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I occasionally get asked by relatives and friends of what to invest in. Now I'm no expert but I guess in the valley of the blind the one-eyed man is king. Thin

by jmyeet 4y ago

I occasionally get asked by relatives and friends of what to invest in. Now I'm no expert but I guess in the valley of the blind the one-eyed man is king. Thing is what I tell them seems to bore them because, well, it's boring. My advice is basically this: Put your money in a broad index fund and don't look at it for 10 years. In giving this advice you start to realize it's not what people want to hear. It's not that they want to get rich quick. They just want to make a lot of money really fast. It's completely different. Crypto-skeptics such as myself could clearly see that the vast majority of Crypto Andys were motivated by nothing more than greed. There's no fundamental belief in blockchain technology. There's no correcting the (alleged) fundamental flaws in the traditional financial system. In fact, there's an awful lot of ignorance of why the financial system is the way it is and little motivation to learn (IME). It's just greed. So when I see these people get wiped out, I feel bad because that must suck and it's probably not the right time to say "I told you so" (or even "I informed you thusly") but I hope at some point people take ownership for their foolish decisions and do better next time.

dubswithus 4y ago
Perhaps they knew what they were doing just as startup investors take a calculated risk that their doggy social networking site might not be the next big thing?
- pphysch 4y ago
  "calculated risk" is doing a lot of heavy lifting here. "Wishful thinking" is the more likely culprit
  - dubswithus 4y ago
    Sam Altman invested in Worldcoin. And VC’s are investing in crypto startups as well. Is there a YC partner that has never invested in a crypto company? I would love to know.
makeitdouble 4y ago
I think index funds are better seen as "savings" than "investments" in most people's mind.
- gruez 4y ago
  Do people actually think this? ie. "it's not investing unless there's a chance of you making 10x returns"?
  - KMag 4y ago
    In my experience, it doesn't seem to be the chance of big returns, but rather the gut feeling of actively "doing something" to invest, vs. a very passive simple strategy of dollar cost averaging a low-fee broad index ETF. I think particularly in popular American culture, we often feel like it's more moral to actively make every penny, and have an aversion to passively earning money. Landlords are demonized, etc.
    - semi-extrinsic 4y ago
      Yeah, this is bang on the money. And of course the financial institutions who make more money in fees when people are active vs. passively holding an index for decades, do what they can with marketing to support this idea.
- nradov 4y ago
  I've literally never heard of anyone referring to index funds that way. You're not making any sense at all.
  - dubswithus 4y ago
    I assume when people say savings they mean investments. Because it would be stupid not to invest a large cash position.
    - Philadelphia 4y ago
yunohn 4y ago
> It's not that they want to get rich quick. They just want to make a lot of money really fast. In their defence, I feel like this is fuelled by media FUD as well as FOMO from the ever-widening wealth gap. A combination of inflation and unaffordable housing along with stagnant wages means that even with everyone in the family working jobs, you can’t even afford a yearly vacation. If the wealthy elites don’t realise that this isn’t sustainable, I’m not sure where we will be in a few years…
- dalyons 4y ago
  Exactly, people aren’t always stupid, they’re desperate. Investing in index funds at ~6% average return (or thereabouts) does nothing meaningful for people who are priced out by the 10-15% y/y gains on housing, or are living paycheck to paycheck due to inflation. Its not so hard to see why people feel their only option is riskier bets.
  - gruez 4y ago
    >does nothing meaningful for people who are priced out by the 10-15% y/y gains on housing Housing never had gains that high. Looking at the rise from the last trough (ie. 2009 to today) works out to 5.3% annualized nationwide[1]. Meanwhile the Vanguard Total Stock Market Index Fund returned 12.4% in the same time period. If you look around at a few different metros, there are many cities that return higher (eg. 7.5% for LA[2]), but none are anywhere close to returns for the index fund. The best I found was arizona[3] with 9.1%. [1] https://fred.stlouisfed.org/series/CSUSHPINSA https://fred.stlouisfed.org/series/CSUSHPINSA [2] https://fred.stlouisfed.org/series/LXXRSA https://fred.stlouisfed.org/series/LXXRSA [3] https://fred.stlouisfed.org/series/PHXRSA https://fred.stlouisfed.org/series/PHXRSA
  - SturgeonsLaw 4y ago
    This is the key that is overlooked a lot. Taking /biz as an example, the sentiment is rife that crypto is their one and only shot to make it out of the hole. Couple that with the "how much do you make" threads that show a lot of them earn somewhere in the $15-$30 per hour range and you can see why these moonshots are (in their view) their only hope. If the most they can scrape together is $5k of capital, then it needs to 10x to provide them with a meaningful change.
