3 ms·

Even though I'm doing all the right things like maxing out 401k etc., I can't help but feel that I will regret it later. It feels like everyone grew up hearing

Even though I'm doing all the right things like maxing out 401k etc., I can't help but feel that I will regret it later. It feels like everyone grew up hearing the same thing (people are poor planners, people go broke in retirement) and now as adults have vowed that will never be them. The problem is that now everyone thinks this way - index funds are on the rise, people are saving into their 401k, I can't help but think that I should be zagging here when everyone is zigging. Unfortunately, however, I can't figure out what that other thing should be.

garethsprice 10y ago
Far from "everyone" - the majority of Americans are massively undersaving. If you are able to max out your 401k every year and track the market in index funds you'll be far ahead of the vast majority of people at retirement. The first generation of people who were expected to save privately are yet to retire. 29% of 55 and older have ZERO savings, and the average of those who do is $104k, which is a $310/mo annuity (GAO, 2015). There is a generational crisis brewing.
- cableshaft 10y ago
  Just wait until the young people of this generation reach retirement. Those numbers will likely be even scarier.
fnovd 10y ago
Investing is simply buying something you think will increase in value over time. US stocks have traditionally been an excellent vehicle due to their rates of growth. You could also invest in bonds, purchased annuities, real estate, gold and silver, foreign currencies & companies, Bitcoin/Ethereum, your offspring, domain names, collectibles... What do you think people will value in the next 10, 20, 50 years?
- DesiLurker 10y ago
  guns, lots of guns [insert matrix gif]..
pbrb 10y ago
Same. I've maxed my 401k since my first job. Now just breaking into 30s... decided to move some of what I would be contributing to 401k into RE investments. Huge tax advantages in this space, and with 15 yr loans you can be cash flowing pretty solidly in your 40s (the earlier you start, the better).
pillowkusis 10y ago
I've been feeling the same way. Having millions of people and billions of dollars blindly dumped into index funds leaves me uneasy. Many view index funds as a "7% return machine". The conventional wisdom is "buy and hold", blindly, regardless of what the market does, what companies fail, or who you're investing in. Most 401k users probably couldn't name more than 10 stocks that their fund is comprised of. Stock markets assume people buy stocks because they believe in some fundemental value of the stock, and have thus done analysis to believe so. When markets are composed of people who don't adhere to this philosophy... I'm not sure what happens next. Having such a large mass of investors who are not thinking rationally about their investment seems like a recipe for disaster, but I'm no economist. REITs, small-cap funds, international stocks, and perhaps commodities seem like the best choices if you're looking to diversify. The reality is if everyone's investment behavior precipitates a large collapse, pretty much no sane investment strategy is going to do well. Diversify, hedge your bets, and just stop worrying about it. That's the conclusion I've come to, anyway.
- dlp211 10y ago
  The whole point of index funds is to insulate yourself from a single company failing. What happens when 1 of the 500 S&P 500 companies even declines is that it is substituted for with another, stronger company. Index funds are not static, they just sometimes appear that way.
empath75 10y ago
You can always put some of your 401k into short term stuff like a money market account if you think the market is overpriced. That way you have money on the side you can throw into the market after it corrects. I've got like 20% of my 401k in a money market account for just this reason.
merpnderp 10y ago
Are there enough funds outperforming the index tracking funds to even start thinking about zagging?

garethsprice 10y ago

Far from "everyone" - the majority of Americans are massively undersaving. If you are able to max out your 401k every year and track the market in index funds you'll be far ahead of the vast majority of people at retirement. The first generation of people who were expected to save privately are yet to retire. 29% of 55 and older have ZERO savings, and the average of those who do is $104k, which is a $310/mo annuity (GAO, 2015). There is a generational crisis brewing.

cableshaft 10y ago
Just wait until the young people of this generation reach retirement. Those numbers will likely be even scarier.

fnovd 10y ago

Investing is simply buying something you think will increase in value over time. US stocks have traditionally been an excellent vehicle due to their rates of growth. You could also invest in bonds, purchased annuities, real estate, gold and silver, foreign currencies & companies, Bitcoin/Ethereum, your offspring, domain names, collectibles... What do you think people will value in the next 10, 20, 50 years?

DesiLurker 10y ago
guns, lots of guns [insert matrix gif]..

pbrb 10y ago

Same. I've maxed my 401k since my first job. Now just breaking into 30s... decided to move some of what I would be contributing to 401k into RE investments. Huge tax advantages in this space, and with 15 yr loans you can be cash flowing pretty solidly in your 40s (the earlier you start, the better).

pillowkusis 10y ago

I've been feeling the same way. Having millions of people and billions of dollars blindly dumped into index funds leaves me uneasy. Many view index funds as a "7% return machine". The conventional wisdom is "buy and hold", blindly, regardless of what the market does, what companies fail, or who you're investing in. Most 401k users probably couldn't name more than 10 stocks that their fund is comprised of. Stock markets assume people buy stocks because they believe in some fundemental value of the stock, and have thus done analysis to believe so. When markets are composed of people who don't adhere to this philosophy... I'm not sure what happens next. Having such a large mass of investors who are not thinking rationally about their investment seems like a recipe for disaster, but I'm no economist. REITs, small-cap funds, international stocks, and perhaps commodities seem like the best choices if you're looking to diversify. The reality is if everyone's investment behavior precipitates a large collapse, pretty much no sane investment strategy is going to do well. Diversify, hedge your bets, and just stop worrying about it. That's the conclusion I've come to, anyway.

dlp211 10y ago
The whole point of index funds is to insulate yourself from a single company failing. What happens when 1 of the 500 S&P 500 companies even declines is that it is substituted for with another, stronger company. Index funds are not static, they just sometimes appear that way.

empath75 10y ago

You can always put some of your 401k into short term stuff like a money market account if you think the market is overpriced. That way you have money on the side you can throw into the market after it corrects. I've got like 20% of my 401k in a money market account for just this reason.

merpnderp 10y ago

Are there enough funds outperforming the index tracking funds to even start thinking about zagging?