4 ms·

'Set It and Forget It' 401(k) Made You Rich. No More

13 points by thm 3y ago

dpflan 3y ago
Waiting for archive link. But this is the subtitle: "Stock-and-bond portfolios that worked for the past 40 years aren’t ready for what’s coming" I want to know "what's coming"...
- marcus0x62 3y ago
  So does everyone else, including the guy who wrote the article. The only problem is, nobody does. Including the guy who wrote the article.
- binarymax 3y ago
  There some doomsayers coming out of the woodwork, esp writing for WSJ and Forbes (https://www.forbes.com/search/?q=stock%20market&sh=44155cf9279f https://www.forbes.com/search/?q=stock%20market&sh=44155cf92...). The conspiracy theorist in me thinks there is a subversive campaign trying to shift emotions and get the market to tank in time for election season.
  - potatolicious 3y ago
    The whole piece is just a confused mess with only the most tenuous grasp on a thesis. It skips from treasury yield rates to meme stocks to national debt as an explanation for why passive investing is over. The author also seems to be living in a reality where high inflation has persisted - they talk about interest rates rising into the double digits to suppress inflation, despite inflation being firmly back to normal and no evidence of any major rate hikes (if any!) on the horizon? I'm mostly with you on the conspiracy theorist thing here - I think there's a motivated group of people who seem desperate to instill a narrative of economic doom-and-gloom, despite the facts on the ground not at all warranting such an outlook at the moment. Also it's not clear that the author themselves understands the notion of the "set it and forget it" passive investment? The entire point of something like a 401k is that you consistently put money into over a long period of time. This cost averaging accounts for periods of poorer returns. That is in fact the entire point of such an investment strategy.
    - dpflan 3y ago
      Indeed: "This cost averaging accounts for periods of poorer returns. That is in fact the entire point of such an investment strategy." The goal of the "motivated group" would be: retention or acquisition of power/influence? Usually that is highly correlated with having wealth. So is it a push to make people buy what they're selling (which is)? Or is this a bitcoin (i.e. this moment's GOLD) push behind the scenes? (e.g. BlackRock's BTC ETF).
      - potatolicious 3y ago
        My read is this is pure political kvetching rather than astroturfing for some product. There's your usual WSJ implication that things are bad because our monetary policy is not austere enough. Then there's the vaguely classist complaining about how "young investors" don't know how to invest and ruined the stock market forever by dumping their stupid money into unprofitable companies (which is funny because these unprofitable companies have oodles of institutional investors and up until 18 months ago were VC darlings - but yes, it's the young people who are idiots) The fact that the author isn't hawking some kind of solution is IMO telling that this is just another "let's complain about the economy" piece that's meant make people believe things are terrible despite little compelling evidence of it. So yeah, it's a day that ends with a "Y" over there at the WSJ.
        dpflan 3y ago
        For sure: look at the writer's article history on WSJ.
- francisofascii 3y ago
  > I want to know "what's coming"... Well, the bond collapse already happened (and could get worse). The writers thinks stocks (which are historically overvalued) are next to collapse.
  - stvltvs 3y ago
    Sounds like a buying opportunity (for those of us with a long enough time horizon and steady employment).
    - francisofascii 3y ago
      I agree, but I thought it was a good buying opportunity a year ago, so who really knows.
  - AnimalMuppet 3y ago
    The bond collapse could get worse, if interest rates continue to climb. The bond market (if I understand correctly) doesn't think it will, projecting that rates will drop after 1 to 2 years. If they're wrong, then bond prices will not collapse, they will move to the level implied by the interest rates. Stock prices should reflect the present value of expected future earnings, with a risk premium. "Present value" takes into account expected interest rates. Stocks were high because, in a zero interest environment, future earnings were not discounted (other than for risk). The question now is, is that coming back, or is it gone for good? If it's gone for good, stock prices should fall to reflect that. That won't be a "collapse", exactly, but it will be a correction.
- fullshark 3y ago
  Basically the claim is a repeat of Jan 1 1966 to Jan 1 1982, advice is to buy short term tbills as well.
goopthink 3y ago
https://archive.ph/gLxWV https://archive.ph/gLxWV
pb7 3y ago
Pointless article. No one that calls stocks “expensive” is worth listening to.
avgDev 3y ago
Paywall alert.
avgDev 3y ago
Always be buying. Live a reasonable life. Ignore the doomers.
Kirby64 3y ago
I can’t even tell what the suggestion is for the article. Panic? Assume my money is going to become worthless? Buy some fancy fund that manages risk better (but, historically, does worse than the s&p)? Seems like this is yet another chicken little prediction that is going to be found to be inaccurate years later. The author doesn’t really give any evidence that this time is different. And, given that everyone cries this time is different, I’m extremely skeptical.
- francisofascii 3y ago
  The suggestion is to simply to lower expectations. People always expect their 401Ks to beat inflation over the long run. Author is saying you might see a lost decade where you gain very little.
  - Kirby64 3y ago
    The 'lost decade' issues only have previously applied if you dump all your money in at a specific timeframe, then never contribute anything else. Or, alternatively, if you pull out a large amount of money after the downturn. Traditional 'set and forget' 401k funding would imply you continue to contribute throughout the period (i.e., dollar-cost-averaging). By putting money in during the downturn, those dollars earn outsized rewards when the market inevitably bounces back. It essentially cancels out the money lost.
  - WkndTriathlete 3y ago
    Which is stupid. If I shouldn't expect returns on my investments to beat inflation why would I bother investing in equities? By that metric I should put all of my money in TIPS and be done with it.
Analemma_ 3y ago
Just another submarine story [0] for actively-managed portfolios. The WSJ publishes these on the regular, because the broad shift to index funds means a lot less free money for overpaid fund managers. Ignore it and move on. [0]: http://www.paulgraham.com/submarine.html http://www.paulgraham.com/submarine.html
- soupfordummies 3y ago
  Reminding me why I skim the comments first. You succinctly nailed it here.
  - MR4D 3y ago
    Unfortunately it has nothing to do with actively-managed funds. Succinct, yes. Correct, no.
- MR4D 3y ago
  You clearly did not read the article and you also showed your ignorance of the market. The article talks about broad market issues, not index vs active. This year is shaping up to be historic. As in capital-H historic. Treasuries have never been down 3 years in a row since the 1700’s. [0] Finally, you can very easily create a 60/40 portfolio using index funds. SPY & AGG are 2 common ETFs used, while VFINX & VBMFX are two common index mutual funds used. [0] - https://markets.businessinsider.com/news/bonds/chart-of-the-day-us-treasurys-1787-longest-stretch-losses-2023-9 https://markets.businessinsider.com/news/bonds/chart-of-the-...
  - Eridrus 3y ago
    The article does seem to be punching a straw man though. A 60/40 portfolio is basically only recommended for those approaching retirement who cannot stomach high volatility. Target date funds that are commonly used would put 30 year olds into a 90/10 portfolio.
    - MR4D 3y ago
      I'd wager that most retired Boomers have 60/40 (or even more conservative) allocations. I agree about the 30 years olds, but people aged 40+ have a higher ratio where they actually see the impacts of this.