KMag 4y ago
In my experience, it seems that a lot of people have an un-stated gut feeling that "doing something" must out-perform passive dollar cost averaging a broad low-fee index ETF. If we came up with some obfuscated mathematical dance that, if un-obfuscated, were obviously dollar cost averaging in a broad-based low-fee index ETF, I think it would be more popular. Edit: There are also lots of investment strategies where people are short tail-risk and don't realize it or properly account for it. For instance, my dad is a pretty smart guy (practicing medical doctor who never got his undergrad degree because he crushed the MCATs and got into med school after 3 years of undergrad, back in the 1970s when med school was less competitive) but he's convinced that his gut-feeling covered calls out-perform a simple buy-and-hold (on a non-risk-adjusted basis). I don't doubt it's possible to out-perform on a risk-adjusted basis, and maybe even on a non-adjusted basis with careful enough analysis, but he's never performed any analysis on the opportunity cost that he has given up over the years. Without any attempts to model or otherwise estimate opportunity costs, I doubt it's likely he's actually out-performing. He sees that most days, he's out-performing, and in the rare cases where his calls get allocated, he just tells himself "well, at least the long stock position did very well". He's short the tail risk, but essentially largely ignores that part because it's hidden by the gains in his simultaneous long position. He feels good because he's doing extra work, and most days he's out-performing, so the gut feeling is that he's out-performing the market on a non-risk-adjusted basis.
- rurp 4y ago
  Heh, I think that idea has a lot of promise. Casinos might offer some guidance here given how good they are at making games with fairly straightforward negative odds seem enticing. We need some sort of responsible investing vehicle that includes gamification, intermittent reinforcement, and a tiny chance for a huge payoff.
  - sumy23 4y ago
    > We need some sort of responsible investing vehicle that includes gamification, intermittent reinforcement, and a tiny chance for a huge payoff. You’re basically describing options.
88913527 4y ago
There's a meaningful difference between putting <10% of your portfolio into a speculative investment versus 100%. If your speculative investments moon anyways, 10% * a large number = still a large number, and you didn't bet the farm. It's a good way to fulfill one's desire to be an active investor, while largely acknowledging most of us won't beat the S&P-- I know the active portion of my own portfolio (no crypto) has underperformed the index.
- yieldcrv 4y ago
  One of my experiences is that nobody tells you what to do next. They don't know. If your speculative investment moons then your portfolio has risen to 95-99% speculative investment. At least thats a consistent case in crypto or a super quick and awesome private equity exit, both of which have multiple thousands of percentage gains. So the people following that kind of risk allocation advice might already be starting from that second state. Rebalancing is an option, but its lame when everything has such high correlations to each other. And rebalancing when? Anytime the speculative investment goes over 10% of the portfolio? After you let it ride and its price got stable for a few days? Waiting a year or more for lower tax treatment on the rebalancing sells?
  - cableshaft 4y ago
    Yes, there are people who rebalance when that happens. I'm not one of those people (I probably should be, but I'm not), but there are people who definitely do rebalance their portfolios whenever it gets out of whack.
ngold 4y ago
Just remind them of Warren buffets 10 year bet on index funds, and he made that right before the 2008 collapse. Still won.
UkrainianJew 4y ago
>Put your money in a broad index fund and don't look at it for 10 years. That might be a dead strategy in 2022. After the 2008 crisis the fed discovered a miraculous economic cure: slowly print money and throw it into the economy, so people keep transacting with each other, and the GDP (and stocks) keep growing. Turns out, most of this growth was on paper - fads, speculative investments, overvalued stocks. Now that the geopolitical shock has disrupted the endless stream of cheap stuff made elsewhere, turns out there's an abundance of dollars and shortage of everything else. There might be a rather non-trivial correction ahead of us.
- landemva 4y ago
  >> there's an abundance of dollars Slightly different perspective here - there is an abundance of debt that spends like dollars. Government debt and some pension debt is nearly unserviceable in some States and countries, so there will be a dollar short squeeze in attempt to get dollars to pay the debt. Yep, seems counter-intuitive at first glance that the USD short squeeze will increase the dollar appetite.
- bmitc 4y ago
  What do you suggest?
  - UkrainianJew 4y ago
