[fasthands9]

When I was born in 1990 my grandparents spent like 5k on government bonds that my dad didn't tell me about until I was 30.

It was a very nice treat, but when I did the math to see how much more it would have been if just invested in the market I gasped.

[ryandrake]

Not comparing apples to apples, though. Those government bonds were, by any reasonable measurement, risk free (EDIT: as another commenter noted, not exactly, we could call them "minimal risk"), while "the market" is not.

Looking back in hindsight is always risk-free, though, which can lead to faulty conclusions.

[jameslk]

On the timescale of 30 years for gov bonds vs diversified US stocks, this is almost meaningless statement. The longer a risky asset is held, the less chance of loss you’ll have. Short-horizon returns are extremely volatile, but that volatility "mean-reverts" over time.

This is especially true for stocks vs bonds. Because the cash flows of bonds are fixed, prolonged inflation or rate spikes can deliver a loss that stays a loss, making long-term "safety" in bonds partly an illusion.

http://www.efficientfrontier.com/t4poi/Ch1.htm

[cortesoft]

> The longer a risky asset is held, the less chance of loss you’ll have

I understand what you are trying to say here, but it really depends on what the “risky asset” is. If you hold a diversified set of risky assets, like a stock market index fund, then what you say is correct.

However, there are other risky assets that don’t hold to this “a long time horizon reduces risk” statement. For example, if you put all your investment in a single stock, that is a risky asset that does not necessarily revert to the mean over time. Many companies go out of business, and the stock goes to zero and will never recover no matter how long you wait.

It is important to note what kind of risk you are taking.

[ryandrake]

> On the timescale of 30 years for gov bonds vs diversified US stocks, this is almost meaningless statement. The longer a risky asset is held, the less chance of loss you’ll have. Short-horizon returns are extremely volatile, but that volatility "mean-reverts" over time.

This is only true if you look back 30 years. What will happen in the next 30 years? Do you know for sure?

[kimbernator]

Realistically, all that actually matters is where I land relative to the population at large. Since so much of the world economy is tied to stocks, by buying into it I will remain at least at parity with my current socioeconomic status regardless of whether the market goes up or down. Nobody with real money is just holding it in cash in case the whole stock thing doesn't work out.

If things go the way they have been for a while now, I'll be able to retire comfortably. If stocks don't gain or lose a penny for the next 40 years, I think society as a whole will have reframed retirement. If society collapses, it didn't matter anyways.

[Lerc]

I guess the questions to be asked would be

Will the US economy completely collapse in the next 30 years?

Will the US government completely collapse in the next 30 years.

For the past century I think the answers to those questions would have been, "Almost certainly not" and "Not a chance in hell"

I honestly didn't know where they stand today, but there's definitely been movement.

[tmtvl]

The past century, you say... wasn't there a little thing called 'the great depression' somewhere around a century ago?

[Lerc]

Wasn't a complete collapse. It took a significant hit, but still functioned.

[jameslk]

The same type of argument can be made about bonds and even cash.

And if a diversified portfolio of US stocks all suddenly go bankrupt, that probably means the US is toast and therefore bonds are screwed too.

Outside of catastrophic black swan events, like I said, stocks generally mean revert if you have a long enough time horizon to allow it

[southernplaces7]

>that probably means the US is toast and therefore bonds are screwed too.

If the US becomes toast, whatever caused it to happen, and/or the geopolitical, economic consequences of it having happened, would likely be so enormous that stock and bond prices in your portfolio would be the very least among your problems.

[narratives1]

This is almost the definition of technical analysis: “chart always reverted to mean so it will always revert to mean”

Note that almost every exchange outside the US has been flat or negative for decades. The US has held a precious position for a few generations that’s made “chart go up” feel like a given

[Kranar]

>Note that almost every exchange outside the US has been flat or negative for decades.

As someone who works in finance this struck me as a remarkable claim. Upon inspection it turns out to be spectacularly incorrect. After adjusting for inflation it's actually the opposite, the vast majority of countries have seen their own version of the S&P 500 grow over a 30 year period, after adjusting for inflation, not stagnation or decline. Developing countries, particularly those in Asia, have seen incredible returns over a 30 year period, albeit with a great deal of volatility involved.

Our neighbor to the north, Canada, has seen gains that are slightly below the U.S., but our neighbor to the south, Mexico has seen about the same growth as our own, once again accounting for Mexico's own inflation.

