Can S&P500 Really Give 10% Returns?

The general knowledge is that you should invest in the S&P500 longer term and dollar cost average in. But why is it that so many people do differently? I myself struggled to do so even when I know the general idea. What keeps myself and others from doing the correct thing and why did I realize to finally make the leap into investing for the long term in a low cost index?

How’s it going everybody this is beat the bush today i’m going to look at the s p 500 and if you can really count on it to give you 10 annual returns every single year this video is brought to you by weeble you can get two free shares of stock valued at up to two thousand dollars one share for opening up an account and one share for depositing just five dollars

Check out my referral link down in the video description below now you’ve been watching this channel you realize that i try to time the market quite often sometimes i buy individual stocks sometimes i buy very very volatile crypto i don’t know what it is about me there’s like not really a gambling gene because i don’t actually like gambling at a casino i’d say in

The very very beginning when i started investing yeah i just kind of listened to all the advice okay just pick a 401k plan you pick some sort of target date fund and i just left it in there and once in a while after i see the market drops a lot and i get scared and stuff i just pull it out right and of course i didn’t make very good gains on those years but also

It didn’t matter too much because i had very little money in it but now that i am sort of semi-retired and you know i played around with stocks enough to know that well you know i’m kind of lagging behind if i took all the lucky hits that i got right bitcoin having made me maybe 30k tesla made me about 60k dogecoin made me about 120 130k here so far if you add

All this up and add up you know some of the good gains that i’ve had in other things i probably lagged behind if i just invested in the s p 500 all the way from the very beginning and just kept on dollar cost averaging and just kept on piling more and more money in as i got more i probably would have been quite a bit better off than right now but the thing that

Keeps me from going all in in it right now or ever is usually because i have this timing the market mentality where i think that oh it’s at all-time highs maybe i can wait maybe a couple years because it looks like it’s really high and it’s gonna drop down by let’s say 40 50 it’s gonna have another dramatic event like the dot-com bust or maybe the housing bubble

Bus right all of those events cause dramatic downturns and then i can swoop in and pick some up and then you know get like 50 gain within one year or so all-time highs it’s as high as it’s ever going to be it’s not going to go higher than that but if you really look at the s p 500 right it just keeps on going up you cannot count on it always going up right but

The thing is if you can wait long term three years five years 10 years or maybe 20 years 30 years then you have a very very high probability that you will make better than average gains of an average investor take a look at 2008 that one year decline is about not minus 38 percent and uh around the dot com bust it was minus 10 one year minus thirteen percent and

See also  Cannmart announces asset purchase agreement with (TSXV: N) (OTCMKTS: NXTTF)

Then minus twenty three percent they can get you really scared looking at those things and if you just happen to buy it and it does that then what you’re supposed to do is wait it out even if it takes three years you need to wait it out usually it comes back within one and a half years so you need this mentality that if it drops that much you have to wait that

Long for it to come back here’s the s p 500 annual returns from 1928 to 2021 in total 94 data points over here and you can see you know it goes up and down there’s a lot of up but it’s really hard to make anything out of it so i decided to take a look at it what happened statistically if you’re able to have a longer time frame let’s say you are able to hold on

For three years five years and 10 years this is what happens when you hold on to it for three years how i did the calculation is i took a look at what happens at the beginning of the year and beginning of the year three years later and then you took a look at the returns there and the number that you see here is compounded annual growth rate let’s say it’s 30 and

You just divide by three it’s not that if it’s a 10 compounded annual growth rate and you do this for three years it’s going to be 10 the first year and if you do another 10 the next year you’re actually gonna get 11 so this is a compounded number that you see here so if i just do a three year period and you randomly pick the history anywhere on the history of

The s p 500 this is the histogram over here of 91 points so it has a good you know good amount of points and you can just kind of eyeball that most of the data points here is above zero percent but there are a few that are not so good there are three data points that are minus 12 there are five data points that are at minus ten percent two data points at minus

A two at minus six two at minus four and two at minus two statistically there is a lot of chances that you will get more than zero percent gain on average you’re actually going to get probably around seven percent gain if you average all this out together so you can kind of think of it like this you start investing you don’t know when it’s going to go up or down

You have to assume you don’t know because you really don’t otherwise you can just keep on timing the market and get like really really outside gains so i’m gonna sit here in a position and say i don’t know where the market is gonna go tomorrow or the next year but statistically if i start investing in it let’s just say it’s like a random dart to this histogram

Chart and any single data point has an equal chance of success on average you can see that i have a high chance of having positive gains over three years in fact let’s say i get to repeat this over and over again i get to keep on throwing darts at it this is actually a really positive sum game because if i just keep on throwing darts at it sometimes i might get

