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> If workers are putting 25% of their paychecks in an index fund and retire a few years earlier, instead of paying off their too-expensive car loan or something

by Aunche 6y ago

> If workers are putting 25% of their paychecks in an index fund and retire a few years earlier, instead of paying off their too-expensive car loan or something, it will be bad for the current financial elite. Nobody is complaining about people placing their paychecks in index funds though. Index funds are a reasonably good proxy for the future health of the economy, so your gains from it will likely represent real growth. By contrast, gains made from cryptocurrency and speculative stock must be coming from someone's losses.

ksdale 6y ago
Index funds go up because more people want to buy them than sell them, cryptocurrencies go up because more people want to buy them than sell them. Index funds happen to represent ownership of productive assets, but the assets don't really care who owns them, your investment in an index fund doesn't increase the number of productive assets in the world, likewise with cryptocurrency.
- scarmig 6y ago
  > our investment in an index fund doesn't increase the number of productive assets in the world Not directly, but it creates an incentive landscape that encourages the formation of more capital, basically making the potential payoff of starting a company larger and more likely.
- Aunche 6y ago
  > your investment in an index fund doesn't increase the number of productive assets in the world Eventually, some rich people will notice that they aren't getting as much money from buybacks and dividends as they used to and will place their money elsewhere. It would be relatively more attractive to invest in developing countries or buy PR in the form of charity.
- arcticbull 6y ago
  Index funds are positive sum because companies are positive sum. You buy shares in a productive enterprise, which then generates revenues, and profits. These profits are returned to shareholders via dividends or buybacks, or just through the accretion of value within the enterprise. On the other hand cryptocurrencies are negative sum. The only way the early folks make money is when late folks put money into the system. At the same time, the house (miners) are constantly extracting massive amounts of actual liquidity. The "sum" of Bitcoin is negative 21,000,000,000 per year. This welfare is extracted by Chinese mining cartels bribing their local governments for access to coal-powered electricity. Enough to offset all of the solar panels installed in the entire world. The total amount of wasted power per Bitcoin transaction is now 30 days of power for the average household, and generates 100 grams of non-recyclable e-waste.
paulgb 6y ago
Amazingly, some people are complaining about index funds. It’s a pretty fringe position, but it comes up frequently enough that “should index funds be illegal?” is one of the recurring headings of Matt Levine’s newsletter. https://www.theatlantic.com/ideas/archive/2021/04/the-autopilot-economy/618497/ https://www.theatlantic.com/ideas/archive/2021/04/the-autopi...
- anonporridge 6y ago
  Index funds being illegal just means they're illegal for the poor and middle class. Any person with sufficient wealth could construct a personal index fund manually by buying the individual stocks. You would probably need millions to make this a worthwhile exercise. Somewhat related, I really want to see someone offer some kind of customizable index fund. Let me start with a base index, and then exclude or include companies at will. e.g. start with the S&P 500, kick out companies like Exxon and Facebook and add in Tesla (pre inclusion), while the service auto weights investments appropriately.
  - paulgb 6y ago
    > I really want to see someone offer some kind of customizable index fund You and me both! https://news.ycombinator.com/item?id=25552346 https://news.ycombinator.com/item?id=25552346 (Also, to your point, as someone commented on that thread this does already exist if you have enough money)
    - anonporridge 6y ago
      Hmm. It looks like Wealthfront offers direct indexing for reasonably small account sizes. But it's not clear from this description if they actually allow customizing stock picks. Could be worth investigating. Their fees might also make it unattractive. https://support.wealthfront.com/hc/en-us/articles/211005023-What-is-Direct-Indexing- https://support.wealthfront.com/hc/en-us/articles/211005023-...
feoren 6y ago
> Nobody is complaining about people placing their paychecks in index funds though There was an article on the front page of Hacker News in the last couple days about how index funds were supposedly ruining the economy.
enraged_camel 6y ago
>> Index funds are a reasonably good proxy for the future health of the economy Were. Index funds were a reasonably good proxy. They have been completely detached from reality for at least a year, and arguably for several years. S&P has doubled over the past 5 years. Does that mean the economy has also gotten twice as healthy?

by Aunche 6y ago

ksdale 6y ago

Index funds go up because more people want to buy them than sell them, cryptocurrencies go up because more people want to buy them than sell them. Index funds happen to represent ownership of productive assets, but the assets don't really care who owns them, your investment in an index fund doesn't increase the number of productive assets in the world, likewise with cryptocurrency.

scarmig 6y ago
> our investment in an index fund doesn't increase the number of productive assets in the world Not directly, but it creates an incentive landscape that encourages the formation of more capital, basically making the potential payoff of starting a company larger and more likely.
Aunche 6y ago
> your investment in an index fund doesn't increase the number of productive assets in the world Eventually, some rich people will notice that they aren't getting as much money from buybacks and dividends as they used to and will place their money elsewhere. It would be relatively more attractive to invest in developing countries or buy PR in the form of charity.
arcticbull 6y ago
Index funds are positive sum because companies are positive sum. You buy shares in a productive enterprise, which then generates revenues, and profits. These profits are returned to shareholders via dividends or buybacks, or just through the accretion of value within the enterprise. On the other hand cryptocurrencies are negative sum. The only way the early folks make money is when late folks put money into the system. At the same time, the house (miners) are constantly extracting massive amounts of actual liquidity. The "sum" of Bitcoin is negative 21,000,000,000 per year. This welfare is extracted by Chinese mining cartels bribing their local governments for access to coal-powered electricity. Enough to offset all of the solar panels installed in the entire world. The total amount of wasted power per Bitcoin transaction is now 30 days of power for the average household, and generates 100 grams of non-recyclable e-waste.

paulgb 6y ago

Amazingly, some people are complaining about index funds. It’s a pretty fringe position, but it comes up frequently enough that “should index funds be illegal?” is one of the recurring headings of Matt Levine’s newsletter. https://www.theatlantic.com/ideas/archive/2021/04/the-autopilot-economy/618497/ https://www.theatlantic.com/ideas/archive/2021/04/the-autopi...

anonporridge 6y ago
Index funds being illegal just means they're illegal for the poor and middle class. Any person with sufficient wealth could construct a personal index fund manually by buying the individual stocks. You would probably need millions to make this a worthwhile exercise. Somewhat related, I really want to see someone offer some kind of customizable index fund. Let me start with a base index, and then exclude or include companies at will. e.g. start with the S&P 500, kick out companies like Exxon and Facebook and add in Tesla (pre inclusion), while the service auto weights investments appropriately.
- paulgb 6y ago
  > I really want to see someone offer some kind of customizable index fund You and me both! https://news.ycombinator.com/item?id=25552346 https://news.ycombinator.com/item?id=25552346 (Also, to your point, as someone commented on that thread this does already exist if you have enough money)
  - anonporridge 6y ago
    Hmm. It looks like Wealthfront offers direct indexing for reasonably small account sizes. But it's not clear from this description if they actually allow customizing stock picks. Could be worth investigating. Their fees might also make it unattractive. https://support.wealthfront.com/hc/en-us/articles/211005023-What-is-Direct-Indexing- https://support.wealthfront.com/hc/en-us/articles/211005023-...

feoren 6y ago

> Nobody is complaining about people placing their paychecks in index funds though There was an article on the front page of Hacker News in the last couple days about how index funds were supposedly ruining the economy.

enraged_camel 6y ago

>> Index funds are a reasonably good proxy for the future health of the economy Were. Index funds were a reasonably good proxy. They have been completely detached from reality for at least a year, and arguably for several years. S&P has doubled over the past 5 years. Does that mean the economy has also gotten twice as healthy?