The 12 % Challenge - Posted by Randy

Re: Stock Market - Posted by Tim Jensen

Posted by Tim Jensen on May 21, 2000 at 15:48:38:


I did not read that book. I am wondering what made you think that?



Re: The 12 % Challenge - Posted by Craig

Posted by Craig on May 22, 2000 at 09:04:41:

The short answer is yes. Just not from people who can borrow somewhere else for 8.5%, which generally won’t be looking for a private money lender in the first place, unless it’s for hardmoney for fixup that is lent based on After repair value and can be used to pay the entire purchase price for a home that’s bought drastically low. Right now I think 12% is around the average rate borrowers get from subprime nonconforming lenders. I see no reason why a private lender could not get more.

Some Facts To Look At… - Posted by JPiper

Posted by JPiper on May 22, 2000 at 11:09:57:


Gosh Tim, there were a lot of mutual funds that didn?t exist in 1968. So what? Are you saying that it?s not an acceptable analysis to extrapolate the results of an index fund by looking at the index??? Isn?t the whole idea behind an index fund to mirror the results of the index??? Not being willing to look at the performance of the index to see what might have happened with your scenario is tantamount to sticking your head in the sand?but I know you?re not one to do that!

In 1968 the Dow Jones Index was at 1000. Now let?s extrapolate what would have happened if we invested in the index as you suggest via an index fund, EXPECTING a 12% annual return in the long term. And let?s ASSUME that this imaginary index fund mirrors the performance of the index?which is all they?re supposed to do.

Let?s assume that today the Dow Jones is around 11,000. According to my calculations, you have earned an annual return of 7.68%. That?s a far cry from the 12% you are suggesting Tim. And this over a period of approximately 32 years.

Where should the Dow Jones be today to have provided a 12% annual return? Approximately 37,580. Obviously we?re not even close to that figure.

Clearly your timing is crucial regarding what your return ends up at, if you?re investing in an index fund. And to prove a point Tim?.had one invested in the Dow Jones at the lowest point possible in modern times?.550 in December of 1974?.and then held until the now (assuming the Dow Jones is at 11000), and thereby participated in what some call the greatest bull market of this century?guess what the return was??? 12.47%.

What this tells me is that as usual, Wall Street is putting out some flawed numbers. Wall Street creates numbers that people don?t check out, that people take as the gospel.

In other words Tim, unless your belief system is that today we?re at a VERY low point?.similar to that of December of 1974, following the Nixon impeachment and the most severe recession we had experienced since the Depression of 1929?..the likelihood of experiencing a 12% return in an index fund is next to nil.

My guess Tim is that you have simply accepted someone else?s numbers?..something you wouldn?t do in real estate. Over the next 10 years the Dow Jones will need to climb to 35,000 to create that 12% return you talk about from an index fund. Amazing?we have Harry Dent claiming this is exactly what will happen. Good luck Tim?hope it works out for you. But even if it does?.remember?.the guy who started in 1968 with the identical long term scenario that you have just suggested, will not have made 12%.


Re: Investing Should Be So Easy… - Posted by Doug Pretorius

Posted by Doug Pretorius on May 21, 2000 at 23:46:05:

The way I look at it is, whether you invest in stocks, futures, real estate or even have some lame JOB, if the economy goes bad there’s a good chance you’re dead no matter.

With that in mind, and the fact that the economy whoops and swings every 10 or 15 years or so, we should all be looking for high-yield, low-maintenance short-term gain!

Re: Stock Market - Posted by Craig

Posted by Craig on May 21, 2000 at 16:17:22:

He gives the same advice. The philosophy basically is that very few people or groups actually outperform the S&P 500 so one would do well to put their money into and S&P 500 index fund rather than trying to beat it. Additionally he show’s historical data that shows that the S&P performs well over a long period of time.

Re: Some Manipulated Facts To Look At… - Posted by Tim Jensen

Posted by Tim Jensen on May 22, 2000 at 22:16:29:


You are manipulating the numbers just like you claim Wall Street is doing. You mention how the market went down, how did other investments do in that time period?

Also, you seem to not like my idea of the stock market what Hassle-Free investment do you reccommend, that make 12%?


comment - Posted by GCage

Posted by GCage on May 22, 2000 at 14:38:51:

I think that if you look at indexes, you can find that there have been bad periods. But, just as you wouldn’t buy any piece of Real Estate or note, I wouldn’t just sack my money into some index. I think if you do your homework about investing in stocks, you can easily get some strategies that would bring in 12%.

Re: Stock Market - Posted by Tim Jensen

Posted by Tim Jensen on May 21, 2000 at 21:23:34:


I got that idea from the Motley Fools. At


Re: Some Manipulated Facts To Look At… - Posted by JPiper

Posted by JPiper on May 23, 2000 at 24:48:56:

Manipulate? I don’t think so. I started this response by simply pointing out the return from 1968…a peak. Later, when you for some reason disagreed with that, I became more interested in knowing where this alleged 12% came from. As Mark (SDCA) pointed out, I neglected to factor in dividends…but unfortunately, I don’t have the time to do so. Feel free to add what you think the dividends are. But if one started today on your program…don’t factor in much…dividends are VERY low today. And from 1968, the subsequent 14 years still wouldn’t have gives you even a profit…let alone a 12% return.

12% doesn’t interest me at all. Frankly, I wouldn’t take the risk of the stock market to make only 12%. I’ve been around long enough to see the market move both directions…something most investors today have not yet seen. If I felt I could only make 12%, I would rather put my money in short-term debt instruments, and make even less…with no risk.

But I believe in “hassle”, because I want MORE than 12%. I want to exert some measure of control over my investments…the “hassle” doesn’t bother me.

By the way, I’ve been trading the stock market since 1966…but not in mutual funds, and certainly not in index funds. To trade effectively requires a whole lot more homework than would seem to be indicated by the term “hassle free”.


Re: comment - Posted by JoeKaiser

Posted by JoeKaiser on May 22, 2000 at 14:47:23:

But how would you ever really know? Truthfully, you can’t possibly.

I can look at a house and KNOW what my return will be. Often, since I’ve already got the check in my hand from my buyer, I know to the penny.

Certainty is good. I have friends who have ridden the market rollercoaster of late, and it consumes them. They are spectators and are along for the ride, with virtually no say in the direction they’re heading. Doesn’t sound like fun to me.

Jimmy Napier talks about not investing where other people get to vote on what to do with your money. Seems like a good plan.

Joe - Posted by Tim Jensen

Posted by Tim Jensen on May 21, 2000 at 21:46:54: