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> wages - however high - are not a path to wealth and security. High wages provide the discretionary income required to invest though. So I'd say, they're not

> wages - however high - are not a path to wealth and security. High wages provide the discretionary income required to invest though. So I'd say, they're not the goal, but if the word path is to be used, I'd say they are part of the path. As far as owning things...investments specifically (not two motorcycles and a hummer), the usual advice is a well balanced portfolio. Could be equities, maybe some real estate, maybe even some crypto, all at different ratios depending on your risk profile. My concern is that we are in a unique time period where all of that is coming to an end and there will be no wealth appreciation even for disciplined investors.

jopsen 1y ago
> My concern is that we are in a unique time period where all of that is coming to an end and there will be no wealth appreciation even for disciplined investors. Everyone always fears the future when their portfolio is down. The best hedge is to also "invest" in something that has value to you. Like bricks / house.
- ghaff 1y ago
  Some conservative investments at the moment? Especially with some known outflows coming up? Sure. But that doesn't imply giving up on investing.
  - Enginerrrd 1y ago
    No, of course not but I think you should respond by increasing your savings rate beyond historically safe targets and diversifying even more aggressively.
    - ghaff 1y ago
      100% agree. Part of it is age, and part of it is current situation and needs, but I've definitely dialed back on aggressive investments into safe harbors.
- Enginerrrd 1y ago
  I'm not the person you're replying to. But actually I've been getting quite concerned about this for some time. Mostly due to the shrinking world demographics on the horizon. Overall growth is slowing and in most developed economies it will be shrinking. Also, increasing wealth inequality tends to lead to lower overall GDP so if that trend continues I expect lower aggregate growth as well. I think there is indeed a strong possibility that we may see very poor inflation-adjusted growth from an otherwise reasonable and diverse investment portfolio. Ultimately, the recipe for growth will just not be so simple in a world economy with a dwindling population. Thats a VERY unique situation so a lot of historical wisdom regarding investments I think may not bear fruit like it did in the past. My approach to mitigate this is two-fold, first I'm trying to be even MORE diversified. I have investments spread out over domestic and international ETF's, real estate, and I work a public sector job with a public pension. In addition, while aggregate growth may become lackluster, certain industries will still do well. Ive run businesses before and I'm looking to start another business in a very well-targeted industry to add an additional potential revenue stream well into the future. And the second prong of my approach is to increase my savings rate much higher than historically safe targets. I think there is good reason to be concerned about this and it has very little to do with the current market turmoil. (Although there are some indicators of trouble in that too)
  - smallmancontrov 1y ago
    Or AI takes off so that labor becomes worthless and owning things is all that matters and labor gets gaslight that it's a them problem until capital has built a big enough army of murderbots to put down anyone who says the emperor has no clothes. I'm hoping for something inbetween the apocalyptic possibilities.
    - grogenaut 1y ago
      someone needs to weld those murderbots, or pick up the little piece of scrap keeping the welding bot from making more murderbots, or to take over welding when the murderbots all stop working and start watching Sanctuary Moon 24/7
- gruez 1y ago