See also  Malaysia's Anwar Ibrahim on Goldman and 1MDB

Minus 12 over a three year period sometimes i might get positive 28 but if i keep on doing this i’m going to make money now i’m making this video partly to convince you guys and also to convince myself yes i miss out on the run-up on the s p 500 but you know you got to get in some time it’s all at all-time highs right now either i get it now or never basically so

I put in some of it in and i have a little bit cash left over i’d say probably about 25 of my portfolio is still in cash and i’ll probably wait a little bit and then i’ll put the rest in just to let you guys know that i’m not just kind of talking over this because you know that i invested in individual stocks in fact i just sold one portion of my in individual

Stocks in coinbase i realized i didn’t do much research into it so i just sold that off and used the money to buy into uh the s p 500 in particular i just bought vo i didn’t really go for the zero management fee thing here’s the five year histogram i have 89 points here and you can see the extremes kind of shrunk in before it was minus 12 to 28 now it’s

Minus 12 and then 24 if you do a five year period but you can see that the certainty of getting 10 gains get more and more prominent the main peak here is actually at around eight percent yeah if you hold for a really long period at least over the entire history of the s p 500 all the way to 1924 you’re gonna be able to expect about eight percent gain but if you

Kind of look more recently in the past three decades then the gains are actually higher why is that i am not too sure maybe you know growth is sort of more exponential now maybe we have more technology so now let’s take a look at the 10 year because i think 10 year is probably doable for me if i am 40 if i’m willing to wait it out all the way till i’m 50 this

Is what i can expect 10-year period histogram this is compounded annual growth rates over this 10-year period if you just kind of eyeball it it’s also around seven percent the extremes really really flattens out the most negative that you’ll ever get over a 10-year period is minus five percent well this is kind of worth it because there’s only three chances out

Of 84 that you’re going to get a minus five but there’s like a whole bunch of chances that you’re going to get a positive gain look there’s three chances that you’re going to get 16 gain compounded this is huge there’s 10 chances that you’re going to get 11 compounded annual gain 12 10 chances that you’re also going to get compounded annual gains so if you just

Throw a dart at this these are really really good odds if you want to kind of be have high certainty that you’re going to make good gains if you look at all the retirement youtube channels this is like the advice they spew out but i really want to take away all the doubts over here because somehow when i invested i knew i knew all of this already i know about

See also  Is Churning Checking Accounts Worth It

You know long term dollar cost averaging smp 500 i know all the things i talk about in this video but i think the main thing that kept me from piling all my money in maybe even three years ago when i you know kind of really went full time on youtube is i still have in the back of my mind that i feel like i can outperform the market and my gosh it really took

My whole investing career like what 15 years or so all the way since i’m 25 to realize that oh my gosh you know i tried all i can i tried very very short term investing you know day trading for an entire year i tried somewhat longer-ish type of trading i tried buying this or died yeah you know i have some successes over here but i’m starting to realize that i am

Trailing behind in the gains and luckily i don’t have that much assets all along the way so now that i you know amassed enough fortune it is that much critical to get it right over the long period so if you really really believe this you can have pretty high certainty that even if you invest today at all-time highs you have over 94 percent chance that you are

Going to make more money than before you’re not always gonna make like 20 gain every year but you have probably over 50 percent chance that you’re gonna make compounded annual gains of over eight percent and this is a really really good odd thanks for watching this video i hope this kind of helps you guys out in doing what i personally am afraid of doing and

I personally am not 100 into s p 500 yet i’d say maybe you know half of it is in there right now and i’m sort of dollar cost averaging into it because i am a little afraid that it might drop significantly you know there’s always a lot of news out there delta variant lambda variant right that might just tank the economy the thing you are investing in when you

Invest really long term you have to believe that the u.s economy the u.s ingenuity is going to keep on going up whatever production rate that we’re at in all the companies right people always figure out how to make something faster and cheaper because of capitalism right quality of life has gone up historically it has trickled up higher and higher and i think this

Is kind of what you’re investing in when you invest in s p uh 500 long term timing the market is kind of like being stubborn or like you know thinking that you’re special because you know you know you got to think you’re special a little bit because you know you got to try or else you don’t know if you’re like some super genius investor if you like buy this and

It goes up you buy that it goes up and then oh my gosh you can get like 30 game 50 gain every year year after year right very few people do that thanks for watching this video don’t forget to get your two free shares at weeble as long as you open up an account get one share deposit five dollars get a second share like this video and subscribe for more thanks for watching you

Transcribed from video
Can S&P500 Really Give 10% Returns? By BeatTheBush

Scroll to top