Millennials: Avocados or homes?

[OMG!WTF!]

Originally Posted by peter12

Then, you're lying. Average RoR for Canadian equity in 2016 was 6.4%. How did you beat the market?

Erase the decimal point.

[blankall]

Originally Posted by peter12

Then, you're lying. Average RoR for Canadian equity in 2016 was 6.4%. How did you beat the market?

I'd also like to point out that this was in a good year, not a bad one.

[V]

A person who wants to have a family? It's great that you can get a 1 bedroom for $400k, but how then how do you make the next step up?

Once again it can be done...pour all money into savings age 18-25, buy condo age 25, buy house in undesirable neighbourhood age 33, buy actual house age 40.

This was not the experience a generation ago. It was more like buy house age 25.

I have four kids. I had 3 before I was 30.

[peter12]

Originally Posted by V

I have four kids. I had 3 before I was 30.

I am in awe of your fecundity.

[CliffFletcher]

Originally Posted by peter12

Well, they suffered from you.

I was the careful one who took pains to never be openly defiant (or to get caught at least). My sister, on the other hand...

[Enoch Root]

Originally Posted by peter12

But 6.4% was the right answer, and 7% wasn't.

To be clear, I am not complaining. I invest a lot of my savings, and I do okay, but there is some absolute nonsensical bragging going on this thread with basically circumstantial and anecdotal evidence being offered.

Why was 6.4% the right answer? Because one article presented that number?

Historically, equities have delivered about inflation + 5 to 6% (except during the high inflation years that destroyed returns).

Currently, dividend yields are about 2.5%.

Add historical expected growth to that and you get 2.5 + 1.5 +5 = 9%, which is about what the TSX has earned over its history.

One could argue that growth rates won't be as high as they have been in the past. It would be a bit of a dubious argument, profitability is actually quite high in recent years, but you could certainly make it.

However, to get to that 6.4%, you would have to assume growth rates of less than 2.5%.

And that would be unprecedented.

But sure, your answer was 'right'.

[Enoch Root]

Originally Posted by peter12

Then, you're lying. Average RoR for Canadian equity in 2016 was 6.4%. How did you beat the market?

The TSX returned 21% last year.

[peter12]

Originally Posted by Enoch Root

Why was 6.4% the right answer? Because one article presented that number?

Historically, equities have delivered about inflation + 5 to 6% (except during the high inflation years that destroyed returns).

Currently, dividend yields are about 2.5%.

Add historical expected growth to that and you get 2.5 + 1.5 +5 = 9%, which is about what the TSX has earned over its history.

One could argue that growth rates won't be as high as they have been in the past. It would be a bit of a dubious argument, profitability is actually quite high in recent years, but you could certainly make it.

However, to get to that 6.4%, you would have to assume growth rates of less than 2.5%.

And that would be unprecedented.

But sure, your answer was 'right'.

What do you mean? GDP growth? The Canadian economy will be lucky to grow by 1% this year.

[V]

This house is plenty for anyone to raise a family in. I lived in this neighbourhood for 10 years, by the time I moved I was living in a very similar house with three kids.

https://www.realtor.ca/Residential/S...Y1S7-Whitehorn

A lifetime family home for under $400k.

[Rutuu]

Originally Posted by Clever_Iggy

This really is counter to my experience. I don't invest in anything fancy - mutual funds, basic indexes, etc - through SunLife. I just looked back at my previous 6 years and I averaged 15.6% ROR. The past 3 years (the "downturn") has been 13.7 (2014), 9.9 (2015) and 12.26 (2016).

These are not GICs and therefore not guaranteed, but if you're blown away by 7% ROR, I agree, find a new investment advisor.

There was an article here in Australia about housing price growth over the last 20yrs in the City I live, it was 3-4% growth per year. Looking at the ASX200 growth over the same period it was 3-4%. Seemed about right. Difference between the two asset classes was the leverage you get in a home multiplies that 3-4% to 12-16% when levered 4:1.

Warren Buffet also recently won "The Bet" against the hedge funds. The premise was that his S&P index fund could outperform any hedge fund in the US over a 10yr period. In the 9th year his cumulative return has been 85.4% (7.1%/yr) with the closest hedge fund at 62.8% and the other competitors significantly below that.

http://www.berkshirehathaway.com/letters/2016ltr.pdf (Pg 20-22 for The Bet)

Clever Iggy you seem to be doing quite well. Over the last 6yrs the S&P fund in Buffet's bet has returned 12.4%/yr. Even subtracting management fees 0.14% for Vanguard and 2-3% for Sun Life.

