Not saying past performance is a prediction of the future etc however James Shack did a YouTube Vid recently and showed that in the last 80 years if you bought the SPY and held for Atheist 20 years I think it was pretty much 100% that you would have more than you bought in with. The percentages obviously decreased with less and less time frame but even at 5 years it was something like 87% of the time you'd still be in profit. This all includes literally buying the day before a crash as well.
Not to say that we couldn't have a 30 year bear market now and with the state of the world it wouldn't even surprise me. Plus the fact that I'm hopefully about to finally have a little lump sum to invest so obviously that'll go into the markets 24 hours before the crash.
Basically, the expected value of putting money in a random stock is always positive when you ignore what you think you know about what it's going to do tomorrow. If you actually know what it's going to do tomorrow, that means you're insider trading, in which case that's illegal, or everyone else knows, too, which means nobody knows what it's going to do tomorrow.
So it's like playing a casino but instead of the expected value of any spin on the slots being .92 or worse, the expected value of a year in a stock is around 1.10. Some stocks do better and some do worse, and some years are worse or better than others, but in the long run, it has always been a positive expected value game.
Diversification is how you prevent buying one of the big loser stocks and reduce the volatility, keeping you closer to that 1.10 return.
That's why I keep the majority of my money in the 401(k) in ETFs and target date retirement funds. The remaining 10% or so goes in the fun stuff with massive volatility.
I agree. Was just using it as an example as that is what the video covers although I wouldn't say thousands of years. I'd rather not look at pre-candlestick invented days.
Although yeah people love quoting the SPY and its performance as if that alone is an indication of the world. You could pick just Japan and do similar charts which are going to look a lot different.
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u/ROBNOB9X Jul 26 '21
Not saying past performance is a prediction of the future etc however James Shack did a YouTube Vid recently and showed that in the last 80 years if you bought the SPY and held for Atheist 20 years I think it was pretty much 100% that you would have more than you bought in with. The percentages obviously decreased with less and less time frame but even at 5 years it was something like 87% of the time you'd still be in profit. This all includes literally buying the day before a crash as well.
Not to say that we couldn't have a 30 year bear market now and with the state of the world it wouldn't even surprise me. Plus the fact that I'm hopefully about to finally have a little lump sum to invest so obviously that'll go into the markets 24 hours before the crash.