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How to Win at the Stock Market by Being Lazy

57 points by 1PlayerOne 6y ago

1PlayerOne 6y ago
Speaking from personal experience, this worked for me. Buy the market, using mutual funds and ETF on Vanguard, and just wait patiently; ignore all the noise, not easy to do sometimes, but you will be rewarded if you just leave it alone. Who says there are no free lunches?
- luxurytent 6y ago
  Did you ever sell those ETFs? The couch potato strategy is to let it sit until you need it (e.g. retirement)
  - 1PlayerOne 6y ago
    Not yet. Yup will wait till I need it in retirement before selling them.
- ISL 6y ago
  > Who says there are no free lunches? People who bought and held the Dow between ~1966 and ~1982?
  - actuator 6y ago
    Even the Total Return one? FTSE 100 has been also flat since the 2000 bubble peak but I think there is some gain if you count the dividends. Anyway, one should diversify between geographies as well.
runawaybottle 6y ago
The problem is people want short term investing strategies too. We don’t want to all be 65 to do something with our money.
- grenoire 6y ago
  Boomers tell zoomers to just stick to the fundamentals. Zoomers are tired of this crap.
  - deleted 6y ago
    [deleted]
  - zhdc1 6y ago
    When ex-zoomer boomers tell zoomers to act more like ex-zoomer boomers, and not zoomer boomers, there's probably a good reason for it (at least when it comes to money).
  - TameAntelope 6y ago
    Zoomers aren’t old enough to be tired of stuff yet... Kidding, but there’s a real value in letting other people explain their mistakes to you in a way that helps you skip those mistakes, and I see a lot of that here.
    - bilekas 6y ago
      Zoomers are forever tired
  - jackhack 6y ago
    the difference is that boomers have lived through more than one market cycle and we know an inevitable "correction/crash" is coming. The wise will take action in advance (e.g. move to cash positions) to lock in gains, then repurchase at what feels like the worst point of doom & gloom. A 50% loss needs a 100% gain to recover... Plus inflation. Factor in opportunity cost and it might be closer to 120%. The first and last lesson in investing is DON'T LOSE MONEY. Sadly, many have to learn firsthand that markets don't grow to the sky forever.
    - icedchai 6y ago
      Also, don't put all your eggs in one basket. It sounds cliche, but diversification is important. When the entire market crashes and you're down 30%, it will come back... in time. When your crazy YOLO stock crashes 90%, it may be done for good.
kache_ 6y ago
Hell yeah, boomer strats FTW. Hedge against inflation and by appreciating assets and forget about it. If you want to get rich quick you're probably better off starting a software company or something, or getting lucky with startup RSUs.
- zhdc1 6y ago
  John Bogle was from the silent generation, while the get rich quick mantra is more of a boomer and Gen-x stereotype.
  - throwaway987978 6y ago
    I'm pretty sure "get rich quick" has been around for a long time in one form or another.
- slothtrop 6y ago
  I think a bit better than boomer strats, which has been overwhelmingly mutual funds with high MER and sub-par performance compared to the indices.
resource0x 6y ago
Buy S&P500 ETF. It's guaranteed to go up. Why? Because if it goes down, Federal Reserve and the Treasury will always find a way to pump it back up. Historical examples are not relevant, it's a new thing - started around year 2000. This game will never stop - even if pumping leads to the debasement of currency, it will continue anyway.
- adflux 6y ago
  This time its different!!!
  - joshspankit 6y ago
    *””
- deleted 6y ago
  [deleted]
- deleted 6y ago
  [deleted]
- AnimalMuppet 6y ago
  But if it goes up as measured by a debased currency, are you really ahead?
  - nknealk 6y ago
    Yes, because in the long run the equity will increase in value by the amount the currency has been debased holding all other things constant. Put another way, if a currency is debased by 20%, businesses will raise prices or reduce costs to maintain the same margins over the long run.
    - AnimalMuppet 6y ago
      But if the equity increases in value by the amount the currency has been debased, are you ahead? To me it looks like you're just even. Worse, you're behind if you have to pay taxes on the gains.
endisneigh 6y ago
The problem I think is that there are asymmetric outcomes and the quality of life changes are exponential. Let's say you have $1000 and there's a 1% chance you can 100X your money in a year by buying $AMAZING. Someone will look at this and say, well, if I 100X my money then I'll have 100,000 and I can buy a house. If it goes to zero I'll be broke, but I was already broke anyway so nothing changed. A rational person will say, yeah but if you took your $1000 and invested at a regular rate of return of 10% and waited 50 years I'd have $17,000! An excellent return on investment, except now your entire life has gone by. edit: I actually meant to say 30 years instead of 50 but will leave the error up for transparency's sake! At 50 years it's more like $120K or so.
