vania-janet/multiturn-rag-retrieval-data huggingface dataset:
The Dow crashed from there, but even today just over 18,000 the return has averaged 7.07% plus dividends. A lengthy tangent, but important to understand. A gold fan will be able to produce his own observation, citing that some percent of one's holding in gold, adjusted to maintain a balanced allocation would create more positive returns than I claim. For a large enough portfolio that's otherwise well diversified, this may be true, just not something I choose to invest in. Last - if you wish to buy gold, avoid the hard metal. GLD trades as 1/10 oz of gold and has a tiny commission as it trades like a stock. The buy/sell on a 1oz gold piece will cost you 4-6%. That's no way to invest. Update - 29 years after that lunch in 1987, the Dow was at 18448, a return of 6.78% CAGR plus dividends. Another 6 years since this question was asked and Gold hasn't moved, $1175, and 6 years' worth of fees, 2.4% if you buy the GLD ETF. From the '82 high of $850 to now (34 years), the return has a CAGR of .96%/yr or .56% after fees. To be fair, I picked a relative high, that $850. But I did the same choosing the pre-crash 2750 high on the Dow.
"This page from simplestockinvesting.com gives details of total returns for the S&P500 for each decade over the last 60 years, including total returns for the entire 60 year period. It is important to understand that, from an investors point of view, the total return includes both the change in index value (capital gain) plus dividends received.  This total then needs to be adjusted for inflation to give the ""total real return"". As noted in the analysis provided, 44% of the total return from the S&P500 over the last 80 years comes from dividends.  For the DowJones30, this site provides a calculator for total returns and inflation adjusted total returns for user selected periods. Finding comparable analysis for the NASDAQ market is more difficult.  The NASDAQ market site provides gross values for total returns over fixed periods, but you will then need to do the arithmetic to calculate the equivalent average annual total returns.  No inflation adjusted values for ""real"" returns are provided, so again you will need to combine inflation data from elsewhere and do the arithmetic."
One can see this expressed more easily with a growing perpetuity: Where P is price, i is income, r is the rate of return, and g is the growth rate of i. Rearranging, r looks like: Here, one can see that a higher P relative to i will dull the expected rate of return while a higher g will boost it. It's fun for us value investor/traders to say that the market is totally inefficient. That's a stretch. It's not perfectly inefficient, but it's efficient. Valuations are clustered very tightly around the median, but there are mistakes that even us little guys can exploit and teach the smart money a lesson or two. If one were to look at a distribution of rs, one'd see that they're even more tightly packed. So while it looks like P/Es are all over the place industry to industry, rs are much more well clustered. Tech, finance, and discretionaries frequently have higher growth rates so higher P/Es yet average rs. Utilities and non-discretionaries have lower growth rates so lower P/Es yet average rs."
"I looked at data from Sept 2010 to present: Standard deviation is what shows the spread shape of returns over time, and it meanS that about 2/3 of the time, AAPL return was within +/- 1.65 higher/lower than the daily average return which was .21 %. Not sure where to go with this except to suggest that in fact, AAPL is more volatile than the S&P and even another random tech company. With time, I'd probably come up with a list of stock more volatile. I know that when I look at a list of stocks I track on Yahoo, there are always a few that are just as volatile on a given day.  Excel makes the above analysis easy to do for a given stock, and it's actually an interesting exercise, at least for me. Disclaimer - the shape of stock returns is not a bell curve, and STdev is just a best fit.  Edit - given more time to tinker on excel, it would be interesting to see how the stock's volatility tracked over the years, did it increase or does it feel that way due to the high price? A $20 swing on a $600 stock is the same as a $2 swing on a $60 stock, yet ""up $20"" sounds huge."
Since Brad answered with a great reply, I'd like to offer another comment: Be careful with the results. Annualized returns of short term trading can produce some crazy results. For example, a 10% gain in a week isn't unheard of for individual stocks, but (1.1)^52 = 142. or a 14,100% return.  This may be obvious, but may help those who aren't so familiar with the numbers to understand that data running less than a year isn't going to provide as much useful conclusion as longer term. Note: Even a year doesn't really reflect success in a given strategy.
