The Money Mustache Community
Learning, Sharing, and Teaching => Investor Alley => Topic started by: jaysee on April 04, 2019, 04:57:25 PM
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Apologies in advance for the negative tone of this post. But I'm just feeling a bit discouraged.
From what certain experts are saying, it looks like we're in for 10 years of low growth.
Kinda makes me sad/annoyed.
If the economy would tank, then there would be a fire sale and I could afford to buy stocks at a discount and maybe have a chance of getting rich in my 50s.
If the economy would boom, then the stocks I've already invested in would grow and I would get rich even faster.
But no... just my luck... I happened to earn most of my highest income after the recession and now all I get is a lousy "lost decade" of 3-4.5% growth (which is pretty much nothing after you take away 3% inflation).
Anyone else in my position and feeling similarly frustrated?
I guess I should stay the course and keep investing, but it looks like I'll probably make more from my salary than from my investments, and I'll probably never be above lower-middle-class and never able to afford anything more than a shoebox unless I move out to woop-woop.
So much for the myth of getting rich by working hard, making sacrifices, saving and investing. None of that means zilch if you happened to be born and enter the economy in the wrong period and all your hard work, blood sweat and tears pays only a measly pathetic 1% p/a.
*sigh*
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I'm not too worried about it if it happens. I would rather have 3-5 than 0 or -1% over a decade. If you plan on retiring within 10 years then compounding isn't helping you as much as your savings rate anyway.
I've seen several outlooks for US stocks that say returns are likely to be in the 3 to 6 range, but then international stocks are normally 5 to 7 given their much more attractive valuations. Have a diversified portfolio.
Oh, PS, MMM retired in 2006. He retired during a lost decade right before the worst financial crisis in a generation. He's okay. You'll be okay.
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I shouldn't complain too much. I still have a good income and work in an in-demand field.
I'm in about 90% stocks, out of which around 50-60% are international, so maybe I'll get a little more growth there.
I guess retirement is an anomaly anyway, and I should just be grateful for every day I can stay employed and earn a salary.
I'm planning to retire in about 30 years time, but that assumes I'm able to stay employed and they don't find some way of automating software development (which I don't think is guaranteed).
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I'm not depressed because I know those "experts" know two things - jack, and sh*t, and jack left town.
Every day on Marketwatch's news feed you can see a roughly 50/50 split of bulls and bears. The "experts" in 2008 predicted growth, not the biggest crisis since the Great Depression. There are perma-bears out there that have predicted the next huge crash since 2010. There have been multiple threads on here declaring that the end is nigh, and they've all been wrong. Check out the "Top is In" thread - the S&P has never gotten down to the level it was at when that thread was started, even with the Q4 2018 bear.
Stop listening to people who are consistently wrong, just because they're feeding into your deepest fears. That's why they're saying these things in the first place - it gets your attention and your clicks.
There's a number of people here on this board who are also lower middle class and have retired early. Talk to them about their strategies. Control what you can.
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We have no idea what the next 10 years will look like. Even if you knew what "big world events" might transpire, you wouldn't be able to guess how that will affect the market and economy and the world's progression. In ten years, we might have universal basic income after robots take most of the jobs. We might have a strong socialist movement in government. We might be in a world war. Who really knows?
All you can do is all you can do. Control your savings and spending and most of the rest will take care of itself. I'm cynical enough to be optimistic that the world's greed will provide a tailwind that I can draft off of.
I don't care about ten-year predictions because I doubt I will take out all my money and/or die in exactly that time frame anyway.
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I shouldn't complain too much. I still have a good income and work in an in-demand field.
I'm in about 90% stocks, out of which around 50-60% are international, so maybe I'll get a little more growth there.
I guess retirement is an anomaly anyway, and I should just be grateful for every day I can stay employed and earn a salary.
I'm planning to retire in about 30 years time, but that assumes I'm able to stay employed and they don't find some way of automating software development (which I don't think is guaranteed).
I'm confused, you said you were lower middles class but you're in software development? Any chance you could give us a rough indication of your salary?
If you're making an average software developer salary you could retire in 30 years without investing a dime. Not recommended of course, just saying.
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I shouldn't complain too much. I still have a good income and work in an in-demand field.
I'm in about 90% stocks, out of which around 50-60% are international, so maybe I'll get a little more growth there.
I guess retirement is an anomaly anyway, and I should just be grateful for every day I can stay employed and earn a salary.
I'm planning to retire in about 30 years time, but that assumes I'm able to stay employed and they don't find some way of automating software development (which I don't think is guaranteed).
I'm confused, you said you were lower middles class but you're in software development? Any chance you could give us a rough indication of your salary?
If you're making an average software developer salary you could retire in 30 years without investing a dime. Not recommended of course, just saying.
No shit. If you truly have a lower middle class income and you are a software developer, it's time to get your ass in gear and find a better paying job. I can assure you that complete imbeciles can do it (I know, I've worked with some of them) and people who can't program at all can do it (ditto), so if you can actually program you're leaving a hell of a lot of money on the table!
How much are you making and what is your skill set?
As for stocks not going up much in the next decade, no one knows. Seriously. No one knows.
So, if you save and invest a bunch and stocks don't go up, what does that mean?
It means you have a big chunk of assets you can sell and redeploy into real estate investments, or some other way to make money. Or just a big chunk of assets that will keep you from having to stress out when a car breaks down or your house needs a new roof. That's a real quality of life improvement from where a whole lot of Americans are nowadays.
Here's a fun tool to let you know how you're doing compared to other American families. https://www.shnugi.com/networth-percentile-calculator/?min_age=45&max_age=65&networth=120000#results (https://www.shnugi.com/networth-percentile-calculator/?min_age=45&max_age=65&networth=120000#results)
You'll be surprised how little wealth one has to have to be in the 50th percentile.
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I'm not a therapist, but it sounds like investment return outlook isn't what put you in the bad mood in the first place. Anything else going on?
I'd spin this as a positive. I think I agree that growth is going to be lower than average, but you will still be getting money purely for being thrifty. It might be a little lower than usual, but 3-4.5% is still not bad at all. And the 3-4.5% growth would be real growth, ie. after adjusting for inflation. Would I rather be investing in an environment like the early 80s when the CAPE was way down? Yes. Am I going to let it spoil my day that I'm not? No.
Here's something to brighten your day:
https://tradingeconomics.com/united-states/productivity/
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I'm not a therapist, but it sounds like investment return outlook isn't what put you in the bad mood in the first place. Anything else going on?
I'd spin this as a positive. I think I agree that growth is going to be lower than average, but you will still be getting money purely for being thrifty. It might be a little lower than usual, but 3-4.5% is still not bad at all. And the 3-4.5% growth would be real growth, ie. after adjusting for inflation. Would I rather be investing in an environment like the early 80s when the CAPE was way down? Yes. Am I going to let it spoil my day that I'm not? No.
Here's something to brighten your day:
https://tradingeconomics.com/united-states/productivity/
Agree with this. What else would you do with your money? Spend it? At the very least you will end up with a nest egg. If you go to certain websites within the span of a week it is either dire calamity or the sun will shine every day news. This is just more noise. Saving is the way to get rich (for most of us).
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I think the market will tank at some point in the next 10 years and eventually make new highs. Feel better now?
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Back in 2007 I bought the Vanguard All World EX US ETF. In all that time I have only seen the fund in the black for a couple of months, it's currently in the red again. So other than dividend payments I got nuthin from it.
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From what certain experts are saying, it looks like we're in for 10 years of low growth...Would these be the same experts that didn't see 2008 coming?
Kinda makes me sad/annoyed.
If the economy would tank, then there would be a fire sale and I could afford to buy stocks at a discount and maybe have a chance of getting rich in my 50s. then I might be out of a job AND my stock portfolio could suck leaving me nothing to fall back on.
Fixed that last one to point out you could be in a far worse position should the stock market take a dive. It's really not something you should wish for, if for no other reason you're wishing it on other people as well.
For your first comment, some folks out there have predicted low growth. Not a shrinking economy, but still growth. Continue to work, continue to save, and learn some new skills. They might come in handy later, or you might be pleasantly surprised to find yourself exactly where you wanted to be in a few years.