  >The best hedge is to also "invest" in something that has value to you. Like bricks / house. That makes intuitive sense, but quickly falls apart when you do any rigorous analysis. Buying a house might cover your shelter needs, but you still need to eat, and you can't eat bricks. Moreover if the fear is your portfolio losing value, buying a house doesn't really mitigate that. Sure, you might still have a house at the end of the day, but that's cold comfort if you paid $2M for a bay area house that subsequently saw its value tank (eg. something like Detroit). Even in some sort of apocalypse scenario a house isn't obviously better than stocks, because the whole concept of owning a house relies on some sort of functioning legal system. On the other hand there are very real problems with investing in "bricks / house". It has historical under-performed stocks. Moreover a single house provides poor diversification compared to a basket of stocks and its performance is tied to the economic health of your local area. If you lose your job, there's a good chance that your house won't fetch a high price. All of this makes for a poor risk adjusted return, and it's unclear how "has value to you" counters this.
  - Clubber 1y ago
    >That makes intuitive sense, but quickly falls apart when you do any rigorous analysis. Buying a house might cover your shelter needs, but you still need to eat, and you can't eat bricks. This analysis relies on someone to have a mortgage that takes 100% of their salary every month. The general rule was don't buy a house over 3x your annual pre-tax salary. I think it's moved up past that in most places though. Either way, don't buy so much house you can't afford food. I would think that goes without saying. >Moreover if the fear is your portfolio losing value, buying a house doesn't really mitigate that. Sure, you might still have a house at the end of the day, but that's cold comfort if you paid $2M for a bay area house that subsequently saw its value tank (eg. something like Detroit). This analysis is an edge case and in no way represents the norm. I'm not sure of any area that has gone from Bay Area prices to Detroit prices in a single lifetime. >Even in some sort of apocalypse scenario a house isn't obviously better than stocks, because the whole concept of owning a house relies on some sort of functioning legal system. Another crazy edge case. It's saying don't buy a house because an asteroid might hit. I'm pretty sure that newly non-functioning legal system wouldn't protect your stock portfolio either. If it comes to that, best to invest in bullets and whiskey. >On the other hand there are very real problems with investing in "bricks / house". It has historical under-performed stocks. Include paying rent in your analysis comparing it with stocks, particularly after you pay it off. You're sinking $X into a rental property with zero return and zero equity gained. I don't have to pay $2000 to the mortgage ever again and I have an asset that has more than doubled in 20 years, and a place to live that is essentially rent/mortgage free for life. That's a lot of dividends comparatively. Also, rents go up, mortgage payments typically don't, so factor inflation in your rent analysis. >Moreover a single house provides poor diversification compared to a basket of stocks and its performance is tied to the economic health of your local area. You shouldn't ever put all your money in stocks. Putting money in real estate, bonds, CDs, cash, etc. is the definition of diversification. >If you lose your job, there's a good chance that your house won't fetch a high price. Housing prices are unrelated to an individual losing their job. If you lose your job and haven't saved up enough runway, you could default on your mortgage. You could also not pay your rent. You get kicked out either way, but the bank should cut you a check for the equity you have remaining, minus whatever fees they conjure up. >All of this makes for a poor risk adjusted return, and it's unclear how "has value to you" counters this. All of your points were based on invalid assumptions, edge cases, or are irrelevant when compared to paying rent. Buying a house is a long game.

