123
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Why do people claim that it's hard to outperform the S&P 500? It has only increased in value by ~1.5x in the past 5 years
Welcome new user, I will take a crack at explaining this. It is a good question and it's a very common misapprehension.
I think the shortest possible explanation is this:
You see how you said ".....
- 13.8k
119
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Accepted
Is this projected return from Wealthify too low?
You grossly miscalculated because you forgot that money has to actually be in the account to earn. You earn nothing on the £50 you haven't deposited yet. And that is the first problem: compounding ...
64
votes
Will Humbled Trader sessions be profitable?
Short answer:
The YouTube channel has over 500k subscribers but most videos have well under 50k views, complete with click-baity thumbnails. Those numbers mean nobody actually cares. Internet ...
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59
votes
"Don't invest now because the market is high"
If mean-reversion does exist, am I correct to say that timing the market is likely to reap great rewards?
Sure!!!
Just one problem: you can't time the market.
why do so many people think it's a ...
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51
votes
At what point do index funds become unreliable?
A great deal of analysis on this question relies on misunderstandings of the market or noticing trends that happened at the same time but were not caused by each other. Without knowing your view, I'...
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50
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Is this projected return from Wealthify too low?
One problem with looking at investments this way is that only £50 of your money was in the market for the whole 5 years. That last investment of £50 was only in the market for a month, and £600 of ...
- 136k
48
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Why do people claim that it's hard to outperform the S&P 500? It has only increased in value by ~1.5x in the past 5 years
Hindsight is 20:20.
companies like Google, Facebook, Netflix, Amazon, Apple have all increased anywhere from 3x-6x in value in the past 5 years.
...while at the same time, companies like General ...
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46
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Why do people claim that it's hard to outperform the S&P 500? It has only increased in value by ~1.5x in the past 5 years
It really depends on what you mean by "hard to outperform the S&P 500".
Consider a roulette wheel. In a certain sense, it's easy to make money at a roulette wheel. The strategy is very ...
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44
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Why would anyone ever invest in a cash-only etf?
One benefit of cash ETFs over a bank deposit is if you're interested in diversifying your currency holdings, they are a cheaper method than going to traditional currency exchanges. For instance, if ...
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38
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What is the difference between these two S&P 500 ETF?
One is priced in US dollars and the other is priced in euro. The euro has appreciated against the US dollar over the past three years, hence the lower return in euro than in dollars.
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37
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Is my back-of-the-envelope calculation about taking out a loan to invest into the markets flawed?
Any scheme of borrowing money to "invest" is in fact a gamble and should be avoided. Stick to your own money for investments.
Nobody can predict the market and neither can you. 4% interest ...
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36
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Why do ETFs that replicate the S&P 500 vary significantly in price?
The ETFs are designed to replicate the return. Don't get hung up on the price.
Illustrative Example:
Say you have two ETFs both designed to replicate the return of an index. Call these ETFs A ...
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35
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"Don't invest now because the market is high"
The common expression in retort would be "Time in the market beats timing the market."
Meaning: On average, the stock market rises [because on average, the global economy is expanding as outputs ...
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35
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Why there is difference between performance of Vanguard S&P500 (VUSA) and S&P500 index
You're comparing an index that is measured in USD versus an ETF that tracks that index but is paid in GBP. The difference is mostly the difference in exchange rate over time between USD and GBP.
- 131k
32
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Why don't index ETFs use leverage to offset their fees and eliminate tracking errors?
Leverage can be good to increase gains, but it amplifies movements of a stock. Also downward movements. Paired with the increased gains is also an increased risk, and that changes the investment ...
- 2,437
30
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Is it insider trading when I already own stock in an ETF and then the ETF adds the company I work for?
No.
Owning a stock is not trading a stock.
See https://en.wikipedia.org/wiki/Insider_trading.
If you are in a position of the company where you know (positive or negative) information about the ...
- 50.6k
28
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How much money do I need to retire?
You can use firecalc (https://www.firecalc.com/) to show the historical probabilities that your stock investments will never run out of money when you take out money each year.
For 15.000, a stock ...
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28
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Is buying an index ETF which contains my company insider trading?
First of all, insider trading is only illegal when you have material, non-public information that affects your trading decision. So if you do not have any pertinent information that could be ...
- 131k
25
votes
Help getting started (I've just opened a trading account)
You're not going to learn anything of significance by investing or trading with only $200 other than how to use the platform of your broker and you could easily do that by opening a FREE paper trading ...
- 75.8k
24
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Is my back-of-the-envelope calculation about taking out a loan to invest into the markets flawed?
Personal rule for borrowing money in order to 'invest' in any kind of generally available thing:
Assume your investment will lose all of its value and you lose your job and need to live off your ...
- 2,489
24
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Empirical evidence on active vs passive investing
There is an interesting paper by Hendrik Bessembinder, Francis J. and Mary B. Labriola from ASU’s W. P. Carey School of Business which shows that
the largest returns come from very few stocks overall ...
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22
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What are the important differences between mutual funds and Exchange Traded Funds (ETFs)?
Behind the scenes, mutual funds and ETFs are very similar. Both can vary widely in purpose and policies, which is why understanding the prospectus before investing is so important.
Since both mutual ...
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21
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Why would a long-term investor ever chose a Mutual Fund over an ETF?
First, it's not always the case that ETFs have lower expenses than the equivalent mutual funds. For example, in the Vanguard family of funds the expense ratio for the ETF version is the same as it is ...
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21
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Why is an ETF, which is tracking foreign equities, ticking in my local time zone?
You have some confusion regarding how ETFs work. N100 is traded on Indian stock exchanges so it will tick during opens hours in the Indian market. People are buying and selling it during the open ...
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21
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If a mutual fund sell shares for a gain, do investors need to pay capital gains tax twice?
Yes, you pay capital gains tax on ETF holdings just like mutual find holdings, but you are not "double taxed".
Say you buy a fund at the beginning of the year and sell it at the end of the ...
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20
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Why do people claim that it's hard to outperform the S&P 500? It has only increased in value by ~1.5x in the past 5 years
The stocks you mentioned are pretty good. So is a Nasdaq index fund, which has had double the returns of the S&P 500 over the past 5 years.
The Nasdaq has a solid record of beating the S&P ...
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20
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Do ETFs move on their own? Or only on aggregate from the individual holdings?
X, A, B and C all trade independently and are subject to their own buy and sell pressures that affects their prices. But the price of the ETF tends to be consistent with the price of the underlying ...
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20
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How much money do I need to retire?
Generally, it is recommended to use 4% initial withdrawal. That gives you a 99% chance to make it through 30 years, using up the capital in the process. So unless you plan to die in 30 years, that's ...
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20
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Is my investment safe if the broker/bank I'm using goes into insolvency?
A simple insolvency or bankruptcy of a broker shouldn't affect that status of ETFs and stocks you own, because they are not part of the assets of the broker. This is different from fractional-reserve ...
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