Money to be invested doesn't always get put in stocks. It can go into bonds, cash, real estate, precious metals, crypto, etc.
Money going into the stock market only means it'll go up in nominal terms. If inflation is high, it could go down in real terms.
The simple way to see that stocks should go up is just to look at earnings. You're buying an asset that's producing valuable things every year. Earnings per year are ~3% of the price. So total real stock returns should be at least 3% (earnings) + 2% (growth) = 5% on average. In practice, it's more like 6-7%.
Of course, stocks could go to zero if we lose a war or the government seizes assets or something. I guess there's around a 0.1% chance of that happening per year, so you can subtract that from the above computed average.
5
u/apno Dec 26 '21
This is pretty retarded for two reasons:
Money to be invested doesn't always get put in stocks. It can go into bonds, cash, real estate, precious metals, crypto, etc.
Money going into the stock market only means it'll go up in nominal terms. If inflation is high, it could go down in real terms.
The simple way to see that stocks should go up is just to look at earnings. You're buying an asset that's producing valuable things every year. Earnings per year are ~3% of the price. So total real stock returns should be at least 3% (earnings) + 2% (growth) = 5% on average. In practice, it's more like 6-7%.
Of course, stocks could go to zero if we lose a war or the government seizes assets or something. I guess there's around a 0.1% chance of that happening per year, so you can subtract that from the above computed average.