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> 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-

> 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.

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.