Future of retail investing w/ETFs & Index Funds

[ramondor]

@skitta I've just accepted I'm going to wake up one day and see that about 40% of my portfolio has been destroyed. It's not a nice thought. It's like thinking about your parents dying. It's going to happen one day, it won't be pleasant, but there's no point believing it won't happen. Knowing when the market will crash is pretty difficult, so you might as well not think too much about it if you've got a decades long timescale. The best you can do is try to avoid bubbles and buy in assets you see as being of good value.

The way I see it is if you don't have the stomach for big losses then you need to adjust your portfolio away from stocks and invest more-so in a selection of bonds. If history is anything to go by, your portfolio will grow less over time, but your returns will be considerably more stable. There's nothing wrong with that. In fact, if you're thinking if crashing out over, say, the next 5 years, it may be advisable.

 

[lifeconnects]

@ramondor this happened just last March! the best remedy is to earn more money.

 

[cerri]

@ramondor what makes you think 20 years is enough to go back to green tho?

 

[ramondor]

@cerri I wouldn't say it's a guarantee, but I'm fairly confident that over long term view the stock market will go up. At the end of the day, the stock market does sit on top of the real-world economy. Humans push for economic growth which should increase wealth.

 

[amisha]

@skitta The "bubble" mentality certainly has some logical traction behind it and is not entirely inaccurate. We're seeing cheap financing, FOMO like never before into highly speculative equities, and political incentive- all of which could encourage a market bubble. I don't think there's reason to be concerned about a total market bubble, despite all-time highs. That being said, there are areas of the market worthy of concern for a bubble.

The biggest areas of the market I think are "at-risk" are cryptocurrencies and IPOs. The recent runup on BTC and ETH, and the absolutely insane price action and quantity of IPOs in recent history have been ridiculous. I'd be hesitant to get into either of these areas right now. Fortunately, a crash in either of these areas wouldn't be too terrible across the market as a whole.

Now, looking at where the S&P 500 is relative to March of last year (pre-crash), it is only up about 15%. That is a lot easier to stomach than looking at how it has recovered using post-crash numbers, then it has shot up almost 70%.

are people worried about future % return potential?

Personally, I firmly believe SPY or VTI will be higher in 10 years than they are now. I have no idea by how much, and I really don't like to look further than 5 years down the road because it just gets too speculative beyond that.

would they be able to see sizable gains over the next 10 years?

ETFs like SPY or VTI are not going to see the best gains over the short term future. I've said it before and I'll say it again: Renewable Energy, US Mid & Small Caps, & Emerging Markets will see the most capital appreciation without a doubt. Don't be afraid to buy into a Disruptive business ETF, like those offered by Ark Invest.

as someone who has always been happy with their passive gains through ETFs I am starting to worry that this may not be viable in the future.

To see consistent double-digit gains over the next 5-10 years, I recommend focusing on the aforementioned market areas and don't sell for at least 5 years. Assuming things get really negative, a good portfolio shouldn't see a drop greater than 23-25% at the bottom.

 

[cerri]

@amisha so assuming covid never happend, we would be " just " +15% from last march?

 

[amisha]

@cerri Yes, which is a better than average year, considering the S&P 500 has historically returned around 7-9% annually, but not so far out there as to suggest the market as a whole is in a bubble. Considering where we are as a country in terms of economic output relative to pre-covid, the +15% seems a bit unjustifiable, but again, the market is always looking ahead.

 

[fire_starter]

@skitta I am personally bullish long term, not talking next 2-5 years who knows I am talking 15+ years out. First It think COVID forced companies and people to adapt, it forced companies to use remote work forces. I believe this will increase worker productivity , allowing companies to do more with less. Less office space, less travel/hotel rooms/plane tickets .

During the pandemic I have personally implemented complex software working with people from the UK, Mexico, USA all remote were before these companies probably would have spend thousands and thousands of dollars on travel costs

That with other automation , self driving cars, AI, I think worker productivity is set to grow in the coming 15-20 years and growth will continue

 

[gail17]

@fire_starter This.
I love waking up every day too

 

[nelxoxox]

@fire_starter Valid point that companies may expend less with people working from home, but I seriously doubt the assumption that workers will be more productive. Do you have any idea how much easier it is to just not work? I’m currently in university, but basically the same deal doing everything online, and it’s absolutely horrible. If I wasn’t getting a degree in something I already know how to do, I’d probably be failing due to the emotional toll. I think any company that adopts these changes long term to cut expenses will pay a price, at least for your average employee.

