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FIRE: Are stocks still the right investment? Maybe NO

20 years of returns VS your other investment options.

So it's 2020.

The "long-run" return rules no longer apply thanks to the digital revolution.

Those that argue the opposite are kidding themselves.

So that leads to my question - are stocks still the superior investment option for the medium & long-term?

Hard to argue that they were ever the best option for the short-term, so I will not even try.

OK, so here's the deal.

You currently have 4 realistic "investment options" (if you are being financially prudent and are not going to assume crazy risk).

Outside of these options, all cash should remain in a high-yield savings account until deployed.

A total market stock index fund

A total market bond index fund

5-Year certificate of deposits

Real estate investment trusts (REITS)

All are readily accessible to the average joe/jane.

We will judge the best option based on the last 20 years of performance on a compounded basis.

Total Market Stock Index Fund

Using Vanguard total stock market index fund performance as our reference, we are able to decipher that the 20 -year compounded annual growth rate (CAGR) equals:


Total Market Bonx Index Fund

Using Vanguard total bond market index fund performance as our reference, the equivalent 20-year compounded annual growth rate (CAGR) equals:


5-Year Certificate of Deposits

Using Bankrates's longrun certificate of deposit performance graphic as our reference, the equivalent 20-year compounded annual growth rate (CAGR) equals:


Real Estate Investment Trust

Using Vanguard real estate index fund performance as our reference, the equivalent 20-year compounded annual growth rate (CAGR) equals:



Based on the above financial performance, US-based REITS are/have been the superior investment option over the prior 20 year period (in the digital era).

Here's what I would recommend:

If you are a classic financial independence retire early saver, your portfolio is likely 100% total market stock index fund.

Over the next year, I would shift a moderate portion (at least 25%) into a real estate index fund.

Shifting entirely over immediately would be crazy and you need to examine the underlying holdings in the real estate fund. ESPECIALLY, since current economic events dictate the essential avoidance of commercial real estate (specifically in the office space area).

A large volume of millennails and Gen-Z buyers are emerging in the residential space, thus this REIT sector will likely stay moderately strong moving forward (with the exception of an obvious buble during the historically low borrowing rate period occurring in 2020).

Value is to be found in the REIT sector.

Happy saving.

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