Are we entering an era of diminishing returns ?
Are we entering an era of diminishing returns ?
Are we headed to an era in which stock market will offer meager returns for decades? With no major downturns and exponential inflation
Obviously no one has a crystal ball but let’s share opinions and why you think that way
Thanks
Obviously no one has a crystal ball but let’s share opinions and why you think that way
Thanks
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Re: Are we entering an era of diminishing returns ?
I don't have any strong belief in any future predictions, but my expectations are such that I wouldn't be surprised by lower returns for the coming decade.
But *decades* (plural)? As you said no one has a crystal ball, and the further out you look the hazier it gets, so I wouldn't presume to project any expectations beyond that.
But *decades* (plural)? As you said no one has a crystal ball, and the further out you look the hazier it gets, so I wouldn't presume to project any expectations beyond that.
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Re: Are we entering an era of diminishing returns ?
What is “exponential inflation”?
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Re: Are we entering an era of diminishing returns ?
No, no, no, and no.
Re: Are we entering an era of diminishing returns ?
Maybe, then again we were supposed to enter this era in 2018 and we have what, almost doubled our money in that time? And also bond interest rates couldn't go lower then they did.
I am sticking with my prediction that the 2020's will give us another 100%, I call SP500 at least 6,500 by 2030.
I am sticking with my prediction that the 2020's will give us another 100%, I call SP500 at least 6,500 by 2030.
Last edited by z3r0c00l on Fri Jul 09, 2021 5:05 pm, edited 2 times in total.
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Re: Are we entering an era of diminishing returns ?
Yes.
No.
Maybe.
Opinions are worth nothing.
No.
Maybe.
Opinions are worth nothing.
Avid user of forums on variety of interests-financial, home brewing, F-150, EV, home repair, etc. Enjoy learning & passing on knowledge. It's PRINCIPAL, not PRINCIPLE. I ADVISE you to seek ADVICE.
Re: Are we entering an era of diminishing returns ?
It's tough to make predictions, especially about the future.
Dave
Dave
"Reality always wins, your only job is to get in touch with it." Wilfred Bion
Re: Are we entering an era of diminishing returns ?
Shiller got a Nobel prize (actually the Swedish Riksbank prize in memory of Alfred Nobel) predicting decades of low return and has been doing so for. well, decades.
John Hussman similarly. And Jeremy Grantham pops up regularly forecasting that long overdue catastrophe he seems to relish.
Therefore that question elicits John Bogle's famous response.
I just stay in the market.
John Hussman similarly. And Jeremy Grantham pops up regularly forecasting that long overdue catastrophe he seems to relish.
Therefore that question elicits John Bogle's famous response.
I just stay in the market.
Better lucky than smart.
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Re: Are we entering an era of diminishing returns ?
They said we were 10 years ago. Lol. Best ten years of my investing career.
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Re: Are we entering an era of diminishing returns ?
For eleven years, at the beginning of each year Larry Swedroe published a list of the "sure things," the things that just about everyone agreed were sure to happen over the next year, and kept score. Overall, in eleven years, about a third of them happened, a third of them didn't happen, and a third couldn't be scored.
In April of 2014, Bloomberg polled 68 economists on what would happen to the 10-year Treasury yield over the next six months. 68 out of 68 said it would rise. It fell.
Impressions that "it must be true because everybody is saying so" are unreliable for several reasons. First, as the Bloomberg example shows, "everybody" can be wrong. Second, because of groupthink "everybody" may be just be echoing each other, rather than coming to independent conclusions, so near-unanimity shouldn't raise our level of trust too much. Third, the apparent "near-unanimity" is usually illusory--you can usually find plenty of experts expressing contrary opinions.
There is a good deal of talk about muted expectations going forward, and John C. Bogle was one of the people saying so. What to do about it? Maybe scale back expectations just on the basis that
In planning, think "Over the next ten years, U.S. large-caps might well average anywhere anything from a -2% annual loss to a +12% annual gain." That is the problem and always the problem, not the value of the center point. Notice that the historical average for the stock market, about 10%, is within the range of Vanguard's forecast, so Vanguard is forecasting that it is literally within the range of possibilities for next ten years could have the same return as the historic average.
