Why I bet on S&P500

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alexfoo39
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Why I bet on S&P500

Post by alexfoo39 » Sat May 11, 2019 5:44 am

Aside from local bond, I bet on S&P 500 for the following reasons

1) Endorsement by Buffet and Bogle to be overweight on the American soil. USA has the best people with the best economic policy (capitalism all the way). I do personally want to see USA succeed. A country is only as successful as its ability to retain money.

2) S&P500 is wholly large-cap. Large-cap always enjoy a slightly higher valuation because of its perceived earning stability. S&P 500 alone dominates around 80% of the total US market. That leaves 20% or so for the mid and small-cap combined. It is reasonable to say that some small/mid cap may eventually evolve to a large cap, and if yes, they will eventually be included in the S&P 500 anyway.

3) Personal belief in Pareto principle, i.e., a small number of stocks dominate significantly large portion of global earning. That proves to be the case for FANGS stocks for now. A validation of 2nd point that S&P 500 sufficiently captures most earnings of the market.

4) S&P 500 has international earning built-in. While it is unsure (hence the famous nobody knows' nothing) that USA will continue to outperform the other countries financially, it is still by large the most influential economy of the world. The fact that S&P 500 has around 50% of its earning coming from international market, that speaks of the needed 'diversification' of earning from a global standpoint. The suggested 20% international stock holding is negligible for portfolio maintenance ease.

I'm grateful to live in this age to be able to invest so conveniently. I reviewed 3-fund portfolio and found that it is 67/33 equity/bond allocation. I personally do 50/50 sp500/bond for an even simpler mix.

Reason? You just couldn't ignore the law of least effort, hehe

Valuethinker
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Re: Why I bet on S&P500

Post by Valuethinker » Sat May 11, 2019 5:53 am

alexfoo39 wrote:
Sat May 11, 2019 5:44 am
Aside from local bond, I bet on S&P 500 for the following reasons

1) Endorsement by Buffet and Bogle to be overweight on the American soil. USA has the best people with the best economic policy (capitalism all the way). I do personally want to see USA succeed. A country is only as successful as its ability to retain money.

2) S&P500 is wholly large-cap. Large-cap always enjoy a slightly higher valuation because of its perceived earning stability. S&P 500 alone dominates around 80% of the total US market. That leaves 20% or so for the mid and small-cap combined. It is reasonable to say that some small/mid cap may eventually evolve to a large cap, and if yes, they will eventually be included in the S&P 500 anyway.

3) Personal belief in Pareto principle, i.e., a small number of stocks dominate significantly large portion of global earning. That proves to be the case for FANGS stocks for now. A validation of 2nd point that S&P 500 sufficiently captures most earnings of the market.

4) S&P 500 has international earning built-in. While it is unsure (hence the famous nobody knows' nothing) that USA will continue to outperform the other countries financially, it is still by large the most influential economy of the world. The fact that S&P 500 has around 50% of its earning coming from international market, that speaks of the needed 'diversification' of earning from a global standpoint. The suggested 20% international stock holding is negligible for portfolio maintenance ease.

I'm grateful to live in this age to be able to invest so conveniently. I reviewed 3-fund portfolio and found that it is 67/33 equity/bond allocation. I personally do 50/50 sp500/bond for an even simpler mix.

Reason? You just couldn't ignore the law of least effort, hehe
The equity vs. bond percentage is what will drive your performance.

Whether 1. S&P500 v. a total market index (including small and mid cap) and/or 2. S&P 500 and international index is marginal vs. that split.

All arguments about the supremacy of US markets have to assume that, somehow, that is not publicly available information and is not priced in by the stock market in the relative valuations of US v. non-US markets. In other words, that the market is not Type II Efficient - it does not fully and instantly reflect all publicly available information.

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Forester
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Re: Why I bet on S&P500

Post by Forester » Sat May 11, 2019 5:57 am

The S&P 500 really stank in the 2000s though.

columbia
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Re: Why I bet on S&P500

Post by columbia » Sat May 11, 2019 6:04 am

Forester wrote:
Sat May 11, 2019 5:57 am
The S&P 500 really stank in the 2000s though.
As did ex-US from 2000-2009. Treasuries trounced both of them:

https://www.portfoliovisualizer.com/bac ... total3=100

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alexfoo39
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Re: Why I bet on S&P500

Post by alexfoo39 » Sat May 11, 2019 6:39 am

Valuethinker wrote:
Sat May 11, 2019 5:53 am
The equity vs. bond percentage is what will drive your performance.

All arguments about the supremacy of US markets have to assume that, somehow, that is not publicly available information and is not priced in by the stock market in the relative valuations of US v. non-US markets. In other words, that the market is not Type II Efficient - it does not fully and instantly reflect all publicly available information.
You know, i used to do 100/0, thinking that bond is a junk in my portfolio. I really appreciate the early hit (those stink individual stocks that went sour) that cause me to rethink my ways of investing for the long haul. I think of 60/40, or 70/30 (according to vanguard questionnaire), but I find the beauty of 50/50 posted by another guy in this forum.