Also, where are you getting your numbers? The average inflation rate for the last 20 years is 2.18% What is this lost decade you speak of? You said your highest income has been after the recession. Stocks have been on a tear since then. You're lower middle class developing software? Very little of what you wrote makes sense.
Edit: Just looked you up and saw that you're Australian. Whose economy are you worried about?
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You’re looking at this all wrong. If you invest 100 bucks today then in ten years you might have 105. But the market doesn’t work in a straight line. That over ten yrs but every day is up and down. In December it tanked. In January and February it was back where it started. You could say no growth over those 4 or 6 months but anything you bought in dec was on sale so today you have more than you would have had if it stayed steady. DCA will get you through highs and lows so even if you start at 2600 Dow and end in ten years at the exact same DOW, you bought high and low and gotten dividends and tax savings etc and added to your stash over time
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You just posted you have a net worth of $832,000 and you're under 30 and worried about not being able to "get rich" by the time you are 50? You're travelling the world on contract to contract earning much more than most professions with the freedom to add significant savings to your investments that 95% of people don't do.
Holy shit your mindset is fucked up. You are already near the top of your age cohort in terms of net worth.
Even a conservative net worth growth of $50-$60k a year gets you to $2 million by the time you are 50.
No one knows what will happen over the next 10 years. The only certainty is if you give up and think it's all too much trouble then you will end up with nothing.
If the economy would tank, then there would be a fire sale and I could afford to buy stocks at a discount and maybe have a chance of getting rich in my 50s.
If the economy would boom, then the stocks I've already invested in would grow and I would get rich even faster.
But no... just my luck... I happened to earn most of my highest income after the recession and now all I get is a lousy "lost decade" of 3-4.5% growth (which is pretty much nothing after you take away 3% inflation).
Anyone else in my position and feeling similarly frustrated?
I guess I should stay the course and keep investing, but it looks like I'll probably make more from my salary than from my investments, and I'll probably never be above lower-middle-class and never able to afford anything more than a shoebox unless I move out to woop-woop.
So much for the myth of getting rich by working hard, making sacrifices, saving and investing. None of that means zilch if you happened to be born and enter the economy in the wrong period and all your hard work, blood sweat and tears pays only a measly pathetic 1% p/a.
*sigh*
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You just posted you have a net worth of $832,000 and you're under 30 and worried about not being able to "get rich" by the time you are 50? You're travelling the world on contract to contract earning much more than most professions with the freedom to add significant savings to your investments that 95% of people don't do.
Holy shit your mindset is fucked up. You are already near the top of your age cohort in terms of net worth.
Even a conservative net worth growth of $50-$60k a year gets you to $2 million by the time you are 50.
No one knows what will happen over the next 10 years. The only certainty is if you give up and think it's all too much trouble then you will end up with nothing.
If the economy would tank, then there would be a fire sale and I could afford to buy stocks at a discount and maybe have a chance of getting rich in my 50s.
If the economy would boom, then the stocks I've already invested in would grow and I would get rich even faster.
But no... just my luck... I happened to earn most of my highest income after the recession and now all I get is a lousy "lost decade" of 3-4.5% growth (which is pretty much nothing after you take away 3% inflation).
Anyone else in my position and feeling similarly frustrated?
I guess I should stay the course and keep investing, but it looks like I'll probably make more from my salary than from my investments, and I'll probably never be above lower-middle-class and never able to afford anything more than a shoebox unless I move out to woop-woop.
So much for the myth of getting rich by working hard, making sacrifices, saving and investing. None of that means zilch if you happened to be born and enter the economy in the wrong period and all your hard work, blood sweat and tears pays only a measly pathetic 1% p/a.
*sigh*
Holy shit, OP. Pack it up and go home. You've already won. You could retire right now by many's standards (at least in the US). That's basically the age and net worth MMM retired.
Have some perspective. I'm 28 making $50k/yr and it feels like I'm making silly money. Also, I'm very much middle-middle class. Household income is about $85k. Median in the US is 60-65k. I know everyone thinks they are lower-middle-class, but you sir, are not.
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I will repeat what I posted to the "Retirement crisis looming, why not to invest in equities in a 401(k)" thread.
When I was young I was told there would be:
- widespread wars
- famines
- catastrophic natural disasters caused by climate change
- a world wide depression
- mass migrations
- destructive cyber attacks
- massive unemployment
- widespread decay of public institutions
You know what happened?
All of it. That was basically 2003-2014.
I invested in stocks and index funds. Now I’m FIRE’d. Find something else to scare me.
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Nope. For one, I strongly doubt that anybody knows what will happen over the next ten years. I have been reading Nassim Taleb, who argues strongly that the future reveals itself a series of "black swans," or events that could not have been credibly predicted. Almost by definition, then, if somebody has a prediction for the next decade it is not credible.
For another, if you are correct and the future 10 years will return 1% annualized, I unfortunately plan to work for the next ten years. Lets look at the last time US stocks returned 1% annualized over ten + years to see what I might expect. Here is what happened March 2000 to October 2000, a 1.32% nominal return, -1.15% with inflation. https://www.portfoliovisualizer.com/backtest-portfolio?s=y&timePeriod=2&startYear=2000&firstMonth=3&endYear=2011&lastMonth=10&calendarAligned=true&endDate=04%2F05%2F2019&initialAmount=10000&annualOperation=0&annualAdjustment=0&inflationAdjusted=true&annualPercentage=0.0&frequency=4&rebalanceType=1&absoluteDeviation=5.0&relativeDeviation=25.0&showYield=false&reinvestDividends=true&symbol1=VTSMX&allocation1_1=100
Now lets see what would have happened if I had been earning and investing my paycheck that whole time:
https://www.portfoliovisualizer.com/backtest-portfolio?s=y&timePeriod=2&startYear=2000&firstMonth=3&endYear=2011&lastMonth=10&calendarAligned=true&endDate=04%2F05%2F2019&initialAmount=3000&annualOperation=1&annualAdjustment=3000&inflationAdjusted=true&annualPercentage=0.0&frequency=2&rebalanceType=1&absoluteDeviation=5.0&relativeDeviation=25.0&showYield=false&reinvestDividends=true&symbol1=VTSMX&allocation1_1=100
If I had put $3,000 every month into VTSMX my return would have jumped to 4.09% nominal, and I would have had $622,000! Not too shabby! With an increasing savings rate or a 15 year investing period I would have done much better. If you have 30 years and any double digit savings rate you will do great!
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10 years of low growth then what? Hyper growth? So stocks go on sale, CAPE ratio drops and I go fire at like CAPE15 or something. Hell to the yeah
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Back in 2007 I bought the Vanguard All World EX US ETF. In all that time I have only seen the fund in the black for a couple of months, it's currently in the red again. So other than dividend payments I got nuthin from it.
If you made regular purchases at all the different price points over the last 12 years rather than just buy and hold an initial parcel you'd have made a bonza. That's the thing about investing, you have to regularly do it. Otherwise it's not investing, it's just invest.
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Back in 2007 I bought the Vanguard All World EX US ETF. In all that time I have only seen the fund in the black for a couple of months, it's currently in the red again. So other than dividend payments I got nuthin from it.
If you made regular purchases at all the different price points over the last 12 years rather than just buy and hold an initial parcel you'd have made a bonza. That's the thing about investing, you have to regularly do it. Otherwise it's not investing, it's just invest.
On top of that, if they'd been reinvesting Dividends then they'd find they actually had some nice growth. Claiming it's 0 gain just because valuation is the same is silly.
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People have said this for years now. During that time the market has gone up a bunch.
It could drop 20% tomorrow and still be above what people were saying it "should" be now back in 2015.
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You just posted you have a net worth of $832,000 and you're under 30 and worried about not being able to "get rich" by the time you are 50? You're travelling the world on contract to contract earning much more than most professions with the freedom to add significant savings to your investments that 95% of people don't do.
Holy shit your mindset is fucked up. You are already near the top of your age cohort in terms of net worth.
