8 ms·

not sure why I got downvoted but in order to get truely wealthy you have to invest your savings and not just put it in a bank account that accrues almost no int

by tempsy 7y ago

not sure why I got downvoted but in order to get truely wealthy you have to invest your savings and not just put it in a bank account that accrues almost no interest. If you do that then agree it will be eaten by inflation eventually.

iso1210 7y ago
That investment may work out, but it may not, and that's where we get the true source of wealth - luck
- tempsy 7y ago
  I've said this many times but I find it amusing how I get downvoted every time I bring up the stock market. Seems like so many on here think it's a scam, a bubble, or something else. The reality is anyone who has thought like that over the last 10 years has missed out on a once-in-a-generation opportunity to multiply their savings from the recession lows. I'm convinced most on here essentially missed out and trying desperately to justify their mistake through negative thinking. And no one is saying you need to invest in individual stocks outside the S&P. It isn't "luck" to make money on an index fund. Perhaps you can argue it is "luck" to beat the market, but not to simply grow your money investing in the broad market.
  - icedchai 7y ago
    Yes! I bought a ton of VTSAX back in 2008 - 09. It was painful at times, seeing those losses. More than 10 years later, I have indeed tripled my money. The only thing I regret is not buying more.
  - rapind 7y ago
    It's because of complexity and lack of trust in the people perceived as running it (especially after 2008). Derivatives, high frequency trading, MBS, and a handful of other acronyms aren't understood by the vast majority of people. That alone wouldn't be an issue if the experts were at least perceived as trustworthy. This isn't unique and could happen in many industries. It's an image problem combined with extreme (intentional) complexity. It's also very deserved IMO.
    - tempsy 7y ago
      Well, exactly. Too many people on here lean toward being skeptics in a lot of areas in life and end up making bad decisions like avoiding the market. So you think it's rigged. Now you missed out on 3x'ing your money in a boring index fund. Does that make you feel better?
  - jbay808 7y ago
    This is something I really wonder about. Presumably, there's a tradeoff between risk and interest rate, right? If you buy national bonds at 1.5%, you're accepting very low growth presumably in exchange for near-zero risk. If you park your money in a bank account earning 2%, you're getting a bit more, presumably at some higher risk. If you're earning 10% or 15% on the stock market through a balanced profile of index funds, doesn't that suggest that there must fundamentally be some significantly higher risk associated with that? How much exactly? Otherwise I assume nobody would be buying bonds at the available interest rates. Why do I see so many people these days giving financial advice that the only responsible thing to do with your money is invest it in the market? Undoubtedly that's been great advice over the past 10 years, but past returns are no guarantee of future performance, right? Is it mainly post-2008 that it became common sense that the average person should park their savings in the market? What does the market think the actual risk level of an index fund is? Or else why does anyone buy 10-year bonds? I'm really curious to hear thoughtful responses about this.
    - dgcupps 7y ago
      Why does anyone buy 10-year bond? It's because they value stability in returns over absolute returns. While it is true that over the long run the stock market will outperform current bonds, it isn't always true that it will in the short-term. If your a pension fund, a retiree, or anyone else who will need to spend money in the short-term, it often makes sense to forgo some long-term returns for short-term stability. You're correct that past returns are no guarantee of future performance; however, there is 100 years of history (not to mention economic theory) that supports the assumption that equities will outperform current interest rates over the long run.
      - jbay808 7y ago
        I guess I didn't think of 10 years as the short term. Let's say the 30 year bond then. The 30 year bond rate is something like 2.5%... Who would buy that if it was vanishingly unlikely that equities would return less than that after 30 years? I guess what I'm trying to get at is, is there a way I can estimate the probability that equities will return less than 2.5% over the next 30 years, given the information that the 30-year bond rate is 2.5% and the expected return on stocks is, say, 10%, and the market is efficient and some people buy bonds anyway?
- lawn 7y ago
  Is it lucky to roll a six ten times on a row? Sure. Is it lucky to roll a six at least once of ten throws? Not really, it's expected. This difference is why smart investment is much more than "just luck".

