I wonder what all the billionaires think about all the new stock market investors

For all the billionaires who either bought stock 50 years ago or owned stock via a company they founded, I imagine what they think about the new generation buying now for the first time. For example if you invested 50 years ago you'd be sitting on a pure growth return of 5054% (100.9% a year on average!!) which means if the S&P increases just 5% this year, that 5045% becomes 5313%, a 5% increase for us is a whopping 268% for them...

And yes I know investing early is the key to huge profits but I wonder if those billionaires secretly think we're absolutely nuts investing now in 2020 when they bought in 1970 or whatever, Warren Buffet said in an interview a few years ago that "America is just getting started" but I wonder how true this is or whether it's just in his own interest to keep the stock market an appealing investment option for young people investing for the first time?

I dunno about you guys but I honestly cannot fathom sitting on ~3000% profit in 30 years. I can't even imagine 20% a year, let alone 100% a year like all these billionaires made. Do you honestly believe the risk is worth it for ~10% a year on average like what we're seeing now?

Will the returns just continue getting lower and lower as it takes more and more new money to push the market higher and higher by any sustainable amount? A 10% increase in 2020 for example would take $2.68trillion of new money, then in 2021 it would take $2.95trillion etc.

Good old compounding, it works both ways.
«13

Replies

  • ApodemusApodemus Forumite
    2.6K Posts
    Sixth Anniversary 1,000 Posts Name Dropper Combo Breaker
    ✭✭✭✭
    I think you should lie down in a darkened room and stop your mind running away on big numbers! :)

    The majority of people investing fifty years ago were very similar to the majority of people investing today. Returns then were not dissimilar to returns today (probably less as costs were higher, as were taxes). You also need to factor inflation rates into your calculations.

    My oldest investment is coming up for 50 years now, and the few pounds my mother put in for me back then is now worth about £6k. Over the years it has grown a bit, hedged against inflation and provided a bit of income, but it hardly puts me in the billionaire category!
  • edited 7 January 2020 at 8:32AM
    marlotmarlot Forumite
    4.7K Posts
    Part of the Furniture 1,000 Posts Name Dropper
    ✭✭✭✭
    edited 7 January 2020 at 8:32AM
    ...For example if you invested 50 years ago you'd be sitting on a pure growth return of 5054% (100.9% a year on average!!)....
    That's not how compound growth works.

    $1 to $5055 over 50 years is about 18.5% each year.
  • cisamcgucisamcgu Forumite
    113 Posts
    Tenth Anniversary 10 Posts
    .....

    Good old compounding, it works both ways.

    I'm not sure you understand how compounding works at all !
  • danmdanm Forumite
    541 Posts
    Part of the Furniture 100 Posts
    ✭✭
    errr.... if the market goes up 5% for me, it has gone up 5% for them also.

    Think about what you have said...that the market has gone up 100% on average....now go any look at the actual market performance and see if it actually returned 100% in any year.
  • CreditCardChrisCreditCardChris Forumite
    344 Posts
    100 Posts Second Anniversary
    ✭✭
    marlot wrote: »
    That's not how compound growth works.

    $1 to $5055 over 50 years is about 18.5% each year.

    If the price has increased 5045% over 50 years, why is it only 18.5% per year? What am I missing?

    18.5% * 50 = 925% ? Not 5054% ?
  • CreditCardChrisCreditCardChris Forumite
    344 Posts
    100 Posts Second Anniversary
    ✭✭
    danm wrote: »
    errr.... if the market goes up 5% for me, it has gone up 5% for them also.

    Think about what you have said...that the market has gone up 100% on average....now go any look at the actual market performance and see if it actually returned 100% in any year.

    I must be missing something then because I just assumed 5045% over 50 years was ~100% a year on average.

    Anyway 1974 - 2000 it went up 2431% over a 26 year period. Meanwhile from the bottom of the crash in 2002, it's only gone up 322% over an 18 year period... 8 years left to gain the remaining ~2100% to remain comparable to the billionaires bull run? Seems very unlikely.
  • danmdanm Forumite
    541 Posts
    Part of the Furniture 100 Posts
    ✭✭
    If 50 grows to 100 it has gone up 100%. If it goes up another 50 it has not gone up 100% only 50%

    I am gonna leave it here.

    I am not actually sure if this is trolling, a premature April fool or anearly contender for best worst opening to a thread of 2020.
  • CreditCardChrisCreditCardChris Forumite
    344 Posts
    100 Posts Second Anniversary
    ✭✭
    danm wrote: »
    If 50 grows to 100 it has gone up 100%. If it goes up another 50 it has not gone up 100% only 50%

    I am gonna leave it here.

    I am not actually sure if this is trolling, a premature April fool or anearly contender for best worst opening to a thread of 2020.

    Oh right that makes sense.

    And no I'm not trolling, I have many posts on this forum trying to learn about investing and stuff. So what's the correct way to calculate the proper average?
  • MalthusianMalthusian Forumite
    9.7K Posts
    Sixth Anniversary 1,000 Posts Name Dropper Photogenic
    ✭✭✭✭
    I must be missing something then because I just assumed 5045% over 50 years was ~100% a year on average.

    What you're missing is that an assumption makes an !!! out of u and mption. And that if you think you have discovered something shocking you should check your facts. The more shocking it is the more checking you should do. In this case a quick Google of "how to calculate compound growth" would have been enough of a check.

    The calculation is (5055 / 1) ^ (1 / 50) = 18.5%pa.
    And yes I know investing early is the key to huge profits but I wonder if those billionaires secretly think we're absolutely nuts investing now in 2020 when they bought in 1970 or whatever.
    Nope. The thousands of billionaires on the planet will be thinking a lot of different things and yet I can guarantee you that's not one of them.

    Last week I made a perfect poached egg. Everyone who puts a shelled egg in boiling water now clearly needs their head examined, I already made a perfect poached egg therefore it can't happen again.
  • rupertsruperts Forumite
    3.7K Posts
    Tenth Anniversary 1,000 Posts Name Dropper
    ✭✭✭✭
    £1 invested at the start of 1970 with a 100.9% annualised growth rate would be worth £1,409,278,535,839,330 today. Quadrillianaire.

    Another way to look at it is if you started working in 1970, earned the average salary throughout your career and paid 10% of that into your pension at a growth rate of 100.9%, your pot would be worth approximately £121,525,271,966,124,000,000,000,000 today, which I believe would make you a Septillionaire. You could probably start thinking about FIRE.
This discussion has been closed.
Latest News and Guides