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Show HN: Inflation-adjusted stock charts – Total Real Returns (totalrealreturns.com)

507 points by compumike ↗ HN
Here's a little side project I’ve been working on: https://totalrealreturns.com/ The Total Real Returns chart demonstrates the preservation or growth of real wealth more clearly than conventional (nominal-dollar, price-only) stock charts, because: (1) we include the effects of inflation-diminished purchasing power, and (2) we include the effects of reinvesting dividends from the initial investment.

I found it harder to explain the y-axis in words than it was to do the math, so please let me know if you think the "baguettes" explanation on the homepage helps.

I was up until 4am ET finishing some features on this, and then at 8:30am ET the BLS released the new CPI numbers through their API: https://download.bls.gov/pub/time.series/cu/ and I was able to manually re-run my daily cronjob with the new numbers, so it's up to date! If you catch any bugs, please let me know via the “Report a bug” link in the footer of every page.

Some FAANG examples: https://totalrealreturns.com/s/META

https://totalrealreturns.com/s/GOOGL

https://totalrealreturns.com/s/AMZN

https://totalrealreturns.com/s/AAPL

https://totalrealreturns.com/s/NFLX

Comparing three Vanguard treasury funds, showing vividly the impact of bond duration (short-term, intermediate-term, long-term) on both risk and reward: https://totalrealreturns.com/s/VFISX,VFITX,VUSTX

278 comments

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Invictus0
Does this account for dilutive secondary offerings?

Edit: I thought about it some more and now I realize this is a dumb question.

compumike
Only implicitly. (In that, via market behavior, the nominal price-per-share might drop when companies increase the number of shares outstanding.) But I believe that's all that's needed?
whatshisface
How can everything go down at once, doesn't the money have to go somewhere?

Best hypotheses so far along with how to test them:

1. Perhaps the parts of the CPI that companies in the stock market can produce are being outpaced by the components that are not produced, like real estate, and so can't contribute to an increase in share prices. (How to check: Look up changes in the CPI components, which are detailed in the reports.) (Edit: This does not hold up, almost all the increases are in energy, which is produced and held in reserve by public companies.)

2. Perhaps the consumer goods in the CPI are increasing in price far more rapidly than prices of goods and services overall, leading to an underestimate of the value of the dollar to anyone except a consumer. (How to check: Since capital goods are eventually used to make consumer goods, this should eventually correct itself. Also, is there a broader version of the CPI?) (Edit: This might be it, although energy is 8% of the CPI and GDP, it is only 4% of the S&P 500.)

3. Perhaps money is leaving the USD, US bonds, and US stocks and going somewhere else. (How to check: Make these same charts but with broader indices.)

compumike
Money (cash) is not wealth. Wealth can be created, or destroyed. The clearest explanation I've read for this was a PG essay: http://www.paulgraham.com/wealth.html specifically the "Money Is Not Wealth", "The Pie Fallacy", and "Craftsmen" sections. Of course this essay has a positive/optimistic take on it, but certainly wealth can be destroyed as well.
whatshisface
That's true, but I am not aware of any wealth indices, only price indices, and price indices can only increase and decrease relative to each other.
JumpCrisscross
> I am not aware of any wealth indices

Term you’re looking for is “benchmark.”

jagtesh
Short unambiguous answer is yes. However, the destination doesn’t have to be limited to stock/bond markets. Think property, gold or toilet paper rolls. Last one is a joke.

It’s hard to accurately measure investments flowing into property (what part of the world?). There are many variables to consider and I don’t think there’s a single trend that will end up as a winner. My hypothesis is that we will see many (eg. very wealthy doing X in Y country/city, middle class doing A in B country/city, etc).

whatshisface
>Think property, gold or toilet paper rolls. Last one is a joke.

Since corporations produce commodities, wouldn't gold and toilet paper be on the stock market?

I guess gold reserves (as opposed to production) and property would have a lot of ownership outside the S&P 500. I wonder if there are any super-broad indices that include them in a cap-weighted form.

echelon
The stock prices capture sentiment. The price people are willing to pay given all the other places their money could go.

People are selling in anticipation of the market going lower, to cover debts, to take advantage of lower asset prices, opportunity costs, margin calls, etc.

whatshisface
When they sell they're wanting money, an equal amount of money to the stock they're selling. That should make the dollar go up by the amount the stock went down.

(I don't really believe this, because it clearly does not describe the chart, but it makes sense and I want to understand why it doesn't work like that.)

mrkstu
Because money is a notational bookkeeping exercise at this point in time and has been since the dollar went off the gold standard. It can't be affected by demand for things as small as stocks, but only its relative demand to other notational currencies.
whatshisface
The total US stock market cap is $45T[1] and M2 is $20T[2]. Are you sure currency prices can't be influenced by the stock market?

[1] https://www.statista.com/statistics/1277195/nyse-nasdaq-comp... [2] https://www.federalreserve.gov/releases/h6/current/default.h...

mrkstu
I think that just furthers the point- there isn't enough 'money' in M2 to 'pay' for all the stocks in the stock market. Yet there that value sits and real estate is another 20+ trillion in land value.

In other words the actual 'money' is a transactional grease for the wheels of commerce- notational/bookkeeping mechanism.

The sale of Apple (the largest value stock in America) as a whole probably couldn't be accomplished in cash only, but even if it was, it'd be mostly notational numbers in an account somewhere and wouldn't 'flood the market' with dollars and crash the value of the currency.

whatshisface
A change in preferences from holding dollar reserves to holding stocks could change the value of the USD, that's what I am saying.
mrkstu
Change in preferring the Yen or the Euro, maybe, but I've never read/seen anything that would reinforce the idea that the dollar would be weakened by preference for holding other assets whose values are ultimately figured by their worth _in dollars_.
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notahacker
Except that you've got a Federal Reserve actively ensuring that there aren't too many (or too few) dollars in circulation for the level of interest rate they want to maintain. They do it by buying and selling bonds rather than stocks, but the principle is the same. So we don't have to worry about shifts in portfolio preferences leading to an unexpected oversupply or undersupply of dollars

But more people wanting to hold AAPL instead of hold cash absolutely will reduce the amount of AAPL stock your $1k is able to buy, of course

whatshisface
Maintaining an interest rate isn't the same as maintaining a fixed rate of CPI growth, especially not in the short run.
notahacker
Sure, but we're not talking about fixing the rate of CPI growth (stock prices aren't a constituent part of that and don't have a fixed relationship with it).

