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If you’re a layman investor just dump all of your shit in index funds. Even if you’re smart and sophisticated, you’re still competing against the massive amount

If you’re a layman investor just dump all of your shit in index funds. Even if you’re smart and sophisticated, you’re still competing against the massive amount of fraudulent insider trading happening right now with zero enforcement and are trading at a disadvantage as a result

mfro 2mo ago
Not to mention huge quant firms that paid more than 4x your salary just to get a trading latency advantage
- weitendorf 2mo ago
  If you understand finance and aren’t specifically attempting to arb on that timescale, you actually want to participate in markets with those participants, because their presence gives you less variance/better price discovery on the scales that don’t factor into your decisions to buy and sell things. So basically if you’re larping as a trader you will consistently get your ass handed to you unless you are genuinely better than all the pros, but if you’re investing or optimizing for a specific risk profile/exposure/timeline you’re playing a different game. Anyway the fact that it’s so hard to explain this stuff to individuals does strengthen the argument that most individuals are better off following the herd.
- zuzululu 2mo ago
  thats one of the areas where quants squeeze edge the other is more boring where they are essentially "market neutral" and they try to figure out how to make a few cents everyday knowing the downside is a global financial crisis. their edge is basically political so that they get a bail out and thats what the quants will never see in their models. not to get cynical further, just do what the GP says, buy index or figure out what the biggest movers are and buy those for more exposure
llamara 2mo ago
I think you're missing the point why younger people do that. Real wages have been deteriorating over the years. It's much more difficult to afford a house today than it was 50 years ago. People are perfectly aware that investing into index funds is the "correct" approach, however it does not solve anything for them. They're desperate and for them _to gamble_ seems like the only way to become decently rich allowing to escape the rats race, otherwise there is not much to live for, just slaving their days away. That's exactly what led to the recent situation of en masse margin calls in Korea. Here in Europe I too have been working for years and I just don't feel like I'm earning actual money. Most of my income is eaten away by taxes and very basic living expenses. ETFs won't compound for me much if there is not a lot invested into them in the first place. This is exactly what led me to despite high electricity costs to buy 2x open source bitcoin lottery miners (NerdQaxe++) and just hope for the best.
- inigyou 2mo ago
  Yes. You used to start at -1000 points and earn 5000 over your life. With investment and luck you could make that 10000 and end up at +9000. Now you start at -9000 and earn 3000. With investment and luck you could make that 6000 and end up at -3000 so that's still a guaranteed loss. To have any hope of hitting the positives at all, you need to excessively gamble. Sure you could end up at -999999 (which is no worse than 0) but also +999999.
  - llamara 2mo ago
    Yep, that's a nice illustration. Basically, if to continue steady leads to an inevitable loss, then _to gamble_ is actually a rational decision. You can see that in chess a lot: if someone is down a pawn, they have to take more risks if they need to win
- ls612 2mo ago
  Real wages are higher today than they ever have been. The whole story about median real wages falling is entirely a result of Simpson’s paradox as applied to women entering the workforce from 1970-2000. This sort of axe grinding is just excusing people’s bad decisions it isn’t grounded in reality.
  - someguynamedq 2mo ago
    How are your real wages being calculated?
    - ls612 2mo ago
      By taking nominal wages and then normalizing them to some specified year’s dollars using a price index. Yes I know you believe that price indices are made up but if anything CPI overstates inflation slightly because it doesn’t properly account for substitution across goods categories (for example if the price of apples increases people will buy fewer apples and more oranges, but the CPI won’t update the weights on apples and oranges immediately). That is why the Fed uses PCE as its target index, because it more accurately adjusts for substitution elasticities.

mfro 2mo ago

Not to mention huge quant firms that paid more than 4x your salary just to get a trading latency advantage

weitendorf 2mo ago
If you understand finance and aren’t specifically attempting to arb on that timescale, you actually want to participate in markets with those participants, because their presence gives you less variance/better price discovery on the scales that don’t factor into your decisions to buy and sell things. So basically if you’re larping as a trader you will consistently get your ass handed to you unless you are genuinely better than all the pros, but if you’re investing or optimizing for a specific risk profile/exposure/timeline you’re playing a different game. Anyway the fact that it’s so hard to explain this stuff to individuals does strengthen the argument that most individuals are better off following the herd.
zuzululu 2mo ago
thats one of the areas where quants squeeze edge the other is more boring where they are essentially "market neutral" and they try to figure out how to make a few cents everyday knowing the downside is a global financial crisis. their edge is basically political so that they get a bail out and thats what the quants will never see in their models. not to get cynical further, just do what the GP says, buy index or figure out what the biggest movers are and buy those for more exposure

llamara 2mo ago

I think you're missing the point why younger people do that. Real wages have been deteriorating over the years. It's much more difficult to afford a house today than it was 50 years ago. People are perfectly aware that investing into index funds is the "correct" approach, however it does not solve anything for them. They're desperate and for them _to gamble_ seems like the only way to become decently rich allowing to escape the rats race, otherwise there is not much to live for, just slaving their days away. That's exactly what led to the recent situation of en masse margin calls in Korea. Here in Europe I too have been working for years and I just don't feel like I'm earning actual money. Most of my income is eaten away by taxes and very basic living expenses. ETFs won't compound for me much if there is not a lot invested into them in the first place. This is exactly what led me to despite high electricity costs to buy 2x open source bitcoin lottery miners (NerdQaxe++) and just hope for the best.

inigyou 2mo ago
Yes. You used to start at -1000 points and earn 5000 over your life. With investment and luck you could make that 10000 and end up at +9000. Now you start at -9000 and earn 3000. With investment and luck you could make that 6000 and end up at -3000 so that's still a guaranteed loss. To have any hope of hitting the positives at all, you need to excessively gamble. Sure you could end up at -999999 (which is no worse than 0) but also +999999.
- llamara 2mo ago
  Yep, that's a nice illustration. Basically, if to continue steady leads to an inevitable loss, then _to gamble_ is actually a rational decision. You can see that in chess a lot: if someone is down a pawn, they have to take more risks if they need to win
ls612 2mo ago
Real wages are higher today than they ever have been. The whole story about median real wages falling is entirely a result of Simpson’s paradox as applied to women entering the workforce from 1970-2000. This sort of axe grinding is just excusing people’s bad decisions it isn’t grounded in reality.
- someguynamedq 2mo ago
  How are your real wages being calculated?
  - ls612 2mo ago
    By taking nominal wages and then normalizing them to some specified year’s dollars using a price index. Yes I know you believe that price indices are made up but if anything CPI overstates inflation slightly because it doesn’t properly account for substitution across goods categories (for example if the price of apples increases people will buy fewer apples and more oranges, but the CPI won’t update the weights on apples and oranges immediately). That is why the Fed uses PCE as its target index, because it more accurately adjusts for substitution elasticities.