Would it be too self-referential for this site if this thread was posted on the Antimustachian Wall of Shame and Comedy sub-forum? It's hard for me to think of many things more antithetical to the entire philosophy of this website than to be "frustrated" about "never be above lower-middle-class and never able to afford anything more than a shoebox" with nearly $1M at under 30 years of age.
Seriously. This thread is absolutely insane.
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You just posted you have a net worth of $832,000 and you're under 30 and worried about not being able to "get rich" by the time you are 50? You're travelling the world on contract to contract earning much more than most professions with the freedom to add significant savings to your investments that 95% of people don't do.
Holy shit your mindset is fucked up. You are already near the top of your age cohort in terms of net worth.
I'd like to echo this, with not as harsh language - that net worth at your age is doing really well. Being afraid of "never getting ahead" and never being more than lower-middle-class with where you are right now is... not rational. Your fear, your dejection, are not logical responses to where you are and where you're likely to be over the upcoming decades. As someone who has been where you are, with a brain that was telling me similar things, I recommend talking to a therapist or other mental health professional. You may need to tweak your brain chemistry or get some help developing new patterns of thought.
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If the economy would tank, then there would be a fire sale and I could afford to buy stocks at a discount and maybe have a chance of getting rich in my 50s.
If the economy would boom, then the stocks I've already invested in would grow and I would get rich even faster.
But no... just my luck... I happened to earn most of my highest income after the recession and now all I get is a lousy "lost decade" of 3-4.5% growth (which is pretty much nothing after you take away 3% inflation).
What are the odds that we don't see a big crash in the next 10 years? I'd wager that we will see a big crash sometime in that time-frame.
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I'm ecstatic. Since I've only just started my career, that's 10 years of good prices for investing in 😈
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You just posted you have a net worth of $832,000 and you're under 30 and worried about not being able to "get rich" by the time you are 50? You're travelling the world on contract to contract earning much more than most professions with the freedom to add significant savings to your investments that 95% of people don't do.
Holy shit your mindset is fucked up. You are already near the top of your age cohort in terms of net worth.
Would it be too self-referential for this site if this thread was posted on the Antimustachian Wall of Shame and Comedy sub-forum? It's hard for me to think of many things more antithetical to the entire philosophy of this website than to be "frustrated" about "never be above lower-middle-class and never able to afford anything more than a shoebox" with nearly $1M at under 30 years of age.
Seriously. This thread is absolutely insane.
That seems a touch harsh to me.
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Expected real returns are pretty fat in EM and EAFE, since it sounds like you are in to that.
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I feel similar. I'm not a doom-sayer who thinks the markets are going to blow up and send us back to a barter economy.
But the "what I would have to believe" for equities to return 7%+ over the next 10 years is pretty ridiculous. It just isn't going to happen. Or if it does, we actually have bigger problems.
For the positive side, this economic environment remains a place where it is easy to maintain high earnings and high savings. People forget that the big-crash "buying opportunity" can easily come with job losses, lower bonuses, lower raises, etc. A recession could easily eat away at your ability to continue saving.
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depressed? You gotta be fucking kidding me. No, absolutely not!
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Not depressed about equity prices, no.
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Any time you're alive, able to save, and able to invest with odds that you will earn a positive return during your expected life is a fabulous time to live.
If you invest over a period of years, your investment purchase price will be tolerable. If you sell over a period of many years, your sale price will be reasonable. Individual years don't matter. You're saving solidly and investing steadily, right?
Think of 3-4% returns as normal. Think of 10-15% returns as "the kind of bonus that happens once or twice in a lifetime, but nobody knows when." Have a plan that works fine with 4% returns. Live your life.
PS. There's a feeling of magic some of us associate with bursts of wealth, soaring returns, the image we have of Piles of Extra Money, and so on. My personal experience is that the feeling of magic distracts me from actual things in my life, such as problems I haven't figured out how to solve. If you have something similar, consider using the "down time" of the next decade as a golden era to clean up all the other aspects of life. An excellent life is available to you - seize it!
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If the economy would tank, then there would be a fire sale and I could afford to buy stocks at a discount and maybe have a chance of getting rich in my 50s.
If the economy would boom, then the stocks I've already invested in would grow and I would get rich even faster.
But no... just my luck... I happened to earn most of my highest income after the recession and now all I get is a lousy "lost decade" of 3-4.5% growth (which is pretty much nothing after you take away 3% inflation).
What are the odds that we don't see a big crash in the next 10 years? I'd wager that we will see a big crash sometime in that time-frame.
What's a big crash?
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I've noticed that with some people, they just have a negative outlook as their basic view of the world. And what's really weird is that when things are going well (ie, stock market is on a tear, net worth is increasing), it does NOT make them feel better, it makes them feel worse.
It's almost like they feel "Hey, things are going TOO WELL and we're overdue for a crash/correction/whatever". And the longer things keep going well, the more and more panicked they become. It's really weird to watch.
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It's almost like they feel "Hey, things are going TOO WELL and we're overdue for a crash/correction/whatever".
Hey! Get out of my head!
I know well that annoying little voice. I fight with her ALL THE TIME. Logic and rationality are vorpal weapons, my friends.
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I've noticed that with some people, they just have a negative outlook as their basic view of the world. And what's really weird is that when things are going well (ie, stock market is on a tear, net worth is increasing), it does NOT make them feel better, it makes them feel worse.
I resemble that remark! But seriously, I want stocks and real estate to be on sale, so I can buy (more of) them. That's no different than my teenage children wanting Apple products to go on sale so that they can buy them.
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If it means anything, we should be on track to reach FI in the next year if the market is flat or up. Which means that our next big downturn will happen within the next year, because I am reaching the point that I just can’t bear working full time anymore. ;-)
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Ridiculous. It sounds to me like forecasters aren't getting enough attention from their "big collapse" predictions, so the only way to keep drawing ad revenue is now to say, "Oh, well, actually, it's just going to be really slow growth...but I'm still great at predicting the future!"
And as the others have essentially stated, stop your complaining. You sound like the average joe who whines about how impossible retirement is, with a BMW sitting in his driveway. Attitude has a huge impact on your ability to be FI/RE.
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You could diversify. I hear that mobile home parks are REALLY profitable.
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Thanks for everyone's responses.
I guess I probably do need some perspective. I'm trying to keep in mind that I'm already in a very good position relatively speaking, at least as far as savings and salary are concerned, that the future can't be predicted reliably anyway, that it's unlikely (though possible) that 1% growth will continue over the next 30 years, and that I need to go on living my life anyway and not get too hung up on trying to predict the future.
So I guess my best shot is to keep educating and improving myself and furthering my career as best as possible, combined with keeping my savings high and my expenses low so as to minimise the effects of inflation. I'm also hopeful that there might be *some* deflation of certain items through technology and business innovations and population increase. For example, digital entertainment and computing have certainly become much cheaper while improving in quality over the past 100 years; maybe we'll see more of that in the future.
I basically just want (like most people, I think) to have some things to look forward to in the future, in order to stay motivated in the present. Perhaps I need to look more inward for happiness though and not expect the external world to always provide it.
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I like the idea of focusing on things you can control. How about how much $ you are able to save each month or your savings rate or how you can progress your salary or some personal growth goals (fitness level, learn a new skill, etc.)? How about creating a list of wild and crazy fun things you would like to try and slowly adding them into your life?
Set your savings and investing on auto pilot and then go focus on more interesting things. If you have the fundamentals right then you will get to your goal eventually. How long it takes will depend on market performance to some extent, but that is completely out of your control, so don’t even think about it. Just decide on a plan you can stick with and then find other things to do.
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Thanks for everyone's responses.
I guess I probably do need some perspective. I'm trying to keep in mind that I'm already in a very good position relatively speaking, at least as far as savings and salary are concerned, that the future can't be predicted reliably anyway, that it's unlikely (though possible) that 1% growth will continue over the next 30 years, and that I need to go on living my life anyway and not get too hung up on trying to predict the future.
So I guess my best shot is to keep educating and improving myself and furthering my career as best as possible, combined with keeping my savings high and my expenses low so as to minimise the effects of inflation. I'm also hopeful that there might be *some* deflation of certain items through technology and business innovations and population increase. For example, digital entertainment and computing have certainly become much cheaper while improving in quality over the past 100 years; maybe we'll see more of that in the future.