jopsen 1y ago

> My concern is that we are in a unique time period where all of that is coming to an end and there will be no wealth appreciation even for disciplined investors. Everyone always fears the future when their portfolio is down. The best hedge is to also "invest" in something that has value to you. Like bricks / house.

ghaff 1y ago
Some conservative investments at the moment? Especially with some known outflows coming up? Sure. But that doesn't imply giving up on investing.
- Enginerrrd 1y ago
  No, of course not but I think you should respond by increasing your savings rate beyond historically safe targets and diversifying even more aggressively.
  - ghaff 1y ago
    100% agree. Part of it is age, and part of it is current situation and needs, but I've definitely dialed back on aggressive investments into safe harbors.
Enginerrrd 1y ago
I'm not the person you're replying to. But actually I've been getting quite concerned about this for some time. Mostly due to the shrinking world demographics on the horizon. Overall growth is slowing and in most developed economies it will be shrinking. Also, increasing wealth inequality tends to lead to lower overall GDP so if that trend continues I expect lower aggregate growth as well. I think there is indeed a strong possibility that we may see very poor inflation-adjusted growth from an otherwise reasonable and diverse investment portfolio. Ultimately, the recipe for growth will just not be so simple in a world economy with a dwindling population. Thats a VERY unique situation so a lot of historical wisdom regarding investments I think may not bear fruit like it did in the past. My approach to mitigate this is two-fold, first I'm trying to be even MORE diversified. I have investments spread out over domestic and international ETF's, real estate, and I work a public sector job with a public pension. In addition, while aggregate growth may become lackluster, certain industries will still do well. Ive run businesses before and I'm looking to start another business in a very well-targeted industry to add an additional potential revenue stream well into the future. And the second prong of my approach is to increase my savings rate much higher than historically safe targets. I think there is good reason to be concerned about this and it has very little to do with the current market turmoil. (Although there are some indicators of trouble in that too)
- smallmancontrov 1y ago
  Or AI takes off so that labor becomes worthless and owning things is all that matters and labor gets gaslight that it's a them problem until capital has built a big enough army of murderbots to put down anyone who says the emperor has no clothes. I'm hoping for something inbetween the apocalyptic possibilities.
  - grogenaut 1y ago
    someone needs to weld those murderbots, or pick up the little piece of scrap keeping the welding bot from making more murderbots, or to take over welding when the murderbots all stop working and start watching Sanctuary Moon 24/7
gruez 1y ago
>The best hedge is to also "invest" in something that has value to you. Like bricks / house. That makes intuitive sense, but quickly falls apart when you do any rigorous analysis. Buying a house might cover your shelter needs, but you still need to eat, and you can't eat bricks. Moreover if the fear is your portfolio losing value, buying a house doesn't really mitigate that. Sure, you might still have a house at the end of the day, but that's cold comfort if you paid $2M for a bay area house that subsequently saw its value tank (eg. something like Detroit). Even in some sort of apocalypse scenario a house isn't obviously better than stocks, because the whole concept of owning a house relies on some sort of functioning legal system. On the other hand there are very real problems with investing in "bricks / house". It has historical under-performed stocks. Moreover a single house provides poor diversification compared to a basket of stocks and its performance is tied to the economic health of your local area. If you lose your job, there's a good chance that your house won't fetch a high price. All of this makes for a poor risk adjusted return, and it's unclear how "has value to you" counters this.
- Clubber 1y ago
  >That makes intuitive sense, but quickly falls apart when you do any rigorous analysis. Buying a house might cover your shelter needs, but you still need to eat, and you can't eat bricks. This analysis relies on someone to have a mortgage that takes 100% of their salary every month. The general rule was don't buy a house over 3x your annual pre-tax salary. I think it's moved up past that in most places though. Either way, don't buy so much house you can't afford food. I would think that goes without saying. >Moreover if the fear is your portfolio losing value, buying a house doesn't really mitigate that. Sure, you might still have a house at the end of the day, but that's cold comfort if you paid $2M for a bay area house that subsequently saw its value tank (eg. something like Detroit). This analysis is an edge case and in no way represents the norm. I'm not sure of any area that has gone from Bay Area prices to Detroit prices in a single lifetime. >Even in some sort of apocalypse scenario a house isn't obviously better than stocks, because the whole concept of owning a house relies on some sort of functioning legal system. Another crazy edge case. It's saying don't buy a house because an asteroid might hit. I'm pretty sure that newly non-functioning legal system wouldn't protect your stock portfolio either. If it comes to that, best to invest in bullets and whiskey. >On the other hand there are very real problems with investing in "bricks / house". It has historical under-performed stocks. Include paying rent in your analysis comparing it with stocks, particularly after you pay it off. You're sinking $X into a rental property with zero return and zero equity gained. I don't have to pay $2000 to the mortgage ever again and I have an asset that has more than doubled in 20 years, and a place to live that is essentially rent/mortgage free for life. That's a lot of dividends comparatively. Also, rents go up, mortgage payments typically don't, so factor inflation in your rent analysis. >Moreover a single house provides poor diversification compared to a basket of stocks and its performance is tied to the economic health of your local area. You shouldn't ever put all your money in stocks. Putting money in real estate, bonds, CDs, cash, etc. is the definition of diversification. >If you lose your job, there's a good chance that your house won't fetch a high price. Housing prices are unrelated to an individual losing their job. If you lose your job and haven't saved up enough runway, you could default on your mortgage. You could also not pay your rent. You get kicked out either way, but the bank should cut you a check for the equity you have remaining, minus whatever fees they conjure up. >All of this makes for a poor risk adjusted return, and it's unclear how "has value to you" counters this. All of your points were based on invalid assumptions, edge cases, or are irrelevant when compared to paying rent. Buying a house is a long game.