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People believe in index funds because of multi-decades of globalization and (in general) cheaper money, which has been less and less true since 10 years ago. E

People believe in index funds because of multi-decades of globalization and (in general) cheaper money, which has been less and less true since 10 years ago. Even if you bought some during the 90s, you still need a tremendous belief in yourself and the market to hold them for 30 years. It's not that easy. I know many people put the fund into a retirement fund, but 1) is every body consistently doing that for 30 years? and 2) what if the market sucks when you retire? I still think that's not a bad idea, maybe one of the best for lay persons.

philsnow 2y ago
> People believe in index funds because of multi-decades of globalization At some point we're going to reach the heat-death of the economy and we'll be "completely globalized", I guess?
lotsofpulp 2y ago
> what if the market sucks when you retire? You don’t have to liquidate all of your investments on your retirement date. If the market sucks so much for 5+ years and your government can’t get it pumped back up, you probably have a bigger problem than your retirement savings, such as food and energy and security shortages. It would be bold to bet against a government not constantly decreasing the purchasing power of its currency to prop up asset prices, especially with declining proportions of young people. The political apparatus will want to maintain old people’s position at the top of the social hierarchy, and if their purchasing power isn’t maintained so they can keep buying the fruits of others’ labor, it means the country is dissolving.
- KK7NIL 2y ago
  > If the market sucks so much for 5+ years and your government can’t get it pumped back up, you probably have a bigger problem than your retirement savings, such as food and energy and security shortages. The S&P500 was flat or negative from 2000 to 2012. And this isn't unusual. > It would be bold to bet against a government not constantly decreasing the purchasing power of its currency to prop up asset prices, especially with declining proportions of young people. The political apparatus will want to maintain old people’s position at the top of the social hierarchy, and if their purchasing power isn’t maintained so they can keep buying the fruits of others’ labor, it means the country is dissolving. How does the government decreasing the purchasing power help old people? This is quite the opposite, retirees survive off of a fixed income (mainly from welfare and pensions but also fixed income investments since they shouldn't risk the stock market) and are the most hurt by inflation.
  - lotsofpulp 2y ago
    > The S&P500 was flat or negative from 2000 to 2012. And this isn't unusual. At its worst, 1999 to 2009, SP500 total annual return was only -0.2%, per dqdyj. Thats really good considering the upside (which has since been realized), and it shows that the government is willing to pull out all the stops if the market is down just -0.2%. > How does the government decreasing the purchasing power help old people? Old people are likelier to have assets and/or fixed income from assets (such as defined benefit pension funds). The government can also increase Social Security benefits quicker than wages in the market. The government also can maintain current benefits and reduce them for younger people by increasing the retirement age and adjusting the “bend points” in the benefit formula. Of course, the poorest old people won’t benefit as much, but there’s a solid contingent of old people who do have at least real estate in their home, if not investments in the broader market that are very politically active. > mainly from welfare and pensions but also fixed income investments since they shouldn't risk the stock market) and are the most hurt by inflation. They shouldn’t be in fixed income for expenses needed beyond 10 years. I’d even be so bullish as to say 5 years. The demographic changes of the population pyramid flattening and turning down just started hitting economies in the 2000s. I don’t see any other way out for governments, so your goal is to tread water, you at least want to be invested in whatever the politicians are going to backstop (which is evidently not USD or fixed income, but rather equities).
    - KK7NIL 2y ago
      Your average retiree should not hold stocks as they usually can't survive a 10+ year drawdown (which, as I just showed you, happens a lot more than people think, even in the survivor biased S&P500 example). This is why target retirement funds transition to safer fixed income assets as the target date approaches. You're also forgetting that inflation doesn't just affect assets, it also affects living necessities (and that's how it's defined in fact), so it's unclear how this is a net gain for asset holders. TL;DR: Inflation doesn't magically make asset holders richer and retirees would be some of the worst affected people anyways. You're wrong on both fronts and your whole idea that the stock market is politically propped up by old people doesn't pass the sniff test.
