Comments, observations and thoughts from two bloggers on applied statistics, higher education and epidemiology. Joseph is an associate professor. Mark is a professional statistician and former math teacher.
Monday, September 5, 2011
XKCD on investing
What's sad is how frequently a guy with a calculator and basic math skills can take down large chunks of conventional wisdom.
1) high rates of return (~8%) that were only available for a short period (basically, the Baby Boom trying to buy up assets for retirement so too much money was chasing too few investment vehicles
2) Shockingly long periods of time. Even this start to look suspect at 2% real rates of return (doubling time = 36 years).
Currently, I am in the happy position of having put more money into TIA-CREF than my account is valued at. I understand investment horizons but I also understand "off to a bad start". :-)
The key to compound interest was either:
ReplyDelete1) high rates of return (~8%) that were only available for a short period (basically, the Baby Boom trying to buy up assets for retirement so too much money was chasing too few investment vehicles
2) Shockingly long periods of time. Even this start to look suspect at 2% real rates of return (doubling time = 36 years).
Currently, I am in the happy position of having put more money into TIA-CREF than my account is valued at. I understand investment horizons but I also understand "off to a bad start". :-)