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>Always be invested in the market. Yes, I've heard that a million times, but that kind of advice presupposes a bull market. What if it's 1967, and you're abou

>Always be invested in the market. Yes, I've heard that a million times, but that kind of advice presupposes a bull market. What if it's 1967, and you're about to go into a 15 year period of up and down markets, with no real growth in stock prices? And that's before inflation; the market fell substantially during the horrible 70s if measured in real dollars. All kinds of stock enthusiasts (like most folks here) got eaten alive. Pessimism reigned by the early 80s. Most people said "I'll never buy stocks again.". Ironically, when investors finally capitulated, the great bull market of the 80s and 90s started. My point is that most people here are mesmerized by that bull market, and by recent gains. But historically the indexes have had huge, long term swings that probably exceed most people's investment horizon. "Past performance is no guarantee of future results" is not just a legal disclaimer. It's a bitter truth. Our current optimism is strongly colored by recent gains. What if you had retired in 1929? You would have received nary a return for 25 years. Sure, indexes average 8 percent or so, over the very long term, but it can be an intolerably long averaging interval.

lewisl9029 10y ago
> "Past performance is no guarantee of future results" is not just a legal disclaimer. It's a bitter truth. Definitely this. I personally believe "Always be invested in the market" is very irresponsible advice to give, precisely because it completely ignores this fundamental truth. Just because markets have averaged a positive return in the past doesn't mean they necessarily will continue to average a positive return in the future. And as the saying goes, the market can remain irrational far longer than you can remain solvent. That said, I still do invest most of my money in the market, but I don't try to pretend it's anything but a gamble. I've weighed my options, and the upside of investing in the stock market is much higher compared to all my other available options for investment, and I can afford to lose this gamble at this early stage in my life. But when people ask me for investment advice, I will tell them it's a gamble and let them make that decision for themselves, rather than try to propagate this ridiculous urban myth that the stock market will always somehow eventually end up higher, and add fuel to what has essentially become a massive pyramid scheme.
loeg 10y ago
> Yes, I've heard that a million times, but that kind of advice presupposes a bull market. What if it's 1967, and you're about to go into a 15 year period of up and down markets, with no real growth in stock prices? And that's before inflation; the market fell substantially during the horrible 70s if measured in real dollars. All kinds of stock enthusiasts (like most folks here) got eaten alive. Pessimism reigned by the early 80s. http://awealthofcommonsense.com/2014/02/worlds-worst-market-timer/ http://awealthofcommonsense.com/2014/02/worlds-worst-market-... > What if you had retired in 1929? You would have received nary a return for 25 years. That just isn't true? You're looking at charts without dividends reinvested. Plug 1929-1950 into https://www.measuringworth.com/datasets/sap/ https://www.measuringworth.com/datasets/sap/ for example. It had bounced back above 1929 by 1937; never falls below the starting value after 1944.
- alejohausner 10y ago
  I'll revise my position, but only slightly. Using the data that you pointed me at, if you had retired in 1929, you would have had to wait until 1944 before the market broke through permanently above the 1929 level, with dividends reinvested. So you would only have starved for 15 years, not 25.
  - loeg 10y ago
    Just because the market's down doesn't mean you can't spend retirement savings. You wouldn't need to starve (as someone wealthy enough to retire in 1929). Ideally you scale back your spending and look for work. Social security was signed into law in 1935 (6 years later). The problem isn't lasting the first 6-15 years (4% rule of thumb = 25x yearly spending; in very low risk cash/bonds obviously that lasts around 25 years), it's having any money left over to last the rest. And keep in mind, 1929 and ~1965 are the two worst years to retire in in US history.

lewisl9029 10y ago

> "Past performance is no guarantee of future results" is not just a legal disclaimer. It's a bitter truth. Definitely this. I personally believe "Always be invested in the market" is very irresponsible advice to give, precisely because it completely ignores this fundamental truth. Just because markets have averaged a positive return in the past doesn't mean they necessarily will continue to average a positive return in the future. And as the saying goes, the market can remain irrational far longer than you can remain solvent. That said, I still do invest most of my money in the market, but I don't try to pretend it's anything but a gamble. I've weighed my options, and the upside of investing in the stock market is much higher compared to all my other available options for investment, and I can afford to lose this gamble at this early stage in my life. But when people ask me for investment advice, I will tell them it's a gamble and let them make that decision for themselves, rather than try to propagate this ridiculous urban myth that the stock market will always somehow eventually end up higher, and add fuel to what has essentially become a massive pyramid scheme.

loeg 10y ago

> Yes, I've heard that a million times, but that kind of advice presupposes a bull market. What if it's 1967, and you're about to go into a 15 year period of up and down markets, with no real growth in stock prices? And that's before inflation; the market fell substantially during the horrible 70s if measured in real dollars. All kinds of stock enthusiasts (like most folks here) got eaten alive. Pessimism reigned by the early 80s. http://awealthofcommonsense.com/2014/02/worlds-worst-market-timer/ http://awealthofcommonsense.com/2014/02/worlds-worst-market-... > What if you had retired in 1929? You would have received nary a return for 25 years. That just isn't true? You're looking at charts without dividends reinvested. Plug 1929-1950 into https://www.measuringworth.com/datasets/sap/ https://www.measuringworth.com/datasets/sap/ for example. It had bounced back above 1929 by 1937; never falls below the starting value after 1944.

alejohausner 10y ago
I'll revise my position, but only slightly. Using the data that you pointed me at, if you had retired in 1929, you would have had to wait until 1944 before the market broke through permanently above the 1929 level, with dividends reinvested. So you would only have starved for 15 years, not 25.
- loeg 10y ago
  Just because the market's down doesn't mean you can't spend retirement savings. You wouldn't need to starve (as someone wealthy enough to retire in 1929). Ideally you scale back your spending and look for work. Social security was signed into law in 1935 (6 years later). The problem isn't lasting the first 6-15 years (4% rule of thumb = 25x yearly spending; in very low risk cash/bonds obviously that lasts around 25 years), it's having any money left over to last the rest. And keep in mind, 1929 and ~1965 are the two worst years to retire in in US history.