Europe has also experienced a great deal of growth with many European countries even growing moreso than the U.S., for example Germany.

While there are examples of decline, they are in countries that are both poor and have unstable governments. Most countries that are strictly poor but don't suffer from instability have for the most part seen growth rather than stagnation.

So I don't know exactly what led you to believe your claim that "almost every exchange" has been flat or negative, but it's certainly not correct.

[throw0101c]

> Note that almost every exchange outside the US has been flat or negative for decades.

And the US itself was flat for over a decade, with the only thing saving a domestic investor's returns being bonds:

* https://www.forbes.com/sites/investor/2010/12/17/the-lost-de...

And as a Canadian, there are different sectors that would have given me positive gains over the years (I generally own mostly VEQT, a globally-diversified ETF):

* https://stingyinvestor.com/SC/PeriodicTableofAnnualReturns.p...

And it's perhaps looking more closely at what specifically about the US has been positive:

> Looking at this data, there are two distinct periods of extended U.S. outperformance—the late 1990s and today. And what do these two periods have in common? The rise of U.S. technology stocks. Bespoke Investment Group recently created this chart illustrating this phenomenon:

> Now that the U.S. technology sector makes up over 30% of the S&P 500 (as it did back in 2000), this begs the question: Is U.S. outperformance just a technological fad?

* https://ofdollarsanddata.com/do-you-need-to-own-internationa...

Outside of tech, how much better is the general US market than any other market?

[ty6853]

Holding stocks in the nation in which you live probably isn't very smart from a hedge perspective, considering US stocks don't have a locked correlation to foreign ones. Your assets would all be in the shitter at the same time you're out the job and need to liquidate them to survive.

[jameslk]

Yes I agree. I was using US stocks for the sake of comparison against US bonds. Otherwise, a diversified portfolio with risk adjusted to goals is what makes sense

[jajko]

Yeah buying Norwegian airlines stock for example would have been a brilliant idea, right. I mean country like Norway with their sovereign fund, oil, very moral population and good government etc, nothing can ever go wrong.

[kimbernator]

It's hardly fair to portray stock market investment in that way, though. Nobody should be investing in a single stock for 30 years. A diversified sector EFT is just as easy to buy and comes with diversification so a single failing company doesn't have that much of an impact.

[floundy]

The Nikkei 225 is still below its peak value from December of 1989. The US is an outlier in terms of historical average stock market returns and there is no guarantee this outperformance will continue into the future. Actually I'd say it's less likely, given that should it continue, the US market cap will eat the entire world stock market. The US stock market is currently 62% of the world's stock market capitalization.

[tokyoseb]

The Nikkei 225 may be below its 1989 peak in price terms but you can’t ignore the dividends which an actual investment in the index would have paid during that period. On a total return basis (if you had reinvested the dividends into the index as you received them) the Nikkei passed its 1989 peak in 2021.

[deanmoriarty]

I struggle to understand why an educated crowd like HN routinely forgets dividends when posting any sort of financial charts. Total returns are what matters.

[andrewmcwatters]

I don’t know how many people in tech you’ve worked with, but the number of other people I’ve interacted with who actually read quarterly reports of publicly traded businesses has been exactly zero.

[floundy]

My point still stands, as the original comment was discussing the risk of loss over 30 years, with no additional investment that was 32 years of the investment being below its peak value.

[throw0101c]

> The Nikkei 225 is still below its peak value from December of 1989.

Okay, and how many people put 100% of their money in at December of 1998? Versus how many people have been dollar cost averaging for the last 30+ years?

* https://ofdollarsanddata.com/now-do-japan/

Further, it's not like the US is immune to long periods of minimum returns:

* https://www.forbes.com/sites/investor/2010/12/17/the-lost-de...

Perhaps these examples are a lesson for what's important: diversification.

[ManBeardPc]

Only if you invested everything in the Nikkei on the height of the market though. Many US companies are pretty global and have a lot of sales outside the USA. In that sense the risk is a lot less concentrated outside of extreme political events.

[floundy]

Many international companies are global, and have a lot of sales to the US. But I never see anybody using that as a justification for not investing in the US.

As to the Nikkei retort this seems to be hindsight bias and ignorance of historical context, the general consensus at the time (both inside and outside of Japan) was that the Japanese economy was going to take over the world.

