It'll be interesting to see how the enormous crop of new index fund investors behave during a market crash. Passive index investing has grown massively since 2008, and there has barely been a few months of consecutive negative monthly returns between then and now. The dogma says time in the market is better than timing the market, but it's easy to preach & believe such things when it gives you a 15%+ return each year. We'll see how strong the passive buy-&-hold ideology really is when the tide goes out.
Which, it will - two more years and we'll have entered the longest uninterrupted period of economic growth in US history.
> We'll see how strong the passive buy-&-hold ideology really is when the tide goes out.
You already know the answer to that. Passive index investors will pull out in record numbers.
I can't believe how many people I know who think "just put all your money in index funds and you'll be a millionaire when you retire." Now I don't have any better advice, but they only say this because of the gains they've seen in the last 7 years, like it's invulnerable. Even when I use my investing website's retirement calculator, it defaults to a 9% gain each year for the rest of my life.
We're in uncharted territory. We could enter a 25-year stagnation. We could be at the beginning of the most prosperous time in history. Nobody knows. And nobody can predict it.
I can predict the future economy --- one where people earn a cryptocurrency where they earn token by hitting their healthy goals.
Money has grown at an exponential pace in the last few years -- see money.visualcapitalist.com/all-of-the-worlds-money-and-markets-in-one-visualization/
Money is a bunch of bets against bets against bets.
At the end of the day, the poorest person you know has air conditioning,a place to live, netflix, and poops in a toilet --- richer than the richest king of even 100 years ago, not to mention 1000, 2000, or even ~100,000 years ago when our species got started.
When you learn to step outside the fishbowl, only then can you see water.
When you step outside the story of money --- you see it's only a story. Between human beings.
And then you can reassign meaning to money. It's just about to explode
Let's chat offline about the health based idea, I had a similar idea. Also classes of produce. Crypto currency of anything, enabling real time comparison shopping globally. Crypto FX.. all decentralized.
> You already know the answer to that. Passive index investors will pull out in record numbers.
They're welcome to do that. Lemmings.
I'll go the other way and get more of the index funds - not because they are "cheap" but because their value going down means the fraction of my investments held in the funds has decreased below what I think it should be.
I don't think they will pull out. That's what's driving the prices so high.
If everyone just lets money go from their check to the S&P 500. And most of that is flowing to only 10 companies. I think about it, if 3rd of the market is blindingly putting money in every month and a 3rd of the market isn't selling an equal amount it will send prices up.
The problem is when it's time for Baby Boomers to retire en mass and they start pulling money out. Huge bear head wind.
I think it will go up for a little while yet, because people are convinced that this is a zero risk investment with guaranteed returns- like real estate was supposed to be. I mean, how could all those companies in the index fund, with all that 401k money pouring in, go down at once? Seems impossible to imagine. That's why it's developing into a bubble.
My worry is that some of these stock prices are being supported by leveraged buybacks at inflated prices, and when the economy goes into a recession, you might see a lot of companies declaring bankruptcy at the same time, being unable to repay those loans, leading to solvency issues with the banks that issued the loans. That's the nightmare scenario.
Well it's a bit more complicated. Sucker if you invest, the market crashes, and then either you panic and pull out, or otherwise need that money and pull out, and then don't get to ride it back up again.
OR... your country turns into Japan, where their main index is still below 60% of its 1980s peak...
I generally invest in the hope that the company will remain profitable, or become more profitable, and in doing so increase dividends to me. Capital increase would be nice too, but it's not the intended source of profit to me.
It's been an interesting ride for the past few years. The economy is chugging along, growing, but not that fast. Yes the stock market is up significantly.
It's done wonders to my porfolio since I was in before the crash of 2008. However, I won't be surprised at all when we see DJIA go under 20,000.
However, my retirement is still decades away so my money will stay in the market, just like it did during 2008.