We're talking about the effect of wealth holders wanting more of their investments in stocks or more of them in cash on the USD. An increase in demand for the liquidity of currency holdings, or an increase in demand for stocks due to perceived improved returns could affect the dollar through knockon effects on availability of credit, but the interest rate for that credit is the price of the bit the Fed fixes.

Symmetry
Andrew and Barney are shipwrecked on an island with nothing but their clothes, the cash in their wallets, and a book Andrew has. Barney pays Andrew $100 for the book since he hasn't read it but Andrew already had. Later, after finishing it Andrew is able to buy it back for $80 because it's old to both of them but has a bit of sentimental value for Andrew. The dollar denominated wealth on the island has gone down by $20 but the same stuff and same number of dollars are there.
whatshisface
The consumer price index on the island has gone from $100 for the basket of one book, to $80 for the same basket, causing an increase in the measured value of currency equal and opposite to the decline in the price of the good. If you made the CPI more realistic by including other goods on the island, this website would show the dollar go up as the stock market (of booksellers with an interest in book prices) went down.
roenxi
The book is an asset in this example. CPI isn't relevant, because trading the book does not affect it.
whatshisface
The book doesn't represent any invested capital, so let's not say that it is an asset. Instead, let's say that there are shares in a book making company, tracked in the index, and also books, which will be in the CPI.

The value of being able to make one book per day is linked to the price of a book, which means that on the island, the CPI and the stock market have to rise and fall together. That causes the stock market and currency to move inversely.

roenxi
Do you want an answer to your original question or do you want to try and argue that the stock market and currency move inversely?

Because if you want an answer, you aren't making changes to the example that will help you understand. You're introducing confusing factors that are not needed. The original example gave a neat little illustration of how wealth-as-measured can drop without money disappearing. Don't bring CPI in to it (and stock prices don't drive the CPI so that is a reasonable assumption).

If you want to argue that the two move inversely then go ahead and don't mind me, but you might like to add in some evidence or case studies. And you'll need to be precise about real vs nominal, and probably start modelling other effects.

whatshisface
My original question was how wealth-as-measured could disappear when dollars were included, not how demand for stocks could shift to demand for dollars. In a market with one good, the value of a dollar must move inversely with the value of the good (no examples needed, it's mathematically tautological) - and that is not what we see happening on the linked page. That's what my question is.
chordalkeyboard
> In a market with one good, the value of a dollar must move inversely with the value of the good (no examples needed, it's mathematically tautological)

this is incorrect

whatshisface
I mean the value of the dollar as measured by the CPI.
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roenxi
You do mean that, but it doesn't have a lot of bearing on the correctness of your argument. I suspect you've assumed that wealth is neither created or destroyed somewhere in your logic, because what you are saying would make sense if that was an assumption. But that would be a poor assumption if you've made it.

CPI is a tool for adjusting the value of a dollar, but it doesn't have any bearing on the value of the total economy vs the value of all the dollars in existence. All the dollars in existence might buy the entire economy many times over or they might buy a tiny fraction of it. And that ratio changes continuously (both from money creation and economic activity). There is no inverse relationship mediated by the CPI.

whatshisface
There are three charts on the linked website - bonds, dollars and stocks. None of them are exactly measures of wealth. My question is about how their properties as mutual numeraires could allow them to all fall at the same time.
someguydave
People are willing to pay fewer dollars for each asset class.
whatshisface
People can't be willing to pay fewer dollars for the third asset class, which is dollars.
chordalkeyboard
tautologically the price of one dollar will always be one dollar but they can be less willing to spend those dollars on anything, and simultaneously less willing to sell assets they already own for dollars.
someguydave
you absolutely can pay fewer dollars for dollars delivered at some point in the future
roenxi
I liked this explanation. Although to attach to it - in this example the price of the book is set by magic/intuition to illustrate the effect. In the real world, the prices are set by less flexible forces of supply, demand and people estimating valuation - usually in a way that means the price has to fall in some relatively narrow band. But after the dust settles on those inflexible forces, it ends up looking the same as this example.
andsoitis
I would expect the demand for the book to go down since the entire population has read it.

Of course, you could use the pages to help start a fire for warmth or cooking fish you will be catching.

peterisza
Money doesn't go into the stock market. If you buy a stock from me today, I can use the exact same money to buy bread tomorrow. That money keeps circulating in the economy, it doesn't go into or out of the stock market.
nly
Exactly. The current stock price is just the last price it traded at, or some measure of supposed liquidity or depth in the market at some price. That liquidity just exists as unfilled orders or quotes on the order book on an exchange and can vanish in an instant.

The other thing is that buying stock for a company A isn't the same as "investing in" company A, since company A doesn't get your money...it's a secondary market!

As buffet says, the stock market is a voting machine in the short term and a weighing machine in the long-term.

imtringued
It circulates in theory. In practice people keep saving ever greater amounts of money.
PheonixPharts
> How can everything go down at once, doesn't the money have to go somewhere?

How can everything go up at once, doesn't the money have to come from somewhere?

Certainly we can have everything go up whenever we find more resources than we consume. Natural resources, when exploited create value for all. A more energy and resource rich world causes everything to go up.

Why is it so hard to understand that increasing energy and resource constraints causes everything to go down?

And, more specific to our situation, much of the perceived value is credit. If I owe you $100,000, as long as you know I'll pay, you can consider that part of your value. But if I don't make enough to pay you, suddenly you aren't going to get that money.

Our entire global economy is massively over-leveraged and the only way to maintain that is perpetual growth, in a real sense of having access to ever more energy and resources. When the future delivers less than expected we start seeing that value disappear from the books.

rmah
No, the money doesn't have to go anywhere. Nor does it have to come from anywhere when everything goes up at once. Because there is no money involved. It's sort of like asking "where do the pounds go when I lose weight?"

