I'm a 21 yo with $70k to sock away who's confused as to getting a solid 7% guaranteed year over year.

But obviously that's not what's stopping us from socking away $70k at 7%.

Nothing's guaranteed but the odds are very, very good. If you invest in a diversified index fund like VTI then 7% is a reasonable average growth estimate.

Investing a lump sum is a risk -- you'd cut your fortune nearly in half if you invested in 2008. This isn't an issue for most folks who save over time.

Frankly, the largest thing stopping folks from investing is financial literacy. The second largest thing is probably lack of disposable income.

You're completely right. Grabbing some Vanguard index ETF and dollar cost averaging is definitely what I (and others) should be doing.

I'd bet 7% YoY over 20 years is conservative.

Typically the 7% number is used for after inflation

> financial literacy

How does one gain it? Everywhere I look, there's so many scam artists and so much confusion that I don't know what's true / reasonable anymore.

Thank you. Every HN thread about the stock market seems to ignore pr downplay risk. If the stock market was really risk-free everyone would be able to retire a millionaire.

At least historically, there is no reason everyone couldn't.

There is no 30 year period in the history of the s&p 500 that returns less than 7% if I remember correctly.

Just imagine what you’d have gotten out of investing in the German, Russian, Chinese or Rhodesian stock exchanges in 1900. I don’t know what happened to people who were heavily invested in the French stock exchange in 1939 but I doubt it was good either. I wouldn’t want to be in the South Korean or Japanese stock exchange if North Korea does anything. You may think war is unlikely but so did a lot of people in 1913. The USA may be the safest available what with the oceans to the East and West and the client states to North and South but it’s not like a civil war would be unprecedented.

Most people don't invest in ultra-cheap index trackers though. They pay high fees for funds that can under-perform the market.

To be fair, index funds are a relatively new thing.

Put $70k into VFIAX for 40 years. That will get you $2,061,991.75 at retirement @7% interest. Maybe a little more or less but this is inflation adjusted. I’d say if you are planning a normal to frugal retirement that is all you really need to invest.

Stocks. Not an every year guarantee but over 20-50 years you'll be fine... If you want 40% you can apparently get Argentinian bonds at the moment ... [EDIT: This last bit is a joke, if it's not clear]

Of course Japan's Nikkei index is still well below its peak in 1989. It isn't smart to assume that 7% will continue forever, particularly since developed economies' growth rates have all slowed, and without massive immigration slowed demographic growth makes it unlikely the rates will increase again.

In any case, if you believe your charitable donations are better off invested in the stock market than being put to charitable work today, then why bother donating? That means you don't believe in the charity. It would be better to find a more effective charity!

Japan now appears to be a special case (also what about dividends reinvested?)... But by all means, diversify. I admit to not having a crystal ball.

As to putting money to charity today I agree that might be a better idea.

[EDIT: Even with dividends this particular time period in Japan yielded terrible returns. Investing in the stock market for long periods doesn't guarantee returns, nothing does, but it's a pretty good probability.]

> Not an every year guarantee but over 20-50 years you'll be fine

only in the aggregate. You might hit a particularly bad spell , or some black swan event happens just as you need to liquidate the holdings.

Stock needs management of some kind (even if it's index, you'd still need to decide when to liquidate, and seize the earnings while high rather than keep betting until you require the funds).

The whole idea of passive investment is no management and no timing. That's proven to outperform most active management. Yes, you could get unlucky, the world can collapse into chaos, humanity could get destroyed, or various other risks. Definitely owning the US stock market over the last 70 years would have had a pretty good return.

So we just need another world war with the associated period of rebuilding and massive economic growth due to the development of integrated circuits and women joining the workforce.

You don't think the developing world continuing to develop will have a version of that effect?

Maybe. Maybe climate change wrecks the economy. Who knows? Past performance is not a great indicator of future performance.

Future value = present value * (1 + interest rate) ^ time

FV = PV * (1 + i) ^ t

FV and PV are in dollars, i is a percent, and t is number of years.

We know FV, i and t and can solve for PV.

8,200,000 = PV * (1 + 0.07) ^ 70

PV = 8,200,000 / 1.07 ^ 70

So 72,000 compounded over 70 years at an interest rate of 7% has a future value of 8,200,000.

He worked backward to see what X would need to be for X to grow to 8200k in 70 years and got 72k. Under an assumption of 7% returns per year on average, which is a fair number to use for the stock market over a long period of time (over a short period of time it's usually a lot lower or a lot higher than that).