Some time ago, there was a hot question on Zhihu Inc., saying, if you have 5 million, can you not go to work and live on bank interest? Many people's answer is absolutely yes, 5 million, 4% interest, 200000 a year of living expenses, not only to live, but also to live quite well.
The problem is that many people ignore the impact of long-term inflation.
Indeed, if the scenario is limited to single individuals with houses, cars, loans and no wages, relying on an interest income of 200000 a year, as long as consumer demand is not exaggerated, they can indeed live well within 10 years; but ten years later, 20 years later, they will face a lot of uncertainty, because no one can predict the future inflation situation.
As we all know, bank deposits cannot effectively resist inflation. There are many news reports reflecting the decline in deposits. If you are interested, you can check it out by Baidu, Inc..
The Wanyuan households in the 1980s belong to the rich, so 100,000 yuan is too much. Suppose 100, 000 yuan is deposited in the bank in 1990, and the annual interest is used for living expenses. By 2020, there will still be 100000 yuan in the account. Calculated at 4% interest rate, the annual interest income will be only 4000 yuan. At this time, can 4000 yuan still support a year's basic living? Obviously not.
Therefore, relying on bank interest to meet the future pension needs, unless the principal is particularly large, otherwise it is probably unreliable. Is there a good alternative? Yes, invest in stocks.
Taking into account the need to draw a fixed cost of living every year, investors can choose to invest in the Shanghai dividend index. The Shanghai dividend Index selects 50 securities with high cash dividend yield, relatively stable dividend and certain size and liquidity listed on the Shanghai Stock Exchange as index samples and adjusts them once a year to ensure that stocks with high dividends are included in a timely manner.
Since 2019, the annualized dividend rate of the index has been 3.93% (from 2004 to 2021, the three-year dividend rates are 4.74%, 5.43% and 5.65%, respectively), which is higher than the one-year bank deposit rate. At the same time, due to the rise in stock prices, the index itself can increase by an average of 6.58% a year, that is, the comprehensive annualized income reached 10.51%.
Assuming that 100000 yuan was invested in the index in 1990 (there was no index at that time, which was limited to hypothetical calculations), all the annual dividends were spent, and the compound growth rate of principal was 6.58%. By 2020, the principal will increase to 676500, and the dividend income for that year will be 36700 yuan. Thrift is still enough.
The question is, why is investing in stocks more attractive than bank deposits in the long run? The reason can be traced back to the industrial revolution and scientific and technological renaissance a hundred years ago.
In the past hundred years, driven by scientific and technological innovation and market economy, human society began to go beyond the constraints of land resources, out of the repeated Malthusian trap, and opened the unilateral rising trend of GDP. Since then, the economy has continued to grow, the profits of listed companies have continued to increase, driving the sustained growth of the stock market, and stock investment has become a magic weapon for long-term investment.
Professor Siegel in the United States once made a statistic that during the 200 years from 1802 to 2003, excluding the influence of inflation, the stock yield remained at 6.5%-7%, and the average annual real yield on bonds was 3.5%, only half of the stock yield. The average annual real return on bills and other short-term money market assets is 2.9%, while gold has a yield of only 0.1% after adjusting for inflation.
In other words, the $1 invested in stocks in 1802 had a purchasing power of $579485 by the end of 2003. If you invest in bonds, it has changed from $1 to $1072, and if it is gold, it has changed from $1 to $1.39, adjusted for inflation. In other words, gold can beat inflation, but it can only beat inflation and does not bring excess returns.
As far as the Chinese market is concerned, people may be more convinced that real estate is the best investment asset. Over the past two decades, house prices have continued to rise, creating the myth of invincibility in real estate investment, but in fact, this is only a special phenomenon in a particular historical stage. in the long run, there is no difference between owning real estate and holding gold. it is a good anti-inflation asset, but it is not a good asset for long-term investment.
Although the A-share market is often complained by investors, from the perspective of long-term holding, the moneymaking effect of A-shares is as good as that of US stocks and real estate. Measured by the Wande whole An index, which covers the Shanghai and Shenzhen stock markets, the index grew at an annualized rate of 10.77% from 1994 to 2020. This is a pretty good result, and if you add in the dividend yield, it will be even higher. It's just that the index fluctuates so much that most investors can't make a profit or lose money for a long time.
Therefore, as an investor, it is important to remember that, considering the huge impact of inflation in the long-term investment process, stocks are the best investment assets from the perspective of long-term investment. In this sense, the short-term fluctuation caused by investing in stocks is not a risk, but allowing assets to depreciate without investing in stocks is the biggest risk.
[note: there are risks in the market, so investment should be cautious. In any case, the information or opinions expressed in this article are for the exchange of views only and do not constitute investment advice to anyone. ]
This article is originally created by the official account "Xue Hongyan Weiyu". The author is Xue Hongyan, vice president of SUNING Institute of Finance.