- sigstoat 6y ago
  > quality of life changes are exponential generally they're logarithmic. that's why billionaires are still basically people, instead of just writhing around in orgasmic ecstasy all of the time.
  - endisneigh 6y ago
    That's true - the real shape is probably S-shaped where as you go from poverty to just above the poverty line the gains are exponential and as you go from above the poverty line to upper middle class it's maybe linear and then upper class to "rich" it's logarithmic.
    - gruez 6y ago
      It's s-shaped insofar as "it's expensive to be poor"[1], but the solution to that isn't to gamble, it's to save. [1] eg. buying a 4-pack of toilet paper rolls every week rather than buying 2x 48 packs when it's on discount.
      - endisneigh 6y ago
        oh I completely agree, but you don't see the gains for a very long time so for some people gambling is a way to quickly escape the trap.
meowzero 6y ago
Passive strategies so far has done better than active strategies. It's the most recommended system. I've tried trading before. I studied all the technical analysis, the fundamental analysis, etc. I know my candle sticks, trend lines, chart patterns etc. I've done it with stock markets, FOREX, and BTC. Maybe I sucked. Or maybe I deluded myself thinking I can beat the market. But buying shares and forgetting about them got the best results. This is the strategy most advisors advise. It saves time, stress, and it works.
- spelunker 6y ago
  I tried the same, and it was really easy to think that I was picking stocks well when in fact most of the market was up - rising tide, etc. I also tried options. Great way to lose money fast!
- toto444 6y ago
  I find that the only 'drawback' is that it is not sexy. When people have talks about what they are going to buy or how much they have made buying and selling bitcoins last week you can't really take part of the conversation.
  - keithwhor 6y ago
    If you find friends with more interesting things to talk about it'll improve your quality of life more than buying and selling bitcoin.
  - meowzero 6y ago
    I dunno. It depends on your view. I wasted so much time looking at charts, studying, and stressing out over the market. The passive strategy gave a lot of free time to do other stuff. And I have on fewer thing to worry about. Also, even with my passive strategy, I still have fun talks of my investments with friends. It's more talks about general trends and what companies I'm looking to hold for a long time.
  - somedudetbh 6y ago
    Locally, that's a drawback. Globally, the unsexyness of passive index investing is the best thing about it. A huge percentage of the angel / seed / FFF capital in the world comes from bored people who don't want to talk about their Vanguard Target Retirement 2050 investment and so put 10% of their portfolio into crazy startups that will sound impressive to their friends. Consequently, for the posters on this site, the boringness of passive investing is a huge creator of jobs and opportunities for us!
hn_throwaway_99 6y ago
I think one problem with this advice is that not everyone can be a passive investor. There has been an absolute explosion in passive investing in the past 10-20 years, so there is actually a bigger battle going on to lead the giant sums of that passive money. Mike Green has commented a lot on this new phenomenon, some very good info: https://hiddenforces.io/podcasts/mike-green-passive-investing/ https://hiddenforces.io/podcasts/mike-green-passive-investin...
- sigstoat 6y ago
  this sort of vague concern about passive investing from folks who profit off of active investing reads like wolves complaining about how the sheep aren't venturing out to eat the tastiest grass at the edge of the fields. it also paints "passive investors" with a rather broad brush, as though every one is out buying exactly ^SPTMI in lock step. when really folks are buying all sorts of subtly different blends of the market, and usually topping it off with a couple of small personal choices.
  - hn_throwaway_99 6y ago
    Even the staunchest Efficient Markets Hypothesis advocates accept that you need a robust amount of active investors, who are the ones who actually keep the markets efficient. We really are in a new world where there has never been so much money in the market that follows other money and is essentially price-insensitive.
finolex1 6y ago
