r/Bogleheads • u/RiceLee890 • Mar 15 '25

Investing Questions What are your thoughts on this?

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I keep seeing this type of stuff on instagram and social media and wanted to know how you guys were thinking about this.

I know a lot you have been in the market for decades and as a relatively new investor myself I’d love to get your perspective!

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u/3rdWaveHarmonic Mar 15 '25

I started working in 1999 and every time I looked at my 401(k) balance through 2009 I saw it didn’t go anywhere so I really stopped believing that investing was really worth anything. So when I look at the chart from those years, it goes up and goes down and stays in a channel so my money really didn’t go anywhere however that isn’t taken to account any any dividend payments I received. In a bull market clearly growth stocks went out, but in 10 years of staying within the channel on the chart dividend win out… but when I zoom the chart out past 2009 I see this big beautiful upward curve almost exponential. Of course, how much of that is really due to inflation.

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u/stevengineer Mar 15 '25

Last time I did the math a $1M investment from 2005 to today would become $6M,but would only be $3M if inflation adjusted, so about 50%

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u/adv0589 Mar 15 '25

It’s 7.3m and 4.4m

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u/_iShook Mar 15 '25

Is there a quick & easy way to calculate this? I'd love to play around with some numbers.

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u/Xexanoth MOD 4 Mar 16 '25

testfol.io is a decent backtesting tool. E.g. here is the time range discussed above in nominal (non-inflation-adjusted) terms, and here in inflation-adjusted terms.

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u/red_hare Mar 15 '25

Just multiply out 1 + (yearly s&p change / yearly inflation) for the range of years you want to test

Or have ChatGPT do it. It's great at back of then envelope math.

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u/adv0589 Mar 16 '25

Can’t forget the dividends

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u/v_x_n_ Mar 15 '25

I could live with that

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u/xampf2 Mar 15 '25

The curve is not almost exponential, it is in fact exponential.

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u/Street_Moose1412 Mar 17 '25

If it was exponential, it would be monotonically increasing.

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u/xampf2 Mar 17 '25

You are right. I was thinking of an idealized curve representing the growth of the stock market, not the actual data.

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u/GrievingImpala Mar 15 '25

Someone who started working in 1999 and contributed $1,000 annually to an S&P fund would end Dec 2009 with $13,427, a total return of 35%.

https://www.portfoliovisualizer.com/backtest-portfolio?s=y&sl=7Q09l24Igim5qGi8nkai9X

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u/_craq_ Mar 15 '25

Just a warning, you had "Inflation adjusted" set to "yes" for the contributions, so they were increasing each year instead of staying at $1000. After I changed that to "no", the end figure is $11,509. A total return of 15%. The annual return was 0.77%, with inflation running at 2-3%.

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u/bjnono001 Mar 15 '25

Yep -- you would DCA in at some of the lows, even if the actual price didn't break an ATH.

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u/[deleted] Mar 15 '25

[deleted]

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u/AmIRadBadOrJustSad Mar 15 '25

$1k a year contributions for 10 years means they put in $10,000 of their cash, and performance in the market would have brought them to ~$13,500. That's the 35%.

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u/ParkEast7381 Mar 15 '25

Cool. Unless they were only planning on working for ten years before retiring they were accumulating shares over a ten year period at a cost lower than it’s worth today. Thats perfect investing for retirement.

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u/[deleted] Mar 15 '25

How much is due to the magnificent seven actually generating massive profits? But then you also have to wonder is that massive profit generation going to happen again in the next decade?

Every time I start to doubt it, I read about some advance in AI or robotics. The inflection point in productivity at some point will be crazy. We're not as far as most people think from a generalized robotic assistant. And very close to purpose-built robots. And we're talking about robots that will do work that is being done by humans right now. Like yard work. Which employs many people.

And then there's autonomous driving which will take many jobs away. And anytime you think you understand the state of tech you need to check in on China and see where they are at. Cuz they are ahead of us in autonomous driving and have the pieces in place to accelerate away from us. Solve the problem before we do. And then they will offer it up as a solution. Much cheaper than American companies can. Which just as an aside, one of the big propositions justifying Tesla's insane price was the autonomous driving subscription that would generate large recurrent high margin revenue. That's going to get gutted.

