Eminence Posted November 24, 2012 Report Share Posted November 24, 2012 Ten years ago (2002), the average price of a new car was $19,000. Millions of Americans probably bought cars for this price. However, maybe they should have made a slightly different investment. Option A: Paid $19,000 and have a car that in 2012 (today) is nearly worthless. Option B: Invested $19,000 into McDonalds stock and sold in 2012. The value of the stock ten years later would be worth $95,000 in the bank. Which would you prefer? Having a $19,000 car for the past ten years or having $95,000 in the bank today? Link to comment Share on other sites More sharing options...
Smidge204 Posted November 24, 2012 Report Share Posted November 24, 2012 Well if that car enabled me to get a job at McDonalds that I would not have otherwise been able to because of commute distance, then at a nominal $17,000/yr pay from that job over ten years would be $170,000 gross income. Minus the $19,000 initial investment and let's say $3,000/yr in fuel, insurance and maintenance I'd still have $121,000, versus $95,000 from stocks. (I'm not sure having my soul crushed from working ten years of minimum-wage burger flipping is worth it, though). Of course you can't exactly sit around waiting for those stocks to ripen, can you? The moral of this story is a car isn't an investment. Also something something opportunity costs, something something net present value.... =Smidge= Link to comment Share on other sites More sharing options...
DimensionWarped Posted November 24, 2012 Report Share Posted November 24, 2012 Only a fool uses the word 'investment' when talking about a new car purchase. A car is an essential piece of equipment for day to day life (for most people in most locations at least in the U.S.). It fits closer to the notion of a commodity than an investment. There's also nothing stopping you from driving a used car as long as you are willing to put up with the particular frustrations of driving one. And then there's the whole 'used car market sucks lately' thing. And let's not even begin to discuss the uncertainty of actually picking which stocks to buy in the first place. If you had instead invested that 19,000 dollars in Microsoft stock, today you would be... right where you started. If you'd invested in Apple stock right now you'd instead be... some flavor of millionaire I guess. The problem is that in 2002, you had no way of knowing their stock price would be exploding over the next 10 years. Let's spin this around a bit. We'll say that ten years ago, I invested in Dell. Everyone needs a computer right? Well, now my 19000 dollars is about 6000 dollars. Shit. This is the reason why people talk about a diversified stock portfolio. That whole... eggs in one basket thing. So you go with something popular like DOW or NASDAQ. Yeah, in about 10 years I have somewhere between 50% and 100% more money. I just had to put up with those terrifying slides where there were portions of time where instead of 19,000 dollars worth, I had 10,000 dollars. Link to comment Share on other sites More sharing options...
Serephim Posted November 25, 2012 Report Share Posted November 25, 2012 stock market is just a formal word for casino Link to comment Share on other sites More sharing options...
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