I basically just want (like most people, I think) to have some things to look forward to in the future, in order to stay motivated in the present. Perhaps I need to look more inward for happiness though and not expect the external world to always provide it.
Dude, WTF is wrong with you? We live in the best time to be alive in all history. I went to a show last night of lute music, $15. If you're not aware, lute music back in Henry VIII's day was the music of kings. I can now have the music of kings performed for me for $15. That's insane. And so on and so on, with almost anything you can name. I can cook better foods (and a wider variety of foods) than people back then even knew about, let alone being able to afford to import them from exotic places like China.
Bringing it back on topic re: money. Back in the 50's, 60's, 70's and 80's, the type of knowledge you're leveraging right now to fuel your savings and retirement goals, that knowledge DID NOT EXIST. Or if it did, it was a closely guarded secret by a few very powerful/wealthy people and NOT available to plebes like us. You have a rocket ship to financial independence that didn't even exist until fairly recently, and you're worried it might not go fast enough? Grrr.... yes, you need some damn perspective.
What you need is a shot from the optimism gun.
http://www.mrmoneymustache.com/2012/10/03/the-practical-benefits-of-outrageous-optimism/
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it's unlikely (though possible) that 1% growth will continue over the next 30 years
^This is true. But it makes me wonder. Do you mean 1% increases in stock prices (for example, S&P 500), or 1% growth in the US economy, or...?
Just to make sure you know: 1% growth in the economy can support more than 1% growth in your portfolio. Your portfolio, if invested with a stable percentage of stock vs bonds, could easily grow faster than the economy.
Stock averages maybe 4% more than bonds over time. The majority of financial investment is bonds, not stock. Supposing for example a national capital distribution of 3/4 bonds and 1/4 stock and 1% national growth rate, even if financial investments only returned 1% in their own right, stock could average 4% and bonds 0%. If your portfolio was 75% stock, you'd average 3% returns plus some advantage from rebalancing, even though investments as a whole only generated 1% return. None of these numbers in the example are likely to be exact in the economy. Real results have usually been much better than this. The main point is that it's reasonable to think your investments will have some real return if you just keep investing reasonably. The timing of when the big returns come is outside your control, but if you buy your tickets, the train will ride.
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^This is true. But it makes me wonder. Do you mean 1% increases in stock prices (for example, S&P 500), or 1% growth in the US economy, or...?
Just to make sure you know: 1% growth in the economy can support more than 1% growth in your portfolio. Your portfolio, if invested with a stable percentage of stock vs bonds, could easily grow faster than the economy.
No, "the 1% growth" comment is based on expectations of 1% growth after inflation in a 90% equities indexed fund, from sources such as Vanguard. See: https://www.youtube.com/watch?v=wuFZDuP8BRw (https://www.youtube.com/watch?v=wuFZDuP8BRw). That's growth from the fund itself, not growth in the economy as a whole.
1%.
Perhaps you can see why I'm feeling a bit negative.
If it were 1% over the next 5 years, followed by maybe 3 or 4%, then cool, 5 years isn't too long to wait for some form of growth.
If it were 4% over 10 years, also cool, that's enough growth to reach enough savings to be able to afford to live off 4% and have enough income to afford to rent a modest 1-bedroom apartment within 1 hour commute of a major city with some basic emergency medical care.
But 1% over 10 years? Are you kidding me? At that rate, I'll be lucky to scrape over 1.2M by the age of 40, and then I'll have to hope and pray that a 1% drawdown won't destroy my principal. 1% of $1M is $10,000 per year. That is not enough to afford a single bedroom within 1 hour commute of practically anywhere, let alone the cost of food and medical care.
So if 1% over 10 years followed by anything less than a full 4% is what I have to look forward to, no, I don't think I'll be retiring early anytime soon. I think I'll be working full-time for practically my whole life.
Outside of from cheap index funds like Vanguard Growth 90%, I don't know how much more growth and risk I could achieve, while not being a professional investor and not wanting to take stupid gambles on stocks I don't know enough about.
Again, maybe I'm only looking at the negatives. I suppose the positive is that I'll remain cash-rich in a 1% growth environment, so at least I have a big huge safety buffer of principle to draw on if I ever need it.
And my occupation isn't the worst in the world, I could probably find jobs I enjoy.
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^This is true. But it makes me wonder. Do you mean 1% increases in stock prices (for example, S&P 500), or 1% growth in the US economy, or...?
Just to make sure you know: 1% growth in the economy can support more than 1% growth in your portfolio. Your portfolio, if invested with a stable percentage of stock vs bonds, could easily grow faster than the economy.
No, "the 1% growth" comment is based on expectations of 1% growth after inflation in a 90% equities indexed fund, from sources such as Vanguard. See: https://www.youtube.com/watch?v=wuFZDuP8BRw (https://www.youtube.com/watch?v=wuFZDuP8BRw). That's growth from the fund itself, not growth in the economy as a whole.
1%.
Perhaps you can see why I'm feeling a bit negative.
If it were 1% over the next 5 years, followed by maybe 3 or 4%, then cool, 5 years isn't too long to wait for some form of growth.
If it were 4% over 10 years, also cool, that's enough growth to reach enough savings to be able to afford to live off 4% and have enough income to afford to rent a modest 1-bedroom apartment within 1 hour commute of a major city with some basic emergency medical care.
But 1% over 10 years? Are you kidding me? At that rate, I'll be lucky to scrape over 1.2M by the age of 40, and then I'll have to hope and pray that a 1% drawdown won't destroy my principal. 1% of $1M is $10,000 per year. That is not enough to afford a single bedroom within 1 hour commute of practically anywhere, let alone the cost of food and medical care.
So if 1% over 10 years followed by anything less than a full 4% is what I have to look forward to, no, I don't think I'll be retiring early anytime soon. I think I'll be working full-time for practically my whole life.
Outside of from cheap index funds like Vanguard Growth 90%, I don't know how much more growth and risk I could achieve, while not being a professional investor and not wanting to take stupid gambles on stocks I don't know enough about.
Again, maybe I'm only looking at the negatives. I suppose the positive is that I'll remain cash-rich in a 1% growth environment, so at least I have a big huge safety buffer of principle to draw on if I ever need it.
And my occupation isn't the worst in the world, I could probably find jobs I enjoy.
2 things. If you want higher returns, go higher in stocks than the 60/40 he mentions. I'm at 90/10. Bonds are always a drag on stocks. 2nd thing - she mentions at the end "this is generally the most optimistic I can usually get from you Joe". Seems like he has a history of bearish predictions. Which makes sense - if you're giving guidance to a bunch of your customers, it's WAY BETTER to tell them 4%. Because if you say 6% or 8%, and it only get 4% you'll have a lot of pissed off customers. On the other hand, if you say 4% and the actual returns are 8%, then whee, everyone's doing GREAT!! And Vanguard doesn't get sued :-)
So yeah, this guy is clearly very conservative in his predictions, probably mandated by Vanguard.
The last thing - what's your savings rate? If you REALLY want to speed up your time to FIRE, then THAT is the variable you need to lean into, hard. See:
http://www.mrmoneymustache.com/2011/04/26/why-hardcore-saving-is-much-more-powerful-than-masterful-investing/
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Focusing on what you can control is a good place to start.
I'd rather have $500,000 at 1% growth than $0 at 0% growth. So the future is unknown, but through thick and thin, humans are always innovating, and I'm willing to trust the future to this. Slow growth or not, you can always choose to live simply and savor life a little more than those who throw everything away when the next big thing comes out. And sure, improving your skills might keep you employed or at least keep you valuable in the job market, but you should be able to work a part-time job if you really need to. And as Jacob Fisker has said on his blog, if you don't need a higher-income job, you have a greater number of lower-income jobs to choose from.
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2 things. If you want higher returns, go higher in stocks than the 60/40 he mentions. I'm at 90/10. Bonds are always a drag on stocks.
