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Topic: How much can you make by saving and compounding - page 3. (Read 439 times)

legendary
Activity: 2366
Merit: 1624
Do not die for Putin

No. Sp500 is not "a quite safe investment". It is  'dancing on a knife's edge'. Remember "past performance is no guarantee of future results"

True, it does not guarantee future results, but long term it is certainly quite safe. It is a well know fact that there is not any period of 20 years in all the SP history that has yielded negative results and, as average, it yields around 6%. In fact, stocks are actually safer than bonds even the popular belief is the opposite.

Even for shorter periods of time, e.g. 10 years, you would really need to buy at a extreme market peak to loose money. See that my post specifies that the results are dependent on the decades that lie ahead, which are said to be not that great.

I do agree with you that during the last 12 months, anyone could make a 25% without much thought.



copper member
Activity: 2856
Merit: 3071
https://bit.ly/387FXHi lightning theory
I feel the problem with dcaing might be that people get different amounts of disposable income throughout the year (eg holiday seasons). So it's tough for a lot to stick to a tight schedule.

I was investigating the march 2020 drop last year and the s&p500 went down to the price it was in January 2019 (which is a tiny drop to make the news)...




I saw a suggestion for people having children to save £5000 for each when they're born so that they'd have £1.5M when they retire (using a reasonable growth of 10% a year).

That 1.5M would then yield ~£20k a year in income adjusting for inflation of 2% (if you don't cash out the stocks and just mainly get your money from dividends at 4%).

Its funny. Recently I've seen few people talking about that a lot. Few youtube videos. Even whole youtube chanel focused on similar strategy - https://www.youtube.com/watch?v=vffTJV0IzHM

Why its funny? Because we are currently during "bubble of everything". Not only bitcoin is mooning. Everything is. And now, when people like Michael Burry (Big short movie was based on his prediction of 2008 crash) is screaming to watch out - 'Big Short' investor Michael Burry says the stock market is 'dancing on a knife's edge' - and fears he's being ignored again YouTubers appeared out of nowhere, now, with approach that - market is super easy - just buy whatever and hodl. Why not 10 years ago? We have a record number of retail investors on the markets. Even high schools students have robinhood installed and gamble their savings. Its not good time for investing in the most overvalued stocks (SP500)

Some things in the stock market are weird atm and I'm not sure if governments have a plan to get out of them but with most of Europe being over leveraged in almost every way I can imagine they'll come up with a way to make it benefit them...

That being said, the next industrial revolution is claimed to be decentralisation so the more work you can do on yourself and your own skills the better. There's a massive skills deficit in everything atm imo which is a bit of a shame (a lot of people chasing safe money is why jobs pay so low).
legendary
Activity: 2156
Merit: 1622
Its funny. Recently I've seen few people talking about that a lot. Few youtube videos. Even whole youtube chanel focused on similar strategy - https://www.youtube.com/watch?v=vffTJV0IzHM

Why its funny? Because we are currently during "bubble of everything". Not only bitcoin is mooning. Everything is. And now, when people like Michael Burry (Big short movie was based on his prediction of 2008 crash) is screaming to watch out - 'Big Short' investor Michael Burry says the stock market is 'dancing on a knife's edge' - and fears he's being ignored again YouTubers appeared out of nowhere, now, with approach that - market is super easy - just buy whatever and hodl. Why not 10 years ago? We have a record number of retail investors on the markets. Even high schools students have robinhood installed and gamble their savings. Mostly on popular stocks, mostly sp500. Every experienced investor should see a red light here. Its not good time for investing in the most overvalued stocks (SP500)

For each case, you get the final amount on money you get depending on the average yield that your investment gives you (this not mathematically accurate, but is good enough. For example, the SP500 index in the past usually yields 6% and is considered a quite safe investment. I have calculated for 6%, 12% and 18%. I call this, the boring 6%, the "nice 12%" and the "the gods love me much 18%" average yield a year.

No. Sp500 is not "a quite safe investment". It is  'dancing on a knife's edge'. Remember "past performance is no guarantee of future results"
legendary
Activity: 2366
Merit: 1624
Do not die for Putin
One of the best know says of Warren Buffet is "It is not about timing the market, it is about time in the market". What he means that if you let the interest compound over a long period, the results can be amazing.

Independently of the style of investment (crypto, fixed income, variable rent, high yield, ...), it is good to take a look about what compounding can do for you. Please, note that you would need to subtract inflation and that can be big in some countries if you only invest locally.

These are very simple simulations that shows you how far can your saving and investing go. In each one you put an initial amount on an investment and then you add a bit more each year.

For each case, you get the final amount on money you get depending on the average yield that your investment gives you (this not mathematically accurate, but is good enough. For example, the SP500 index in the past usually yields 6% and is considered a quite safe investment. I have calculated for 6%, 12% and 18%. I call this, the boring 6%, the "nice 12%" and the "the gods love me much 18%" average yield a year.

This will give you the graphs and results for 17 years. Why 17? No particular reason Smiley


SIMULATION 1: Initial savings 5000, and you won't add anything else.



As you can see, a final capital of 13.000 is perfectly achievable with a 6% yield, while you can dream of 83.000. This is not bitcoin remember Smiley


SIMULATION 2: Initial savings 1000, and 1000 more a year.



Better results overall, with a basic of 31000 and a dreamy 104 if you catch a great decade of yields.

SIMULATION 3: Initial savings 5000, and 1000 more a year.



Better results overall, with a basic of 42,000 and a dreamy 170,000, this looks like a great option.

Notice that this is not USD specific, so 170,000 may not be "dreamy" in your currency. However, if you think of it, it should not be difficult for the average joe to save 100 dollar or euros or pounds a month in OCDE countries, and the effects on retirement can be noticeable. See a previous post on that here.


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