2 year investment journey so far, trying not to feel disheartened.

OldScientist

Outcomes have been very variable historically. Here is the final portfolio value (in real terms) after 25 years where the accumulator has invested £1k inflation adjusted per year over a period of 25 years starting in different years*.



In the worst cases (a few of the 25 year periods starting in the late 19th century) the investor barely got back (in real terms) what they invested. In the median case, they had about £63k (in real terms), while in the best case they had just over £200k.

Which of these historical paths the future will most resemble is impossible to predict, but it might be worth noting that using cash instead of equities produced a worst case of £15k, a median case of £28k and a best case of about £45k - in other words, pretty poor compared to equities. So to quote Jack Bogle "Invest we must" even though the variability and lack of apparent progress is sometimes difficult to stomach.

* I've used returns and inflation data from macrohistory.net and a portfolio consisting of 50% UK equities and 50% US equities as an example and UK inflation. The returns on 3 month T-bills have been used as a proxy for cash.

Hoenir

SneakySpectator said:

I was up like 26% or so at one point before the tariff crash and now I'm back down to 9.20%. I'm trying not to let it affect me and just focusing on the long term average as I will be going at this for about 20 - 25 years longer.

That's precisely why investing in stock markets is akin to riding a roller coaster. Just as you reach the top of a long climb feeling relaxed. The floor drops away............

kempiejon

Hoenir said:

SneakySpectator said:

I was up like 26% or so at one point before the tariff crash and now I'm back down to 9.20%. I'm trying not to let it affect me and just focusing on the long term average as I will be going at this for about 20 - 25 years longer.
@Snealy

That's precisely why investing in stock markets is akin to riding a roller coaster. Just as you reach the top of a long climb feeling relaxed. The floor drops away............

Which is why we can diversify away from stock markets, I recently learnt that something like the global traded market in bonds is about the same size as the total of all traded equities valued around around $120trillion each. Then I read the global derivities market is worth 10 times that at $1quadrillion.

If @SneakySpectator the gain over 2 years is 9% well you might have made that in a building society account of course you can never get 26% up in a building society though the value there never falls.

boingy

masonic said:

It appears 6 people thanked my post correcting your misconceptions about flipping coins.

The only reason I haven't thanked you yet is that I'm still flipping all those coins to check your numbers. It wouldn't be so bad if I only had to do it once but I'm doing it at least 1 million times to get a decent data set. 

masonic

OldScientist said:

Outcomes have been very variable historically. Here is the final portfolio value (in real terms) after 25 years where the accumulator has invested £1k inflation adjusted per year over a period of 25 years starting in different years*.



In the worst cases (a few of the 25 year periods starting in the late 19th century) the investor barely got back (in real terms) what they invested. In the median case, they had about £63k (in real terms), while in the best case they had just over £200k.

Which of these historical paths the future will most resemble is impossible to predict, but it might be worth noting that using cash instead of equities produced a worst case of £15k, a median case of £28k and a best case of about £45k - in other words, pretty poor compared to equities. So to quote Jack Bogle "Invest we must" even though the variability and lack of apparent progress is sometimes difficult to stomach.

* I've used returns and inflation data from macrohistory.net and a portfolio consisting of 50% UK equities and 50% US equities as an example and UK inflation. The returns on 3 month T-bills have been used as a proxy for cash.

It's interesting to see the effect of asset allocation on the results there. 50% UK equities would not be something many would advocate today and it seems to have changed the profile somewhat. Perhaps by compressing the upside rather than limiting downside. It would certainly suck to retire in the early 1980s, a few years after your older brother.

thunderroad88

Going back to the original post, I’m surprised by the direction this thread took. I got the impression from it that SS was a fledgling investor looking for either simple reassurance or a pat on the back, but then picked a fight with a heavyweight poster in Masonic. Anyway, all I’d say to a high point return of 26% from 100% equities during the last two years is “Is that all?”

masonic

That's the curse of starting your investment journey in a period of (mostly) rising markets. You don't get the full benefit of the returns because very little of your current capital has been invested through the rises. Drip feeding really comes into its own when markets are in steady decline (but not forever). A crash in the first few years is really something to be celebrated. You just need to be able to stomach it. Seeing your portfolio 20-30% in the red (or worse) while it doesn't have potential life-changing consequences is a good test of resolve and risk tolerance. One of the problems during the Covid crash was that there was a generation of investors who hadn't seen markets take a tumble before. One needs to keep an open mind; anchoring on a specific outcome will very often lead to disappointment. If you end up investing through the 1 in 10 quarter-centuries where returns weren't much more than the risk free rate, or the roughly 1 in 5 where they were less than half the average, then you've still played the hand you were dealt as well as you could.

SneakySpectator

masonic said:

That's the curse of starting your investment journey in a period of (mostly) rising markets. You don't get the full benefit of the returns because very little of your current capital has been invested through the rises. Drip feeding really comes into its own when markets are in steady decline (but not forever). A crash in the first few years is really something to be celebrated. You just need to be able to stomach it. Seeing your portfolio 20-30% in the red (or worse) while it doesn't have potential life-changing consequences is a good test of resolve and risk tolerance. One of the problems during the Covid crash was that there was a generation of investors who hadn't seen markets take a tumble before. One needs to keep an open mind; anchoring on a specific outcome will very often lead to disappointment. If you end up investing through the 1 in 10 quarter-centuries where returns weren't much more than the risk free rate, or the roughly 1 in 5 where they were less than half the average, then you've still played the hand you were dealt as well as you could.

I agree with this, all we can do is try our best and I genuinely believe the best option is a low cost global index fund over a 25 year period. 

Hoenir

thunderroad88 said:

Going back to the original post, I’m surprised by the direction this thread took. I got the impression from it that SS was a fledgling investor looking for either simple reassurance or a pat on the back

That's the inherent danger when people start out. Bull markets breed complancency. An over estimation in their own abilities. A belief that investing is easy. One only has to follow the herd. 

On the flip side. Bear markets cause the herd to scatter. New investor's become scarred by the experience. As uncertainty makes decision making impossible. There's no concensus on social media as to the best approach. Making bad decisions is common place. 

Takes two parties to conduct a trade. No shortage of people who take advantage of those making uninformed choices. It's a brutal dog eats dog world. No one takes any prisoners. 

SneakySpectator

Hoenir said:

thunderroad88 said:

Going back to the original post, I’m surprised by the direction this thread took. I got the impression from it that SS was a fledgling investor looking for either simple reassurance or a pat on the back

That's the inherent danger when people start out. Bull markets breed complancency. An over estimation in their own abilities. A belief that investing is easy. One only has to follow the herd. 

On the flip side. Bear markets cause the herd to scatter. New investor's become scarred by the experience. As uncertainty makes decision making impossible. There's no concensus on social media as to the best approach. Making bad decisions is common place. 

Takes two parties to conduct a trade. No shortage of people who take advantage of those making uninformed choices. It's a brutal dog eats dog world. No one takes any prisoners. 

I'm a new investor but I absolutely promise you I'm going nowhere, I'm never selling until retirement it's as simple as that. Unless I literally have to in order to survive but I've put in place protections against that so should be ok.

The difference between me and most novice investors is I know that I cannot time the market so it's completely pointless for me to panic sell in the hopes of trying to buy back in later etc.