[Just a Guy]

I find it odd that you used the three bad years to prove your point, yet ignored all the good years before that which allowed you to accumulate that million dollars for significantly less money. To accumulate a million dollars with bonds would cost you at least a million dollars of after tax dollars, to accumulate it with stocks took significantly less money, even with the dates you selected.

 

[MrBlackhill]

I've just sent the average, min and max returns for every 15-year window between 1972 and 2020.

Even though I'm 100% equity, I don't want to enter the debate. In my opinion, there's simply one fact : stocks have obviously a wider spread of outcomes compared to bonds, therefore stocks can make you filthy rich or totally broke, while bonds can bring you some profits and little losses.

 

[hboy54]

I have always thought picking a start date, end date decades later, to compare investing results highly stupid. I have never seen someone invest all the money they will ever invest one one day in their 20s or 30s only to come back 30 years later to see how they did. James' suggestion to do a monte carlo simulation just moves the needle from highly stupid to very stupid.

The most interesting and useful study would be comparing investing say $100 every pay over 20, 30 or 40 years amongst these various equity/bond ratios and see what wins, preferably with a monte carlo simulation. Even this isn't that enlightening as most people spend their first 2 decades of earnings getting a roof over their heads with no money to put in the markets.

At the end of the day I think the dominant reason for financial success or not is an individual's behaviour and habits.

 

[MrBlackhill]

Hold on.

Backtesting a specific start and end date with a single investment at the start date is meaningless.

Backtesting a specific start and end date with a cashflow (contributions or withdrawals) is better as I used for comparison.

Backtesting and using the rolling returns of an investment provides more information, but Portfolio Visualizer does not allow this analysis with cashflows unfortunately.

Stimulating using the Monte Carlo simulation allows cashflow and it builds a simulation based on historical returns which then provides a range of possible outcomes and their percentile, which is great. It's actually the best we have available for free on a web tool.

 

[Just a Guy]

I find it funny that people constantly complain that returns others get are “Impossible”, that they must be lying...why? Because they expect everyone to follow their strategies which don’t work. The idea that their ideas are bad (like bonds being a waste of time) is like attacking their religion...they’ll hold onto their ideals until their dying day while shouting alternatives are heresy, insisting everyone needs to make money their way.

 

[james4beach]

I have always thought picking a start date, end date decades later, to compare investing results highly stupid. I have never seen someone invest all the money they will ever invest one one day in their 20s or 30s only to come back 30 years later to see how they did. James' suggestion to do a monte carlo simulation just moves the needle from highly stupid to very stupid.

I think you might not understand what the Monte Carlo simulations do.

We never know what conditions will exist at the time one starts, and ends, their investment adventure. The MC will play out many possible scenarios based on historical market behaviour, and shows you the range of possible outcomes. This is useful when considering withdrawal strategies, like living off your portfolio... this is what @MrBlackhill gave an example of. The MC simulation is very appropriate for assessing that situation.

At the end of the day I think the dominant reason for financial success or not is an individual's behaviour and habits.

I agree that the investor's behaviour and habits are extremely important. But they cannot overrule the random and unpredictable nature of markets.

An investor can do all the right things, make all the smartest decisions and have optimal behaviour ... and can still fall short of the historical average market performance. This is due to the random or unpredictable nature of the market.

 

[Gruff403]

I was brought up borderline poverty and debt was to be avoided at all costs. Friends told me that you couldn't retire if you had debt. Debt was an anchor around your neck. I woke up and realized it's no big deal under the right circumstances. It's secure income and cash flow that truly matters and having the ability to manage the debt. You can be debt free with a fully paid for home and no way to feed yourself if you have no income. Debt is simply a tool. We constantly hear about the Debt to income ratio and how it was getting worse but I chose to look at debt to asset ratio. People worry about having $200K in debt but yet have $600K in assets through a home, savings TFSA, RRSP etc... They can cover their debt three times. That is the value of a net worth statement.