Will the US Stock market continue to provide exceptional returns? If you had invested in the German or Russian markets decades ago, you wouldn't have made much gains at all. https://www.bridgewater.com/research-and-insights/geographic-diversification-can-be-a-lifesaver-yet-most-portfolios-are-highly-geographically-concentrated https://www.bridgewater.com/research-and-insights/geographic...
- zhdc1 6y ago
  The S&P500 is surprisingly diversified, simply because most of the companies are large enough to operate globally.
  - RhysU 6y ago
    I like to think of buying the S&P500 as going long Western Capitalism. If that craters, one has bigger problems than one's portfolio.
- chki 6y ago
  > If you had invested in the German or Russian markets decades ago, you wouldn't have made much gains at all. Is that actually true? I just tried to find out what would have happened if you invested in the German DAX 30 years ago and apparently you would have had an 800% return on investment, approximately 7.5% annualized. Seems pretty good to me.
  - finolex1 6y ago
    True, I guess I was speaking on an even longer time horizon.
joyeuse6701 6y ago
The main argument (passive investing) has issues when inflation is high, pulling this from a newsletter I read recently: "Bianco further notes that, for an investor who bought the S&P 500 in 1966, it would not have been until 1993 — 27 years later — that the holding would have delivered real, inflation-adjusted gains."
- andrewprock 6y ago
  Real inflation adjusted gains are one thing, protection against inflation is another. Stocks deliver both, though with significant risk. But if you are passively investing, the inflation protection you get is essentially free. You will still have to fade the risk though. If your portfolio is large and consists of 100% stocks, you need to diversify out. The mostly common alternative asset classes are real estate, commodities, and cash.
ErikAugust 6y ago
Last week: SPECULATIVE (TO THE MOON!) bubble This week: Yeah, just buy index funds ... I feel this cycle is common, but speeding up?
- mschuster91 6y ago
  More and more people get into (day)trading on RH and friends during the latest bubbly craze and then stick to it... some because they managed to get a decent chunk of cash to play with (u/DFV should be set for life!), some because they find trading interesting, some because they follow the sunk cost fallacy or worse, try to gamble back their six figures of debt. And now that the bubble has popped, they're searching for new avenues of investment... and until the next bubble arrives, a decent ETF is a good way to park money. (for disclosure: holding a couple dozen AMC, NOK and DAX/MSCI World ETFs)
- sigstoat 6y ago
  it's definitely faster when you listen to r/wsb one week, and then sane people the next.
kras143 6y ago
As a civilization it is better for 95% of the people to think that holding stocks for long term is better. We leave the milking to the top 5%, and we enjoy peace of mind.
tinyhouse 6y ago
I think some people can beat ETFs by pick and choose stocks, assuming they know what they are doing and get lucky. For me the biggest problem with this approach is that it becomes a job. Maybe not a full time job, but you end up spending non-trivial amount on this. If you really enjoy it then it's OK. But for many people it takes over other important hings in their life (their job, family, etc). You need to decide if it's worth it.
llbeansandrice 6y ago
Folks seem to be fighting about which way is "best" to play the stock market. Boomer ETFs and Index funds with regular deposits vs buying individual stocks vs day trading vs WSB YOLO plays. I think there's a place for all of them. I've been okay dumping money into index funds, but my best "play" ever was buying 5 shares of AAPL a few years ago. That ~$500 is now up over $2k. If you have the capital, there's room for all 3. Boomer investing to stay safe and have an EF and build your retirement nest egg. Buying individual stocks that you like with a smaller percentage. Maybe a small amount of "fun money" for day trading/YOLO. Everything in moderation, including moderation and all that.
- icedchai 6y ago
  I do all three, as well. I shy away from YOLOs but occasionally gamble on puts or calls. Basically, I have a Vanguard account for index funds / ETFs: long term investing. I have an Etrade for individual stocks: shorter term. My best stocks have been AMD, MU, FB, HUBS, PYPL. All are 4 to 5x+. HUBS is a 10x. You won't get those returns with index funds.
david927 6y ago
The adage that "the stock market always goes up" has been true for decades but there's nothing inherently true about that. A Ponzi scheme can also go up for decades as long as there's growth. It's when there are contractions that it pops. Anytime someone invests in "the stock market" they're doing this: creating growth without underlying value. And it might work out -- and it has for decades so far -- but that doesn't mean it makes sense or will continue that way forever.