You are conflating using "dollars" when used as a unit to measure the value something, with "dollars" as an asset in the economy when used to conduct trade. This confusion is easy to make (and widespread) because we use the same word for both things.

The vast majority of wealth in an economy is not in monetary form. It's in hard and soft assets: land, buildings, cars/trucks, factories, raw materials, home appliances, copyrights, patents, film libraries, etc. The economic value of all those things is just measured in dollars.

s1artibartfast
Unrealized gains can simply evaporate. If a crap company has a 1 B valuation and it fails, that money is gone. The value in stockholders portfolio just goes down, not to anywhere in particular.
TekMol
I tried to look at QQQ to see the performance of the Nasdaq 100 with dividends reinvested:

https://www.tradingview.com/chart/?symbol=NASDAQ%3AQQQ

But the difference is so small. Nasdaq 100 even performing better. Does QQQ pay out dividends or does the management fee eat up so much that the dividends get cancelled out?

Since the development is so similar to the index, I guess they pay dividends.

How can one see the Nasdaq 100 performance with dividends reinvested?

ywain
QQQ does pay quarterly dividends.
simmons
Very neat! It's easy to be discouraged seeing how much my investments have fallen in recent months. But this graph makes it seem like the stock market could still be on track, producing slow and steady gains in the long term, when we consider that the crazy bull market of the last couple of years was an aberration. (No guarantees about where the stock market goes from here, of course.)

Now, if only I had a crystal ball, or at least was more in tune with the world of finance so I could have ridden the ups and downs more effectively. ;)

fundamental
If the goal is to demonstrate relative performance over time, wouldn't it be useful to use a normalization such that all lines either start at the same point (e.g. simulating investing X amount) or ending at the same point (showing requirement to get to X final amount)?
compumike
I think that's a reasonable idea and I may try including that option in the future. Right now, the start point is quite arbitrary: it's the first date where we have data for all the symbols requested. And date ranges dramatically affect any sort of relative performance comparison. So in the current code I decided to just normalize to today's nominal-dollar value so that the end values are relatable.

What would the ideal UX be on this?

fundamental
If you want to have ragged starting information displaying pricing information for the various symbols in the range they're defined, I'd assume it's much more common that there's different start dates, but they're all defined for today. So, you could have a single checkbox to normalize based upon equal value at today's value and I'd default to having that on. As your baguette argument about the absolute values not having huge significance still applies it seems like it would work with no other modifications (i.e. it doesn't matter that it could require fractional shares and the like).
mediaman
Just index it all to the same starting value, which will have the same effect. I don't think this works for the drawdown chart but works for the total return chart.

Usually in economic and financial reporting you show multiple return series by saying, for example, 1989 = 100 and then showing the total return from there for multiple series in the same chart.

ricardobayes
Start every asset at 100k? I might be oversimplifying something, but it would really help to see how each asset performed over time.
kaimaoi
Growth of $10K (growth of a hypothetical $10,000 investment) is a chart that is commonly-used to illustrate this. Your chart would then have VFINX, VBMFX, and USDOLLAR start with $10,000 on 1987-08-03 and go from there.
irae
Showing $10k way back in the day would be a bit misleading since every graph starts in a different day and the whole idea is that inflation makes $10k translate to different real world value (baguettes) across time.

It could instead show how much back at the start date one would need for it to be todays $10k? Not sure. Maybe absulute dolar values should just be ommited and work only off percentages.

georgeecollins
Isn't the comparison of relative performance in the trend line? That's a year over year % change for every asset, so it doesn't matter what value you start with.
noway421
Yeah it's the trendline's slope, but it might be a bit hard to compare them since the angles are not that dissimilar.
jonathan-adly
The problem with these kind of charts is the implicit message that history is the future. America have been on the dominant financial and militaristic force in the world for the last century and its equities have reflected that strength.

Would it continue to be the same for the next century? Who knows! Ray Dalio and the Maxis think otherwise. Good work OP though!

compumike
Thank you. :)

I agree with the "Who knows!" and that we've benefited from a lot of favorable tailwinds, which are quite uncertain for the future.

The implicit positivity partially comes from looking at indexes, rather than individual companies. If you look at any specific companies that may have been unstoppable corporate giants in decades past (maybe try https://totalrealreturns.com/s/GE https://totalrealreturns.com/s/X https://totalrealreturns.com/s/F for example?) the idea of limitless growth becomes much more uncertain.

TameAntelope
> Portfolio emphasizing U.S. and foreign large- and mid-capitalization value stocks.

VFINX is not composed exclusively of US stocks.

loeg
It’s an S&P500 fund; that is composed (exclusively) of large cap US stocks.
zie
That's not true. It's MOSTLY large cap US stocks, but it has some mid-caps, pretty much regardless of how you define mid-caps.
loeg
S&P publish a mid-cap index: the S&P400. It doesn't overlap the S&P500[1]. You have to have a generous definition of mid-cap to describe even the smallest S&P500 component as mid-cap. The 500th component has a market cap of ~$6B.

Regardless, they're all US stocks; the comment I was responding to claimed they were not.

[1]: https://www.spglobal.com/spdji/en/images/campaign/707133-us-...

zie
LOL.

First the S&P 500 captures 80% of the entire US market, 80%! [0]

Second, 6B is well within the middle of the Mid-cap range for at least one common definition: "Mid-cap (or mid-capitalization) is the term that is used to designate companies with a market cap (capitalization)—or market value—between $2 and $10 billion. " [1]

Now some people might define mid-cap differently(and S&P tries to), but that doesn't change the math. If 80% of the US market is the S&P 500, then by definition some mid-cap has to be in there, or one has a very distorted view of what the middle means.

US public companies are giant these days. Of course there are mid-cap only indexes(and funds), that has nothing to do with the S&P 500 though.

As for all US stocks, it definitely depends on how one defines a US stock. S&P obviously has their definition, and it may or may not agree with your personal definition, but I generally agree that the S&P 500 is basically US companies.

