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> "Vast Majority of People Who Invest Inevitably Lose Money". Yep. That's always held true. I don't think that's true, otherwise people wouldn't pile so much m

> "Vast Majority of People Who Invest Inevitably Lose Money". Yep. That's always held true. I don't think that's true, otherwise people wouldn't pile so much money into stock funds in their 401ks.

randomdata 4y ago
Let's assume, for argument's sake, all investments lose money. People are still going to try and invest in the places where they expect to lose the least. Humans tend to be very loss averse. Hanging onto what they've got, to the greatest extent possible, may be their priority and doesn't necessarily disprove the earlier assertion.
- pessimizer 4y ago
  Except that if the mean investment loses money, the place where you expect to lose the least is cash. e.g. if you are very loss averse, you don't buy lottery tickets at all. You don't just buy the safest ones where you expect to lose the least.
  - jovial_cavalier 4y ago
    Not necessarily. If you have 5% inflation, and the best returns on securities are -2% in real terms, you're still better off investing in securities.
    - pessimizer 4y ago
      If you rewrite half of the equation to be about real losses, of course that's true, but that wouldn't make sense to do. However, securities denominated in dollars are also affected by inflation, so the only way to discuss their losses coherently is also against the inflation-adjusted dollar. e.g. lottery winnings are also affected by inflation.
      - randomdata 4y ago
        > If you rewrite half of the equation to be about real losses There is nothing in need of rewrite. The original claim was about money, not currency. As money is defined as the assets, property, or resources owned by someone (i.e. wealth), we can substitute currency with any other asset. Let's use cars, as is convention, and works well as they tend to decline in value much like currency does. So, you trade your car for a security. Some years go by and you decide you want a car again, track down the guy who you sold your car to, and offer to trade the security back for the car. He agrees and now you've got your car back. You didn't lose any cars. You are back to one car, just like you had originally. However, the car is scratched up a little, needs new tires, etc. and as such isn't worth as much as it was when you first traded it. And so, while you haven't lost any cars, you have lost money. The car isn't what it used to be; your wealth has declined. You might not lose any currency in an exchange of assets, you might even gain currency in the deal, but that doesn't necessarily mean you haven't lost money.
  - randomdata 4y ago
    Cash is the investment where you expect to lose the most. Hedging against cash losses (also known as inflation) is largely why people chase other investment opportunities. Cash is the easiest investment to hold. If it were stable it would be very attractive, but it is not. The monetary system works hard to ensure that it isn't stable, with mandated targets to ensure that cash holdings lose money every year.
    - pessimizer 4y ago
      If we're talking about securities that are losing money, they can't be beating inflation. You're talking about securities that are beating inflation. i.e. iff your security is worth fewer dollars than it was worth some period of time ago, it is losing money. The fact that dollars have also lost value during the same time means you've lost more money, not less.
      - randomdata 4y ago
        > You're talking about securities that are beating inflation. I said no such thing...? > iff your security is worth fewer dollars than it was worth some period of time ago, it is losing money. And if it sells for more dollars than in the past, but not commensurate with the decline in value of those dollars, then you've still lost money. Less money lost than would have been by holding dollars, but still a loss.
welshwelsh 4y ago
Individual investors usually have terrible investment habits. They buy trendy stocks after hearing about them on the news, and then sell after they crash This same crowd gets interested in Bitcoin at every ATH because of the news coverage. I got so many people asking me how to buy Bitcoin when it hit 20k in 2017 and 60k in 2021. That's when the vast majority of people buy. Yes, if you put money in your 401k and don't take it out until retirement you will make money. That doesn't describe the vast majority of investors though
- retrac 4y ago
  > That doesn't describe the vast majority of investors though Doesn't it? My mother did it that way. Made regular payments into her selected cooperative low-risk mutual fund that built up a reasonable retirement pension. I know a lot of people that do that. I suppose the difference is that they don't think of themselves as investors.
- deleted 4y ago
  [deleted]
- cortesoft 4y ago
  > That doesn't describe the vast majority of investors though I think you have a skewed view of the average investor. About 58% of Americans own stock, but only 35% of Americans own any outside their 401k. That means 40% of investors only have money in their 401k. I couldn’t find the numbers for how many of those investing outside of their 401k just owned index or mutual funds, but I even if it was only a small percentage it would mean a majority of investors aren’t buying individual stocks. There is a vocal minority who invest speculatively. It makes sense that this number would seem larger than it actually is, because they are the ones who talk about investing. You don’t see questions or posts from people just investing in their 401k and index funds, but there are more of them than the speculators. https://news.gallup.com/poll/266807/percentage-americans-owns-stock.aspx https://news.gallup.com/poll/266807/percentage-americans-own... https://www.pewresearch.org/fact-tank/2020/09/25/few-in-u-s-owned-stocks-outside-of-401ks-in-2019-fewer-said-market-had-a-big-impact-on-their-view-of-economy/ https://www.pewresearch.org/fact-tank/2020/09/25/few-in-u-s-...
elil17 4y ago
Bonds, stocks, private equity, futures, and real estate are cash flow producing assets. The expected rate of return of cash flow producing assets is positive. I don't mean statistically, I mean logically. People value having money now more than they value having money in the future, so people will sell you cash flow producing assets for less than they're worth over the long run. Commodities and currencies (including crypto currencies) are not cash flow producing assets. There's no value in them that can't be accessed immediately, so no one's going to sell them to you for less than their long run worth.
- tablespoon 4y ago
  So basically: the GGP's overgeneralization "Vast Majority of People Who Invest Inevitably Lose Money" was wrong, because they lumped all kinds of investments together and failed to make important distinctions.
  - elil17 4y ago
    The story is slightly more complicated than that. Most people who put money into their 401ks end up with positive real returns. If you invest in the whole market, you're going to get positive real returns in something like 96% of historical 30 year periods. [1] Most mutual funds/ETFs invest in a large enough portion of the market that this number isn't far off. People who buy a small number of individual stocks end up in a different situation. While their average return is positive, those results have a large degree of skewness (meaning most stocks stagnate or fall, but the meteoric rise of those that do well makes up for it on average). If you picked a random stock in 1992, you'd quite likely have lost money by now. [1]: https://rationalreminder.ca/podcast/224 https://rationalreminder.ca/podcast/224
dpweb 4y ago
Stock prices are tethered, albeit with unfortunate volatility, to the expected cash flow of real companies. Crypto only to the willingness of others to buy crypto.

