• SDN Site Updates

    Hey everyone! The site will be down for approximately 2 hours on Thursday, August 5th for site updates.

Entol

Senior Member
7+ Year Member
15+ Year Member
Jun 10, 2003
163
0
Status (Visible)
I've seen several people, when discussing how they are planning to pay off loans from med school, say that they expect to make ~10% interest on any money through investments, so they will beat the interest rate. Others have said that 10% is a pretty conservative estimate.

I'm curious what do people do to earn such huge returns? I mean, I know about CDs, but even a 5 yr CD at a decent percentage is around 5% in my area, and you can't touch your money without paying a penalty. Is there a safe place you can invest your money where you don't have to worry about it constantly and have it amass big returns?

-Entol
 

spinestudent

Senior Member
7+ Year Member
15+ Year Member
Jun 10, 2003
137
0
Status (Visible)
Entol said:
I've seen several people, when discussing how they are planning to pay off loans from med school, say that they expect to make ~10% interest on any money through investments, so they will beat the interest rate. Others have said that 10% is a pretty conservative estimate.

I'm curious what do people do to earn such huge returns? I mean, I know about CDs, but even a 5 yr CD at a decent percentage is around 5% in my area, and you can't touch your money without paying a penalty. Is there a safe place you can invest your money where you don't have to worry about it constantly and have it amass big returns?

-Entol

If investment conditions stay the same, most people won't be making 10% on their investments. I don't know what to say about those estimates except that they are overly optimistic(based on the current investing climate)

Also, I didn't know cd's were at 5% now. I thought it was more like 3-4% at the most.
 

ms. a

Senior Member
10+ Year Member
15+ Year Member
Mar 21, 2003
449
2
Houston
Status (Visible)
  1. Resident [Any Field]
I believe that, over the long term, the average return on investments in the stock market is 8%. Counting on a 10% return, especially in just 4 years, would be pretty risky.
 
About the Ads

Entol

Senior Member
7+ Year Member
15+ Year Member
Jun 10, 2003
163
0
Status (Visible)
Good point about the CDs. I know I got a special deal on a CD for a very high return-- ~6.25% for 5 yrs at a bank that was just opening up. I assumed they would be a few percent lower than that, but I imagine 3-4% wouldn't be a bad guess.

My question is if you are earning 3-4% on CDs and inflation is taking place, then how are people making such high estimates on the amount they will earn?



spinestudent said:
If investment conditions stay the same, most people

Also, I didn't know cd's were at 5% now. I thought it was more like 3-4% at the most.
 

WatchingWaiting

Full Member
7+ Year Member
15+ Year Member
Mar 7, 2003
637
0
Status (Visible)
Entol said:
Good point about the CDs. I know I got a special deal on a CD for a very high return-- ~6.25% for 5 yrs at a bank that was just opening up. I assumed they would be a few percent lower than that, but I imagine 3-4% wouldn't be a bad guess.

My question is if you are earning 3-4% on CDs and inflation is taking place, then how are people making such high estimates on the amount they will earn?

The estimates are based on the long-term return of the stock market being about 10.9%. Or, at least, that's what most of the studies in the late 90s showed. After the recent downturn, that return is maybe down to 10% or so over a thirty or fourty year period. It is NOT at all a reasonable assumption to make for assets only held for three or four years. There are certainly other ways to get a 10% a year return, like bonds in companies with low credit ratings ("junk bonds"), but none that are risk-free.
 

spinestudent

Senior Member
7+ Year Member
15+ Year Member
Jun 10, 2003
137
0
Status (Visible)
Entol said:
Good point about the CDs. I know I got a special deal on a CD for a very high return-- ~6.25% for 5 yrs at a bank that was just opening up. I assumed they would be a few percent lower than that, but I imagine 3-4% wouldn't be a bad guess.

My question is if you are earning 3-4% on CDs and inflation is taking place, then how are people making such high estimates on the amount they will earn?

I'm not a financial guru, but I think there is usually relationship between loan interest rates and cd/bond rates. If you are only earning 3% on cd's then I don't think inflation will be extremely high. During the late 70's/early 80's when inflation was very high, cd rates were also really high.

But speaking for the stock market in general, assuming some kind of 10% gain regardless of past trends isn't realistic. Some mutual funds are going to do 20%. Some are going to do -5%. And it all depends on when you select a beginning point for the analysis. If in 2007 we analyze average 6 year returns in the stock market going back to 2001, the results wouldn't be very good at all.
 

Entol

Senior Member
7+ Year Member
15+ Year Member
Jun 10, 2003
163
0
Status (Visible)
These replies make a lot of sense, and I am definitely not a financial guru either :) I am curious how laymen learn about which stocks to invest their money in or if just going into a mutual fund is a pretty safe way to make money?
 
About the Ads
This thread is more than 17 years old.

Your message may be considered spam for the following reasons:

  1. Your new thread title is very short, and likely is unhelpful.
  2. Your reply is very short and likely does not add anything to the thread.
  3. Your reply is very long and likely does not add anything to the thread.
  4. It is very likely that it does not need any further discussion and thus bumping it serves no purpose.
  5. Your message is mostly quotes or spoilers.
  6. Your reply has occurred very quickly after a previous reply and likely does not add anything to the thread.
  7. This thread is locked.