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I never see anyone mention this, but I don't buy the idea—perhaps based on a gut feeling versus reading any particular studies—that it's wise to just stick your

I never see anyone mention this, but I don't buy the idea—perhaps based on a gut feeling versus reading any particular studies—that it's wise to just stick your cash into any asset vehicle because inflation is ever persistent. Well it's ever persistent for everyone, and if everyone is buying, it's not impossible to purchase something beyond its fair value. For instance, if you bought into US equities on Feb 10th, you would have lost over 24% by March 23rd. If you held it until now, you would have made back your losses... but if you bought broad equities on EOY 2021, you would have lost more than inflation up to this point in 2022. Ray Dalio mentioned his confusion about markets not crashing when he was young because the dollar became untethered from gold a second time in U.S. history, and he later realized buying assets when central banks print was a "rhyme" in economics history--these events don't repeat perfectly, but similar situations occur over time. In his case, it was a repeat event. But I hate with a passion when people talk about generally what you should do without ever talking about mechanical limits to that type of decision making. It's so pervasive that you get studies put out by financial institutions saying you're better to always be fully invested, and to never set aside cash. Could you elaborate on that? Or is it because you're an institution getting paid on expense ratios based on AUM. The whole attitude industry-wide is gross and conflicting to me. If you refused to buy when general equities were historically high at any point in time and held on to cash while eating inflation, when market prices came down and you bought when valuations were fair value you would have made money, you didn't lose it simply because inflation was present. It always is. But you have a choice of whether you want to buy a dollar of assets for two, or if you want to buy a dollar of assets for 80 cents. That's NOT MARKET TIMING. That's refusing to buy something when it's overvalued, but people so grossly conflate the two that you can't have any reasonable discussion with a layperson about this concept because catch-all sayings predominantly reside in average investors' minds over studies and historic figures about asset management. Buy low, sell high! Buy and hold forever! Yeah, but what is "high"? And why would you hold something that is dying? I feel like the pop literature available to the public that is digestible covers some reasonable concepts but I think there are studies that either haven't been independently recreated to back simple common questions for the above average person, or they haven't been performed at all.

UncleMeat 5y ago
> Yeah, but what is "high"? "Buy now, sell decades later" is a very close approximation to "buy low, sell high."
andrewmcwatters 5y ago
For example, Bogle's "buy everything and hold it forever" only works when you're not really doing that, and you're buying an index. But any market cap weighted index is doing EXACTLY not that. It by definition has to reduce and increase weighting of constituents over time because their valuations change over time... including going to ZERO.
- sokoloff 5y ago
  When a constituent stock in an index goes to zero, it has self-adjusted the weight of your holdings automatically.
yata69420 5y ago
> I never see anyone mention this, but I don't buy the idea—perhaps based on a gut feeling versus reading any particular studies—that it's wise to just stick your cash into any asset vehicle because inflation is ever persistent. Modern currency like USD is not intended as a store of value, it's intended to facilitate transactions. You should only have it when you need to do transactions. Otherwise you should be invested in assets that you believe will grow over time. There is no reason to believe the value of USD will grow over time. It's not backed by any commodities and the government prints more of it as it sees fit, with a target inflation rate that's intended to devalue the dollar over time, by design. In other words, dollars are good for convenient transactions, but you generally wouldn't buy them as an investment. > it's not impossible to purchase something beyond its fair value. By definition the price at which an asset trades is the fair value. > Ray Dalio mentioned his confusion about markets not crashing when he was young because the dollar became untethered from gold a second time in U.S. history, and he later realized buying assets when central banks print was a "rhyme" in economics history--these events don't repeat perfectly, but similar situations occur over time. In his case, it was a repeat event. The entire world economy is a fiction, but that doesn't change how it works. A lot of "gold bugs" had to learn this the hard way. The entire world is invested in this fiction. > It's so pervasive that you get studies put out by financial institutions saying you're better to always be fully invested, and to never set aside cash. Because it is. Dollars are for transacting. > If you refused to buy when general equities were historically high at any point in time and held on to cash while eating inflation, when market prices came down and you bought ... That's NOT MARKET TIMING. It is market timing, but trying to time the market can be fine. People say "time in the market beats timing the market", and that's true on aggregate, but there are personal reasons why individuals may want to take on additional risk by trying to time the market for greater gains. > The whole attitude industry-wide is gross and conflicting to me. Yes. > Buy low, sell high! Buy and hold forever! Yeah, but what is "high"? And why would you hold something that is dying? Don't do this. Buy assets that you believe will appreciate over time relative to other assets. In other words, try to make good bets. If your bets are working and will continue to work, or you believe your bets will work over time, then keep holding and borrowing as you need dollars. If you believe you've made a bad bet, take your losses and reinvest into hopefully better bets. Taxes are a big factor in the decision to sell, but generally, you want to borrow instead of sell when you can. > I feel like the pop literature available to the public that is digestible covers some reasonable concepts but I think there are studies that either haven't been independently recreated to back simple common questions for the above average person, or they haven't been performed at all. This has nothing to do with studies. The US Dollar is designed to lose value relative to other assets over time. You have to allocate your dollars into other assets to mitigate this effect.

