8 ms·

My grandparents were children of the Depression and given their experience living through that they always considered the stock market to be gambling and thus n

My grandparents were children of the Depression and given their experience living through that they always considered the stock market to be gambling and thus never invested in the stock market. My parents absorbed that ethos and also never invested until they had to when they got a 401K (but they were well into their 50s)... then they liquidated their holdings as quickly as they could like they thought stocks were dirty, or something.

bluedino 1y ago
Even right now a lot of people retire and then liquidate their 401k I just don't get it. My father and father-in-law both did it.
- Retric 1y ago
  I agree it’s a terrible strategy on average, but Money has diminishing marginal utility. Having 1/10th as much money is far worse than having 10x as much is better. As such once people can lock in a reasonable retirement they often get really conservative.
  - no_wizard 1y ago
    This is why you might say, transition out of stocks being the majority of you portfolio to bonds. To completely cash out - as in, not be invested at all - isn't wise.
  - h2zizzle 1y ago
    This is why high progressive tax rates, let alone high marginal tax rates, are justifiable. The less you earn, the lower a percentage of your earnings you can afford to lose before having to make drastic lifestyle changes. However, relatively low on the absolute income range for Western countries, you reach a point where you could lose 90% of your income, live in a high-cost-of-living area, and still experience negligible change in your circumstances. Tax rates should be based on analyzing where that point is.
    - giantg2 1y ago
      Tax rates should also be based on what the public expenditure need is, not just maximum revenue.
      - Retric 1y ago
        That’s true up until the point of budget deficit.
      - h2zizzle 1y ago
        The redistributive effect of taxes is a feature, not a bug. Inequality distorts political and social dynamics. One of the functions of taxation is to make rich people less rich, and we shouldn't run from that.
        giantg2 1y ago
        It doesn't seem like taxes are a cure for inequality. At least I don't see any examples of it.
        Retric 1y ago
        The goal is to mitigate inequality not eliminate it. Someone making 10x as much as the average person has minimal impact, 100x isn’t a big deal, but you keep adding zeros especially with passive income and there’s significant repercussions. US inequality increased significantly after the top tax rates, long term capital gains, etc declined significantly. There’s no question those are related, it was explicitly the intended effect.
        giantg2 1y ago
        It doesn't seem to have the intended effects in other countries. Income inequality has gone up in other places such as Europe too. The real driver seems to be the modernization of jobs with the job types moving from secondary to tertiary types, especially knowledge work. The main reason the wealth is uneven here more so than in other countries is because of the big tech companies that we have and others don't. All those unrealized gains from company ownership are the main driver of the extra 20-30% the top people have vs the top people of other countries.
- danans 1y ago
  Did they need the money for life expenses?
  - toast0 1y ago
    Spending from your 401k is different than liquidating it (until the end... if you've got a month or a year of funds in the 401k and you take it all out, sure that's liquidated, but if it took you 10+ years to use it all up, it's not liquidating in casual conversation)
    - danans 1y ago
      > Spending from your 401k is different than liquidating it Define "liquidating". Do you mean moving all investments in the 401k to cash and equivalents? That seems sensible if you don't want any more market-risk exposure going forward. Withdrawing everything at once seems ill-advised because you'll get hit with high taxes unless your 401k balance is really small.
      - toast0 1y ago
        I would assume this means take a full withdrawal of the 401k and dump it into a checking account. > Even right now a lot of people retire and then liquidate their 401k
JoshTriplett 1y ago
If you needed the money immediately, that's an understandable reaction to the Depression. If you did dollar-cost averaging through the Depression, and didn't have any immediate need to withdraw, you'd have come out of it doing pretty well.
- bittercynic 1y ago
  Many people aren't able to dollar-cost average through the times it would be most beneficial. There's a strong correlation between stocks getting cheaper and being temporarily unable to earn enough money to continue your usual investing.
  - bregma 1y ago
    How to become a millionaire: 1. Start with $10,000,000 2. Invest right before an economic downturn.
coldpie 1y ago
> always considered the stock market to be gambling I also feel this way, and all of the terminology and marketing around the stock market definitely reinforces this belief. I have my retirement put into one of those diversified retirement mutual fund things which I completely ignore, but other than that, I don't mess around with stock market stuff at all. The up & down junk, trying to decide when to buy or sell, all that stuff makes me feel terrible. Same feeling as going to a casino. Not my kind of fun. I don't want anything to do with it.