On efficient market, do you think US is 'strong' according to EMH?

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alexfoo39
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Re: Why I bet on S&P500

Post by alexfoo39 » Sat May 11, 2019 6:40 am

Forester wrote:
Sat May 11, 2019 5:57 am
The S&P 500 really stank in the 2000s though.
hehe, there's always a price to pay after the dot-com mania :D

In 2000 I was still a toddler hugging my computer monitor.

s8r
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Re: Why I bet on S&P500

Post by s8r » Sat May 11, 2019 6:50 am

alexfoo39 wrote:
Sat May 11, 2019 5:44 am
USA has the best people with the best economic policy (capitalism all the way).
USA sure does attract the majority of the best talents, but you might be surprised to learn that research says there are as many as 11 countries that have greater economic freedom (more capitalistic) than USA.

https://www.heritage.org/index/ranking

Dudley
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Re: Why I bet on S&P500

Post by Dudley » Sat May 11, 2019 7:11 am

Invest in it maybe, but 'bet' on it....
However, I choose not to 'bet' on it. Possibly I'm older (wiser?) and less willing to 'gamble' what I have.

Xrayman69
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Re: Why I bet on S&P500

Post by Xrayman69 » Sat May 11, 2019 7:48 am

Dudley wrote:
Sat May 11, 2019 7:11 am
Invest in it maybe, but 'bet' on it....
However, I choose not to 'bet' on it. Possibly I'm older (wiser?) and less willing to 'gamble' what I have.
I’m getting the sense the OP was using the term “betting” figuratively and not literally. Investing has uncertainties for which admittedly no one has the complete visibility or absolute knowledge.

I’m “betting” on my investing strategy using BH principles. I’m hoping past performance based upon BH principles may correlate with future outcomes and result in higher asset value and that those asset values will be sufficient for me to make withdrawals to support myself and my family in future years. So yes I have a risk and thus the chance that what I put in or currently have may have less value in the future and thus in essence “gambling” or making a bet as the outcome is not absolutely certain (unlike taxes and death)

rkhusky
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Re: Why I bet on S&P500

Post by rkhusky » Sat May 11, 2019 7:48 am

alexfoo39 wrote:
Sat May 11, 2019 5:44 am
S&P500 is wholly large-cap.
S&P 500 has about 10% classified as mid-cap by Morningstar, compared to 17% midcap and 6% small for Total Stock Market (US).

272 Sheep
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Re: Why I bet on S&P500

Post by 272 Sheep » Sat May 11, 2019 8:08 am

alexfoo39 wrote:
Sat May 11, 2019 6:39 am
Valuethinker wrote:
Sat May 11, 2019 5:53 am
The equity vs. bond percentage is what will drive your performance.

All arguments about the supremacy of US markets have to assume that, somehow, that is not publicly available information and is not priced in by the stock market in the relative valuations of US v. non-US markets. In other words, that the market is not Type II Efficient - it does not fully and instantly reflect all publicly available information.
You know, i used to do 100/0, thinking that bond is a junk in my portfolio. I really appreciate the early hit (those stink individual stocks that went sour) that cause me to rethink my ways of investing for the long haul. I think of 60/40, or 70/30 (according to vanguard questionnaire), but I find the beauty of 50/50 posted by another guy in this forum.

On efficient market, do you think US is 'strong' according to EMH?
I would add to that, it would depend on what type of bonds you hold? Are they high-quality and intermediate/short-term duration?
Far as I know, US is still the largest most transparent economy in the world. However, US is interconnected with the world.
S&P 500 does 48% of its business overseas.
As you say, to date, never has there ever been a better time for the average individual investor! :)
Carl W.

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gilgamesh
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Re: Why I bet on S&P500

Post by gilgamesh » Sat May 11, 2019 8:44 am

Doing the right thing for all the wrong reasons :D

lostdog
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Re: Why I bet on S&P500

Post by lostdog » Sat May 11, 2019 8:56 am

Another weekly all U.S. confirmation bias thread.
Last edited by lostdog on Sat May 11, 2019 9:27 am, edited 2 times in total.

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alexfoo39
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Re: Why I bet on S&P500

Post by alexfoo39 » Sat May 11, 2019 8:57 am

s8r wrote:
Sat May 11, 2019 6:50 am
alexfoo39 wrote:
Sat May 11, 2019 5:44 am
USA has the best people with the best economic policy (capitalism all the way).
USA sure does attract the majority of the best talents, but you might be surprised to learn that research says there are as many as 11 countries that have greater economic freedom (more capitalistic) than USA.

https://www.heritage.org/index/ranking
Nice. My homeland is very near Singapore. I must say that our people contributed nearly 50% of the Singapore workforce because of their stronger currency.

