Bogle himself is saying we will expect like 3% for the next decades

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steadyeddy
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Re: Bogle himself is saying we will expect like 3% for the next decades

Post by steadyeddy » Sat Oct 07, 2017 1:39 am

I wouldn't mind the market taking a short breather. I'm in it for the long haul, so I'll just keep shoveling money in at better valuations than are available today.

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Re: Bogle himself is saying we will expect like 3% for the next decades

Post by randomizer » Sat Oct 07, 2017 1:53 am

emoore wrote:
Fri Oct 06, 2017 3:03 pm
Why do you think he’s right? He’s been saying that for years.
He seems to have gotten more pessimistic. Has been saying 4% for a while now, and "for a decade" not "for decades".

He may be right, but it won't change what I do either way. Even if I do earn only 3% for the rest of my investing life, I'll still be better off than somebody who doesn't save, or who's getting 0%.

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Re: Bogle himself is saying we will expect like 3% for the next decades

Post by CurlyDave » Sat Oct 07, 2017 1:56 am

I view this more as an ad for indexing than as a market prediction.

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Re: Bogle himself is saying we will expect like 3% for the next decades

Post by venkman » Sat Oct 07, 2017 1:57 am

Stocks are highly valued, but so is everything else. The issue is a relatively high amount of capital in the markets. As long as that persists, expected returns will be low for everything. The Fed paring down its balance sheet might help in the long term, but that process will be painfully slow.

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Re: Bogle himself is saying we will expect like 3% for the next decades

Post by JBTX » Sat Oct 07, 2017 2:18 am

david1082b wrote:
Fri Oct 06, 2017 11:19 pm
AlohaJoe wrote:
Fri Oct 06, 2017 7:42 pm
This made me wonder how often, in the historical data, we've seen a decade of real returns at 3%. I can't recall seeing numbers like that talked about very often, so I spent some time with https://dqydj.com/sp-500-return-calculator/ to look....

I think most people have no idea how often real 10-year returns have been at or below Bogle's 3% number, so I made a color coded chart to show how things have been since 1950.

Image

Over that 58 year period, 27 of the periods have been at or below 3% real returns for the S&P 500. That's nearly a 50/50 split.

Of course, another way to look at the data is that they've only been red -- at or below 3% real -- during 3 of the 4 largest stock market crashes in world history.
I used your link and got these yearly results after inflation:

Jan 2006 to Jan 2016: 4.447%
Jan 2004 to Jan 2014: 4.535%
Jan 2003 to Jan 2013: 4.744%

Seems more than 3%. Maybe you accidentally used the first number given by dqydj, it confusingly gives a "total return" EXCLUDING dividends first, then below that says "Annualized S&P 500 Return (Dividends Reinvested)", which is the actual total return.

Jan 1960 to Jan 1970 was 5.1% a year INCLUDING dividends, 1.8% WITHOUT dividends. Funny how the return gets better when you include dividends! Historically dividend payout ratios were much bigger than now, so the further you go back the more they matter and the more misleading prices are on their own.

One or two more: Jan 2007 to Jan 2017, 5.093% INCLUDING dividends, 2.905% EXCLUDING dividends,
Jan 1977 to Jan 1987: 7.924% including divs, 2.974% excluding divs.


Pretty annoying that DQYDJ falsely gives a "Total S&P 500 Return" without including dividends, a common fallacy, since total return by definition includes dividends. Even more bizarrely, below the calculator the site talks about unfair comparisons, while the calculator itself gives a confusing presentation, leading people to misunderstand returns.
Something didn't seem right, thanks for digging it out.

I googled and found this
Image

10 year returns have been negative several times, but it is fairly rare.
Image

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Re: Bogle himself is saying we will expect like 3% for the next decades

Post by stemikger » Sat Oct 07, 2017 3:06 am

Dottie57 wrote:
Fri Oct 06, 2017 5:40 pm
"Nobody knows nothin" - Jack Bogle
Actually Raymond (one of the old runners) said this. Bogle just repeats the story.

https://www.youtube.com/watch?v=A0gQiz0pCyI
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Re: Bogle himself is saying we will expect like 3% for the next decades

Post by stemikger » Sat Oct 07, 2017 3:54 am

Jags4186 wrote:
Fri Oct 06, 2017 3:36 pm
Just because he’s right about expenses doesn’t mean he’s right about everything.
Jack himself always adds, "I may very well be wrong". However, studying Jack all these years, that is not very often, in fact it's hard to find instances of that. I believe it was Dr. Bill Bernstein who said every time he disagrees with Jack, he is usually proven wrong.

Stay the Course, stick to your plan and take what the markets will give. Bogle also adds not to change your asset allocation, in fact he usually says, stick to the conservative side.
Last edited by stemikger on Sat Oct 07, 2017 6:18 am, edited 1 time in total.
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Re: Bogle himself is saying we will expect like 3% for the next decades

Post by lazyday » Sat Oct 07, 2017 3:55 am

It's 3% NOMINAL return, not real return, on a 50/50 portfolio assuming a 2.5% nominal return on bonds.

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Re: Bogle himself is saying we will expect like 3% for the next decades

Post by lazyday » Sat Oct 07, 2017 3:56 am

columbia wrote:
Fri Oct 06, 2017 7:09 pm
This is a US only prediction?
Probably. I've never seen him make a prediction for non-US equity.

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Re: Bogle himself is saying we will expect like 3% for the next decades

Post by KSOC » Sat Oct 07, 2017 4:09 am

Really hard to peer into the future and make guess's without knowledge of administrations,taxes,healthcare,regulations,foreign policy,technology,employment,climate etc etc etc. Not just the U.S. but Global impacts.

I appreciate Mr. Bogles wisdom & preparing us for lower returns. I never factor much above 3 or 4 when forecasting my portfolio, and actually prepare for worse.

