Author Topic: Lending Club vs Stocks vs Gold?  (Read 14649 times)

watermen

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Lending Club vs Stocks vs Gold?
« on: February 09, 2013, 07:09:08 PM »
With share prices being so high now and there is no way to know if it can get higher?

Other options I am looking into is lending club or buy real gold?

What do everyone think?

Kriegsspiel

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Re: Lending Club vs Stocks vs Gold?
« Reply #1 on: February 09, 2013, 07:18:31 PM »
Personally, I think it's good to be diversified.  I have stocks, treasuries, cash, gold, and I'm looking to get into the P2P lending in the near future, and real estate in the far future.

chucklesmcgee

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Re: Lending Club vs Stocks vs Gold?
« Reply #2 on: February 09, 2013, 07:28:53 PM »
With share prices being so high now and there is no way to know if it can get higher?


Said everyone at every time in history. It being relatively high doesn't mean it's going down. Doesn't mean it's going up.

Rangifer

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Re: Lending Club vs Stocks vs Gold?
« Reply #3 on: February 09, 2013, 08:19:47 PM »
The problem with lending club is that you can't just dump a whole bunch of money at once and not expect to get some crappy loans. Like someone with a $2400/mo gross income asking for a loan with a $900/mo payment.

I've been putting about $100 a month into lc just for fun and have no problem finding people with steady income, reasonable loan amounts, and well written applications. If I dumped 10k at once it'd be a completely different story.

Nords

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Re: Lending Club vs Stocks vs Gold?
« Reply #4 on: February 09, 2013, 10:22:20 PM »
With share prices being so high now and there is no way to know if it can get higher?
Other options I am looking into is lending club or buy real gold?
What do everyone think?
I think you need to decide what you're investing for (retirement, college, possessions) and figure out your asset allocation.
http://www.bogleheads.org/wiki/Investment_Policy_Statement

Then you can decide what assets/funds you want to buy, and put your money into them at whatever pace feels best to you-- all at once or over a period of months.

Otherwise you're just wandering around the market without a shopping list.

arebelspy

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Re: Lending Club vs Stocks vs Gold?
« Reply #5 on: February 10, 2013, 03:47:28 AM »
Otherwise you're just wandering around the market without a shopping list.

Hah, I like that.

Thanks for the link.  Sent me into a spiral of reading old Bogleheads posts I know I've read before, but still couldn't resist reading. :P

This one is probably my favorite for answering the OP (linked from the wiki you linked to): www.bogleheads.org/forum/viewtopic.php?t=69802

Quite concrete examples.
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Honest Abe

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Re: Lending Club vs Stocks vs Gold?
« Reply #6 on: February 10, 2013, 04:38:47 AM »
I invest a small part of my portfolio in P2P... Think of it as a substitute for a CD.. Unless you sell your notes on the aftermarket, (which is VERY laborious) you'll be locked into the account for at least 3-5 years. Stocks and gold, on the other hand, can be liquidated when needed.

CptPoo

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Re: Lending Club vs Stocks vs Gold?
« Reply #7 on: February 10, 2013, 10:41:32 AM »
Precious metals can be a good long term investment, just make sure you buy from a dealer that will deliver the actual physical good to you. You really can't trust the paper ETF's because it is nearly impossible to know if they are actually backed by anything. I recommend APMEX.com.

I have a meager investment in gold and silver and you have to understand that those markets are always volatile in the short term. Precious metals are not something to be day-traded on because they can move pretty drastically over the course of a day, week, or even a month. At a minimum, I would recommend at least a 6 month investment if you decide to.

My understanding of precious metals is that they are typically a good way to retain wealth, and as the cost of goods like food, oil, and other commodities rise, it is likely that metals will as well. For me, it is primarily a hedge against a dollar that is decreasing in value so I keep a similar amount of metals as I have dollars on hand.

As always, I am not a financial advisor so take what I say with a grain of salt. The FED and our currency's monetary value are tricky subjects.

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Re: Lending Club vs Stocks vs Gold?
« Reply #8 on: February 10, 2013, 03:00:45 PM »
With share prices being so high now and there is no way to know if it can get higher?

Other options I am looking into is lending club or buy real gold?