[scubazealous]

Bonds are considered safer because short of the US losing WWIII there is practically no way the US bonds would not pay out or lose value. US Bonds are safe and predictable, backed up by the immense military and resources of the nation.

Investing in Apple 30 years ago would net a much higher return on $5k but even Apple was considered a unsafe investment in the 90s. On the other hand, Enron was considered a safe investment by many but went bankrupt almost overnight and shares became practically worthless.

[kgwgk]

> there is practically no way the US bonds would not pay out or lose value.

Bonds can "lose value" and they did so quite strongly in 2022/23.

If you bought 20-year bonds in 2020 for $100 they are worth $60 now (and were as low as $55 in 2023). Getting $1 per year is far from compensating the loss.

They will recover gradually until they "pay out" $100 but right now they're underwater.

[taeric]

I mean... the risk of risky assets is that they won't last that long. Any asset you can look back on having held for a long time, is by definition less risky than you could have been. No?

[BlandDuck]

Exactly, if it had been obvious at the time that "the market" would deliver a better return, for certain, then nobody would have bought bonds at those prices.

Then bond prices would have declined (and their expected returns or interest rate would have increased) until, in equilibrium, the anticipation was that the stocks and bonds would deliver comparable expected risk-adjusted returns.

[JackFr]

Very few entities have a 98 year horizon. People sure don't. Some insurance companies do I suppose.

A more interesting graph would be to show me the 30 year return at each point along the way. My gues is that stocks would still mostly come out on top, but not the runaway you see here.

[tjwebbnorfolk]

"Risk-free" is a popular shorthand for "The US government won't default". But default is far from the only risk inherent in bond ownership.

Risk is the chance something bad happens to you.

Held for 30 years, bonds are eaten alive by inflation. That's a bad thing that happens to you if you hold bonds for a long time.

[kgwgk]

> Held for 30 years, bonds are eaten alive by inflation.

20-year and 30-year bonds yield 5% today. That's well above inflation expectations.

You can actually buy inflation-linked bonds that are going to pay you 2.5% over inflation for the next 20 or 30 years - whatever happens with inflation.

[tjwebbnorfolk]

You're talking about making a 30-year duration bet that inflation will not increase. If you call that risk-free, then all I can say is I have a very different idea of what risk means.

I'd argue a much better 30-year bet is that somebody like Coca Cola will be able to charge an amount for their product that reflects whatever happens with inflation much better than betting on a fixed rate of 5% that can never increase.

[kgwgk]

> You're talking about making a 30-year duration bet that inflation will not increase. If you call that risk-free

I didn’t say anything about “risk-free” (the closest is the second paragraph but you don’t address it at all).

I was clearly commenting on the quoted sentence “Held for 30 years, bonds are eaten alive by inflation” which has not applied since the seventies, doesn’t seem the best assumption going forward, and has an easy solution as discussed.

> reflects whatever happens with inflation much better than betting on a fixed rate of 5% that can never increase.

If your main objective is to beat inflation, getting inflation + 2.50% with certainty seems an attractive proposition! (Inflation-linked bonds have a “fixed” rate on top on inflation.)

[ty6853]

Indeed. There's always the story of finding stacks of bills in the wall of granddaddies house despite the fact creditors and the bank were up his ass to the bitter end for medical bills.

Given the ever increasing number of people bankrupted by medical bills, divorce, child support, lawsuits, etc we're quickly moving into a world where it might be foolish to expect assets accessible to a brokerage or bank will still be there by the time you need them.

[toasterlovin]

I'm not sure that a US government bond has a meaningfully different risk profile than an aggregate investment in US equity markets.

[ryandrake]

If this were really true, they would offer similar returns.

[toasterlovin]

Famously, Mr. Market deals in what things cost, not what they are worth.

[eweise]

isn't the stock market risk free over a 30 year span? Maybe with the exception of the depression.

[BJones12]

The US stock market has not had a negative return over any 30 year span. There are 30 year spans with total returns under 10%, which significantly lag what bonds returned in those spans.

[marsten]

A surprising number of 401(k) plans default to a money market fund for invested assets. Imagine retiring after a decades-long career and realizing what could have been.

[cced]

> Imagine retiring after a decades-long career and realizing what could have been.

I'm not following what this means. Can you please elaborate?