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Re: Bogle himself is saying we will expect like 3% for the next decades

Post by stemikger » Sat Oct 07, 2017 6:17 am

lazyday wrote:
Sat Oct 07, 2017 3:56 am
columbia wrote:
Fri Oct 06, 2017 7:09 pm
This is a US only prediction?
Probably. I've never seen him make a prediction for non-US equity.
Yes it is. Bogle does not invest in international. He is a U.S. only investor.
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Re: Bogle himself is saying we will expect like 3% for the next decades

Post by abuss368 » Sat Oct 07, 2017 6:43 am

Vision wrote:
Fri Oct 06, 2017 3:25 pm
Toons wrote:
Fri Oct 06, 2017 3:22 pm
3% is better than Nothing.
Anyway,
Keep Investing :happy
Sorry, but 3% is [absolutely unacceptable --admin LadyGeek]. Nobody gets rich with 3% annual.

There must be alternatives. I dunno, buying condos, renovating them and renting them out will get you more than 3%.

Investing that money in some business venture will get you more than 3%.

5% would have been fine, but when it gets under that it is really not worth it. You are not getting rich with that
Buying a business or real estate is risky. Neither will “get you more than 3.00%”.
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Rocco Sampler
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Re: Bogle himself is saying we will expect like 3% for the next decades

Post by Rocco Sampler » Sat Oct 07, 2017 6:50 am

IMHO an overvalued market is the norm until interest rates rise to where you can get a reasonable return for little risk. Also, we are in a time of astounding technological and social change. World population continues to grow and consume. Who knows?

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Re: Bogle himself is saying we will expect like 3% for the next decades

Post by AlohaJoe » Sat Oct 07, 2017 6:56 am

david1082b wrote:
Fri Oct 06, 2017 11:19 pm
Image

Seems more than 3%. Maybe you accidentally used the first number given by dqydj, it confusingly gives a "total return" EXCLUDING dividends first, then below that says "Annualized S&P 500 Return (Dividends Reinvested)", which is the actual total return.
Good catch. The browser window size was just small enough that it cut off everything below "total return" so, even though I've used DQYDJ dozens of times, I didn't realise the number I was looking at didn't include dividends. :oops:

Image

Here's the same thing again, but including dividends, and going back to 1900. It actually doesn't change things tremendously, though the dividends do help at the margin. There are still 34 out of 108 cycles below 3% real. They are still centered around "world shattering bad events (WW1 when the markets shut for several months, the Great Depression, WW2, Stagflation, and the Global Financial Crisis). And having another "bad" cycle now would give us one of the shortest "good" cycles ever. (Only 5 years of >3% real returns before falling below that again.)

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Re: Bogle himself is saying we will expect like 3% for the next decades

Post by harvestbook » Sat Oct 07, 2017 8:18 am

I've seen other sensible-seeming projections of 3 percent real in a decade. However, I doubt I will be taking all my money out in 10 years or investing it all today, so the information or guess isn't very actionable. Even if I knew it was true, I wouldn't do much of anything differently. I use 4-6 percent nominal in my personal long-term projections but fully prepared for a negative outcome.
I'm not smart enough to know, and I can't afford to guess.

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Re: Bogle himself is saying we will expect like 3% for the next decades

Post by unclescrooge » Sat Oct 07, 2017 9:02 am

Vision wrote:
Fri Oct 06, 2017 3:01 pm
https://www.youtube.com/watch?v=KF1RodFhFwc

This is very depressing.

Even the master himself is saying we will get something like measly 3% from the market and the fun times are over.

Really? :(

Not fair. I guess due to exposure of everyone to these markets indexing is just not that profitable anymore. Too many players. Will we really have to stick to Bitcoin?
These are expected returns for U.S.Markets, not international developed and emerging markets. Boggle doesn't believe in diversifying into non-U.S.markets. This is why his returns are so low.

Additionally, the 3% comes from an average of stocks and bonds returns. It's the bonds that have 2% returns and are dragging down the total return.

So if you've underweighted your allocation to U.S.stocks, over weighted foreign stocks, and have less than the mentioned 50% allocation to bonds, your returns are likely to be higher than the stated 3%.

I'm not worried.

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Re: Bogle himself is saying we will expect like 3% for the next decades

Post by bobcat2 » Sat Oct 07, 2017 9:27 am

What's so surprising about 3% returns going forward? So far this century the real return for the US stock market is 3.5%. One half percent below that over the next 10 years is hardly a big change.

3.5% Real Annualized Wilshire 5000 Return, Dividends Reinvested from 12/31/1999 - 10/6/2017
Link to Wilshire 5000 Dividend Reinvested Calculator - http://dqydj.com/wilshire-5000-return-calculator/

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Re: Bogle himself is saying we will expect like 3% for the next decades

Post by jocdoc » Sat Oct 07, 2017 10:28 am

Research Affiliates web site predicts worse than 3% real returns on US stocks. They predict 5% real returns on International EAFE stocks and 7% real return on EM.
Bottom line have a good slug of International equities. Vanguards suggestion of 40% Intl is reasonable in that light.

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Re: Bogle himself is saying we will expect like 3% for the next decades

Post by mptfan » Sat Oct 07, 2017 10:42 am

Vision wrote:
Fri Oct 06, 2017 3:01 pm
This is very depressing.

Even the master himself is saying we will get something like measly 3% from the market and the fun times are over.

Really? :(
Do you realize that 3% real is more like 6% after inflation?
I eat risk for breakfast. :)

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Re: Bogle himself is saying we will expect like 3% for the next decades

Post by digarei » Sat Oct 07, 2017 11:12 am

...
From this source,

October 8, 2016 - Sacramento Area Bogleheads - Meeting Summary


begin quote

Expected Returns 10 year forecast: 4% nominal (from 2015)

There was a discussion of expected returns triggered by a member’s recollection that Jack Bogle had stated in the previous year that his expectation was that over the next ten years a 60/40 portfolio would return 4% nominal.