UncleMeat 5y ago

> Yeah, but what is "high"? "Buy now, sell decades later" is a very close approximation to "buy low, sell high."

andrewmcwatters 5y ago

For example, Bogle's "buy everything and hold it forever" only works when you're not really doing that, and you're buying an index. But any market cap weighted index is doing EXACTLY not that. It by definition has to reduce and increase weighting of constituents over time because their valuations change over time... including going to ZERO.

sokoloff 5y ago
When a constituent stock in an index goes to zero, it has self-adjusted the weight of your holdings automatically.

yata69420 5y ago

> I never see anyone mention this, but I don't buy the idea—perhaps based on a gut feeling versus reading any particular studies—that it's wise to just stick your cash into any asset vehicle because inflation is ever persistent. Modern currency like USD is not intended as a store of value, it's intended to facilitate transactions. You should only have it when you need to do transactions. Otherwise you should be invested in assets that you believe will grow over time. There is no reason to believe the value of USD will grow over time. It's not backed by any commodities and the government prints more of it as it sees fit, with a target inflation rate that's intended to devalue the dollar over time, by design. In other words, dollars are good for convenient transactions, but you generally wouldn't buy them as an investment. > it's not impossible to purchase something beyond its fair value. By definition the price at which an asset trades is the fair value. > Ray Dalio mentioned his confusion about markets not crashing when he was young because the dollar became untethered from gold a second time in U.S. history, and he later realized buying assets when central banks print was a "rhyme" in economics history--these events don't repeat perfectly, but similar situations occur over time. In his case, it was a repeat event. The entire world economy is a fiction, but that doesn't change how it works. A lot of "gold bugs" had to learn this the hard way. The entire world is invested in this fiction. > It's so pervasive that you get studies put out by financial institutions saying you're better to always be fully invested, and to never set aside cash. Because it is. Dollars are for transacting. > If you refused to buy when general equities were historically high at any point in time and held on to cash while eating inflation, when market prices came down and you bought ... That's NOT MARKET TIMING. It is market timing, but trying to time the market can be fine. People say "time in the market beats timing the market", and that's true on aggregate, but there are personal reasons why individuals may want to take on additional risk by trying to time the market for greater gains. > The whole attitude industry-wide is gross and conflicting to me. Yes. > Buy low, sell high! Buy and hold forever! Yeah, but what is "high"? And why would you hold something that is dying? Don't do this. Buy assets that you believe will appreciate over time relative to other assets. In other words, try to make good bets. If your bets are working and will continue to work, or you believe your bets will work over time, then keep holding and borrowing as you need dollars. If you believe you've made a bad bet, take your losses and reinvest into hopefully better bets. Taxes are a big factor in the decision to sell, but generally, you want to borrow instead of sell when you can. > I feel like the pop literature available to the public that is digestible covers some reasonable concepts but I think there are studies that either haven't been independently recreated to back simple common questions for the above average person, or they haven't been performed at all. This has nothing to do with studies. The US Dollar is designed to lose value relative to other assets over time. You have to allocate your dollars into other assets to mitigate this effect.