[peterbecich]

If I remember this article correctly https://www.wsj.com/personal-finance/retirement/the-401-k-ro..., the summary is some peoples' 401k accounts are not invested in the stock market. Rather the money sits for years collecting interest, growing far less.

[jlmcguire]

I believe they mean realizing that if you had invested into stocks instead of money market you'd have likely realized a quite large return. Money markets seek to keep your returns to around inflation.

[rufus_foreman]

>> It was a very nice treat, but when I did the math to see how much more it would have been if just invested in the market I gasped.

This is known as "looking a gift horse in the mouth".

[Hasnep]

They just gasped, they didn't seem ungrateful to me.

[kgwgk]

If they bought 30-year bonds, yielding 8%-9% per year, you may have received only the 5k in the end but what happened with the 13k in coupons?

[kgwgk]

Also, if you had been born in 2000 you may have preferred the bonds. It took 20 years for equities to outperform.

[trod1234]

The problem is that most people don't know how to invest, and this has been done by purposeful intent. Financial education was removed from centralized education long ago.

Bonds necessarily need to exceed the yearly inflation to retain their purchasing power. People claim these are risk free, but they aren't, even when held to maturity. You lose money from the inflation when the rate of interest is below the inflation rate which it almost surely was given the several decades of almost zero low-interest rates in that time period.

There are some general rules that anyone should know. Rule #1 is don't lose your principal investment (don't lose money). Rule #2 is don't invest in a casino, always manage your risk, and know when its unmanageable. Rule #3 invest in yourself, understand the business, limit debt, and focus on value.

People today don't realize the market has been rigged through a number of convoluted ways into that of a casino.

Price discovery is gone because most transactions happen off exchange in the dark. In 2024, over 50% of transactions occurred off-exchange in dark pools. You then also have payment for order flow, synthetic shares via options through predatory middlemen, and no real law enforcement mechanism for when those big players break the rules; and they do on the regular as they did in GME/FRC, and too many other places to count. You've also got large banks pumping the prices up through non-fractional reserve based debt backing options contracts which they use to yield farm, and profits funneled away from businesses into stock buybacks hollowing them out of any value.

No visibility, no price discovery, no economic calculation. These things fail when about 1/4 of the market is off-exchange, its been at crisis for a long time.

There is no real opportunity for investment when you allow those rules to be broken. Its not an actual investment.

[kgwgk]

> several decades of almost zero low-interest rates in that time period

What are those “several decades” more precisely?

https://fred.stlouisfed.org/graph/?g=1JtLn

[trod1234]

The chart you linked isn't inflation indexed.

I believe the chart below is the one you should have been linking (at least one that's public, the reports I get are subscription only so I can't share those):

https://fred.stlouisfed.org/series/DFII10

Anything less than 4% for a real return of 2-3% after inflation falls under low interest rates, and as you can see 2003-2022 this period matches that criteria, with real negative rates 2011-2013, and 2020-2022.

Notwithstanding all the unstated shennanigans and other changes to try to make the numbers look more palatable on the surface, like the YTM reporting loophole, there is also the backroom deals between blackrock to swap old low rate treasuries for newer treasuries on the taxpayer dime (1), and the abandonment of the fractional reserve system (2020, reserves set to 0% for Basel 3) which call into question more foundational issues of the money system.

1 (https://www.bloomberg.com/news/articles/2020-05-21/how-larry...)

[kgwgk]

> The chart you linked isn't inflation indexed.

Neither was your comment. The alternative reading "You lose money from the inflation when the rate of interest is below the inflation rate which it almost surely was given the several decades of almost zero low-interest REAL rates in that time period" wouldn't have made much sense. The interest rate is below the inflation rate when the real rates are negative - not just low.

> Anything less than 4% for a real return of 2-3% after inflation falls under low interest rates, and as you can see 2003-2022 this period matches that criteria.

How does that support the claim that the rate of interest was almost surely below the inflation rate during and that made you "lose money from the inflation" during that period? That happened only very briefly as you notice.

Investing in bonds didn't "lose money from the inflation" in 1990-2020. Actually it was an exceptionally good period to have bonds!

Buying 10-year bonds one after the other in 1990, 2000 and 2010 you got coupons in excess of 8%, 6% and 3% respectively with inflation rates over those decades around 3%, 2.5% and 2%.