I'm also at 90/10. Definitely going hard on stocks. I'll listen again but I'm pretty sure I heard him say that even with 90% stocks you probably won't make above 5% before inflation (really 1-2%).
So yeah, this guy is clearly very conservative in his predictions, probably mandated by Vanguard.
I sure hope so, because if his view is actually optimistic, I'd be better off staying in full-time work, making as much $ as I possibly can for the next 10 years.
The last thing - what's your savings rate? If you REALLY want to speed up your time to FIRE, then THAT is the variable you need to lean into, hard. See:
http://www.mrmoneymustache.com/2011/04/26/why-hardcore-saving-is-much-more-powerful-than-masterful-investing/
Fair point. I could probably improve my savings rate by 2 or 3% by cycling to work, cooking cheaper meals and sharing a room instead of renting my own room.
The cycling will be a slightly hard, since I live in London and the weather is variable, and it would be a 1 hour cycle to work. But I guess I should just develop some grit and make it happen.
I am lucky to be making a very good income here in London, so I will be able to add a lot to my portfolio for the remainder of my time here.
I've been thinking of maybe doing mini-retirements instead of quitting work altogether. So maybe working 9 months, then relaxing 3 months, then working 9 months again, etc. I could probably do that for my whole life and be pretty happy.
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2 things. If you want higher returns, go higher in stocks than the 60/40 he mentions. I'm at 90/10. Bonds are always a drag on stocks.
I'm also at 90/10. Definitely going hard on stocks. I'll listen again but I'm pretty sure I heard him say that even with 90% stocks you probably won't make above 5% before inflation (really 1-2%).
So yeah, this guy is clearly very conservative in his predictions, probably mandated by Vanguard.
I sure hope so, because if his view is actually optimistic, I'd be better off staying in full-time work, making as much $ as I possibly can for the next 10 years.
The last thing - what's your savings rate? If you REALLY want to speed up your time to FIRE, then THAT is the variable you need to lean into, hard. See:
http://www.mrmoneymustache.com/2011/04/26/why-hardcore-saving-is-much-more-powerful-than-masterful-investing/
Fair point. I could probably improve my savings rate by 2 or 3% by cycling to work, cooking cheaper meals and sharing a room instead of renting my own room.
The cycling will be a slightly hard, since I live in London and the weather is variable, and it would be a 1 hour cycle to work. But I guess I should just develop some grit and make it happen.
I am lucky to be making a very good income here in London, so I will be able to add a lot to my portfolio for the remainder of my time here.
I've been thinking of maybe doing mini-retirements instead of quitting work altogether. So maybe working 9 months, then relaxing 3 months, then working 9 months again, etc. I could probably do that for my whole life and be pretty happy.
So what's your income and how much are you saving?
Don't get me wrong, I'm not awesome at saving either, especially after the divorce and now alimony. I make $120k per year and I save about $20k, now. Used to be in the mid-$30k's, so decent but not awesome.
Here's the thing. I started seriously investing in about 2009. EVERY SINGLE YEAR that I've been investing, the predictions are ALWAYS - "well the future doesn't look so good" or "growth is going to be flat" or "huge drop in stock market immanent!". Now, look at what's actually happened. And back when I have very little $$ invested that all stressed me out because I'd never paid attention to stocks or the market before. After a while of continual, epic failures to predict ANYTHING correctly, I've just stopped listening to those people. They're all just guessing. And I might add, usually guessing wrong.
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^This is true. But it makes me wonder. Do you mean 1% increases in stock prices (for example, S&P 500), or 1% growth in the US economy, or...?
Just to make sure you know: 1% growth in the economy can support more than 1% growth in your portfolio. Your portfolio, if invested with a stable percentage of stock vs bonds, could easily grow faster than the economy.
No, "the 1% growth" comment is based on expectations of 1% growth after inflation in a 90% equities indexed fund, from sources such as Vanguard. See: https://www.youtube.com/watch?v=wuFZDuP8BRw (https://www.youtube.com/watch?v=wuFZDuP8BRw). That's growth from the fund itself, not growth in the economy as a whole.
1%.
Perhaps you can see why I'm feeling a bit negative.
I guess you're feeling negative because you think the video projects 1% returns. But I watched it and it doesn't say that. Maybe you're doing some additional analysis that I don't recognize?
Here are the quotes from the video that summarize the interviewee's projections and outlook, at least when I play the video:
"Balanced portfolio. Let's just say for the sake of argument you had 60% stocks, diversified portfolio, and 40% fixed income" (0:25-0:34...note that he doesn't say 90% equities)
"Our expectations there for the next five years are roughly four to four and a half percent for that portfolio." (0:43-0:48...note that he says five years, not ten)
He doesn't mention inflation, but a report by the same economist and his team projects less than 2% for the next 10 years (Figure II-3 on page 34 of the report linked below; the center line of the inflation appears to be around 1.9%). Applying 1.9% inflation to his five year estimate would imply real returns of 2.1% to 2.6%.
https://pressroom.vanguard.com/nonindexed/Research-Vanguard-Economic-and-Market-Outlook-2019-120618.pdf
In the video, Dr. Davis does mention a 10 year trend in which his team's annual 10 year forecasts have shown gradually declining projections. But he notes that the trend has changed. This year's projection estimates higher long term returns than last year's! (3:30-4:18)
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Yes one mistake I see people make all the time is they account for inflation when talking about stocks, but not when talking about other things like CD's or Bonds or high interest savings accounts.
Stocks before inflation: 7%
Stocks after inflation: 5%
High Interest Savings Account before inflation: 2.5%
High Interest Savings Account after inflation: 0.5%
Cash before inflation: 0%
Cash after inflation: -2%
Now, stocks don't look so bad, do they?
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I re-listened and he says: “on the equities side ... you get a modest return that’s above inflation, roughly four... four and a half percent”.
So that’s above inflation. So take away 3% inflation and what do you get? 4 - 3 = 1%.
I admit I’m looking at a pessimistic scenario. It could be slightly better. But that’s the ballpark.
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I re-listened and he says: “on the equities side ... you get a modest return that’s above inflation, roughly four... four and a half percent”.
So that’s above inflation. So take away 3% inflation and what do you get? 4 - 3 = 1%.
I admit I’m looking at a pessimistic scenario. It could be slightly better. But that’s the ballpark.
You're doing it wrong. If inflation is 2%, then they are saying 4% + 2% or actually 6%.
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I mean, I’m not arguing that there’s any alternative to stocks.
(Unless you’re a billionaire with multiple hedge funds and can probably get 20% with that leverage. But then you’re already rich anyway and you don’t need to even bother investing it, you’ll always have enough money.)
That’s why I’m feeling a bit negative. It seems like early retirement was only ever going to work in a high growth economy and it turns out that’s an anomaly, and the norm to expect for a big chunk of my life is essentially zero growth in my net worth (apart from saving 50 - 100k p. year, which sure, is a lot, but isn’t going to get me above 1.5M anytime soon).
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You're doing it wrong. If inflation is 2%, then they are saying 4% + 2% or actually 6%.
Are you sure?? If so, that would be great as even 4% over 10 years would definitely put me in the bracket I want to be in.
I’m going to try and research this more carefully. I’ll let you peeps know what I find.
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Why are you placing such weight on what one random dude on the internet is predicting? Is his crystal ball better than any of the other random doom-sayers out there? You can just as easily find some one who has a rosy outlook on the future stock returns and can make a fancy video or couple of graphs to try to convince you of that.
None of us know what the stock market returns will be in the next ten years. I am interested in that because I plan on FIREing soon, and the first ten years performance of a portfolio is quite meaningful for sequence of returns risk. But I am hedging against that with a reverse equity glide path asset allocation. Otherwise there isn’t much I can do except be willing to be flexible.
If you aren’t retiring soon then why do you care? What really matters is how your portfolio will do over the next 50 years. If the next ten are bum years then there is a good chance that years 11-20 will be great and you will be just fine.
As others have already said, a big savings rate far trumps what your investment returns will be. Focus on moving that lever to a desirable spot; it is both entirely within your control and much more predictable than what the stock market will return.
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I re-listened and he says: “on the equities side ... you get a modest return that’s above inflation, roughly four... four and a half percent”.