- psunavy03 1y ago
  This mentality is why so many people stay poor.
  - UncleOxidant 1y ago
    How would you convince people that they aren't gambling when investing in stocks? It's easy to say that this fear will keep them poor, but how would you alleviate their fears? There certainly do seem to be features of the current market that seem quite akin to gambling. Are current price/earnings ratios warranted? What about market manipulation by tweets that we see from the current administration? It seems that insiders that are privy to certain information will do much better than your average investor. At some point, people don't want to be suckers and decide to no longer participate.
    - bombcar 1y ago
      The best argument I've been able to find is when they're offered a company match in their 401(k) or similar. Basically - total market index funds have very low cost, and the entire market has very rarely gone down 50%, and eventually recovered. Since your company is matching you 50% (or 100%) on your contributions, if the market goes down you're losing "house money/free money" you wouldn't have otherwise. Then after years and years they just get used to it.
    - psunavy03 1y ago
      Because gambling is ultimately just betting on a random number generator that's actively weighted against you. Investing is betting on the competence of an executive team to run a business. One of these, you have no control over. The other one is a win-win situation. If the business does well, you do well. It's like saying that because your sibling or friend ended up in a shitty relationship that you need to be celibate for your entire life . . . no, you don't. Just because Company A blew up doesn't mean Company B will. And to be clear, I'm not a fan of stock picking as a core investment strategy, but I'm talking about dollar-cost averaging in equities (low-cost index funds) as opposed to stashing cash under the bed. Long-term, betting on the economy is free money.
BurningFrog 1y ago
It is gambling, but the kind where the odds are in your favor!
swatcoder 1y ago
Market/fund investment for us normal folk is so passive and disempowered that it really does amount to gambling. You put some share of your hard-earned wages in and hope for the best. It's been shown to be a mostly rewarding strategy over the last century of so, averaged out at least, and so of course it's not really a foolish bet for most folks, but it's not the only way to secure one's financial health and isn't the ideal one for everybody. Scrappy hustlers, skilled trade workers, and (SMB-scale) entrepreneurs in particular can often see a better return by investing in themselves and in ventures in their own community, where things are not so passive. Likewise, people with modest dreams and a preference for stability often might prefer securing a paid off house, car, etc before throwing too much money into the casino -- even on good bets. And others with strong and healthy family bonds benefit most by prioritizing enrichment and opportunity for family members who can be trusted to return the favor in less flush/capable times. etc Many young people have only really been exposed to the idea of market investment as a retirement strategy, and its a good one for many, but there are a lot of roads to staying financially healthy through late life.
- solatic 1y ago
  > entrepreneurs in particular can often see a better return by investing in themselves and in ventures in their own community, where things are not so passive. You don't understand the power of diversification in portfolios. Yes, there are plenty of individual ventures that will return more than an index fund. But individual ventures are fundamentally volatile. They are volatile because human beings are not machines. People burn brightly and then burn out. People push hard and then fall sick. Cultures and institutions and trust are painstakingly built, and then wiped away in an instant by ideologues. As an individual investor, you have your labor and your savings. You cannot productively diversify your labor, but you can diversify your savings.
  - dinkblam 1y ago
    yes, diversification is the basis for sound investing. yet, if you look at all people and companies that have grown extremely rich extremely quickly, there is one very common factor: they didn't take money out of the company, but reinvested every single penny. thats the way you can outgrow your competition which doesn't do the same thing. failing businesses are often those that paid too much to their owners.
wiredfool 1y ago
My Grandfather was young during the Great Depression, and his relationship with money was much different than I can imagine. His idea of diversified investments was cash in several different banks. He just didn't spend money if he didn't have to -- to the point of not wanting to get a cordless phone (which could be carried in his walker) because he had a perfectly good wired one in the phone nook. When he died in his 90s, his car was the one he bought to visit my parents when I was born.
giantg2 1y ago
They aren't wrong. It kind of is gambling, depending on how you do it. Even if you do it the smart way there's still some small risk. That's why the fine print on any perspectus says you could lose all of your investment.

bluedino 1y ago

Even right now a lot of people retire and then liquidate their 401k I just don't get it. My father and father-in-law both did it.