The inflation over the 30 years is below 2.5%. $100 in 1990 was $260 in 2020.

Investing $100 in 10-year bonds in 1990 without even bothering with reinvesting results in over $180 in 2000.

Investing $180 in 10-year bonds in 2000 without even bothering with reinvesting results in over $280 in 2010.

Investing $280 in 10-year bonds in 2010 without even bothering with reinvesting results in over $360 in 2010.

That's more than 4% per annum - compared to an inflation below 2.5%. (I didn't include taxes but there was no reinvestment either and everything is rounded down at every step.)

You also got similar (slightly better) returns if you rolled over the bonds to keep constant duration at 10 years (and even better if you had longer duration bonds). The annualized return of the IEF ETF (7-10 year bonds) since inception in 2002 to 2020 is 4.5% - it definitely didn't "lose money from the inflation" which was just 2.1%.

[trod1234]

> Neither was your comment.

The comment I made refers to the underlying process of inflation indexing a yield curve in loose terms. You seem to be nitpicking on semantics for no real reason.

You also seem to have messed up your math with regards to calculating the loss in purchasing power due to inflation of the principal and interest (coupon) of an investment.

Inflation in 1990 was 5.4%, the return was 8.2% for that year, but I see you rounded that down to 8% in your example, so I'll stick with what you rounded down to in my breakdown below but the real rate of return for that year without your adjustment was 2.8% without taxes. Taxes play an important part in figuring your breakeven.

In your 1990 example, you make $8 as a coupon payment in interest for that year at what appears to be an 8% interest rate. Inflation in that year was 5.4%.

Depending on your ordinary income capital gains bracket/investment you may be taxed on this payment anywhere from 10% to 37%.

That's between $0.80-$2.96 of that $8 in tax.

The real profit/gain after inflation losses was $2.60, absent taxes, but you have to account for your real investment which includes taxes. You are taxed on $8, not that $2.6.

We'll assume its the upper tax rate, which taxes amount to 2.96. $2.60-2.96=-0.36, it is negative so you lost purchasing power on your principal for that year but still made a real return of $5.04 in that years dollars.

Lets look at the next year (its a 10 year bond after all). You get 8%, inflation is at 4.8%, real is $0.30 after subtracting out the tax. You still haven't broken even in purchasing power from the previous year, and if you do the autosum each year you end up making an ever so slight profit because stars align, and only because you caught the top of the bond market.

Over the years rates dropped to 6% down to, 4% in 2001 which enters our low rate era.

Now the general consensus at the time in the 90s was it was a great time to buy bonds, but that was only because the stock market during that time on average lost 6% per annum (iirc), and gold was down too. Nearly everyone was losing some money in purchasing power.

Lets say you reup that bond, $100 in 2001, rates are at 4%, You invest 100 you get 140 at the end, $4 coupon payments per year. Inflation is at 2.8%.

Real gain for that year is $1.20, but you are taxed on $4, which is $1.48 in tax (@37%). Your net profit after taxes: -0.28 in purchasing power.

This gets worse later on when rates go negative as a result of inflation (2011, and 2020), you pay people at a loss for the privilege of loaning them money.

In the long-run you barely break even, maybe, and that bond bubble still hasn't popped yet.

Now these are pretty good estimates considering you don't need to know lot of financial math so long as you handle the calculations properly at the right time, there is some error but not much.

The exact gain amounts also greatly depend on how accurate that CPI calculation is and in most recent years its almost borderline fabrication to the point of uselessness. Shadowstats produces reports on CPI utilizing the older more accurate methods, and those reports show much worse losses which agree with subjective observations I've seen during that time.

The point of note is, percentages depend upon the basis they indirectly reference, you can't perform operations on them out of order and expect to get a accurate answer.

> The annualized return of IEF ETF ...

The annualized returns of bond ETFs cannot be relied upon because they all utilize shennanigans such as the yield to maturity loophole, and they do not mark to market the actual value of assets held in the ETF even when they expire.

There is also synthetic share manipulations on the options chains for those at times where the valuation and share price become entirely divorced from reality, also you don't get coupon payments on ETFs.

This is why, if you happened to be paying attention to the interest trends and purchased long-term inversely correlated contracts on a bond ETF like say... TLT ... well ahead of the FED announcing their intent to raise interest rates dramatically, you would have been significantly burned when the price didn't drop appropriately for the assets held in trust when they did actually raise interest rates.

