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Skip college, invest in stock market. People love to chart out how great it is to invest in the stock market and how historically it generates great returns.

Skip college, invest in stock market. People love to chart out how great it is to invest in the stock market and how historically it generates great returns. Nobody seems to remember everyone around them losing enormous amounts of money whenever the economy tanks. Where were all those 7.1% earnings going when the banks were getting bailed out and people were camping on wall street because their houses were foreclosed? Who pays that 7.1% that everybody wins every year? It must come from tax dollars if nobody is losing any money in the market. Or maybe so much money is being generated from all that business that everything is just dandy and there's more money than there used to be. Or maybe the big investment firms are just handing it out to everybody who participates in the market. I don't know and I guess it doesn't matter. I should tell my kids to forget college and invest instead. They can learn about how it works as they go. Heck, high school is definitely more advanced than when I went. Maybe they teach kids how to invest now. It's so easy to make 7.1% every year that I'm sure the old shop teacher can cover it since they killed the shop program due to lack of funding. I guess the state didn't know that you just had to put your money in the market to have it grow 7.1% every year. Someone should let them know.

goobynight 9y ago
You know that 7.1% average doesn't mean 7.1% every year. Anyone that didn't panic sell during the crash has recovered. There are ways to handle the risk of a crash. #1 is to not play the high risk-high reward game if you are near retirement or already in retirement. You can't handle big swings at that point, since recovery could take 10 years and you're already 70. #2 is to have a liquid emergency fund, so you don't have to sell low if you have a big problem during a crash. #3 is to not panic sell during the crash...
- Steeeve 9y ago
  > Anyone that didn't panic sell during the crash has recovered. What does 500 shares of Pets.com sell for these days? All the people who had pensions heavily invested in Bear Stearns High-Grade Structured Credit Enhanced Leveraged Fund came out OK after a bit of time? --- Investment carries risk at all levels. The longer you play the market, the more likely it is that you'll get burned at some point. Professional investors can come up with plans to hedge their risk and avoid calamity. Some of those plans might even work. People who go straight to work out of high school are not professional investors. "Panic selling" is not always a choice, and it's not always even possible. And no, not everybody who lost a boatload of money during any particular crash ended up OK because they decided to let their investments coast.
  - MagnumOpus 9y ago
    You are building strawmen. The suggestion was to "invest into the stock market", not to "gamble on the single riskiest stock you can find". If an amateur invests their money into a passive index fund or even a diversified equity fund like, say, Fidelity Magellan, they would have done well over any 20-year span. Nuff said.
    - Steeeve 9y ago
      Both of the investments I referenced were solid until they weren't. My adult life has seen 3 major market crashes and a terrible recession. I've watched neighborhoods go into foreclosures on 80% of their homes. I've had friends go unemployed for over a year. When I see people spread investment advice as if there's no downside, I have to shake my head. There's money to be made in the market, but it's not without risk. The Nasdaq Composite lost 78% of its value as it fell from 5046.86 to 1114.11 in the dotcom crash. The S&P 500 declined 57% from its high in the housing crash. The Dow lost more than 5% in a single day at least 5 times in 2008. The next time one of the major indexes drops 700 points in a day look around and tell people "you'll be fine if you don't panic sell. Think about it in 20 year increments. It'll all average out. You're money is all in an index fund, right? Those are totally safe. You didn't want to spend anything during this presidential cycle anyways." Where was the index fund advice in '98? Where were all the people who had well balanced / well hedged portfolios in '07-'09? I'll tell you where they weren't. Every house with brown grass that the banks had foreclosed on and decided not to keep up. There was an army of day-traders once upon a time not all that long ago that blew all kinds of sunshine up people's asses about investments. There's no reason to. People who have the money to can invest if they want and if they do they should learn about the risks and ask the people who are giving them advice how they fared during the crashes. If those advisors don't admit it was hairy and ridiculously stressful, they are lying through their teeth. Index fund advice became widespread after '08. Now Black Rock, State Street, and Vanguard own majority stock in 440 S&P companies. You aren't invested in the S&P500 anymore. You are invested in BR/SS/VG management. Who aren't incentivized towards the interest of any particular firm. What happens as these funds grow? If investors herd to passively managed funds, what's the outcome? Faster cycles. The indexes do more securities lending, which makes them less liquid come crash time. Do investors know that these funds will have liquidity problems if the market goes belly up? A whole shitload of people are going to learn the term "halting redemptions" really quickly. Do investors realize that the growth of passive investment increases anti-competitive behavior? Which isn't good for the economy and sure as shit isn't good for small investors. But by all means, keep shilling the passive investment advice as if you've been doing it for 40 years. Then complain with the rest of the country that the funds should have been regulated more and how people should have known not to give that much power to so few companies in the financial sector.
- watwut 9y ago
  "Anyone that didn't panic sell during the crash has recovered." That is simply not true.

