It is true that you have to adjust for inflation. 1.68% seems low to me. Remember that those bonds may sell at less than their face value, muddying the calculation.
This article quotes 7% above inflation for equity.
It comes out at a rate of 4.79% PA if you reinvest dividends, and 1.6% if you don’t, after adjustment for inflation. If you’re aiming to save efficiently for the future, you would reinvest dividends.
4.79^41 = 6.81
So your discount factor over 41 years is pretty huge. For 82 years that would be a factor of 46, and for 100 years that’s a factor of 107.
And I should add that markets are wickedly anti-inductive. With all the people being prodded into the stock market by tax policies and “finance gurus” … yeah, the risk is being underpriced.
Also, there needs to be a big shift, probably involving a crisis, before risk-free rates actually make up for taxation, inflation, and sovereign risk. After that happens, I’ll be confident the return on capital will be reasonable again.
This is all survivorship bias and nothing more, many other stock exchanges crashed completely
I presume that you mean cases where some violent upheaval caused property right violation, followed by the closing of a relevant exchange?
I agree that this is a significant problem. What is the real survival ratio for exchanges between 1870 and 2010?
However, let us return to the original point: that cryo would make people invest more in the future. Suppose I get a cryo contract and expect to be reanimated 300 years hence. Suppose that I am considering whether to invest in stocks, and I expect 33% of major exchanges to actually return my money if I am reanimated. I split my money between, say, 10 exchanges, and in those that survive, I get 1.05^300 or 2,200,000 times more than I invested—amply making up for exchanges that don’t survive.
So are you saying that the S&P returned 1.0168^41 times more than you invested, if you invested in 1969 and pulled out today? Is there a web app that we can test that on?
It is true that you have to adjust for inflation. 1.68% seems low to me. Remember that those bonds may sell at less than their face value, muddying the calculation.
This article quotes 7% above inflation for equity.
It seems low but it’s correct. Risk-free interests rate are very very low.
Individual stocks carry very high risk, so this is nowhere near correct calculation.
And even if you want to invest in S&P index—notice the date − 2007. This is a typical survivorship bias article from that time. In many countries stock markets crashed hard, and failed to rise for decades. Not just tiny countries, huge economies like Japan too. And by 2010 the same is true about United States too (and it would be ever worse if it wasn’t for de facto massive taxpayers subsidies)
Here’s Wikipedia:
Empirically, over the past 40 years (1969–2009), there has been no significant equity premium in (US) stocks.
This wasn’t true back in 2007.
Actually, yes, there is such a web app
It comes out at a rate of 4.79% PA if you reinvest dividends, and 1.6% if you don’t, after adjustment for inflation. If you’re aiming to save efficiently for the future, you would reinvest dividends.
4.79^41 = 6.81
So your discount factor over 41 years is pretty huge. For 82 years that would be a factor of 46, and for 100 years that’s a factor of 107.
This is all survivorship bias and nothing more, many other stock exchanges crashed completely or had much lower returns like Japanese.
And I should add that markets are wickedly anti-inductive. With all the people being prodded into the stock market by tax policies and “finance gurus” … yeah, the risk is being underpriced.
Also, there needs to be a big shift, probably involving a crisis, before risk-free rates actually make up for taxation, inflation, and sovereign risk. After that happens, I’ll be confident the return on capital will be reasonable again.
I presume that you mean cases where some violent upheaval caused property right violation, followed by the closing of a relevant exchange?
I agree that this is a significant problem. What is the real survival ratio for exchanges between 1870 and 2010?
However, let us return to the original point: that cryo would make people invest more in the future. Suppose I get a cryo contract and expect to be reanimated 300 years hence. Suppose that I am considering whether to invest in stocks, and I expect 33% of major exchanges to actually return my money if I am reanimated. I split my money between, say, 10 exchanges, and in those that survive, I get 1.05^300 or 2,200,000 times more than I invested—amply making up for exchanges that don’t survive.
So are you saying that the S&P returned 1.0168^41 times more than you invested, if you invested in 1969 and pulled out today? Is there a web app that we can test that on?