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One thing I feel like I have learned from Reddit/ TikTok is the average person is terrible with money. Some VCs argue we should lower the bar to investing to d

One thing I feel like I have learned from Reddit/ TikTok is the average person is terrible with money. Some VCs argue we should lower the bar to investing to democrative it. I am all for democracy, but maybe we would be better served if the average person didn't try to be a tycoon.

SkipperCat 2y ago
One of workplace tragedy in America is how we moved from professionally managed pensions to individual 401k retirement plans. Most folks have no business deciding asset allocation, managing risk, etc.
- virtue3 2y ago
  good thing the investment firms kept the fees the same tho :)
- pizzalife 2y ago
  Most 401ks will just default to a target date fund, which is usually a total market stock ETF + bonds. That will certainly perform better than most actively managed pension funds.
  - paulryanrogers 2y ago
    But worse than the defined benefit pensions that 401k's were leveraged to replace.
    - throwaheyy 2y ago
      Defined benefit pensions are unsustainable Ponzi schemes though. Attempting to guarantee market returns is silly.
      - paulryanrogers 2y ago
        Yeah, I wish we'd at least have tried scaling the benefits based on company's ability to pay. Or if they were guaranteed yet more realistic. Ultimately maybe only something market-based is realistic. Yet if we must do that then I'd prefer gov workers be forced to use the same system. Also 401Ks being born out of a carve out for executives feels like an awkward fit for regular employees. Perhaps a unified system not tied to employment could be the best of both worlds.
- tbrownaw 2y ago
  Pensions have extra counterparty risk. I've also heard things that sound like they tend to have sharp eligibility cutoffs or amount calculations. There aren't issues with a 401k if I keep changing employers every few years. And you can't play stupid games with taking lots of overtime for your final year to boost retirement benefits beyond what they "should" be.
paulpauper 2y ago
Two types of people: those who have money and those who have yet to be separated from it.
- paulryanrogers 2y ago
  Aren't those one and the same group?
Terr_ 2y ago
I think the tricky thing is the distinction between: (A) Democratization: Let everyone participate as individuals on a freshly equalized playing field that was previously so slanted they couldn't even try. (B) Democratization: Encourage lots of small disorganized weaker players into the market as unwitting prey for existing interests that have already established themselves with regulatory or competitive edges that they retain/maintain indefinitely.
- Terr_ 2y ago
  P.S.: A closely-related rant over another situation involving market-access and devil-in-the-details: Various attempts to "privatize social security" often with the pitch of "giving individuals more control." In this case I'm not focused on whether individuals can act wisely, but rather that such plans often means replacing an insurance policy with an investment account. Those two kinds of financial instruments have extremely different features, benefits, and risks! So even if believe that's a great idea, be be suspicious of anybody who seems to be trying to hide that aspect of their plan from the public, since it means they're trying to get voters to make an uninformed choice.
  - greentxt 2y ago
    Well, if the privatized version doesn't allow other people to take my money away from me at the point of a gun and give it to other people, using the state's proverbial "monopoly on violence" it doesnt seem like a very fair comparison. Apples and oranges. Maybe that was your implicit point?
    - Terr_ 2y ago
      > Well, if the privatized version doesn't [risk loss because of] the point of a gun Except it does. A soldier with a gun in your face can take your insurance payout just as easily as they can take your bank balance. With respect to a kleptocracy, neither option protects you. > take my money away from me Ah, this is the place where you've confused an apple for an orange: The premiums collected for "destitute in a ditch" insurance is not "your money", because that's not how insurance works. Similarly if you buy "house burns down" insurance and your house is fine until the day you sell it, then you get zero dollars back from the insurance company and nobody blinks an eye. Your payout is potential, conditional, and generally non-transferable, and that's normal, because an insurance policy is not an investment account. There was never a discrete "your money" pile sitting around in the insurance-company vault waiting for you to reclaim it. (Well, aside from in the minds of criminals plotting insurance fraud.)
pants2 2y ago
As it turns out, the accredited investor rule (>$1M liquid assets) isn't to filter for savvy investors, it's to make sure you can still land on your feet after your investment disappears.
- slavboj 2y ago
  Professionals holding a Series 7 etc count as accredited investors, even if they live in a cardboard box.

