What percentage of time does 100% stocks win?

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masonstone
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What percentage of time does 100% stocks win?

Post by masonstone » Sat Jun 08, 2019 10:23 am

Over a 20 year interval according to historical markers (from 1930s and onward) what percentage of the time did 100% stocks win as compared to other asset allocations?

Addendum to question:
My actual question should have been that over a 20 year interval what percentage of time did 100% stocks beat other AA if the contributions were made on a monthly basis over that 20 year period.
I wonder if there's a way to calculate that?
Last edited by masonstone on Sat Jun 08, 2019 7:53 pm, edited 3 times in total.

mhalley
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Re: What percentage of time does 100% stocks win?

Post by mhalley » Sat Jun 08, 2019 12:01 pm

You could run some aa numbers since 1972 at portfolio visualizer.
https://www.portfoliovisualizer.com/bac ... allocation

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Tyler9000
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Re: What percentage of time does 100% stocks win?

Post by Tyler9000 » Sat Jun 08, 2019 12:33 pm

Here are a bunch stats since 1970 for a wide variety of popular portfolios: https://portfoliocharts.com/portfolios/

For the specific data point you're looking for, scroll down to the Rolling Returns chart and set the timeframe to 20 years. Or to study the big picture, the Heat Map is a nice way to get a quick feel for the high and low points of a portfolio over all investing timeframes.

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masonstone
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Re: What percentage of time does 100% stocks win?

Post by masonstone » Sat Jun 08, 2019 2:20 pm

Has anyone crunched the numbers? 😝😋

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Nate79
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Re: What percentage of time does 100% stocks win?

Post by Nate79 » Sat Jun 08, 2019 2:25 pm

What is your period length you want to look at? Daily, monthly, yearly, ...?

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arcticpineapplecorp.
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Re: What percentage of time does 100% stocks win?

Post by arcticpineapplecorp. » Sat Jun 08, 2019 2:34 pm

does this help:

http://archive.nytimes.com/www.nytimes. ... aphic.html

"In Investing, It's When You Start And When You Finish"
Investors often have expectations of real annual returns greater than 7 percent — the areas in green. But over 20 years or longer, rates that high are rare.

After 60 or 70 years, returns are relatively stable, but this time frame is longer than the relevant horizon for many retirement plans.
"May you live as long as you want and never want as long as you live" -- Irish Blessing | "Invest we must" -- Jack Bogle

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Re: What percentage of time does 100% stocks win?

Post by mhalley » Sat Jun 08, 2019 3:28 pm

Crunch the numbers for a man, he has the answer to one question. Post a link to the number crunching site, and he has answers for a lifetime.

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Re: What percentage of time does 100% stocks win?

Post by delamer » Sat Jun 08, 2019 3:53 pm

mhalley wrote:
Sat Jun 08, 2019 3:28 pm
Crunch the numbers for a man, he has the answer to one question. Post a link to the number crunching site, and he has answers for a lifetime.
:D

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masonstone
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Re: What percentage of time does 100% stocks win?

Post by masonstone » Sat Jun 08, 2019 4:10 pm

mhalley wrote:
Sat Jun 08, 2019 3:28 pm
Crunch the numbers for a man, he has the answer to one question. Post a link to the number crunching site, and he has answers for a lifetime.
Lol but I only need the answer to one question 😂

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Re: What percentage of time does 100% stocks win?

Post by sunnywindy » Sat Jun 08, 2019 4:11 pm

masonstone wrote:
Sat Jun 08, 2019 10:23 am
Over a 20 year interval according to historical markers (from 1930s and onward) what percentage of the time did 100% stocks win as compared to other asset allocations?
(If my memory hasn't betrayed me) I remember reading in Jeremy Siegel's most recent edition of "Stocks for the Long Run" (2014) that stocks have never lost to bonds in any 20 year period.

This is one of Siegel's best charts via AAII- https://www.aaii.com/files/images/artic ... gure-1.jpg
Powered by chocolate!

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Re: What percentage of time does 100% stocks win?

Post by Frobie » Sat Jun 08, 2019 4:27 pm

Tyler9000 wrote:
Sat Jun 08, 2019 12:33 pm
Here are a bunch stats since 1970 for a wide variety of popular portfolios: https://portfoliocharts.com/portfolios/
Huh. I stop by the forum for a few minutes pretty much every day, but somehow I’ve never come across that link before.

Neat resource. Thank you for posting it.

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Re: What percentage of time does 100% stocks win?

Post by SovereignInvestor » Sat Jun 08, 2019 4:29 pm

It's potentially misleading to look at time periods even 20 years. Unless one has large sum of money to ibest and does it all at once many likely are putting in new funds every year for a period.

If someone put in 1M into stocks in 1929 the 20 year return was poor. But if they put in 50K a year starting in 1929 even though 20 year returns were poor from 1929 the average annualized return from DCA was very robust.

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Re: What percentage of time does 100% stocks win?

Post by siamond » Sat Jun 08, 2019 4:40 pm

masonstone wrote:
Sat Jun 08, 2019 10:23 am
Over a 20 year interval according to historical markers (from 1930s and onward) what percentage of the time did 100% stocks win as compared to other asset allocations?
Funny that you asked about 1930 onward... I actually started in 1927, when stock returns tracking started to become more reliable. I assume that 'win' means annualized growth (e.g. CAGR), either nominal or real. Here is a graph comparing all periods of 20 years starting on Jan 1st for each starting year. First comparison is 100% (US) stocks to 80/20 (US) stocks and bonds. Second comparison is 100% (US) stocks to 60/40 (US) stocks and bonds. Click on the images to see a larger version. And note how special the 1927 to 1930 data points are...

Image

Image

mhalley wrote:
Sat Jun 08, 2019 3:28 pm
Crunch the numbers for a man, he has the answer to one question. Post a link to the number crunching site, and he has answers for a lifetime.
I do agree, so let me explain that the previous graphs were generated in just a few seconds using the Simba's backtesting spreadsheet [a Bogleheads community project].

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siamond
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Re: What percentage of time does 100% stocks win?