Not mentioned in the discussion was the reasoning and parameters he uses to reach this number nor the fact that when providing it Mr. Bogle normally couches such predictions with a statement to the effect that the margin of error is almost 8%—this is what Jack calls the ‘speculative return’ factor. The prediction then should be framed as a range of possible return values: from -4% to +12%. The question becomes, is such a prediction useful to the investor? The coordinator and several others in the group would say that for both accumulators and retirees practicing DIY investing in broad spectrum index funds (or a diversified basket of inexpensive managed funds) there is little takeaway.

The 10 year ‘forecast’ is a meme promulgated by Mr. Bogle to emphasize the importance of keeping investing costs low. It's not an invitation to chase yield/performance, begin investing in exotic instruments or make radical changes to one’s asset allocation in the hope of beating the market return. Such action would be anathema to Mr. Bogle, who has been consistent in his advice over the years that the investor must accept what the market returns. Low expected earnings / returns is just an admonishment to prepare for adverse times: accumulators should save a little more than they think they'll need, invest more, spend less. Retired investors may want to tighten expenses, reduce the annual draw against their investments in years when the market has done poorly or shift an aggressive allocation a little more into bond territory. Note that few investors should be more conservative than 30/70. A better long term allocation may be 50/50.

Finally, note that Jack Bogle’s estimate of 10 year returns applies to a 60/40 portfolio, US Stocks & Bonds only. The returns of foreign stocks (ex-US) are predicted to be slightly higher over the next 10 years. Including international bonds would also change the forecast, as would an allocation other than 60/40, or a portfolio that overweights specific market sectors or factors (such as having a tilt to small stocks and/or value.)


end of quote
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Re: Bogle himself is saying we will expect like 3% for the next decades

Post by minimalistmarc » Sat Oct 07, 2017 11:24 am

3% is okay. For people not retiring within the next 10 years, lower gains is a positive thing.

Could be 0% for 10 years then 300% over the next 5

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Re: Bogle himself is saying we will expect like 3% for the next decades

Post by Seasonal » Sat Oct 07, 2017 11:56 am

A number of researchers, including Vanguard, have found the best predictor of 10 year real stock market returns has been the market's earnings yield (one over the p/e ratio or the 10 year p/e) and the best predictor of bonds has been the current yield (YTM). Best means explaining about half of the time variation of real returns.

The current market p/e is about 22x, so predicted return would be 4.5%

10 year TIPS are yielding 0.5%.

A 50/50 portfolio would therefore return 2.5% real, which rounds to Bogle's 3%.

Of course, all of this comes with a large margin of error, something in the range of 5-10 percentage points up or down.

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Re: Bogle himself is saying we will expect like 3% for the next decades

Post by lazyday » Sat Oct 07, 2017 3:12 pm

Seasonal wrote:
Sat Oct 07, 2017 11:56 am
A 50/50 portfolio would therefore return 2.5% real, which rounds to Bogle's 3%.
Bogle is predicting 3% nominal for the 50/50 portfolio, or 1.5% real.

I've queued up the video for you. Just listen to the next 10 seconds: https://youtu.be/KF1RodFhFwc?t=5m15s

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Re: Bogle himself is saying we will expect like 3% for the next decades

Post by WanderingDoc » Sat Oct 07, 2017 3:53 pm

The question becomes, would any rational individual go ahead and put money in a 401k and IRA knowing that there was a GOOD (not 100%) chance that real returns will be around 3% for the next 20 years. What are your thoughts?
One day it suddenly dawned on me that I had won the real estate lottery. | I'm not looking to get rich quickly. I'm not looking to get rich slowly. I'm looking to get rich for sure.

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Re: Bogle himself is saying we will expect like 3% for the next decades

Post by whodidntante » Sat Oct 07, 2017 3:58 pm

WanderingDoc wrote:
Sat Oct 07, 2017 3:53 pm
The question becomes, would any rational individual go ahead and put money in a 401k and IRA knowing that there was a GOOD (not 100%) chance that real returns will be around 3% for the next 20 years. What are your thoughts?
Yes, it would be rational to save money in that environment. I expect these kind of muted returns and yet I max every tax advantaged account available to me.

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Re: Bogle himself is saying we will expect like 3% for the next decades

Post by WanderingDoc » Sat Oct 07, 2017 4:04 pm

whodidntante wrote:
Sat Oct 07, 2017 3:58 pm
WanderingDoc wrote:
Sat Oct 07, 2017 3:53 pm
The question becomes, would any rational individual go ahead and put money in a 401k and IRA knowing that there was a GOOD (not 100%) chance that real returns will be around 3% for the next 20 years. What are your thoughts?
Yes, it would be rational to save money in that environment. I expect these kind of muted returns and yet I max every tax advantaged account available to me.
I just watched that Bogle video. One word: Depressing. he basically said in so many words (if not directly) what I have been saying since about 2013:
The real return of the stock market, after taxes, inflation, fees, and human psychology is 0%, at best. I will probably throw no more than $10-12K into the market per year in the near future just for fun, I will write this into my IPS.
One day it suddenly dawned on me that I had won the real estate lottery. | I'm not looking to get rich quickly. I'm not looking to get rich slowly. I'm looking to get rich for sure.

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Re: Bogle himself is saying we will expect like 3% for the next decades

Post by WanderingDoc » Sat Oct 07, 2017 4:11 pm

Vision wrote:
Fri Oct 06, 2017 3:25 pm
Toons wrote:
Fri Oct 06, 2017 3:22 pm
3% is better than Nothing.
Anyway,
Keep Investing :happy
Sorry, but 3% is [absolutely unacceptable --admin LadyGeek]. Nobody gets rich with 3% annual.

