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Latest Asset Class Returns vs The Average Investor
Posted: Sat May 07, 2016 3:13 pm
by MachineGhost
Re: Latest Asset Class Returns vs The Average Investor
Posted: Sun May 08, 2016 10:03 am
by drumminj
At least, if I'm reading this right, the average investor beat inflation?
Re: Latest Asset Class Returns vs The Average Investor
Posted: Sun May 08, 2016 10:19 am
by Reub
How about versus the PP investor?
Re: Latest Asset Class Returns vs The Average Investor
Posted: Sun May 08, 2016 3:11 pm
by Tyler
Reub wrote:
How about versus the PP investor?
A PP investor who stuck with the plan over the same timeframe had an annualized return of 7.8% nominal and 5.0% real.
Thanks for the chart, MG. I always love that one.
Re: Latest Asset Class Returns vs The Average Investor
Posted: Mon May 09, 2016 6:58 am
by sophie
It's sad to see that the average investor would have done better to put all their money into 3 month treasuries and a house. Harry Browne at one point suggested that very plan for people who couldn't cope with the Permanent Portfolio structure.
This by the way is one reason why I keep needling the forum members who talk about their plans to beat the market by timing purchases and sales of this or that asset. This is precisely what the "average investor" does, and you can see on the chart how that works out on average. Unless you have information not available to everyone, there is no reason to think you would do any better.
Re: Latest Asset Class Returns vs The Average Investor
Posted: Mon May 09, 2016 7:22 am
by ngcpa
Where did your data come from? I don't believe REIT's only returned 4 % annually over the past 20 years. Perhaps
without counting dividends. I also don't believe the S&P 500 out performed REIT's over the 20 years. I suspect
something is wrong here.
Norm
Re: Latest Asset Class Returns vs The Average Investor
Posted: Mon May 09, 2016 8:18 am
by Libertarian666
sophie wrote:
It's sad to see that the average investor would have done better to put all their money into 3 month treasuries and a house. Harry Browne at one point suggested that very plan for people who couldn't cope with the Permanent Portfolio structure.
This by the way is one reason why I keep needling the forum members who talk about their plans to beat the market by timing purchases and sales of this or that asset. This is precisely what the "average investor" does, and you can see on the chart how that works out on average. Unless you have information not available to everyone, there is no reason to think you would do any better.
Yes, and frequent trading is also expensive in terms of transaction costs.
Re: Latest Asset Class Returns vs The Average Investor
Posted: Mon May 09, 2016 1:49 pm
by Kbg
I think the biggest thing far and away has very little to do with trading costs and everything to do with emotional costs. If people invested the same way they shopped for pretty much anything (look for low prices and sell at high prices) they would do pretty well. But for whatever reasons, people do it exactly opposite.
Re: Latest Asset Class Returns vs The Average Investor
Posted: Mon May 09, 2016 1:52 pm
by jafs
I think part of it is that it's hard to know what prices are in the markets - whether they're high, in the middle, or low.
And, when things go up, people somehow think they'll keep going up, and so they buy. Which creates a self-fulfilling prophecy for a while.
Also, when they go down, people are nervous they'll keep going down, so they sell. And the same self-fulfilling thing happens that way.
Re: Latest Asset Class Returns vs The Average Investor
Posted: Mon May 09, 2016 1:53 pm
by KevinW
sophie wrote:
It's sad to see that the average investor would have done better to put all their money into 3 month treasuries and a house. Harry Browne at one point suggested that very plan for people who couldn't cope with the Permanent Portfolio structure.
This is the reason that I think Dave Ramsey's investing advice is actually not THAT bad.
For reference, his advice is to save 12+ months' expenses in cash, then buy an affordable house with 20% down and a 15 year mortgage, then put the rest in stocks.
If you crunch the numbers for a typical middle-class household, you end up with a big chunk of wealth in cash and home equity, and stock retirement investments that are easy to implement in IRAs and 401ks. With all that cash sitting around, and low fixed expenses, it's easy to hold through recessions.
Re: Latest Asset Class Returns vs The Average Investor
Posted: Mon May 09, 2016 2:11 pm
by Tyler
ngcpa wrote:
Where did your data come from? I don't believe REIT's only returned 4 % annually over the past 20 years. Perhaps
without counting dividends. I also don't believe the S&P 500 out performed REIT's over the 20 years. I suspect
something is wrong here.
Norm
The data is from the annual
Dalbar QAIB report. I agree that the REIT numbers seem off.
BTW, I'll point out that there is disagreement on whether Dalbar's methodology properly accounts for true median investor behavior.
https://www.kitces.com/blog/does-the-da ... uest-post/
Re: Latest Asset Class Returns vs The Average Investor
Posted: Mon May 09, 2016 8:43 pm
by ngcpa
According to Longrundata.com, VGSIX Vanguard's REIT index fund for the past 20 years the total return was over 11% annualized not 4 %.
Re: Latest Asset Class Returns vs The Average Investor
Posted: Tue May 10, 2016 7:54 am
by jafs
Portfolio visualizer gives a CAGR over that period for VGSIX of 9.64%.
