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You seem to be aware of index funds but not of buy-and-hold index fund investing and you assume everybody is like you. I say this because an attack of index fun

You seem to be aware of index funds but not of buy-and-hold index fund investing and you assume everybody is like you. I say this because an attack of index fund investing based on a prediction of low future returns makes no sense. A major point of index fund investing is resigning that you cannot reliably do better than the average. Predicting a lower market average doesn't change this. Such an investor would say that a slow market average makes it difficult for everyone to make money, not somehow just the index fund people. I am also bewildered that you'd think buying index funds is good in an up-economy but is bad an a down-economy. You want the diversified gain and the non-diversified loss? It seems to me that if you could somehow make accurate market predictions you'd be better off doing the exact opposite strategy.

charlesdm 7y ago
You can totally do better than the average, especially with small amounts of money, but not for the same effort required of an index fund (i.e. close to none).
AlchemistCamp 7y ago
I'm aware of "buy-and-hold index fund investing". I believe it was a good strategy because it was an an unpopular, undervalued asset class 100 years ago and has since become very popular and overvalued. Another important consideration is that companies now go public much later than they did pre-Sarbox. The sad truth is that a company's biggest gains are generally behind them by the time retail investors are allowed in. There will be no repeat of the windfalls ordinary investors made[1] from the IPOs of Microsoft, Walmart, Starbucks and similar companies in today's batch of new IPOs. This in itself is a good reason not to reflexively discourage someone from learning about angel investing. > I am also bewildered that you'd think buying index funds is good in an up-economy but is bad an a down-economy. I don't think this. Provided long-term real-GDP growth prospects are good, I think buying index funds when the funds themselves are under-valued is a good strategy. Looking at the underlying P/E, P/B, DCF or just about any metric you choose, you'll see that on average, publicly traded stocks[1] are very expensive compared to historical valuations. 1) both directly and through funds that index them
- icedchai 7y ago
  100 years ago? Index funds aren't that old.
  - AlchemistCamp 7y ago
    Stocks are. A common pitch used to sell people on index funds involves bragging about annualized returns of stocks going back even longer than that, and comparing them decade by decade against other asset classes such as real-estate and bonds. The implicit pitch is, "Look at this upward historical trend of stock valuations. If you invest in a fund that indexes them, you too will see these kinds of returns". Your point is good, though. Index funds never return quite as much as the underlying assets do since there are management fees. Over time, those fees compound.
    - icedchai 7y ago
      You will see those returns if you're invested long enough. Take a look at any 30+ year chart. Yes, there are periods of little-to-no return (2000-2011...)

charlesdm 7y ago

You can totally do better than the average, especially with small amounts of money, but not for the same effort required of an index fund (i.e. close to none).

AlchemistCamp 7y ago

I'm aware of "buy-and-hold index fund investing". I believe it was a good strategy because it was an an unpopular, undervalued asset class 100 years ago and has since become very popular and overvalued. Another important consideration is that companies now go public much later than they did pre-Sarbox. The sad truth is that a company's biggest gains are generally behind them by the time retail investors are allowed in. There will be no repeat of the windfalls ordinary investors made[1] from the IPOs of Microsoft, Walmart, Starbucks and similar companies in today's batch of new IPOs. This in itself is a good reason not to reflexively discourage someone from learning about angel investing. > I am also bewildered that you'd think buying index funds is good in an up-economy but is bad an a down-economy. I don't think this. Provided long-term real-GDP growth prospects are good, I think buying index funds when the funds themselves are under-valued is a good strategy. Looking at the underlying P/E, P/B, DCF or just about any metric you choose, you'll see that on average, publicly traded stocks[1] are very expensive compared to historical valuations. 1) both directly and through funds that index them

icedchai 7y ago
100 years ago? Index funds aren't that old.
- AlchemistCamp 7y ago
  Stocks are. A common pitch used to sell people on index funds involves bragging about annualized returns of stocks going back even longer than that, and comparing them decade by decade against other asset classes such as real-estate and bonds. The implicit pitch is, "Look at this upward historical trend of stock valuations. If you invest in a fund that indexes them, you too will see these kinds of returns". Your point is good, though. Index funds never return quite as much as the underlying assets do since there are management fees. Over time, those fees compound.
  - icedchai 7y ago
    You will see those returns if you're invested long enough. Take a look at any 30+ year chart. Yes, there are periods of little-to-no return (2000-2011...)