I would think seriously about your assumptions.  Share prices high?  But they've barely reached the levels of 4 years ago?  Gold a good investment?  The price is near historic highs, and 4x what it was a decade ago.  I think you'd be taking a serious risk of getting in on the wrong side of the "buy low, sell high" equation.

Can't speak to Lending Club or similar, since all I know is what I've read here.  But if you buy (physical) gold, it not only just sits there, you have a risk of theft &c on top of the chance of price declines.  Buy stocks, and at least you should have some dividend income from them.

Kriegsspiel

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Re: Lending Club vs Stocks vs Gold?
« Reply #9 on: February 10, 2013, 03:50:12 PM »
With share prices being so high now and there is no way to know if it can get higher?

Other options I am looking into is lending club or buy real gold?

I would think seriously about your assumptions.  Share prices high?  But they've barely reached the levels of 4 years ago?  Gold a good investment?  The price is near historic highs, and 4x what it was a decade ago.  I think you'd be taking a serious risk of getting in on the wrong side of the "buy low, sell high" equation.

And since we don't know whether stocks and gold are going to go on a bear or bull run, I think it's best to figure out SOME asset allocation % for both, and stick with it.  Maybe you're comfortable with 5% gold, maybe 15%... same with stocks.  Then just keep them in the correct ratio and you are automatically buying high and selling low.


KingCoin

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Re: Lending Club vs Stocks vs Gold?
« Reply #10 on: February 10, 2013, 03:53:35 PM »
To echo what other have said, you're going to want to think in terms of portfolio allocation rather than "this asset vs that asset". Gold, personal loans, and stocks each have very different characteristics as asset classes and each will perform well under a given set of macro economic circumstances.
- Stocks will track economic strength and inflation.
- Gold is a non-productive asset whose valuation will track its desirability as an alternative to "fiat" currency (this, incidentally, makes it very difficult to peg the "correct" valuation for gold).
- Lending Club loans are a negatively convex asset that will perform well in stable and strong economic environments with a capped upside, and poorly in deteriorating economic conditions.
Comparing them is very much apples to oranges. And, unless you have a crystal ball and know what the world is going to look like in 10 years, it's prudent to take a diversified approach. So at the end of the day, you'll want something like this:

30% Domestic Stocks
20% Foreign Stocks
10% Precious Metals
10% Lending Club Loans
10% REITs
10% Gov Long Bonds
10% TIPS

How you precisely divvy up the pie is going to depend on your risk tolerance, your investment horizon, your tax status, and maybe, to some extent, how you view the valuation of these assets (e.g. you think Long Bonds are rich and Lending Club loans are cheap).
« Last Edit: February 10, 2013, 03:55:09 PM by KingCoin »

Nords

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Re: Lending Club vs Stocks vs Gold?
« Reply #11 on: February 10, 2013, 06:18:24 PM »
My understanding of precious metals is that they are typically a good way to retain wealth, and as the cost of goods like food, oil, and other commodities rise, it is likely that metals will as well. For me, it is primarily a hedge against a dollar that is decreasing in value so I keep a similar amount of metals as I have dollars on hand.
I've felt that they generally track a currency's depreciation, minus a healthy carrying cost for trades and storage.

My alma mater has a tradition of encouraging its students to buy a large, flashy gold ring to knock on tables.  Around 1980 (give or take a few months) the price of gold hit $800/ounce (give or take a few bucks), which made those rings particularly unaffordable.  Let's assume that it's $1668/ounce today. 

Yet when you put 1980's $800 into the BLS inflation calculator (http://www.bls.gov/data/inflation_calculator.htm) it claims that we'd need over $2200 today.  I guess that just reinforces how wildly overvalued gold was in 1980... or else it reflects three decades of carrying costs.  But if I'd been investing in gold as long as I've been investing in stocks, I wouldn't be very happy with the results.

KingCoin

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Re: Lending Club vs Stocks vs Gold?
« Reply #12 on: February 10, 2013, 07:40:28 PM »
The price of gold is extremely volatile, vs inflation:
http://www.aboutinflation.com/gold-vs-inflation

Basically, the inflation adjusted price of gold has ranged from 400 to 1800.  You'd expect this value to be constant (or at least exist in a very tight range) if gold simply tracked inflation.