Post by siamond » Sat Jun 08, 2019 6:17 pm

Here is another definition of 'winning', which should be a bit closer to real life. In this scenario, an individual (or a couple) would save $10,000 every year for a period of 20 years, adjusting the amount of savings for inflation every year. Here is the resulting portfolio balance, expressed in inflation-adjusted dollars, as a function of the starting year. Again, those graphs were generated with the Simba backtesting spreadsheet, assuming US-only stocks and bonds.

On the left side, we compare a 100% total-weight allocation to 80/20, while the right side compares to 60/40. Note how the starting point led to considerable differences and how the allocation sometimes considerably changed the final outcome while sometimes it didn't make much of a difference.

Image

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Re: What percentage of time does 100% stocks win?

Post by nisiprius » Sat Jun 08, 2019 6:46 pm

sunnywindy wrote:
Sat Jun 08, 2019 4:11 pm
masonstone wrote:
Sat Jun 08, 2019 10:23 am
Over a 20 year interval according to historical markers (from 1930s and onward) what percentage of the time did 100% stocks win as compared to other asset allocations?
(If my memory hasn't betrayed me) I remember reading in Jeremy Siegel's most recent edition of "Stocks for the Long Run" (2014) that stocks have never lost to bonds in any 20 year period.
Your memory has betrayed you. Here is what Siegel wrote in the fifth edition of Stocks for the Long Run:
In the first four editions of Stocks for the Long Run, I noted that the last 30-year period when the return on long-term bonds beat stocks ended in 1861, at the onset of the Civil War. That is no longer true. Because of the large drop in government bond yields over the past decade, the 11.03 percent annual returns on long-term government bonds surpassed the 10.98 percent on stocks for the 30-year period from January 1, 1982, through the end of 2011.
Note that:
  • The period of time was not twenty years, it was thirty.
  • It was not "never," it was "since 1861." He states specifically that there was a thirty-year period before that when bonds beat stocks.
  • The statement, made in four editions of Stocks for the Long Run, is no longer true.
That last point is particularly interesting. Siegel says, accurately, "That is no longer true." Nevertheless, it is notable that people continue to repeat the old statement anyway even though it is no longer true.
Last edited by nisiprius on Sat Jun 08, 2019 6:57 pm, edited 2 times in total.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

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Re: What percentage of time does 100% stocks win?

Post by nisiprius » Sat Jun 08, 2019 6:56 pm

I'm quoting a table in a standard reference volume, the 2015 Ibbotson SBBI Classic Yearbook (sorry, too much of a cheapskate to buy a new edition of this volume every year), p. 49, table 2-8, over (overlapping) 20-year holding periods from 1926-2014. Whatever the rationale for the choices, it was made by someone other than me, so wasn't subject to my personal biases.

The table compares seven portfolios with varying allocations to large company stocks (S&P 500 and predecessor) and long-term government bonds.

For each of the seven portfolios, it tabulates the number of times it was the highest-returning of the seven:

100% stocks: 59 times out of 70
90% stocks/10% bonds: 0 times out of 70
70% stocks/30% bonds: 5 times out of 70
50% stocks/50% bonds: 4 times out of 70
30% stocks/70% bonds: 1 time out of 70
10% stocks/90% bonds: 0 times out of 70
0% stocks/100% bonds 1 time out of 70
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

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Re: What percentage of time does 100% stocks win?

Post by mariezzz » Sat Jun 08, 2019 7:05 pm

100% of what kind of stocks? VTSAX? (total US) or Total International?

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Re: What percentage of time does 100% stocks win?

Post by Seasonal » Sat Jun 08, 2019 7:06 pm

nisiprius wrote:
Sat Jun 08, 2019 6:46 pm
sunnywindy wrote:
Sat Jun 08, 2019 4:11 pm
masonstone wrote:
Sat Jun 08, 2019 10:23 am
Over a 20 year interval according to historical markers (from 1930s and onward) what percentage of the time did 100% stocks win as compared to other asset allocations?
(If my memory hasn't betrayed me) I remember reading in Jeremy Siegel's most recent edition of "Stocks for the Long Run" (2014) that stocks have never lost to bonds in any 20 year period.
Your memory has betrayed you. Here is what Siegel wrote in the fifth edition of Stocks for the Long Run:
In the first four editions of Stocks for the Long Run, I noted that the last 30-year period when the return on long-term bonds beat stocks ended in 1861, at the onset of the Civil War. That is no longer true. Because of the large drop in government bond yields over the past decade, the 11.03 percent annual returns on long-term government bonds surpassed the 10.98 percent on stocks for the 30-year period from January 1, 1982, through the end of 2011.
Note that:
  • The period of time was not twenty years, it was thirty.
  • It was not "never," it was "since 1861." He states specifically that there was a thirty-year period before that when bonds beat stocks.
  • The statement, made in four editions of Stocks for the Long Run, is no longer true.
That last point is particularly interesting. Siegel says, accurately, "That is no longer true." Nevertheless, it is notable that people continue to repeat the old statement anyway even though it is no longer true.
Something that was true based on historical data is no longer true. It's almost as if past performance is not actually a great guide to the future, but people rely on it anyway, ignoring that things can change.

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Re: What percentage of time does 100% stocks win?

Post by AlohaJoe » Sat Jun 08, 2019 8:49 pm

masonstone wrote:
Sat Jun 08, 2019 10:23 am
Over a 20 year interval according to historical markers (from 1930s and onward) what percentage of the time did 100% stocks win as compared to other asset allocations?
Image

malabargold
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Re: What percentage of time does 100% stocks win?

Post by malabargold » Sat Jun 08, 2019 10:24 pm

A lot of parsing by the hard core bond fans.
Answer
- almost always

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Re: What percentage of time does 100% stocks win?

Post by Tyler9000 » Sun Jun 09, 2019 1:14 am

masonstone wrote:
Sat Jun 08, 2019 10:23 am
My actual question should have been that over a 20 year interval what percentage of time did 100% stocks beat other AA if the contributions were made on a monthly basis over that 20 year period. I wonder if there's a way to calculate that?
Ok -- I'll play. 8-)

First, let me explain three tweaks to your request that I had to make to accommodate the data I have available. First, I only have data for all of the assets required to do this back to 1970. Second, I'm going to look at 15-year investing periods instead of 20 because the 20-year stock bubble right in the middle of the dataset introduces a systematic bias in the numbers when the rolling timeframe gets too long relative to the sample. So I'm not trying to shift the goalposts or anything -- I just want it to be a reasonable analysis given the data I have to work with. And third, I only have annual returns data so the contributions are annual and not monthly. But even with those qualifications hopefully you'll find it helpful.

