So we are in August 2020. I am not going to spend time telling you what has happened this year in the world :) But here I just curated the view of different smart people that may give you different perspectives on what they think about putting your money in different places. Some will be right, some will be wrong, but they are all certainly people worth listening to. In no particular order:
- Where money comes from (I guess one should start there, if in the end, all what you are trying to do is to conserve or grow that):
- Stock market returns accounting for inflation. The short story:
- $1 in 1950 bought you the same as $9.1 in 2010.**
- $1 invested in S&P in 1950 with dividend reinvestment would be worth ~50 in 2010 if you had reinvested the dividends, once you account for inflation. If you didn't reinvest the dividends it would be only worth about $7. Certainly the gains are much lower than many financial advisors will tell you but still great and a good hedge against inflation. An example would be to look at Jimmy Carter's presidency (1/1977 to 1/1981) with this calculator. The total gain with div reinvested adjusted for inflation in that period was a mere 5%. BUT the inflation was actually 50%! If you left the money under the mattress, you would have lost 50% of its value at the end of his presidency.
- ** Is inflation what you really care about? For the most part, yes, but the key thing to keep in mind is that you get money and hope to use it on stuff. You would hope that at least when you want to buy something, it will cost the same or less than today. There are products that you can buy today but some you got to wait (can't buy food for 2040). In those, inflation is critical. Nevertheless, what you plan to buy may or may not match what the government considers in the basket of products for inflation. So, watch for those. For instance, the main one is one of your biggest expenses, housing. As it is so big, people usually doesn't miss it/gets fooled by government data. But it is interesting to note why they do not include that (different topic).
- Is gold a good hedge against inflation? With the last stimulus of 3 trillion dollars, a lot of people says that there will be inflation and that Gold helps offset that. Some articles on the topic:
- Ray Dalio: highly respected in the investment world, founder of Bridgewater. I am no one to judge his knowledge and way of thinking (which I think it is really good) but I do find his texts not so easy to understand (probably my fault more than his) and a bit repetitive (could include different angles to the same concept):
- How the economic machine works?
- The Changing World Order (a 2020 series of articles on how he sees the US position in the world evolving, the effects on macro-economy, the potential role of other countries like China...). I am just starting to read it so can't really judge yet...
- John Hussman. To many what is called a permabear (someone who always thinks the market is going to go down). He got this reputation over the last 10 years as he claimed the market was overbought but kept going up. He admits that although he may be right on the first (market fundamentals), he didn't appreciate the fact that people (psychology) may still keep pumping the market up (market internals). Regardless, I find his analysis sound and you can learn quite a bit reading his monthly notes.
- Liquidity concept
- Want to invest on start-ups?
This is work in progress but anyhow hope it helps...
Resources:
No comments:
Post a Comment