Hmm, I see the success of the economic policy from an outcome perspective. Call me outcome bias, but Microsoft, Apple, McDonald, Abbott, Google, Intel have a strong presence even in Southeast Asia. Imagine that. Who wouldn't want to invest in these great companies with a fraction of money? :D

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alexfoo39
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Re: Why I bet on S&P500

Post by alexfoo39 » Sat May 11, 2019 9:00 am

Xrayman69 wrote:
Sat May 11, 2019 7:48 am
I’m getting the sense the OP was using the term “betting” figuratively and not literally. Investing has uncertainties for which admittedly no one has the complete visibility or absolute knowledge.

I’m “betting” on my investing strategy using BH principles. I’m hoping past performance based upon BH principles may correlate with future outcomes and result in higher asset value and that those asset values will be sufficient for me to make withdrawals to support myself and my family in future years. So yes I have a risk and thus the chance that what I put in or currently have may have less value in the future and thus in essence “gambling” or making a bet as the outcome is not absolutely certain (unlike taxes and death)
You know, I was at first doubting the BH principles as one main idea is to project its earning based on past performance. But isn't it the very thing that Bogle warns us about, that nobody knows nothing? The idea of owning the whole haystack strikes me the first time by Markiel's quote, and it took time to sink in my mind to make sense that BH's approach does indeed promise a better result with the least risk (mass diversification instead of laughable 30 stocks per mutual fund).

I guess, nobody likes to be called a punter. We all did our research and hope for the best. :D

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alexfoo39
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Re: Why I bet on S&P500

Post by alexfoo39 » Sat May 11, 2019 9:05 am

272 Sheep wrote:
Sat May 11, 2019 8:08 am

I would add to that, it would depend on what type of bonds you hold? Are they high-quality and intermediate/short-term duration?
Far as I know, US is still the largest most transparent economy in the world. However, US is interconnected with the world.
S&P 500 does 48% of its business overseas.
As you say, to date, never has there ever been a better time for the average individual investor! :)
Carl W.
I hold a bond-like (but is actually an equity fund) fund that promises fixed-price unit, zero cost purchasing and redemption fee, and most importantly, government backed. Almost sounds like a ponzi scheme, hehe, and I think I'm playing with fire here.

So you're on 3-fund portfolio?

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alexfoo39
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Re: Why I bet on S&P500

Post by alexfoo39 » Sat May 11, 2019 9:06 am

alexfoo39 wrote:
Sat May 11, 2019 8:57 am
s8r wrote:
Sat May 11, 2019 6:50 am
alexfoo39 wrote:
Sat May 11, 2019 5:44 am
USA has the best people with the best economic policy (capitalism all the way).
USA sure does attract the majority of the best talents, but you might be surprised to learn that research says there are as many as 11 countries that have greater economic freedom (more capitalistic) than USA.

https://www.heritage.org/index/ranking
Nice. My homeland is very near Singapore. I must say that our people contributed nearly 50% of the Singapore workforce because of their stronger currency.

Hmm, I see the success of the economic policy from an outcome perspective. Call me outcome bias, but Microsoft, Apple, McDonald, Abbott, Google, Intel have a strong presence even in Southeast Asia. These companies are USA made. Imagine that. Who wouldn't want to invest in these great companies with a fraction of money? :D

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alexfoo39
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Re: Why I bet on S&P500

Post by alexfoo39 » Sat May 11, 2019 9:08 am

double post
Last edited by alexfoo39 on Sat May 11, 2019 9:11 am, edited 1 time in total.

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alexfoo39
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Re: Why I bet on S&P500

Post by alexfoo39 » Sat May 11, 2019 9:08 am

gilgamesh wrote:
Sat May 11, 2019 8:44 am
Doing the right thing for all the wrong reasons :D
sometimes they say ignorance is bliss :sharebeer

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alexfoo39
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Re: Why I bet on S&P500

Post by alexfoo39 » Sat May 11, 2019 9:10 am

Xrayman69 wrote:
Sat May 11, 2019 7:48 am
I’m getting the sense the OP was using the term “betting” figuratively and not literally. Investing has uncertainties for which admittedly no one has the complete visibility or absolute knowledge.

I’m “betting” on my investing strategy using BH principles. I’m hoping past performance based upon BH principles may correlate with future outcomes and result in higher asset value and that those asset values will be sufficient for me to make withdrawals to support myself and my family in future years. So yes I have a risk and thus the chance that what I put in or currently have may have less value in the future and thus in essence “gambling” or making a bet as the outcome is not absolutely certain (unlike taxes and death)
You know, I was at first doubting the BH principles as one main idea is to project its earning based on past performance. But isn't it the very thing that Bogle warns us about, that nobody knows nothing? The idea of owning the whole haystack strikes me the first time by Markiel's quote, and it took time to sink in my mind. Then it starts to make sense that BH's approach does indeed promise a better result with the least risk (mass diversification instead of laughable 30 stocks per mutual fund).