Anyways -- check this out. All portfolio definitions can be found here: https://portfoliocharts.com/portfolios/

Image

The blue columns track the percentage of time that a portfolio starting from scratch and contributing $10k/year beat 100% US stocks on an inflation-adjusted compounded basis after 15 years. But that doesn't tell the whole story, as the magnitude of the difference also matters. The green columns track the most that the final portfolio values beat the stock market in any one 15-year period. High values mean they were particularly good at mitigating fat tail downside risk in the stock market.

I included that second datapoint to illustrate that there's more to wise asset allocation than simply beating the stock market more often than not. For example, investors in portfolios with high green columns slept very well at night even while the stock market burned around them and I imagine they were a lot more likely to stay the course and make more money than any of those blue columns indicate. A big part of investing is knowing how you'll handle certain situations beyond the cold numbers on a spreadsheet.

Frobie wrote:
Sat Jun 08, 2019 4:27 pm
Tyler9000 wrote:
Sat Jun 08, 2019 12:33 pm
Here are a bunch stats since 1970 for a wide variety of popular portfolios: https://portfoliocharts.com/portfolios/
Huh. I stop by the forum for a few minutes pretty much every day, but somehow I’ve never come across that link before.

Neat resource. Thank you for posting it.
You're welcome! I respect the rules and culture here and try not to over-do the links, but I've put a lot of work into Portfolio Charts and I'm always happy to share good data.

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Re: What percentage of time does 100% stocks win?

Post by YRT70 » Sun Jun 09, 2019 3:11 am

Tyler9000 wrote:
Sun Jun 09, 2019 1:14 am
Ok -- I'll play. 8-)

Image

The blue columns track the percentage of time that a portfolio starting from scratch and contributing $10k/year beat 100% US stocks on an inflation-adjusted compounded basis after 15 years. But that doesn't tell the whole story, as the magnitude of the difference also matters. The green columns track the most that the final portfolio values beat the stock market in any one 15-year period.
Great info. Thanks for sharing.

Do you have more info or maybe pictures like the one above that illustrate better at how well the portfolios mitigate downside risk? It's an area I'd like to learn more about.

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Re: What percentage of time does 100% stocks win?

Post by masonstone » Sun Jun 09, 2019 6:17 am

Tyler9000 wrote:
Sun Jun 09, 2019 1:14 am
masonstone wrote:
Sat Jun 08, 2019 10:23 am
My actual question should have been that over a 20 year interval what percentage of time did 100% stocks beat other AA if the contributions were made on a monthly basis over that 20 year period. I wonder if there's a way to calculate that?
Ok -- I'll play. 8-)

First, let me explain three tweaks to your request that I had to make to accommodate the data I have available. First, I only have data for all of the assets required to do this back to 1970. Second, I'm going to look at 15-year investing periods instead of 20 because the 20-year stock bubble right in the middle of the dataset introduces a systematic bias in the numbers when the rolling timeframe gets too long relative to the sample. So I'm not trying to shift the goalposts or anything -- I just want it to be a reasonable analysis given the data I have to work with. And third, I only have annual returns data so the contributions are annual and not monthly. But even with those qualifications hopefully you'll find it helpful.

Anyways -- check this out. All portfolio definitions can be found here: https://portfoliocharts.com/portfolios/

Image

The blue columns track the percentage of time that a portfolio starting from scratch and contributing $10k/year beat 100% US stocks on an inflation-adjusted compounded basis after 15 years. But that doesn't tell the whole story, as the magnitude of the difference also matters. The green columns track the most that the final portfolio values beat the stock market in any one 15-year period. High values mean they were particularly good at mitigating fat tail downside risk in the stock market.

I included that second datapoint to illustrate that there's more to wise asset allocation than simply beating the stock market more often than not. For example, investors in portfolios with high green columns slept very well at night even while the stock market burned around them and I imagine they were a lot more likely to stay the course and make more money than any of those blue columns indicate. A big part of investing is knowing how you'll handle certain situations beyond the cold numbers on a spreadsheet.

Frobie wrote:
Sat Jun 08, 2019 4:27 pm
Tyler9000 wrote:
Sat Jun 08, 2019 12:33 pm
Here are a bunch stats since 1970 for a wide variety of popular portfolios: https://portfoliocharts.com/portfolios/
Huh. I stop by the forum for a few minutes pretty much every day, but somehow I’ve never come across that link before.

Neat resource. Thank you for posting it.
You're welcome! I respect the rules and culture here and try not to over-do the links, but I've put a lot of work into Portfolio Charts and I'm always happy to share good data.
Thank you

randomguy
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Re: What percentage of time does 100% stocks win?

Post by randomguy » Sun Jun 09, 2019 8:20 am

Is everyone buying long term bonds these days? It always seems like we talk long term bonds when talking performance but buy total bond when building portfolios.

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Re: What percentage of time does 100% stocks win?

Post by randomguy » Sun Jun 09, 2019 8:28 am

YRT70 wrote:
Sun Jun 09, 2019 3:11 am
Tyler9000 wrote:
Sun Jun 09, 2019 1:14 am
Ok -- I'll play. 8-)

Image

The blue columns track the percentage of time that a portfolio starting from scratch and contributing $10k/year beat 100% US stocks on an inflation-adjusted compounded basis after 15 years. But that doesn't tell the whole story, as the magnitude of the difference also matters. The green columns track the most that the final portfolio values beat the stock market in any one 15-year period.
Great info. Thanks for sharing.

Do you have more info or maybe pictures like the one above that illustrate better at how well the portfolios mitigate downside risk? It's an area I'd like to learn more about.
For fun do 10 year and 20 year charts. Over 10 years I expect stocks to get beaten by a lot more. Over 20, I expect the success rate of beating sticks to plummet.

The other thing to think about is that the a lot of the bad stock cases are a result of crashes at the end. That is important if you need money on a a given day. Not so much if you need it on others. If you look at the long bonds beating stocks chart, you end up with more money by owning stocks for 29 or the 30 years. Being a loser for a long time and making it up in a brief period is a mentally hard strategy to follow.