In April of 2014, Bloomberg polled 68 economists on what would happen to the 10-year Treasury yield over the next six months. 68 out of 68 said it would rise. It fell.
Impressions that "it must be true because everybody is saying so" are unreliable for several reasons. First, as the Bloomberg example shows, "everybody" can be wrong. Second, because of groupthink "everybody" may be just be echoing each other, rather than coming to independent conclusions, so near-unanimity shouldn't raise our level of trust too much. Third, the apparent "near-unanimity" is usually illusory--you can usually find plenty of experts expressing contrary opinions.
There is a good deal of talk about muted expectations going forward, and John C. Bogle was one of the people saying so. What to do about it? Maybe scale back expectations just on the basis that
Beyond that, ignore predictions that don't include a range and pay attention to the range. In a recent Vanguard forecast, I think the ranges are more interesting than the center values:In 'A Shropshire Lad,' A. E. Housman wrote:Therefore, since the world has still
Much good, but much less good than ill,
And while the sun and moon endure
Luck's a chance, but trouble's sure,
I'd face it as a wise man would,
And train for ill and not for good.
In planning, think "Over the next ten years, U.S. large-caps might well average anywhere anything from a -2% annual loss to a +12% annual gain." That is the problem and always the problem, not the value of the center point. Notice that the historical average for the stock market, about 10%, is within the range of Vanguard's forecast, so Vanguard is forecasting that it is literally within the range of possibilities for next ten years could have the same return as the historic average.
Last edited by nisiprius on Fri Jul 09, 2021 8:05 pm, edited 1 time in total.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.
Re: Are we entering an era of diminishing returns ?
I don't know and I don't care.
For better or worse, my 60/40 portfolio return will not be the same as the market return. And, my portfolio is big enough and I would do fine with a meager return if it is true,
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Re: Are we entering an era of diminishing returns ?
So let’s go with the assumption the next 10 years we’re gonna have minimal returns on the market what should be the investing strategy you would adopt?
Just thinking out loud here I totally understand this is not a substitute for financial advice
Just thinking out loud here I totally understand this is not a substitute for financial advice
Re: Are we entering an era of diminishing returns ?
Destiple,
Why do you think that we need a new investing strategy?
I have a very simple answer. I saved 1 year of expense every year. I can be FI in less than 20 years with near 0% real return. I never have a problem. It is a saving rate problem. It is not a return rate problem.
This is not the answer that most people like to hear. They hope that the return rate can solve their saving rate problem. But, the market return is always unpredictable.
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Re: Are we entering an era of diminishing returns ?
I care. But I really don’t know.
As far as what I should do, if I think this is going to happen? Keep working, saving, maintain a sensible asset allocation. Pretty much the same as I would do if I think this isn’t going to happen. Which is good, because none of us knows.
Re: Are we entering an era of diminishing returns ?
Why no?
Logically and mathematically, returns are smaller after the market cap gets so large
This is why small caps have outperformed
But also after a good run with expensive stocks, returns have always been lower. There is proof of this and it makes sense
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Re: Are we entering an era of diminishing returns ?
My only ask is for returns in the next 10 years to be on par with the returns that we've seen in the last 10 years. If that happens, I'll retire before turning 50.
I hope that's not too much to ask for.
I hope that's not too much to ask for.
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Re: Are we entering an era of diminishing returns ?
I think yes, we are entering a period of diminishing returns.
John Bogle: "It's amazing how difficult it is for a man to understand something if he's paid a small fortune not to understand it."
Re: Are we entering an era of diminishing returns ?
Since I'm early in my accumulation stage, a decade of low returns followed by another bull run would be awesome. One can only hope.
- quantAndHold
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Re: Are we entering an era of diminishing returns ?
I turned 45 in 2008. Best thing that ever happened to me. I retired at 53. A big chunk of what I retired on was because I doubled down on my 401k and IRA starting in 2008.
Re: Are we entering an era of diminishing returns ?
Depends on how close you are to retirement. I'm 32 so pretty far still.
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Re: Are we entering an era of diminishing returns ?
Economic growth is already being dampened by climate change, and that party is just getting started (https://en.wikipedia.org/wiki/Economic_ ... ate_change).
Whether or not this will outweigh countervailing forces is anybody's guess.
Invest we must.
