Author Topic: Is VTSAX a bad investment? Am I doing it wrong?  (Read 761 times)

jamesbond007

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Is VTSAX a bad investment? Am I doing it wrong?
« on: August 26, 2020, 04:23:20 PM »
I was casually browsing about VTSAX and stumbled upon this article. https://keepinvestingsimplestupid.com/beating-vtsax-part-7-comparing-inflation-adjusted-returns/


He claims VTSAX is a bad investment as the return factoring in inflation is only about 3% or less. I have been using 7% inflation adjusted return for my FIRE. Am I doing it wrong?


I am 100% VTSAX.

FrugalFisherman10

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Re: Is VTSAX a bad investment? Am I doing it wrong?
« Reply #1 on: August 26, 2020, 04:27:34 PM »
Lol. I presume you're tongue in cheek here a bit given you have 500+ posts on this forum, but yeah..he calls an IRR an "inflation adjusted return"???
And this guy has a personal finance blog!?

Telecaster

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Re: Is VTSAX a bad investment? Am I doing it wrong?
« Reply #2 on: August 26, 2020, 04:35:23 PM »
The 7% number is the long term inflation adjusted average return.   But there have been any number of long periods when the average inflation adjusted return was both higher and lower than that.  7% is just a quick rule of thumb. 

However, the author is pulling a bit of a fast one.  He starts in January 2000, which was near the peak of the dot com bubble.  And ends in May 2020, which was near the bottom of the COVID bust.  Adjust those dates a little bit and you come up with very different results.  Generally it is a good idea to hold some bonds as ballast (as he recommends) but I don't think the results are nearly as stark as he makes them out to be. 

Telecaster

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Re: Is VTSAX a bad investment? Am I doing it wrong?
« Reply #3 on: August 26, 2020, 04:36:05 PM »
Lol. I presume you're tongue in cheek here a bit given you have 500+ posts on this forum, but yeah..he calls an IRR an "inflation adjusted return"???
And this guy has a personal finance blog!?

That kind of threw me because I went straight to his tables, and I was like "WTF  am I even reading here?"

jamesbond007

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Re: Is VTSAX a bad investment? Am I doing it wrong?
« Reply #4 on: August 26, 2020, 04:41:25 PM »
Haha. I should've added sarcasm tag there. I wish there were a font for sarcasm on the Internet. But yes, you are right. I was click baited into the article by the sensationalist headline. I wanted to make sure it is not just me, so I posted it here.