Anti-trading. Dollar Cost Averaging

D

dozu888

A simple savings calculator.

https://www.bankrate.com/calculators/savings/simple-savings-calculator.aspx

- assume medium income $50000 or so; monthly saving $500 into QQQ
- QQQ returned 12.75% per year since inception;
- starting balance $1

See - trading is pointless. With a dumb method above, you reach $1m after 25 years, $7m after 40... this means you can early retire in late 40's into a modest life, or retire in early 60's and live gracefully... There is no reason not to become rich in America... short term trading with 95% fail rate is pointless.

Some preemptive answers to certain people's reactions:

- well, $7m in 40 years won't buy your much.... right, this is assuming you never get a pay raise for 40 years;

- well, look if you bot QQQ in 2000, how long it took you to break even.... right, that's the point of DCA, you keep buying thru the crashes and accumulate many more shares at cheap.

- well, what else...

Actually the math is too simple, everybody understands it... the major hurdle is actually the psychology... in 40 years you will likely go thru 50% draw-downs a few times, not to mention the 10-20% shake-downs that happen almost every year... very few people can actually get to the finish line, because every time there is a shake-down, there is also constant media story push, that convince you this time the sky is indeed falling... look how many people are actually really long in equities right now, and how many people are hiding in 'safety' such as gold/silver/even BTC right now.

The math is simple, the implementation is not.
 
dozu888 said:
short term trading with 95% fail rate is pointless.
More...

You're correct... most people shouldn't bother active trading.

But you conveniently took a technology focused index that started right before one of the biggest booms in history... tech. You should be a bit more realistic. Saying that 95% fail rate is pointless, perhaps... but over 12% a year is not realistic either.

I doubt the Nasdaq index will keep performing to an average of 12% a year. Would be more in-line with the long term stock average, closer to 7%. Including avg inflation of (neg) 2%, that's 5%...

So in real terms, that would be a total of about 300k after 25 years, of which is 150k monthly deposits.
In 40 years time, that's 750k of which 250k deposits... not sure if it's enough to be "f$ck-you-money"...
 
JackRab said:
You're correct... most people shouldn't bother active trading.

But you conveniently took a technology focused index that started right before one of the biggest booms in history... tech. You should be a bit more realistic. Saying that 95% fail rate is pointless, perhaps... but over 12% a year is not realistic either.

I doubt the Nasdaq index will keep performing to an average of 12% a year. Would be more in-line with the long term stock average, closer to 7%. Including avg inflation of (neg) 2%, that's 5%...

So in real terms, that would be a total of about 300k after 25 years, of which is 150k monthly deposits.
In 40 years time, that's 750k of which 250k deposits... not sure if it's enough to be "f$ck-you-money"...
More...

http://financeandinvestments.blogsp...nasdaq-100-1986.html?_sm_au_=iVVfs1q2qHv3fVV5

- 30+ years of track record, with 2 major bear markets thrown in, should be long enough; actually if you factor in 2017, it's closer to 13%
- I didn't mention that the internal rate of return should be slightly better than the nominal 12.75%, because you do buy more shares when the nominal is cheaper;
- nobody knows the future for sure... I can also counter argue that with the exponential growth of technology, the future may return more than 12.75%.. and the anecdotal evidence is pointing that way, the per capita revenue generated by AMZN AAPL FB etc is far greater than the traditional companies, and the gap is still increasing.
 
I agree mostly. If people want to give trading a go, I suggest they make sure they’re doing it after they’ve got some sort of retirement or systematic investment being properly funded. Like others I question whether QQQ can deliver 12% for 20 more years though, not arguing one should disregard long term index investing.
 
If you want to see something insane look up the charts of QLD or TQQQ. I certainly am not suggesting systematically investing in those this far into a bull market, but didn’t all the pros say those weren’t good for long term holding and only good for intraday? Really kicking myself for listening to them back in 09 and 10
 
FXbeachbum said:
If you want to see something insane look up the charts of QLD or TQQQ. I certainly am not suggesting systematically investing in those this far into a bull market, but didn’t all the pros say those weren’t good for long term holding and only good for intraday? Really kicking myself for listening to them back in 09 and 10
More...

yup... actually this is not much different from people taking mortgages to buy rental houses... why not stocks.. except the volatility in stocks present more psychological challenges.

if every time you buy/sell stock, you have to get title insurance, inspection, 60-day closing, and pay 6% commission to the broker, most people would be rich with stocks by now... the liquidity of stocks, a perceived 'advantage', actually becomes the biggest disadvantage for individual investors.

we are on the edge of some major AI break-thru now... Google's Alpha-zero figured out chess from scratch, in 4 hours it beats the previous strongest chess robot... it's voice AI just created a media stir... imagine the major labor displacement in the coming years and major profit for the tech giants, and businesses adopting these technologies.... we shall see!
 
dozu888 said:
yup... actually this is not much different from people taking mortgages to buy rental houses... why not stocks.. except the volatility in stocks present more psychological challenges.

if every time you buy/sell stock, you have to get title insurance, inspection, 60-day closing, and pay 6% commission to the broker, most people would be rich with stocks by now... the liquidity of stocks, a perceived 'advantage', actually becomes the biggest disadvantage for individual investors.

we are on the edge of some major AI break-thru now... Google's Alpha-zero figured out chess from scratch, in 4 hours it beats the previous strongest chess robot... it's voice AI just created a media stir... imagine the major labor displacement in the coming years and major profit for the tech giants, and businesses adopting these technologies.... we shall see!
More...

I won’t complain if QQQ does continue it’s past performance. I would hope most traders do some systematic investing(in separate accounts) along with their trading.
 
Are you seriously saying investing in a 3x leveraged tech index ETF like TQQQ is a good idea for a long term investment strategy? Really? A 30% correction is enough to wipe out.... you're kidding yourselves if you disregard that very likely possibility.
 
JackRab said:
Are you seriously saying investing in a 3x leveraged tech index ETF like TQQQ is a good idea for a long term investment strategy? Really? A 30% correction is enough to wipe out.... you're kidding yourselves if you disregard that very likely possibility.
More...

that's why I said it's no different from taking out mortgages to invest in rental houses... if you put only 30% down, then a 30% correction does wipe you out.

Although due to the volatility it's more likely for TQQQ to do that :)
 
You must log in or register to reply here.
Back
Top