"The question ""do they?"" is a fair one, but the answer, ""we can only observe the past, and that's what they did,"" may not be so satisfying to you. It's safe to say that any longer term view of any market will show far less volatility than a short one. It only takes a glance at the return of the 2000's 2009 27.11 2008 -37.22 2007 5.46 2006 15.74 2005 4.79 2004 10.82 2003 28.72 2002 -22.27 2001 -11.98 2000 -9.11 (for the S&P) to see that in an awful decade containing -37% and -22% that the full decade was ""only"" down 9% in total or just less than 1% per year compounded. I'm not predicting any particular returns forward, just noting this is how the math works. DCA performs well through such a decade, better than in a rising one. You are offered the opportunity to buy into a market selling below the long term trend. Added note in response to Enno's answer below - On rereading the linked article, I see where the author cites Zvi Bodie who clearly made a logical error. He concludes that since a 20 month S&P put costs triple what a 2.3 mo put costs, that there's more risk the market falls over the longer period, not less. American options can be sold or exercised at any time. If a 2 year option were cheaper than a 2 month option, no one would buy the shorter term. It's pretty simple that the Options Pricing Models take time into account and their value, put or call, increases along with the time till expiration. On a lighter note, when I take the S&P data for 1871-2012 (I know, no S&P back then, but it's Schiller's data) I get average 40 year returns of 44X, similar to the author's conclusion, $1K growing to $44K. But, the Standard deviation is 28. So the high end of +1 STDEV is $72K, not the author's $166K. Although, the low end 44-28=16 comes close to his $14K figure.
Yes, and there are several ways, the safest is a high-yield savings account which will return about 1% yearly, so $35 per month. That's not extremely much, but better than nothing (you probably get almost zero interest on a regular checking account).
You made 94$ on an investment of 554.80 *100 = 55480$ for an approx holding period of 1 year. So the % return is ~0.16%, which is not much better than the short term us treasury rate. The current 1 year treasury rate is 0.27%: http://ycharts.com/indicators/1_year_treasury_rate So yes, you have a risk free portfolio, so you make the risk free rate. Remember this is an European option, so you are stuck for 1 year. if you found the same mispricing in an American option, then you found an arbitrage.
If your gut told you to buy during the depths of '09, your gut might be well-calibrated. The problem is stock market declines during recessions are frequently not that large relative to the average long run return of 9%:  A better strategy might be hold a percentage in equities based upon a probability distribution of historical returns.  This becomes problematic because of changes in the definition of earnings and the recent inflation stability which has encouraged high valuations:  Cash flow has not been as corrupted as earnings now, and might be a better indicator:  This obviously isn't perfect either, but returns can be improved. Since there is no formulaic way yet conventionally available, the optimal primary strategy is still buy & hold which has made the most successful investor frequently one of the richest people on the planet for decades, but this could still be used as an auxiliary for cash management reserves during recessions once retired.
The average joe wouldn't... we would bury our cash in a mayonaise jar before we would take a guaranteed loss... (although the argument could be made that a positive return that doesnt outpace inflation IS a negative return)...  big corporations with billions on hand dont have that luxury however... some investments may also guarantee investors that a certain percentage be allocated to bonds... and in times of deflation a negative return could still provide a net positive return...
Prices are adjusted for return and not payout.  So if you take the ratio of the close price and the adjusted close price, it should remain constant. The idea behind a total return (back-)adjustment is to give you a feeling how much money you would have needed back then to reach the price today under the premise that all distributions (dividends, spin-offs, etc.) are reinvested instantly and that reinvestment doesn't cost anything.
Or you owned one that was bought out, so you got a ~30% return + whatever else the stock had returned prior to that. Everyone is pushing for the companies they hold to be bought for a quick paycheck, so you're seeing fewer companies...
Actually, it does make some sense.  Returns are where you have a customer who is not satisfied, and the company's job is to redeem themselves.  If you piss someone off when they're already unsatisfied with something, you risk alienating them permanently.  Easy returns mean that you get the return knocked out quickly, and get them spending money again, in your store, and that generally outweighs the cost of the return.
"From the Vanguard page -  This seemed the easiest one as S&P data is simple to find. I use MoneyChimp to get -  which confirms that Vanguard's page is offering CAGR, not arithmetic Average. Note: Vanguard states ""For U.S. stock market returns, we use the Standard & Poor's 90 from 1926 through March 3, 1957,"" while the Chimp uses data from Nobel Prize winner, Robert Shiller's site."
Well this is not the best situation.  Sorry to your friend. First off ROTHs are out, you need earned income.  Secondly, I don't think the focus should be on retirement planning until there is again an earned income.  Thirdly, this person is just in a bad spot. Lets assume that you can find some really good mutual funds, that consistently return 10% per year.  At best this person can only pull out 10K per year without touching principle.  At that income level, taxes are not much of a concern; not as much as surviving.  If this person knows anything about investing, they know funds don't work like this.  They could be down 5%, down 5%, up ~40% in three years to give an average of 10% return.  Which of course further complicates matters.     This person (IMO) should seek to start a different career.  One that can cater to any long term issues this person has with pain/disability.  The money could be used toward training/education in order to get money flowing again.  That is not to say the full amount should be used for a BA in Russian Folk Literature, but some minimum training to get a career that starts earning real money.