 

[fire_starter]

@nelxoxox I was speaking from first hand experience. I am an consultant that helps implement ERP systems what means I am part project manger, part accountant, part programmer (what I went to school for) . Make no mistake we did plenty of remote work before but 2017/2018/2019 I probably spent 60-90 days traveling ; what means flight, hotel , meals , rental cars ect....

From march 2020 until now; I have done zero travel, I have 100% worked from home. And guess what, I probably have gotten just as much or more work done then flying all over the world just to be "face to face"...

This year I admit I missed traveling to the UK, Italy , Mexico , puerto rico and singapore for work but have had projects in all those countries but just worked 100% remote ; where before I would spend 1-2 weeks onsite in each place

 

[nelxoxox]

@fire_starter I don’t think you’re representative of the majority of the workforce, both in terms of resilience and being flown around the world.
I have a buddy who works almost completely remote, and he’s still great at his job, but he’s not your average employee.
I’m sure they’re doing studies on it now, but I would bet a fair sum that the larger portion of people doing simpler, but still fundamental and important work, are losing productivity.

 

[resjudicata]

@nelxoxox Especially if you have kids at work all day every day... Plus the feeling like you are always at work. There is always two sides of the coin.

 

[roelien]

@resjudicata What about people who build or fix things? Warehouse people, skilled laborers, electricians, plumbers.
Only certain levels of management can do the home thing. At some point your sewer is going to clog. Or collapse. Then whatca going to do?
I agree society is looking at a major labor/management change. But learning to code to compete against India is a fools game.

 

[resjudicata]

@roelien I build things. I have no luxury to work from home at all.

 

[hungry_hungry_hippo]

@nelxoxox Typically a happier worker is harder worker.

Obviously depends on your job heavily but my mother lives it. She can just chill at home and relax while doing work.

 

[cerri]

@fire_starter

were before these companies probably would have spend thousands and thousands of dollars on travel costs

that's good for some companies and bad for the ones providing such services tho

 

[mnan]

@skitta I feel like I'm the only one with insights to the future of the Stock Market...

but first let me consult my crystal ball.

Nobody knows the future of the market. Unprecedented times make it especially difficult to predict anything with any confidence right now.

 

[hungry_hungry_hippo]

@mnan Wait... I think I can see something!!

Oh YES!!! I CAN SEE IT!!

Shakes head to come back to reality the market will crash again someday soon or later.

 

[clayjars]

@skitta George Soros noted in his theory of reflexivity that investors can drive prices that become detached from the norm.

https://www.georgesoros.com/2014/01...xivity-and-the-human-uncertainty-principle-2/

My conceptual framework is built on two relatively simple propositions. The first is that in situations that have thinking participants, the participants’ views of the world never perfectly correspond to the actual state of affairs. People can gain knowledge of individual facts, but when it comes to formulating theories or forming an overall view, their perspective is bound to be either biased or inconsistent or both. That is the principle of fallibility.

The second proposition is that these imperfect views can influence the situation to which they relate through the actions of the participants. For example, if investors believe that markets are efficient then that belief will change the way they invest, which in turn will change the nature of the markets in which they are participating (though not necessarily making them more efficient). That is the principle of reflexivity.

If we want to explore some form of analog forecasting, we can use the long-term charts of the S&P and the Dow. Two things to note:

• As with any form of technical analysis, past results do not guarantee future results.
• Companies are always being added and removed from the indexes. The trend of the Dow doesn't mean that a company, sector, or another index will move the same way.

https://www.macrotrends.net/1319/dow-jones-100-year-historical-chart

https://www.macrotrends.net/2324/sp-500-historical-chart-data

Starting at the bottom of the Great Depression, I notice a few things off-hand:

• The Dow rises initially, but consolidates quickly to a sideways trend in 1949. This lasts for 17 years.
• From 1949 to 1966, the Dow experiences a rapid climb. This also lasts for 17 years.
• The Dow begins a descent until it hits the bottom in 1982. This lasts for 16 years.
• From there, the Dow begins another rapid ascent until the dot-com bubble in 2000. This lasts for 18 years.
• After the pop of the dot-com bubble, the market overall goes sideways until the Great Recession in 2009. This goes for 9 years.
• From there, the market begins another rapid ascent which is still continuing. This has been ongoing for another 12 years.

As I mentioned above, using this method doesn't mean the market will behave exactly as it has done in the past. But, if historical trends are anything to go by, we might still have a few more years to go. The other thing to note is that the chart is using inflation adjusted numbers. If you turn that off, then the chart shows that it just keeps going up.

One thing some people have been discussing is that the market may still grow, but might not grow as rapid of a pace in certain areas. If you're thinking that a more "sideways" market might develop, look into some of the covered calls ETFs like QYLD.