Fyi, people have been predicting the crash for about 12 years now. I'm not saying their won't be another crash. It's just that anyone claiming they know when it will be is either lying or a 1-in-a-million genius who could make a fortune working for a hedge fund but for some reason is giving the information away for free on HN...
I have a share portfolio that's 70/30 stocks/bonds because that suits my age and risk appetite. If it crashes I can live with losses, if the market goes up I can live with the missed opportunity.
I have some "gambling" money in a separate account that I buy risky stuff with. If I lose it all, cest la vie.
That's all anyone can do really.
(Edit, I should have been clear: my portfolio is in index funds, not individual stocks. The "gambling" money is in individual stocks ONLY because its gambling money not a real investment. Index funds are where 95% of us should be with 95% of our case IMHO.)
It's not about knowing when because, as you say, it's difficult to predict... Still preparing or defending your assets for the possibility would be wise.
Preparing for a crash is easy if you don't care when it is: sell everything and sit on the cash (or better still gold).
Of course, if you do that you'll lose out on more from missed opportunities than you save from missed crashes. Soneone who did that in 2008 would be perfectly safe right now. They'd have missed out on quadrupling their money. But they'd be perfectly prepared.
So you can do as suits you. But the best strategy is to have a mix of bonds and stock. Never more than 70% bonds (as risk goes UP past roughly that point). The more you are able to deal with big movements (up or down), the more stock.
This is what Warren Buffet and others have endorsed for normal every day humans like us. The mathematics backs it up.
How does it work in the US with index funds? If the index fund contains stocks with dividends, do you get some of that money?
Where I live I haven’t seen any broker that doesn’t keep these for themselves which is kind of a bummer to be honest.
For the US I'm not sure I'm afraid. Here in the UK, we get the money if we want it. You can select either to have the dividend re-invested (called growth or accumulating) or to receive it normally quarterly (called distributing)...
You probably right, I could have been so hung up on cash payouts that I missed that.
As for example I haven’t seen any broker in Sweden that does cash payouts but like you said the money is probably going back to the investors just not as cash.
For tax reasons, reinvesting the dividends is preferable as (here at least) that doesn't trigger a tax event like a dividend paid outside the fund would.
Further, the best thing you can to protect your assets from a crash is: have a regular investment plan, follow it, and stop looking at the market.
If you’re ten or more years from retirement, the overwhelming likelihood is that a crash simply does not matter. A drop in prices only matters when you’re buying (good) or selling (bad). Everything in between is noise that only affects you on paper. Selling due to a crash is the ideal way to lock in losses. Just contribute to your retirement accounts as normal, regardless of what the market is doing. If anything, feel happy you’re getting a discount on your regular purchases.
If you’re nearing retirement, the answer is that you should be gradually shifting over time from riskier assets to more conservative ones. While young you might be at and 80:20 ratio of stock market index funds to bond market index funds, but nearing retirement that might flip to 60:40 with the remaining 10% in fixed-income assets (exact numbers are determined by your personal risk threshold and not meant as absolutes). For most people, a Target Retirement fund is probably the best choice here since they’re fire-and-forget.
As an anecdote, I have a friend who felt very strongly that a crash was imminent in early 2018. He argued passionately that markets would drop, and wouldn’t it be great to be in a position to be able to swoop back in and grab everything at a discount when this happened? I bet beers that the S&P would be greater than or equal to its current price (~2715) on Jan 1 2019. He also sold everything and held cash.
Well, as luck would have it, there was a “crash”. Based on the exact timing of our bet, I ended up losing by a few dollars (it was at ~2700) and had to buy him beers. He stayed in cash while I’ve continued buying. If he’d had perfect knowledge and changed course at rock bottom, he would have squeezed out an extra 8% return. In practice, he’s actually lost out on a 40%+ return that required simply doing nothing. I think my strategy has pretty soundly won in retrospect.
Wow, this is definitely something I didn’t know. I’ve removed the incorrect part of my post, as I wasn’t sure if it’s possible to do a strikethrough on HN. Thanks!