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Re: What percentage of time does 100% stocks win?

Post by nisiprius » Sun Jun 09, 2019 8:41 am

To me, the big take-home is that the correct statement is "stocks usually have beaten bonds."

The problem is that "stocks usually have beaten bonds" is just not a catchy or compelling story. There is a strong urge to simplify it to "stocks always beat bonds." This urge prompts people to make careless statements, exaggerated statements, misunderstood and misquoted statements, and failure to update statements (for example, quoting what Siegel said in the 4th edition and failing to quote "that is no longer true.")

Even putting it, correctly, in the past tense, "Stocks have always beaten bonds" is an impressive and convincing statement that suggests a high likelihood that they'll continue to do so, and supports the idea that there's virtually no risk in 100% stocks. "Stocks have usually beaten bonds" just ain't the same. It raises uncomfortable questions about the times when they didn't.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

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Re: What percentage of time does 100% stocks win?

Post by randomguy » Sun Jun 09, 2019 8:57 am

nisiprius wrote:
Sun Jun 09, 2019 8:41 am
To me, the big take-home is that the correct statement is "stocks usually have beaten bonds."

The problem is that "stocks usually have beaten bonds" is just not a catchy or compelling story. There is a strong urge to simplify it to "stocks always beat bonds." This urge prompts people to make careless statements, exaggerated statements, misunderstood and misquoted statements, and failure to update statements (for example, quoting what Siegel said in the 4th edition and failing to quote "that is no longer true.")

Even putting it, correctly, in the past tense, "Stocks have always beaten bonds" is an impressive and convincing statement that suggests a high likelihood that they'll continue to do so, and supports the idea that there's virtually no risk in 100% stocks. "Stocks have usually beaten bonds" just ain't the same. It raises uncomfortable questions about the times when they didn't.

Does making .05% more over 30 years really change anything? Stocks over 30 years have won big and lost small when compared to long bonds in the US. Obviously this is all backwards looking. The risk in US stocks over long periods in the US hasn't shown up. Japan stands as the example of a noninvaded, nonrevolution country where stocks have not paid off

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Re: What percentage of time does 100% stocks win?

Post by willthrill81 » Sun Jun 09, 2019 9:23 am

randomguy wrote:
Sun Jun 09, 2019 8:57 am
nisiprius wrote:
Sun Jun 09, 2019 8:41 am
To me, the big take-home is that the correct statement is "stocks usually have beaten bonds."

The problem is that "stocks usually have beaten bonds" is just not a catchy or compelling story. There is a strong urge to simplify it to "stocks always beat bonds." This urge prompts people to make careless statements, exaggerated statements, misunderstood and misquoted statements, and failure to update statements (for example, quoting what Siegel said in the 4th edition and failing to quote "that is no longer true.")

Even putting it, correctly, in the past tense, "Stocks have always beaten bonds" is an impressive and convincing statement that suggests a high likelihood that they'll continue to do so, and supports the idea that there's virtually no risk in 100% stocks. "Stocks have usually beaten bonds" just ain't the same. It raises uncomfortable questions about the times when they didn't.

Does making .05% more over 30 years really change anything? Stocks over 30 years have won big and lost small when compared to long bonds in the US.
That's my thought as well. The statement that "stocks have always beaten bonds" actually is true, but the question is how long of a period do we have to look at for it to be true. If we exclude the Civil War era, I believe that it's about 31 or 32 years.

Over a 20 year period (ala the OP), the 'win ratio' of stocks has been very high, probably over 90%. Better than Vegas. :P
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Re: What percentage of time does 100% stocks win?

Post by Tyler9000 » Sun Jun 09, 2019 9:55 am

YRT70 wrote:
Sun Jun 09, 2019 3:11 am
Do you have more info or maybe pictures like the one above that illustrate better at how well the portfolios mitigate downside risk? It's an area I'd like to learn more about.
Sure. For individual portfolios, use this Drawdowns calculator or browse for the same pre-populated chart on the portfolios pages. If you like the chart I made here comparing multiple portfolios you might play around with the Portfolio Matrix and Risk & Return chart. And if you like to tinker, the Simba Spreadsheet that Siamond referenced earlier is a terrific open-source tool with some good risk data.

randomguy wrote:
Sun Jun 09, 2019 8:28 am
For fun do 10 year and 20 year charts. Over 10 years I expect stocks to get beaten by a lot more. Over 20, I expect the success rate of beating sticks to plummet.
The first chart was definitely for fun, but it took long enough that two more sound like a chore. :wink: But in my experience you're absolutely right. The longer the timeframe, the better the data looks for stocks. The important question that each individual has to answer for themselves is just how long they're willing and able to wait for the superior long-term average returns to finally manifest. Not every life goal can be put on hold for 20+ years when stocks don't cooperate.

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Re: What percentage of time does 100% stocks win?

Post by randomguy » Sun Jun 09, 2019 11:49 am

Tyler9000 wrote:
Sun Jun 09, 2019 9:55 am

randomguy wrote:
Sun Jun 09, 2019 8:28 am
For fun do 10 year and 20 year charts. Over 10 years I expect stocks to get beaten by a lot more. Over 20, I expect the success rate of beating sticks to plummet.
The first chart was definitely for fun, but it took long enough that two more sound like a chore. :wink: But in my experience you're absolutely right. The longer the timeframe, the better the data looks for stocks. The important question that each individual has to answer for themselves is just how long they're willing and able to wait for the superior long-term average returns to finally manifest. Not every life goal can be put on hold for 20+ years when stocks don't cooperate.
I was hoping you had a script:) The worst 15 year period for the S&P 500 since 1970 was 3.7%. The worst 20 year period was 6.4%. A bad decade really shows up in 15 year returns but at 20 years so far you pretty much have always gotten enough returns to beat the alternatives from the bull markets on either. People often have a lot of money with 30+ time frames (i.e. you are 40 retiring in 15 years and planning on living another 30) where things like this matter. You still run into the problem that everything we talk about is the past and the past doesn't dictate the futures. Given past results 100% SV would be an easy choice. Win big a lot of times, and lose small the rest. But who knows what the future will bring. We could have had a lucky 100 year stock run or an unlucky one. And the rules of the game could have changed.

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Re: What percentage of time does 100% stocks win?