    Bonds might become a thing again with the interest rates above 3%.
    - stocknoob 4y ago
      Bonds will take a hit if interest rates keep rising. (Look at how they’ve done year to date.) If you want to actually hedge your investments, use a collar. https://www.investopedia.com/articles/active-trading/011515/how-protective-collar-works.asp https://www.investopedia.com/articles/active-trading/011515/...
      - 4y ago
theplumber 4y ago
Why you think someone trades the same stock 10 times per day? (i.e day trader). Isn't that greed? The advantage of crypto/defi done right is that at least you have some transparency and your positions won't be put on hold or liquidated arbitrary by someone like it happened on LME case or GME
- matteotom 4y ago
  Even if the on-chain stuff is transparent, there’s much less transparency in crypto/defi exchanges than any traditional investment firm.
shimonabi 4y ago
Which are broad index funds? I put a tiny amount of my savings in a pharma ETF last year and got destroyed almost as much as crypto. I hope it recovers soon.
- Zizizizz 4y ago
  Non industry specific
- distances 4y ago
  Total market / All world are very common.
lyrrad 4y ago
> Put your money in a broad index fund and don't look at it for 10 years. You should check on their investments accounts on a regular basis. If your bank or brokerage makes an error, there is likely a limited period of time during which it can be fixed. Also, if you do not have activity on your bank or investment accounts for a period of time, the contents may be escheated by a state and investments may be sold automatically. Planet Money had an episode about escheatment a couple of years ago: https://www.npr.org/transcripts/799345159 https://www.npr.org/transcripts/799345159 They mention that Delaware, where the person's broker was incorporated escheats investments after three years.
deleted 4y ago
[deleted]
RC_ITR 4y ago
The problem is: Ask most people today and they’ll tell you Internet stocks were overvalued in 1998. But then you take their IRR since then and you realize you could open a hedge fund and be a billionaire just by buying the ones that were big enough to get time magazine covers, even if you bought at the absolute peak (there are literal billionaires who did basically just this!) So now you have this thing that feels a lot like the internet, especially to lay people, and it’s not totally unreasonable for them to think “this could happen again.” It’s just that crypto is way stupider than the internet and is unlikely to have a similar impact, so they’re probably wrong.
- jjav 4y ago
  > even if you bought at the absolute peak If you bought CSCO at its peak in 2000, you're still underwater today 22 years later.
bowsamic 4y ago
It's ego and over-confidence. People think they can outperform the S&P500. They can't.
- carnitine 4y ago
  Yes they can and many do. It’s just not likely if you’re actively trading.
  - mensetmanusman 4y ago
    Of course some do, but there are just as many (and a bit more) that under perform. The average performance relative to the index matters.
    - carnitine 4y ago
      Yes, but that’s not what the comment I’m replying to said. There seems to be some pervasive belief that absolutely no one ever beats the S&P500 index in the long run, which is obviously nonsense.
      - mensetmanusman 4y ago
        There is a chance to beat the market, just as there is a chance to beat the house.
      - bowsamic 4y ago
        Absolutely no normal person beats it except by dumb luck
        carnitine 4y ago
        If I spent the last 20 years allocating 90% of my savings to SPY, and the remaining 10% in a large-cap tech focussed index, I’ve outperformed SPY. Is that dumb luck or is it a pretty trivial implementation of a sensible investment thesis? There’s nothing magical about some committee-curated collection of 500 US-only equities which means it outperforms every other option ipso facto. If you were talking about a normal person actively managing a portfolio I’d be more inclined to agree.
imtringued 4y ago
Wealth concentration happens when the long term return on capital exceeds the growth rate of the economy according to Thomas Piketty. The wealth obviously concentrates with those, that have the most assets and least amount of spending in relation to their total income. When you think about this, this system is inherently injust if r<g is true, which is the reason why politicians and economists are addicted to growth. Capital must dictate the growth rate of the economy instead of people dictating the growth rate that they want. Now, under this perspective you have found the secret cheat code on how to get richer automatically. There obvious problems for every day people. Exponential growth is really slow in the beginning so most people never get to the point where their money is growing as much as a get rich quick scheme would promise every single year. The other problem is that they are human beings that need food and shelter which means living expenses are a big portion of their income meaning they don't have much to invest in the first place. It would be better if you didn't have to pay capital gains to the rich. However, if you are going for that living off other people's work strategy, you should be aware that the road is long and the rewards are only reaped at the end. Oh, and everyone will hate you.