I guess, nobody likes to be called a punter. We all did our research and hope for the best. :D

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alexfoo39
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Re: Why I bet on S&P500

Post by alexfoo39 » Sat May 11, 2019 9:11 am

double post

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arcticpineapplecorp.
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Re: Why I bet on S&P500

Post by arcticpineapplecorp. » Sat May 11, 2019 9:14 am

columbia wrote:
Sat May 11, 2019 6:04 am
Forester wrote:
Sat May 11, 2019 5:57 am
The S&P 500 really stank in the 2000s though.
As did ex-US from 2000-2009. Treasuries trounced both of them:

https://www.portfoliovisualizer.com/bac ... total3=100
three things:

1. but international did better than US from 2000-2009 so to say "as did ex-US" is disingenuous. They didn't do equally bad. International had a postive return. U.S. did not. Which is the point. Sometimes international does better than U.S.

2. the "treasuries" you speak of were actually intermediate term treasuries on your portfolio visualizer. So we should be specific. Because when I talk treasuries, I'm talking about the risk free rate, that is, short term treasuries. Again, to just say treasuries without specifying the amount of risk is disingenous.

3. Being that you chose intermediate term treasuries as your argument, saying they "trounced" both U.S. and Global stocks, I then ask you, why you don't invest 100% of your money going forward in intermediate treasuries? Why own stocks at all if "treasuries" are such a slam dunk? Disingenuous again. The past is not prologue. Because a less risky asset did better than a riskier asset over a short period of time, doesn't mean that will be the case in the future or over a longer period of time. If anything, this favors diversification because we don't know what will do well when. Sometimes it will be U.S. Other times, it will be international. And other times still, it may be treasuries. Since we don't know and can't know, it's best to own all three and be fully diversified. Three fund portfolio.
"May you live as long as you want and never want as long as you live" -- Irish Blessing | "Invest we must" -- Jack Bogle

jibantik
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Re: Why I bet on S&P500

Post by jibantik » Sat May 11, 2019 9:21 am

alexfoo39 wrote:
Sat May 11, 2019 6:40 am
Forester wrote:
Sat May 11, 2019 5:57 am
The S&P 500 really stank in the 2000s though.
hehe, there's always a price to pay after the dot-com mania :D

In 2000 I was still a toddler hugging my computer monitor.
If you are this young you definitely should not be speculating and you definitely should not be 100% US (and a subset of US no less!). I am not sure why you think you can predict how global markets will evolve over the next 50 years, but you cannot, no one can. You are making a dangerous gamble.

staythecourse
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Re: Why I bet on S&P500

Post by staythecourse » Sat May 11, 2019 9:25 am

Maybe you should add the biggest reason... It has destroyed every other equity market the last 10+ years. Can you really say you would be all in on sp500 if it as negative last 10 years? I am never surprised how strong rationalization is with investing.

Good luck.
"The stock market [fluctuation], therefore, is noise. A giant distraction from the business of investing.” | -Jack Bogle

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alexfoo39
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Re: Why I bet on S&P500

Post by alexfoo39 » Sat May 11, 2019 9:34 am

jibantik wrote:
Sat May 11, 2019 9:21 am
alexfoo39 wrote:
Sat May 11, 2019 6:40 am
Forester wrote:
Sat May 11, 2019 5:57 am
The S&P 500 really stank in the 2000s though.
hehe, there's always a price to pay after the dot-com mania :D

In 2000 I was still a toddler hugging my computer monitor.
If you are this young you definitely should not be speculating and you definitely should not be 100% US (and a subset of US no less!). I am not sure why you think you can predict how global markets will evolve over the next 50 years, but you cannot, no one can. You are making a dangerous gamble.
do you mean ditch sp500 for total market + international?

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JoMoney
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Re: Why I bet on S&P500

Post by JoMoney » Sat May 11, 2019 9:41 am

staythecourse wrote:
Sat May 11, 2019 9:25 am
Maybe you should add the biggest reason... It has destroyed every other equity market the last 10+ years. Can you really say you would be all in on sp500 if it as negative last 10 years? I am never surprised how strong rationalization is with investing.

Good luck.
I can't speak for the OP, but I was invested primarily in the S&P 500 even when it wasn't. It was never my expectation that other markets wouldn't perform comparably as well. I just never thought it was necessary or added anything meaningful to the portfolio. The US market is a pretty well diversified portfolio, it was lower cost, and didn't have any additional tax complications.
Just over 10 years ago, when Buffett made his hedge-fund bet, and I heard him give some advice to a question blogger Tim Ferris asked at the 2008 annual BRK meeting, I was all-in... At that point Vanguard's International Index had outperformed over the prior ten years... heck, even Vanguard's Total Bond index had outperformed the prior 10 years.