Post by willthrill81 » Sun Jun 09, 2019 1:21 pm

randomguy wrote:
Sun Jun 09, 2019 11:49 am
Given past results 100% SV would be an easy choice.
Given the past, I would have been 100% Apple, then 100% Amazon, then 100% Bitcoin (until Dec. 2017). And then I'd make Warren Buffett look like a pauper. :D
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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masonstone
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Re: What percentage of time does 100% stocks win?

Post by masonstone » Sun Jun 09, 2019 1:32 pm

willthrill81 wrote:
Sun Jun 09, 2019 1:21 pm
randomguy wrote:
Sun Jun 09, 2019 11:49 am
Given past results 100% SV would be an easy choice.
Given the past, I would have been 100% Apple, then 100% Amazon, then 100% Bitcoin (until Dec. 2017). And then I'd make Warren Buffett look like a pauper. :D
I would’ve picked the winning lottery numbers.

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willthrill81
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Re: What percentage of time does 100% stocks win?

Post by willthrill81 » Sun Jun 09, 2019 1:36 pm

masonstone wrote:
Sun Jun 09, 2019 1:32 pm
willthrill81 wrote:
Sun Jun 09, 2019 1:21 pm
randomguy wrote:
Sun Jun 09, 2019 11:49 am
Given past results 100% SV would be an easy choice.
Given the past, I would have been 100% Apple, then 100% Amazon, then 100% Bitcoin (until Dec. 2017). And then I'd make Warren Buffett look like a pauper. :D
I would’ve picked the winning lottery numbers.
Another good choice. Although I suspect that you would be subject to numerous investigations after winning multiple lotteries. Winning one might be enough though. :wink:
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: What percentage of time does 100% stocks win?

Post by visualguy » Sun Jun 09, 2019 3:23 pm

randomguy wrote:
Sun Jun 09, 2019 11:49 am
You still run into the problem that everything we talk about is the past and the past doesn't dictate the futures. Given past results 100% SV would be an easy choice. Win big a lot of times, and lose small the rest. But who knows what the future will bring. We could have had a lucky 100 year stock run or an unlucky one. And the rules of the game could have changed.
All true, but I don't think a large percentage in bonds is a good way to handle this risk because of the poor return of bonds - they don't even keep up with inflation post tax. If our stocks perform poorly over the long run, and our bonds don't keep up with inflation, most of us would be in trouble. One approach is to diversify to direct real estate which is what I most often see people do.

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masonstone
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Re: What percentage of time does 100% stocks win?

Post by masonstone » Sun Jun 09, 2019 4:08 pm

visualguy wrote:
Sun Jun 09, 2019 3:23 pm
randomguy wrote:
Sun Jun 09, 2019 11:49 am
You still run into the problem that everything we talk about is the past and the past doesn't dictate the futures. Given past results 100% SV would be an easy choice. Win big a lot of times, and lose small the rest. But who knows what the future will bring. We could have had a lucky 100 year stock run or an unlucky one. And the rules of the game could have changed.
All true, but I don't think a large percentage in bonds is a good way to handle this risk because of the poor return of bonds - they don't even keep up with inflation post tax. If our stocks perform poorly over the long run, and our bonds don't keep up with inflation, most of us would be in trouble. One approach is to diversify to direct real estate which is what I most often see people do.
That’s actually exactly what i was thinking

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Re: What percentage of time does 100% stocks win?

Post by pkcrafter » Sun Jun 09, 2019 5:06 pm

John Norstand answers in this thread

viewtopic.php?t=78230
“The 16 years from 1966 through 1981 were indeed a period when stocks went nowhere (actually less than nowhere – they went backwards). Using the “Fama/French Factors” data at Ken French’s web site for the total stock market (not just large caps), the total return in excess of the risk-free rate over that 16 year period was -7.69%, and the total “real” return in excess of inflation as measured by the CPI was -5.54%.”

“ Interesting to compare this period to the Great Depression. The total real return for the 16 years from 1929 through 1944 was 20.58%. This isn’t a very handsome total return for 16 years of investing, but it’s lots better than -5.54%. We usually think of the Great Depression as a bad time for investors (and it was), but that 66-81 period was actually quite a bit worse.“

“So in the last 83 years we have 2 examples of 16 year periods when stocks didn’t do well at all. 16 years is a long time. In both cases investors who stayed the course happened to end up being well rewarded eventually. But was this guaranteed? Will this pattern always repeat in the future? It’s not a sure bet, IMHO, and the fact that it happened twice is no kind of proof that this kind of recovery is some kind of immutable law of nature.” – John Norstad, 2011, Bogleheads
“If you take the full 18 years from the end of 1999 to the end of 2017, the S&P 500 has only risen 82%, which works out to only 3.4% per year, annualized.” – Louis Navellier

Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.

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Re: What percentage of time does 100% stocks win?

Post by visualguy » Sun Jun 09, 2019 6:29 pm

Absolutely, which illustrates that relying solely on stocks or a stock/bond combo is risky even in the long run.

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Re: What percentage of time does 100% stocks win?

Post by randomguy » Sun Jun 09, 2019 7:08 pm

visualguy wrote:
Sun Jun 09, 2019 3:23 pm
randomguy wrote:
Sun Jun 09, 2019 11:49 am
You still run into the problem that everything we talk about is the past and the past doesn't dictate the futures. Given past results 100% SV would be an easy choice. Win big a lot of times, and lose small the rest. But who knows what the future will bring. We could have had a lucky 100 year stock run or an unlucky one. And the rules of the game could have changed.
All true, but I don't think a large percentage in bonds is a good way to handle this risk because of the poor return of bonds - they don't even keep up with inflation post tax. If our stocks perform poorly over the long run, and our bonds don't keep up with inflation, most of us would be in trouble. One approach is to diversify to direct real estate which is what I most often see people do.
The problem with real estate is that there is limited data on it. How did direct real estate investor help the 1929 investor, the 1966 one, the 1989 Japan, or the 2005 US investor? With stocks and bonds it is trivial to comment on. I have never seen any real estate advocate give numbers. They just talk about how great it is. In their defense numbers like this are hard to come by and somewhat individualistic to the investor and markets. I can say track houston real estate as a whole through the oil bubble of the 80s but it is very hard to track what rents did on those various properties (i.e. property losing 30% real is one things if your getting a ton of rent. seem to remember huge levels of commercial vacancy during that period.) is tougher. Through in varying carrying costs and the like and good luck coming up with numbers:)

Making one more bet might help but given how correlated it might be with the rest of your holdings, I am not sure how much faith I should have on it bailing me out. And even if real estate as a whole does well, how much individual holding risk am I taking? REITs don't provide the same diversification from what I can tell, so I will be place a half dozen-dozen bets on maybe 2 markets. Thats not much diversification.

