There was a story on Reddit a while back about a soldier who bought a Rolex in the 1960s for $120, and it was worth $70,000 today. Pretty lucky, right? But then someone pointed out that if he'd invested in the S&P 500 instead, it would be worth $25,000 today (if I remember the figures correctly).
It's pretty hard to outdo investing in the S&P 500, and most anyone can do it.
> There was a story on Reddit a while back about a soldier who bought a Rolex in the 1960s for $120, and it was worth $70,000 today.[0]
> Pretty lucky, right? But then someone pointed out that if he'd invested in the S&P 500 instead, it would be worth $25,000 today (if I remember the figures correctly).
What's not said is that from 1960 till 1980, you'd only make 200% (10% annualized). Compared to angel investing giving you 250% over 4 years (62.5 annualized).[1]
This is also assuming you know how to time your trades properly and get in at a bottom. If you got in at the floor of the dot com crash you'd make, at most, 180% in the 15 years you held (12% annualized). If you got in at the floor of the 07-09 crash you'd make, at most, 250% in the 9 years you held (28% annualized). These are best case scenarios and it's unlikely for someone that believes in the S&P will know about market timing.
The base of this argument is laden with guilt and regret over not having 20/20 hindsight. "If you got in at X you would have Y." The same is said with BTC, "if you got in at the beginning you would have been an Xillionaire!"
However, this is no longer practical in the ironed-out, risk-adjusted world we live in now. The S&P's risk has been priced in and over-sized returns are no longer possible. You'll start seeing this with startups in the coming years too. As people start understanding them more, risk will be lower, and thus returns will be lower.
It is not practical to guess at picking the right unicorn investment, collectible, or market timing. It remains practical, however, to invest in broad market indices. You won't become a zillionaire, but with consistent investing and discipline, such boring strategies pay off in the long term.
If you're willing to accept more risk/return than the S&P 500, there are Nasdaq index funds, too.
To play with various scenarios, there's a calculator:
