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Is it unfair that if someone plants a tree, they get free apples for the rest of their life? It’s easy to see finance as just a game of numbers, but underlying

Is it unfair that if someone plants a tree, they get free apples for the rest of their life? It’s easy to see finance as just a game of numbers, but underlying it are real things that provide real future value.

spencerflem 2y ago
Is buying an index fund the same as planting a tree? The odd thing to me, that I still havent been able to wrap my head around, is that it's no work at all. It's money that comes to you because you had it, not because you did anything.
- tjohns 2y ago
  For the purposes of this analogy, yes. The "work" is losing access to your money. You're foregoing the ability to buy nice material things today, in exchange for investing in a business so that they can use your funds to do something productive with it instead. Real work does actually happen at other end of the exchange. On top of that, there's the risk that a business you invest in might fail, and you lose all of that money permanently. You earn a premium for accepting that risk. After 10+ years (market downturns historically can last up to a decade, so you need to be prepared not to access your funds for a long while in the worst case) you can start getting that money back. That's the fruit from the tree. The only thing that's different is that with an index fund is that you're investing in hundreds of companies, rather than individual ones. Which you should be doing anyway in order to mitigate the risk of any one company failing.
- triceratops 2y ago
  You (usually) have to work to earn the money in the first place.
lotsofpulp 2y ago
>but underlying it are real things that provide real future value. This is why spencerflem is correct, and why governments around the world are scrambling to figure out what to do about sub replacement rate total fertility rates and top heavy population histograms. You can have all the investments and assets and money in the world, but if there are insufficient hands to perform the services and deliver the goods you want (automation notwithstanding), then there is nothing real underlying those numbers on the brokerage statement. The political issue of a top heavy population is clear, the rent seekers, those who want income for doing nothing is directly at odds with the goals of the younger population, because the younger population knows they are going to get less.
jayd16 2y ago
Is it unfair if someone's ancestors bought land when others are forced to share crop?

spencerflem 2y ago

Is buying an index fund the same as planting a tree? The odd thing to me, that I still havent been able to wrap my head around, is that it's no work at all. It's money that comes to you because you had it, not because you did anything.

tjohns 2y ago
For the purposes of this analogy, yes. The "work" is losing access to your money. You're foregoing the ability to buy nice material things today, in exchange for investing in a business so that they can use your funds to do something productive with it instead. Real work does actually happen at other end of the exchange. On top of that, there's the risk that a business you invest in might fail, and you lose all of that money permanently. You earn a premium for accepting that risk. After 10+ years (market downturns historically can last up to a decade, so you need to be prepared not to access your funds for a long while in the worst case) you can start getting that money back. That's the fruit from the tree. The only thing that's different is that with an index fund is that you're investing in hundreds of companies, rather than individual ones. Which you should be doing anyway in order to mitigate the risk of any one company failing.
triceratops 2y ago
You (usually) have to work to earn the money in the first place.

lotsofpulp 2y ago

>but underlying it are real things that provide real future value. This is why spencerflem is correct, and why governments around the world are scrambling to figure out what to do about sub replacement rate total fertility rates and top heavy population histograms. You can have all the investments and assets and money in the world, but if there are insufficient hands to perform the services and deliver the goods you want (automation notwithstanding), then there is nothing real underlying those numbers on the brokerage statement. The political issue of a top heavy population is clear, the rent seekers, those who want income for doing nothing is directly at odds with the goals of the younger population, because the younger population knows they are going to get less.

jayd16 2y ago

Is it unfair if someone's ancestors bought land when others are forced to share crop?