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Despite knowing this to be true, I still actively trade the majority of my investments. (My retirement fund is in low-cost index funds.) Why? Because I like pl

Despite knowing this to be true, I still actively trade the majority of my investments. (My retirement fund is in low-cost index funds.) Why? Because I like playing the lottery with stocks. On average, I might do slightly worse than the market but I retain the potential for massive, life-changing upside. And that's really all that matters to me. If I put $100,000 into index funds I might reasonably expect that to be worth $108,000 next year. That would literally not change my lifestyle at all, as it's approximately equivalent to accepting 1 or 2 extra short contracting gigs. If I put $100,000 into stocks I personally pick, I might unreasonably expect it to be worth $1,000,000 next year. That would definitely change my lifestyle. I can also reasonably expect it to be worth $0, which I'm fine with considering I'm young and gainfully employed. I just don't see the problem with buying stocks as lottery tickets whose expected value is 1.03% (sub-market) but whose potential value is 1000%.

chavesn 13y ago
> "it's approximately equivalent to accepting 1 or 2 extra short contracting gigs." Except: - You don't have to do the work (you are free to do more work or relax) - That's one or two gigs every year (until you choose to spend the money) - The gigs compound: in 9 years, it's 2-4, and in 18, 4-8 per year. I'm just providing an alternate viewpoint, but I don't disparage your right to play "the lottery" this way. I think that's a perfectly valid basis for a personal investment strategy. As you pointed out, it might be statistically worse, but you aren't interested in the median return, either.
- morgante 13y ago
  > - The gigs compound: in 9 years, it's 2-4, and in 18, 4-8 per year. Ideally, my hourly rate also increases, though perhaps not exponentially. Still, I really meant the gigs purely as a comparison point... even $16,000 after 9 years isn't much of a lifestyle difference.
  - chavesn 13y ago
    That's true, and an important point: if you expect your personal earning power to grow at a rate far greater than 8%, then investing your principal now will have little effect one way or the other. But investing later will, so it's good to be prepared with the right strategy for you (whatever that is).
rdtsc 13y ago
> I can also reasonably expect it to be worth $0, which I'm fine with considering I'm young and gainfully employed. Hmm, if you can reasonably expect to gamble away $100k without much worrying, congratulations, and also this article probably wasn't' written with you mind.
- morgante 13y ago
  > Hmm, if you can reasonably expect to gamble away $100k without much worrying, congratulations, and also this article probably wasn't' written with you mind. I'd actually argue that a good number of people with $100k savings could easily lose it without much worry because if you're able to save up that kind of money you probably already have a good enough job to replenish your savings after a few years.

chavesn 13y ago

> "it's approximately equivalent to accepting 1 or 2 extra short contracting gigs." Except: - You don't have to do the work (you are free to do more work or relax) - That's one or two gigs every year (until you choose to spend the money) - The gigs compound: in 9 years, it's 2-4, and in 18, 4-8 per year. I'm just providing an alternate viewpoint, but I don't disparage your right to play "the lottery" this way. I think that's a perfectly valid basis for a personal investment strategy. As you pointed out, it might be statistically worse, but you aren't interested in the median return, either.

morgante 13y ago
> - The gigs compound: in 9 years, it's 2-4, and in 18, 4-8 per year. Ideally, my hourly rate also increases, though perhaps not exponentially. Still, I really meant the gigs purely as a comparison point... even $16,000 after 9 years isn't much of a lifestyle difference.
- chavesn 13y ago
  That's true, and an important point: if you expect your personal earning power to grow at a rate far greater than 8%, then investing your principal now will have little effect one way or the other. But investing later will, so it's good to be prepared with the right strategy for you (whatever that is).

rdtsc 13y ago

> I can also reasonably expect it to be worth $0, which I'm fine with considering I'm young and gainfully employed. Hmm, if you can reasonably expect to gamble away $100k without much worrying, congratulations, and also this article probably wasn't' written with you mind.

morgante 13y ago
> Hmm, if you can reasonably expect to gamble away $100k without much worrying, congratulations, and also this article probably wasn't' written with you mind. I'd actually argue that a good number of people with $100k savings could easily lose it without much worry because if you're able to save up that kind of money you probably already have a good enough job to replenish your savings after a few years.