Retric 1y ago
I agree it’s a terrible strategy on average, but Money has diminishing marginal utility. Having 1/10th as much money is far worse than having 10x as much is better. As such once people can lock in a reasonable retirement they often get really conservative.
- no_wizard 1y ago
  This is why you might say, transition out of stocks being the majority of you portfolio to bonds. To completely cash out - as in, not be invested at all - isn't wise.
- h2zizzle 1y ago
  This is why high progressive tax rates, let alone high marginal tax rates, are justifiable. The less you earn, the lower a percentage of your earnings you can afford to lose before having to make drastic lifestyle changes. However, relatively low on the absolute income range for Western countries, you reach a point where you could lose 90% of your income, live in a high-cost-of-living area, and still experience negligible change in your circumstances. Tax rates should be based on analyzing where that point is.
  - giantg2 1y ago
    Tax rates should also be based on what the public expenditure need is, not just maximum revenue.
    - Retric 1y ago
      That’s true up until the point of budget deficit.
    - h2zizzle 1y ago
      The redistributive effect of taxes is a feature, not a bug. Inequality distorts political and social dynamics. One of the functions of taxation is to make rich people less rich, and we shouldn't run from that.
      - giantg2 1y ago
        It doesn't seem like taxes are a cure for inequality. At least I don't see any examples of it.
        Retric 1y ago
        The goal is to mitigate inequality not eliminate it. Someone making 10x as much as the average person has minimal impact, 100x isn’t a big deal, but you keep adding zeros especially with passive income and there’s significant repercussions. US inequality increased significantly after the top tax rates, long term capital gains, etc declined significantly. There’s no question those are related, it was explicitly the intended effect.
        giantg2 1y ago
        It doesn't seem to have the intended effects in other countries. Income inequality has gone up in other places such as Europe too. The real driver seems to be the modernization of jobs with the job types moving from secondary to tertiary types, especially knowledge work. The main reason the wealth is uneven here more so than in other countries is because of the big tech companies that we have and others don't. All those unrealized gains from company ownership are the main driver of the extra 20-30% the top people have vs the top people of other countries.
danans 1y ago
Did they need the money for life expenses?
- toast0 1y ago
  Spending from your 401k is different than liquidating it (until the end... if you've got a month or a year of funds in the 401k and you take it all out, sure that's liquidated, but if it took you 10+ years to use it all up, it's not liquidating in casual conversation)
  - danans 1y ago
    > Spending from your 401k is different than liquidating it Define "liquidating". Do you mean moving all investments in the 401k to cash and equivalents? That seems sensible if you don't want any more market-risk exposure going forward. Withdrawing everything at once seems ill-advised because you'll get hit with high taxes unless your 401k balance is really small.
    - toast0 1y ago
      I would assume this means take a full withdrawal of the 401k and dump it into a checking account. > Even right now a lot of people retire and then liquidate their 401k

JoshTriplett 1y ago

If you needed the money immediately, that's an understandable reaction to the Depression. If you did dollar-cost averaging through the Depression, and didn't have any immediate need to withdraw, you'd have come out of it doing pretty well.

bittercynic 1y ago
Many people aren't able to dollar-cost average through the times it would be most beneficial. There's a strong correlation between stocks getting cheaper and being temporarily unable to earn enough money to continue your usual investing.
- bregma 1y ago
  How to become a millionaire: 1. Start with $10,000,000 2. Invest right before an economic downturn.

coldpie 1y ago

> always considered the stock market to be gambling I also feel this way, and all of the terminology and marketing around the stock market definitely reinforces this belief. I have my retirement put into one of those diversified retirement mutual fund things which I completely ignore, but other than that, I don't mess around with stock market stuff at all. The up & down junk, trying to decide when to buy or sell, all that stuff makes me feel terrible. Same feeling as going to a casino. Not my kind of fun. I don't want anything to do with it.

