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> Obviously, either way a decline in the stock market indexes is good news for almost everyone. I'm hoping for a real crash as I need to save lots more money, n

> Obviously, either way a decline in the stock market indexes is good news for almost everyone. I'm hoping for a real crash as I need to save lots more money, not just for my retirement but also for my kids college. Could you elaborate?

lorenzq 9y ago
You don't want to buy your groceries when they're not on sale.
- optimuspaul 9y ago
  because that would be stealing? :p Seriously though, I think this is a bad analogy. I buy groceries when I need groceries, sales have little bearing on that. A car however, that is something that wait for a deal before I buy.
  - Normal_gaussian 9y ago
    My car costs me about the same as my groceries over the same period of time; they are very comparable in price. As for sales - buying in season and buying in bulk saves huge amounts of money, a larger %age than I expect to get off a special deal on a car.
    - marcosdumay 9y ago
      Closely controlling all of your grocery prices costs way more labor than closely controlling all of your car prices. That said, I do adjust the amount I buy from groceries based on the current price. It's a cheap (in labor) way to save on them, but has lower gains than actively searching for deals.
  - tialaramex 9y ago
    For groceries that don't keep, you are obliged to buy when you need them, although because humans are omnivores you _can_ choose to eat steak only when steak is cheap or eat raspberries only when raspberries are cheap and save quite a bit that way. However most peoples' grocery shopping includes staples that have a relatively long shelf life if stored sensibly. Those who aren't dirt poor can and should purchase larger volumes of these products at lower prices if they know lower prices are not always available. This is one of many ways that being poor is expensive, your financial status makes it impossible to invest up front on bulk items that would be cheaper over the medium term.
valuearb 9y ago
Buffett had a good quote about it once that I can't find now, but essentially during most of your life you will be a net buyer of stocks. Only at the end, during your retirement, will you be a net seller and only then will you want high prices. Until then, the less you pay for your stock purchases, the better your long term gains will be.
- hsitz 9y ago
  Another way of thinking about it is: on average, stock value over the long term (20+ years) is very likely to be in range of, say, 5%/year, plus or minus (actual number is not that important for our purpose here), after adjusting for inflation. If stocks have been on a recent runup, gaining, say, 50% or 100% over a period of a few years, then they are very likely to grow more slowly than average (i.e., revert to the mean) over the coming years. If you buy during period of inflated prices you will realize a lower than average return if you're holding over the long term. Robert Shiller (Yale finance professor, of Case/Shiller housing index) likes to make the following analogy. Predicting the stock market is basically the opposite of predicting weather. With weather our short-term predictions can be fairly accurate, but our long term predictions are very poor. With the stock market it's the reverse, short-term predictions are worthless, but long term predictions are generally fairly accurate.
  - enoch_r 9y ago
    > they are very likely to grow more slowly than average (i.e., revert to the mean) I mostly agree with you, but this is basically the gambler's fallacy. If I'm flipping a coin every second for days, and I hit a run of 10 heads in a row, "reversion to the mean" just means that the next 10 flips are likely to be less extreme than the previous 10. It does not mean that I should expect "more tails than usual" for the next flips. We revert towards the mean, not past it.
    - poke111 9y ago
      No. The gambler's fallacy is when we ascribe dependency to independent events. Stock performance tomorrow is very much NOT independent of stock performance today, e.g. "market correction"
IncRnd 9y ago
The meaning is to Buy when the market dips, and sell when the market goes up.

lorenzq 9y ago

You don't want to buy your groceries when they're not on sale.

optimuspaul 9y ago
because that would be stealing? :p Seriously though, I think this is a bad analogy. I buy groceries when I need groceries, sales have little bearing on that. A car however, that is something that wait for a deal before I buy.
- Normal_gaussian 9y ago
  My car costs me about the same as my groceries over the same period of time; they are very comparable in price. As for sales - buying in season and buying in bulk saves huge amounts of money, a larger %age than I expect to get off a special deal on a car.
  - marcosdumay 9y ago
    Closely controlling all of your grocery prices costs way more labor than closely controlling all of your car prices. That said, I do adjust the amount I buy from groceries based on the current price. It's a cheap (in labor) way to save on them, but has lower gains than actively searching for deals.
- tialaramex 9y ago
  For groceries that don't keep, you are obliged to buy when you need them, although because humans are omnivores you _can_ choose to eat steak only when steak is cheap or eat raspberries only when raspberries are cheap and save quite a bit that way. However most peoples' grocery shopping includes staples that have a relatively long shelf life if stored sensibly. Those who aren't dirt poor can and should purchase larger volumes of these products at lower prices if they know lower prices are not always available. This is one of many ways that being poor is expensive, your financial status makes it impossible to invest up front on bulk items that would be cheaper over the medium term.

valuearb 9y ago

Buffett had a good quote about it once that I can't find now, but essentially during most of your life you will be a net buyer of stocks. Only at the end, during your retirement, will you be a net seller and only then will you want high prices. Until then, the less you pay for your stock purchases, the better your long term gains will be.

hsitz 9y ago
Another way of thinking about it is: on average, stock value over the long term (20+ years) is very likely to be in range of, say, 5%/year, plus or minus (actual number is not that important for our purpose here), after adjusting for inflation. If stocks have been on a recent runup, gaining, say, 50% or 100% over a period of a few years, then they are very likely to grow more slowly than average (i.e., revert to the mean) over the coming years. If you buy during period of inflated prices you will realize a lower than average return if you're holding over the long term. Robert Shiller (Yale finance professor, of Case/Shiller housing index) likes to make the following analogy. Predicting the stock market is basically the opposite of predicting weather. With weather our short-term predictions can be fairly accurate, but our long term predictions are very poor. With the stock market it's the reverse, short-term predictions are worthless, but long term predictions are generally fairly accurate.
- enoch_r 9y ago
  > they are very likely to grow more slowly than average (i.e., revert to the mean) I mostly agree with you, but this is basically the gambler's fallacy. If I'm flipping a coin every second for days, and I hit a run of 10 heads in a row, "reversion to the mean" just means that the next 10 flips are likely to be less extreme than the previous 10. It does not mean that I should expect "more tails than usual" for the next flips. We revert towards the mean, not past it.
  - poke111 9y ago
    No. The gambler's fallacy is when we ascribe dependency to independent events. Stock performance tomorrow is very much NOT independent of stock performance today, e.g. "market correction"

IncRnd 9y ago

The meaning is to Buy when the market dips, and sell when the market goes up.