- iams 6y ago
  There is something inherently true. The stock market goes up because the world becomes more efficient. What the world was able to do last year, it's able to do again and then some because we are better at doing it.
  - david927 6y ago
    No, a company's ability to be more efficient (as well as general increasing efficiencies) is priced into its value. That's where P/E ratios come into play. Currently the entire stock market doesn't reflect value, it reflects growth. Shiller P/E (CAPE) is normally between 10 and 15 depending on that efficiency that you're talking about. It's at 35 right now. (https://www.multpl.com/shiller-pe https://www.multpl.com/shiller-pe) That's higher than Black Tuesday and any other time in this market's history outside of the 2000 crash.
brundolf 6y ago
> But the reality is that the stock market has also offered a path for ordinary people to build wealth — and more so in the last generation than ever before. You haven’t needed to burn down the system. All you’ve had to do is take the laziest, simplest approach to stock investing imaginable, and have a little patience. > Any schlub on the street can put money to work harvesting a small share of the earnings of hundreds of leading companies, led by some of the sharpest corporate executives on earth and their millions of employees. This is leaving out a very important detail, which is that you first have to be living comfortably and holding excess savings (that you're willing to risk, or at least leave alone!) to be able to even take the safe road in the market. That's not something "any schlub" can do; it excludes something like half of Americans. The "40% don't have $400 for an emergency" statistic is tired at this point, but it's telling here. You shouldn't be investing, even in an index fund, if you don't have enough cash to cover an unexpected emergency. It's not a question of patience. The really predatory thing about Robinhood and the like isn't that they prey on "impatience", it's that they prey on desperation. A person who can't afford to put $1000 in an index fund and leave it alone for ten years can maybe scrape together $100 to bet on the small chance of striking it rich and pulling themselves out of borderline-poverty. It may still be bad advice, but when people don't have other options, the calculus starts to make sense from their perspective. Robinhood's commercials even emphasize this specific angle. This article is great advice for the shrinking middle-class, but it comes off as tone-deaf for a growing majority of Americans.
- rufus_foreman 6y ago
  >> The "40% don't have $400 for an emergency" statistic is tired at this point, but it's telling here The survey didn't indicate that 40% didn't have $400 for an emergency, it indicated that if they had a $400 emergency, 61% of people would use short term cash to pay for it. 27% would use some other means to pay for it - for example put it on a credit card and worry about it later. That didn't necessarily mean they didn't have $400 in cash, it just meant they would use some other way to deal with the emergency. 12% said they wouldn't be able to come up with the money. >> This article is great advice for the shrinking middle-class, but it comes off as tone-deaf for a growing majority of Americans. The majority of people leaving the shrinking middle-class are leaving it to join the upper class. Not that the lower class isn't growing also, it is, the middle class is indeed hollowing out, but more middle class people are getting richer than getting poorer. From a personal perspective, I invested money in a 401K when I was working class, with the goal of letting it compound for many decades. I'm guessing that people with that mindset are less likely to stay working class, and I have no idea where I got that mindset. Certainly not from my parents or siblings, they were all the normal get the paycheck, spend the whole paycheck type.
sheepybloke 6y ago
I think the thing it's talking about is building wealth, which is easiest to do passively. But if you want to get rich, I feel like now days you either have to play the stock market or start a successful business. You can work your whole life and get enough to maybe retire comfortably, but if you ever want to be actually rich, I don't think you can just passively invest anymore.
pgroves 6y ago
Index fund performance is starting to sound exactly like "house prices have never gone down" in 2005.
- loco5niner 6y ago
  Have you seen house prices lately? I wish I had bought in 2005
joshspankit 6y ago
Question for the room: Are index funds that focus entirely on socially and environmentally responsible companies something that’s on your radar? Why/why not?