Whether or not this will outweigh countervailing forces is anybody's guess.
Invest we must.
Re: Are we entering an era of diminishing returns ?
No.
No.With no major downturns and exponential inflation
Reply hazy. Try again later.Obviously no one has a crystal ball but let’s share opinions and why you think that way
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Re: Are we entering an era of diminishing returns ?
The day of this post... the S&P 500 went up a fantastic 1.13%.
So.... this prediction starts... next Monday!
So.... this prediction starts... next Monday!
Re: Are we entering an era of diminishing returns ?
I think humans are on the doorstep of great expansion, Blue Origin and Virgin Galactic both have significant launches coming up.
The question is when does that really drive the stock market. My hope is it’s in decades and not centuries.
The question is when does that really drive the stock market. My hope is it’s in decades and not centuries.
Re: Are we entering an era of diminishing returns ?
My view is that we are entering an era of increased returns but those returns are unlikely to keep up with real inflation (not the CPI but inflation everyone is experiencing) after accounting for taxes.
Re: Are we entering an era of diminishing returns ?
I've seen several stories talking about deflation a more likely scenario than high inflation. Much will depend on the situation with the virus. Many countries are still struggling with that and that is causing some supply issues leading to price spikes due to shortages that won't last (such as computer chips).
Even with something like lumber that went from $350 per thousand board feet to 1750 and now back to 700, that was the price of finished lumber and the price of raw lumber hasn't really moved.
https://www.npr.org/2021/07/08/10138197 ... ic-economy
The labor shortage is mostly a short term issue as well.
I do think over the next decade real returns could be quite low, maybe 1% which hurts short timers but hopefully over 20+ years things will be better.
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Re: Are we entering an era of diminishing returns ?
But have small caps outperformed?
Source
The DFA US Micro Cap Portfolio (blue) is one of the oldest and most admired small-cap funds. Since inception it has, in fact, underperformed the Vanguard 500 index Fund (red).
And it underperformed despite taking on a quite noticeably higher level of risk, which shows up here both as higher standard deviation (almost a third higher, 20.01% versus 15.06%), and as deeper drawdown. Once you allow for risk, the small-cap fund had much lower risk-adjusted return, as shown by the Sharpe and Sortino ratios.
Last edited by nisiprius on Fri Jul 09, 2021 8:19 pm, edited 1 time in total.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.
Re: Are we entering an era of diminishing returns ?
I wish I knew if you are right. I wouldn’t even go back to work tomorrow.z3r0c00l wrote: ↑Fri Jul 09, 2021 5:02 pm Maybe, then again we were supposed to enter this era in 2018 and we have what, almost doubled our money in that time? And also bond interest rates couldn't go lower then they did.
I am sticking with my prediction that the 2020's will give us another 100%, I call SP500 at least 6,500 by 2030.
Re: Are we entering an era of diminishing returns ?
How many of those story tellers have a record, say over the last 10-12 years, of making accurate calls?
This is the first time in history where all central banks are trying to inflate together. Do you really think it's wise to fight them?
Re: Are we entering an era of diminishing returns ?
What if it goes up 100% but your cost of living goes up 150% during that time?Vtsax100 wrote: ↑Fri Jul 09, 2021 8:18 pmI wish I knew if you are right. I wouldn’t even go back to work tomorrow.z3r0c00l wrote: ↑Fri Jul 09, 2021 5:02 pm Maybe, then again we were supposed to enter this era in 2018 and we have what, almost doubled our money in that time? And also bond interest rates couldn't go lower then they did.
I am sticking with my prediction that the 2020's will give us another 100%, I call SP500 at least 6,500 by 2030.
Re: Are we entering an era of diminishing returns ?
A) Why should you care if your saving rate is high enough?
B) If you care, you should save more and spend less.
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Re: Are we entering an era of diminishing returns ?
anoop wrote: ↑Fri Jul 09, 2021 8:19 pmWhat if it goes up 100% but your cost of living goes up 150% during that time?Vtsax100 wrote: ↑Fri Jul 09, 2021 8:18 pmI wish I knew if you are right. I wouldn’t even go back to work tomorrow.z3r0c00l wrote: ↑Fri Jul 09, 2021 5:02 pm Maybe, then again we were supposed to enter this era in 2018 and we have what, almost doubled our money in that time? And also bond interest rates couldn't go lower then they did.
