this post was submitted on 25 Oct 2023
26 points (86.1% liked)
Personal Finance
3710 readers
2 users here now
Learn about budgeting, saving, getting out of debt, credit, investing, and retirement planning. Join our community, read the PF Wiki, and get on top of your finances!
Note: This community is not region centric, so if you are posting anything specific to a certain region, kindly specify that in the title (something like [USA], [EU], [AUS] etc.)
founded 1 year ago
MODERATORS
you are viewing a single comment's thread
view the rest of the comments
view the rest of the comments
You are looking at it the wrong way, Because the market has traded mostly sideways for a while that means that the market is underpriced compared to what it should be. That is when you should be more willing to invest. I know it seems counterintuitive. This article explains the concept better than I can.
Since ~2019, the SP500 has gone up 45%. That is the equivalent of a 8.5% compound interest rate or 11% simple interest rate per year. If you're portfolio accounts are under performing that by a big margin than you might want to switch Funds and/or account providers.
There are always gloomy articles and headlines meant to convince you to sell. Because they want to buy your stocks on the cheap.
Everyone always quotes the growth of the S&P500, but isn't pretty much no one 100% invested for their entire retirement in the S&P500? My 401k is in a target date 2055 and my Roth is split between FXAIX (S&P500, 55%), FSPSX (international, 20%), FSMAX (extended market, 15%), FXNAX (bonds, 10%). It's a little conservative but not that conservative.
Fidelity says my Roth 1Y returns are 10.8% compared to S&P 500's 10.3%. It says my 1Y returns on my target date 2055 are 18.0%. Neither of those numbers can be accurate so it's hard to know what to read in to them. If I try to calculate my returns in a very simple way (take current value, subtract contributions from the last 12 months, which can be easily looked up, call that number X, then find the growth rate that takes the account value I had as Nov. 1st last year and compound that at different rates until it produces X as of now - this gives an upper bound on returns, since the returns of the various money deposited throughout the year at random times is treated as not growing at all), I get 1%. And that's 1% before inflation.
I know the S&P500 is 10% YoY over really long time scales, and I also know that number is like +/-15% year to year. But it feels like my fund picks are pretty normal yet they're not worth any more than what I put in to them since I started saving. Because of that, I'd have to have a 30+% savings rate in order to catch up to the "X salary by Y age" rule because the assumptions over the growth rate of the accounts are wildly off in the years since I started investing.
Why does it matter if no one else does it? Investing is not a social experience. Most people don't do it because they are uninformed and ignorant about how to manage their money. The easy option is the easy option because you someone else can get more of a cut of your money. You generally pick up to two of these three with any product: good, easy, cheap. The promoted target date funds are usually just easy. They have high expense ratios and are therefore not good or cheap.
I didn't think an expense ratio of 0.08% was considered high?