I would quibble with OP's statement about the best people and being on American soil (there's nothing special about the dirt here, other places are richer in natural resources), and the people here are just like everywhere else - except for the system established here that has worked quite well (certainly as far as business is concerned) for hundreds of years - even for the people that have come here from all over and adopted that system.
Last edited by JoMoney on Sat May 11, 2019 9:46 am, edited 1 time in total.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham

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whodidntante
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Re: Why I bet on S&P500

Post by whodidntante » Sat May 11, 2019 9:44 am

Since America makes the best cars, it makes sense that we would make the best stocks.

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Watty
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Re: Why I bet on S&P500

Post by Watty » Sat May 11, 2019 9:49 am

Why I bet on S&P500
I cringe when people use the word "bet" when trying to figure out an investing strategy.

Not so much because of comparing investing to gambling but because it implies that if they have a few bad years they might bet on something else.

The S&P 500 is not a bad choice but as other people mentioned a total stock market and an international stock index fund would be better for more diversification and you can get that with very little additional cost or effort.

columbia
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Re: Why I bet on S&P500

Post by columbia » Sat May 11, 2019 9:51 am

whodidntante wrote:
Sat May 11, 2019 9:44 am
Since America makes the best cars, it makes sense that we would make the best stocks.
Out curiosity: has any car maker beat the SP500 over the last 30 years?

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Phineas J. Whoopee
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Re: Why I bet on S&P500

Post by Phineas J. Whoopee » Sat May 11, 2019 9:55 am

alexfoo39 wrote:
Sat May 11, 2019 6:39 am
...
On efficient market, do you think US is 'strong' according to EMH?
Here's my write-up from several years ago. EMH strength does not depend on geography.

PJW

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whodidntante
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Re: Why I bet on S&P500

Post by whodidntante » Sat May 11, 2019 9:58 am

columbia wrote:
Sat May 11, 2019 9:51 am
whodidntante wrote:
Sat May 11, 2019 9:44 am
Since America makes the best cars, it makes sense that we would make the best stocks.
Out curiosity: has any car maker beat the SP500 over the last 30 years?
Doubt it. But Tesla has beaten the S&P500 since IPO. Surely that will continue. :twisted:

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JoMoney
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Re: Why I bet on S&P500

Post by JoMoney » Sat May 11, 2019 9:59 am

columbia wrote:
Sat May 11, 2019 9:51 am
whodidntante wrote:
Sat May 11, 2019 9:44 am
Since America makes the best cars, it makes sense that we would make the best stocks.
Out curiosity: has any car maker beat the SP500 over the last 30 years?
Auto makers all over have not been a particularly good investment. Not many auto stocks have 30 years of trackable history.
Tesla TSLA has come pretty close to returning 30 years of S&P returns in their 10 years of existence (thanks to their meteoric rise).

Edit: I see you already had TSLA in mind.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham

jibantik
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Re: Why I bet on S&P500

Post by jibantik » Sat May 11, 2019 10:01 am

alexfoo39 wrote:
Sat May 11, 2019 9:34 am
jibantik wrote:
Sat May 11, 2019 9:21 am
alexfoo39 wrote:
Sat May 11, 2019 6:40 am
Forester wrote:
Sat May 11, 2019 5:57 am
The S&P 500 really stank in the 2000s though.
hehe, there's always a price to pay after the dot-com mania :D

In 2000 I was still a toddler hugging my computer monitor.
If you are this young you definitely should not be speculating and you definitely should not be 100% US (and a subset of US no less!). I am not sure why you think you can predict how global markets will evolve over the next 50 years, but you cannot, no one can. You are making a dangerous gamble.
do you mean ditch sp500 for total market + international?
Sort of. I would just recommend a single global market cap fund: VTWAX.

You are doing two levels of speculation here. You are speculating that the you know better than everyone else that the US market is underpriced on the global stage AND, even within that market, you are speculating that you know better than everyone else that the S&P is underpriced.

I am not sure why you think you can predict how the global market of thousands of companies will perform over several decades, but I firmly believe no one can.

If you were a Japanese investor with these view points, you would have been devastated. Recall that Japan, in the not so distant past, had the highest market cap of the global stock market.

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alexfoo39
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Re: Why I bet on S&P500

Post by alexfoo39 » Sat May 11, 2019 10:03 am

jibantik wrote:
Sat May 11, 2019 10:01 am
Sort of. I would just recommend a single global market cap fund: VTWAX.

You are doing two levels of speculation here. You are speculating that the you know better than everyone else that the US market is underpriced on the global stage AND, even within that market, you are speculating that you know better than everyone else that the S&P is underpriced.

I am not sure why you think you can predict how the global market of thousands of companies will perform over several decades, but I firmly believe no one can.

If you were a Japanese investor with these view points, you would have been devastated. Recall that Japan, in the not so distant past, had the highest market cap of the global stock market.
Thank you. I'm just following Bogle and Buffet on SP500 as in point 1. I firmly believe that I know nothing, but found it strange why the former are dogmatic about the choice.