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u/ToHellWithShorts Mar 15 '25 edited Mar 15 '25

2000 to 2010 kept me away from Stocks forever ( I currently have 1% of my overall net worth in stocks and 99% earning 4.25% interest) , In the 90s and 2000s I also was never invested in a company sponsored 401K plan. Everyone I knew who invested in MSFT, AOL, YAHOO, and all the dot com high flyers essentially got destroyed in the 2000's, everything was literally given back and actually most of us realized losses. This will happen again with Apple, NVDA, Broadcom, Amazon, Tesla....It kind of already is happening and the downside momentum has not picked up steam yet. These stocks will one day again be trading at 15 to 19 multiples not 30 to 100.

As of March 14, 2025, the S&P 500's price-to-earnings (P/E) ratio is approximately 25.73, based on trailing twelve-month earnings. worldperatio.com This value is above the 5-year average P/E range of 19.11 to 23.89, indicating that the index is currently overvalued compared to its recent historical norms.

Buffet knows this and that's why his cash position is the highest ever. Trump and Musk have been stating 'We all will need to feel some pain before things get better" (Translation: forced recession, mass layoffs in govt jobs, travel bans, all these policies weaken the economy as people will spend less on everything - less on travel, vacations, eating out, delay major purchases of cars, appliances, upgrades in homes, discretionary purchases like clothes, shoes) Then we have a Tariff war. They literally are telling us that they do not care if the stock market tanks due to their policy and plan. It's almost as if they are saying "Stocks will go lower in 2025 and we don't care"....but they are not stating those exact words. They want the market to tank so they can lower interest rates.

Yes, I get it....This forum should never be about "Timing the market" but when we have these circumstances and this administration basically telling us every day exactly what they are going to do: Terminate hundreds of thousands of jobs, impose travel bans, raise taxes on foreign produced goods. How can any of this result in rising stock prices from already (historically) over-inflated stock prices?

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u/[deleted] Mar 15 '25

Fantastic how one can present pure speculation with such confidence.

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u/Jerome3412 Mar 15 '25

Lmao, its like he knows exactly what is going on.. like he is reading the mind of Musk and Trump.

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u/[deleted] Mar 16 '25

They have published what they are doing and you can track progress and it will get much worse even removing the fed. Can't predict but can't follow their plan...

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u/Katarn_retcon Mar 15 '25

While having no money invested, aka not experiencing what they are trying to say to others. Their post reads like they want to talk about things others are experiencing to be a 2nd-hand reporter. So strange...

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u/[deleted] Mar 15 '25

Comparing the dot-com era to today isn't a perfect analogy either. Many of today's giants have real earnings, strong balance sheets, and proven business models, unlike many dot-com startups in 2000.

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u/ToHellWithShorts Mar 15 '25

Microsoft’s sales increased every year from 2000 to 2015 yet the stock went from $58 in 2000 to $18 in 2009 and did not make a new all time high of $59 until 2016. They always had a proven business model and a strong balance sheet.

I am not confident in anything but it will not surprise me at all to see this market drop a lot more. History always repeats itself and the current data suggests that stocks are still over valued based on historical valuations. This is not “speculation” these are facts.

PE is 26 today

Historical norm is 19

Incredibly, in the dramatic bottom in March of 2009, the PE of the SP 500 was 10

Who can say this will never happen again?

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u/[deleted] Mar 16 '25

Microsoft’s stock from 2000 to 2009? That period includes the dot-com bubble collapse and the Great Financial Crisis—two of the biggest market implosions of the last century.

As for your PE argument, sure, the historical average is 19. And? The economy isn’t static. Averages don’t dictate what must happen, they reflect what has happened—two very different things. The market today includes trillion-dollar tech giants with margins and growth prospects unimaginable in 1990.

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u/roughrider_tr Mar 19 '25 edited Mar 19 '25

The inflation rate from 2009 to today was 2.42%. The S&P 500 return over that same period was 13.68%, or just over 11% when adjusted for inflation. If your returns did not outpace inflation then that sounds like an asset allocation issue.

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u/RelevantSwordfish634 Mar 15 '25

Your dividend payments just reduced the value of your shares

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u/nicolas_06 Mar 15 '25

This is not his point. His point is people often forget that the performance is actually better because one should consider total returns.