13 points by thm 3y ago

Waiting for archive link. But this is the subtitle: "Stock-and-bond portfolios that worked for the past 40 years aren’t ready for what’s coming" I want to know "what's coming"...

marcus0x62 3y ago
So does everyone else, including the guy who wrote the article. The only problem is, nobody does. Including the guy who wrote the article.
binarymax 3y ago
There some doomsayers coming out of the woodwork, esp writing for WSJ and Forbes (https://www.forbes.com/search/?q=stock%20market&sh=44155cf9279f https://www.forbes.com/search/?q=stock%20market&sh=44155cf92...). The conspiracy theorist in me thinks there is a subversive campaign trying to shift emotions and get the market to tank in time for election season.
- potatolicious 3y ago
  The whole piece is just a confused mess with only the most tenuous grasp on a thesis. It skips from treasury yield rates to meme stocks to national debt as an explanation for why passive investing is over. The author also seems to be living in a reality where high inflation has persisted - they talk about interest rates rising into the double digits to suppress inflation, despite inflation being firmly back to normal and no evidence of any major rate hikes (if any!) on the horizon? I'm mostly with you on the conspiracy theorist thing here - I think there's a motivated group of people who seem desperate to instill a narrative of economic doom-and-gloom, despite the facts on the ground not at all warranting such an outlook at the moment. Also it's not clear that the author themselves understands the notion of the "set it and forget it" passive investment? The entire point of something like a 401k is that you consistently put money into over a long period of time. This cost averaging accounts for periods of poorer returns. That is in fact the entire point of such an investment strategy.
  - dpflan 3y ago
    Indeed: "This cost averaging accounts for periods of poorer returns. That is in fact the entire point of such an investment strategy." The goal of the "motivated group" would be: retention or acquisition of power/influence? Usually that is highly correlated with having wealth. So is it a push to make people buy what they're selling (which is)? Or is this a bitcoin (i.e. this moment's GOLD) push behind the scenes? (e.g. BlackRock's BTC ETF).
    - potatolicious 3y ago
      My read is this is pure political kvetching rather than astroturfing for some product. There's your usual WSJ implication that things are bad because our monetary policy is not austere enough. Then there's the vaguely classist complaining about how "young investors" don't know how to invest and ruined the stock market forever by dumping their stupid money into unprofitable companies (which is funny because these unprofitable companies have oodles of institutional investors and up until 18 months ago were VC darlings - but yes, it's the young people who are idiots) The fact that the author isn't hawking some kind of solution is IMO telling that this is just another "let's complain about the economy" piece that's meant make people believe things are terrible despite little compelling evidence of it. So yeah, it's a day that ends with a "Y" over there at the WSJ.
      - dpflan 3y ago
        For sure: look at the writer's article history on WSJ.
francisofascii 3y ago
> I want to know "what's coming"... Well, the bond collapse already happened (and could get worse). The writers thinks stocks (which are historically overvalued) are next to collapse.
- stvltvs 3y ago
  Sounds like a buying opportunity (for those of us with a long enough time horizon and steady employment).
  - francisofascii 3y ago
    I agree, but I thought it was a good buying opportunity a year ago, so who really knows.
- AnimalMuppet 3y ago
  The bond collapse could get worse, if interest rates continue to climb. The bond market (if I understand correctly) doesn't think it will, projecting that rates will drop after 1 to 2 years. If they're wrong, then bond prices will not collapse, they will move to the level implied by the interest rates. Stock prices should reflect the present value of expected future earnings, with a risk premium. "Present value" takes into account expected interest rates. Stocks were high because, in a zero interest environment, future earnings were not discounted (other than for risk). The question now is, is that coming back, or is it gone for good? If it's gone for good, stock prices should fall to reflect that. That won't be a "collapse", exactly, but it will be a correction.
fullshark 3y ago
Basically the claim is a repeat of Jan 1 1966 to Jan 1 1982, advice is to buy short term tbills as well.