0: https://www.spglobal.com/spdji/en/indices/equity/sp-500/#ove... 1: https://www.investopedia.com/terms/m/midcapstock.asp

TameAntelope
Not according to Vanguard[0] (the link is for VFIAX but that's just the admiral fund), the quote I gave was from Vanguard's own description of the fund's composition.

You can take it up with Vanguard why they describe the fund as I've quoted[1].

[0] https://investor.vanguard.com/investment-products/mutual-fun...

[1] https://support.vanguard.com/

loeg
Vanguard notoriously calls mid-caps "small," e.g., VB. Anyway, they're not the ones who select S&P500 index components. I love Vanguard, but this is one case where they're kind of off-base.
TameAntelope
So Vanguard (venerated investment institution for 50 years) is wrong and you (random HN commenter) are right?

Sure, okay.

skinnymuch
This is a really weak way to think or see the the world. Regardless of who is correct in this specific situation.
TameAntelope
No, it very much is not. It's literally how all education works, for example.
skinnymuch
You’re sticking to the same logic of blind trust to tradition and authority
TameAntelope
Who said anything about blind or tradition? That seems like stuff you injected into this convo, not me.

I trust institutions who have a strong track record of predictiveness and desirable outcomes. Vanguard has both in spades, and has earned their authority. If they stop accurately predicting future behavior and/or stop producing desirable outcomes, that will change their authority on matters of investing.

Not trusting predictiveness and desirable outcomes seems prone to bias. If your alternative is that you only trust yourself, that seems like both a paranoid and privileged outlook, given how much time and how many resources you'd need to expend to gain even half of the knowledge Vanguard as an institution has about operating as an investment advisor.

skinnymuch
Your previous comment was about both. Saying that’s how all education works.
TameAntelope
No, "education" as a concept does not mean either of those things.
wing-_-nuts
Vanguard tracks the index. The index are US large caps. In this case OP is right and vanguard is wrong. You should do a little research before you display such ignorance.
TameAntelope
Do my research, you say?

Like, find a company in the S&P 500[0] that is not an American company? A company named, oh I dunno, Linde plc, which trades as $LIN and was founded in Germany[1] and currently has its headquarters in the UK?

So on the technical merits, what I said was correct, the S&P 500 does indeed have non-US stocks. Further, on the general thrust of my point, that the S&P 500 has exposure to international markets, that also holds true, something like 71% US and 29% international based on some cursory research [2].

But please, continue to lecture me on my ignorance. :)

[0] https://en.wikipedia.org/wiki/List_of_S%26P_500_companies

[1] https://en.wikipedia.org/wiki/Linde_plc

[2] https://www.spglobal.com/en/research-insights/articles/daily...

londons_explore
Total inflation-adjusted returns are what everyone should be looking at when considering investments.

Yet it seems so awfully hard to find that data on stockbrokers sites/apps.

Why?

compumike
I agree and that's why I decided to build it :)

I think part of the answer is that: (1) it's very hard to explain what that means to most people ("WTF, why are the historical prices on this chart changing?") beyond simple 2:1 splits, and (2) it's hard to get everyone to agree on what inflation metric to trust/use.

HFguy
Short answer is some combination of (1) That requires work and then they would have to explain to people and (2) People aren't asking for it.

If you want to roll your own, you can use free data from Yahoo and FRED and get there pretty quick.

You should also consider tax implications. For example, trading equities short-term is awful and PL taxed at income rate. Compare that to buying real estate which has a 101 ways to avoid paying taxes.

moneywoes
Where can I see the percent return inflation adjusted not just the trend line?
compumike
I'm not currently showing this directly because it's so sensitive to the specific start and end dates. :-/ (Is there a good UX for that?)

For now you could calculate it by mousing-over the dates your interested in and reading the values off the chart legend.

Barrera
The trick is the to get those inflation-adjusted returns you need 100% time exposure. No selling because circumstances force you to. No selling because you get spooked at a 50% drawdown. Not many people can tolerate even a 20% hit, which explains a lot about the situation the world economy finds itself in.
TheFreim
This is why I don't follow how my portfolio is doing, knowing doesn't give me much actual information and can often encourage bad behavior (admittedly I don't have many investments compared to many).
SV_BubbleTime
I'm with you.

I consider this an area where the burden of knowledge will hit you pretty hard. Time suck along with stress, and performing at best case a few percent over an automated "MODERATE RISK" button.

I don't have any more time in my life to track anything with the degree that it would take to "be good" at it.

s1artibartfast
My philosophy is essentially buy low, hold forever.

I don't put money that I might realistically need in the market

deathanatos
I mean… that defeats the point, no? Surely you must plan to use the money at some point, even if that is just enjoying the end of your days. That's still a time horizon.

> I don't put money that I might realistically need in the market

While it's great that you might have a time horizon far, far into the future, not everyone has that luxury. In theory, I'm supposed to purchase a home & start a family around this point in my life, so that's a rather quick time horizon for at least some portion of my wealth.

s1artibartfast
I think you have a point. I should have been more clear. What I'm saying is I don't account for anticipated withdraw when investing. That's not to say I don't or won't do it, just that it's not a consideration when putting the money in.

I treat the question of if I can afford to take money out or if it is a good time to take money out as an entirely separate topic.

I found that trying to optimize investing and weigh risks for a short-term Horizon will drive you crazy.

xeromal
My strategy is to ignore it until about my late 40s early 50s and then start slowly cycling it over into more reasonable investments and bonds.
compumike
You're right, and the conventional advice has been to have a mix of stocks and bonds, with bonds to reduce volatility and preserve some of the wealth that you might need to access in the shorter term. However, what's unusual about the past few months is that bonds have been getting whacked too!

Here's a comparison of four Vanguard funds, with stock:bond ratios of 80:20, 60:40, 40:60, 20:80 respectively: https://totalrealreturns.com/s/VASGX,VSMGX,VSCGX,VASIX What I find interesting is that they are all experiencing significant and comparable drawdowns right now.

