Hosted by Sean & Katelyn Mulcahy.
Together, we discuss personal finance and how it affects me as a young adult moving forward. On Dads Daughters and Dollars, I learn from my dad the keys to financial independence and general money management.
Why You Want Volatility
What is VOLATILITY?
The speed or degree of change in prices is called volatility. Turns out you want volatility. Why?.Volatility is what you want because volatility leads to returns.
3 Reasons
1)To make money in the financial markets, there must be price movement. Fortunately, the stock market obliges everyday because price movement is a constant in the markets. If the markets did not go up and down randomly you wouldn’t have compounding. To get compounding you need volatility.
2)Taking a long-term view is important
Long term Investors tend to be less concerned with volatility. Why?
They stay invested because Timing the market is impossible
It’s virtually impossible to predict exactly when the top or bottom of a market will be. When investors try to ‘time the market’, they run the risk of buying high and selling low. An investor who missed the 10 Best Days in the Market over the past 112 years-that’s 10 days out of 49,910 days-he or she would have missed 2/3rd’s the Total Gains of the Market. MISS 10 DAYS- LESS 66%
ODDS OF EARNING A POSITIVE RETURN OVER TIME BY HOLDING AN INVESTMENT
Holding Time % Chance of A Positive Return
15 Years 95%
20 Years 100%
30 Years 100%
So by Holding an Investment like the S & P 500 or the Total Stock Market Index over 20 years, there is a 100% chance of a positive return.
3)Why To Stay Invested
Over time, stock values increase. That is not an opinion, it is a simple fact.
EXAMPLE -Cost of a 8.5 oz. bottle of Coca Cola in 1960-.08 cents. Cost of a 8.5 oz. bottle of Coca Cola in 2023-.86 cents.
STAYING FULLY INVESTED
From 1963 to 2004 - 40 years ( A period of 10,400 trading days)
If you stayed fully invested you had an annual average return of 11%.
However if you missed just the 90 Best days (Best Days are when the Stock Market went up the most) , your return would have been 3% a year. 90 Days over 40 years is just over 2 days a year not being perfect.
If you invested $10,000 in 1963 and stayed fully invested that 11% annual return would be worth $740,000 in 2004. If you missed those 90 Days, that $10,000 turned into $32,000 in 2004! Staying fully invested the WHOLE TIME earned you $708,000 More.
So logically, if stocks will inevitably increase in value over time, those that stay invested will benefit.
Episode #108:Why Smart People Stay Invested
https://www.dadsdaughtersanddollars.com/podcast-financial-independence/episode/26a38e9d/ep-108-why-smart-people-stay-invested
1 Nov 2023
Ep.714: A Quick Lesson From Warren Buffett
A QUICK LESSON FROM W (https://www.cnbc.com/2008/03/03/warren-buffett-answers-your-emails-on-squawk-box-transcript-part-1.html)ARREN BUFFETT
If the Dow Jones Industrial Average, at 33,057 as of this date in early November 2023, compounds at 1.47% annually, what will its value be on Dec. of 2099? The end of the century - 76 years from now.
That would take the Dow to 100,000.
What if the Dow compounds at 4.6% annually?
That would bring the Dow to 1,000,000 by the end of the century. 1,000,000.
Now imagine that the Dow compounds at 7.8% annually. That would push the Dow Jones Industrial Average past 10,000,000 by Dec. 31, 2099.
That is still below its 8.4% average over the past 30 years.If we compound today’s 33,057 Dow at 8.4%, we get a Dow Jones Industrial Average at the end of the century over 15 MILLION.
Let’s put that in dollars. That means every $100 invested now (today) will turn into $45,943.64 in 76 years. Let’s say your child is 3 years old and you invest $200 a month or $2400 for the year and your child is 3. In 76 years or the end of the century that $2400 turns into $1,102,647.48 for them.
Those rates of return don’t include any boost from dividends. Also that is below the 9.8% the S & P 500 has returned over the last 30 years.
Lesson -Even at low to moderate rates of return over long periods of continuous growth turn small amounts into mountains of money. This is important for investors to remember.
18 Oct 2023
Ep.713: What's Predictable About Personal Finance?
THINGS THAT ARE PREDICTABLE ABOUT PERSONAL FINANCE
1)The stock market will go up and the stock market will go down. Every year there are rallies and every year there are declines. It is the cost of being in the stock market. Accept it as fact.
2)Stock Market indexes are a zero sum game . Poker is an example of a zero-sum game since the sum of the amounts won by some players equals the combined losses of the others. Since the value of an index includes all gains and losses, it is, by definition, a zero sum game. Every outperformance in the market implies an underperformance or loss in the market somewhere else. At any time, half of invested assets must outperform the average market return and the other half must underperform it. Once costs & fees are subtracted, though, it becomes increasingly difficult to beat the average market return.
3)You can have a bad low-cost portfolio AND you can have a good low cost portfolio, but you cannot have a good high cost portfolio.
4)Index funds do so well because their fees are so low. That is the reason over the long term ( 20 years or more) they finish in the top 95% of funds over actively managed funds.
5) People will sell when the stock market is high and sell when it is low. IT IS THE WORST TIME. DON'T DO IT.
6)More money will make you happier, or money will solve all of your problems. USUALLY MORE MONEY MEANS MORE PROBLEMS.
Link to Bogleheads University. Do yourself a favor and watch these 10 short videos.
https://boglecenter.net/bogleheads-university/
Link to 2 part Episode about Jack Bogle and index funds.
Episode 113
https://podcasts.apple.com/us/podcast/ep-113-follow-the-michael-jordan-of-investing/id1523622122?i=1000492240303
Episode 114
https://podcasts.apple.com/us/podcast/ep-114-follow-the-michael-jordan-of-investing/id1523622122?i=1000493091225
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