There must be alternatives. I dunno, buying condos, renovating them and renting them out will get you more than 3%.

Investing that money in some business venture will get you more than 3%.

5% would have been fine, but when it gets under that it is really not worth it. You are not getting rich with that
Exactly. From my rentals {mostly condos in markets with strong job and population fundamentals}, I have seen a 3.5% real return from principal paydown by tenants ALONE (not even factoring other estate profit centers: appreciation, cash flow, inflation hedging, tax incentives, etc). When all of these are factored in, its more like >30% IRR on the low end. I would genuinely be disappointed in any deal which returns less than 20%.
One day it suddenly dawned on me that I had won the real estate lottery. | I'm not looking to get rich quickly. I'm not looking to get rich slowly. I'm looking to get rich for sure.

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Re: Bogle himself is saying we will expect like 3% for the next decades

Post by MarginalCost » Sat Oct 07, 2017 8:26 pm

3% nominal, 1.5% real wouldn't be the end of the world. A 4% inflation-adjusted withdrawal rate (barely) survives a 30-year retirement (with about $60k left for every $1m in starting cash), though this is of course ignoring sequence-of-returns risk, and any tax drag.

While I'll agree with those who take Bogle's predictions with a grain of salt, I don't think "nobody has any idea what could happen" is the right attitude either. High p/e ratios place a natural benchmark for potential returns, and you've got to have a good reason to deviate from that. The S&P 500 has a PE of about 25 (4% yield), CAPE10 of about 31 (3.2% yield), and Vanguard Total Stock has a PE of about 21.5 (4.65%). If we compare to a historical P/E closer to 16 (6.25%) it seems clear we're facing serious reduction in returns (about 1/3 of returns gone).

One thing I was surprised by in the video: Bogle seems to treat the reduction in dividend yield as independent evidence of a decline in returns. I tend to think of a decline in dividend yield as just a reallocation of the firm's free cash flow. I think the decline in dividends is more due to investor/board preferences shifting away from (tax-inefficient) dividends and towards reinvestment and buybacks.

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Re: Bogle himself is saying we will expect like 3% for the next decades

Post by incognito_man » Sat Oct 07, 2017 11:09 pm

JBTX wrote:
Sat Oct 07, 2017 2:18 am
david1082b wrote:
Fri Oct 06, 2017 11:19 pm
AlohaJoe wrote:
Fri Oct 06, 2017 7:42 pm
This made me wonder how often, in the historical data, we've seen a decade of real returns at 3%. I can't recall seeing numbers like that talked about very often, so I spent some time with https://dqydj.com/sp-500-return-calculator/ to look....

I think most people have no idea how often real 10-year returns have been at or below Bogle's 3% number, so I made a color coded chart to show how things have been since 1950.

Image

Over that 58 year period, 27 of the periods have been at or below 3% real returns for the S&P 500. That's nearly a 50/50 split.

Of course, another way to look at the data is that they've only been red -- at or below 3% real -- during 3 of the 4 largest stock market crashes in world history.
I used your link and got these yearly results after inflation:

Jan 2006 to Jan 2016: 4.447%
Jan 2004 to Jan 2014: 4.535%
Jan 2003 to Jan 2013: 4.744%

Seems more than 3%. Maybe you accidentally used the first number given by dqydj, it confusingly gives a "total return" EXCLUDING dividends first, then below that says "Annualized S&P 500 Return (Dividends Reinvested)", which is the actual total return.

Jan 1960 to Jan 1970 was 5.1% a year INCLUDING dividends, 1.8% WITHOUT dividends. Funny how the return gets better when you include dividends! Historically dividend payout ratios were much bigger than now, so the further you go back the more they matter and the more misleading prices are on their own.

One or two more: Jan 2007 to Jan 2017, 5.093% INCLUDING dividends, 2.905% EXCLUDING dividends,
Jan 1977 to Jan 1987: 7.924% including divs, 2.974% excluding divs.


Pretty annoying that DQYDJ falsely gives a "Total S&P 500 Return" without including dividends, a common fallacy, since total return by definition includes dividends. Even more bizarrely, below the calculator the site talks about unfair comparisons, while the calculator itself gives a confusing presentation, leading people to misunderstand returns.
Something didn't seem right, thanks for digging it out.

I googled and found this
Image

10 year returns have been negative several times, but it is fairly rare.
Image
To add to this, I consulted MY spreadsheet which has all the necessary monthly data for this (going back to 1923) and I also 'smooth' the returns out (rather than looking at a strict month to 10 years later month, I take an an average of a year centered on year 10.

From 1/1923 to 4/2007 there have been 1,011 10yr rolling monthly returns (again, 10yrs +/- 6mo average). Of those, 297 (30%) have resulted in a sub 3% real return (on 100% S&P 500 equity investment) with dividends reinvested.

I know this may not be germane to the discussion, but it had me curious to check so I did as well!

Image

Sorry for lack of x-axis, did this really quickly (and data is months since, not dates) BUT chart is from 1923 to 2007.

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Re: Bogle himself is saying we will expect like 3% for the next decades

Post by FIREchief » Sun Oct 08, 2017 12:54 am

WanderingDoc wrote:
Sat Oct 07, 2017 4:11 pm
I would genuinely be disappointed in any deal which returns less than 20%.
Dude, you really need to get off the computer and write some books or set up some seminars. If you have a recipe for 20% returns, you're going to become famous. :sharebeer
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.

