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> If you want to win at life, you “save money” by purchasing non-cash assets like stocks. Except when you don't. Between 1995 and 2000 I lived in a student ho

> If you want to win at life, you “save money” by purchasing non-cash assets like stocks. Except when you don't. Between 1995 and 2000 I lived in a student house in the UK and one of my housemates (who was also a student, and from my recollection almost as broke as I was back then) was really into investing into the stock market during the dot-com boom. He bought both Lastminute.com (IPO March 2000 @ 380p/share[1], sold to Travelocity in 2005 @ 165p/share[2]) and Railtrack (IPO 1996[3], went bankrupt 2001[4]) [1] https://money.cnn.com/2000/03/14/europe/lastminute/ https://money.cnn.com/2000/03/14/europe/lastminute/ [2] https://www.theguardian.com/technology/2005/may/13/business.travelnews https://www.theguardian.com/technology/2005/may/13/business.... [3] https://www.railwaysarchive.co.uk/docsummary.php?docID=740 https://www.railwaysarchive.co.uk/docsummary.php?docID=740 [4] https://www.independent.co.uk/news/uk/home-news/railtrack-goes-bankrupt-with-debts-of-aps3-3bn-9132843.html https://www.independent.co.uk/news/uk/home-news/railtrack-go...

epgui 5y ago
I’d suggest that for most people, buying diversified index funds are a more appropriate strategy. Nothing you do in life is risk free, even keeping cash under your mattress: the fact that there is risk involved does not change that this is how you make money. When you know that you’re guaranteed a loss of ~2%, at best, on cash, and that your expected real return on stocks is positive, well… That’s the point.
- logifail 5y ago
  > I’d suggest that for most people, buying diversified index funds are a more appropriate strategy At least in the UK, buying into index funds was substantially more expensive back then. I held shares in a retail bank for a time not long after that, for which I had an actual paper certificate! No wonder trading was expensive....
kache_ 5y ago
Well, you don't buy individual stocks; you buy slices of slices of everything to dissipate your risk towards variance. And you definitely don't hold cash. Holding cash has a lot of risk as well
- kbenson 5y ago
  Ah, like slices of slices of mortgages. :/
  - kache_ 5y ago
    There are degrees to it. Slices of all mortgages are less risky than a single mortgage. Slices of all tech stocks are less risky than individual tech stocks. Slices of all American stocks is less risky than slices of one industry in America. And slices of all equities trades across the world is less risky than slices of America Bet on humanity :)
    - logifail 5y ago
      > Slices of all mortgages are less risky than a single mortgage If you've not watched The Big Short (2015)[0], it's a really excellent film. [0] https://www.imdb.com/title/tt1596363/ https://www.imdb.com/title/tt1596363/
- logifail 5y ago
  > And you definitely don't hold cash. Holding cash has a lot of risk as well (Sorry, genuine questions) risk of what and compared to what?
  - epgui 5y ago
    Risk of loss, theft or physical degradation. Then there’s the costs of holding cash, which are known to give you a negative yield due to inflation (nevermind bank fees or insurance costs, etc)
    - ghaff 5y ago
      I assume cash was being used in the normal financial accounting sense of the word as opposed to dollar bills in the mattress. Yes, there's inflation negative yield. But especially in the low interest and inflation rate environment that has been the case until possibly recently, the difference between "cash" (i.e. default investment at a brokerage) and other very low-risk investments (e.g. high quality corporate bonds) has been pretty minimal.
vmurthy 5y ago
The problem with an example like this is that a (hypothetical) friend of yours could have bought into Apple or Amazon or MSFT back then and had a ton of money now :) . I was about to suggest index funds but looks like the FTSE-100 has been sh$t for the last 22 years, too (~10 percent total return). No luck there for your friend even if he had invested in index funds :(
- tildeon 5y ago
  I'm afraid you've mixed up "price return" (as in the change in the level of the index - ~6200 in April 2000 to ~7600 in April 2022. (Which is a 22.5% total return)) with "total return" (as in the return when you include dividend payouts - 170% in total, or 4.6% annualized)

epgui 5y ago

I’d suggest that for most people, buying diversified index funds are a more appropriate strategy. Nothing you do in life is risk free, even keeping cash under your mattress: the fact that there is risk involved does not change that this is how you make money. When you know that you’re guaranteed a loss of ~2%, at best, on cash, and that your expected real return on stocks is positive, well… That’s the point.

logifail 5y ago
> I’d suggest that for most people, buying diversified index funds are a more appropriate strategy At least in the UK, buying into index funds was substantially more expensive back then. I held shares in a retail bank for a time not long after that, for which I had an actual paper certificate! No wonder trading was expensive....

kache_ 5y ago

Well, you don't buy individual stocks; you buy slices of slices of everything to dissipate your risk towards variance. And you definitely don't hold cash. Holding cash has a lot of risk as well

kbenson 5y ago
Ah, like slices of slices of mortgages. :/
- kache_ 5y ago
  There are degrees to it. Slices of all mortgages are less risky than a single mortgage. Slices of all tech stocks are less risky than individual tech stocks. Slices of all American stocks is less risky than slices of one industry in America. And slices of all equities trades across the world is less risky than slices of America Bet on humanity :)
  - logifail 5y ago
    > Slices of all mortgages are less risky than a single mortgage If you've not watched The Big Short (2015)[0], it's a really excellent film. [0] https://www.imdb.com/title/tt1596363/ https://www.imdb.com/title/tt1596363/
logifail 5y ago
> And you definitely don't hold cash. Holding cash has a lot of risk as well (Sorry, genuine questions) risk of what and compared to what?
- epgui 5y ago
  Risk of loss, theft or physical degradation. Then there’s the costs of holding cash, which are known to give you a negative yield due to inflation (nevermind bank fees or insurance costs, etc)
  - ghaff 5y ago
    I assume cash was being used in the normal financial accounting sense of the word as opposed to dollar bills in the mattress. Yes, there's inflation negative yield. But especially in the low interest and inflation rate environment that has been the case until possibly recently, the difference between "cash" (i.e. default investment at a brokerage) and other very low-risk investments (e.g. high quality corporate bonds) has been pretty minimal.

vmurthy 5y ago

The problem with an example like this is that a (hypothetical) friend of yours could have bought into Apple or Amazon or MSFT back then and had a ton of money now :) . I was about to suggest index funds but looks like the FTSE-100 has been sh$t for the last 22 years, too (~10 percent total return). No luck there for your friend even if he had invested in index funds :(

tildeon 5y ago
I'm afraid you've mixed up "price return" (as in the change in the level of the index - ~6200 in April 2000 to ~7600 in April 2022. (Which is a 22.5% total return)) with "total return" (as in the return when you include dividend payouts - 170% in total, or 4.6% annualized)