Yeah I always find dot com burst comparison apt because like, yeah market corrections will probably happen, but even if you invested in big tech RIGHT before the burst you would probably still be very rich today if you just held.
Even if you invested in a company that ultimately became a winner, you'd need to be able to hold on to it throughout the correction. You put your savings in tech stocks, the tech sector undergoes a significant correction, the stocks dive, you get laid off because you also work in tech and now you have to liquidate your stocks to meet your obligations. (Or you just retire at the wrong time.)
And in any case no, you should not pour your money into tech stocks if you need that money to eat, that was true then as it is today.
They don't look at 3DFX, Transmeta, Centillium, Virata, or the numerous other companies because they are dead in the graveyard of failed companies that have lost full valuation.
Depending on how much you invest in each, if you panic-buy/sell, etc changes all that. You're also ultimately betting on whether or not there will ever be another bubble/hype in the industry, and that you are betting wide enough into fully speculative companies like Nvidia instead of just aiming for power players. People forget that the market for luxury PC hardware barely existed at the time and was populated by a very small group of wealthy consumers. Expecting that to take off against the cheap prices of console offerings and against the technical know-how of assembling/disassembling PCs is closer to faith than any rationale.
Just by law of probability and total number of actual bagholders, the vast majority of people didn't bet that way. But I guess if you think you're special or have some lucrative insight into the industry, you might think you're an exception to that rule.
I'm sure there are studies out there on the ratio of upper-middle-to-upper class households vs not, adjusted for inflation, with surveys on how they invest (if they do at all) with other factors accounted for. I know for sure that the total number of households who hold index funds (50+%) [0] far exceeds households that have a million+ in assets (10+%) [1]. If index funds were some magic bullet investment vehicle for multiplying your money, we'd see better ratios than 1:5 with only the top 20% becoming wealthy-adjacent (and that's provided that 100% of the millionaire class got rich via index funds and not other means like real estate).
[0] https://www.ici.org/news-release/ici-report-shows-mutual-fun...
[1] https://finance.yahoo.com/news/guess-percent-people-1-millio...
edit: as a corollary, I was just talking about this with someone who works in finance and the sentiment amongst ICs like them, they say, is that this is definitely a bubble that will pop at some point. The only contention is how devastating the effects will be, if it'll be a slump, a recession, or a depression.
Its very good and tells a lot!
Thanks for sharing!
It’s showing how much better or worse than inflation.
That’s not an apples-apples comparison.
Like if you don’t invest into say SNP500 then the money grows (or not) at what rate and is that rate better than the SNP500? It’s way better to get a 10% return when there’s 11% inflation if the alternative was 0%.
- Anybody wise enough to invest in the S&P 500 is likely also wise enough not to invest their entire nest egg in a single year, 20 years before retirement.
- The massive bulk of “ordinary American” 401(k) / IRA funds are in low-fee, no-tax-on-growth accounts. This chart has a nebulous “taxes and fees” component, which in this already artificial context makes even less sense to apply to annual returns.
- Counting only real growth without comparing to other investment options (real estate, bonds, cash under the mattress) fails to capture the relative value of diversified index funds. In short: Impossible to beat reliably no matter how you set the metric.
> 'Yikes': CoreWeave stock sinks after its bond yield touched 15%
https://finance.yahoo.com/technology/article/yikes-coreweave...
Which is why you buy an index, rather than try pick individual stocks.
Currently, there are three companies owned by the same person, the financials and their relative performance/competitiveness is not good despite the oversized hype in comparison to other blue chip companies. But many people have gotten great returns however, it is a don’t get caught holding the bag type of stocks Hint: The three companies are owned by same guy and has a cult like following.
The average recovery is 18 months I think (I'm in a meeting, and can't look it up), but people like my dad watched his retirement fizzle out in the dotcom bubble, because he was all in on tech. Then he moved to safer bond and realestate funds, and his value never recovered, and then 07/08 happened and he watched what he thought were "safe" investments disappear almost immediately. He pulled everything out of the market, and never invested again. He went through 2 crashes on his portfolio, and to this day doesn't trust stocks and bonds.
He was sold an annuity that according to him is supposed to double it's payout every 5 years it is left un touched, so he didn't touch it for 15 years, now that he is drawing it down, it draws from principal before ever touching the growth, and when he dies, only the principal will get passed to my mother. It was basically a scam.
If you were in on the upside then you've got much less ground to retrace.
And it's painful to watch your holdings drop like you said if you're planning on retiring in the next 1, 2, 5 years.
So I get it.
If you're 25 you've got tons of room to maneuver. If you're 60 things are a lot less rosy (even if by now you should theoretically be cycling into less volatile assets. But bonds didn't do that great either over that period) .
But that is assuming they survive the bust, which is not a given.
What about the hundreds of losers that looked good right before the burst? My coworker retells a story where he dumped his life savings in dotcom companies that went to zero.
1. Yes, if someone generally invested in "dot-com stocks" before that crash--covering both winners and losers--they might today have a surprising amount of (potential) dollars.
2. However much of that impressive-looking sum would be just because of 25-30 years in the market.
3. So we need to scale that "very rich" against someone putting the same money into an total-stock market index fund back then, which may not make it look nearly as impressive.
Yeah you won't get extremely lucky and 200x your money because you bought NVidia a decade ago, but you also won't lose all your money because you bought Enron.
Today, e.g. ZooPlus is one of the biggest pet-stuff-retailers (2023 revenue 2.5billion)
#2 "after all payments done for yourself/husband"
#1 will be the kids
I know people who bought Ask Jeeves at the height of the bubble.
https://www.etftimemachine.com/en/compare/XLK-vs-SPY?start=2...
Had you invested in XLK when it opened in 1998, then following the .com crash, it would take until early 2020 to return to parity to the S&P 500.
It took the companies that survived a decade or more to recover.
You still have to pay bills while you endure inflation and the opportunity costs in the meantime.