Don't need 1000X return to retire. Index funds and income stocks are all that's needed.

Edit: Got to like the down voters who think individual investors should be out picking stocks. Even though experts and basic investing advice tells people they should not be picking individual stocks.

Who says they necessarily need to be picking stocks? Retail investors could still utilize the same vehicles they're using on large blue chip stocks if they had access to newer, higher growth-potential companies.

There are ETF's for everything today. If more small companies were available on public equities markets, then they would be included in a variety of different ETF's. The problem is that today you need to be an "accredited investor" to buy any of the high-growth potential private companies' equity, and even then, the best companies are usually raising capital from a small number of people and organizations.

This means the majority of the high growth in equities markets is captured by high-wealth individuals, and private organizations owned and operated by high-wealth individuals. Without strong connections, it's difficult to gain access to any solid high-growth private companies.

Individual investors don't need to pick single stocks to benefit from growth. These companies also don't have a presence in various etfs and mutual funds that people can invest in, and it's not unreasonable to think that a wider selection of say small-cap growth companies might make for a better selection of small-cap stocks to put in an index.

There's another societal trend at play here, and that's the increasing pace of technological change and market disruption. Increasingly, "income stocks" are becoming "death stocks" - rather than companies with stable income streams for the foreseeable future, they are companies whose products and business models have become obsolete and who are just awaiting a competitor to replace them.

The days where the economy was relatively stable and large companies had wide moats against competition are largely over. The last 15 years has seen a large number of huge household names go bankrupt entirely, from Kmart to Sears to Toys'r'us to Chrysler to GM to MCI/Worldcom to Bear Stearns to Lehman Brothers to Wachovia to virtually every airline. Many more are now at risk, from Visa & Mastercard to Walmart to every hotel chain.

All of these huge returns for private tech companies are coming at the expense of their competitors, which are largely the big public companies that many people have their retirement money invested in.

Historically, the stock market would return 10% YoY (after averaging out). The problem is that that number has dropped. Decades ago, companies IPOed with $50m to $100m in revenue and citizens could enjoy the growth from there (like MSFT). But now, they tend to have to IPO with $1b+ in revenue (like Facebook). Many unhealthy economic factors drive down the public stock growth rate.

That is the core problem.

10% YoY for index funds = healthy. Far lower for rigged economy reasons = a large scale societal problem.

> Historically, the stock market would return 10% YoY (after averaging out). The problem is that that number has dropped.

What do you mean? The current market has many problems but recent returns being low is not one of them (of course returns going forward are something else entirely).

S&P 500 total returns (annualized) are:

17% over the last one and two years

13% over the last three and five years

11% over the last ten years

9% over the last eleven years (roughly corresponding to the peak of the previous bull market)

Roughly 28% of the S&P500's 2017 advance was due to FAANG, and 40% due to tech in general:

https://www.marketwatch.com/story/a-quarter-of-sp-500s-2017-...

Take them out and you're much closer to the historical 10% return, and that's in a bull market.

Sure, that's one of the problems with the current market.

But if understand correctly, HashThis' claim is that the market is not even returning the historical 10% average.

The problem with SP500 is survivorship bias, obviously the "top 500" companies is continually redefined every year and is, after all, the top companies, so you'd expect a much better return from a subset of the best companies rather than the market in general.

Something like Wilshire Index returns 7% CAGR over the last 20 years. Interestingly, Russell and Dow are about the same 7%.

As the economy becomes ever more permanently unequal, the concept of one number representing inflation becomes less meaningful because there is no longer one standard of living or one cultural expectation. Something like M2 is 14000 now and 4000 in 98 so thats 6.4% annually. After tax the Wilshire would only return maybe 3% or so, minus 6.4% inflation, whoops... Or you could use the famous Big Mac price index which is about 2.8% over the same time period, leading to a very slight profit of a fraction of a percent. Are you part of the separate subset of society that lives off M2 or off big macs or ...?

So investing in "the market" depending on hand waving provides a modest negative to approximately zero return. If you can pick the subset of winners in advance, the SP500 is quite profitable, although if you can pick winners in advance there's probably more profitable things to predict.

Also remember the market can remain irrational longer than you can remain solvent over all values of "irrational" or "solvent" or "longer". I have a medical insurance bill to pay next month, not over ten twenty or hundred year average. Pulling out a constant sales price from the market to live draws down a balance faster than pulling out a constant small percentage of total value over a long time period.

Then of course there's long term demographic issues. The USA is supposed to be richer in the future because... why exactly? You might get a bigger slice of the pie, but theres no particular reason to expect the pie overall to expand.

This may be a suprise for you but you can invest in an S&P 500 tracker and get the S&P 500 returns. You don’t need to pick the winners in advance.

Another thing you may find surprising: the long-term historical average return for small cap indices is higher than for large cap indices.

I don't think you understand how the SP500 works.

When you invest in the SP500 and companies drop out of it, your investment in those companies ALSO drops out.

And the publicly stated "return" of the SP500 takes this into account.

A better explanation is that stock market growth has slowed because real GDP growth has slowed [0], which it should match [1]. Why has it slowed? Well, economists have hotly debated this so you'll have to read into the dozens of theories but not once have I heard it is related startup IPO time.

[0]: https://en.wikipedia.org/wiki/Economy_of_the_United_States#G...

[1]: https://www.wise-owl.com/investment-education/is-there-a-cor...

I think the point is if early-stage growth was still part of the stock market, index funds & the like would all perform better for it. The argument is by removing early-stage growth from the market & conducting it privately, the entire open market as a whole is less lucrative.

Even more simply, just imagine how the market might look different if you could invest in a VC. You don't pick startups, you pick a VC- kind of like picking a fund today.

I think the point is it's not possible to even build a high growth index fund anymore - at least not one based on US companies. Existing funds skew towards emerging markets, and would never include a Facebook 2008-2012 or a Dropbox 2012-2015, for example.

Experts suggest this so they can remain "experts".

Actually no, it's very well known in investing that index funds tend to outperform actively managed funds over the long term[1].

[1]: https://www.thebalance.com/index-funds-vs-actively-managed-f...