- yieldcrv 4y ago
  Mmm, Thomas Piketty. Were you able to read the whole book? I was really enthralled by the main points and graphs made near the beginning but was wondering if there were further insights because its a bit of a slog.
randomran01234 4y ago
> There's no fundamental belief in blockchain technology. For skeptics, sure. But there are many investors who hold crypto precisely because they believe in the technology. > Put your money in a broad index fund and don't look at it for 10 years. This is a good safe and low risk bet. It doesn’t invalidate an investment thesis based on crypto currencies and blockchain tech. Crypto is higher risk and higher maintenance, potentially higher returns, and better suited to those who want to manage their own portfolios.
- nradov 4y ago
  But the technology doesn't actually work for anything useful (besides tax evasion). Cryptocurrency is a zero-sum ponzi scheme; for someone to win, others have to lose. With stocks, there are on average more winners than losers because new value is being created.
  - randomran01234 4y ago
    Is it really a good way to evade taxes? Each transaction is recorded publicly on-chain forever. User would have to be very careful with their on-chain privacy and very determined to skirt the legal system. The average crypto user will begrudgingly pay their crypto taxes to avoid having to live the life of a criminal, and would happily welcome more frictionless ways of having taxes recorded and collected on-chain. > Cryptocurrency is a zero-sum ponzi scheme This is repeated a lot on HN but it is easy to refute. A user can purchase $1000 of DAI and send this to another person in the world within 30-60 seconds, without the beneficiary needing to set up a USD bank account or disclose private data to a third party. The beneficiary can decide to hold this asset or exchange it to another asset such as fiat, gold, ETH, food. These are not zero-sum games - they are more comparable to a PayPal exchange than a zero-sum game. > With stocks, there are on average more winners than losers because new value is being created. This is questionable. Many stocks are overpriced far beyond their intrinsic value. The expectation that they will continue to go up forever and provide returns depends on people continuing to buy them at higher and higher prices, just like crypto. Some investors do not feel that NFLX and META will continue to go up in value forever, as the price already exceeds their value. And when you own stock, you cannot do much except hodl and sell. When you own ETH, you can hodl and sell, but also use the token to send transactions to the network and interact with smart contracts.
koonsolo 4y ago
I think you can allocate 1 to 5% of your investment money into more risky bets. I did with crypto and was lucky enough to do very well. If I lost my 1%, that was part of the game. The benefit/risk at the time was worth it. But even there, the most boring strategy works best: hold on to it for several years and sell a part when it becomes too big. I tried timing the market on stocks and crypto, but it basically can't compete with just holding it. The biggest problem is of course that you hear these stories how some people made a crazy amount of money, and then "why didn't you know about it?". But you never hear about the people who made nothing.
weq 4y ago
Im sorry but a high horse for betting on the slave traders vs betting on crypto. NUP. Money breeds money. the whales (1%ers) on index funds are doing it investing in the companies that are destroying the world. Displacing millions of people a year, causing corruption and famine, funneling offshore into tax havens. Crypto has a LONG way to go before it gutters into the dirty tactics of the stock market.
scotty79 4y ago
My current advice would be put, all money in bitcoin and don't look at it till the beginning on 2025. Then put a sale offer for 6x the price for what you bought for to get a conservative return on your investment. Than wait few years for the next crypto crash and when you read heading "Bitcoin is dead" it's time to buy again. https://mobile.twitter.com/cz_binance/status/1538647152813039616 https://mobile.twitter.com/cz_binance/status/153864715281303... Unless you believe, that this time it'll be different.
- hackerfromthefu 4y ago
  As the cost of energy rises, the energy to mine crypto rises, while the value of crypto keeps decreasing, I wonder if there's an inflection point where e.g. bitcoin just implodes and vanished because mining is losing money?
  - scotty79 4y ago
    Bitcoin mining difficulty adjusts to the available mining power. When price of Bitcoin drops. Some miners quit because it's no longer profitable for them. The ones that remain get more of mined Bitcoin for themselves so profitability of their operation increases. Difficulty of mining increases so that blocks are still mined roughly at constant rate. Network can operate regardless of how many or how few Bitcoin miners operate.