[peter12]

Originally Posted by Enoch Root

The TSX returned 21% last year.

You run a financial company?

http://www.moneysense.ca/save/invest...rns-are-a-lie/

http://www.theglobeandmail.com/globe...article536314/

[V]

VTI:US has returned over 7% over the last 10 years, and that included the meltdown in '08. It also has a 1.7% dividend that you can re-invest.

[peter12]

Originally Posted by V

VTI:US has returned over 7% over the last 10 years, and that included the meltdown in '08. It also has a 1.7% dividend that you can re-invest.

If you are regularly beating bench-marks, then you are either a criminal or incredibly lucky.

For goodness sake, I have a CFA 1 and I work in marketing, and I know this stuff. I barely passed Grade 12 math, and I get that the law of averages applies for a reason.

[V]

Hey, I'm just arguing the idea that 7% is laughable. Total market index is almost 9% over the last 10 years even when you include the financial meltdown.

There is nothing wrong with setting 7% as a target.

[Clever_Iggy]

Originally Posted by Rutuu

There was an article here in Australia about housing price growth over the last 20yrs in the City I live, it was 3-4% growth per year. Looking at the ASX200 growth over the same period it was 3-4%. Seemed about right. Difference between the two asset classes was the leverage you get in a home multiplies that 3-4% to 12-16% when levered 4:1.

Warren Buffet also recently won "The Bet" against the hedge funds. The premise was that his S&P index fund could outperform any hedge fund in the US over a 10yr period. In the 9th year his cumulative return has been 85.4% (7.1%/yr) with the closest hedge fund at 62.8% and the other competitors significantly below that.

http://www.berkshirehathaway.com/letters/2016ltr.pdf (Pg 20-22 for The Bet)

Clever Iggy you seem to be doing quite well. Over the last 6yrs the S&P fund in Buffet's bet has returned 12.4%/yr. Even subtracting management fees 0.14% for Vanguard and 2-3% for Sun Life.

Interesting read. As I said in my follow up post, I am an inactive investor for the majority of my investment portfolio. The part that I do play with, my returns are more moderate and I would have been better just lumping it into the bulk of my investments.

My posts weren't meant to brag or take a side. It was more to point out my nativity on the matter and that my experience was different than another posters. Since we are dealing largely with anecdotal examples, I offered mine.

[peter12]

Originally Posted by V

Hey, I'm just arguing the idea that 7% is laughable. Total market index is almost 9% over the last 10 years even when you include the financial meltdown.

There is nothing wrong with setting 7% as a target.

If you are a hobbyist with your own ETF portfolio, then it probably isn't super unreasonable. Most investors are pretty passive - myself absolutely included.

[V]

That's one index fund. Total market. Just set it to automatically re-invest your dividends and you're done. You can't possibly get more couch potato than this.

[OMG!WTF!]

Originally Posted by peter12

If you are regularly beating bench-marks, then you are either a criminal or incredibly lucky.

For goodness sake, I have a CFA 1 and I work in marketing, and I know this stuff. I barely passed Grade 12 math, and I get that the law of averages applies for a reason.

That's just not true. A CFA is no more a ticket to market beating results than operating a successful car wash guarantees you a permanently clean car. If you want to beat the market, study that. It quite often comes down to risk management. But there are people, lots of people, who can and do beat the market year after year. It's no fluke, luck or gamble.

[peter12]

Originally Posted by OMG!WTF!

That's just not true. A CFA is no more a ticket to market beating results than operating a successful car wash guarantees you a permanently clean car. If you want to beat the market, study that. It quite often comes down to risk management. But there are people, lots of people, who can and do beat the market year after year. It's no fluke, luck or gamble.

No, I know. I was mocking my paltry lack of financial knowledge. The CFA Level 1 is just a giant grade 10 math test.

Your last sentence is totally false. People do beat the market, but it is a fluke. It has to be a fluke. You increase your risk, you increase your payout. It is luck.

[OMG!WTF!]

Originally Posted by peter12

No, I know. I was mocking my paltry lack of financial knowledge. The CFA Level 1 is just a giant grade 10 math test.

Your last sentence is totally false. People do beat the market, but it is a fluke. It has to be a fluke. You increase your risk, you increase your payout. It is luck.

It's not. You're wrong. Proof abounds. If you're genuinely curious I'll prove it. If not...6.4% ain't all that bad. Better than a kick in the pants.