What I am saying is this - we should always consider real rates of return. You said that someone DCAing over time is guaranteed to succeed - earning a nominal annualised average return of 9%. But once you factor in inflation, that will be significantly less. Let's us use VAS for example, in 2010 VAS had a nominal return of -1.49%. Slightly negative, not terrible right? But when you factor in inflation, VAS's real rate of return for that year was -4.41%. Not insignificant. Now do that for every year in a 20 year period and tell me what the annualised average return is. Index investing and DCAing has become this religious like cult where apparently is has become impossible to outperform markets. Obviously I disagree and wish these people would factor in one of the biggest drags on performance returns - inflation, before they start espousing their zero effort nominal annualised average returns of 7-9%I guess what you are saying it that the dollar cost averaging that would have earned about 9% over that time would have earn less than 9% once you factor in inflation, that is true.
but inflation is still a curse on the trend follower, especially the one that got it wrong and earned 0% or worse lost 10% on average each year.
Whole heartedly agree. Futile exercise from both sides.I am not here to argue which strategy
True. Always the possibility of this.but you also have to admit that if you try you are opening yourself up to the possibility of a worse result.
Also true.After all for every $1 you beat the market average return by, some one else has to underperform by $1 to fund your over performance, that’s just simple math.
This is probably true. But, if I am going to have to sit through a 40-50% drawdown, I want to be putting the odds in my favor that I will be getting more than a 7-9% nominal rate of return. Sitting and leaving my returns to chance without having some protection like a stop loss or trailing stop isn't my view of the world and does not suit my trading psychology.If you recommend 100 people take up trend following rather than dollar cost averaging, some will win some will lose, but if you recommend 100 people take up dollar cost averaging the market, all 100 will get the market average return, which over time has proved to be a decent return.
9% return over the time frame being discussed does best inflation, and in general holding shares is a god inflation hedge over time, because the assets owned and the products produced have natural inflation hedges.What I am saying is this - we should always consider real rates of return. You said that someone DCAing over time is guaranteed to succeed - earning a nominal annualised average return of 9%. But once you factor in inflation, that will be significantly less. Let's us use VAS for example, in 2010 VAS had a nominal return of -1.49%. Slightly negative, not terrible right? But when you factor in inflation, VAS's real rate of return for that year was -4.41%. Not insignificant. Now do that for every year in a 20 year period and tell me what the annualised average return is. Index investing and DCAing has become this religious like cult where apparently is has become impossible to outperform markets. Obviously I disagree and wish these people would factor in one of the biggest drags on performance returns - inflation, before they start espousing their zero effort nominal annualised average returns of 7-9%
100% agree. Inflation is a curse on all market participants regardless of strategy.
Whole heartedly agree. Futile exercise from both sides.
True. Always the possibility of this.
Also true.
This is probably true. But, if I am going to have to sit through a 40-50% drawdown, I want to be putting the odds in my favor that I will be getting more than a 7-9% nominal rate of return. Sitting and leaving my returns to chance without having some protection like a stop loss or trailing stop isn't my view of the world and does not suit my trading psychology.
I understand what you're saying, but, are you really trying to explain to me that just because someone is a buy and hold investor, that inflation adjusted returns don't apply to them? Because that is insane.9% return over the time frame being discussed does best inflation, and in general holding shares is a god inflation hedge over time, because the assets owned and the products produced have natural inflation hedges.
but as I mentioned bringing up inflation is a red herring, because your trend follower is equally affected by inflation.
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inflation lowers the spending power of money, but the reason it does that is because prices rise over time.
Therefore, the prices of the products sold by the companies on the stock market rise over time, as to the capital value of the assets they own, this over time increases the shares prices, giving long term holders a natural inflation hedge.
for example when baked beans were $0.25 a can Woolworths probably made $0.01 profit selling it, but now that baked beans are $1.25 a can, they make $0.05 selling it.