by jmyeet 4y ago

dubswithus 4y ago

Perhaps they knew what they were doing just as startup investors take a calculated risk that their doggy social networking site might not be the next big thing?

pphysch 4y ago
"calculated risk" is doing a lot of heavy lifting here. "Wishful thinking" is the more likely culprit
- dubswithus 4y ago
  Sam Altman invested in Worldcoin. And VC’s are investing in crypto startups as well. Is there a YC partner that has never invested in a crypto company? I would love to know.

makeitdouble 4y ago

I think index funds are better seen as "savings" than "investments" in most people's mind.

gruez 4y ago
Do people actually think this? ie. "it's not investing unless there's a chance of you making 10x returns"?
- KMag 4y ago
  In my experience, it doesn't seem to be the chance of big returns, but rather the gut feeling of actively "doing something" to invest, vs. a very passive simple strategy of dollar cost averaging a low-fee broad index ETF. I think particularly in popular American culture, we often feel like it's more moral to actively make every penny, and have an aversion to passively earning money. Landlords are demonized, etc.
  - semi-extrinsic 4y ago
    Yeah, this is bang on the money. And of course the financial institutions who make more money in fees when people are active vs. passively holding an index for decades, do what they can with marketing to support this idea.
nradov 4y ago
I've literally never heard of anyone referring to index funds that way. You're not making any sense at all.
- dubswithus 4y ago
  I assume when people say savings they mean investments. Because it would be stupid not to invest a large cash position.
  - Philadelphia 4y ago

yunohn 4y ago

> It's not that they want to get rich quick. They just want to make a lot of money really fast. In their defence, I feel like this is fuelled by media FUD as well as FOMO from the ever-widening wealth gap. A combination of inflation and unaffordable housing along with stagnant wages means that even with everyone in the family working jobs, you can’t even afford a yearly vacation. If the wealthy elites don’t realise that this isn’t sustainable, I’m not sure where we will be in a few years…

dalyons 4y ago
Exactly, people aren’t always stupid, they’re desperate. Investing in index funds at ~6% average return (or thereabouts) does nothing meaningful for people who are priced out by the 10-15% y/y gains on housing, or are living paycheck to paycheck due to inflation. Its not so hard to see why people feel their only option is riskier bets.
- gruez 4y ago
  >does nothing meaningful for people who are priced out by the 10-15% y/y gains on housing Housing never had gains that high. Looking at the rise from the last trough (ie. 2009 to today) works out to 5.3% annualized nationwide[1]. Meanwhile the Vanguard Total Stock Market Index Fund returned 12.4% in the same time period. If you look around at a few different metros, there are many cities that return higher (eg. 7.5% for LA[2]), but none are anywhere close to returns for the index fund. The best I found was arizona[3] with 9.1%. [1] https://fred.stlouisfed.org/series/CSUSHPINSA https://fred.stlouisfed.org/series/CSUSHPINSA [2] https://fred.stlouisfed.org/series/LXXRSA https://fred.stlouisfed.org/series/LXXRSA [3] https://fred.stlouisfed.org/series/PHXRSA https://fred.stlouisfed.org/series/PHXRSA
- SturgeonsLaw 4y ago
  This is the key that is overlooked a lot. Taking /biz as an example, the sentiment is rife that crypto is their one and only shot to make it out of the hole. Couple that with the "how much do you make" threads that show a lot of them earn somewhere in the $15-$30 per hour range and you can see why these moonshots are (in their view) their only hope. If the most they can scrape together is $5k of capital, then it needs to 10x to provide them with a meaningful change.

