3Sem.
In principle, I would agree with these considerations.
But since when has the market yield been 10%pa? More like half.
But since when has the market yield been 10%pa? More like half.
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@Epi For my consideration, I have assumed the nominal market return, i.e. not adjusted for inflation.
"The average stock market return of the S&P 500 is about 10% annually - and 6% to 7% when adjusted for inflation" (https://www.sofi.com/learn/content/average-stock-market-return/#:~:text=The%20average%20stock%20market%20return%20of%20the%20S%26P%20500%20is,years%20with%20much%20lower%20returns.)
Why nominal and not real? If I were to use the real return, I would theoretically also have to discount the loan installment / loan interest rate by inflation for a clean comparison - after all, €1,000 in interest charges in 2035 is not comparable with €1,000 in interest charges in 2024.
"The average stock market return of the S&P 500 is about 10% annually - and 6% to 7% when adjusted for inflation" (https://www.sofi.com/learn/content/average-stock-market-return/#:~:text=The%20average%20stock%20market%20return%20of%20the%20S%26P%20500%20is,years%20with%20much%20lower%20returns.)
Why nominal and not real? If I were to use the real return, I would theoretically also have to discount the loan installment / loan interest rate by inflation for a clean comparison - after all, €1,000 in interest charges in 2035 is not comparable with €1,000 in interest charges in 2024.
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@Mister_ultra But to speak of "market return" for the average return of the S&P 500 is also a bit far-fetched🤔. At least the MSCI World or similar should be used for "market return"...
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@All-in-or-nothing That's right! However, 73% of the MSCI World now consists of the USA.
Personally, I have an even higher US quota of around 82%. In my opinion, the remaining 18% are also heavily dependent on the US, for example TSMC or MercadoLibre, which are even listed on the NASDAQ.
Nevertheless, you are of course right and I have of course made it easy for myself. The yield can also be completely different, inflation can be significantly higher/lower,...
But I didn't want to be too precise. Whether it ends up being 9% or 10% nominal doesn't make a big difference for my considerations :)
Personally, I have an even higher US quota of around 82%. In my opinion, the remaining 18% are also heavily dependent on the US, for example TSMC or MercadoLibre, which are even listed on the NASDAQ.
Nevertheless, you are of course right and I have of course made it easy for myself. The yield can also be completely different, inflation can be significantly higher/lower,...
But I didn't want to be too precise. Whether it ends up being 9% or 10% nominal doesn't make a big difference for my considerations :)
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•3Sem.
@Mister_ultra 10%pa since 1993 in the SP500. That may be true, but those were also boom years for US large caps.
"Market return" is more like 7%pa (exl. inflation) since 1970 in the ACWI. So rather 4-5%pa.
"Market return" is more like 7%pa (exl. inflation) since 1970 in the ACWI. So rather 4-5%pa.
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•@Epi You're right, of course, and it's clear that returns over the next few years could be well below the average of recent years/decades!
If this were to happen, my "bet" would of course be less successful.
As I have a significantly higher US share, I am planning or calculating with the higher return of 9-10% (7-8% real).
Nevertheless, the 5-6% bottom line would still be just fine if the interest rate on the loan is around 3%.
Unfortunately, I won't be able to say whether it worked out or not for another 10-20 years 😂
If this were to happen, my "bet" would of course be less successful.
As I have a significantly higher US share, I am planning or calculating with the higher return of 9-10% (7-8% real).
Nevertheless, the 5-6% bottom line would still be just fine if the interest rate on the loan is around 3%.
Unfortunately, I won't be able to say whether it worked out or not for another 10-20 years 😂
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