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Re: What percentage of time does 100% stocks win?

Post by cheesepep » Sun Jun 09, 2019 7:26 pm

A win is subjective, subject to if you want passive income or total income, etc. If you use the normal definition of total income over a set period of time, 100% of stocks for most investors will probably lose to the total stock market index. For my own portfolio of 100% stocks over the last 10 years or so, I've beaten the market 8-9 times out of 10. Last year, I really lost big as I stupidly placed my money in a handful of Chinese internet stocks. Still suffering now from it, but overall quite happy with my performance. Will continue to be 100% stocks. Of course, this is my own personal portfolio and results will vary from person to person.

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Re: What percentage of time does 100% stocks win?

Post by visualguy » Sun Jun 09, 2019 7:35 pm

randomguy wrote:
Sun Jun 09, 2019 7:08 pm
visualguy wrote:
Sun Jun 09, 2019 3:23 pm
randomguy wrote:
Sun Jun 09, 2019 11:49 am
You still run into the problem that everything we talk about is the past and the past doesn't dictate the futures. Given past results 100% SV would be an easy choice. Win big a lot of times, and lose small the rest. But who knows what the future will bring. We could have had a lucky 100 year stock run or an unlucky one. And the rules of the game could have changed.
All true, but I don't think a large percentage in bonds is a good way to handle this risk because of the poor return of bonds - they don't even keep up with inflation post tax. If our stocks perform poorly over the long run, and our bonds don't keep up with inflation, most of us would be in trouble. One approach is to diversify to direct real estate which is what I most often see people do.
The problem with real estate is that there is limited data on it. How did direct real estate investor help the 1929 investor, the 1966 one, the 1989 Japan, or the 2005 US investor? With stocks and bonds it is trivial to comment on. I have never seen any real estate advocate give numbers. They just talk about how great it is. In their defense numbers like this are hard to come by and somewhat individualistic to the investor and markets. I can say track houston real estate as a whole through the oil bubble of the 80s but it is very hard to track what rents did on those various properties (i.e. property losing 30% real is one things if your getting a ton of rent. seem to remember huge levels of commercial vacancy during that period.) is tougher. Through in varying carrying costs and the like and good luck coming up with numbers:)

Making one more bet might help but given how correlated it might be with the rest of your holdings, I am not sure how much faith I should have on it bailing me out. And even if real estate as a whole does well, how much individual holding risk am I taking? REITs don't provide the same diversification from what I can tell, so I will be place a half dozen-dozen bets on maybe 2 markets. Thats not much diversification.
Real estate is indeed about individual markets, so, yeah, you don't buy some random property somewhere or an index, but it's not rocket science. A couple of good properties in desirable and economically strong parts of the country give you good diversification from stocks-only or stocks with bonds which lose real value. I don't have long-term historical numbers, mostly my own experience. Also, I've always been encouraged by the experience of my parents and grandparents who lived through the 60s and 70s, and did well with their rentals when stocks/bonds didn't do well, and those properties continued to be a good investment beyond that period as well.

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Re: What percentage of time does 100% stocks win?

Post by randomguy » Sun Jun 09, 2019 8:52 pm

visualguy wrote:
Sun Jun 09, 2019 7:35 pm

Real estate is indeed about individual markets, so, yeah, you don't buy some random property somewhere or an index, but it's not rocket science. A couple of good properties in desirable and economically strong parts of the country give you good diversification from stocks-only or stocks with bonds which lose real value. I don't have long-term historical numbers, mostly my own experience. Also, I've always been encouraged by the experience of my parents and grandparents who lived through the 60s and 70s, and did well with their rentals when stocks/bonds didn't do well, and those properties continued to be a good investment beyond that period as well.
If I said my parents did well investing in individual stocks in the 70s/80s by avoiding indexes and random stocks, would you say I should also start active investing?:) Now to some extent I agree with you. Real estate isn't super efficient or hard. But I am not convinced I would be able to detect the trend where my healthy location goes south that early. If I was in houston in the late 70s I don't think I would go, hmm oil is going to drop in a couple of years and all this activity will cease. Or New England in the late 80s. And so on. Whenever you bring it up, the response is always don't invest in bad locations which sounds an a lot like the advice to don't buy stocks that are going to go down.

Most of the time, I am sure you will do more than fine with real estate. The question is the bottom 5% when risk shows up and how often that is correlated with the rest of the economy.

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Re: What percentage of time does 100% stocks win?

Post by visualguy » Sun Jun 09, 2019 9:10 pm

randomguy wrote:
Sun Jun 09, 2019 8:52 pm
visualguy wrote:
Sun Jun 09, 2019 7:35 pm

Real estate is indeed about individual markets, so, yeah, you don't buy some random property somewhere or an index, but it's not rocket science. A couple of good properties in desirable and economically strong parts of the country give you good diversification from stocks-only or stocks with bonds which lose real value. I don't have long-term historical numbers, mostly my own experience. Also, I've always been encouraged by the experience of my parents and grandparents who lived through the 60s and 70s, and did well with their rentals when stocks/bonds didn't do well, and those properties continued to be a good investment beyond that period as well.
If I said my parents did well investing in individual stocks in the 70s/80s by avoiding indexes and random stocks, would you say I should also start active investing?:) Now to some extent I agree with you. Real estate isn't super efficient or hard. But I am not convinced I would be able to detect the trend where my healthy location goes south that early. If I was in houston in the late 70s I don't think I would go, hmm oil is going to drop in a couple of years and all this activity will cease. Or New England in the late 80s. And so on. Whenever you bring it up, the response is always don't invest in bad locations which sounds an a lot like the advice to don't buy stocks that are going to go down.