KMag 4y ago

In my experience, it seems that a lot of people have an un-stated gut feeling that "doing something" must out-perform passive dollar cost averaging a broad low-fee index ETF. If we came up with some obfuscated mathematical dance that, if un-obfuscated, were obviously dollar cost averaging in a broad-based low-fee index ETF, I think it would be more popular. Edit: There are also lots of investment strategies where people are short tail-risk and don't realize it or properly account for it. For instance, my dad is a pretty smart guy (practicing medical doctor who never got his undergrad degree because he crushed the MCATs and got into med school after 3 years of undergrad, back in the 1970s when med school was less competitive) but he's convinced that his gut-feeling covered calls out-perform a simple buy-and-hold (on a non-risk-adjusted basis). I don't doubt it's possible to out-perform on a risk-adjusted basis, and maybe even on a non-adjusted basis with careful enough analysis, but he's never performed any analysis on the opportunity cost that he has given up over the years. Without any attempts to model or otherwise estimate opportunity costs, I doubt it's likely he's actually out-performing. He sees that most days, he's out-performing, and in the rare cases where his calls get allocated, he just tells himself "well, at least the long stock position did very well". He's short the tail risk, but essentially largely ignores that part because it's hidden by the gains in his simultaneous long position. He feels good because he's doing extra work, and most days he's out-performing, so the gut feeling is that he's out-performing the market on a non-risk-adjusted basis.

rurp 4y ago
Heh, I think that idea has a lot of promise. Casinos might offer some guidance here given how good they are at making games with fairly straightforward negative odds seem enticing. We need some sort of responsible investing vehicle that includes gamification, intermittent reinforcement, and a tiny chance for a huge payoff.
- sumy23 4y ago
  > We need some sort of responsible investing vehicle that includes gamification, intermittent reinforcement, and a tiny chance for a huge payoff. You’re basically describing options.

88913527 4y ago

There's a meaningful difference between putting <10% of your portfolio into a speculative investment versus 100%. If your speculative investments moon anyways, 10% * a large number = still a large number, and you didn't bet the farm. It's a good way to fulfill one's desire to be an active investor, while largely acknowledging most of us won't beat the S&P-- I know the active portion of my own portfolio (no crypto) has underperformed the index.

yieldcrv 4y ago
One of my experiences is that nobody tells you what to do next. They don't know. If your speculative investment moons then your portfolio has risen to 95-99% speculative investment. At least thats a consistent case in crypto or a super quick and awesome private equity exit, both of which have multiple thousands of percentage gains. So the people following that kind of risk allocation advice might already be starting from that second state. Rebalancing is an option, but its lame when everything has such high correlations to each other. And rebalancing when? Anytime the speculative investment goes over 10% of the portfolio? After you let it ride and its price got stable for a few days? Waiting a year or more for lower tax treatment on the rebalancing sells?
- cableshaft 4y ago
  Yes, there are people who rebalance when that happens. I'm not one of those people (I probably should be, but I'm not), but there are people who definitely do rebalance their portfolios whenever it gets out of whack.

ngold 4y ago

Just remind them of Warren buffets 10 year bet on index funds, and he made that right before the 2008 collapse. Still won.

UkrainianJew 4y ago

>Put your money in a broad index fund and don't look at it for 10 years. That might be a dead strategy in 2022. After the 2008 crisis the fed discovered a miraculous economic cure: slowly print money and throw it into the economy, so people keep transacting with each other, and the GDP (and stocks) keep growing. Turns out, most of this growth was on paper - fads, speculative investments, overvalued stocks. Now that the geopolitical shock has disrupted the endless stream of cheap stuff made elsewhere, turns out there's an abundance of dollars and shortage of everything else. There might be a rather non-trivial correction ahead of us.