> "Vast Majority of People Who Invest Inevitably Lose Money". Yep. That's always held true. I don't think that's true, otherwise people wouldn't pile so much money into stock funds in their 401ks.

randomdata 4y ago

Let's assume, for argument's sake, all investments lose money. People are still going to try and invest in the places where they expect to lose the least. Humans tend to be very loss averse. Hanging onto what they've got, to the greatest extent possible, may be their priority and doesn't necessarily disprove the earlier assertion.

pessimizer 4y ago
Except that if the mean investment loses money, the place where you expect to lose the least is cash. e.g. if you are very loss averse, you don't buy lottery tickets at all. You don't just buy the safest ones where you expect to lose the least.
- jovial_cavalier 4y ago
  Not necessarily. If you have 5% inflation, and the best returns on securities are -2% in real terms, you're still better off investing in securities.
  - pessimizer 4y ago
    If you rewrite half of the equation to be about real losses, of course that's true, but that wouldn't make sense to do. However, securities denominated in dollars are also affected by inflation, so the only way to discuss their losses coherently is also against the inflation-adjusted dollar. e.g. lottery winnings are also affected by inflation.
    - randomdata 4y ago
      > If you rewrite half of the equation to be about real losses There is nothing in need of rewrite. The original claim was about money, not currency. As money is defined as the assets, property, or resources owned by someone (i.e. wealth), we can substitute currency with any other asset. Let's use cars, as is convention, and works well as they tend to decline in value much like currency does. So, you trade your car for a security. Some years go by and you decide you want a car again, track down the guy who you sold your car to, and offer to trade the security back for the car. He agrees and now you've got your car back. You didn't lose any cars. You are back to one car, just like you had originally. However, the car is scratched up a little, needs new tires, etc. and as such isn't worth as much as it was when you first traded it. And so, while you haven't lost any cars, you have lost money. The car isn't what it used to be; your wealth has declined. You might not lose any currency in an exchange of assets, you might even gain currency in the deal, but that doesn't necessarily mean you haven't lost money.
- randomdata 4y ago
  Cash is the investment where you expect to lose the most. Hedging against cash losses (also known as inflation) is largely why people chase other investment opportunities. Cash is the easiest investment to hold. If it were stable it would be very attractive, but it is not. The monetary system works hard to ensure that it isn't stable, with mandated targets to ensure that cash holdings lose money every year.
  - pessimizer 4y ago
    If we're talking about securities that are losing money, they can't be beating inflation. You're talking about securities that are beating inflation. i.e. iff your security is worth fewer dollars than it was worth some period of time ago, it is losing money. The fact that dollars have also lost value during the same time means you've lost more money, not less.
    - randomdata 4y ago
      > You're talking about securities that are beating inflation. I said no such thing...? > iff your security is worth fewer dollars than it was worth some period of time ago, it is losing money. And if it sells for more dollars than in the past, but not commensurate with the decline in value of those dollars, then you've still lost money. Less money lost than would have been by holding dollars, but still a loss.