That's not to say gold is a good or bad asset to hold in your portfolio, but it's performance is far more complicated and volatile than simply an inflation hedge. The fact that gold is reaching a peak in real terms and being hawked by late night infomercials should give investors pause, if not scare them off altogether.

Jamesqf

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Re: Lending Club vs Stocks vs Gold?
« Reply #13 on: February 11, 2013, 12:03:01 PM »
Maybe you're comfortable with 5% gold, maybe 15%...

Personally, at today's prices/conditions, I wouldn't be comfortable with more gold than I could slot into a money belt, just in case I had to run for the nearest border.  If I had invested, back in the '90s or so, I would have sold when the price peaked a year or so ago.

AdrianM

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Re: Lending Club vs Stocks vs Gold?
« Reply #14 on: February 11, 2013, 01:32:16 PM »
Nobody knows where the economy is headed. Nobody knows if economic prosperity looms on the horizon — or if we’re in for decades of rampant inflation. And because nobody knows what’s ahead, nobody knows the best way to save for retirement (or any other purpose).

But with the Permanent Portfolio, you don’t have to see the future. You don’t need a crystal ball to divine the best place to put your money. Instead, you hedge your bets against all possibilities. Sexy? Nope. Safe? You bet.

25% Stocks for Growth
25% Bonds for Deflation
25% Gold for Inflation
25% Cash for Recession

The portfolio should assure that your wealth will survive any event — including an event that would be devastating to any individual element within the portfolio. In other words, this portfolio should protect you no matter what the future brings.


arebelspy

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Re: Lending Club vs Stocks vs Gold?
« Reply #15 on: February 11, 2013, 01:46:15 PM »
The portfolio should assure that your wealth will survive any event — including an event that would be devastating to any individual element within the portfolio. In other words, this portfolio should protect you no matter what the future brings.

That may be the case, but it may also be the case that one needs more than "protection" to have a successful portfolio in ER.

Who knows.
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KingCoin

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Re: Lending Club vs Stocks vs Gold?
« Reply #16 on: February 11, 2013, 01:59:53 PM »
That may be the case, but it may also be the case that one needs more than "protection" to have a successful portfolio in ER.

Agreed. It's likely a poor portfolio for ER. The real returns of 75% of the assets are either 0 (gold, gov bonds) or negative (cash).

AdrianM

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Re: Lending Club vs Stocks vs Gold?
« Reply #17 on: February 11, 2013, 11:01:34 PM »
That may be the case, but it may also be the case that one needs more than "protection" to have a successful portfolio in ER.

Agreed. It's likely a poor portfolio for ER. The real returns of 75% of the assets are either 0 (gold, gov bonds) or negative (cash).

Looks like you both have a crystal ball that tells you what the future will bring.

Best of luck then.

AdrianM

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Re: Lending Club vs Stocks vs Gold?
« Reply #18 on: February 12, 2013, 03:10:36 AM »
Agreed. It's likely a poor portfolio for ER. The real returns of 75% of the assets are either 0 (gold, gov bonds) or negative (cash).

This is a good case for home country bias.
You looked at your own country and assumed every other county must be the same.

I live in Australia, So there are substantial differences to what the markets have done.

Stocks - Our stock market is in a 3.5 year trading range 4000 - 5000 But still nowhere near the 2007 peak 6873.  5 years have gone by and you are still underwater if you bought at the peak.
Gold - in Australian terms has risen from $1000 to $1600 over 5 years. So what's that an average of 12% yield?
Bonds - (ASX:IAF) currently 5.3% yield.
Cash - Term deposit for 6 months 4.5% yield

Before you say investment property. Check out the latest demogphia study
http://www.demographia.com/dhi.pdf
Where I live the median house price is $355,000 interest rates are 6% variable and they rent for $1600 a month Repayments on a normal loan with 20% down is $1700 + Rates + Insurance + management fee.
So investment properties are currently in negative yield.

So from my perspective the permanent portfolio works well.

arebelspy

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Re: Lending Club vs Stocks vs Gold?
« Reply #19 on: February 12, 2013, 07:01:20 AM »
Looks like you both have a crystal ball that tells you what the future will bring.

Best of luck then.

Reread my post, then post your same comment again please.