landemva 4y ago
>> there's an abundance of dollars Slightly different perspective here - there is an abundance of debt that spends like dollars. Government debt and some pension debt is nearly unserviceable in some States and countries, so there will be a dollar short squeeze in attempt to get dollars to pay the debt. Yep, seems counter-intuitive at first glance that the USD short squeeze will increase the dollar appetite.
bmitc 4y ago
What do you suggest?
- UkrainianJew 4y ago
  Bonds might become a thing again with the interest rates above 3%.
  - stocknoob 4y ago
    Bonds will take a hit if interest rates keep rising. (Look at how they’ve done year to date.) If you want to actually hedge your investments, use a collar. https://www.investopedia.com/articles/active-trading/011515/how-protective-collar-works.asp https://www.investopedia.com/articles/active-trading/011515/...
    - 4y ago

theplumber 4y ago

Why you think someone trades the same stock 10 times per day? (i.e day trader). Isn't that greed? The advantage of crypto/defi done right is that at least you have some transparency and your positions won't be put on hold or liquidated arbitrary by someone like it happened on LME case or GME

matteotom 4y ago
Even if the on-chain stuff is transparent, there’s much less transparency in crypto/defi exchanges than any traditional investment firm.

shimonabi 4y ago

Which are broad index funds? I put a tiny amount of my savings in a pharma ETF last year and got destroyed almost as much as crypto. I hope it recovers soon.

Zizizizz 4y ago
Non industry specific
distances 4y ago
Total market / All world are very common.

lyrrad 4y ago

> Put your money in a broad index fund and don't look at it for 10 years. You should check on their investments accounts on a regular basis. If your bank or brokerage makes an error, there is likely a limited period of time during which it can be fixed. Also, if you do not have activity on your bank or investment accounts for a period of time, the contents may be escheated by a state and investments may be sold automatically. Planet Money had an episode about escheatment a couple of years ago: https://www.npr.org/transcripts/799345159 https://www.npr.org/transcripts/799345159 They mention that Delaware, where the person's broker was incorporated escheats investments after three years.

deleted 4y ago

[deleted]

RC_ITR 4y ago

The problem is: Ask most people today and they’ll tell you Internet stocks were overvalued in 1998. But then you take their IRR since then and you realize you could open a hedge fund and be a billionaire just by buying the ones that were big enough to get time magazine covers, even if you bought at the absolute peak (there are literal billionaires who did basically just this!) So now you have this thing that feels a lot like the internet, especially to lay people, and it’s not totally unreasonable for them to think “this could happen again.” It’s just that crypto is way stupider than the internet and is unlikely to have a similar impact, so they’re probably wrong.

jjav 4y ago
> even if you bought at the absolute peak If you bought CSCO at its peak in 2000, you're still underwater today 22 years later.

bowsamic 4y ago

It's ego and over-confidence. People think they can outperform the S&P500. They can't.

carnitine 4y ago
Yes they can and many do. It’s just not likely if you’re actively trading.
- mensetmanusman 4y ago
  Of course some do, but there are just as many (and a bit more) that under perform. The average performance relative to the index matters.
  - carnitine 4y ago
    Yes, but that’s not what the comment I’m replying to said. There seems to be some pervasive belief that absolutely no one ever beats the S&P500 index in the long run, which is obviously nonsense.
    - mensetmanusman 4y ago
      There is a chance to beat the market, just as there is a chance to beat the house.
    - bowsamic 4y ago
      Absolutely no normal person beats it except by dumb luck
      - carnitine 4y ago
        If I spent the last 20 years allocating 90% of my savings to SPY, and the remaining 10% in a large-cap tech focussed index, I’ve outperformed SPY. Is that dumb luck or is it a pretty trivial implementation of a sensible investment thesis? There’s nothing magical about some committee-curated collection of 500 US-only equities which means it outperforms every other option ipso facto. If you were talking about a normal person actively managing a portfolio I’d be more inclined to agree.

imtringued 4y ago

Wealth concentration happens when the long term return on capital exceeds the growth rate of the economy according to Thomas Piketty. The wealth obviously concentrates with those, that have the most assets and least amount of spending in relation to their total income. When you think about this, this system is inherently injust if r<g is true, which is the reason why politicians and economists are addicted to growth. Capital must dictate the growth rate of the economy instead of people dictating the growth rate that they want. Now, under this perspective you have found the secret cheat code on how to get richer automatically. There obvious problems for every day people. Exponential growth is really slow in the beginning so most people never get to the point where their money is growing as much as a get rich quick scheme would promise every single year. The other problem is that they are human beings that need food and shelter which means living expenses are a big portion of their income meaning they don't have much to invest in the first place. It would be better if you didn't have to pay capital gains to the rich. However, if you are going for that living off other people's work strategy, you should be aware that the road is long and the rewards are only reaped at the end. Oh, and everyone will hate you.