Most of the time, I am sure you will do more than fine with real estate. The question is the bottom 5% when risk shows up and how often that is correlated with the rest of the economy.
It's definitely better diversification than just the stock market (or stocks/bonds), and it does relatively well with inflation. The single location isn't really equivalent to a single stock... Places like the current economic centers of the coasts will continue to do well even if some of the leading industries there change with time. They evolved in the past as well - people want to live there, and they create new things. They come to do their thing, need a place to live, they make money, and you benefit from whatever it is they happen to be doing at the time.

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Re: What percentage of time does 100% stocks win?

Post by randomguy » Sun Jun 09, 2019 10:58 pm

visualguy wrote:
Sun Jun 09, 2019 9:10 pm


It's definitely better diversification than just the stock market (or stocks/bonds), and it does relatively well with inflation. The single location isn't really equivalent to a single stock... Places like the current economic centers of the coasts will continue to do well even if some of the leading industries there change with time. They evolved in the past as well - people want to live there, and they create new things. They come to do their thing, need a place to live, they make money, and you benefit from whatever it is they happen to be doing at the time.
Sure. But when they only have to pay 70% of what they do today because of lowered demand, what does that do to your returns? The people that bought at the top go bankrupt and the people who bought years ago just break even.

I am guessing my ability to predict the future of real estate is about as accurate as my ability to predict the stock market.:) I expect both to be up significantly in 20 years. But I also wouldn't be shocked to seem them all treading about at the same levels in 20 years also.

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Re: What percentage of time does 100% stocks win?

Post by visualguy » Sun Jun 09, 2019 11:21 pm

randomguy wrote:
Sun Jun 09, 2019 10:58 pm
visualguy wrote:
Sun Jun 09, 2019 9:10 pm


It's definitely better diversification than just the stock market (or stocks/bonds), and it does relatively well with inflation. The single location isn't really equivalent to a single stock... Places like the current economic centers of the coasts will continue to do well even if some of the leading industries there change with time. They evolved in the past as well - people want to live there, and they create new things. They come to do their thing, need a place to live, they make money, and you benefit from whatever it is they happen to be doing at the time.
Sure. But when they only have to pay 70% of what they do today because of lowered demand, what does that do to your returns? The people that bought at the top go bankrupt and the people who bought years ago just break even.

I am guessing my ability to predict the future of real estate is about as accurate as my ability to predict the stock market.:) I expect both to be up significantly in 20 years. But I also wouldn't be shocked to seem them all treading about at the same levels in 20 years also.
It's all possible, but it's about probabilities. The chance of both disappointing you is lower than the chance that one will. The chance that both will be hit by some higher new taxes is lower than those that one of them will, etc.

The stock market is particularly cruel because of its high volatility and occasionally long recovery times, which lead to sequence of returns problems and emotional stress. Mitigating that with bonds is problematic because of the low returns of bonds. This leaves real estate. There aren't all that many options for most of us...

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Re: What percentage of time does 100% stocks win?

Post by AlohaJoe » Sun Jun 09, 2019 11:22 pm

randomguy wrote:
Sun Jun 09, 2019 7:08 pm
The problem with real estate is that there is limited data on it. How did direct real estate investor help the 1929 investor
A bit of a tangent but there is an interesting paper from 2013 by Nicholas & Scherbina that tries to answer this, "Real Estate Prices During the Roaring Twenties and the Great Depression".
During the 1920s prices reached their highest level in the third quarter of 1929 before falling by 67% at the end of 1932 and hovering around that value for most of the Great Depression. The value of high-end properties strongly co-moved with the stock market between 1929 and 1932. A typical property bought in 1920 would have retained only 56% of its initial value in nominal terms two decades later. An investment in the stock market index (including dividends) would have outperformed an investment in a typical property (including net rental income) by a factor of 5.2 over our time period.
Anecdotally, if anyone reads Benjamin Roth's The Great Depression: A Diary, you'll see he constantly talks about how landlords were getting destroyed by the Great Depression.

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Re: What percentage of time does 100% stocks win?

Post by willthrill81 » Mon Jun 10, 2019 12:29 am

AlohaJoe wrote:
Sun Jun 09, 2019 11:22 pm
randomguy wrote:
Sun Jun 09, 2019 7:08 pm
The problem with real estate is that there is limited data on it. How did direct real estate investor help the 1929 investor
A bit of a tangent but there is an interesting paper from 2013 by Nicholas & Scherbina that tries to answer this, "Real Estate Prices During the Roaring Twenties and the Great Depression".
During the 1920s prices reached their highest level in the third quarter of 1929 before falling by 67% at the end of 1932 and hovering around that value for most of the Great Depression. The value of high-end properties strongly co-moved with the stock market between 1929 and 1932. A typical property bought in 1920 would have retained only 56% of its initial value in nominal terms two decades later. An investment in the stock market index (including dividends) would have outperformed an investment in a typical property (including net rental income) by a factor of 5.2 over our time period.
Anecdotally, if anyone reads Benjamin Roth's The Great Depression: A Diary, you'll see he constantly talks about how landlords were getting destroyed by the Great Depression.
That's why I would be very wary of highly leveraged rental properties. There are many circles where the thing to do is to buy properties with the least cash possible, but if/when the market goes the wrong way, you can find out the hard way that leverage works in both directions. Personally, I wouldn't want to buy any rental properties with less than a 50% equity stake from day one.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: What percentage of time does 100% stocks win?

Post by CurlyDave » Mon Jun 10, 2019 1:50 am

willthrill81 wrote:
Mon Jun 10, 2019 12:29 am

...That's why I would be very wary of highly leveraged rental properties. There are many circles where the thing to do is to buy properties with the least cash possible, but if/when the market goes the wrong way, you can find out the hard way that leverage works in both directions. Personally, I wouldn't want to buy any rental properties with less than a 50% equity stake from day one.
As both a stock and a real estate investor, I find a place for both.

Rentals with a low equity percentage (I never went below 20% due to mortgage rules) can work fine if one has a sufficient emergency fund*. Remember a mortgage can not be called just because the property value has fallen. If you can make the mortgage payments, you can ride out most economic downturns.

A real discriminator we don't talk about much on this board is that I can put sweat equity into real estate, I can't do that with stocks, mutual funds, or ETFs.

