| HN Mirror

That's cherry-picking a single country's stock market with the benefit of hindsight, though. Over the time frame you're talking about, that country became the world's sole superpower and also underwent an unprecedented redistribution of income from workers to investors. Neither of those things can happen again in the US, they aren't very likely to happen anywhere else, and if you had invested at those points in time, you wouldn't have known they were going to happen. If investors had known they were going to happen, they would have bid the price up higher earlier on.

And of course it isn't a risk-free return.

Consider what happened to investors in Germany, Hungary, or Romania in the 01930s, or South Vietnam in the 01960s, or Afghanistan in the 01970s, or Iraq in the 01990s.

You might think this is irrelevant because you don't live in 01930s Germany or 01970s Afghanistan or 01990s Iraq; you live in the USA.

But, if you live in the USA, you don't live in the USA of the 01970s or the 01930s. You live in the USA of 02025. In 02025, the country most like 01930s USA or 01970s USA is China, which is obvious if you read books from the USA from those periods. The USA in 02025 is the country that's been trying and failing to build high-speed rail for 60 years, since Japan got it working, and just elected a xenophobic demagogue who praises dictatorship; it's much more like 01980s Russia or 01930s Italy.

Warren Buffett said that, in the long run, you can't expect the stock market to return more than the long-run economic growth rate, which you can't expect to consistently be more than 3%. I don't understand the logic behind either of these propositions, but I suspect Buffett knows more about market returns than I do.

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By contrast, if you can get an 0.8% discount on the potatoes your family eats by bulk-buying enough potatoes for the next three months, that's about a 10% annual return on investment, and the risk is pretty low—and almost entirely under your control. And, in practice, you can often get a much bigger discount than that, especially if you assign some cost to the errand of going potato shopping. You just have to make sure you have proper potato storage and that you don't have a sudden dropoff in family potato consumption.

How do I figure that ROI? Well, the amount of extra money you have tied up in potatoes oscillates between two months' worth and zero, with an average of one month of potatoes. But your expenditures on potatoes are 0.8% less each month, which is your earnings from that investment. Every year, you save 10% of a month of potatoes: 10% of your investment. Tax-free.

If you learn to calculate ROIs and reorganize your household expenses on the basis of ROIs, whatever income you have will go dramatically further than it would for someone who hasn't done that.