I like the forced selling of my winners via annual rebalancing. I have something like 110-my age in stocks (and other risky investments, like reits) and the balance in bonds. Every December I rebalance. Or throughout the year when two things happen: 1. I have time to plug the numbers into my spreadsheet and 2. any asset class is ahead or below asset allocation by 5% or more.
I am pessimistic by nature and the USA has its issues, but there just isn't an economy in the world that I see performing as well as the USA (part is history, part is demography).
We're doing the same thing! I rebalance every year or when I put more money into my investments. I love the approach because it automates "sell high, buy low". When stocks go up, you sell some and buy bonds, and vice versa.
There is no compelling evidence that market timing works, both in terms of technical analysis and fundamental analysis. In 2015, there was talk about a so-called 'earnings recession'; had you sold, you would have missed out on the 15% rally that followed. For years, people have been attributing the rally to the fed and such, ignoring the fact that the fed ended QE in 2014 yet the market has risen 25% since then. Purported successes of timing are due to various statistical and data mining biases, that cannot be replicated with similar success. IMHO, the market is going a lot a lot higher even if valuations seem kinda high. inflation and interest rates are still historically very low, which makes stocks attractive to bonds and cash, and profits and earnings are also strong.
22 comments
[ 2.6 ms ] story [ 59.9 ms ] threadWhich, it will - two more years and we'll have entered the longest uninterrupted period of economic growth in US history.
You already know the answer to that. Passive index investors will pull out in record numbers.
I can't believe how many people I know who think "just put all your money in index funds and you'll be a millionaire when you retire." Now I don't have any better advice, but they only say this because of the gains they've seen in the last 7 years, like it's invulnerable. Even when I use my investing website's retirement calculator, it defaults to a 9% gain each year for the rest of my life.
We're in uncharted territory. We could enter a 25-year stagnation. We could be at the beginning of the most prosperous time in history. Nobody knows. And nobody can predict it.
Money has grown at an exponential pace in the last few years -- see money.visualcapitalist.com/all-of-the-worlds-money-and-markets-in-one-visualization/
Money is a bunch of bets against bets against bets.
At the end of the day, the poorest person you know has air conditioning,a place to live, netflix, and poops in a toilet --- richer than the richest king of even 100 years ago, not to mention 1000, 2000, or even ~100,000 years ago when our species got started.
When you learn to step outside the fishbowl, only then can you see water.
When you step outside the story of money --- you see it's only a story. Between human beings.
And then you can reassign meaning to money. It's just about to explode
They're welcome to do that. Lemmings.
I'll go the other way and get more of the index funds - not because they are "cheap" but because their value going down means the fraction of my investments held in the funds has decreased below what I think it should be.
If everyone just lets money go from their check to the S&P 500. And most of that is flowing to only 10 companies. I think about it, if 3rd of the market is blindingly putting money in every month and a 3rd of the market isn't selling an equal amount it will send prices up.
The problem is when it's time for Baby Boomers to retire en mass and they start pulling money out. Huge bear head wind.
https://www.cnbc.com/2017/04/17/a-seismic-shift-is-happening...
http://www.zerohedge.com/news/2017-05-11/just-these-ten-comp...
My worry is that some of these stock prices are being supported by leveraged buybacks at inflated prices, and when the economy goes into a recession, you might see a lot of companies declaring bankruptcy at the same time, being unable to repay those loans, leading to solvency issues with the banks that issued the loans. That's the nightmare scenario.
OR... your country turns into Japan, where their main index is still below 60% of its 1980s peak...
It's done wonders to my porfolio since I was in before the crash of 2008. However, I won't be surprised at all when we see DJIA go under 20,000.
However, my retirement is still decades away so my money will stay in the market, just like it did during 2008.
I am pessimistic by nature and the USA has its issues, but there just isn't an economy in the world that I see performing as well as the USA (part is history, part is demography).
It's worked well for me for the past ~15 years.
When you put on the inflation goggles these valuations become a lot more reasonable.