I posted:
Quote
That may be the case, but it may also be the case that one needs more than "protection" to have a successful portfolio in ER.

Who knows.

And you interpret that as me claiming to have a crystal ball that knows the future?

You undermine your own posts when you say ridiculous stuff like that.

/shrug
« Last Edit: February 12, 2013, 07:07:15 AM by arebelspy »
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arebelspy

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Re: Lending Club vs Stocks vs Gold?
« Reply #20 on: February 12, 2013, 07:05:41 AM »
I live in Australia, So there are substantial differences to what the markets have done.

What they have done over the past 5 years isn't particularly relevant to what they'll do in a 50-year ER.  Fundamentally understanding how bonds, stocks, gold, and cash work and why they generate returns will tell you that the past 5-year results that you mention are... abnormal, compared to history.

Regardless, I have no problems with the PP (you seem to think any questioning of it is a direct attack against you - it isn't) and may even implement something similar myself during parts of my ER (for specific reasons).

Nevertheless, I stand by what I said. The PP protects your assets with very moderate growth, and for a very long retirement merely protecting them may not be enough.
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Mike

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Re: Lending Club vs Stocks vs Gold?
« Reply #21 on: February 12, 2013, 07:25:07 AM »
If you want your money to last for several decades, you need growth - and quite a bit of it at that.  In my view, 25% in stocks simply won't generate enough of that.

KingCoin

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Re: Lending Club vs Stocks vs Gold?
« Reply #22 on: February 12, 2013, 08:46:39 AM »
Fundamentally understanding how bonds, stocks, gold, and cash work and why they generate returns will tell you that the past 5-year results that you mention are... abnormal, compared to history.

This is the key point. In some respects I do have a crystal ball. I know that in 25 years 100oz of gold is still going to be 100oz of gold. No more, no less. A stack of $100 bills is still going to be a stack of $100 bills. A 25yr treasury bond at 4% will have yielded 4%. If you're drawing down 4% a year, these assets will be gone in 25 years. Yes, gold may appreciate or depreciate with respect to your consumption basket, so some periods you may have to draw down 2% of your gold or 7% of your gold, but sooner or later you'll run out of gold. Contrast that with stocks, which should track inflation over the long run, as well as generate real returns (in the form of dividends and capital appreciation). In a sense, stocks are a renewable income source, whereas cash, gold, and bonds are a fixed capital pool.

Could the PP outperform a more traditional, stock heavy portfolio over the next 5 years? Absolutely. Is it a defensive, arguably quite bearish portfolio that's more suited to capital preservation than a long term retirement? Absolutely.

tooqk4u22

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Re: Lending Club vs Stocks vs Gold?
« Reply #23 on: February 12, 2013, 10:07:55 AM »
I may not have a crystal ball, but I will step out on the ledge and say (as I have elsewhere) that the Permanent Portfolio and those who believe in it are relying exclusively on bullish sentiment in those otherwise safe assets with gold and bonds rising ever so much over the last two decades due to monetary easing and low inflation and once inflation starts to show its head interest rates will rise and bonds and gold will fall - look at the link KingCoin posted to see the correlation in inflation/gold/rates.  I don't know when this will happen, but it is not as far off as you may think, and when it does your safe portfolio won't feel that safe. 

My basic view is that at best the PP provides capital protection with no upside (from these levels - not from 5-10 years ago) and possibly significant downside.   The risk/reward equation is significantly imbalanced right now with this investment allocation unless you think deflation is a major concern and even this is a maybe.   

« Last Edit: February 12, 2013, 10:32:18 AM by tooqk4u22 »

AdrianM

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Re: Lending Club vs Stocks vs Gold?
« Reply #24 on: February 12, 2013, 03:07:32 PM »
I am reading a lot of reasoning why the PP wont work.

Would someone like to propose a investment Portfolio that they think would work.

I am interested to see what sort of allocation everyone thinks is better and why.

I used 5 years as that is how long I have been on the ER path.
So far I am doing well with my PP.


KingCoin

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Re: Lending Club vs Stocks vs Gold?
« Reply #25 on: February 12, 2013, 03:41:45 PM »
I am reading a lot of reasoning why the PP wont work.

