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Assuming there is a large bubble, what is the best course of action for your average middle class software developer? Stay the course for retirement accounts th

• mattmaroon 6y ago
  Well if you knew stocks were way overvalued you would of course sell stocks. If you knew the bubble was going to burst you’d go short, buy puts, etc. Of course we don’t know anything. We could be at the beginning of a record breaking bull market brought on my technological advances. Or we could be in a bubble that doesn’t burst but just goes sideways for a decade. But if you thought there was a good chance of a pop, but not 100%, you could diversify some of your holdings. Put some % into puts, some into cash, etc.
• bluedevil2k 6y ago
  I’d you’re young, keep buying at regular intervals. No one can time the market, and in 20 years this asset bubble pop will be a minor price correction.
  • david927 6y ago
    I would recommend reading The Limits To Growth: https://www.clubofrome.org/publication/the-limits-to-growth https://www.clubofrome.org/publication/the-limits-to-growth
    • bluedevil2k 6y ago
      I appreciate the sentiment, but the books is from 1970. Not sure how relevant it is anymore. Malthus said essentially the same thing hundreds of years ago and was wrong because he couldn’t predict the technological changes that change the supply curve.
      • david927 6y ago
        It's not related to Malthus' argument and it's been updated and shown to be utterly prescient: https://www.theguardian.com/commentisfree/2014/sep/02/limits-to-growth-was-right-new-research-shows-were-nearing-collapse https://www.theguardian.com/commentisfree/2014/sep/02/limits... Our technologies have made extraction of resources more efficient but hasn't really fixed the limit of resources.
        • t0mbstone 6y ago
          Once we start doing space mining, our resources will become significantly less limited...
        • SpicyLemonZest 6y ago
          This article is, frankly, statistical malpractice. Limits of Growth predicted continuations of historical trends followed by sharp reversals; the data in this article shows that historical trends have continued, and the authors conclude that the sharp reversal must becoming soon. You could confirm any model you wanted that way. The peak oil discussion is especially anti-prescient, because innovations since this article was written have made both oil and renewable energy much more available. It's generally acknowledged nowadays that demand for oil will peak long before the supply starts to run out.
        • Clewza313 6y ago
          The article is from 2014 and speculates that peak oil is going to trigger societal collapse. Given the advances we've seen in solar and battery tech just in the last decade, I feel fairly confident in stating that this is looking increasingly unlikely.
• randmeerkat 6y ago
  You’ll never predict how, when, why, or even if a “bubble” will pop. Realistically there’s trillions of dollars tied up by the 1% in the market and I’m sure they’ll do everything in their power to keep it from crashing down. I would say hold the course, if you have enough extra money and you don’t know what to do with it, ask a financial advisor what they think you should do.
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• encoderer 6y ago
  Here's how I'm handling it: - Keep most of IRA in super-broad funds like VTI. - For personal brokerage accounts, understand that the risk profile now is more like a portfolio of in the money call options than it is equities. With much higher volatility, you can keep a portion of your account in cash, and that is the dry powder you can use when the market takes a dive. I used this strategy before Covid, had money to buy stocks last march, and it's worked beautifully. I moved some positions back into cash over the summer. Portfolio up over 100% in 2020, even with the cash.
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  • itsoktocry 6y ago
    >I used this strategy before Covid, had money to buy stocks last march, and it's worked beautifully. I moved some positions back into cash over the summer. Portfolio up over 100% in 2020, even with the cash. "Everyone has a plan until they get punched in the mouth." It's great your strategy has worked for you, but we've been in a market that has done nothing but climb for over 10 years, and the last couple of years have been absolutely insane. "Buy buy buy" won't work forever.
  • jdmoreira 6y ago
    I'm sure you know the old saying... "anyone can make money in a bull market." And here is the proof https://www.bloomberg.com/news/articles/2021-01-19/robinhood-couple-in-viral-tiktok-discover-quant-momentum-trade https://www.bloomberg.com/news/articles/2021-01-19/robinhood... I'm sorry I don't want to sound rude but those 100% don't sound that impressive to me right now.
    • encoderer 6y ago
      Not meant to impress, and not financial advice. Share what works for you!
• breck 6y ago
  > best course of action for your average middle class software developer? I'd say get into active investing, not passive index funds. Active investing could mean angel investing, or it could be public equity investing, but what it means is put your money into things you want to learn and help grow. That way, you greatly protect your downside. If your investment goes to zero, at least you learned stuff you are interested in along the way, made friends in the industries you like (could lead to job opps down the road), and helped nudge the world in a direction you want it to go. You'll probably make plenty of mistakes in the first 10 years, but by the second decade you'll be better at it and then if your second decade performance is good you can beat the passive markets and get all those benefits at the same time. It's a real shame the USA has made it hard for individuals to invest in stuff they know.
  • vinger 6y ago
    Your average middle class developer is not an angel investor and the opportunies in an average person network would be too risky. Lose everything but make a friend and some knowledge is a win for you but not your average developer. Staying with index funds. They give the safest upside with the safest downside.
    • breck 6y ago
      Statistically speaking we're all going to die and all your investments will go to zero then in the long run. The only thing that will then be left is the experience you had and in what direction you nudged the world. Fall. Get back up. Fall. Get back up. That is life.
• lackbeard 6y ago
  The only advice I have to offer (which may be terrible advice!) is to keep a big chunk of your investment portfolio in cash (10-25%.) If you maintain your target weights in how you allocate your contributions and also by rebalancing a couple of times per year, you'll effectively be automatically buying low & selling high.