It didn't help that Benjamin Graham didn't care about money so never reached the heights of Buffett who frequently alternates with Bill Gates as the richest person on the planet. Buffett has given much credibility, and academia finally caught on around in 2000 or so after he was proven right about a pending tech collapse that nearly no one believed would happen; at least, that's where I begin seeing papers being published delving into value concepts. If one looks harder, academia's even taken the torch and discovered some very useful tools. Yes, investment firms and fellow value investors kept up the information publishing, but they are not academics. The days of professors throwing darts at the stock listings and beating active managers despite most active managers losing to the market anyways really held back this side of academia until Buffett entered the fray and embarrassed them all with his club's performance, culminating in the Superinvestors article which is still relatively ignored. Before that, it was the obsession with beta, the ratio of a security's variance to its covariance to the market, a now abandoned theory because it has been utterly discredited; the popularizers of beta have humorously embraced the P/B, not giving the satisfaction to Buffet by spurning the P/E. Tiny technology firms receive ridiculous valuations because a long-surviving tiny tech firm usually doesn't stay small for long thus will grow at huge rates. This is why any solvent and many insolvent tech firms receive large valuations: risk-adjusted, they should pay out huge on average. Still, most fall by the wayside dead, and those 100 P/S valuations quickly crumble. Valuations are influenced by growth. One can see this expressed more easily with a growing perpetuity: Where P is price, i is income, r is the rate of return, and g is the growth rate of i. Rearranging, r looks like: Here, one can see that a higher P relative to i will dull the expected rate of return while a higher g will boost it. It's fun for us value investor/traders to say that the market is totally inefficient. That's a stretch. It's not perfectly inefficient, but it's efficient.
Excel has two functions you can use: Your question has the CD with a APR and the savings account that mentions both APR and APY. So convert them both to APY to compare them. The savings account (2.27 APY) will return more money based on the numbers in your question (2.27% vs 1.56%) The previous part was the math part of the answer. The following takes into other considerations. For this case the Savings account will return a larger amount of money if the conditions don't change. The CD rate is guaranteed, but the savings account could change every business day. The savings rate could go up, or down. If you expect the savings account rate to rain higher than the CD you might not want to lock into the CD. If you expect the savings rate will drop then get the CD. Of course  there are penalties if you cash in the CD early.
You should use the Gordon Growth model, but you are using the wrong rate.  required return = rf + market premium x Beta  rm = 0,12, premium = 0,08 --&gt; rf = 0,04 thus rr = 0.04 + 0.08 * 1.5 = 0.16  then you get $15/(0.16-0.05) = $136,36
I think that those options might well be your best bet, given the potential 700% return in one year if you're right. You could look and see if any Synthetic Zeros (a Synthetic Zero is a derivative that will pay out a set amount if the underlying security is over a certain price point) exist for the share but chances are if they do they wouldn't offer the 700% return. Also might be worth asking the question at the quant stack exchange to see if they have any other ideas.
"anything that produces steady income will produce a ""real return"" (return above inflation) in a zero-interest rate environment: Note, however, that all of these will decline in value if interest rates rise."
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After you return the $76,000 in leverage, you're left with $3,000, or a net loss of (3,000 - 4000)/(4000) = -25%. The math illustrates why using leverage increases your risk, but also increases your potential for return. Consider the first scenario, in which the index increases to 1,610. If you had forgone using margin and spent $80,000 of your own funds, your profit would be (80,500 - 80,000) / 80000 = .625%. This is smaller than your leveraged profit by a factor of 20, the inverse of the margin requirement (.625% / .05 = 12.5%). In this case, the use of leverage dramatically increased your rate of return. However, in the case of a decrease, you spent $80,000, but gained $79,000, for a loss of only 1.25%. This is 20 times smaller in magnitude than your negative return when using leverage. By forgoing leverage, you've decreased your opportunity for upside, but also decreased your downside risk. 1) For futures contracts, the margin requirements are set by the exchange, which is CME group, in the case of the E-mini. The 5% in my example is higher than the actual margin requirement, which is currently $3,850 USD per contract, but it keeps the numbers simple. Also note that CME group refers to the initial margin as the performance bond instead.
&gt;At 15K per year for the 40+ years of work from 22 or so to 65, it will be 600K.   Hah. You can't take nominal terms like that. Even if you take just inflation at say, 2% a year, and a modest required rate of return of 8%, the present value of 15K a year for 40 years is 146,685. So basically if you expect to get only 15K a year more for the next 40 years, you can only afford to pay 146,685 dollars for tuition + forgone income today. That's just to break you even. And many people invest much more than that.