SkipperCat 2y ago

One of workplace tragedy in America is how we moved from professionally managed pensions to individual 401k retirement plans. Most folks have no business deciding asset allocation, managing risk, etc.

virtue3 2y ago
good thing the investment firms kept the fees the same tho :)
pizzalife 2y ago
Most 401ks will just default to a target date fund, which is usually a total market stock ETF + bonds. That will certainly perform better than most actively managed pension funds.
- paulryanrogers 2y ago
  But worse than the defined benefit pensions that 401k's were leveraged to replace.
  - throwaheyy 2y ago
    Defined benefit pensions are unsustainable Ponzi schemes though. Attempting to guarantee market returns is silly.
    - paulryanrogers 2y ago
      Yeah, I wish we'd at least have tried scaling the benefits based on company's ability to pay. Or if they were guaranteed yet more realistic. Ultimately maybe only something market-based is realistic. Yet if we must do that then I'd prefer gov workers be forced to use the same system. Also 401Ks being born out of a carve out for executives feels like an awkward fit for regular employees. Perhaps a unified system not tied to employment could be the best of both worlds.
tbrownaw 2y ago
Pensions have extra counterparty risk. I've also heard things that sound like they tend to have sharp eligibility cutoffs or amount calculations. There aren't issues with a 401k if I keep changing employers every few years. And you can't play stupid games with taking lots of overtime for your final year to boost retirement benefits beyond what they "should" be.

paulpauper 2y ago

Two types of people: those who have money and those who have yet to be separated from it.

paulryanrogers 2y ago
Aren't those one and the same group?

Terr_ 2y ago

I think the tricky thing is the distinction between: (A) Democratization: Let everyone participate as individuals on a freshly equalized playing field that was previously so slanted they couldn't even try. (B) Democratization: Encourage lots of small disorganized weaker players into the market as unwitting prey for existing interests that have already established themselves with regulatory or competitive edges that they retain/maintain indefinitely.

Terr_ 2y ago
P.S.: A closely-related rant over another situation involving market-access and devil-in-the-details: Various attempts to "privatize social security" often with the pitch of "giving individuals more control." In this case I'm not focused on whether individuals can act wisely, but rather that such plans often means replacing an insurance policy with an investment account. Those two kinds of financial instruments have extremely different features, benefits, and risks! So even if believe that's a great idea, be be suspicious of anybody who seems to be trying to hide that aspect of their plan from the public, since it means they're trying to get voters to make an uninformed choice.
- greentxt 2y ago
  Well, if the privatized version doesn't allow other people to take my money away from me at the point of a gun and give it to other people, using the state's proverbial "monopoly on violence" it doesnt seem like a very fair comparison. Apples and oranges. Maybe that was your implicit point?
  - Terr_ 2y ago
    > Well, if the privatized version doesn't [risk loss because of] the point of a gun Except it does. A soldier with a gun in your face can take your insurance payout just as easily as they can take your bank balance. With respect to a kleptocracy, neither option protects you. > take my money away from me Ah, this is the place where you've confused an apple for an orange: The premiums collected for "destitute in a ditch" insurance is not "your money", because that's not how insurance works. Similarly if you buy "house burns down" insurance and your house is fine until the day you sell it, then you get zero dollars back from the insurance company and nobody blinks an eye. Your payout is potential, conditional, and generally non-transferable, and that's normal, because an insurance policy is not an investment account. There was never a discrete "your money" pile sitting around in the insurance-company vault waiting for you to reclaim it. (Well, aside from in the minds of criminals plotting insurance fraud.)

pants2 2y ago

As it turns out, the accredited investor rule (>$1M liquid assets) isn't to filter for savvy investors, it's to make sure you can still land on your feet after your investment disappears.

slavboj 2y ago
Professionals holding a Series 7 etc count as accredited investors, even if they live in a cardboard box.