I am sticking with my prediction that the 2020's will give us another 100%, I call SP500 at least 6,500 by 2030.
Thats unlikely enough to be out of the realm of things I consider.
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Re: Are we entering an era of diminishing returns ?
Increase your savings rate, lower your expenses and expectations. It is as simple as that. My plan does not count on any particular prediction of return.
“You only find out who is swimming naked when the tide goes out.“ — Warren Buffett
Re: Are we entering an era of diminishing returns ?
Probably. Long term rates are very low, implying low growth. They have also pushed up stock prices relative to earnings, so you shouldn't expect too much stock price appreciation. But it is what it is. I don't see any way to avoid it. Hopefully we'll have strong growth and grow out of the issue relatively quickly, but I'm not counting on it.
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Re: Are we entering an era of diminishing returns ?
2% a year.
That works out to be an exponential function y = 1.02^x.
Re: Are we entering an era of diminishing returns ?
No. I expect the historic returns of the total market... 10%+ nominal.
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Re: Are we entering an era of diminishing returns ?
Let’s say that S&P 500 at 10000 in 10 years or roughly a 9% year over year.
The current Market cap is 36.32T. That’s at a PE ratio of around 30. You can calculate the estimated Market Cap at 10000….
So the question becomes: do you really want to get to 10000? At the end of the day it is all a zero sum game with a small premium given for the risk you take. You gain in stock appreciation, you lose in purchasing power. These past 10 years, with the last supercharged year have been a a glitch in the Matrix.
The only way I see that earnings justify the 10000 valuation would be via inflation. You may still get a real positive return, and you will definitely outperform owning debt or cash if this becomes the case. But again, do we really want to get there?
interesting years ahead. Buckle up.
Interesting data:
http://pages.stern.nyu.edu/~adamodar/Ne ... spearn.htm
Year Earnings Yield Dividend Yield S&P 500 Earnings Dividends Payout Ratio
1960 5.34% 3.41% 58.11 3.10 1.98 63.86%
1961 4.71% 2.85% 71.55 3.37 2.04 60.51%
1962 5.81% 3.40% 63.1 3.67 2.15 58.52%
1963 5.51% 3.13% 75.02 4.13 2.35 56.81%
1964 5.62% 3.05% 84.75 4.76 2.58 54.27%
1965 5.73% 3.06% 92.43 5.30 2.83 53.40%
1966 6.74% 3.59% 80.33 5.41 2.88 53.26%
1967 5.66% 3.09% 96.47 5.46 2.98 54.59%
1968 5.51% 2.93% 103.86 5.72 3.04 53.18%
1969 6.63% 3.52% 92.06 6.10 3.24 53.09%
1970 5.98% 3.46% 92.15 5.51 3.19 57.86%
1971 5.46% 3.10% 102.09 5.57 3.16 56.78%
1972 5.23% 2.70% 118.05 6.17 3.19 51.63%