"6% isn't ""too high"" in terms of market rates at the moment, however it's a very subjective question whether it's too high for you. The real question to determine is if paying 6%, can you make more than 6% return (to cover the costs plus your profit)? As for a rule of thumb, there's none I know of, however your best bet is to take the time to model it in Excel (not difficult).  It's different for each portfolio or investment. Something with a high standard deviation of returns is already high risk, adding margin to it only makes it worse.  So, long story short is that, ""it depends""."
You are comparing a risk-free cost with a risky return. If you can tolerate that level of risk (the ups and downs of the investment) for the chance that you'll come out ahead in the long-run, then sure, you could do that.   So the parameters to your equation would be: If you assume that the risky returns are normally distributed, then you can use normal probability tables to determine what risk level you can tolerate. To put some real numbers to it, take the average S&P 500 return of 10% and standard deviation of 18%.  Using standard normal functions, we can calculate the probability that you earn more than various interest rates: so even with a low 3% interest rate, there's roughly a 1 in 3 chance that you'll actually be worse off (the gains on your investments will be less than the interest you pay).  In any case there's a 3 in 10 chance that your investments will lose money.
The problem with rate of return calculation on short positions is, that the commonly used approach assumes an initial investment creating a cash outflow. If we want to apply this approach to short selling, we should look at the trade from another perspective. We buy money and pay for this money with stock. Our investment to buy 50$ in your example is 1 share.  When closing the short position, we effectively sell back our money (50$) and receive 2 shares. Our profit on this position is obviously 1 share. Setting this in relation to our investment of 1 share yields a performance of 100%   in reality, we do not sell back the entire cash but only the amount needed to get back our investment of 1 share. This is actually comparable to a purchase of stock which we only partially close to get back our invested cash amount and keep the remaining shares as our profit
I'll mirror what the others have said in that your expectations for returns are wildly out of line with reality. If you could achieve that with only moderate risk hopefully you can see that you could ladder those returns by re-investing them and become a billionaire in short order. You may have noticed that there are a lot of really financially savvy people who are not billionaires. So the math for your plan falls apart somewhere, obviously. However, in the spirit of being helpful, and with the caveat that super high returns involve super high risk I'll try and point you in the direction where this is theoretically possible, even if the odds would be better buying lottery tickets. One way to get more leverage from your money than just buying stocks is to buy options. With an options strategy your return/loss will be magnified greatly compared to buying stocks. That is, you can lose or gain a much higher multiplier of your original investment. That said, I don't advise doing that with any money that you can't afford to lose every penny of, because you likely will.
Please do give an example that offers 50% returns. If it is rigged and you are successful, then are you not suggesting that you are personally involved with the rigging?   I mean, I'd love to believe you, but your cringe worthy writing makes me doubt that you're such a high level player.
I learned most of this stuff from 3 textbooks in school probably totaling $900 between the 3. I imagine you don't want to spend the cash on that. I would suggest finding a source online. A lot of the surface level stuff you are looking for can be found online on websites like Investopedia. They are a great resource and are free usually.
This is similar to your TFSA question. While the S in RRSP or TFSA stands for savings, it does not stipulate exactly what instruments you use to build up those savings. With few exceptions, you can hold any type of investment in either an RRSP or TFSA. Thus, do not think of them as savings accounts per se, but more like umbrella accounts, or plans. It's actually the financial industry that creates these misnomers of so-called RRSPs, which are usually GICs or balanced mutual funds held inside an RRSP plan, or TFSAs, which are literally savings accounts held inside a TFSA plan. The most versatile accounts are the self-directed RRSP or TFSA accounts, usually through a discount broker, where you can purchase many different types of investments inside your registered accounts, including stocks, bonds, mutual funds, GICs, gold, etc. Thus a share purchase plan held inside an RRSP is completely eligible and may be a sensible investment for retirement savings.
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I looked a bit at the first 3, .24% expense.  There's a direction to not discuss individual investments here, so the rest of my answer will need to lean generic. I see you have 5 funds. I'm surmising it's an attempt at 'diversifying'. I'll ask you - what do these five, when combined, offer that a straight S&P 500 index (or some flavor of extended market) doesn't?  I've gone through the exercise of looking at portfolios with a dozen funds and found overlap so great that 2 or 3 funds would have been sufficient.  There are S&P funds that are as low as .05%. this difference may not seem like much, but it adds over time.  To your last point, I'd consider a Solo 401(k) as you're self employed. One that offers the Roth option if you are in the marginal 15% bracket.