Here are treasury bonds with a comparison between duration: https://totalrealreturns.com/s/VFISX,VFITX,VUSTX

And here are corporate bonds with a comparison between duration: https://totalrealreturns.com/s/VFSTX,VFICX,VWESX

Even inflation-protected bonds (TIPS) are in trouble: https://totalrealreturns.com/s/VIPSX

So right now, bonds are not doing much to provide the short-term real wealth preservation that lets people take the 100% time exposure risk.

tunesmith
Bond funds are different than bonds. With bonds, you can hold them to maturity and not get whacked.
jlawson
You can hold bond funds to the maturity date of the underlying bonds and get the same result (minus fees).

But in either case, you still get whacked with inflation, which would show up on this chart as a drop.

sicp-enjoyer
At an individual bonds maturity I get the full principal back. How do I do that principal back from a bond fund if the value has dropped due to the macro environment?
jlawson
The value will have dropped, but the distributions/dividends you got in the meantime will have made up the difference. The fund and its underlying holdings must end up even in the end (minus fees).
wing-_-nuts
I'm of the old school bogleheads mentality. I've typically been ageInBonds since I started investing after the great recession. While I expect poor stock performance, I am pretty shook by the poor returns on bonds. I accepted years of poor performance with the expectation that they would cushion the blow during the next recession, and they have done nothing.

I don't know how long, or how bad this recession will be, but I will likely be much less willing to hold bonds going forward.

icu
Sorry for your investment woes.

I think part of the problem is established dogma (and regulatory regime) that believes bonds offer diversification from stocks. However this seems to have broken down post 2008, as they have become increasingly correlated.

Imho it's healthy to expect that market regimes change, especially since we do not operate in free market, but a semi-intervined market (where the Fed sets the price of money which is an incredibly important input to the global economy).

I also think it's important to not think of diversification in terms of asset classes anymore, but in terms of alpha source.

I know this is much harder to do because, as far as I know, only by actively trading can you isolate and quantify alpha sources like this.

paulmd
Bonds have been the only thing backstopping my 401k from taking the bigger hit that equities have taken, the Vanguard 500 portion itself is down 21% or something and total I'm still down 16% or something like that YTD.

I'm guessing it's the "real returns with investment" that is painful here... bonds may not be losing (as) much but they're also not keeping pace with 10-15% annualized inflation either.

Due to the way energy prices (which are a massive component of everything else too) are factored out of CPI, even TIPS probably has negative real returns at this point compared to reality. Is there a non-CPI TIPS equivalent, lol?

smt88
> No selling because you get spooked at a 50% drawdown.

This is common-sense trading advice anyway. If short-term losses spook you into selling, you're probably doing too much stock-picking and are not long enough.

In fact, this is the often-cited reason that active investors can't beat index funds consistently.

boringg
Really illustrates how well dollar holds to inflation.
nathancahill
Needs a way to specify the time range. As you mention on the page, the trend lines are very dependent on the time range.
kaycebasques
I also just requested this via the feature request form in the footer of the site
kaycebasques
Thank you for creating this. I appreciate its value and encourage you to keep going.
e63f67dd-065b
Huh, so portfoliovisualizer but with slightly more convenient shortcuts built in. Looks neat, but way less powerful than just using portfolio visualiser. I’ve always wondered where the data is sourced; so the exchanges publish this data for all to use, or does everybody have to scrape them together? Obviously if you pay them you’ll get real-time data, but all these free tools do leave me wondering.
nostrademons
Wish it had the 70s, or ideally, the whole 20th century. The 80s-2010s has been a period of unusually low inflation and consistent market returns, buoyed by the end of the Cold War and entry of the developing world into the world economy. There's a good chance that we revert to the mean going forwards and see much more geopolitical instability and resource constraints.
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Teknoman117
So, what does a young person do these days?

First few years out of college were just "max out 401k contributions into some target fund" + build emergency fund, but now that I've amassed more cash than what an emergency fund requires, what does one do?

Originally, my plan was to use it for a house down-payment, but with the mortgage rates having nearly doubled in the last 6 months, that's kind of out of the question at this point (especially having moved to a higher property value area to be closer to friends and family).

Everything I've seen in the news for last few months just seems to say "sorry, the last 50 years was a gravy train, it'll never work that way again, you're screwed".

Both my parents' and grandparents' entire careers existed (or to this point existed) during the "good times", so I'm honestly feeling like I can't just take their advice directly.

Part of me wants to leave my present (tech) job and move to a FAANG type company (for the pay increase), but with all the uncertainty on the horizon, are the big tech companies going to maintain their current headcount or salaries if another '08 style recession (or worse) hits? How stable are their revenues if people start spending way less money on things?

gabereiser
Go for the house down payment and refinance once the rates go down. A few percentage points aren’t going to make much difference near term.
cercatrova
You do the same thing that was recommended for the past 100 years, invest in VTI and chill.
tootie
House prices are at a peak and stocks are in a trough. Try to make clear economic decisions and don't be enamored with home ownership. A house is a huge illiquid asset that you can live in. There's calculators out there to use but know that buying a house usually only makes sense if you're definitely staying for at least 10 years. And don't be swayed by headlines. Big tech is doing extremely well and isn't slowing down.
aluminaient
The only time stocks have been this expensive was just before the great depression and just before 2008. They are practically the most overvalued they've ever been, ignoring the last year or two of QE, which were intuitively overpriced. Thinking they are cheap now is how you get burned.
Swizec
> So, what does a young person do these days?

Barbell investing from Taleb makes the most sense to me. Cap your downside, go balls out with the rest.

And prioritize long-term assets over cashflow. Revenue generating assets are best.

throwaway894345
> Cap your downside, go balls out with the rest.

This doesn’t mean anything to me. Can you elaborate? Also, why are revenue generating assets better, and doesn’t pursuing revenue generating assets imply prioritizing cash flow? Sorry for the noob questions.

Swizec
> This doesn’t mean anything to me. Can you elaborate?

Taleb elaborates better in his very accessible book(s). The basic idea is to invest/use most of your net worth in “safe” investments, those primarily keeping up with inflation or just barely beating it. If shit hits the fan, you have a cushion to fall back on.