yieldcrv 4y ago
Mmm, Thomas Piketty. Were you able to read the whole book? I was really enthralled by the main points and graphs made near the beginning but was wondering if there were further insights because its a bit of a slog.

randomran01234 4y ago

> There's no fundamental belief in blockchain technology. For skeptics, sure. But there are many investors who hold crypto precisely because they believe in the technology. > Put your money in a broad index fund and don't look at it for 10 years. This is a good safe and low risk bet. It doesn’t invalidate an investment thesis based on crypto currencies and blockchain tech. Crypto is higher risk and higher maintenance, potentially higher returns, and better suited to those who want to manage their own portfolios.

nradov 4y ago
But the technology doesn't actually work for anything useful (besides tax evasion). Cryptocurrency is a zero-sum ponzi scheme; for someone to win, others have to lose. With stocks, there are on average more winners than losers because new value is being created.
- randomran01234 4y ago
  Is it really a good way to evade taxes? Each transaction is recorded publicly on-chain forever. User would have to be very careful with their on-chain privacy and very determined to skirt the legal system. The average crypto user will begrudgingly pay their crypto taxes to avoid having to live the life of a criminal, and would happily welcome more frictionless ways of having taxes recorded and collected on-chain. > Cryptocurrency is a zero-sum ponzi scheme This is repeated a lot on HN but it is easy to refute. A user can purchase $1000 of DAI and send this to another person in the world within 30-60 seconds, without the beneficiary needing to set up a USD bank account or disclose private data to a third party. The beneficiary can decide to hold this asset or exchange it to another asset such as fiat, gold, ETH, food. These are not zero-sum games - they are more comparable to a PayPal exchange than a zero-sum game. > With stocks, there are on average more winners than losers because new value is being created. This is questionable. Many stocks are overpriced far beyond their intrinsic value. The expectation that they will continue to go up forever and provide returns depends on people continuing to buy them at higher and higher prices, just like crypto. Some investors do not feel that NFLX and META will continue to go up in value forever, as the price already exceeds their value. And when you own stock, you cannot do much except hodl and sell. When you own ETH, you can hodl and sell, but also use the token to send transactions to the network and interact with smart contracts.

koonsolo 4y ago

I think you can allocate 1 to 5% of your investment money into more risky bets. I did with crypto and was lucky enough to do very well. If I lost my 1%, that was part of the game. The benefit/risk at the time was worth it. But even there, the most boring strategy works best: hold on to it for several years and sell a part when it becomes too big. I tried timing the market on stocks and crypto, but it basically can't compete with just holding it. The biggest problem is of course that you hear these stories how some people made a crazy amount of money, and then "why didn't you know about it?". But you never hear about the people who made nothing.

weq 4y ago

Im sorry but a high horse for betting on the slave traders vs betting on crypto. NUP. Money breeds money. the whales (1%ers) on index funds are doing it investing in the companies that are destroying the world. Displacing millions of people a year, causing corruption and famine, funneling offshore into tax havens. Crypto has a LONG way to go before it gutters into the dirty tactics of the stock market.

scotty79 4y ago

My current advice would be put, all money in bitcoin and don't look at it till the beginning on 2025. Then put a sale offer for 6x the price for what you bought for to get a conservative return on your investment. Than wait few years for the next crypto crash and when you read heading "Bitcoin is dead" it's time to buy again. https://mobile.twitter.com/cz_binance/status/1538647152813039616 https://mobile.twitter.com/cz_binance/status/153864715281303... Unless you believe, that this time it'll be different.

hackerfromthefu 4y ago
As the cost of energy rises, the energy to mine crypto rises, while the value of crypto keeps decreasing, I wonder if there's an inflection point where e.g. bitcoin just implodes and vanished because mining is losing money?
- scotty79 4y ago
  Bitcoin mining difficulty adjusts to the available mining power. When price of Bitcoin drops. Some miners quit because it's no longer profitable for them. The ones that remain get more of mined Bitcoin for themselves so profitability of their operation increases. Difficulty of mining increases so that blocks are still mined roughly at constant rate. Network can operate regardless of how many or how few Bitcoin miners operate.