  • unstatusthequo 6y ago
    Inflation means holding cash actually devalues it. Assets are better protection mechanisms. Real estate, precious metals, crypto maybe, fine art, etc .
    • lackbeard 6y ago
      Assets are not a good protection mechanism if you buy them at the height of a bubble in asset prices!
    • tonyedgecombe 6y ago
      Inflation is very low at the moment and there are benefits to having at least some cash on hand.
  • ac29 6y ago
    Meet Bob, the world's worst market timer: https://awealthofcommonsense.com/2014/02/worlds-worst-market-timer/ https://awealthofcommonsense.com/2014/02/worlds-worst-market... Over long time scales, it really doesn't matter if the market is just about to crash. Time in the market will always beat timing the market, given that no one can know market tops and bottoms. That being said, if you have a short term savings goal, are just about to retire, or simply dont sleep well worrying about losses - cash isnt the worst way to allocate some of your assets. Its not for me, but to each their own.
• omginternets 6y ago
  I am by no means a reference for financial matters, so I tend to think about big-picture macro-optimisations. In other words: what is fundamentally true, and must therefore always remain true? One fundamental truth is that tangible, material assets will always outlast virtual assets. In an extreme financial crisis, owning a house is better than owning cash, for example. If you follow this reasoning to its logical conclusion, buying is better than investing (in the financial sense of the word). Or, if you prefer: invest in material assets that are of real use. Optimize these purchases to reduce your tax burden. Put yourself in a position to "hold out". How far along this reasoning you go depends on your threat model.
• zwieback 6y ago
  Most of our savings are in 401K and bonds but we diversified a bit and bought a condo in a stable neighborhood for our own weekend use and now contemplating rental property. I'm about 10 yrs from retirement so not really looking for high-growth investments at this point. On the other end of the risk scale I buy a couple Powerball tickets each time it goes over 500M$
  • kinghajj 6y ago
    > On the other end of the risk scale I buy a couple Powerball tickets each time it goes over 500M$ Buying cheap OTM calls every once in a while would probably have a higher chance of profit.
    • fuzzfactor 6y ago
      Or you could buy scratch-offs and be an instant loser.
  • OldHand2018 6y ago
    I generate random Bitcoin wallets as my lottery tickets.
    • vntok 6y ago
      You are trading a 0% chance + power costs with a 1/16M chance + $2 ?
• kgin 6y ago
  Everything isn't overvalued. Avoid the ARK stocks, smallcaps, and crypto. Everything else is sensibly valued.
  • ZephyrBlu 6y ago
    From a quick google ARK seems to be an "innovation ETF". Does that mean stay away from tech?
    • kgin 6y ago
      For the most part, but especially early-stage negative p/e stocks. Surprisingly, the FAANG stocks aren't nearly as stretched as the rest of tech. AMZN is pretty close to in-line with its historical levels.
    • 015a 6y ago
      Its worth looking into what ARK (specifically, ARKK, the main one), actually holds. Its not really "tech"; its more "tech which is expected to explode". Its far riskier than just your Big Tech AMZN/GOOG/AAPL/etc. 1. Tesla (~9%) 2. Roku (~7%) 3. Teladoc Health Inc (~5%) 4. Square (~5%) 5. Zillow (~3%) 6. etc
  • Dirlewanger 6y ago
    What's wrong with small caps?
    • kgin 6y ago
      They've just run up so much this year. The Russell 2000 has a negative p/e ratio.
  • andrewmcwatters 6y ago
    A majority of equities are overvalued. You'd have to be asleep to think otherwise. And of the marketable securities that aren't, projected future cash flows are difficult to calculate (sending the discount rate to 0), or when they aren't, growth prospects are very poor.
• 01100011 6y ago
  No one knows. We all want to, but we really don't. I think a sensible strategy is to diversify. I have my assets and retirement split between the market(mix of VTI/VXUS/VOO for no apparent reason), cash, and commodities(VCMDX). I may buy back into gold if it dips down to around $1,500 (where I think it should be for no good reason). I have half of my potential wealth tied up in unvested RSUs of a large S&P500 corp so I feel fairly exposed to the market as it is. I plan to periodically rebalance as things grow and shrink over time. If you want to get rich, I'd explore ways to start a business using the cheap credit available now. If I wasn't a software dev, I'd be looking into doing that for real estate and service businesses(small, specialized restaurants) in underserved areas where CA folks have decamped to during the pandemic. I still think(for no real reason) that the most profitable use of money(and even better, debt) is to run businesses.
• Tiktaalik 6y ago
  If you're big up in the stock market and can afford to do so, take some money out of that and buy an house you can live in. If the market implodes well you still have a house and (hopefully) a job to pay the mortgage. Problem with this strategy is that while there's been incredible asset inflation in equities, there's also been incredible asset inflation in real estate too (especially in Canada).
• christophilus 6y ago
  No one knows. There are many reasons why “this time, it’s different.” Our playbooks are based on very small datasets. Every time I hear someone say: “the Schiller P/E ratio has only been this high once, and here’s what always happened after”, I think, we’ve got a sample size of what? Maybe 100 years worth of decent stock market data? There’s nothing that says this will end the way it did at other points in an incomplete and small dataset. So, with that caveat, I don’t think it’s different this time. I think there’s a deflationary bust near term. Probably inflation hits hard afterwards. When the market gives off the kinds of signals it’s currently giving off, I think it’s reasonable to cash up.
• Markoff 6y ago
  I mean if are decades away I would not worry too much about correction/crash you can always diversify with real estate, gov bonds, IAU/GLD, the last one probably mot reasonable and liquid to compensate for stock crash