No one's saying that it "won't work". It all depends on what your goals are. If your goal is long term growth, the portfolio is highly suspect for the reasons I listed above. If your goal is to live off the income from your portfolio, it's highly suspect for the reasons I listed above. The fact is that 75% of the assets in the portfolio produce no real returns and will be lucky to keep up with inflation. Do you disagree with that? This puts the burden of all your growth and income needs on 25% of the portfolio.

If you're worried about economic conditions and want to preserve capital, especially if the market tanks, the PP is probably a good way to go.

A more traditional portfolio might look like this:
30% Domestic Equity
20% Foreign/Emerging Equity
20% REITs/Real Estate
10% TIPS
10% Gov Bonds
10% Cash/Precious Metals

Again, the precise allocation is going to depend on your own personal goals, risk tolerance, investment horizon, etc.

The problem with looking at recent history is that gold and bonds have gone on an epic bull run and are now are priced at their richest levels ever. So it's no surprise that the PP has been a veritable rock star of late. Keep in mind that Browne proposed the PP when cash and bonds had double digit yields. However, if you look at the PP vs the portfolio above, over multiple 20 year periods, I'd venture a guess the PP loses 9 times out of 10, many times by an extremely large margin.

arebelspy

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Re: Lending Club vs Stocks vs Gold?
« Reply #26 on: February 12, 2013, 03:54:02 PM »
I am reading a lot of reasoning why the PP wont work.

No one's saying that it "won't work". It all depends on what your goals are.

This.  As I said, "[ I ] may even implement something similar myself during parts of my ER (for specific reasons)."

Those reasons will be related to capital preservation with reserves in relation to real estate.

I wouldn't count on the PP as my main AA for 40+ years of ER.  It CAN work fine, but so can cash, or any other AA, such as hoarding jellybeans.  It depends completely on what your goals, time frame, risk tolerance, etc. is.

If you have a SWR of 0.5% and no risk tolerance, the PP may be the way to go.  You'll have to work way longer than necessary to build up a giant stache to support that lack of growth, but that may be the way to go for some people.
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AdrianM

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Re: Lending Club vs Stocks vs Gold?
« Reply #27 on: February 12, 2013, 04:01:31 PM »
I read through the link KingCoin posted, Found this interesting line
"The chart below - US 3 months Bill Rate yield, shows that in 1979 as interest rate got above 8 % P.A. Gold bubble begin to deflate See chart above.
Would the history of 1979 Gold bubble repeat?"

So you are telling me that the Dow would be going up if US 3 months Bill rates where at 8% not 0.05%(Personally I would love it)
Also do you understand what that would do to your government liabilities?

KingCoin

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Re: Lending Club vs Stocks vs Gold?
« Reply #28 on: February 12, 2013, 04:27:54 PM »
So you are telling me that the Dow would be going up if US 3 months Bill rates where at 8% not 0.05%(Personally I would love it)
Also do you understand what that would do to your government liabilities?

No doubt many governments would be devastated if short term rates went to 8%. Especially countries like Japan. This is a case guys like Kyle Bass are making.

But I'm not sure what your contention is. Gold and rates both fell post 1980 as inflation was tempered by Volcker.

My point was simply that compared to 1980, gold is about the same price, but cash and bonds are far less attractive, making the PP less interesting now than when it was proposed.


arebelspy

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Re: Lending Club vs Stocks vs Gold?
« Reply #29 on: February 12, 2013, 05:28:43 PM »
To understand what these investments do long term (say, over the next 50 years you'll be ER'd), let's look at a long timeframe: not the past 5 yrs, but the past 200 years.

If you took $1 in 1802 and invested it in stocks, it would have been worth $755,000 in 2006.

Had you put that dollar in bonds, $1 turned into $1,083.

Gold grew to $1.95.

Cash depreciated to $0.06.

All of these are adjusted to inflation.. Meaning that 1.95 is that gold basically matched inflation.  Cash went way, way down, much underperforming inflation.  Stocks would be worth 755k in 1802 dollars... In today's dollars, billions and billions. 

(Source: Stocks for the Long Run by Wharton's Jeremy Siegel, p. 11 - http://http://en.wikipedia.org/wiki/Stocks_for_the_Long_Run )

Will the future match that?  Who knows?  Maybe. Probably not. But fundamentally, stocks will outperform inflation by a lot more than bonds, a LOT more than gold, and even MORE than cash.