Take a look for yourself, the TLT fund was ~99% 1.8 10YR treasuries trading at 120, FED raised rates in 2022. The value loss on the assets of the ETF put the ETF book value on a par ~$67/share in 2022 instead it remained between 120-110.

There are a lot of older people whose financial advisor told them to invest in bonds, and that market was teetering on the edge ever since 2020, and is now being backstopped through currency devaluation through blackrock/Fed partnership. This only creates more inflation, on top of the petrodollar/geopolitic adverse consequences.

[kgwgk]

> You seem to be nitpicking on semantics for no real reason.

I guess I didn't interpret your statement about "several decades of almost zero low-interest rates" between 1990 and 2020 loosely enough.

> You also seem to have messed up your math

Your only issue seems to be with taxes and I explicitly mentioned that I didn't consider them, just like I didn't consider reinvestment until the end of the ten years period and I used rounded down yields and rounded up inflation numbers.

You say taxes can be anywhere from 10% to 37% - but choose to apply 37% to show the "error".

Let's consider taxes. 40% if you want, why not.

You buy in January 1990 a 10-year bond with a 8.36% coupon trading at par for $1k [for simplicity I use the monthly averages from https://home.treasury.gov/system/files/226/tnc_qh_pars_1.xls]. You get $83.6 per year, after taxes at 40% you keep $50.2. Let's say you put them in a box because you are too lazy to reinvest them. You will get then the $1000 back for a total of $1502.

$1000 in January 1990 are $1325 in January 2000.

$1502 are more than $1325. (And that's with high taxes and without reinvestment.)

--

For 2000-2010 (6.88%) you have $1000 + 10 $68.8 (100%-40%) = $1413.

$1000 in January 2000 are $1284 in January 2010.

$1413 are more than $1284. (And that's with high taxes and without reinvestment.)

--

For 2010-2020 (3.87%) you have $1000 + 10 $38.7 (100%-40%) = $1232.

$1000 in January 2010 are $1190 in January 2020.

$1232 are more than $1190. (And that's with high taxes and without reinvestment.)

--

It seems that you agree that over the three decades being discussed bonds did better than inflation (even after taxes) so I'm not sure why do you think I messed something up or what were you trying to explain to me.

> You still haven't broken even in purchasing power from the previous year

You're ignoring that the bond has appreciated from the previous year keeping purchasing power intact.

[kgwgk]

> The annualized returns of bond ETFs cannot be relied upon because

The annualized returns are calculated from the prices you pay when you buy and the price you get when you sell. Whatever you think they do seems irrelevant. The fact is that you put $100 in 2002 and you get $250 in 2020 (if you reinvest the money they give you every month - if you spend it you will have only $140 left but that doesn't seem the right way to calculate things).

> also you don't get coupon payments on ETFs.

You get distributions. You know that, right?

> Take a look for yourself, the TLT fund was ~99% 1.8 10YR treasuries

That would be remarkable for an ETF that "seeks to track the investment results of an index composed of U.S. Treasury bonds with remaining maturities greater than twenty years." Where do you suggest that I look?

The price of the TLT share has dropped more than 50% from July 2020 to October 2023. Imagine if they had not been manipulating the price! (In total returns terms it's slightly better but not that much: a 48% drawdown.)

[NoboruWataya]

I believe the first broadly diversified ETF didn't come about until a few years later, so realistically there wasn't an easy way for a retail investor to invest 5k in "the market" back then.

(EDIT: Not true, see below.)

[sokoloff]

Vanguard launched an S&P 500 fund for retail investors in 1976.

[NoboruWataya]

I stand corrected! I was just thinking about SPY and its ilk.

[taeric]

Well, your "5k" figure is still probably accurate. They had much larger minimums at launch.

[sokoloff]

I graduated in 1993 and going back through my old Quickbooks file, my 1993 IRA contribution went to a broad-based fund at Twentieth Century (now American Century). It was a half-year of working and all I could scrape together was $2000 and they accepted it to invest. I suspect making a mutual fund investment for $5000 (over $10,000 today) would have been possible three years prior.

[taeric]

Amusingly, for 1993, looks like you maxed out what you could even do in an IRA?

Searching for "Vanguard S&P mutual fund minimum 1993" shows that many had a minimum of 3000? I'm guessing that is the same general search you were doing?