57 points by 1PlayerOne 6y ago

Speaking from personal experience, this worked for me. Buy the market, using mutual funds and ETF on Vanguard, and just wait patiently; ignore all the noise, not easy to do sometimes, but you will be rewarded if you just leave it alone. Who says there are no free lunches?

luxurytent 6y ago
Did you ever sell those ETFs? The couch potato strategy is to let it sit until you need it (e.g. retirement)
- 1PlayerOne 6y ago
  Not yet. Yup will wait till I need it in retirement before selling them.
ISL 6y ago
> Who says there are no free lunches? People who bought and held the Dow between ~1966 and ~1982?
- actuator 6y ago
  Even the Total Return one? FTSE 100 has been also flat since the 2000 bubble peak but I think there is some gain if you count the dividends. Anyway, one should diversify between geographies as well.

runawaybottle 6y ago

The problem is people want short term investing strategies too. We don’t want to all be 65 to do something with our money.

grenoire 6y ago
Boomers tell zoomers to just stick to the fundamentals. Zoomers are tired of this crap.
- deleted 6y ago
  [deleted]
- zhdc1 6y ago
  When ex-zoomer boomers tell zoomers to act more like ex-zoomer boomers, and not zoomer boomers, there's probably a good reason for it (at least when it comes to money).
- TameAntelope 6y ago
  Zoomers aren’t old enough to be tired of stuff yet... Kidding, but there’s a real value in letting other people explain their mistakes to you in a way that helps you skip those mistakes, and I see a lot of that here.
  - bilekas 6y ago
    Zoomers are forever tired
- jackhack 6y ago
  the difference is that boomers have lived through more than one market cycle and we know an inevitable "correction/crash" is coming. The wise will take action in advance (e.g. move to cash positions) to lock in gains, then repurchase at what feels like the worst point of doom & gloom. A 50% loss needs a 100% gain to recover... Plus inflation. Factor in opportunity cost and it might be closer to 120%. The first and last lesson in investing is DON'T LOSE MONEY. Sadly, many have to learn firsthand that markets don't grow to the sky forever.
  - icedchai 6y ago
    Also, don't put all your eggs in one basket. It sounds cliche, but diversification is important. When the entire market crashes and you're down 30%, it will come back... in time. When your crazy YOLO stock crashes 90%, it may be done for good.

kache_ 6y ago

Hell yeah, boomer strats FTW. Hedge against inflation and by appreciating assets and forget about it. If you want to get rich quick you're probably better off starting a software company or something, or getting lucky with startup RSUs.

zhdc1 6y ago
John Bogle was from the silent generation, while the get rich quick mantra is more of a boomer and Gen-x stereotype.
- throwaway987978 6y ago
  I'm pretty sure "get rich quick" has been around for a long time in one form or another.
slothtrop 6y ago
I think a bit better than boomer strats, which has been overwhelmingly mutual funds with high MER and sub-par performance compared to the indices.

resource0x 6y ago

Buy S&P500 ETF. It's guaranteed to go up. Why? Because if it goes down, Federal Reserve and the Treasury will always find a way to pump it back up. Historical examples are not relevant, it's a new thing - started around year 2000. This game will never stop - even if pumping leads to the debasement of currency, it will continue anyway.

adflux 6y ago
This time its different!!!
- joshspankit 6y ago
  *””
deleted 6y ago
[deleted]
deleted 6y ago
[deleted]
AnimalMuppet 6y ago
But if it goes up as measured by a debased currency, are you really ahead?
- nknealk 6y ago
  Yes, because in the long run the equity will increase in value by the amount the currency has been debased holding all other things constant. Put another way, if a currency is debased by 20%, businesses will raise prices or reduce costs to maintain the same margins over the long run.
  - AnimalMuppet 6y ago
    But if the equity increases in value by the amount the currency has been debased, are you ahead? To me it looks like you're just even. Worse, you're behind if you have to pay taxes on the gains.