Anything beyond keeping you safe and comfortable enough should go chasing the highest returns possible. So you can partake in as much upside as possible.

Startup comp follows this logic. Enough salary to fund your life and basic savings, equity to chase high upside.

Revenue generating assets are nice because you don’t just need to sell for a higher price to make a return. They have intrinsic value. For example owning a profitable business or a rental property.

throwaway894345
Thanks for the explanation. That was very concise and accessible!
epups
Can you recommend a specific book that discusses this in the context of private investors? I have read a couple of books from Taleb and he only talks about similar strategies for investment firms.
smallerfish
Don't buy a house until the real estate market crashes. Then buy.

I bought a fixer-upper in 2008 for 200k; sold it for 425k 5 years later. Recently it sold for 650k (we still get redfin notifications.) In the meantime I bought a house for 625k (nice house with some rough edges) and sold it 18 months ago in covid real estate madness for 950k. We certainly put money into both houses over time, but we'd never have been able to do what we did had we not started at the bottom of the market.

Wait a year or two.

FooBarWidget
What if the house market crashes in 10 years? Live in a car for 10 years?
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stavros
Are "buy" and "live in a car" the only two options?
FooBarWidget
You can rent, but that's money wasted. The longer you rent, the longer you didn't invest. Also rents are higher than mortgage payments, making it worse.
GoldenStake
But are rents higher than the mortgage + insurance + maintenance + lack of liquidity + the potential home value changes. If the expectations is that the home value are dropping, the math seems pretty simple.

But in a different financial environment, maybe a few years from now, your expectations might be different and the math works out differently

FooBarWidget
Yes, in Netherlands, rents are higher than mortgage + insurance + maintenance + taxes - tax breaks. That's why everyone wants a house.

A bit odd that you talk about liquidity. The house itself isn't liquid, but you finance it so you don't need a huge liquidity up front. Also, rents paid are no longer liquid to you either.

A mortgage ends one day. Rents do not.

House prices increase 20% year on year in Amsterdam. Even during the 2008 financial crisis did they barely drop in value.

arghnoname
If rent really is lower than the mortgage payment (assuming the alternative return on the downpayment is taken into account, etc) for an equivalent property, then buying is pretty reasonable in most circumstances.

I'm observing rents way, way below mortgages, but it's very location dependent.

When making decisions about where to put my money, I stopped worrying about what other people are going to do and are doing, what the market might do, etc, and instead think what makes _sense_ for me to do. If some expense makes sense for me, offers good value, etc, independent of attempting to prognosticate the future, it probably does for others as well and the investment will probably work out fine. If it doesn't, it doesn't matter, it still made sense for me to do it.

For me, this has meant buying a house when lots of my peers were running scared at what turned out to be the bottom of the housing market, selling one recently, and renting for the moment. In each case, this was just the cheaper and 'sensible' approach. I think people overcomplicated this stuff.

FooBarWidget
In the Netherlands, there are no places where rents are below mortgages. Unless you apply for social housing, but that requires you to be below a certain income threshold, which means that you couldn't have bought a house anyway. Social housing also have 20 years waiting list.
epups
That sounds really weird. In Germany an apartment that rents for about €1000 would sell for €400,000 or so, which means a mortgage would cost 2 to 3 times more (with a 20% down-payment). This is with a 2% interest rate.

How does the math work in the Netherlands?

FooBarWidget
An apartment that's worth about €400,000 rents for about €1,550. The equivalent mortgage with 3.85% interest is €1875, but becomes about €1426 after tax breaks. The 10% down payment can and often is financed too. This leaves about €10,000 of notary fees and taxes that you have to pay yourself.

Interest rates used to be lower so the mortgage used to be much cheaper.

smallerfish
If the real estate market is near a local maximum, then rent is still a better deal, for now, with your numbers. Upkeep, hoa fees, insurance on an apartment very likely sum to more than €124/mo. That said, of course, if the real estate market is still going to grow by a significant percent, and you time selling correctly, then you could make money by owning.
sicp-enjoyer
> that's money wasted

Just wait until you see how much is wasted in a 30 year loan. These decisions often comes down to life style.

FooBarWidget
Yes you pay interest. But how is that any worse than the mortgage?
wing-_-nuts
I really hate this mindset. I rented for about a decade. Renting allowed me to bounce around from job to job in various cities and grow my career. Had I owned houses during that time I would have lost money due to the transaction cost overhead. I was also not responsible for any upkeep, which I'm not well suited for anyway. Oh and I absolutely did invest. My money was simply invested in the stock market which had a far higher rate of return than the housing market.

I own today, but I'm well ahead of most of my peers that bought houses right out of college.

FooBarWidget
Yes people who move often shouldn't buy. No disagreement there. But that's like saying that you shouldn't invest in stocks because if you sell in a year then it's probably at a loss. Investments are to be held for a long period.

As for investing: you invested what you had left after rent, but you didn't invest what you paid in rent. With a mortgage, you are investing the mortage payment minus interest, and you can still invest what you have left.

dvt
> Wait a year or two.

The real estate market won't crash, and it especially won't crash in high-demand areas (Southern California, the Bay Area, Atlanta, SoFlo, Colorado, etc.). We'll likely see a steep-ish correction in "second-tier" markets, like the ones in Texas, Tennessee, and the Rust Belt (Pittsburgh comes to mind).

MaxHoppersGhost
If history repeats itself you are dead wrong. During 2008 the Texas market barely flinched while California and Florida was tanking. I think Texas won’t budge much again considering the consistent flow of people and jobs to Texas in pretty much every major city.
sizzle
I hope so, it makes no sense how much houses appreciated in 1 year during COVID without lifting a finger to improve the property.
mywittyname
> Wait a year or two.

The Great Financial Crisis will be the only event of this nature in our lifetimes. The country would need to overbuild like crazy to cause housing to crash like that again.

Everyone is expecting housing prices to fall in "a year or two." I've been hearing this for two years now. The market has a habit of doing the opposite of what people expect it to.

x3sphere
Housing prices are correcting now, at least in some areas. It's definitely happening in AZ. I've seen drops of almost 15%.