I'm torn, as I want to think this isn't wrong. However, I also remember you could buy a car for 10k EASY in the early nineties. Was a pretty decent sum to make in a year. Especially if it was on top of all other expenses. I'd also hazard that for many, getting a car to commute to a job would have probably been a better investment. (Of course... this is only true if you use the car for the added productivity.)

[fasthands9]

That's very fair. Index funds are conventional wisdom now, but I do suspect there was a long time where they were undervalued because fees were high. Now, everyone is encouraged to invest in them and do think the conventional wisdom in 30 years could possibly swing back to real estate or something like "index funds of tech"

[kgwgk]

> Index funds [...] fees were high

According to https://corporate.vanguard.com/content/corporatesite/us/en/c... they were 0.35% in 1990. Higher than now, but hardly "high".

Of course there are other fees involved and everything was more complex and more expensive.

[nosianu]

> but when I did the math to see how much more it would have been

I have a suggestion for all the many similar problems around probability: Reframe it to be more correct.

Instead of looking against the arrow of time, backwards with full knowledge ask yourself the corresponding question looking forward, from where you are right now.

And then remember that that was the position you were in back then.

Questions that deal directly or indirectly with probabilities become confusing, and frankly stupid, when you violate the arrow of time and make "backward predictions". One should just not ask that question, not even for fun. They not only make no sense, our psyche suffers when we try, even if just a little.

This is part of another kind of problems: Asking why a given answer is wrong, for example in multiple choice questions. One of the best courses I took was an audio cassette pilot license theory course. One thing the speaker said about the multiple choice part of the exam was this. DO NOT (with a lot of emphasis and repetition in the audio) try to dwell on why a point is wrong. Concentrate on the true statements alone. Reason was similar to why raising the question why person XYS is NOT a pedophile still creates the association in the brains of people exposed to statements like that repeatedly. Apart from that, the number of potential wrong statements exceeds the valid ones by many orders of magnitude.

Similarly, just do not think about problems that deal with probabilities and predictions looking backward. It's just not a valid way to think about them. If you must, reformulate to make them forward-looking.

The problem of words and thoughts is the universe checks their validity only very rarely directly and immediately. If we don't restrain ourselves, our thoughts end up not representing reality more and more. Thinking requires quite a bit of self-discipline, we have to place the missing rails ourselves.

[trod1234]

This isn't useful or correct, and ends up being a bit circular getting into the weeds.

The focus should be that the normal math formula for bond valuation doesn't account for yearly real or projected inflation.

Almost everyone I have met doesn't know how to modify the standard formula correctly unless they've already done it at some point in the past. Its not a trivial exercise.

You have to understand the formulas well enough to modify them to account for the loss in purchasing power that compounds yearly, as a difference between the interest rate and real inflation over the bond terms.

Most years, inflation has been well above that 2% margin dramatically impacting the rate of return or real yield.

[nosianu]

> This isn't useful or correct

The formulas do not help you at all with the knowing. or not knowing, with being able to "predict" the past vs. being able to predict the future! They make assumptions.

I would make the claim my statement is useful for what I said, which was for somebody looking back at a decision of the long ago past with hindsight knowledge.

The post was not about somebody evaluating different investments either.

Oh and thanks, I guess, for completely disregarding that my comment was much more generalized? You threw away the vast majority of it.

[trod1234]

The vast majority of your argument's volume was promoting an incorrect way of thinking comparing two unrelated things, for a question not asked or really that useful.

You can't determine logical truth in a stochastic environment except after the fact when there is objective measure; and importantly there is no personal harm in doing this either, which is a direct contradiction to what you said.

You then went way out into the weeds when you started talking about pedophiles, and truth.

Any reasonable reader would throw away the vast majority of what you had to say as useless, or worse unstable.

The underlying concepts you mention indirectly, while correct in a narrow context in psychology, bad choice of example aside, also don't have anything to do with what's being said here in this topic.

[nosianu]

> The vast majority of your argument's volume was promoting an incorrect way of thinking comparing two unrelated things

Funny, that is exactly what I saw when I read your "arguments".

> Any reasonable reader would throw away the vast majority of what you had to say as useless

You are talking about your own baseless attacks. You don't even try to argue, you replace coming up with arguments completely with going on the attack with otherwise content-free words, just accusations and insults.