endisneigh 6y ago

The problem I think is that there are asymmetric outcomes and the quality of life changes are exponential. Let's say you have $1000 and there's a 1% chance you can 100X your money in a year by buying $AMAZING. Someone will look at this and say, well, if I 100X my money then I'll have 100,000 and I can buy a house. If it goes to zero I'll be broke, but I was already broke anyway so nothing changed. A rational person will say, yeah but if you took your $1000 and invested at a regular rate of return of 10% and waited 50 years I'd have $17,000! An excellent return on investment, except now your entire life has gone by. edit: I actually meant to say 30 years instead of 50 but will leave the error up for transparency's sake! At 50 years it's more like $120K or so.

sigstoat 6y ago
> quality of life changes are exponential generally they're logarithmic. that's why billionaires are still basically people, instead of just writhing around in orgasmic ecstasy all of the time.
- endisneigh 6y ago
  That's true - the real shape is probably S-shaped where as you go from poverty to just above the poverty line the gains are exponential and as you go from above the poverty line to upper middle class it's maybe linear and then upper class to "rich" it's logarithmic.
  - gruez 6y ago
    It's s-shaped insofar as "it's expensive to be poor"[1], but the solution to that isn't to gamble, it's to save. [1] eg. buying a 4-pack of toilet paper rolls every week rather than buying 2x 48 packs when it's on discount.
    - endisneigh 6y ago
      oh I completely agree, but you don't see the gains for a very long time so for some people gambling is a way to quickly escape the trap.

meowzero 6y ago

Passive strategies so far has done better than active strategies. It's the most recommended system. I've tried trading before. I studied all the technical analysis, the fundamental analysis, etc. I know my candle sticks, trend lines, chart patterns etc. I've done it with stock markets, FOREX, and BTC. Maybe I sucked. Or maybe I deluded myself thinking I can beat the market. But buying shares and forgetting about them got the best results. This is the strategy most advisors advise. It saves time, stress, and it works.

spelunker 6y ago
I tried the same, and it was really easy to think that I was picking stocks well when in fact most of the market was up - rising tide, etc. I also tried options. Great way to lose money fast!
toto444 6y ago
I find that the only 'drawback' is that it is not sexy. When people have talks about what they are going to buy or how much they have made buying and selling bitcoins last week you can't really take part of the conversation.
- keithwhor 6y ago
  If you find friends with more interesting things to talk about it'll improve your quality of life more than buying and selling bitcoin.
- meowzero 6y ago
  I dunno. It depends on your view. I wasted so much time looking at charts, studying, and stressing out over the market. The passive strategy gave a lot of free time to do other stuff. And I have on fewer thing to worry about. Also, even with my passive strategy, I still have fun talks of my investments with friends. It's more talks about general trends and what companies I'm looking to hold for a long time.
- somedudetbh 6y ago
  Locally, that's a drawback. Globally, the unsexyness of passive index investing is the best thing about it. A huge percentage of the angel / seed / FFF capital in the world comes from bored people who don't want to talk about their Vanguard Target Retirement 2050 investment and so put 10% of their portfolio into crazy startups that will sound impressive to their friends. Consequently, for the posters on this site, the boringness of passive investing is a huge creator of jobs and opportunities for us!

hn_throwaway_99 6y ago

I think one problem with this advice is that not everyone can be a passive investor. There has been an absolute explosion in passive investing in the past 10-20 years, so there is actually a bigger battle going on to lead the giant sums of that passive money. Mike Green has commented a lot on this new phenomenon, some very good info: https://hiddenforces.io/podcasts/mike-green-passive-investing/ https://hiddenforces.io/podcasts/mike-green-passive-investin...

sigstoat 6y ago
this sort of vague concern about passive investing from folks who profit off of active investing reads like wolves complaining about how the sheep aren't venturing out to eat the tastiest grass at the edge of the fields. it also paints "passive investors" with a rather broad brush, as though every one is out buying exactly ^SPTMI in lock step. when really folks are buying all sorts of subtly different blends of the market, and usually topping it off with a couple of small personal choices.
- hn_throwaway_99 6y ago
  Even the staunchest Efficient Markets Hypothesis advocates accept that you need a robust amount of active investors, who are the ones who actually keep the markets efficient. We really are in a new world where there has never been so much money in the market that follows other money and is essentially price-insensitive.