So that’s above inflation. So take away 3% inflation and what do you get? 4 - 3 = 1%.
I admit I’m looking at a pessimistic scenario. It could be slightly better. But that’s the ballpark.
You're doing it wrong. If inflation is 2%, then they are saying 4% + 2% or actually 6%.
Like @tyort1 says, Dr. Davis' team projects equity returns of 4 to 4 and half % above inflation. Not 1 percent, 4 percent. Keep re-listening.
Supposing 2% inflation, that means equity returns of 6 to 6 and 1/2 percent.
Where are you pulling 3% inflation from? Did you notice that Davis own team projects inflation of less than 2%? Do you believe the source of your 3% estimate is more accurate than Vanguard's team of economists?
To me it looks like you are mis-reading / mis-hearing in a way that produces an overly pessimistic outlook. You are welcome to live your life any way you want, but the source you've quoted doesn't support your 1% conclusion.
I am FIREd on 500k because of reading such analyses in a more accurate manner. Care to join me? :)
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You're doing it wrong. If inflation is 2%, then they are saying 4% + 2% or actually 6%.
Are you sure?? If so, that would be great as even 4% over 10 years would definitely put me in the bracket I want to be in.
I’m going to try and research this more carefully. I’ll let you peeps know what I find.
I am absolutely positive.
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To answer a question - my savings rate is about 70% (slightly above) so that nets me about 100k p year (though, as I’m a contractor, this isn’t guaranteed year upon year; however it seems likely so long as I keep my skills sharp and stay up to date, as my track record has been increase every year).
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Like @tyort1 says, Dr. Davis' team projects equity returns of 4 to 4 and half % above inflation. Not 1 percent, 4 percent. Keep re-listening.
Supposing 2% inflation, that means equity returns of 6 to 6 and 1/2 percent.
Where are you pulling 3% inflation from? Did you notice that Davis own team projects inflation of less than 2%? Do you believe the source of your 3% estimate is more accurate than Vanguard's team of economists?
To me it looks like you are mis-reading / mis-hearing in a way that produces an overly pessimistic outlook. You are welcome to live your life any way you want, but the source you've quoted doesn't support your 1% conclusion.
I am FIREd on 500k because of reading such analyses in a less biased manner. Care to join me? :)
Ok maybe I misread it.
4% and above and I’m perfectly happy even if I have to wait 5 years to get it. I’m shoving all my savings directly into my Vanguard High Growth fund just as quickly as I can.
I just want a reasonable payoff given that I’ve been working and saving pretty hard since the age of 15. Though I get that the markets don’t care about my feelings or my history, they just do their thing.
But I just hope to god some of my generation gets a chance to get some level of financial security, while there are billionaires out there who can afford to go into space. Sorry I know I come off as. Tad envious, I kind of am.
But 4% is ok. I can live with that.
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To answer a question - my savings rate is about 70% (slightly above) so that nets me about 100k p year (though, as I’m a contractor, this isn’t guaranteed year upon year; however it seems likely so long as I keep my skills sharp and stay up to date, as my track record has been increase every year).
Shit man, you're crushing it! Keep it up and you'll be FI in no time flat. Seriously, that's awesome.
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To answer a question - my savings rate is about 70% (slightly above) so that nets me about 100k p year (though, as I’m a contractor, this isn’t guaranteed year upon year; however it seems likely so long as I keep my skills sharp and stay up to date, as my track record has been increase every year).
Shit man, you're crushing it! Keep it up and you'll be FI in no time flat. Seriously, that's awesome.
Thanks for the encouragement!
It’s not like I had any real hardship, I enjoy my work in fact. But it’s still hard work. It’s not like I was born into a rich family or got to go to a fancy school like some. So money means a lot to me, it’s more than just retiring early.
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To answer a question - my savings rate is about 70% (slightly above) so that nets me about 100k p year (though, as I’m a contractor, this isn’t guaranteed year upon year; however it seems likely so long as I keep my skills sharp and stay up to date, as my track record has been increase every year).
I literally LOL'd on this one - happily, in a positive supportive way.
70%? Dude, you're going to be fine. There's no way to tell exactly when your 4% will come. Your portfolio could drop like a diving falcon tomorrow and still be in negative territory in 2030. If that happens, you could have years of less work and less savings too, right when you wish you were investing at those sweet juicy low prices. But you'll be fine because your low expenses will get you through the bad times, and your high earning ability will push you ahead whenever you have work. The investment returns will then add in over time.
It's fine that you want a big stash. Keep going after it and you'll get there.
PS. You yourself already quoted the interviewee as predicting equities to be 4% over inflation (see post #49)...
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Yep, your savings rate is awesome so you will do great if you keep it up. How much is your invested net worth, if you don’t mind me asking? I found for the first several years that I felt like I was treading water. Then somewhere around the $100k point it felt like I got this lift in my wings and compound interest started helping out. The ride from $1M onwards has been crazy. I think it took us ten years to get to $1M and another four to get to $2M.
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I feel similar. I'm not a doom-sayer who thinks the markets are going to blow up and send us back to a barter economy.
But the "what I would have to believe" for equities to return 7%+ over the next 10 years is pretty ridiculous. It just isn't going to happen. Or if it does, we actually have bigger problems.
For the positive side, this economic environment remains a place where it is easy to maintain high earnings and high savings. People forget that the big-crash "buying opportunity" can easily come with job losses, lower bonuses, lower raises, etc. A recession could easily eat away at your ability to continue saving.
Wait, why is 7%+ return over the next decade ridiculous?
Historically that's 3% below CAGR.
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Yep, your savings rate is awesome so you will do great if you keep it up. How much is your invested net worth, if you don’t mind me asking? I found for the first several years that I felt like I was treading water. Then somewhere around the $100k point it felt like I got this lift in my wings and compound interest started helping out. The ride from $1M onwards has been crazy. I think it took us ten years to get to $1M and another four to get to $2M.
Thanks for your encouragement. I definitely intend to keep it up and even increase it.
I guess my plan (ideally) would be to continue saving 70-80%, while cutting work back to 9 or even 6 months per year, so I can spend more time relaxing, studying, working on side-projects and finding ways to reduce my spending even further.
If I can keep this up for the next 10-20 years, all without touching my principle or its returns, then hopefully through 4% compound interest, I'll have $2M+ by the age of 50, at which point I can work part-time and spend most of my time keeping fit, relaxing, holidaying, etc.
How much is your invested net worth, if you don’t mind me asking?
I have about $550k already invested and then a further $250k (approx.) that I will only able to access toward the end of this year (guaranteed, but just need to wait, for tax reasons).
So by the end of the year, I'll probably have $800k invested in high growth diversified vehicles and $50k in cash (2 years living expenses for me).
(This is all in Australian dollars BTW.)
So I guess I'm not in too bad a position right now in terms of cash. I'm just looking ahead to 10 or 20 years from now and hoping that I'll be able to afford a decent place to live, given that this money is all I have (I don't own any real-estate and rents don't seem to be getting cheaper, though to look at the positive, on the low-end they don't seem to be getting more expensive either).
I'm happy to keep working full-time and saving and investing, but I don't know that my wage will keep going up. I feel like I've hit a glass ceiling, probably due to not having a degree or being extremely well connected. But still I can probably make at least 100k p/year for another decade (hopefully).
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25k/year expenses and ~800k invested by the end of the year. Congrats you won! Be happy and enjoy life.
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I'll say the same thing I said before. Lets move away from the depressive fantasy. If you started in 2001 with the assets and saving rate you have now, ten years later you would have had $2.2M. I don't think anybody would have called December 2001 - November 2010 a great time to be investing, in fact they would have said it was a terrible time. And you would have taken 6% annualized returns, or 3.4% minus inflation. This is not your worst case, but financially speaking it is one of the worse sequences. US dollar based, but the concept is the same and that sequence won't repeat for anybody anyhow. Also, November 2010 would have ended up being a great time to start living off the 'stache, the strong uptrend for the next 9+ years was perfect for it.
https://www.portfoliovisualizer.com/backtest-portfolio?s=y&timePeriod=2&startYear=2000&firstMonth=3&endYear=2010&lastMonth=11&calendarAligned=true&endDate=04%2F05%2F2019&initialAmount=800000&annualOperation=1&annualAdjustment=6000&inflationAdjusted=true&annualPercentage=0.0&frequency=2&rebalanceType=1&absoluteDeviation=5.0&relativeDeviation=25.0&showYield=false&reinvestDividends=true&symbol1=VTSAX&allocation1_1=45&symbol2=VGTSX&allocation2_1=45&symbol3=VBTLX&allocation3_1=10
I also tried peak to trough (using investor class funds), and your actual worst case, March 2000 to March 2009, still put you at $1.2M. Had you had the guts to voluntarily leave employment in March 2009 (or misfortune to involuntarily do so), it would have been one of the best months in history to FIRE. Unless everything ends, fundamentals move inversely to prices.
25k/year expenses and ~800k invested by the end of the year. Congrats you won! Be happy and enjoy life.
Also, this.
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From what certain experts are saying, it looks like we're in for 10 years of low growth.
I would be far more worried if the experts were saying we are in for 10 good years. They have *never* said this. Ever. If they did, I would start to worry.
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Not really.
The world has changed more in the last 15 years than it did in the last 50. (Disclaimer: my opinion)
Nobody knows what the future of earnings look like. It's possible we're flat-ish for 10 years. Or, it's possible AI and other advances lead to unprecedented profitability. Hard to say.
If it's keeping you up at night, consider rebalancing to to more international indexes. They aren't expensive by P/E standards. Will they outperform the US? Not sure, but I can understand how it gives one hope.
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I have about $550k already invested and then a further $250k (approx.) that I will only able to access toward the end of this year (guaranteed, but just need to wait, for tax reasons).
So by the end of the year, I'll probably have $800k invested in high growth diversified vehicles and $50k in cash (2 years living expenses for me).
(This is all in Australian dollars BTW.)
So I guess I'm not in too bad a position right now in terms of cash. I'm just looking ahead to 10 or
This is all in Australian dollars!
(thinks...ponders...Googles just to make sure...) ($AUS 1 = $US .72)
Hmm, your expenses are slightly lower than mine. You are frugal! Congrats!
I do read real estate is costly where you are. Still it sounds like renting and having a modest safety layer are viable.
That said, I can understand wanting to achieve a higher goal, and to own one's own home. I agree that might take another decade at least.
For what it's worth, the video you linked was a US-based outlook. If I lived where you do, I'd be careful to figure out more than I currently know about my local investment market vs international. I think the conclusions will be similar, but if anything, would lead to accumulating a little more. Specific investment choices would probably differ from a US investor. There are lots of smart Australians on this board; maybe you can search for them.
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certain experts are saying
There's ALWAYS certain experts calling for doom and gloom ahead. And there's ALWAYS something to worry about.
For the last 10 years these certain experts have been completely wrong.
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At the end of the day, I guess nothing in life is guaranteed.
You just do the best you can and try to enjoy the ride.
Maybe the best way is to just try and set up life to be as fun and enjoyable as possible, whatever the stock market does.
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At the end of the day, I guess nothing in life is guaranteed.
You just do the best you can and try to enjoy the ride.
Maybe the best way is to just try and set up life to be as fun and enjoyable as possible, whatever the stock market does.
Very wise, very wise.
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You just posted you have a net worth of $832,000 and you're under 30 and worried about not being able to "get rich" by the time you are 50? You're travelling the world on contract to contract earning much more than most professions with the freedom to add significant savings to your investments that 95% of people don't do.
Holy shit your mindset is fucked up. You are already near the top of your age cohort in terms of net worth.
Would it be too self-referential for this site if this thread was posted on the Antimustachian Wall of Shame and Comedy sub-forum? It's hard for me to think of many things more antithetical to the entire philosophy of this website than to be "frustrated" about "never be above lower-middle-class and never able to afford anything more than a shoebox" with nearly $1M at under 30 years of age.
Seriously. This thread is absolutely insane.
That seems a touch harsh to me.
Perhaps a tad harsh but at best this is a humblebrag. OP is a smart guy and being smart he knows he is crushing it financially compared to most people in the PF space and is certainly destroying it compared to the average American in terms of financial health. But OP is insecure at some level so these threads help in that regard. I don’t have any advice other than to say focus on living life and put your money on autopilot. Look occasionally at performance but not too much and stay away from sites like this and the news which can bring you down.
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At the end of the day, I guess nothing in life is guaranteed.
You just do the best you can and try to enjoy the ride.
Maybe the best way is to just try and set up life to be as fun and enjoyable as possible, whatever the stock market does.
I've been in life-altering, severe, unremitting pain for 7 straight weeks and found out just *yesterday* that I most likely have a serious, incurable disease that may land me in a wheelchair before I even reach retirement age and even then, I have a more positive outlook on my future than you do.
Your investment returns won't determine your happiness.
You will.
Whose job do you think it is to make your life a good one?
Seriously.
Think about it.
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I re-listened and he says: “on the equities side ... you get a modest return that’s above inflation, roughly four... four and a half percent”.
So that’s above inflation. So take away 3% inflation and what do you get? 4 - 3 = 1%.
I admit I’m looking at a pessimistic scenario. It could be slightly better. But that’s the ballpark
He is clearly talking about inflation- corrected return. 4% above the inflation rate. That's 4 times 1%.
But I guess if you are bound and determined to be depressed about imaginary things, then there is little we're going to be able to do to stop your downward spiral.
An "outlook" is an imaginary thing. Finance outlooks are not predictions, like you can do in simple physics problems, no matter how much math you use to "smoke and mirror" the issue.
Edit: and what Malkynn said... And I thought I was strongly making my point :-)
Malkynn, be strong and keep the Positive Mental Attitude!
Check out " Best day till tomorrow " by The Real McKenzies
https://m.youtube.com/watch?v=0lQ5zg4aOJY
enjoy what'chas got, not what you have not
'tis a weak heart lamenting with sorrow
when the days seem cursed, it could always be worse
fight depression with sword and arrow
when the zeppelinous clouds of trouble abound
and thunder is clapping and lightning strikes ground
just when yer thinking this may be your last
throw a lash 'round the mast, hold fast!
when the world ain't right, and it smithes ye with strife
ye can now buckle down, it's a test they call life
very soon you will see what kind of animal you'd be
taking the bite outta life
when they're testing the gallows, yer hung like a dog
or they're marching us out to a firing squad
we just smile and recall all the good times we had
it's the best 'til tomorrow
it's the best day 'til tomorrow
no considering surrender when yer down in the dregs
if ye look down and notice you still have your legs
so stand up and fight you just might seize the day
it's the best day 'til tomorrow
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You just posted you have a net worth of $832,000 and you're under 30 and worried about not being able to "get rich" by the time you are 50? You're travelling the world on contract to contract earning much more than most professions with the freedom to add significant savings to your investments that 95% of people don't do.
Holy shit your mindset is fucked up. You are already near the top of your age cohort in terms of net worth.
Would it be too self-referential for this site if this thread was posted on the Antimustachian Wall of Shame and Comedy sub-forum? It's hard for me to think of many things more antithetical to the entire philosophy of this website than to be "frustrated" about "never be above lower-middle-class and never able to afford anything more than a shoebox" with nearly $1M at under 30 years of age.
Seriously. This thread is absolutely insane.
That seems a touch harsh to me.
Perhaps a tad harsh but at best this is a humblebrag. OP is a smart guy and being smart he knows he is crushing it financially compared to most people in the PF space and is certainly destroying it compared to the average American in terms of financial health. But OP is insecure at some level so these threads help in that regard. I don’t have any advice other than to say focus on living life and put your money on autopilot. Look occasionally at performance but not too much and stay away from sites like this and the news which can bring you down.
I don't think it is a humblebrag. Most people here are crushing it financially in comparison to the average person, so this isn't the best place to humblebrag about finances.
I completely agree with OP that returns are down on everything at the moment. PE ratios are way up, real estate is expensive, and bond rates have gone back down. In an efficient market that means that real returns over the next decade-ish have a higher likelihood of being below average. That's not a prediction of an impending crash or anything else in the near future. It's not any kind of doomsday scenario.