1973 8.16% 3.70% 97.55 7.96 3.61 45.34%
1974 13.64% 5.43% 68.56 9.35 3.72 39.81%
1975 8.55% 4.14% 90.19 7.71 3.73 48.42%
1976 9.07% 3.93% 107.46 9.75 4.22 43.33%
1977 11.43% 5.11% 95.1 10.87 4.86 44.71%
1978 12.11% 5.39% 96.11 11.64 5.18 44.51%
1979 13.48% 5.53% 107.94 14.55 5.97 41.02%
1980 11.04% 4.74% 135.76 14.99 6.44 42.93%
1981 12.39% 5.57% 122.55 15.18 6.83 44.96%
1982 9.83% 4.93% 140.64 13.82 6.93 50.15%
1983 8.06% 4.32% 164.93 13.29 7.12 53.60%
1984 10.07% 4.68% 167.24 16.84 7.83 46.47%
1985 7.42% 3.88% 211.28 15.68 8.20 52.29%
1986 5.96% 3.38% 242.17 14.43 8.19 56.71%
1987 6.49% 3.71% 247.08 16.04 9.17 57.16%
1988 8.69% 3.68% 277.72 24.12 9.75 40.42%
1989 6.88% 3.32% 353.4 24.32 11.06 45.48%
1990 6.86% 3.74% 330.22 22.65 12.09 53.38%
1991 4.63% 3.11% 417.09 19.30 12.20 63.21%
1992 4.79% 2.90% 435.71 20.87 12.39 59.37%
1993 5.77% 2.72% 466.45 26.90 12.58 46.77%
1994 6.91% 2.91% 459.27 31.75 13.17 41.48%
1995 6.12% 2.30% 615.93 37.70 13.79 36.58%
1996 5.49% 2.01% 740.74 40.63 14.90 36.67%
1997 4.54% 1.60% 970.43 44.09 15.50 35.16%
1998 3.60% 1.32% 1229.23 44.27 16.20 36.59%
1999 3.52% 1.14% 1469.25 51.68 16.69 32.29%
2000 4.25% 1.23% 1320.28 56.13 16.07 28.63%
2001 3.38% 1.37% 1148.09 38.85 15.74 40.51%
2002 5.23% 1.81% 879.82 46.04 15.96 34.67%
2003 4.92% 1.61% 1111.91 54.69 17.88 32.69%
2004 5.58% 1.57% 1211.92 67.68 19.01 28.09%
2005 6.12% 1.79% 1248.29 76.45 22.34 29.23%
2006 6.18% 1.77% 1418.3 87.72 25.04 28.55%
2007 5.62% 1.92% 1468.36 82.54 28.14 34.09%
2008 5.48% 3.15% 903.25 49.51 28.45 57.46%
2009 5.10% 1.97% 1115.1 56.86 21.97 38.64%
2010 6.66% 1.80% 1257.64 83.77 22.65 27.04%
2011 7.67% 2.11% 1257.60 96.44 26.53 27.51%
2012 6.79% 2.19% 1426.19 96.82 31.25 32.28%
2013 5.68% 1.89% 1848.36 104.92 34.90 33.26%
2014 5.64% 1.92% 2058.90 116.16 39.55 34.04%
2015 4.92% 2.12% 2043.94 100.48 43.41 43.20%
2016 4.75% 2.04% 2238.83 106.26 45.70 43.01%
2017 4.66% 1.83% 2673.61 124.51 48.93 39.30%
2018 5.92% 2.14% 2506.85 148.34 53.61 36.14%
2019 5.03% 1.82% 3230.78 162.35 58.80 36.22%
2020 3.68% 1.51% 3756.07 138.12 56.70 41.05%
The current Market cap is 36.32T. That’s at a PE ratio of around 30. You can calculate the estimated Market Cap at 10000….
So the question becomes: do you really want to get to 10000? At the end of the day it is all a zero sum game with a small premium given for the risk you take. You gain in stock appreciation, you lose in purchasing power. These past 10 years, with the last supercharged year have been a a glitch in the Matrix.
The only way I see that earnings justify the 10000 valuation would be via inflation. You may still get a real positive return, and you will definitely outperform owning debt or cash if this becomes the case. But again, do we really want to get there?
interesting years ahead. Buckle up.