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alexfoo39
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Re: Why I bet on S&P500

Post by alexfoo39 » Sat May 11, 2019 10:04 am

whodidntante wrote:
Sat May 11, 2019 9:58 am

Doubt it. But Tesla has beaten the S&P500 since IPO. Surely that will continue. :twisted:
third time's a charm! up all the way :D

Prahasaurus
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Re: Why I bet on S&P500

Post by Prahasaurus » Sat May 11, 2019 10:10 am

alexfoo39 wrote:
Sat May 11, 2019 5:44 am
USA has the best people with the best economic policy (capitalism all the way). I do personally want to see USA succeed. A country is only as successful as its ability to retain money.
That's right Canada, you losers! Everyone: "I'm proud to be an AMERI-CAN cuz' least I know I'm free!"

Woo Hoo! U-S-A! U-S-A!

Seriously though, as an American, and with over half of my portfolio invested in America, it's posts like this that almost make me want to see the US markets tank for 10 years. Almost... ;-)

Nationalism, baby.. It's bad enough in politics, now we have it infesting our financial discussions.

I know not what course others may take. But as for me: VTWAX and chill.

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JoMoney
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Re: Why I bet on S&P500

Post by JoMoney » Sat May 11, 2019 10:11 am

alexfoo39 wrote:
Sat May 11, 2019 10:03 am
...
Thank you. I'm just following Bogle and Buffet on SP500 as in point 1. I firmly believe that I know nothing, but found it strange why the former are dogmatic about the choice.
I really don't believe either are dogmatic about an international stock allocation.
As far as I can tell, the "dogmatic" ones, are the people who insist it's somehow necessary and will provide some "diversification benefit", which might be the case if your home market wasn't the U.S... but I don't believe the case is that strong for U.S. investors.
Bogle has, on multiple occasions, said people should look at it for themselves - and has even offered advice as to what he thinks a reasonable international allocation might look like...
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham

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alexfoo39
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Re: Why I bet on S&P500

Post by alexfoo39 » Sat May 11, 2019 10:15 am

JoMoney wrote:
Sat May 11, 2019 9:41 am

I would quibble with OP's statement about the best people and being on American soil (there's nothing special about the dirt here, other places are richer in natural resources), and the people here are just like everywhere else - except for the system established here that has worked quite well (certainly as far as business is concerned) for hundreds of years - even for the people that have come here from all over and adopted that system.
As an Asian, I can feel the power of American corporate engine by exposure of product and service. We use microsoft windows here, and many love Apple phones, and Intel, and McD, and Starbucks, and Abbott, and Google! Android etc. It has enhanced our standard of living because of quality products. Hence I'm making a 'bet' by investing in the US. Half my portfolio is in SP500.

I did not bet on small/mid US, they are only 20%. No international for me too, coz USA > All :D

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alexfoo39
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Re: Why I bet on S&P500

Post by alexfoo39 » Sat May 11, 2019 10:22 am

JoMoney wrote:
Sat May 11, 2019 10:11 am
I really don't believe either are dogmatic about an international stock allocation.
As far as I can tell, the "dogmatic" ones, are the people who insist it's somehow necessary and will provide some "diversification benefit", which might be the case if your home market wasn't the U.S... but I don't believe the case is that strong for U.S. investors.
Bogle has, on multiple occasions, said people should look at it for themselves - and has even offered advice as to what he thinks a reasonable international allocation might look like...
A fair one. How do you feel if you're in my shoe? I'm a foreigner to the US, and my exposure to the US is 50% my overall portfolio. Personally I really don't like the EU policy (high tax, socialistic elements despite fueled by capitalism in backdrop). I don't like China either (even if it's nearer to my home country), because there's still problem with repatriating money and the infamous stock fraud in their culture.

Bogle says 20% international is the upper limit for him.

Prahasaurus
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Re: Why I bet on S&P500

Post by Prahasaurus » Sat May 11, 2019 10:27 am

alexfoo39 wrote:
Sat May 11, 2019 10:22 am
A fair one. How do you feel if you're in my shoe? I'm a foreigner to the US, and my exposure to the US is 50% my overall portfolio. Personally I really don't like the EU policy (high tax, socialistic elements despite fueled by capitalism in backdrop). I don't like China either (even if it's nearer to my home country), because there's still problem with repatriating money and the infamous stock fraud in their culture.

Bogle says 20% international is the upper limit for him.
Well, not surprisingly, the nationalistic America first original post has devolved into a political discussion on "socialism" and "high tax" in the EU (neglecting to mention tax rates are quite variable across the EU, and healthcare and educational costs are a fraction of the US). But here we go, now we're talking politics, so countdown to having this thread locked...

lostdog
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Re: Why I bet on S&P500

Post by lostdog » Sat May 11, 2019 10:32 am

alexfoo39 wrote:
Sat May 11, 2019 10:15 am
JoMoney wrote:
Sat May 11, 2019 9:41 am

I would quibble with OP's statement about the best people and being on American soil (there's nothing special about the dirt here, other places are richer in natural resources), and the people here are just like everywhere else - except for the system established here that has worked quite well (certainly as far as business is concerned) for hundreds of years - even for the people that have come here from all over and adopted that system.
As an Asian, I can feel the power of American corporate engine by exposure of product and service. We use microsoft windows here, and many love Apple phones, and Intel, and McD, and Starbucks, and Abbott, and Google! Android etc. It has enhanced our standard of living because of quality products. Hence I'm making a 'bet' by investing in the US. Half my portfolio is in SP500.

