/biz/ - Business & Finance

[Anonymous No.58460372]

What's the logic of the 3% and 4% rules?
Can't you just put your money into high yield dividend stocks and fuck off with safe 10% annual returns?
This is to say a million dollar portfolio could yield you $100,000/year, some of which you could reinvest and keep making more long-term.

[Anonymous No.58460375]

>he thinks he can generate a safe 10% annually
lmfao

[Anonymous No.58460376]

>>58460372
There isn't an issue with that. The issue is that you're taking financial advice from gurus and boomers who know nothing about creating wealth because they're either grifters or had it so easy that anything they tried worked.

[Anonymous No.58460610]

>>58460372
>safe 10% annual returns
lol

Stocks give around 8% annually in the long term, 3% kept for offsetting inflation leaves 5%, and 3-4% is used because stock returns are extremely noisy. Some years you loose, some you gain much more than 8%. The volatility means you can't withdraw as much, because you can fuck your balance up by withdrawing during a few years of bad returns.

[Anonymous No.58460614]

>>58460372
There's a way to get safe 300% returns every year, it's called getting a job you lazy fuck.

[Anonymous No.58460621]

High yield dividend stocks are generally not safe to hold long term.

[Anonymous No.58463556]

>>58460375
The S&P 500 returns an average of 10.26 percent annually you retard. It's pretty simple to get about 10 percent. All you have to do is put money in the S&P. Sure, some years it'll go down, but it should average out at 10 percent.

[Anonymous No.58463604]

>>58463556
Returning 10% annually isn't the same as being able to withdraw 10% per year, especially if you have a few bad years in a row.

>The S&P 500 returns an average of 10.26 percent annually
It returenED 10.26 over a period of time that everyone considers to be an unusually high period of stock returns fuelled mostly by rising valuations. You really shouldn't bet on 10% or greater returns going forwards.

[Anonymous No.58463710]

>>58463604
Well it's not as simple as I made is sound I'll admit. The idea though would be to use the gains on the particularly good years to keep you afloat on the bad years, so it all averages out. Yeah sure, no one really can predict the future of course and this 10.26 number comes from the past. Past results may not be a definite way to predict future results, but I still think it's one of the best predictors available. The economy may seem doomy and gloomy now, but when shits bad everyone will expect it to get worse and when shits good everyone will expect it to get better. That's what makes tops and bottoms. People expecting trends to continue indefinitely and buying/selling at the tops and bottoms. I have faith the economy will continue to grow at a good pace, but who knows, maybe the US will go the way of Japan. I still think the S&P is your best bet if you're looking to regularly make around 10 percent gains a year to live off.

[Anonymous No.58463811]

>>58463556
Past performance is not indicative of future results.

[Anonymous No.58463943]

>>58463710
No. Absolutely not. If you are looking to have regular income you can absolutely count on you should be looking for debt. Stock is a good way to go for growth when you have a lot of time, but you should absolutely NOT count on past success as being future success. Think of if you did exactly what you are saying between the years of 2007 - 2012. What happened? Be logical about this, the basics are the basics for a reason.

[Anonymous No.58463966]

>>58463556
>10% annually
It's unironically just luck that it has averaged out to about that amount. The data is set is far, far too small to be meaningful at all, honestly. That's like saying you should asssume Bitcoin will go up about 1000% per year on average, until the end of time, because that's been the average since 2010.
Basically "assume the stock market will average out to 10% per year forever" is terrible fucking advice.

[Anonymous No.58463998]

>>58460372
>high yield dividend stocks
say goodbye to your principal
those stocks are down only because nobody wants fucking fiat

[Anonymous No.58464008]

>>58463943
>>58463710
Stocks are for growth. Pray for 8-10% per year.
Bonds, annuities, specific dividend stocks, and debt are for distribution. Plan for 3-4% per year. This is where that number comes from OP.

>But why can't I just let my portfolio "grow" forever?
You can, but you may actually be missing out on gains by doing it. Because at the end of the day OP, what you want to do is leverage your money so it can grow even faster. For example, you buy a house with little to no money down and stick the house's worth in dollars into a distribution portfolio of stocks and bonds. This is effectively taking a margin bet on the stock/bond market. If your distribution portfolio loses too much value, you get "margin called" and lose the house. So you need 3-4% to pay the mortgage but you end up making more money with the real estate + distribution portfolio combined than you would with a single growth portfolio.
You could, of course, ignore all this and shove all your money in a leveraged stock position instead. You could take as much risk as you want.

[Anonymous No.58464081]

>>58463966
>The data is set is far, far too small to be meaningful at all, honestly
Yeah, taking the S&P 500 (or even the total US stock market) post-war has been a uniquely strong period of stock returns across time and geography, you certainly don't get 10% when you broaden your data.

I'm sure someone will say
>Just invest in the US then bro because it's got a good track record
but all the future advantages of the US are priced into the stock market already. For the US to continue to outperform the world in stock price it means public company earning expectations needs to be better than what everyone's already expecting given that everyone already knows the US has a great environment for business.

[Anonymous No.58465108]

>>58460372
Yes this is the smart strategy if you understand what a company is doing and why. Most "investment managers" are lazy accountants who put other people's money into entire industries and indexes instead of individual picks. So yes you can eat their retarded lunch by knowing which companies are going to "win" upcoming trends. It takes a long time though. I went all-in on AMD when the 2nd-gen console wars were going down because they won the contract for Gamecube, PS2, AND Xbox CircleRoundDotRing; then reinvested that money into mobile systems-on-a-chip (at a time when the iPhone was new AF.) That decision yielded tens of thousands but it took 7-8 years for the bet to really mature.

[Anonymous No.58465152]

>>58460372
The real big deal on choosing this over conventional market is anonimity, that's why we keep getting idiots going into random casino-like shit like Superverse which yieklds some dopamine on tight spots when it pumps.