Interesting data:
http://pages.stern.nyu.edu/~adamodar/Ne ... spearn.htm
Year Earnings Yield Dividend Yield S&P 500 Earnings Dividends Payout Ratio
1960 5.34% 3.41% 58.11 3.10 1.98 63.86%
1961 4.71% 2.85% 71.55 3.37 2.04 60.51%
1962 5.81% 3.40% 63.1 3.67 2.15 58.52%
1963 5.51% 3.13% 75.02 4.13 2.35 56.81%
1964 5.62% 3.05% 84.75 4.76 2.58 54.27%
1965 5.73% 3.06% 92.43 5.30 2.83 53.40%
1966 6.74% 3.59% 80.33 5.41 2.88 53.26%
1967 5.66% 3.09% 96.47 5.46 2.98 54.59%
1968 5.51% 2.93% 103.86 5.72 3.04 53.18%
1969 6.63% 3.52% 92.06 6.10 3.24 53.09%
1970 5.98% 3.46% 92.15 5.51 3.19 57.86%
1971 5.46% 3.10% 102.09 5.57 3.16 56.78%
1972 5.23% 2.70% 118.05 6.17 3.19 51.63%
1973 8.16% 3.70% 97.55 7.96 3.61 45.34%
1974 13.64% 5.43% 68.56 9.35 3.72 39.81%
1975 8.55% 4.14% 90.19 7.71 3.73 48.42%
1976 9.07% 3.93% 107.46 9.75 4.22 43.33%
1977 11.43% 5.11% 95.1 10.87 4.86 44.71%
1978 12.11% 5.39% 96.11 11.64 5.18 44.51%
1979 13.48% 5.53% 107.94 14.55 5.97 41.02%
1980 11.04% 4.74% 135.76 14.99 6.44 42.93%
1981 12.39% 5.57% 122.55 15.18 6.83 44.96%
1982 9.83% 4.93% 140.64 13.82 6.93 50.15%
1983 8.06% 4.32% 164.93 13.29 7.12 53.60%
1984 10.07% 4.68% 167.24 16.84 7.83 46.47%
1985 7.42% 3.88% 211.28 15.68 8.20 52.29%
1986 5.96% 3.38% 242.17 14.43 8.19 56.71%
1987 6.49% 3.71% 247.08 16.04 9.17 57.16%
1988 8.69% 3.68% 277.72 24.12 9.75 40.42%
1989 6.88% 3.32% 353.4 24.32 11.06 45.48%
1990 6.86% 3.74% 330.22 22.65 12.09 53.38%
1991 4.63% 3.11% 417.09 19.30 12.20 63.21%
1992 4.79% 2.90% 435.71 20.87 12.39 59.37%
1993 5.77% 2.72% 466.45 26.90 12.58 46.77%
1994 6.91% 2.91% 459.27 31.75 13.17 41.48%
1995 6.12% 2.30% 615.93 37.70 13.79 36.58%
1996 5.49% 2.01% 740.74 40.63 14.90 36.67%
1997 4.54% 1.60% 970.43 44.09 15.50 35.16%
1998 3.60% 1.32% 1229.23 44.27 16.20 36.59%
1999 3.52% 1.14% 1469.25 51.68 16.69 32.29%
2000 4.25% 1.23% 1320.28 56.13 16.07 28.63%
2001 3.38% 1.37% 1148.09 38.85 15.74 40.51%
2002 5.23% 1.81% 879.82 46.04 15.96 34.67%
2003 4.92% 1.61% 1111.91 54.69 17.88 32.69%
2004 5.58% 1.57% 1211.92 67.68 19.01 28.09%
2005 6.12% 1.79% 1248.29 76.45 22.34 29.23%
2006 6.18% 1.77% 1418.3 87.72 25.04 28.55%
2007 5.62% 1.92% 1468.36 82.54 28.14 34.09%
2008 5.48% 3.15% 903.25 49.51 28.45 57.46%
2009 5.10% 1.97% 1115.1 56.86 21.97 38.64%
2010 6.66% 1.80% 1257.64 83.77 22.65 27.04%
2011 7.67% 2.11% 1257.60 96.44 26.53 27.51%
2012 6.79% 2.19% 1426.19 96.82 31.25 32.28%
2013 5.68% 1.89% 1848.36 104.92 34.90 33.26%
2014 5.64% 1.92% 2058.90 116.16 39.55 34.04%
2015 4.92% 2.12% 2043.94 100.48 43.41 43.20%
2016 4.75% 2.04% 2238.83 106.26 45.70 43.01%
2017 4.66% 1.83% 2673.61 124.51 48.93 39.30%
2018 5.92% 2.14% 2506.85 148.34 53.61 36.14%
2019 5.03% 1.82% 3230.78 162.35 58.80 36.22%
2020 3.68% 1.51% 3756.07 138.12 56.70 41.05%
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Re: Are we entering an era of diminishing returns ?
I only think we are entering an era of diminished returns if you are highly concentrated in certain regions (US) or assets with guaranteed low expected returns (Bonds).
But looking around at other asset classes, they seem reasonably valued for historical performance.
But looking around at other asset classes, they seem reasonably valued for historical performance.
20% VOO | 20% VXUS | 20% AVUV | 20% AVDV | 20% AVES
Re: Are we entering an era of diminishing returns ?