So Woolworths and most other companies on the markets profits will increase in value to match inflation due to the revenue streams expanding with inflation, so there is a good chance that the long term holder will be protected from any inflation over time.
No I didn’t say that at all, my original point was simple pointing out that dollar costing averaging into the example given would have improved the return from 2% to 9%.I understand what you're saying, but, are you really trying to explain to me that just because someone is a buy and hold investor, that inflation adjusted returns don't apply to them? Because that is insane.
Why not go for a value stock like FMG or T?Praying for a crash these days, but no dice, yet.
Does anyone really do the tedium of moving around a decent sum between all those bank deals with arcane rules to squeeze the absolute most from a cash account? All saving interest rates (even on term deposits - which I'm not interested in) are uninspiring now, but the sometimes ok deals on comparison sites look a lot better than what I'm currently receiving.
But it's a lot of aggravation for things like intro rates that only last 3 months or deals that mean I gotta make certain # of transacs a month on their visa debit card and/or have linked transaction account. Could mean sometimes going with purely online neo banks or credit unions, any entity that guarantees up to government-backed threshold that has the best rate offer at the time.
Trying to squeeze the max rate out of savings products, hopping from account to account, seems like a special purgatory but might be wise if your pot is decent, to somewhat offset erosion by inflation (that may soon get crazy).
This is kind of an anti-trading post, so likely a bit against the grain. Everything safe just seems too expensive at the moment.
Why not go for a value stock like FMG or T?
Plenti is a good place to store some cash.Praying for a crash these days, but no dice, yet.
Does anyone really do the tedium of moving around a decent sum between all those bank deals with arcane rules to squeeze the absolute most from a cash account? All saving interest rates (even on term deposits - which I'm not interested in) are uninspiring now, but the sometimes ok deals on comparison sites look a lot better than what I'm currently receiving.
But it's a lot of aggravation for things like intro rates that only last 3 months or deals that mean I gotta make certain # of transacs a month on their visa debit card and/or have linked transaction account. Could mean sometimes going with purely online neo banks or credit unions, any entity that guarantees up to government-backed threshold that has the best rate offer at the time.
Trying to squeeze the max rate out of savings products, hopping from account to account, seems like a special purgatory but might be wise if your pot is decent, to somewhat offset erosion by inflation (that may soon get crazy).
This is kind of an anti-trading post, so likely a bit against the grain. Everything safe just seems too expensive at the moment.
Plenti is a good place to store some cash.
I also obviously use cash holding to offset interest on my home loan, which is has the added benefit of being a tax free return.
I think if you check out Plenti’s provisionfund, you will find it offers investors quite a lot of protection, and puts it in a better position than most alternatives such as corporate bonds etc.The P2P stuff is not gov guaranteed and not funds at call. Perish the thought, but in a true situation where something serious goes down, with genuine safe stock bargain implications, I would not wanna have money returned to me reliant on citizen borrowers repaying me like that.
Yeah you're right if you have a home loan then offset will be best, as you'll save more on that than you get from a bank account.
What happened to Ratesetters, or is that now Plenti?I think if you check out Plenti’s provisionfund, you will find it offers investors quite a lot of protection, and puts it in a better position than most alternatives such as corporate bonds etc.
But no it’s not government guaranteed, (neither are banks over certain limits), but then again things that are government guaranteed offer negative returns at the moment after tax and inflation, so you have to make a decision about earning a return or reducing risk.
I keep some cash at bank, but I hate having more cash in the bank than my offsets accounts can absorb, so I put some into Plenti.
Post in thread 'Anyone go ALL IN at the depths of a crash?' https://www.aussiestockforums.com/threads/anyone-go-all-in-at-the-depths-of-a-crash.33525/post-1126553What happened to Ratesetters, or is that now Plenti?
They split from the UK based parent, changed their name to Plenti, and listed on the share market.What happened to Ratesetters, or is that now Plenti?
wait a week.Is opportunity about to present? Is this the bust before the boom, or the bust before the abyss?
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