Real return from the S&P 500 for the last 50 years = 1.9% / year

[Zorba]

401k is easy and cheap to get into. Most people don't have time to manage investments let alone a side business. But to claim market is a good performer compared to doing the later, and doing it successfully, is crazy. There is too much load on stocks e.g. CEO gets paid before you do vs. you getting paid first at or least somewhere near the top..

You do know the owner of a small business gets paid last, right? Vendors, employees, taxes, etc all get paid before the owner does.

 

[StageLeft]

Thats why you buy low and sell high... Hitting the right few days in the market and missing a few bad days changes the percentages a lot.

Well, yes. But that's like me saying that the lottery is a net loss for the buyers and you say "but you only have to win once".

Heck, if I knew I could beat the market I'd have people quite literally throwing money at me. Beating the market, consistently and predictably, is the holy grail of investing. And almost nobody can do it. Because if you play long enough the house always wins.

I want to read this article in more depth. I have to say, though, that given how bonds have historically (at least I thought until 10 minutes ago) only lagged stocks _a little bit_ and with far less hours lost to sleep I'm heavy in them relative to my age. Also, if the US ends up anything like Japan (I think it's trading at 1/4 or 1/3rd where it was TWENTY FREAKING YEARS AGO), then it would be nice not to be sitting with a stock up my ass all that time.

EDIT: Yeah this is kinda sad. if it's true. I'm really not sure it is. I pay no income tax on what goes into my 401k, so if the S&P is gaining 9.5%/year and I'm not paying much in trading/management (I'm not), then how can the gains be down to 1.3%?

 

[thegimp03]

This guy makes too many generalizations, like others said, 1.9% real rate of return isn't too bad over the long haul. Most 401(k)'s offer a variety of funds like small/mid caps, fixed income, bonds, international, emerging markets...not just S&P 500 funds. Frankly, it's smart to stash some cash in a 401(k) because most companies offer a free match which will add up over 35 or 40 years of working, not to mention contributing to one lowers the taxes you pay today.

 

[HGC]

Buy and hold and diversify. This self-serving formula, promoted by the financial industry to maximize assets under management (which is how managers are compensated) and to minimize legal exposure (hey, not our fault, you should have held on to it, and/or diversified!) is one of the biggest propaganda coups in history.

Stock speculation (that's what it really is) is risky, and involves hard work. If you need safety, you should save, not speculate.

 

[ebaycj]

EDIT: Yeah this is kinda sad. if it's true. I'm really not sure it is. I pay no income tax on what goes into my 401k, so if the S&P is gaining 9.5%/year and I'm not paying much in trading/management (I'm not), then how can the gains be down to 1.3%?

Are you taking into account the tax hit (at least 20-30%) you will have to take on that money when you withdraw it? And how much inflation will happen between now and then (A loaf of bread could cost $15-20). Do your 20 or 30 year amortization then tack a 30% penalty on there. Then trend the CPI out 20 or 30 years and figure out the future utility of the amount you should have based on your (amortization - tax).

 

[dmcowen674]

Real return from the S&P 500 for the last 50 years = 1.9% / year Rethinking Stocks: Not Nearly the Pot of Gold We Thought

Well, that's not good.

Bahahahahah something I've said for years that it is nothing but a Monopoly game for the rich boys and you and your buds always said I was full of shit.

Who's full of shit now?

 

[LegendKiller]

Bahahahahah something I've said for years that it is nothing but a Monopoly game for the rich boys and you and your buds always said I was full of shit.

Who's full of shit now?

Yes, investing in America is so horrible. Fucking communist.

 

[joeboggs]

The article doesn't say what you think it does; you're subconsciously combining the results of the two articles to process it as "The S&P returns 1.9% so 401(k) plans are bad". That's not what it says at all. It's actually two independent statements: "The S&P returns 1.9% so it's bad" and "401(k) plans don't work because people are stupid and put their money in products that are too volatile for their needs".

Tackling the first, S&P is bad, is easy. The author makes several blatant logical and/or journalistic errors:

1) Intentionally blurring the line between real and nominal rates of return.
2) not offering comparisons to put the number in context- alternative investments often can have a real return in the negative values
3) offers none of his methodology- what the hell sort of acquisition and maintenance costs does he assume people are stupid enough to pay on an s&p ETF?!

The second is even easier. His premise is that tax-deferred accounts are bad because the drop in the market ruined people's retirement savings. That's hardly justification to trash them. Let the stupidity of some outweigh the intelligence of the rest. Tax-deferred accounts are great, often better than defined-benefit plans. Taking the stupidest people during a bad 2 year span is a specious argument for change.