goobynight 9y ago

You know that 7.1% average doesn't mean 7.1% every year. Anyone that didn't panic sell during the crash has recovered. There are ways to handle the risk of a crash. #1 is to not play the high risk-high reward game if you are near retirement or already in retirement. You can't handle big swings at that point, since recovery could take 10 years and you're already 70. #2 is to have a liquid emergency fund, so you don't have to sell low if you have a big problem during a crash. #3 is to not panic sell during the crash...

Steeeve 9y ago
> Anyone that didn't panic sell during the crash has recovered. What does 500 shares of Pets.com sell for these days? All the people who had pensions heavily invested in Bear Stearns High-Grade Structured Credit Enhanced Leveraged Fund came out OK after a bit of time? --- Investment carries risk at all levels. The longer you play the market, the more likely it is that you'll get burned at some point. Professional investors can come up with plans to hedge their risk and avoid calamity. Some of those plans might even work. People who go straight to work out of high school are not professional investors. "Panic selling" is not always a choice, and it's not always even possible. And no, not everybody who lost a boatload of money during any particular crash ended up OK because they decided to let their investments coast.
- MagnumOpus 9y ago
  You are building strawmen. The suggestion was to "invest into the stock market", not to "gamble on the single riskiest stock you can find". If an amateur invests their money into a passive index fund or even a diversified equity fund like, say, Fidelity Magellan, they would have done well over any 20-year span. Nuff said.
  - Steeeve 9y ago
    Both of the investments I referenced were solid until they weren't. My adult life has seen 3 major market crashes and a terrible recession. I've watched neighborhoods go into foreclosures on 80% of their homes. I've had friends go unemployed for over a year. When I see people spread investment advice as if there's no downside, I have to shake my head. There's money to be made in the market, but it's not without risk. The Nasdaq Composite lost 78% of its value as it fell from 5046.86 to 1114.11 in the dotcom crash. The S&P 500 declined 57% from its high in the housing crash. The Dow lost more than 5% in a single day at least 5 times in 2008. The next time one of the major indexes drops 700 points in a day look around and tell people "you'll be fine if you don't panic sell. Think about it in 20 year increments. It'll all average out. You're money is all in an index fund, right? Those are totally safe. You didn't want to spend anything during this presidential cycle anyways." Where was the index fund advice in '98? Where were all the people who had well balanced / well hedged portfolios in '07-'09? I'll tell you where they weren't. Every house with brown grass that the banks had foreclosed on and decided not to keep up. There was an army of day-traders once upon a time not all that long ago that blew all kinds of sunshine up people's asses about investments. There's no reason to. People who have the money to can invest if they want and if they do they should learn about the risks and ask the people who are giving them advice how they fared during the crashes. If those advisors don't admit it was hairy and ridiculously stressful, they are lying through their teeth. Index fund advice became widespread after '08. Now Black Rock, State Street, and Vanguard own majority stock in 440 S&P companies. You aren't invested in the S&P500 anymore. You are invested in BR/SS/VG management. Who aren't incentivized towards the interest of any particular firm. What happens as these funds grow? If investors herd to passively managed funds, what's the outcome? Faster cycles. The indexes do more securities lending, which makes them less liquid come crash time. Do investors know that these funds will have liquidity problems if the market goes belly up? A whole shitload of people are going to learn the term "halting redemptions" really quickly. Do investors realize that the growth of passive investment increases anti-competitive behavior? Which isn't good for the economy and sure as shit isn't good for small investors. But by all means, keep shilling the passive investment advice as if you've been doing it for 40 years. Then complain with the rest of the country that the funds should have been regulated more and how people should have known not to give that much power to so few companies in the financial sector.
watwut 9y ago
"Anyone that didn't panic sell during the crash has recovered." That is simply not true.