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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
by 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 agoSo 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 agoThe 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