The main thing I don't agree with is the emotional component. It is disappointing to be investing in a low-return environment, but it's not the end of the world.
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At the end of the day, I guess nothing in life is guaranteed.
You just do the best you can and try to enjoy the ride.
Maybe the best way is to just try and set up life to be as fun and enjoyable as possible, whatever the stock market does.
I've been in life-altering, severe, unremitting pain for 7 straight weeks and found out just *yesterday* that I most likely have a serious, incurable disease that may land me in a wheelchair before I even reach retirement age and even then, I have a more positive outlook on my future than you do.
Your investment returns won't determine your happiness.
You will.
Whose job do you think it is to make your life a good one?
Seriously.
Think about it.
Sorry to hear about that. Thanks for the perspective.
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At the end of the day, I guess nothing in life is guaranteed.
You just do the best you can and try to enjoy the ride.
Maybe the best way is to just try and set up life to be as fun and enjoyable as possible, whatever the stock market does.
I've been in life-altering, severe, unremitting pain for 7 straight weeks and found out just *yesterday* that I most likely have a serious, incurable disease that may land me in a wheelchair before I even reach retirement age and even then, I have a more positive outlook on my future than you do.
Your investment returns won't determine your happiness.
You will.
Whose job do you think it is to make your life a good one?
Seriously.
Think about it.
@Malkynn, sorry about your health news. Best wishes! Also, nice move turning it to good use so quickly.
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At the end of the day, I guess nothing in life is guaranteed.
You just do the best you can and try to enjoy the ride.
Maybe the best way is to just try and set up life to be as fun and enjoyable as possible, whatever the stock market does.
I've been in life-altering, severe, unremitting pain for 7 straight weeks and found out just *yesterday* that I most likely have a serious, incurable disease that may land me in a wheelchair before I even reach retirement age and even then, I have a more positive outlook on my future than you do.
Your investment returns won't determine your happiness.
You will.
Whose job do you think it is to make your life a good one?
Seriously.
Think about it.
@Malkynn, sorry about your health news. Best wishes! Also, nice move turning it to good use so quickly.
I've got a lot of flair, what can I say ;)
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At the end of the day, I guess nothing in life is guaranteed.
You just do the best you can and try to enjoy the ride.
Maybe the best way is to just try and set up life to be as fun and enjoyable as possible, whatever the stock market does.
I've been in life-altering, severe, unremitting pain for 7 straight weeks and found out just *yesterday* that I most likely have a serious, incurable disease that may land me in a wheelchair before I even reach retirement age and even then, I have a more positive outlook on my future than you do.
Your investment returns won't determine your happiness.
You will.
Whose job do you think it is to make your life a good one?
Seriously.
Think about it.
@Malkynn, sorry about your health news. Best wishes! Also, nice move turning it to good use so quickly.
I've got a lot of flair, what can I say ;)
I hope things get better for you. You're one of the reasons I like this forum so much - your posts are always interesting and thought provoking (and it helps that I agree with you most of the time).
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I hope things get better for you. You're one of the reasons I like this forum so much - your posts are always interesting and thought provoking (and it helps that I agree with you most of the time).
Lol, yeah, people tend to really like me when they agree with me. The rest can't stand me.
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I hope things get better for you. You're one of the reasons I like this forum so much - your posts are always interesting and thought provoking (and it helps that I agree with you most of the time).
Lol, yeah, people tend to really like me when they agree with me. The rest can't stand me.
Screw the rest ;)
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At the end of the day, I guess nothing in life is guaranteed.
You just do the best you can and try to enjoy the ride.
Maybe the best way is to just try and set up life to be as fun and enjoyable as possible, whatever the stock market does.
I've been in life-altering, severe, unremitting pain for 7 straight weeks and found out just *yesterday* that I most likely have a serious, incurable disease that may land me in a wheelchair before I even reach retirement age and even then, I have a more positive outlook on my future than you do.
Your investment returns won't determine your happiness.
You will.
Whose job do you think it is to make your life a good one?
Seriously.
Think about it.
@Malkynn, sorry about your health news. Best wishes! Also, nice move turning it to good use so quickly.
I've got a lot of flair, what can I say ;)
So sorry to hear that, really hope it's a misdiagnosis :(
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the reasons that you are doing well in your job, raking in loads of money and feel good about your earnings potential are the same reasons that stocks are fully valued.
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1) OP’s net worth and savings rate are not relevant because if you retire on a 4% WR and then experience a decade at 1% per year total return your portfolio will be somewhat diminished, and you’ll probably be back to work. If any reasonable level of inflation occurs in that decade, even worse for the retiree.
2) This 1% for a decade scenario would probably not be a smooth ride. It would look like +15% one year -13% the next, etc. This matters because you can skip much of the dips using options strategies like the protected put or collar. I just insured a S&P 500 ETF position for 2.6 years at a cost of less than 1.9% per year (yay for exploiting low volatility!). My maximum downside is now 7% - better than most bond portfolio risk profiles. This is how I sleep at night with 95% equities (and 5% hedges). In the event of a 20% correction (which historically occurs every couple of years), my IPS says to sell my hedge and go fully long. This worked beautifully in January 2019, and I only recently sold some, but not all, of the shares I picked up 20% ago in order to reestablish my hedge.
This is how it’s possible to have a pessimistic forecast while staying invested and excited about the future. I WILL FIRE in about 5 years regardless of market performance because my returns are predictable. It would take a Great Depression scenario to set me back 2 years. Pessimism never felt so good.
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I've been in life-altering, severe, unremitting pain for 7 straight weeks and found out just *yesterday* that I most likely have a serious, incurable disease that may land me in a wheelchair before I even reach retirement age and even then, I have a more positive outlook on my future than you do.
I'm really really sorry to hear this. I hope the doctors are able to do something about your pain. I appreciate you mentioning this, because it gives me some perspective. Something like this could very well happen to me too, all else equal.
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On a somewhat philosophical level, what actually happens in the next 10 years is nothing you can control anyway. The biggest factor in how well off you are a decade from now is not what the markets will or won't do, it's what YOU will or won't do. I would like to offer this excerpt from the great Jim Rohn:
I once did a seminar for a group of oil company executives during their convention in Honolulu. While we were sitting around the conference table, one of them asked, “Mr. Rohn, you know some important people around the world. What do you think the next 10 years are going to be like?” I said, “Gentlemen, I do know the right people. I can tell you.” So they all listened very carefully. I said, “Gentlemen, based on the people I know and from the best of my own experience, I’ve concluded that in the coming 10 years, things are going to be about like they’ve always been.”
I said that to make a point, but also because it’s accurate. Things are going to be about like they’ve always been. The tide comes in, and then what? It goes out. That’s been the case for 6,000 years of recorded history, and probably long before that, so it’s not likely to change.
It gets light and then what? It turns dark. For 6,000 years. We are not to be startled by that now. If the sun goes down and someone says, “What happened?” he must have just gotten here, I guess. It always goes down about this time of day.
In rotation, the next season after fall is winter. And pray tell, how often does winter follow fall? Every time, without fail, for 6,000 years that we know of. Of course, some winters are long and some are short, some are difficult and some are easy, but they always come right after fall. That isn’t going to change.
Sometimes you can figure it out, sometimes there’s no way to figure it out. Sometimes it goes well, sometimes it gets in a knot. Sometimes it sails along, sometimes it goes in reverse. That’s not going to change. That last 6,000 years read like this: opportunity mixed with difficulty. It isn’t going to change.
Someone says, “Well, then, how will my life change?” And the answer is: When you change.
Whether I’m talking to high school kids or business executives, my message is always the same. The only way it gets better for you is when you get better. Better is not something you wish for; better is something you become.
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My crystal ball reads somewhat differently than the click bait masters.
Maybe I can interest you in my non existent e book " Make huge gains in the next 10 years", it's about buying the index in a regular fashion.
But wait! That's not all! If you order now I'll send you my secret guidebook called "the future is always tomorrow", it's about appreciating the present.