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Re: Bogle himself is saying we will expect like 3% for the next decades

Post by WanderingDoc » Sun Oct 08, 2017 1:33 am

FIREchief wrote:
Sun Oct 08, 2017 12:54 am
WanderingDoc wrote:
Sat Oct 07, 2017 4:11 pm
I would genuinely be disappointed in any deal which returns less than 20%.
Dude, you really need to get off the computer and write some books or set up some seminars. If you have a recipe for 20% returns, you're going to become famous. :sharebeer
I do have some ideas for books, but that won't be one of them. There is nothing I hate more than pitchfests and "sign up now for our 3-day seminar for only $1998" I always poked fun anyone who was dumb enough to attend any of these. I learned everything I needed to succeed in real estate from books, internet, and mentors. Cost me peanuts to nothing.

20% returns are not very high, speaking frankly. What I like about real estate is you could modulate your returns if they are bad or good, by putting in less/or more time. Aren't finding any good deals on the MLS? Tighten up your networking or look fo off market deals. Rents aren't where you want them? Ditch the PM for a few years to boost your returns, or get creative with adding another whole unit or room.

With mutual fund investing.. Market will return a real 1.5% over the next 15 years? Well buckle up buttercup, you can't do anything, just try not to pull out, and hope you live long enough! :beer
One day it suddenly dawned on me that I had won the real estate lottery. | I'm not looking to get rich quickly. I'm not looking to get rich slowly. I'm looking to get rich for sure.

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Re: Bogle himself is saying we will expect like 3% for the next decades

Post by Longtermgrowth » Sun Oct 08, 2017 1:48 am

Noticed at 2:23 Bogle said: "So today the dividend yield is 2%, the previous 50 year average or so is like 3.5% dividend yield, and that's a dead weight loss of 1.5% return."

Got me thinking about the Vanguard High Dividend Yield Index currently being around 3%. Could that current 3% actually be above the historic 4% safe withdrawal rate? I wonder what the previous 50 year average dividend yield would have been for the Vanguard High Dividend Index if it had been around back then. I'm guessing well above 4%...

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Re: Bogle himself is saying we will expect like 3% for the next decades

Post by lazyday » Sun Oct 08, 2017 4:19 am

WanderingDoc wrote:
Sat Oct 07, 2017 3:53 pm
would any rational individual go ahead and put money in a 401k and IRA knowing that there was a GOOD (not 100%) chance that real returns will be around 3% for the next 20 years
When I was young I made big sacrifices to save and invest. With such low expected returns, I wouldn't have made the same decisions.

(By the way, Bogle predicts 1.5% real for 10 years in the video. But your 3% for 20 seems reasonable if your portfolio is mostly global equity. At 100% global equity and 0% bonds I would be predicting 2.7% for 10 years, or 3.8% if the timeframe is infinite. Or maybe lower, the global CAPE on that site seems to be optimistic.)

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Re: Bogle himself is saying we will expect like 3% for the next decades

Post by JBTX » Sun Oct 08, 2017 8:37 pm

WanderingDoc wrote:
Sun Oct 08, 2017 1:33 am
FIREchief wrote:
Sun Oct 08, 2017 12:54 am
WanderingDoc wrote:
Sat Oct 07, 2017 4:11 pm
I would genuinely be disappointed in any deal which returns less than 20%.
Dude, you really need to get off the computer and write some books or set up some seminars. If you have a recipe for 20% returns, you're going to become famous. :sharebeer
I do have some ideas for books, but that won't be one of them. There is nothing I hate more than pitchfests and "sign up now for our 3-day seminar for only $1998" I always poked fun anyone who was dumb enough to attend any of these. I learned everything I needed to succeed in real estate from books, internet, and mentors. Cost me peanuts to nothing.

20% returns are not very high, speaking frankly. What I like about real estate is you could modulate your returns if they are bad or good, by putting in less/or more time. Aren't finding any good deals on the MLS? Tighten up your networking or look fo off market deals. Rents aren't where you want them? Ditch the PM for a few years to boost your returns, or get creative with adding another whole unit or room.

With mutual fund investing.. Market will return a real 1.5% over the next 15 years? Well buckle up buttercup, you can't do anything, just try not to pull out, and hope you live long enough! :beer
If you can get 20% returns, then you can turn $100k into $6.4 million in 20 years, and $410 million in 40 years. If that is the case, why are you wasting time here?

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Re: Bogle himself is saying we will expect like 3% for the next decades

Post by WanderingDoc » Sun Oct 08, 2017 8:43 pm

JBTX wrote:
Sun Oct 08, 2017 8:37 pm
WanderingDoc wrote:
Sun Oct 08, 2017 1:33 am
FIREchief wrote:
Sun Oct 08, 2017 12:54 am
WanderingDoc wrote:
Sat Oct 07, 2017 4:11 pm
I would genuinely be disappointed in any deal which returns less than 20%.
Dude, you really need to get off the computer and write some books or set up some seminars. If you have a recipe for 20% returns, you're going to become famous. :sharebeer
I do have some ideas for books, but that won't be one of them. There is nothing I hate more than pitchfests and "sign up now for our 3-day seminar for only $1998" I always poked fun anyone who was dumb enough to attend any of these. I learned everything I needed to succeed in real estate from books, internet, and mentors. Cost me peanuts to nothing.

20% returns are not very high, speaking frankly. What I like about real estate is you could modulate your returns if they are bad or good, by putting in less/or more time. Aren't finding any good deals on the MLS? Tighten up your networking or look fo off market deals. Rents aren't where you want them? Ditch the PM for a few years to boost your returns, or get creative with adding another whole unit or room.

With mutual fund investing.. Market will return a real 1.5% over the next 15 years? Well buckle up buttercup, you can't do anything, just try not to pull out, and hope you live long enough! :beer
If you can get 20% returns, then you can turn $100k into $6.4 million in 20 years, and $410 million in 40 years. If that is the case, why are you wasting time here?
Thats not how it works. I won't be reinvesting proceeds from capital appreciation. Only from cash flow, which is a fraction of the >20%. If I wanted to quit my job, then sell off properties and purchase more and larger ones and reinvest ALL profits, that would be possible. But, I'm too lazy and I like my job in medicine and want to keep most of my properties for simplicity. Rental income has been 8-12% return on cash, so that will have to do!

