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Comment by klochner | Hacker News Reader

Lawyers aren't known for their stock picking, I wonder if she was piggybacking on insider trading by M&A lawyers.

Saving $5000 per year for 75 years compounded annually at 6.2% would net you a little over $8M. An unremarkable return on an unremarkable savings rate.

I don't think a 21year old secretary was saving the equivalent of $70k 2018 dollars in 1943.

Who said anything about $70k?

Parent is stating $5k in 1943 dollars is $70k in 2018 dollars (a claim I did not verify).

6.2% would be inflation adjusted returns. Actual inflation adjusted returns were 7.4%. So investing the equivalent of $5k each year from then until now (so starting at $350 or whatever) would yield >$8.2M.

Andre_Wanglin alluded to it, though $70k was a slight overstatement.

With the effective inflation rate, $5,000 in 1947 was equivalent to $58,035 in 2018.

https://data.bls.gov/cgi-bin/cpicalc.pl?cost1=5000&year1=194...

He was using 5k inflation adjusted dollars so starting with ~350 actual $/ year in 1947.

Really, just do the calculation.

The $5k figure is in 2018 dollars and the rate of return is inflation-adjusted.

That's not true, you only get to that figure with 5,000 nominal dollars and 6.2% unadjusted interest

  >>> def comp(s, n, i):
  ...     m = 0
  ...     for x in range(n):
  ...             m *= i
  ...             m += s
  ...     return m
  ...
  >>> comp(5000, 77, 1.062)
  8201943.704759633

So there were some abnormal returns (or inheritance) involved.

I think your program confirms rather than disputes my comment.

My program adds 5000 nominal dollars to a savings account every 'year' and then applies a 6.2% interest rate once a 'year'.

Where is the '2018 dollars'? The account takes the same nominal deposit at year 0 as at year 76.

Where is the adjustment for inflation in the interest rate? The account adds 6.2% every year regardless of that years inflation.

EDIT: The program obviously cannot account for inflation since it has no notion of inflation. If the secretary were depositing 5000 '2018 dollars' in 1947, then the nominal deposit would have to be something like $500. Inflation is usually positive, so money in the past is worth more.

6.2% is the average, inflation-adjusted rate.

https://dqydj.com/sp-500-return-calculator/

Average dividend reinvested and inflation adjusted return between 1949 and 2016 is 7.5%

  >>> def comp(A, n, i):
  ...     m = 0
  ...     for x in range(n):
  ...         m += i**x
  ...     return A/m
  ... 
  >>> comp(9000000, 67, 1.0725)
  6053.012676780852

Assuming costs of 0.25%, she needs to invest a little over 6000 2016 USD per year to get 9 million USD.

It's an example. I bet she was saving way more than $5000 for most of that time.

All it takes is one remarkable variable -- age.

The same values taken for a 50 year period are only $1.65MM, nothing to sneeze at, but a far cry from $8.2MM.

This is overly dismissive. Age and duration are important, but the saving is also necessary.

100 years of living barely within your means won't leave $8.2MM or $1.65MM.

Never retiring, so never drawing on the principal is going to make a significant difference,

You are neglecting inflation. There was no way this secretary was saving $5000 a year 75 years ago - her yearly salary was mostly likely around that amount.

The 6.2% return on investment is after subtracting inflation. Think of the $5k in 2018 dollars.

I didn't need to consider inflation to make my point.

I think it's more the fact that they were a two income family and never had kids. Their apartment was probably paid off and they were one of those couples that was perfectly happy not taking expensive vacations or buying expensive things. Combine that with smart investing and you an amass quite a fortune over a lifetime.

Of course then you are 95 and realize that without descendants about the only thing you can do with the money is give it to a charity and hope they don't squander it.

> without descendants about the only thing you can do with the money is give it to a charity and hope they don't squander it

A reputable charity is less likely to squander $8M than one's descendants are.

Dink dink dink! We have a winner!

Actually M&A lawyers know the law, and have a lot more to lose than the average person. So insider trading amongst them is quite rare. Ask around at work and see what your GC thinks about your hypothesis.

She had many years to compound.

Quick script, to show some example numbers on how this could happen (assumes she worked for 75 years, that her salary kept up with annual rate of inflation and she always invested 10%, and a very high annual rate of return of 10%) [1].

[1] https://gist.github.com/wjn0/67641a83d61e2fe74f8729f65fe4bdb...

10% isn't a very high annual rate, it's probably almost exactly what the stock market returned over that period.

Warren Buffet says 6-7%, and by rules of compound interest, that 3-4% difference is a lot over 75 years, so I'd say "high." I'd guess a really good, modern, algorithm from the past couple years could average, maybe, 15%? I actually have no idea.

There’s no need to quote authority; this is public data. The annualized return on the S&P 500 over the last 75 years (Mar 1943 - Mar 2018) was 11.35%. Adjusted for inflation, 7.45%.

Warren Buffet: 6-7% S&P returns: 7.45%

Looks like Warren Buffet knows what he's talking about.

We shouldn't defer to authority on things that can be readily checked ourselves.

My personal overall rate of return is 13% over the last 20 years, without any algorithmic bullshit. Just 80% in a basket of dollar cost averaged mutual funds and 20% in cash strategically invested when opportunity arises.

Iirc, last year was around 14% in the mutual funds, with the “fun money” mostly cash.

Uh, no. $8 million after 75 years of compound growth isn't significant.

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