welshwelsh 4y ago

Individual investors usually have terrible investment habits. They buy trendy stocks after hearing about them on the news, and then sell after they crash This same crowd gets interested in Bitcoin at every ATH because of the news coverage. I got so many people asking me how to buy Bitcoin when it hit 20k in 2017 and 60k in 2021. That's when the vast majority of people buy. Yes, if you put money in your 401k and don't take it out until retirement you will make money. That doesn't describe the vast majority of investors though

retrac 4y ago
> That doesn't describe the vast majority of investors though Doesn't it? My mother did it that way. Made regular payments into her selected cooperative low-risk mutual fund that built up a reasonable retirement pension. I know a lot of people that do that. I suppose the difference is that they don't think of themselves as investors.
deleted 4y ago
[deleted]
cortesoft 4y ago
> That doesn't describe the vast majority of investors though I think you have a skewed view of the average investor. About 58% of Americans own stock, but only 35% of Americans own any outside their 401k. That means 40% of investors only have money in their 401k. I couldn’t find the numbers for how many of those investing outside of their 401k just owned index or mutual funds, but I even if it was only a small percentage it would mean a majority of investors aren’t buying individual stocks. There is a vocal minority who invest speculatively. It makes sense that this number would seem larger than it actually is, because they are the ones who talk about investing. You don’t see questions or posts from people just investing in their 401k and index funds, but there are more of them than the speculators. https://news.gallup.com/poll/266807/percentage-americans-owns-stock.aspx https://news.gallup.com/poll/266807/percentage-americans-own... https://www.pewresearch.org/fact-tank/2020/09/25/few-in-u-s-owned-stocks-outside-of-401ks-in-2019-fewer-said-market-had-a-big-impact-on-their-view-of-economy/ https://www.pewresearch.org/fact-tank/2020/09/25/few-in-u-s-...

elil17 4y ago

Bonds, stocks, private equity, futures, and real estate are cash flow producing assets. The expected rate of return of cash flow producing assets is positive. I don't mean statistically, I mean logically. People value having money now more than they value having money in the future, so people will sell you cash flow producing assets for less than they're worth over the long run. Commodities and currencies (including crypto currencies) are not cash flow producing assets. There's no value in them that can't be accessed immediately, so no one's going to sell them to you for less than their long run worth.

tablespoon 4y ago
So basically: the GGP's overgeneralization "Vast Majority of People Who Invest Inevitably Lose Money" was wrong, because they lumped all kinds of investments together and failed to make important distinctions.
- elil17 4y ago
  The story is slightly more complicated than that. Most people who put money into their 401ks end up with positive real returns. If you invest in the whole market, you're going to get positive real returns in something like 96% of historical 30 year periods. [1] Most mutual funds/ETFs invest in a large enough portion of the market that this number isn't far off. People who buy a small number of individual stocks end up in a different situation. While their average return is positive, those results have a large degree of skewness (meaning most stocks stagnate or fall, but the meteoric rise of those that do well makes up for it on average). If you picked a random stock in 1992, you'd quite likely have lost money by now. [1]: https://rationalreminder.ca/podcast/224 https://rationalreminder.ca/podcast/224

dpweb 4y ago

Stock prices are tethered, albeit with unfortunate volatility, to the expected cash flow of real companies. Crypto only to the willingness of others to buy crypto.