finolex1 6y ago

Will the US Stock market continue to provide exceptional returns? If you had invested in the German or Russian markets decades ago, you wouldn't have made much gains at all. https://www.bridgewater.com/research-and-insights/geographic-diversification-can-be-a-lifesaver-yet-most-portfolios-are-highly-geographically-concentrated https://www.bridgewater.com/research-and-insights/geographic...

zhdc1 6y ago
The S&P500 is surprisingly diversified, simply because most of the companies are large enough to operate globally.
- RhysU 6y ago
  I like to think of buying the S&P500 as going long Western Capitalism. If that craters, one has bigger problems than one's portfolio.
chki 6y ago
> If you had invested in the German or Russian markets decades ago, you wouldn't have made much gains at all. Is that actually true? I just tried to find out what would have happened if you invested in the German DAX 30 years ago and apparently you would have had an 800% return on investment, approximately 7.5% annualized. Seems pretty good to me.
- finolex1 6y ago
  True, I guess I was speaking on an even longer time horizon.

joyeuse6701 6y ago

The main argument (passive investing) has issues when inflation is high, pulling this from a newsletter I read recently: "Bianco further notes that, for an investor who bought the S&P 500 in 1966, it would not have been until 1993 — 27 years later — that the holding would have delivered real, inflation-adjusted gains."

andrewprock 6y ago
Real inflation adjusted gains are one thing, protection against inflation is another. Stocks deliver both, though with significant risk. But if you are passively investing, the inflation protection you get is essentially free. You will still have to fade the risk though. If your portfolio is large and consists of 100% stocks, you need to diversify out. The mostly common alternative asset classes are real estate, commodities, and cash.

ErikAugust 6y ago

Last week: SPECULATIVE (TO THE MOON!) bubble This week: Yeah, just buy index funds ... I feel this cycle is common, but speeding up?

mschuster91 6y ago
More and more people get into (day)trading on RH and friends during the latest bubbly craze and then stick to it... some because they managed to get a decent chunk of cash to play with (u/DFV should be set for life!), some because they find trading interesting, some because they follow the sunk cost fallacy or worse, try to gamble back their six figures of debt. And now that the bubble has popped, they're searching for new avenues of investment... and until the next bubble arrives, a decent ETF is a good way to park money. (for disclosure: holding a couple dozen AMC, NOK and DAX/MSCI World ETFs)
sigstoat 6y ago
it's definitely faster when you listen to r/wsb one week, and then sane people the next.

kras143 6y ago

As a civilization it is better for 95% of the people to think that holding stocks for long term is better. We leave the milking to the top 5%, and we enjoy peace of mind.

tinyhouse 6y ago

I think some people can beat ETFs by pick and choose stocks, assuming they know what they are doing and get lucky. For me the biggest problem with this approach is that it becomes a job. Maybe not a full time job, but you end up spending non-trivial amount on this. If you really enjoy it then it's OK. But for many people it takes over other important hings in their life (their job, family, etc). You need to decide if it's worth it.

llbeansandrice 6y ago

Folks seem to be fighting about which way is "best" to play the stock market. Boomer ETFs and Index funds with regular deposits vs buying individual stocks vs day trading vs WSB YOLO plays. I think there's a place for all of them. I've been okay dumping money into index funds, but my best "play" ever was buying 5 shares of AAPL a few years ago. That ~$500 is now up over $2k. If you have the capital, there's room for all 3. Boomer investing to stay safe and have an EF and build your retirement nest egg. Buying individual stocks that you like with a smaller percentage. Maybe a small amount of "fun money" for day trading/YOLO. Everything in moderation, including moderation and all that.

icedchai 6y ago
I do all three, as well. I shy away from YOLOs but occasionally gamble on puts or calls. Basically, I have a Vanguard account for index funds / ETFs: long term investing. I have an Etrade for individual stocks: shorter term. My best stocks have been AMD, MU, FB, HUBS, PYPL. All are 4 to 5x+. HUBS is a 10x. You won't get those returns with index funds.