goopthink 3y ago

https://archive.ph/gLxWV https://archive.ph/gLxWV

pb7 3y ago

Pointless article. No one that calls stocks “expensive” is worth listening to.

avgDev 3y ago

Paywall alert.

avgDev 3y ago

Always be buying. Live a reasonable life. Ignore the doomers.

Kirby64 3y ago

I can’t even tell what the suggestion is for the article. Panic? Assume my money is going to become worthless? Buy some fancy fund that manages risk better (but, historically, does worse than the s&p)? Seems like this is yet another chicken little prediction that is going to be found to be inaccurate years later. The author doesn’t really give any evidence that this time is different. And, given that everyone cries this time is different, I’m extremely skeptical.

francisofascii 3y ago
The suggestion is to simply to lower expectations. People always expect their 401Ks to beat inflation over the long run. Author is saying you might see a lost decade where you gain very little.
- Kirby64 3y ago
  The 'lost decade' issues only have previously applied if you dump all your money in at a specific timeframe, then never contribute anything else. Or, alternatively, if you pull out a large amount of money after the downturn. Traditional 'set and forget' 401k funding would imply you continue to contribute throughout the period (i.e., dollar-cost-averaging). By putting money in during the downturn, those dollars earn outsized rewards when the market inevitably bounces back. It essentially cancels out the money lost.
- WkndTriathlete 3y ago
  Which is stupid. If I shouldn't expect returns on my investments to beat inflation why would I bother investing in equities? By that metric I should put all of my money in TIPS and be done with it.

Analemma_ 3y ago

Just another submarine story [0] for actively-managed portfolios. The WSJ publishes these on the regular, because the broad shift to index funds means a lot less free money for overpaid fund managers. Ignore it and move on. [0]: http://www.paulgraham.com/submarine.html http://www.paulgraham.com/submarine.html

soupfordummies 3y ago
Reminding me why I skim the comments first. You succinctly nailed it here.
- MR4D 3y ago
  Unfortunately it has nothing to do with actively-managed funds. Succinct, yes. Correct, no.
MR4D 3y ago
You clearly did not read the article and you also showed your ignorance of the market. The article talks about broad market issues, not index vs active. This year is shaping up to be historic. As in capital-H historic. Treasuries have never been down 3 years in a row since the 1700’s. [0] Finally, you can very easily create a 60/40 portfolio using index funds. SPY & AGG are 2 common ETFs used, while VFINX & VBMFX are two common index mutual funds used. [0] - https://markets.businessinsider.com/news/bonds/chart-of-the-day-us-treasurys-1787-longest-stretch-losses-2023-9 https://markets.businessinsider.com/news/bonds/chart-of-the-...
- Eridrus 3y ago
  The article does seem to be punching a straw man though. A 60/40 portfolio is basically only recommended for those approaching retirement who cannot stomach high volatility. Target date funds that are commonly used would put 30 year olds into a 90/10 portfolio.
  - MR4D 3y ago
    I'd wager that most retired Boomers have 60/40 (or even more conservative) allocations. I agree about the 30 years olds, but people aged 40+ have a higher ratio where they actually see the impacts of this.