Because direct real estate is a concentrated investment one has to be very careful not to make a bad investment. DW and I spent many hours driving together, looking at possibilities, scouting the neighborhoods, and discussing potential properties. There are two ways to look at this -- one is that it was "too much work" for the average investor. The other is that it was a bonding experience that helped our relationship through the development of shared goals and recognition of each other's perspective on various properties.

Once we bought a property, we enlisted the whole family in repairs, general spruce up, and marketing. Now some people think this is not as much fun as a beach vacation, but our kids learned the value of working together, saving and investing. And they will ultimately inherit the fruits of our labors. The memory of that beach vacation fades over time, the income from the rental increases with inflation. The primary thing kids learn on a vacation is how to spend mom and dad's money.

* On this board we talk a lot about having an "emergency fund". DW and I had one, but it was part of an "emergency strategy" which we discussed periodically. We had tiers of financial reserves with increasing levels of financial pain associated with tapping them, but I feel strongly that this is a far better way to go than just an emergency fund. If a financial setback lasted long enough, moving into a smaller, already owned rental was on the table, along with tapping retirement funds, selling from the taxable account, etc.

We retired a while ago and never had to implement an emergency strategy.

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Re: What percentage of time does 100% stocks win?

Post by siamond » Mon Jun 10, 2019 8:08 am

randomguy wrote:
Sun Jun 09, 2019 7:08 pm
The problem with real estate is that there is limited data on it. How did direct real estate investor help the 1929 investor, the 1966 one, the 1989 Japan, or the 2005 US investor? With stocks and bonds it is trivial to comment on. I have never seen any real estate advocate give numbers. They just talk about how great it is.
Actually, there is a very extensive study on the matter, comparing real estate returns (incl. rent) with stock/bond returns over numerous countries over a long period of time. The study was recently updated. You will find a link (and Bogleheads discussion) on this thread.

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Re: What percentage of time does 100% stocks win?

Post by Valuethinker » Mon Jun 10, 2019 8:27 am

AlohaJoe wrote:
Sun Jun 09, 2019 11:22 pm
randomguy wrote:
Sun Jun 09, 2019 7:08 pm
The problem with real estate is that there is limited data on it. How did direct real estate investor help the 1929 investor
A bit of a tangent but there is an interesting paper from 2013 by Nicholas & Scherbina that tries to answer this, "Real Estate Prices During the Roaring Twenties and the Great Depression".
During the 1920s prices reached their highest level in the third quarter of 1929 before falling by 67% at the end of 1932 and hovering around that value for most of the Great Depression. The value of high-end properties strongly co-moved with the stock market between 1929 and 1932. A typical property bought in 1920 would have retained only 56% of its initial value in nominal terms two decades later. An investment in the stock market index (including dividends) would have outperformed an investment in a typical property (including net rental income) by a factor of 5.2 over our time period.
Anecdotally, if anyone reads Benjamin Roth's The Great Depression: A Diary, you'll see he constantly talks about how landlords were getting destroyed by the Great Depression.
UK commercial leases are normally 15 years, upward only. Normally reviewed at every 5 years with a clause to ensure rent increases with inflation. To ensure the sector was investable by institutional investors - a good, safe, inflation-linked asset.

If you are in UK retail property now you are getting destroyed. Major retail chains are using Creditor Voluntary Agreements (a form of Chapter 11) to demand significant rent reductions from landlords. The alternative is to refuse and if a majority of landlords so do, the company goes bust and you lose your tenant anyways.

In the chain dining sector a lot of the chains are shrinking quite fast.

So much for safety in commercial real estate.

The residential RE market is tiny (but growing) however if a new government brings in rent controls (as is mooted) then that will kill any above inflation growth. That is, in fact, how the private institutional rental investment market disappeared in the postwar years - successive governments limited rent increases to less than inflation.

Industrial? High risk.

Commercial. A lot of companies now use flexible work spaces -- which is great for We Work but not maybe for conventional landlords. London is still pretty buoyant but outside of London is a lot tougher. One big employer goes and that's the market shot. Employers are looking to make space economies e.g. by hot desking and flexible working, video conferencing. When I started, the average was something like 150 square foot per employee and we are down below 100, now.

There are growth areas (Personal Storage).

Landlords are not immune to structural changes in society *as well as* the impacts of recessions.

John Grant of Grant's Interest Rate observer found the fortunes of a Boston office property from 1880 to the early 2000s. The movements in valuation, in a city which had declined and then rebounded, was not as good as one might think. Period booms followed by decade+ periods of stagnation. Imagine what it would have been like for Buffalo (or Rochester NY) or Cleveland, which at mid century were significant commercial centres.

There was another paper cited here which showed something similar for a like-for-like group of buildings. Basically the real depreciation of city centre offices was about -1% p.a. reflecting greater suburbanisation and (presumably) better communications technology.

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Re: What percentage of time does 100% stocks win?

Post by smitcat » Mon Jun 10, 2019 8:53 am

willthrill81 wrote:
Mon Jun 10, 2019 12:29 am
AlohaJoe wrote:
Sun Jun 09, 2019 11:22 pm
randomguy wrote:
Sun Jun 09, 2019 7:08 pm
The problem with real estate is that there is limited data on it. How did direct real estate investor help the 1929 investor
A bit of a tangent but there is an interesting paper from 2013 by Nicholas & Scherbina that tries to answer this, "Real Estate Prices During the Roaring Twenties and the Great Depression".
During the 1920s prices reached their highest level in the third quarter of 1929 before falling by 67% at the end of 1932 and hovering around that value for most of the Great Depression. The value of high-end properties strongly co-moved with the stock market between 1929 and 1932. A typical property bought in 1920 would have retained only 56% of its initial value in nominal terms two decades later. An investment in the stock market index (including dividends) would have outperformed an investment in a typical property (including net rental income) by a factor of 5.2 over our time period.
Anecdotally, if anyone reads Benjamin Roth's The Great Depression: A Diary, you'll see he constantly talks about how landlords were getting destroyed by the Great Depression.
That's why I would be very wary of highly leveraged rental properties. There are many circles where the thing to do is to buy properties with the least cash possible, but if/when the market goes the wrong way, you can find out the hard way that leverage works in both directions. Personally, I wouldn't want to buy any rental properties with less than a 50% equity stake from day one.
"There are many circles where the thing to do is to buy properties with the least cash possible,"

In a non recourse state ...

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