- eru 2y ago
  > It would be bold to bet against a government not constantly decreasing the purchasing power of its currency to prop up asset prices, [...] That would only prop up assets prices in nominal terms, but doesn't have much to do with your retirement planning. (Unless your only alternative to index funds is sticking local money under your mattress; and you can't even think of sticking gold coins or foreign currencies under your mattress, or buy real estate etc.)
  - lotsofpulp 2y ago
    Correct, but that accomplishes the goal of having a hidden tax (although more people are aware of it now) on earning income (since labor price increases lag asset prices increases). Just look at who the biggest winners pre and post Covid are. If you owned assets pre Covid, you are golden. The more you owned, the more guilded you became. Pretty much all government policy I see starts with the basis of how do we ensure existing asset owners stay ahead of the rest. It’s a mechanism to ensure the social order/hierarchy persists (which is a combination of wealthier/older/soon to be older/beneficiaries of older at the top and labor sellers/young/poor at the bottom). Because that is what is politically possible (until a catalyst prompts revolution). Reducing purchasing power of currency is one way, but another is also replacing goods and services in defined benefits with inferior goods and services. For example, Medicare/Medicaid used to provide for seeing a doctor, whereas now and in the future, you are likely to have to see a Nurse Practitioner or Physician Assistant, unless you cough up more money for concierge care or direct primary care.!
    - atlasmd 2y ago
      ideally, direct care is saving more than it costs - $50 for unlimited visits, free telemedicine, no copays, all office procedures free, wholesale meds and labs for up to 95% less. Then you can lower your ins premiums by 30-60%.
      - eru 2y ago
        Why would you abandon co-pays? They are a key way to align incentives between payers and patients.
ForHackernews 2y ago
I don't think you need tremendous belief. What else are you going to do with your money? I can't think of any other proposition that compares with investing in the US economy. https://apollowealth.com/one-chart-120-years-of-the-dow-jones-industrial-average/ https://apollowealth.com/one-chart-120-years-of-the-dow-jone...
williamdclt 2y ago
> what if the market sucks when you retire? if it's been good (on average) for 30y but then sucks when you're about to retire, you still probably accumulated a lot of money from these 30y of interest
- hunter2_ 2y ago
  I wonder what the longest duration has been, in the history of let's just say S&P500 or similar, between [a low so bad that people would say "sucks that I'm retiring now"] and [the point in time prior to that, where it had the same exact value but as an all-time high]. A decade maybe? So basically one would conclude that they could've begun taking withdrawals a decade ago with the same size of retirement account (well, except for all the contributions throughout that decade, and except for the extra decade of remaining life expectancy, and prevailing wisdom to reduce risk as retirement approaches, each extremely significant, but the point remains to some extent).
  - JoshTriplett 2y ago
    There was a study (https://en.wikipedia.org/wiki/Trinity_study https://en.wikipedia.org/wiki/Trinity_study) showing that you could count on a 4% withdrawal rate for retirement income over any 30-year retirement period, including periods spanning the Great Depression and other market lows. Most of the time you can count on more; that was the lowest across the entire study. And with compounding, the difference between "30-year retirement period" and "indefinite retirement period" is not much; withdraw a bit less, or be able to adapt to prevailing conditions, and your retirement portfolio will last indefinitely.
  - eru 2y ago
    Are you talking inflation adjusted or nominal? Total returns?
    - hunter2_ 2y ago
      I guess nominal, because not having kept up with inflation would be the main source of it sucking badly. I think of it like this: You lose to inflation badly with uninvested cash. You get close to keeping up with inflation with near zero risk vehicles (CD or high yield savings account). You hope to at least keep up with inflation with medium-low risk vehicles (S&P500 or similar funds). You roll the decide after that (leverage, timing, stock picking, etc.).