by tempsy 7y ago

iso1210 7y ago

That investment may work out, but it may not, and that's where we get the true source of wealth - luck

tempsy 7y ago
I've said this many times but I find it amusing how I get downvoted every time I bring up the stock market. Seems like so many on here think it's a scam, a bubble, or something else. The reality is anyone who has thought like that over the last 10 years has missed out on a once-in-a-generation opportunity to multiply their savings from the recession lows. I'm convinced most on here essentially missed out and trying desperately to justify their mistake through negative thinking. And no one is saying you need to invest in individual stocks outside the S&P. It isn't "luck" to make money on an index fund. Perhaps you can argue it is "luck" to beat the market, but not to simply grow your money investing in the broad market.
- icedchai 7y ago
  Yes! I bought a ton of VTSAX back in 2008 - 09. It was painful at times, seeing those losses. More than 10 years later, I have indeed tripled my money. The only thing I regret is not buying more.
- rapind 7y ago
  It's because of complexity and lack of trust in the people perceived as running it (especially after 2008). Derivatives, high frequency trading, MBS, and a handful of other acronyms aren't understood by the vast majority of people. That alone wouldn't be an issue if the experts were at least perceived as trustworthy. This isn't unique and could happen in many industries. It's an image problem combined with extreme (intentional) complexity. It's also very deserved IMO.
  - tempsy 7y ago
    Well, exactly. Too many people on here lean toward being skeptics in a lot of areas in life and end up making bad decisions like avoiding the market. So you think it's rigged. Now you missed out on 3x'ing your money in a boring index fund. Does that make you feel better?
- jbay808 7y ago
  This is something I really wonder about. Presumably, there's a tradeoff between risk and interest rate, right? If you buy national bonds at 1.5%, you're accepting very low growth presumably in exchange for near-zero risk. If you park your money in a bank account earning 2%, you're getting a bit more, presumably at some higher risk. If you're earning 10% or 15% on the stock market through a balanced profile of index funds, doesn't that suggest that there must fundamentally be some significantly higher risk associated with that? How much exactly? Otherwise I assume nobody would be buying bonds at the available interest rates. Why do I see so many people these days giving financial advice that the only responsible thing to do with your money is invest it in the market? Undoubtedly that's been great advice over the past 10 years, but past returns are no guarantee of future performance, right? Is it mainly post-2008 that it became common sense that the average person should park their savings in the market? What does the market think the actual risk level of an index fund is? Or else why does anyone buy 10-year bonds? I'm really curious to hear thoughtful responses about this.
  - dgcupps 7y ago
    Why does anyone buy 10-year bond? It's because they value stability in returns over absolute returns. While it is true that over the long run the stock market will outperform current bonds, it isn't always true that it will in the short-term. If your a pension fund, a retiree, or anyone else who will need to spend money in the short-term, it often makes sense to forgo some long-term returns for short-term stability. You're correct that past returns are no guarantee of future performance; however, there is 100 years of history (not to mention economic theory) that supports the assumption that equities will outperform current interest rates over the long run.
    - jbay808 7y ago
      I guess I didn't think of 10 years as the short term. Let's say the 30 year bond then. The 30 year bond rate is something like 2.5%... Who would buy that if it was vanishingly unlikely that equities would return less than that after 30 years? I guess what I'm trying to get at is, is there a way I can estimate the probability that equities will return less than 2.5% over the next 30 years, given the information that the 30-year bond rate is 2.5% and the expected return on stocks is, say, 10%, and the market is efficient and some people buy bonds anyway?
lawn 7y ago
Is it lucky to roll a six ten times on a row? Sure. Is it lucky to roll a six at least once of ten throws? Not really, it's expected. This difference is why smart investment is much more than "just luck".