I have realized, I have enough passive income already to be FI. My expenses have become lower as I get older. So while making a bunch of money sounds nice, surfing every day and meditation retreats interest me more - these things don't pay you last I checked :wink: I am content with a modest sum of net worth I've realized over the last year or two.
One day it suddenly dawned on me that I had won the real estate lottery. | I'm not looking to get rich quickly. I'm not looking to get rich slowly. I'm looking to get rich for sure.

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Re: Bogle himself is saying we will expect like 3% for the next decades

Post by zaboomafoozarg » Sun Oct 08, 2017 9:33 pm

Yeah, projections like this are really making me start thinking about getting into some real estate, or working even more to grow my side business, or moving more money to bonds, or *something*. The future just looks so bad with valuations and interest rates where they're at, and I think that shoving more money into stocks and bonds has a chance to look like a really stupid move 20 years from now.

I know nothing about real estate and can't fix a leaky faucet to save my life, but maybe I need to start getting into real estate anyway. If stock returns really are going to be this low, there is probably no point in putting any more money in them.

Truth be told, several people I know who are my age (mid 30's) are already financially independent. 2 from real estate and 1 from bitcoin. They poke fun of my index fund invested as a cop-out that'll maybe get me rich by the time I'm 65. But mainly they think that investing $50k per year into index funds is a huge waste of potential.

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Re: Bogle himself is saying we will expect like 3% for the next decades

Post by JBTX » Sun Oct 08, 2017 9:44 pm

zaboomafoozarg wrote:
Sun Oct 08, 2017 9:33 pm
Yeah, projections like this are really making me start thinking about getting into some real estate, or working even more to grow my side business, or moving more money to bonds, or *something*. The future just looks so bad with valuations and interest rates where they're at, and I think that shoving more money into stocks and bonds has a chance to look like a really stupid move 20 years from now.

I know nothing about real estate and can't fix a leaky faucet to save my life, but maybe I need to start getting into real estate anyway. If stock returns really are going to be this low, there is probably no point in putting any more money in them.

Truth be told, several people I know who are my age (mid 30's) are already financially independent. 2 from real estate and 1 from bitcoin. They poke fun of my index fund invested as a cop-out that'll maybe get me rich by the time I'm 65. But mainly they think that investing $50k per year into index funds is a huge waste of potential.
If stocks have long term lower than normal returns, chances are that the same thing that depresses those returns will have an impact on other economically senstive investments like real estate, bit coin, tulips, etc.

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Re: Bogle himself is saying we will expect like 3% for the next decades

Post by WanderingDoc » Sun Oct 08, 2017 10:11 pm

zaboomafoozarg wrote:
Sun Oct 08, 2017 9:33 pm
Yeah, projections like this are really making me start thinking about getting into some real estate, or working even more to grow my side business, or moving more money to bonds, or *something*. The future just looks so bad with valuations and interest rates where they're at, and I think that shoving more money into stocks and bonds has a chance to look like a really stupid move 20 years from now.

I know nothing about real estate and can't fix a leaky faucet to save my life, but maybe I need to start getting into real estate anyway. If stock returns really are going to be this low, there is probably no point in putting any more money in them.

Truth be told, several people I know who are my age (mid 30's) are already financially independent. 2 from real estate and 1 from bitcoin. They poke fun of my index fund invested as a cop-out that'll maybe get me rich by the time I'm 65. But mainly they think that investing $50k per year into index funds is a huge waste of potential.
I highly recommend that you consider real estate. I cannot swing a hammer or turn a wrench to save my life.

I have started investing in real estate in late 2013, I currently own $1.45M of real estate, $850K of which is equity. Properties and passive K-1 partnerships conservatively pay me $4.5K per month, enough to cover my basic expenses. That is money deposited RIGHT into my checking account (this is KEY).

The funny thing is, I never tried to build a cash flowing business. This was all done during medical residency (considered by some to be a busy time). Real estate is a very forgiving asset class, and you need about a 3rd grade math proficiency to evaluate a deal.

I don't have a problem with mutual funds, per se. The issue is, you have already decided to work full-time for 25-40 years by investing your savings into a 401k/IRA. That proposition is not for everyone.
One day it suddenly dawned on me that I had won the real estate lottery. | I'm not looking to get rich quickly. I'm not looking to get rich slowly. I'm looking to get rich for sure.

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Re: Bogle himself is saying we will expect like 3% for the next decades

Post by visualguy » Sun Oct 08, 2017 11:04 pm

Agreed about real estate... Much better investment than stock and bond index funds, particularly when looking at the expected returns of a Boglehead portfolio going forward based on current market conditions.

One issue, however, is location, location, location... What if you live in a location where real estate investment is problematic for whatever reason? For example, the cap rate is lousy, or you need too much capital to get in, or the appreciation potential is minimal because of a mediocre or lousy local economy. If you aren't lucky enough to live in a good location for real estate investment, it gets more problematic - you have to research, buy, and manage remote properties... Not impossible, but it does make it tougher.

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Re: Bogle himself is saying we will expect like 3% for the next decades

Post by EddyB » Sun Oct 08, 2017 11:20 pm

WanderingDoc wrote:
Sat Oct 07, 2017 4:04 pm
whodidntante wrote:
Sat Oct 07, 2017 3:58 pm
WanderingDoc wrote:
Sat Oct 07, 2017 3:53 pm
The question becomes, would any rational individual go ahead and put money in a 401k and IRA knowing that there was a GOOD (not 100%) chance that real returns will be around 3% for the next 20 years. What are your thoughts?
Yes, it would be rational to save money in that environment. I expect these kind of muted returns and yet I max every tax advantaged account available to me.
I just watched that Bogle video. One word: Depressing. he basically said in so many words (if not directly) what I have been saying since about 2013:
The real return of the stock market, after taxes, inflation, fees, and human psychology is 0%, at best. I will probably throw no more than $10-12K into the market per year in the near future just for fun, I will write this into my IPS.
But since January 2013, the real return of the S&P 500 has been about 12.5% annually.