For instance what assets please elaborateNathan Drake wrote: ↑Fri Jul 09, 2021 10:10 pm I only think we are entering an era of diminished returns if you are highly concentrated in certain regions (US) or assets with guaranteed low expected returns (Bonds).
But looking around at other asset classes, they seem reasonably valued for historical performance.
Re: Are we entering an era of diminishing returns ?
Like your approach
How much % of your net pay can you realistically save
Esp let’s say you have a wife and kid
My goal is 50% for next 10 yrs
Re: Are we entering an era of diminishing returns ?
Are you close to retirement or accumulating?
I was accumulating during 2000-2010... And I was mostly in stock, even though stocks ended up not doing that well during those 10 years...
All that money I accumulated went up like 5x from 2010-2021.
So it totally paid off.
"The best tools available to us are shovels, not scalpels. Don't get carried away." - vanBogle59
Re: Are we entering an era of diminishing returns ?
I think volatility will continue to be volatile and large draw downs will continue occur randomly. I think returns will continue to be high for random periods of time and returns will continue to be low for other random periods of time.
Re: Are we entering an era of diminishing returns ?
I would invest in waffle futures to help make up for diminishing returns.
https://youtu.be/fm2mlT7q7mY
https://youtu.be/fm2mlT7q7mY
May all your index funds gain +0.5% today.
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Re: Are we entering an era of diminishing returns ?
P/Es for exUS, EM, and SCV are all attractively valued and trading at roughly historical norms despite lower interest rates of today. You can't say the same for US TSM.Destiple wrote: ↑Fri Jul 09, 2021 10:47 pmFor instance what assets please elaborateNathan Drake wrote: ↑Fri Jul 09, 2021 10:10 pm I only think we are entering an era of diminished returns if you are highly concentrated in certain regions (US) or assets with guaranteed low expected returns (Bonds).
But looking around at other asset classes, they seem reasonably valued for historical performance.
20% VOO | 20% VXUS | 20% AVUV | 20% AVDV | 20% AVES
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Re: Are we entering an era of diminishing returns ?
If you believe in mean reversion AND we will not have an amazing productivity spike then yes, we are due for a period of meager returns at some point. Who knows when that will be. Could be crash, could be a gradual slide.
Re: Are we entering an era of diminishing returns ?
"Logically and mathematically, returns are smaller after the market cap gets so large"nisiprius wrote: ↑Fri Jul 09, 2021 8:17 pmBut have small caps outperformed?
Source
The DFA US Micro Cap Portfolio (blue) is one of the oldest and most admired small-cap funds. Since inception it has, in fact, underperformed the Vanguard 500 index Fund (red).
And it underperformed despite taking on a quite noticeably higher level of risk, which shows up here both as higher standard deviation (almost a third higher, 20.01% versus 15.06%), and as deeper drawdown. Once you allow for risk, the small-cap fund had much lower risk-adjusted return, as shown by the Sharpe and Sortino ratios.
I would question this statement in light of market performance of the last 10-20 years. Amazon was still a huge company when it had 50% of its current market value. The same can be said for AAPL, MSFT, and so on. Just like asking when the stock market is "too high", we will have to ask when these companies can be considered to be "too large". In fact, rather than impeding growth, scale has allowed these companies to seed product lines that are long-term profitable, and to strategically scale new businesses to great effect. Perhaps there is a point where antitrust regulations will become a limiting factor, but market performance has not been affected so far.
It is interesting how the chart above suggests that small cap investors have not been adequately compensated for risk, relative to large cap investors. I wonder what could be the reason for this seeming inefficiency. Is this just a random result from relatively recent history, or perhaps something related to changing technology, which has allowed larger enterprises to capture larger value over time, and that continues to occur at a pace that is generally underestimated by stock prices.
Last edited by hi_there on Fri Jul 09, 2021 11:16 pm, edited 1 time in total.
Re: Are we entering an era of diminishing returns ?
This is incorrect.Stormfloatter wrote: ↑Fri Jul 09, 2021 9:03 pmAt the end of the day it is all a zero sum game with a small premium given for the risk you take.
It's not a zero-sum game. It's not a closed system. A couple billion humans go to work every day and input their work into the system making it more valuable over time.
"The best tools available to us are shovels, not scalpels. Don't get carried away." - vanBogle59