How to Win at the Stock Market by Being Lazy

[brooklynite]

New York Times

Yes, there is abundant greed and venality on Wall Street. But the reality is that the stock market has also offered a path for ordinary people to build wealth — and more so in the last generation than ever before. You haven’t needed to burn down the system. All you’ve had to do is take the laziest, simplest approach to stock investing imaginable, and have a little patience.

Ever since Vanguard introduced its S&P 500 index fund 45 years ago, ordinary investors have been able to invest in broad stock indexes in a tax-efficient manner, with extremely low fees. Any schlub on the street can put money to work harvesting a small share of the earnings of hundreds of leading companies, led by some of the sharpest corporate executives on earth and their millions of employees. You haven’t had to do much of anything!

Your returns would have been strong even if you had terrible timing. Suppose you had received a $10,000 windfall in March 2000, the peak of the dot-com bubble and a moment at which we can all agree stocks were overpriced. Yet even with such unfortunate timing, if you invested that money in a low-fee S&P 500 index fund and reinvested dividends for the last 20 years, your $10,000 would have turned into nearly $28,000 by the end of this past month — a 5 percent annual return when adjusted for inflation.

And that was the single worst month in decades to begin investing. On average, if you were to select a month between 1990 and 2019 to begin investing, your annualized return through January 2021 would have been 9.8 percent after inflation. Simply for having the patience to sit on your hands.

My wife and I have never tried to game the market; we invest in the same set of mutual index funds every month and let our money work for itself.

[ananda]

1. I don't invest myself, directly, in the stock market.

I do have a financial adviser at my credit union
who has found instruments that have done very
well... mutual funds, annuities, S&P, and so on,
plus a fantastic company that put me in stock
and bond instruments that also give me monthly
and other payouts, some tax free.

[PJMcK]

2. I am not a financial wizard

And I'm not really rich. However, I did invest in a Vanguard index fund that has a diverse asset allocation. The dividends have almost all been reinvested which results in a very low tax requirement. In fact, I think the only time I pay any taxes is the capital gains obligations when I withdraw any funds. In 25 years, the fund has appreciated by over 50%.

If Trump had done the same thing I did, he would be a real billionaire. Instead, he's squandered his inheritance. What an idiot.

[cwydro]

3. I've got a nice little portfolio.

It’s been doing quite well so I can’t complain.

[Happy Hoosier]

4. I'm a terrible gambler....

I guarantee that if I try to time the market or pick winners and losers, I will lose money.

Soooo.... index funds and dollar-cost averaging for me. I am still 12-15 years from retirement, so moves in the market don't really bother me. Over a long time, I will do 8-10% average annual, just like I have for the last 25 years.

About a year before she graduated from High School, I moved my daughters' college fund to bonds, so I do not live in fear of a crash wiping out her college savings.

[NRaleighLiberal]

5. Yep. When I retired in 2010, we started with a financial adviser

she does our taxes (I started my own LLC), doesn't sell any particular investment instruments - just took the 401K from my 25 years in pharma and divided it out into about 15 mutual funds.

Here, in 2021, it has doubled - and at 65, provides great comfort with my wife and I both retired.

She checks out where the market is, seems to be going, and suggests tweaks every year. He main messages - the stock market has no heart or soul and is not tied to politics....and when things dip, just stop looking and ride it out.

[DBoon]

6. I hve been putting my retirement savings into Vanguard for decades

I am now securely retired.

Fees kill you in a down market.

No fund manager or individual investor can beat the market in the long run.

The transaction costs of trying to game the market are very significant./

[BSdetect]

10. I must be an outlier then.

+123.73%
Rate of Return*** (1-Year)
AS OF 01/31/2021

[cbdo2007]

7. If you have the money, it is a no brainer to be in the stock market.

If you don't have the money, stay very far away because it won't be worth the risk.

[BSdetect]

8. Your calculation does not seem to allow for taxes on dividends?

Allowing for taxes and inflation the 5% does not seem so attractive.

[brooklynite]

11. You'd pay the same taxes on bank interest or any other earnings...

[Beakybird]

9. What about investing in something great for the planet, like renewable energy?

I wouldn't say to risk one's whole nest egg on just one sector of the economy. But if we want a better world, shouldn't we invest a portion of our retirement into something that makes the future brighter?

[brooklynite]

14. How much do you know about the renewable energy industry?

I know something about computer technology, so I was able to make an informed investment in Apple. If you don't know much about an industry sector, deciding HOW to invest in it is risky.

[JT45242]

16. Tiaa cref has a social choice mutual fund

They invest in a wide variety of planet friendly businesses.


The account code is TICRX

The low carbon fund is TLWCX

Others probably do as well.

[JT45242]

12. That is the smart way

My brother tried to day trade because he is a smart guy and lost a couple hundred thousand that he made from selling his home when he moved out of NYC. I tried to warn him that you have to do that stuff 24/7 if you are going to day trade..but he did well at first.

I have money in about 8 different mutual funds and the slow but steady approach has averaged about 8 percent over the last twenty years.

[dsp3000]

13. Use vanguard, invest in target retirement funds or S&P index fund... can confirm.

much better than keeping your money in a saving account or mattress

[safeinOhio]

15. No funds here. I invest in high quality stocks with a record

of good dividends and growth.

Retired a long time ago and those dividends are a big part of my income. I usually cash in about 5% of my investments every year and most years I get that investment back by the next year.

Boring, just the way I like my life.

[Iwasthere]

17. I sold all my traditional stocks ($37,000) and bought ETHE and BITCOIN

Since last spring I've had mega returns. If Etherium hits $50,000.00 before years end I will have made $30,000,000.00

[PoindexterOglethorpe]

18. I have an excellent financial advisor.

Among the things he's done for me is to get me into two annuities, which I'm now taking income from. Plus, I'm able to take money out of the account each month to supplement Social Security and a small pension. My yearly income is somewhat under the national median, and a couple of hundred dollars above my state's median income. At that, I have a better cash flow than I have ever had in my life.

So yeah, investing for the long haul is the only way to do it.

I recall when day-trading was such a huge thing, and for every story about someone who hit it big were three about the person who lost everything.

Something else to keep in mind: it's almost impossible to save enough money in cash to see you through a twenty or thirty year retirement. But good investments are very likely to do so. My concern recently has been that I perhaps ought to up my spending some. No point in leaving an excess of cash to my only heir, who already has plenty. When we can all resume travelling, there are several trips I want to take before I get too old.