Thanks for responding, I appreciate the interesting discussion. :) You began this sub-thread by making the following claim: > It's only at the risk-free rate

Thanks for responding, I appreciate the interesting discussion. :) You began this sub-thread by making the following claim: > It's only at the risk-free rate of return that the two products you describe are of equal value. In order to realize returns higher than the risk-free rate, investors must do work. I think that the extra gain beyond the risk-free rate should be taxed as ordinary income, because that's really what it is: income produced by work. With this in mind, look at the following table, based on historical returns since 1928:[0] Stocks TBills TBonds Arith avg. 11.50% 3.57% 5.21% Geo avg. 9.55% 3.53% 4.93% Std Dev 20.02% 3.06% 7.85% Let's say your time horizon is 10 years. You have at least four options: 1. Buy $1000 worth of equity ETFs. Sell them in 10 years. Expected value: $2,489.57. Expected tax paid: $223.44 (22%). 2. Buy $1000 worth of T bill ETFs. Sell them in 10 years. Expected value: $1,414.69. Expected tax paid: $62.20 (6.2%). 3. Buy $1000 worth of T bond ETFs. Sell them in 10 years. Expected value: $1,618.07. Expected tax paid: $92.71 (9.2%). 4. Hold $1000 worth of cash. Expected value: $1,000. Expected tax paid: $0 (0%). Do these four products have unequal present values? No, they are equally valued at $1000, despite the fact that stocks have a higher expected return, because people are risk averse. Are some of these products likely to realize returns higher than the risk-free rate? Yes--riskier assets typically pay a risk premium.[1] Does investing in stocks require more work than investing in T bills or bonds? No. Does investing in stocks require more work than investing in bonds, where "work" is defined as "possessing knowledge of, and acting on, the fact that higher risk assets typically have higher returns"? No, such knowledge is neither necessary nor sufficient. Unnecessary because plenty of people invest in stocks without any underlying research because they've been told to do so, or pay someone else to manage their money for them. Insufficient because plenty of people prefer the stability of lower-risk assets to stocks' higher expected return. Look, I don't work in finance either. I'm a software developer. I try to save money, and when I do, I throw it into an ETF that tracks the market as a whole. I don't try to time the market. I don't try to identify growth markets or over- or under-performance of asset classes. If I wanted risk-free returns, I could use the time I spend logging into my brokerage account and buying equity ETFs to instead... log into my brokerage account and buy bond ETFs. Or I could use that time to log into a savings account and transfer money over from a checking account. I completely reject the idea that my personal decision to purchase stocks instead of bonds is work. If you want to change your position to claim that taxation should discourage risk-taking, I strongly disagree, but that's a different argument entirely. [0] http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/histretSP.html http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/... [1] http://en.wikipedia.org/wiki/Risk_premium http://en.wikipedia.org/wiki/Risk_premium