philsnow 2y ago

> People believe in index funds because of multi-decades of globalization At some point we're going to reach the heat-death of the economy and we'll be "completely globalized", I guess?

lotsofpulp 2y ago

> what if the market sucks when you retire? You don’t have to liquidate all of your investments on your retirement date. If the market sucks so much for 5+ years and your government can’t get it pumped back up, you probably have a bigger problem than your retirement savings, such as food and energy and security shortages. It would be bold to bet against a government not constantly decreasing the purchasing power of its currency to prop up asset prices, especially with declining proportions of young people. The political apparatus will want to maintain old people’s position at the top of the social hierarchy, and if their purchasing power isn’t maintained so they can keep buying the fruits of others’ labor, it means the country is dissolving.

KK7NIL 2y ago
> If the market sucks so much for 5+ years and your government can’t get it pumped back up, you probably have a bigger problem than your retirement savings, such as food and energy and security shortages. The S&P500 was flat or negative from 2000 to 2012. And this isn't unusual. > It would be bold to bet against a government not constantly decreasing the purchasing power of its currency to prop up asset prices, especially with declining proportions of young people. The political apparatus will want to maintain old people’s position at the top of the social hierarchy, and if their purchasing power isn’t maintained so they can keep buying the fruits of others’ labor, it means the country is dissolving. How does the government decreasing the purchasing power help old people? This is quite the opposite, retirees survive off of a fixed income (mainly from welfare and pensions but also fixed income investments since they shouldn't risk the stock market) and are the most hurt by inflation.
- lotsofpulp 2y ago
  > The S&P500 was flat or negative from 2000 to 2012. And this isn't unusual. At its worst, 1999 to 2009, SP500 total annual return was only -0.2%, per dqdyj. Thats really good considering the upside (which has since been realized), and it shows that the government is willing to pull out all the stops if the market is down just -0.2%. > How does the government decreasing the purchasing power help old people? Old people are likelier to have assets and/or fixed income from assets (such as defined benefit pension funds). The government can also increase Social Security benefits quicker than wages in the market. The government also can maintain current benefits and reduce them for younger people by increasing the retirement age and adjusting the “bend points” in the benefit formula. Of course, the poorest old people won’t benefit as much, but there’s a solid contingent of old people who do have at least real estate in their home, if not investments in the broader market that are very politically active. > mainly from welfare and pensions but also fixed income investments since they shouldn't risk the stock market) and are the most hurt by inflation. They shouldn’t be in fixed income for expenses needed beyond 10 years. I’d even be so bullish as to say 5 years. The demographic changes of the population pyramid flattening and turning down just started hitting economies in the 2000s. I don’t see any other way out for governments, so your goal is to tread water, you at least want to be invested in whatever the politicians are going to backstop (which is evidently not USD or fixed income, but rather equities).
  - KK7NIL 2y ago
    Your average retiree should not hold stocks as they usually can't survive a 10+ year drawdown (which, as I just showed you, happens a lot more than people think, even in the survivor biased S&P500 example). This is why target retirement funds transition to safer fixed income assets as the target date approaches. You're also forgetting that inflation doesn't just affect assets, it also affects living necessities (and that's how it's defined in fact), so it's unclear how this is a net gain for asset holders. TL;DR: Inflation doesn't magically make asset holders richer and retirees would be some of the worst affected people anyways. You're wrong on both fronts and your whole idea that the stock market is politically propped up by old people doesn't pass the sniff test.
eru 2y ago
> It would be bold to bet against a government not constantly decreasing the purchasing power of its currency to prop up asset prices, [...] That would only prop up assets prices in nominal terms, but doesn't have much to do with your retirement planning. (Unless your only alternative to index funds is sticking local money under your mattress; and you can't even think of sticking gold coins or foreign currencies under your mattress, or buy real estate etc.)
- lotsofpulp 2y ago
  Correct, but that accomplishes the goal of having a hidden tax (although more people are aware of it now) on earning income (since labor price increases lag asset prices increases). Just look at who the biggest winners pre and post Covid are. If you owned assets pre Covid, you are golden. The more you owned, the more guilded you became. Pretty much all government policy I see starts with the basis of how do we ensure existing asset owners stay ahead of the rest. It’s a mechanism to ensure the social order/hierarchy persists (which is a combination of wealthier/older/soon to be older/beneficiaries of older at the top and labor sellers/young/poor at the bottom). Because that is what is politically possible (until a catalyst prompts revolution). Reducing purchasing power of currency is one way, but another is also replacing goods and services in defined benefits with inferior goods and services. For example, Medicare/Medicaid used to provide for seeing a doctor, whereas now and in the future, you are likely to have to see a Nurse Practitioner or Physician Assistant, unless you cough up more money for concierge care or direct primary care.!
  - atlasmd 2y ago
    ideally, direct care is saving more than it costs - $50 for unlimited visits, free telemedicine, no copays, all office procedures free, wholesale meds and labs for up to 95% less. Then you can lower your ins premiums by 30-60%.
    - eru 2y ago
      Why would you abandon co-pays? They are a key way to align incentives between payers and patients.

ForHackernews 2y ago

I don't think you need tremendous belief. What else are you going to do with your money? I can't think of any other proposition that compares with investing in the US economy. https://apollowealth.com/one-chart-120-years-of-the-dow-jones-industrial-average/ https://apollowealth.com/one-chart-120-years-of-the-dow-jone...

williamdclt 2y ago

> what if the market sucks when you retire? if it's been good (on average) for 30y but then sucks when you're about to retire, you still probably accumulated a lot of money from these 30y of interest

hunter2_ 2y ago
I wonder what the longest duration has been, in the history of let's just say S&P500 or similar, between [a low so bad that people would say "sucks that I'm retiring now"] and [the point in time prior to that, where it had the same exact value but as an all-time high]. A decade maybe? So basically one would conclude that they could've begun taking withdrawals a decade ago with the same size of retirement account (well, except for all the contributions throughout that decade, and except for the extra decade of remaining life expectancy, and prevailing wisdom to reduce risk as retirement approaches, each extremely significant, but the point remains to some extent).
- JoshTriplett 2y ago
  There was a study (https://en.wikipedia.org/wiki/Trinity_study https://en.wikipedia.org/wiki/Trinity_study) showing that you could count on a 4% withdrawal rate for retirement income over any 30-year retirement period, including periods spanning the Great Depression and other market lows. Most of the time you can count on more; that was the lowest across the entire study. And with compounding, the difference between "30-year retirement period" and "indefinite retirement period" is not much; withdraw a bit less, or be able to adapt to prevailing conditions, and your retirement portfolio will last indefinitely.
- eru 2y ago
  Are you talking inflation adjusted or nominal? Total returns?
  - hunter2_ 2y ago
    I guess nominal, because not having kept up with inflation would be the main source of it sucking badly. I think of it like this: You lose to inflation badly with uninvested cash. You get close to keeping up with inflation with near zero risk vehicles (CD or high yield savings account). You hope to at least keep up with inflation with medium-low risk vehicles (S&P500 or similar funds). You roll the decide after that (leverage, timing, stock picking, etc.).