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> Both of the investments I referenced were solid until they weren't. No they weren't, not even close. Investing all your money in one company (whether Pets.c

by lodi 9y ago

> Both of the investments I referenced were solid until they weren't. No they weren't, not even close. Investing all your money in one company (whether Pets.com, McDonald's, or any other) is not, and has never been, "solid". Also, the words "leveraged hedge fund" should tip you off that that wasn't a low-risk investment. > When I see people spread investment advice as if there's no downside... Seriously? No true scotsman... err investor... would imply that the stock market is risk-free. Of course there's risk! It's literally the second-most risky/lucrative investment you can make (next to options trading). But the argument is that investing passively in a well-diversified index shifts most of that risk away from total loss--as in your examples--and into more manageable risks, e.g. waiting for the market to recover. > The S&P 500 declined 57% from its high in the housing crash. Sure, and then it grew 232% in five years to restore itself. > You didn't want to spend anything during this presidential cycle anyways. That's right, we're talking specifically about long-term savings; money that you're not planning to use in the next 5, maybe 10 years. If you're buying pets.com stock with next month's rent money, that's on you. Stock market isn't for everyone; buy T-bills if you want a safer investment. And by the way, in the context of this thread, money spent on tuition is also money that you can't spend in this presidential cycle, or the next! The break-even on something like med-school could easily take three presidencies or more. > 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. This literally happened a few weeks ago. I "lost" 9% in a day on news of a possible Trump impeachment, proceeded to not panic, and then watched my funds restore themselves. You can't use people doing the exact opposite of what they're advised to do as an example of the advice not working. > Where was the index fund advice in '98? Where were all the people who had well balanced / well hedged portfolios in '07-'09? I guess it was with all the people that still had green grass on their lawns? The ones that actually followed the advice? > 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. They're still there, and they're still blowing, but that's not the advice we're talking about in this thread. We're literally talking about sitting on a passive index for 24 years. > But by all means, keep shilling the passive investment advice... Who are we shilling for? Big Passive Investment? Am I getting commissions off your money? --- By the way, I'm interested to know what you propose I do with, say, an unexpected year-end bonus. Put it in a bank account earning -2% real interest?

Steeeve 9y ago
> Seriously? No true scotsman... err investor... would imply that the stock market is risk-free. ... > But the argument is that investing passively in a well-diversified index shifts most of that risk away from total loss--as in your examples--and into more manageable risks, e.g. waiting for the market to recover. So you're saying that the only risk is that you might have to wait a few years to see your money again. That's plain and simply not true. The risk is that you can lose all of your money. It's spelled out in every prospectus, just like it spells out that things like turnover costs are not accounted for in any marketing you've received. > By the way, I'm interested to know what you propose I do with, say, an unexpected year-end bonus. Put it in a bank account earning -2% real interest? My advice is don't put money in places you don't understand. When people give you the impression that there's no downside to a particular investment they don't understand it either. If all you understand is that a savings account won't lose money, then put it in a savings account, but remember that FDIC is limited insurance.
- lodi 9y ago
  > The risk is that you can lose all of your money. It's spelled out in every prospectus... If you buy equity in a single company, you could lose all of your money if they go bankrupt. Likewise, if you buy stock in 500 companies, they could all go bankrupt and you could lose all of your money, but the chances of that kind of "total loss" happening become astronomically low as your portfolio becomes more and more diversified. So yes, there's technically a chance of losing all of your money even when buying well-diversified index funds, and therefore this risk is listed in all the relevant legal documents. But I'm not losing any sleep over this particular category of risk. > When people give you the impression that there's no downside to a particular investment they don't understand it either. Of course there's a downside; the fundamental property of all investments is that risk is intrinsically proportional to reward. As a somewhat-rewarding investment strategy, it's therefore somewhat-risky. Being "locked out" of your money for a presidential cycle is one of the major downsides that we've both identified in this strategy.

by lodi 9y ago

Steeeve 9y ago

> Seriously? No true scotsman... err investor... would imply that the stock market is risk-free. ... > But the argument is that investing passively in a well-diversified index shifts most of that risk away from total loss--as in your examples--and into more manageable risks, e.g. waiting for the market to recover. So you're saying that the only risk is that you might have to wait a few years to see your money again. That's plain and simply not true. The risk is that you can lose all of your money. It's spelled out in every prospectus, just like it spells out that things like turnover costs are not accounted for in any marketing you've received. > By the way, I'm interested to know what you propose I do with, say, an unexpected year-end bonus. Put it in a bank account earning -2% real interest? My advice is don't put money in places you don't understand. When people give you the impression that there's no downside to a particular investment they don't understand it either. If all you understand is that a savings account won't lose money, then put it in a savings account, but remember that FDIC is limited insurance.

lodi 9y ago
> The risk is that you can lose all of your money. It's spelled out in every prospectus... If you buy equity in a single company, you could lose all of your money if they go bankrupt. Likewise, if you buy stock in 500 companies, they could all go bankrupt and you could lose all of your money, but the chances of that kind of "total loss" happening become astronomically low as your portfolio becomes more and more diversified. So yes, there's technically a chance of losing all of your money even when buying well-diversified index funds, and therefore this risk is listed in all the relevant legal documents. But I'm not losing any sleep over this particular category of risk. > When people give you the impression that there's no downside to a particular investment they don't understand it either. Of course there's a downside; the fundamental property of all investments is that risk is intrinsically proportional to reward. As a somewhat-rewarding investment strategy, it's therefore somewhat-risky. Being "locked out" of your money for a presidential cycle is one of the major downsides that we've both identified in this strategy.