I did not bet on small/mid US, they are only 20%. No international for me too, coz USA > All :D
Another confirmation bias thread. American exceptionalism, investing in the rear view mirror, american nationalists, recency bias etc etc...

lostdog
Posts: 1908
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Re: Why I bet on S&P500

Post by lostdog » Sat May 11, 2019 10:39 am

Prahasaurus wrote:
Sat May 11, 2019 10:10 am
alexfoo39 wrote:
Sat May 11, 2019 5:44 am
USA has the best people with the best economic policy (capitalism all the way). I do personally want to see USA succeed. A country is only as successful as its ability to retain money.
That's right Canada, you losers! Everyone: "I'm proud to be an AMERI-CAN cuz' least I know I'm free!"

Woo Hoo! U-S-A! U-S-A!

Seriously though, as an American, and with over half of my portfolio invested in America, it's posts like this that almost make me want to see the US markets tank for 10 years. Almost... ;-)

Nationalism, baby.. It's bad enough in politics, now we have it infesting our financial discussions.

I know not what course others may take. But as for me: VTWAX and chill.
+1000 :sharebeer

bogledogle87
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Re: Why I bet on S&P500

Post by bogledogle87 » Sat May 11, 2019 10:41 am

alexfoo39 wrote:
Sat May 11, 2019 10:03 am
I'm just following Bogle and Buffet on SP500 as in point 1. I firmly believe that I know nothing, but found it strange why the former are dogmatic about the choice.
With all due respect to Bogle (RIP) and Buffet, and they have done great things for US investors, my investment horizon exceeds their time on this earth by 50 years or more. I have no reason to believe that their theories on US-only bias will carry forward through the end of my lifetime. We have to recognize that perhaps these theories could be that of survivorship bias and might be a bit lucky rather than a solid foundation for investing over the next 50+ years. If the S&P is so indirectly tied to international, it should not really underperform, as it has for many periods in the past. It’s not some magical index that holds the best of all worlds with less risk - although it’s performance is justifiably enticing.

The fact is the entire world is changing and developing around us constantly and will do so in ways neither of those two will never see or ever could have imagined.

VTWAX/VT is the ultimate approach to unbiased passive equity Indexing and the most convenient way to actually “buy the haystack”.
VTWAX and chill

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alexfoo39
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Re: Why I bet on S&P500

Post by alexfoo39 » Sat May 11, 2019 10:54 am

bogledogle87 wrote:
Sat May 11, 2019 10:41 am
alexfoo39 wrote:
Sat May 11, 2019 10:03 am
I'm just following Bogle and Buffet on SP500 as in point 1. I firmly believe that I know nothing, but found it strange why the former are dogmatic about the choice.
With all due respect to Bogle (RIP) and Buffet, and they have done great things for US investors, my investment horizon exceeds their time on this earth by 50 years or more. I have no reason to believe that their theories on US-only bias will carry forward through the end of my lifetime. We have to recognize that perhaps these theories could be that of survivorship bias and might be a bit lucky rather than a solid foundation for investing over the next 50+ years. If the S&P is so indirectly tied to international, it should not really underperform, as it has for many periods in the past. It’s not some magical index that holds the best of all worlds with less risk - although it’s performance is justifiably enticing.

The fact is the entire world is changing and developing around us constantly and will do so in ways neither of those two will never see or ever could have imagined.

VTWAX/VT is the ultimate approach to unbiased passive equity Indexing and the most convenient way to actually “buy the haystack”.
Alright, I'm sold. I'll sell my S&P 500 for VTWAX.

Vanguard Total World Stock ETF

Do you know any Ireland domiciled VTWAX for my case? :D

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JoMoney
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Re: Why I bet on S&P500

Post by JoMoney » Sat May 11, 2019 10:59 am

alexfoo39 wrote:
Sat May 11, 2019 10:22 am
JoMoney wrote:
Sat May 11, 2019 10:11 am
I really don't believe either are dogmatic about an international stock allocation.
As far as I can tell, the "dogmatic" ones, are the people who insist it's somehow necessary and will provide some "diversification benefit", which might be the case if your home market wasn't the U.S... but I don't believe the case is that strong for U.S. investors.
Bogle has, on multiple occasions, said people should look at it for themselves - and has even offered advice as to what he thinks a reasonable international allocation might look like...
A fair one. How do you feel if you're in my shoe? I'm a foreigner to the US, and my exposure to the US is 50% my overall portfolio. Personally I really don't like the EU policy (high tax, socialistic elements despite fueled by capitalism in backdrop). I don't like China either (even if it's nearer to my home country), because there's still problem with repatriating money and the infamous stock fraud in their culture.