(FWIW, I believe I read somewhere, but can't find the source right now, that real estate's return was around $1 - similar to gold - i.e. it matched inflation as well. I personally don't hold real estate for real growth - I do expect appreciation that matches inflation, and then take the cash flow.)

I consider my investment horizon for ER long enough (could end up being 70 years, if I live long enough) that inflation is my main concern.. And assets that track it, like gold and real estate, are nice, but assets that beat the pants off it to sustain my buying power without eating into my principal is even better.
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watermen

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Re: Lending Club vs Stocks vs Gold?
« Reply #30 on: February 12, 2013, 07:21:29 PM »
To understand what these investments do long term (say, over the next 50 years you'll be ER'd), let's look at a long timeframe: not the past 5 yrs, but the past 200 years.

If you took $1 in 1802 and invested it in stocks, it would have been worth $755,000 in 2006.

Had you put that dollar in bonds, $1 turned into $1,083.

Gold grew to $1.95.

Cash depreciated to $0.06.

All of these are adjusted to inflation.. Meaning that 1.95 is that gold basically matched inflation.  Cash went way, way down, much underperforming inflation.  Stocks would be worth 755k in 1802 dollars... In today's dollars, billions and billions. 

(Source: Stocks for the Long Run by Wharton's Jeremy Siegel, p. 11 - http://http://en.wikipedia.org/wiki/Stocks_for_the_Long_Run )

Will the future match that?  Who knows?  Maybe. Probably not. But fundamentally, stocks will outperform inflation by a lot more than bonds, a LOT more than gold, and even MORE than cash.

(FWIW, I believe I read somewhere, but can't find the source right now, that real estate's return was around $1 - similar to gold - i.e. it matched inflation as well. I personally don't hold real estate for real growth - I do expect appreciation that matches inflation, and then take the cash flow.)

I consider my investment horizon for ER long enough (could end up being 70 years, if I live long enough) that inflation is my main concern.. And assets that track it, like gold and real estate, are nice, but assets that beat the pants off it to sustain my buying power without eating into my principal is even better.

But this assume that you bought the right stock and hope the company never go bankrupt or shut down.

If you were able to travel back to 1802, which stock will you buy?

On the other hand, if you invest $1 in 1802 in Lending Club, with an interest rate of 12% (this 12% is your final rate, default is taken into calculation), how much will that be 200 years later? anyone?

arebelspy

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Re: Lending Club vs Stocks vs Gold?
« Reply #31 on: February 12, 2013, 07:27:04 PM »
No, that's not cherry-picking the best stock.  That's the average stock.  You could have done much, much better (or worse).  That's basically like doing an index fund.
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grantmeaname

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Re: Lending Club vs Stocks vs Gold?
« Reply #32 on: February 12, 2013, 07:37:35 PM »
On the other hand, if you invest $1 in 1802 in Lending Club, with an interest rate of 12% (this 12% is your final rate, default is taken into calculation), how much will that be 200 years later? anyone?
Right, because a risk-free 12% return is something that definitely exists.

watermen

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Re: Lending Club vs Stocks vs Gold?
« Reply #33 on: February 12, 2013, 08:05:25 PM »
No, that's not cherry-picking the best stock.  That's the average stock.  You could have done much, much better (or worse).  That's basically like doing an index fund.

I know what you mean, but which fund offer long term return? Most of them I see just go up and down....( I lost quite a lot in stock, which is I am wary now and more caution with it.)

Even my AAPL I bought 1.5 months ago, thought it was a good investment, I have lost nearly 10%.

KingCoin

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Re: Lending Club vs Stocks vs Gold?
« Reply #34 on: February 12, 2013, 08:07:13 PM »
But this assume that you bought the right stock and hope the company never go bankrupt or shut down.

If you were able to travel back to 1802, which stock will you buy?

On the other hand, if you invest $1 in 1802 in Lending Club, with an interest rate of 12% (this 12% is your final rate, default is taken into calculation), how much will that be 200 years later? anyone?