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Re: Bogle himself is saying we will expect like 3% for the next decades

Post by WanderingDoc » Mon Oct 09, 2017 12:19 am

visualguy wrote:
Sun Oct 08, 2017 11:04 pm
Agreed about real estate... Much better investment than stock and bond index funds, particularly when looking at the expected returns of a Boglehead portfolio going forward based on current market conditions.

One issue, however, is location, location, location... What if you live in a location where real estate investment is problematic for whatever reason? For example, the cap rate is lousy, or you need too much capital to get in, or the appreciation potential is minimal because of a mediocre or lousy local economy. If you aren't lucky enough to live in a good location for real estate investment, it gets more problematic - you have to research, buy, and manage remote properties... Not impossible, but it does make it tougher.
I am of the opinion that there are deals to be had in EVERY market and submarket, with the caveat that 99/100 of properties (ie. on the MLS) are "bad deals". You would need about 2 years of learning real estate (read books and blogs or talk to a successful investor) than anyone can jump in at any time.

I would throw out the term 'cap rate' unless you are referring to 5+ unit buildings. Although in general, lower cap rate = higher profit. The definition of cap rate has to do with the perceived risk of a property or market, for the chance to collect a specific NOI. It does not apply to single family homes (despite what Turnkey companies show on their websites). Its a market-driven and psychological definition.

I have properties and deals which turn a profit as far west as Hawaii, and as far east as Atlanta. However, I would recommend everyone to start in their backyard. Since I move around every few years, I am comfortable with what I am doing.
One day it suddenly dawned on me that I had won the real estate lottery. | I'm not looking to get rich quickly. I'm not looking to get rich slowly. I'm looking to get rich for sure.

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Leif
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Re: Bogle himself is saying we will expect like 3% for the next decades

Post by Leif » Mon Oct 09, 2017 12:28 am

This video is from a year ago. I'm sure his 10 year estimate has gone down based on current valuations.
Investors should diversify across many asset-classes so that whatever happens, we will not have all our investments in underperforming asset classes and thereby fail to meet our goals-Taylor Larimore

30sep16
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Re: Bogle himself is saying we will expect like 3% for the next decades

Post by 30sep16 » Mon Oct 09, 2017 12:33 am

And people say we're nuts to hold Bitcoin, which is already up 360% this year.

You're nuts not to have 1% in bitcoin. 1% in bitcoin would have added 3.6% to your performance this year, and the most you can lose is 1%. Which you made in a quarter. You just keep frequently scooping off your profits (which is what rebalancing amounts to when you're dealing with bitcoin).

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Re: Bogle himself is saying we will expect like 3% for the next decades

Post by WanderingDoc » Mon Oct 09, 2017 12:47 am

30sep16 wrote:
Mon Oct 09, 2017 12:33 am
And people say we're nuts to hold Bitcoin, which is already up 360% this year.

You're nuts not to have 1% in bitcoin. 1% in bitcoin would have added 3.6% to your performance this year, and the most you can lose is 1%. Which you made in a quarter. You just keep frequently scooping off your profits (which is what rebalancing amounts to when you're dealing with bitcoin).
If I knew how to easily buy and hold bitcoin, I already would have. Seems cumbersome.
One day it suddenly dawned on me that I had won the real estate lottery. | I'm not looking to get rich quickly. I'm not looking to get rich slowly. I'm looking to get rich for sure.

30sep16
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Re: Bogle himself is saying we will expect like 3% for the next decades

Post by 30sep16 » Mon Oct 09, 2017 1:21 am

WanderingDoc wrote:
Mon Oct 09, 2017 12:47 am
30sep16 wrote:
Mon Oct 09, 2017 12:33 am
And people say we're nuts to hold Bitcoin, which is already up 360% this year.

You're nuts not to have 1% in bitcoin. 1% in bitcoin would have added 3.6% to your performance this year, and the most you can lose is 1%. Which you made in a quarter. You just keep frequently scooping off your profits (which is what rebalancing amounts to when you're dealing with bitcoin).
If I knew how to easily buy and hold bitcoin, I already would have. Seems cumbersome.
Are you an American? Go to Coinbase. Use your bank account, not your credit card (because the card will probably decline). They make it ridiculously easy to buy Bitcoin.

Someone might say you should avoid Coinbase's markup and use their sister site GDAX to buy with no fees. But that takes learning how to trade. Don't let that stop you. Just pay the Coinbase markup. A 0.5% markup matter in an investment that's only going to make 5% a year. It's practically irrelevant for an investment that doubles or triples or more per year.

Someone might also say not to keep your Bitcoin on Coinbase/GDAX because all you have is an IOU and you are subject to the exchange being hacked. Which is true but pretty unlikely, given they are the "blue chip" choice. If you put more than 1% of your net worth Bitcoin, then buy a hardware wallet and transfer your Bitcoins out of the exchange. I recommend KeepKey, for the same reason as Coinbase: it's designed to be super simple for the novice.

But don't worry about KeepKey or GDAX now. Just go to Coinbase and get an order in.

Someone might say you should wait until after the 2 upcoming forks. I took my money out of Bitcoin with the previous fork, and ended up losing out on a big bonus had I stayed in. This time I'm just holding.

Bottom line, we have a new asset class that's unique in having a fixed supply. And only a tiny fraction of the world's population own any yet. So it looks like a bubble, but it isn't.