OpenDoor has been taking a loss on a lot of properties it bought over the past few months too.

Considering inventory is up over 2X YOY as well, I expect prices to fall even further here. I'm not sure if it'll get as bad as 08 though, but a 30-40% drop isn't out of the question the way things are headed imo.

The thing is though with rates as high as they are, housing prices dropping this much actually doesn't make affordability any better unless you can pay in cash.

aaron_m04
> OpenDoor has been taking a loss on a lot of properties it bought over the past few months too.

I don't understand how they are able to stay solvent. It's gotta be VC money keeping them alive, right?

gedy
Not sure where you are, but California at least has clear up/down cycles, but they take many years unlike a stock bubble.

E.g. I the last housing bubble started popping in 2005-2006, but didn't bottom until about 2010-11

x3sphere
Yep, it'll take a long time to bottom. That said, I'm surprised how much things have already fallen in AZ. Some of the properties with 10% price cuts, have been sitting on the market for over 2 months. Demand has fallen off a cliff here. I can't see how it gets any better with the Fed continuing to rate rates.
tastyfreeze
As cheap debt dries up there are less people that are able to pay the high price for a house. If the Fed keeps raising the federal funds rate it is a near certainty that home prices are going to fall, on average, due to lack of buyers.
mywittyname
There's too much demand for housing for this to happen. Worst case, they go down 5-10% in the hardest hit areas, but most places are going to see low or no growth even if rates hit 7%.
sizzle
Wow congrats on pulling this off, I wish I can do this too but the homes are still $8-900k like your example and it just makes no sense to buy unless it cools down to 600’s, which seems like it may never happen. I sure as hell am not paying 900-1 mill for these homes that need a ton of work and are 50+ years old sigh
gumby
> Everything I've seen in the news for last few months just seems to say "sorry, the last 50 years was a gravy train, it'll never work that way again, you're screwed".

I first came to Palo Alto in 1984. All the houses were underwater (worth less than their mortgages). The tech boom was over and consensus was that it wasn’t coming back. Too bad you missed that!

Just keep investing (dollar cost averaging). Pick your poison: “barbell” as some other comments have suggested or just a couple of very broad index funds. Since you have a long time ahead of you, I’d recommend the latter. You can spend some of it on a down payment when that makes sense to you.

mywittyname
People tend to not appreciate the struggles that the people before us had. We are looking at their situation with the absolute knowledge that things got better.

We distort the lives of those in the past much in the same way do the people we follow on social media.

nostrademons
Also survivorship bias. We tend to forget the people that died penniless and alone.
anon291
> Originally, my plan was to use it for a house down-payment, but with the mortgage rates having nearly doubled in the last 6 months, that's kind of out of the question at this point (especially having moved to a higher property value area to be closer to friends and family).

Higher interest rates lead to lower home prices, which should make it easier to make a down payment. Interest rates may double, but mortgage payment amounts typically end up staying the same. You are in a prime position to buy a house. In the next 30 years, mortgage rates will likely decrease and you can refinance to a better rate, and end up paying a lower price for your house than what you would have had mortgage rates stayed low.

Carp
That's what my plan is. Just waiting/hoping housing prices drop within the next year or two. Been waiting a while now though so who knows if they'll actually come down
ricardobayes
It will be tough finding where the sweet spot is of lowest prices vs still acceptable interest rates.
anon291
Home prices are coming down in my area of Portland, OR, which was already an overpriced market. Homes have been on the market much longer, and several homes have had price reductions in my neighborhood. Ultimately though, I wouldn't try timing the market, if you can afford the down payment, and the monthly, and like the house, I'd go for it. Always time to refinance later.
jokethrowaway
Portland got some pretty negative press in the last few years.

I barely knew Portland existed before that and now I just know I wouldn't want to settle there.

Real estate seems still up in general, I assume because of a mix of inflation and BlackRock / investors overpaying for it to escape all the other failing assets

sizzle
Aren’t they building multi-tenant buildings like crazy that are sitting vacant cause of the huge rent prices?
loxias
> now that I've amassed more cash than what an emergency fund requires, what does one do?

Pick a few things you can put your money into, which you have confidence won't lose value given a long enough time horizon. For me, this is SPY (highest alpha but needs 10 years to recover). The traditional 60/40 SPY/TLT mix is great. Currency funds also good. VTI & chill is good. Right now the Euro has Dollar parity (ECB isn't fighting inflation aggressively and won't start reducing its balance sheet for a while), maybe throw some of that into the mix.

Sell covered calls to reduce your cost basis.

Don't spend cash. Invest cash, borrow against it at favorable interest rates, and make purchases with the borrowed money. SBLOC, portfolio margin (>100k) can unlock some cheap (75bp above prime) cash.

If I could send a message to myself 20 years ago it would be the above.

All of my words are nonsense, nothing in this comment shall be construed as professional or financial advice. I've been excessively stupid with money far longer than I should.

mlcrypto
Born too late to buy 20k House. Born just in time for 20k Bitcoin.
dsomers
IIRC the book ‘Common Sense on Mutual Funds’ has data going that far back with charts. I believe the period from the start of the 20th century until the 70s had similar inflation adjusted returns. However, for the early data I think it was really just measuring the largest companies in the country that made up the original Dow. Although, the author argues that’s a fine comparison because the 30 largest companies in the country represent the large majority of the top 500 index in terms of cap today— he further argues that over the long term small cap and large cap stocks give similar returns regardless.
lostmsu
No cryptos?
compumike
You can use ETFs that hold those assets, for example: https://totalrealreturns.com/s/GBTC,ETHE
lostmsu
No, you really can not: https://habr-com.translate.goog/ru/post/675802/?_x_tr_sl=ru&...
dmurdoch
Well, you're both right and wrong. He's right You CAN, but your linked article is also 100% correct, GBTC / trusts are absolutely NOT etf's.

