happy with that it's chasing more
When the music stops there will be a lot of goobers left without a chair.
This is why it's honestly a good idea to invest in $VT or $VTWAX and why I'm doing more of that. I think Vanguard or Fidelity did a study showing that, while the US has historically outperformed, there are decades/periods where international stocks perform better and you actually improve your risk-reward ratio a bit by diversifying internationally, even if total return drops a bit.
I also do agree with you and am a bit concerned about how long America can continue to be the place of prosperity from the trends I'm seeing. The older generation has it great still and will cling to it till they die, but I'm noticing that certain goals that were achievable for my peers growing up are quickly becoming out of reach. For example, I'm making an income that statistically puts me at least in the top 5% of earners my age, yet I would have had 0 shot of owning property in Southern California if it weren't for a once-in-a-century pandemic that allowed me to live at home, save on rent, and invest in stock market that literally cratered and is now near new all-time highs almost overnight. If even people like me need extreme circumstances/outside help to afford housing, college, etc., I can't imagine how much the average person is and will continue to struggle. That's not even to mention all the social unrest that's leading to declining birth rates, etc. that will rear their ugly heads down the road.
So putting all that aside, I think it's very prudent of you to realize how fortunate we are to be in a country that has outperformed so dramatically over a long period of time and to be weary of achieving similar, double-digit compounding returns going forward.
@calpers
Have their returns been trash? Haven't kept up with their performance recently. Not fully related but it's always puzzled me why there aren't as many public pension shops/etc. that have direct investing teams (particularly in alternative assets like RE, PE, etc.) vs the international players like the Australian superannuation funds, the Canadians of course, Singaporean and the Emirati funds and others.
Single people like yourself shouldn't be owning SFH property. The reason house prices have skyrocketed, along with low interest rates, is rise of dual income households.
Low interest rates, zoning laws, and regulation against new constructions. Perfect cocktail for sky-high housing prices
There are two phenomenons that are currently happening and will continue to happen indefinitely1) the pace of global and US growth is slowing, and 2) The pace of innovation and disruptions is accelerating. If you invest in the old economy and the companies of yesterday or even companies of today, you will get left behind. However, if you invest in the companies of tomorrow and embrace disruption (maybe not as extreme as Cathie Wood) you will prosper. Ditch the ViacomCBS's of the world and buy the Rokus, or at least hire a manager that does it for you. Further, I will leave you with the below statement that capital allocators have accepted (as shown by asset flows).
"There are three types of companies in the world.
1: Companies that are technology companies.
2: Companies that are becoming technology companies.
3: and Companies that are being disrupted by technology companies."
Is Sweetgreen a technology company like the vegans at their executive sweet pathetically claim? No! But they are attempting to become on. Is Subway being disrupted by their shitty legacy business. Yes. Has Chipotle and Shake Shack successfully embraced technology? Yes.
From a macroeconomic standpoint, these are contradictory statements
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