3 ms·
This is bullshit: past returns aren't indicative of future returns. You can't predict the next catastrophe. "Zooming out" is the perfect way to loose money, eve
by fedeb95 4y ago
This is bullshit: past returns aren't indicative of future returns. You can't predict the next catastrophe. "Zooming out" is the perfect way to loose money, even better than CAPM or similar stupid things.
Edit: Since I'm being downvoted, go read: "The misbehaviour of markets" by Mandelbrot or "The black swan" by Taleb, or just reflect on what "zooming " really is: averaging to keep out outliers.
Edit 2: to put it in less salty terms: yes, now it's down 23% from the previous year, so probably it will go up and you will make a profit, as long as US economy doesn't collapse. But you don't know the probability of such an event, since the distribution of returns in markets is unknown (we're not yet at the limit at which the central limit theorem holds). Not knowing that probability, you may die before you see your return. Or, as said, US economy may collapse, your bank or broker will, etc. Meaningless risks? Perhaps in a world of gaussian distributions, not our.
- hartator 4y agoI think you have to see it more from "best alternative" mindset. This shows that long term (20 years and plus) assets are best held in low cost stock index funds. Over cash (inflation), bonds, savings accounts, or other assets. It's the least bad option. And you are not suggesting something else. Hence I guess the downvotes. Of course, markets can be irrational forever or tomorrow we could have a nuclear world war or aliens annex us or a meteor can hit us. This is life 101 though. This is not a deep insight.
- fedeb95 4y agoNot suggesting something else isn't an argument. Long term from now you don't know anything, you know long term up to now. The risk of a market crash isn't the same as of a meteor hitting earth, since tails of the probability distribution (as can be estimated, so not cast in stone) are fat.
- verdverm 4y agoIf the US economy collapses (to black swan catastrophe levels), you are going to have a much different set of problems and markets will stop running all together, the world will collapse. We do know that the probability of a collapse is so small that it is not worth worrying about for investment strategy. Better to worry about the things that might lead to such collapses and strategies to mitigate those
- fedeb95 4y agoMy main point isn't the only risk is the economy collapsing, this is nitpicking
- ManuelKiessling 4y agoI don’t know the probability of me being hit by a deathly-traffic-accident, therefore I will never leave the house.
- fedeb95 4y agoIt's not the same type of risk. I'm not against risk taking, but betting everything in the stock market is plainly stupid. I'm ok with many people believing it's not however, I can keep benefiting from crashes ;)