I also recommend reading Horizon Kinetic's review of Bitcoin:
http://horizonkinetics.com/bitcoin-review/

Final word, even if you are die-hard Bitcoin skeptic, you have to have 1% of your assets in it as an insurance policy...in case you're wrong. Because that 1% could double your net worth or more.

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Re: Bogle himself is saying we will expect like 3% for the next decades

Post by 30sep16 » Mon Oct 09, 2017 1:31 am

Also, prepare yourself mentally for Bitcoin volatility.

Bitcoin recently crashed 40% and it didn't bother me the slightest, while I find an equivalent crash in the stock market traumatizing.

Why the difference?

Because Bitcoin frequently crashes and recovers from its crashes in a couple months, where the stock market takes YEARS which I find agonizing. (Yes I know Bitcoin had a multi-year crash too, but it was an immature asset class at that time.)

Because I have 7.5% of my investable assets in Bitcoin so even a major crash doesn't affect my portfolio that much, vs. an AA of 60% or more in stocks to get a decent return (and a return less than my 7.5 Bitcoin / 92.5 cash portfolio). That's the comfort of a barbell portfolio.

WanderingDoc
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Re: Bogle himself is saying we will expect like 3% for the next decades

Post by WanderingDoc » Mon Oct 09, 2017 1:59 am

30sep16 wrote:
Mon Oct 09, 2017 1:21 am
WanderingDoc wrote:
Mon Oct 09, 2017 12:47 am
30sep16 wrote:
Mon Oct 09, 2017 12:33 am
And people say we're nuts to hold Bitcoin, which is already up 360% this year.

You're nuts not to have 1% in bitcoin. 1% in bitcoin would have added 3.6% to your performance this year, and the most you can lose is 1%. Which you made in a quarter. You just keep frequently scooping off your profits (which is what rebalancing amounts to when you're dealing with bitcoin).
If I knew how to easily buy and hold bitcoin, I already would have. Seems cumbersome.
Are you an American? Go to Coinbase. Use your bank account, not your credit card (because the card will probably decline). They make it ridiculously easy to buy Bitcoin.

Someone might say you should avoid Coinbase's markup and use their sister site GDAX to buy with no fees. But that takes learning how to trade. Don't let that stop you. Just pay the Coinbase markup. A 0.5% markup matter in an investment that's only going to make 5% a year. It's practically irrelevant for an investment that doubles or triples or more per year.

Someone might also say not to keep your Bitcoin on Coinbase/GDAX because all you have is an IOU and you are subject to the exchange being hacked. Which is true but pretty unlikely, given they are the "blue chip" choice. If you put more than 1% of your net worth Bitcoin, then buy a hardware wallet and transfer your Bitcoins out of the exchange. I recommend KeepKey, for the same reason as Coinbase: it's designed to be super simple for the novice.

But don't worry about KeepKey or GDAX now. Just go to Coinbase and get an order in.

Someone might say you should wait until after the 2 upcoming forks. I took my money out of Bitcoin with the previous fork, and ended up losing out on a big bonus had I stayed in. This time I'm just holding.

Bottom line, we have a new asset class that's unique in having a fixed supply. And only a tiny fraction of the world's population own any yet. So it looks like a bubble, but it isn't.

I also recommend reading Horizon Kinetic's review of Bitcoin:
http://horizonkinetics.com/bitcoin-review/

Final word, even if you are die-hard Bitcoin skeptic, you have to have 1% of your assets in it as an insurance policy...in case you're wrong. Because that 1% could double your net worth or more.
Sounds good. I will throw $10K in. How long do you think can the doubling/tripling per year go on for?
One day it suddenly dawned on me that I had won the real estate lottery. | I'm not looking to get rich quickly. I'm not looking to get rich slowly. I'm looking to get rich for sure.

chevca
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Re: Bogle himself is saying we will expect like 3% for the next decades

Post by chevca » Mon Oct 09, 2017 6:51 am

30sep16 wrote:
Mon Oct 09, 2017 1:21 am
Final word, even if you are die-hard Bitcoin skeptic, you have to have 1% of your assets in it as an insurance policy...in case you're wrong. Because that 1% could double your net worth or more.
Unless one has Warren Buffett amounts of money, having 1% of their assets in anything isn't going to move the needle much one way or the other. Why bother? I would certainly say one does not "have to have" any amount in Bitcoin.

When did Bogleheads turn into a real estate and Bitcoin sales pitch forum anyway? :happy

BlueCable
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Re: Bogle himself is saying we will expect like 3% for the next decades

Post by BlueCable » Mon Oct 09, 2017 6:59 am

Purchasing Bitcoin may pay off, but it is speculation, not investment. It is little different than buying gold or Swiss francs.

lostdog
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Re: Bogle himself is saying we will expect like 3% for the next decades

Post by lostdog » Mon Oct 09, 2017 7:39 am

WanderingDoc wrote:
Sat Oct 07, 2017 4:04 pm
whodidntante wrote:
Sat Oct 07, 2017 3:58 pm
WanderingDoc wrote:
Sat Oct 07, 2017 3:53 pm
The question becomes, would any rational individual go ahead and put money in a 401k and IRA knowing that there was a GOOD (not 100%) chance that real returns will be around 3% for the next 20 years. What are your thoughts?
Yes, it would be rational to save money in that environment. I expect these kind of muted returns and yet I max every tax advantaged account available to me.
I just watched that Bogle video. One word: Depressing. he basically said in so many words (if not directly) what I have been saying since about 2013:
The real return of the stock market, after taxes, inflation, fees, and human psychology is 0%, at best. I will probably throw no more than $10-12K into the market per year in the near future just for fun, I will write this into my IPS.
Are you serious? Giving into speculation? Market timing works?
Financial Independence is the best revenge. | "Our life is frittered away by detail. Simplify, simplify." -Thoreau

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