david927 6y ago

The adage that "the stock market always goes up" has been true for decades but there's nothing inherently true about that. A Ponzi scheme can also go up for decades as long as there's growth. It's when there are contractions that it pops. Anytime someone invests in "the stock market" they're doing this: creating growth without underlying value. And it might work out -- and it has for decades so far -- but that doesn't mean it makes sense or will continue that way forever.

iams 6y ago
There is something inherently true. The stock market goes up because the world becomes more efficient. What the world was able to do last year, it's able to do again and then some because we are better at doing it.
- david927 6y ago
  No, a company's ability to be more efficient (as well as general increasing efficiencies) is priced into its value. That's where P/E ratios come into play. Currently the entire stock market doesn't reflect value, it reflects growth. Shiller P/E (CAPE) is normally between 10 and 15 depending on that efficiency that you're talking about. It's at 35 right now. (https://www.multpl.com/shiller-pe https://www.multpl.com/shiller-pe) That's higher than Black Tuesday and any other time in this market's history outside of the 2000 crash.

brundolf 6y ago

> But the reality is that the stock market has also offered a path for ordinary people to build wealth — and more so in the last generation than ever before. You haven’t needed to burn down the system. All you’ve had to do is take the laziest, simplest approach to stock investing imaginable, and have a little patience. > Any schlub on the street can put money to work harvesting a small share of the earnings of hundreds of leading companies, led by some of the sharpest corporate executives on earth and their millions of employees. This is leaving out a very important detail, which is that you first have to be living comfortably and holding excess savings (that you're willing to risk, or at least leave alone!) to be able to even take the safe road in the market. That's not something "any schlub" can do; it excludes something like half of Americans. The "40% don't have $400 for an emergency" statistic is tired at this point, but it's telling here. You shouldn't be investing, even in an index fund, if you don't have enough cash to cover an unexpected emergency. It's not a question of patience. The really predatory thing about Robinhood and the like isn't that they prey on "impatience", it's that they prey on desperation. A person who can't afford to put $1000 in an index fund and leave it alone for ten years can maybe scrape together $100 to bet on the small chance of striking it rich and pulling themselves out of borderline-poverty. It may still be bad advice, but when people don't have other options, the calculus starts to make sense from their perspective. Robinhood's commercials even emphasize this specific angle. This article is great advice for the shrinking middle-class, but it comes off as tone-deaf for a growing majority of Americans.

rufus_foreman 6y ago
>> The "40% don't have $400 for an emergency" statistic is tired at this point, but it's telling here The survey didn't indicate that 40% didn't have $400 for an emergency, it indicated that if they had a $400 emergency, 61% of people would use short term cash to pay for it. 27% would use some other means to pay for it - for example put it on a credit card and worry about it later. That didn't necessarily mean they didn't have $400 in cash, it just meant they would use some other way to deal with the emergency. 12% said they wouldn't be able to come up with the money. >> This article is great advice for the shrinking middle-class, but it comes off as tone-deaf for a growing majority of Americans. The majority of people leaving the shrinking middle-class are leaving it to join the upper class. Not that the lower class isn't growing also, it is, the middle class is indeed hollowing out, but more middle class people are getting richer than getting poorer. From a personal perspective, I invested money in a 401K when I was working class, with the goal of letting it compound for many decades. I'm guessing that people with that mindset are less likely to stay working class, and I have no idea where I got that mindset. Certainly not from my parents or siblings, they were all the normal get the paycheck, spend the whole paycheck type.

sheepybloke 6y ago

I think the thing it's talking about is building wealth, which is easiest to do passively. But if you want to get rich, I feel like now days you either have to play the stock market or start a successful business. You can work your whole life and get enough to maybe retire comfortably, but if you ever want to be actually rich, I don't think you can just passively invest anymore.

pgroves 6y ago

Index fund performance is starting to sound exactly like "house prices have never gone down" in 2005.

loco5niner 6y ago
Have you seen house prices lately? I wish I had bought in 2005

joshspankit 6y ago

Question for the room: Are index funds that focus entirely on socially and environmentally responsible companies something that’s on your radar? Why/why not?