psunavy03 1y ago
This mentality is why so many people stay poor.
- UncleOxidant 1y ago
  How would you convince people that they aren't gambling when investing in stocks? It's easy to say that this fear will keep them poor, but how would you alleviate their fears? There certainly do seem to be features of the current market that seem quite akin to gambling. Are current price/earnings ratios warranted? What about market manipulation by tweets that we see from the current administration? It seems that insiders that are privy to certain information will do much better than your average investor. At some point, people don't want to be suckers and decide to no longer participate.
  - bombcar 1y ago
    The best argument I've been able to find is when they're offered a company match in their 401(k) or similar. Basically - total market index funds have very low cost, and the entire market has very rarely gone down 50%, and eventually recovered. Since your company is matching you 50% (or 100%) on your contributions, if the market goes down you're losing "house money/free money" you wouldn't have otherwise. Then after years and years they just get used to it.
  - psunavy03 1y ago
    Because gambling is ultimately just betting on a random number generator that's actively weighted against you. Investing is betting on the competence of an executive team to run a business. One of these, you have no control over. The other one is a win-win situation. If the business does well, you do well. It's like saying that because your sibling or friend ended up in a shitty relationship that you need to be celibate for your entire life . . . no, you don't. Just because Company A blew up doesn't mean Company B will. And to be clear, I'm not a fan of stock picking as a core investment strategy, but I'm talking about dollar-cost averaging in equities (low-cost index funds) as opposed to stashing cash under the bed. Long-term, betting on the economy is free money.

BurningFrog 1y ago

It is gambling, but the kind where the odds are in your favor!

swatcoder 1y ago

Market/fund investment for us normal folk is so passive and disempowered that it really does amount to gambling. You put some share of your hard-earned wages in and hope for the best. It's been shown to be a mostly rewarding strategy over the last century of so, averaged out at least, and so of course it's not really a foolish bet for most folks, but it's not the only way to secure one's financial health and isn't the ideal one for everybody. Scrappy hustlers, skilled trade workers, and (SMB-scale) entrepreneurs in particular can often see a better return by investing in themselves and in ventures in their own community, where things are not so passive. Likewise, people with modest dreams and a preference for stability often might prefer securing a paid off house, car, etc before throwing too much money into the casino -- even on good bets. And others with strong and healthy family bonds benefit most by prioritizing enrichment and opportunity for family members who can be trusted to return the favor in less flush/capable times. etc Many young people have only really been exposed to the idea of market investment as a retirement strategy, and its a good one for many, but there are a lot of roads to staying financially healthy through late life.

solatic 1y ago
> entrepreneurs in particular can often see a better return by investing in themselves and in ventures in their own community, where things are not so passive. You don't understand the power of diversification in portfolios. Yes, there are plenty of individual ventures that will return more than an index fund. But individual ventures are fundamentally volatile. They are volatile because human beings are not machines. People burn brightly and then burn out. People push hard and then fall sick. Cultures and institutions and trust are painstakingly built, and then wiped away in an instant by ideologues. As an individual investor, you have your labor and your savings. You cannot productively diversify your labor, but you can diversify your savings.
- dinkblam 1y ago
  yes, diversification is the basis for sound investing. yet, if you look at all people and companies that have grown extremely rich extremely quickly, there is one very common factor: they didn't take money out of the company, but reinvested every single penny. thats the way you can outgrow your competition which doesn't do the same thing. failing businesses are often those that paid too much to their owners.

wiredfool 1y ago

My Grandfather was young during the Great Depression, and his relationship with money was much different than I can imagine. His idea of diversified investments was cash in several different banks. He just didn't spend money if he didn't have to -- to the point of not wanting to get a cordless phone (which could be carried in his walker) because he had a perfectly good wired one in the phone nook. When he died in his 90s, his car was the one he bought to visit my parents when I was born.

giantg2 1y ago

They aren't wrong. It kind of is gambling, depending on how you do it. Even if you do it the smart way there's still some small risk. That's why the fine print on any perspectus says you could lose all of your investment.