Bogle says 20% international is the upper limit for him.
Hard to say, I've only ever been in my own shoes ;)
I don't see any big issues with investing in most other developed countries, there will always be struggles and various political turmoil. The businesses in countries within the EU will largely continue to work through them... As will U.S. based companies... I don't see any reason to not hold them on par from a profitability perspective... but as a U.S. investor there are additional expenses, tax consequences, and risks associated with me buying international stocks, and I don't see it bringing any benefit (same expectations but with extra risks and expenses).
As far as emerging markets (and China is the 800 pound gorilla of them), that's just beyond my sleep at night comfort zone. Maybe the great EM growth story will pan out this time, but the risks are just beyond what I want in my portfolio. There's plenty of fraud even in the U.S. market, but at least I have legal recourse here, and I have some idea of what it is I'm buying or what a share of the companies stock represents ownership of. I don't know what I'm buying in the case of some foreign stocks.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham

DB2
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Re: Why I bet on S&P500

Post by DB2 » Sat May 11, 2019 11:12 am

bogledogle87 wrote:
Sat May 11, 2019 10:41 am
alexfoo39 wrote:
Sat May 11, 2019 10:03 am
I'm just following Bogle and Buffet on SP500 as in point 1. I firmly believe that I know nothing, but found it strange why the former are dogmatic about the choice.
With all due respect to Bogle (RIP) and Buffet, and they have done great things for US investors, my investment horizon exceeds their time on this earth by 50 years or more. I have no reason to believe that their theories on US-only bias will carry forward through the end of my lifetime. We have to recognize that perhaps these theories could be that of survivorship bias and might be a bit lucky rather than a solid foundation for investing over the next 50+ years. If the S&P is so indirectly tied to international, it should not really underperform, as it has for many periods in the past. It’s not some magical index that holds the best of all worlds with less risk - although it’s performance is justifiably enticing.

The fact is the entire world is changing and developing around us constantly and will do so in ways neither of those two will never see or ever could have imagined.

VTWAX/VT is the ultimate approach to unbiased passive equity Indexing and the most convenient way to actually “buy the haystack”.
+1

northtexan
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Re: Why I bet on S&P500

Post by northtexan » Sat May 11, 2019 11:29 am

should go with SPXL, the 3x leveraged S&P fund. That is the real bet.

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mrspock
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Re: Why I bet on S&P500

Post by mrspock » Sat May 11, 2019 11:57 am

northtexan wrote:
Sat May 11, 2019 11:29 am
should go with SPXL, the 3x leveraged S&P fund. That is the real bet.
UPRO.... and some of us do exactly that.

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mrspock
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Re: Why I bet on S&P500

Post by mrspock » Sat May 11, 2019 12:09 pm

bogledogle87 wrote:
Sat May 11, 2019 10:41 am
With all due respect to Bogle (RIP) and Buffet, and they have done great things for US investors, my investment horizon exceeds their time on this earth by 50 years or more. I have no reason to believe that their theories on US-only bias will carry forward through the end of my lifetime. We have to recognize that perhaps these theories could be that of survivorship bias and might be a bit lucky rather than a solid foundation for investing over the next 50+ years. If the S&P is so indirectly tied to international, it should not really underperform, as it has for many periods in the past. It’s not some magical index that holds the best of all worlds with less risk - although it’s performance is justifiably enticing.

The fact is the entire world is changing and developing around us constantly and will do so in ways neither of those two will never see or ever could have imagined.

VTWAX/VT is the ultimate approach to unbiased passive equity Indexing and the most convenient way to actually “buy the haystack”.
I believe this is referred to as a "false choice" argument. You are assuming those who are 100% US must remain this way for the duration of their lives, they obviously do not. Should political, and economic differences between international & US begin to lessen, I'd be happy to change my position.

The reality is, it's painfully obvious to anyone who's traveled or lived outside the US for any length of time why the US will out perform: it's a society heavily tilted in the favour of capitalists & capitalism. There's all sorts of consequences to this (good and bad), but one of primary consequences is it creates an environment where capital is very efficiently used, workers very productive, companies are very profitable and survivorship bias works beautifully in the equity markets.

Spend a mere 2 days in Italy, France or the UK and it becomes pretty clear. Lovely places to visit.... invest? No so much.

bondsr4me
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Re: Why I bet on S&P500

Post by bondsr4me » Sat May 11, 2019 12:38 pm

I would be very interested to see performance of the S&P 500 if included all the companies that have gone bankrupt or have been kicked out or in any other way excluded from the perfomance numbers compared to US Treasuries.

Getting rid of the bad apples and keeping only the "good" ones and adding new ones is not IMHO a fair measure of performance.

Locked