There are however etfs for crypto in other districts (I hold for example ethx.b, a canadian ETF that tracks ETH within my RRSP).

lostmsu
Well, the funds you mentioned are not on the website.
workah0lic
I used to calculate this manually whenever I thought about the reality, and whenever wondering if I can retire. This is really cool. One comment though is the mass of company names at the bottom is illegible so I would think a search box + top 20 list would be better
ezekg
> One comment though is the mass of company names at the bottom is illegible so I would think a search box + top 20 list would be better

Probably for SEO. :)

compumike
I'd been planning to add an autocomplete symbol search box. I ran out of time because I knew the new CPI data was being released this morning. I wanted to launch the site today, so last night at 3am ET I just added a big list of symbols. But yeah might be good for SEO too :)
olalonde
Suggestion: it would be nice to have a chart like the first one but where relative changes (%) in value are plotted... That would make it easier to use a linear Y axis instead of a logarithmic one (which can be hard to interpret).
artursapek
What a dope tool, thanks for building it! I love clean, simple dataviz websites like this.
adrianmsmith
Visually it's a really nice looking site. If I may offer one suggestion, it would be to use a minus sign (unicode U+2212) for the negative numbers - by default, for historical pre-unicode reasons, computers tend to use a hyphen instead and it just doesn't look as good, at least to my eye!
noja
Which inflation? If I am earning a thousand bucks a month and all my money goes on fixed costs, and those double, my inflation is 100%.
zie
Clearly they are talking about CPI-U, the common US definition of inflation.

Everyone has their own personal inflation rate, mine in 2021 was 1%. We will see how 2022 turns out, but I'm betting it will go up for me.

pedrosorio
Having all lines normalized so they start from a common point at x = 0 would be helpful. That would allow reading the total returns as percentage of the initial (1987) investment and compare them.

Similarly in the drawdown chart, if it starts at 1987, it makes no sense to start the dollar at -81%. If I am looking at a chart from 1987 to 2022, I want to see how the dollar did compared to other assets in that time period.

nonethewiser
Is that even possible? Wouldn't that suggest something that is not true?
epgui
How is it not true? All these numbers are relative, and you can make the choice of comparing them to whatever reference point you want.
rm999
The y-axis has actual meaning: it tells you the purchasing power of a public stock, which will never be 0.

What you could do is normalize it by the value of the stock at the start of the chart, which would make the charts start at 1. On a log plot this is the equivalent of dividing all the values by the starting value, which moves the lines up/down but does not change their shape. This could make it easier to compare the lines, but in doing so, you throw out information (the real value of the y axis).

pedrosorio
> The y-axis has actual meaning: it tells you the purchasing power of a public stock, which will never be 0.

If we are trying to visualize the total return of a given asset since 1987, how is the price of a single stock (an arbitrary unit) in 1987 or any time since, relevant data?

The ROI expressed as a percentage on the y axis (with 0% at the beginning of the period) would be a much better visualization of the relative returns among asset classes throughout the period.

Currently I get USD < VBMXFX < VFINX at the beginning of the chart, for reasons that have nothing to do with the total return since 1987.

The drawdown chart is even more confusing with the USD starting at -81%. If we were plotting a chart of drawdown of multiple currencies, the older ones would start lower (since they've had more time to be affected by inflation) which only makes it hard to visualize the answer to the question "how did they do since 1987".

epgui
As another commenter points out, it completely depends on what feature of the data you're trying to highlight, or what question you're trying to answer.

I don't think anyone looking at this chart really cares about the inflation-adjusted value of one share in a specific year, I think the main point of this chart is the real returns of stocks, bonds and cash (or an approximation of such represented by the selected indices), over time.

ricardobayes
I had the same thought. Having each assets start from the same value (eg. 100k USD) would really help.
kurthr
You don't really need that on a logarithmic plot since the ratio of stock prices is always a constant vertical separation. It is very necessary on linear pricing plots.
pedrosorio
Can you tell at a glance which asset had a better return since the start date until March of 2009? A plot of total ROI (with all assets starting at y = 0) would make that obvious (for any given end date).

As far as I can tell, the different intercepts just add noise (price of a single stock) that is not helpful to visualize what the plot is supposed to be showing (total returns).

kurthr
To within a fraction of a percent? Probably not, but to within a reasonable fraction of total performance over 13 years... yes. Look at the initial separation and the final separation and see if the are larger or smaller or look the same. If you can't see it, use a larger monitor. I'd see the point of scaling them when looking at VFISX vs GOOG since there would be a huge range on the scale, but even there you can see the current draw downs are very similar (38% vs 28%). So you can see a 10% (<1% per year) difference in performance between things with a 250x range.

Look at the link for VFISX,VFITX,VUSTX where they start with a ~100% separation (4,5.5,8) and end with very low separation (<+/-3%). In June of 2020 there's a blip where VUSTX goes up 20-25% over VFISX (about a quarter of the original separation) and VFITX is about a third of that or 7-8% over VFISX. So you can see ~3% difference in performance over 12 years or (0.25% annualized).

pedrosorio
> To within a fraction of a percent? Probably not, but to within a reasonable fraction of total performance over 13 years... yes.

You didn't answer my question. Could you tell which one had larger returns from the beginning of the period until March of 2009? I couldn't easily tell, and yet VMBFX has a total return of 127% and VFINX 89%

adrianmsmith
One suggestion I would have - it's great that you can drag on the graph to choose a different time period. But the data at the top isn't changed by that change of time period, e.g. https://totalrealreturns.com/s/AAPL stays 1980 to current. Obviously Apple wasn't doing well before the return of Steve Jobs, so it'd be nice to see the data for a shorter time period e.g. in my case I'd love to look at e.g. APPL for 2000 onwards.
loeg
What is the Total Real Drawdown chart supposed to show? Does it just reset where 0% is every time the fund reaches a new market high?
elil17
Yes, that’s correct.
loeg
Seems like a kind of useless visualization?
nope96
Perhaps Gold should be on the front page, as it is always mentioned as a supposed inflation hedge.

also https://www.portfoliovisualizer.com/backtest-asset-class-all... has stock data back to 1971, it would be nice to go back that far.

odyssey7
While it's not a security and summarizing its returns is more complex, it would also be interesting to see "home ownership."
ianai
Wondering whether the Case-Shiller index would be good for this. The problem with RE is broad heterogeneity.