From your comments, it's clear you you're missing a lot basic concepts on the risk/return characteristics of different asset classes (I'm not trying to be insulting, everyone was there at one point or another). Your best bet is to pick up 3 or 4 books on personal finance and investing and read them. Something like "A Random Walk Down Wall Street" might be a good place to start. This will give you a good broad based education. I think forums like this are best suited for more specific advice and questions.

And to underscore grant's post, 12% may be the recent historical performance of Lending Club's high risk personal loans, but make no mistake, if the economy turns south again, you can suffer devastating losses on these kinds of loans.
« Last Edit: February 12, 2013, 08:12:11 PM by KingCoin »

arebelspy

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Re: Lending Club vs Stocks vs Gold?
« Reply #35 on: February 12, 2013, 08:13:41 PM »
No, that's not cherry-picking the best stock.  That's the average stock.  You could have done much, much better (or worse).  That's basically like doing an index fund.

I know what you mean, but which fund offer long term return? Most of them I see just go up and down....( I lost quite a lot in stock, which is I am wary now and more caution with it.)

Even my AAPL I bought 1.5 months ago, thought it was a good investment, I have lost nearly 10%.

Imagine walking up stairs.  It goes up and flat and up and flat, but overall ends up up.   Picture stocks spiking up and down, but on a long trend moving steadily up.  Invest for the long term.

Don't buy individual stocks.  Do you know more than the market about able?  No?  Then buying them you were gambling.   Buy index funds, keep investing over time regardless of share price, become rich.
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Re: Lending Club vs Stocks vs Gold?
« Reply #36 on: February 12, 2013, 09:55:42 PM »
I know what you mean, but which fund offer long term return? Most of them I see just go up and down....( I lost quite a lot in stock, which is I am wary now and more caution with it.)
So Watermen, how're you doing on reading the Bogleheads Wiki on asset allocation?  Any questions on what you've read?

Are you trying to come up with a solution that you can live with, or are you just here to debate the futility of picking winning stocks? 

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Re: Lending Club vs Stocks vs Gold?
« Reply #37 on: February 13, 2013, 12:22:51 PM »
On the other hand, if you invest $1 in 1802 in Lending Club, with an interest rate of 12% (this 12% is your final rate, default is taken into calculation), how much will that be 200 years later? anyone?
Right, because a risk-free 12% return is something that definitely exists.

I think the last guy to offer that kind of "guaranteed" return is doing 150 years of hard time.

KingCoin

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Re: Lending Club vs Stocks vs Gold?
« Reply #38 on: February 13, 2013, 01:05:06 PM »
This conversation reminds me of this article:

http://www.nytimes.com/2013/02/11/business/wave-of-investor-fraud-extends-to-ordinary-retirement-savers.html

Basically, people become nervous about the stock market and seek out "safer" "alternatives" which end up being far more risky and opaque.   

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Re: Lending Club vs Stocks vs Gold?
« Reply #39 on: February 13, 2013, 08:59:08 PM »
On the other hand, if you invest $1 in 1802 in Lending Club, with an interest rate of 12% (this 12% is your final rate, default is taken into calculation), how much will that be 200 years later? anyone?
Right, because a risk-free 12% return is something that definitely exists.
I think the last guy to offer that kind of "guaranteed" return is doing 150 years of hard time.
Yeah, but when he gets out that 12% APY compounded to the 150th power will make him a gazillionaire!

chucklesmcgee

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Re: Lending Club vs Stocks vs Gold?
« Reply #40 on: February 14, 2013, 07:44:51 PM »
If you took $1 in 1802 and invested it in stocks...
Gold grew to $1.95. All of these are adjusted to inflation.. Meaning that 1.95 is that gold basically matched inflation.

Well that's unfair. The dollar was basically pegged to gold until 1971- so there really couldn't be any change in the value of a dollar invested in gold unless the US decided to change the exchange rate. Gold's now worth 40 times what it was in 1971, though inflation does take a bite out of real returns.

arebelspy

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Re: Lending Club vs Stocks vs Gold?
« Reply #41 on: February 14, 2013, 09:03:30 PM »
That's true.  Nevertheless, do you think gold would have kept up with bonds, let alone stocks?

Also, you should attribute that quote to me, not watermen, who was just quoting me.
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with two kids.
If you want to know more about us, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.