Could you recommend anything to start reading on how to actually make a plan? I’m young and honestly don’t know how to generate a financial plan besides the basic stuff like maxing out 401k, emergency fund, etc. I’ve considered hiring a financial consultant, but I’m unsure.
Every 3 months roughly. I'm paying into mine still, so usually I can rebalanced without selling if I do it once every few months. I'm not super precise with it, 70% means anything over 65 and under 75.
I guarantee that the market will crash. I just can’t guarantee when, and I can’t tell you how much gain you’ll miss by investing conservatively until then.
I’m prepared for the risk of a market crash by maintaining a market posture that matches my risk tolerance and investing horizon.
Edit to add: “are you preparing for a market crash?” is another way of saying “are you confident you can time the market?” I’m not.
And I think that if someone could confidently time the market, they would be unlikely to be vocal about it. Announcing the future if the market is likely to change it.
Honestly I think that’s what some crash predictors are trying to do. They’re long bitcoin or gold, or short the market, and if they can get everyone else to go along with them now, they’ll make money now.
Though this is not a failsafe solution, as the two have been often correlated lately. Also, it requires a crazy high risk tolerance.
The problem is that I worry any market crash would be associated with inflation in the current economic environment, so the old solution of going long on cash/usbonds doesn't seem viable to me anymore.
My 401k has been all t bills since January 2018. Since then it’s been a super rocky ride for stocks, and I’ve skipped both massive crashes and stupendous surges- feels like an equally risky move to just keeping everything in stocks. But, I’m not going back in until valuations go back to some kind of sanity.
> But, I’m not going back in until valuations go back to some kind of sanity.
This may be never, or may not be on your time horizon. Be careful.
The other thing you're missing out on is cash dividends. It's not like "stock goes down I lose exactly the amount the stock goes down every time".
I would personally never recommend this investment strategy (100% Treasuries) under any circumstances. When evaluating risk, you have to consider that not making any money is also risky. Markets go up, markets go down. If markets evaporated (this has never happened) then your T-bills will be worthless because we'll be eating beans and freezing to death.
Don't make the mistake of thinking that skipping the crashes and surges are of equal weight. Even if you took all your money and invested at the very top of the market in 2007/2008 right before the crash, you'd have more money than you do now.
I hope this doesn't come across as mean-spirited. I genuinely want you and others to read this and of course have a discussion but also learn more about investing and risk/reward.
Please reach out if you want to chat. If you find this annoying or unhelpful I understand and wish you the best of luck.
1) I believe that the chance of a stock market crash within 2 years is greater than 50/50. That’s only a guess of course.
2) the downside of losing my life savings would be far more devastating than the upside of doubling them- the risk/reward profile is extremely asymmetrical.
3) the people who can trade the news fast will get out fast in the event of a crash, and the 401k people will be left holding the bag, which means that stock market volatility is essentially a way to transfer wealth from the middle class to the super wealthy. I’m not interested in that.
To be frank I wish that 401ks didn’t exist at all and the government just increased social security payments a certain percentage every year. If the economy is growing as fast as the payments then it shouldn’t be an issue right? The fact that I am essentially forced to play poker with my retirement account is very frustrating. The whole point of saving money for retirement is to reduce risk, it’s supposed to make me feel secure not give me one more thing to worry about.
But, my wife has all her 401k in stocks, so between the two of us we’re still split 50/50, so I guess I exaggerate when I say it’s all t bills.
> 1) I believe that the chance of a stock market crash within 2 years is greater than 50/50. That’s only a guess of course.
Right. It's a guess. But it's no more good of a guess than the stock market won't crash. Just keep that in mind.
> 2) the downside of losing my life savings would be far more devastating than the upside of doubling them- the risk/reward profile is extremely asymmetrical.
Not sure how old you are, but if you're not near retirement age you wouldn't lose your life savings if you were invested in something like a total stock market index fund. If you lost all of your life savings, then the entire economy collapses (back to beans). Granted, it COULD be the case that the market crashes, say, 50% and doesn't recover for 20 or 30 years. But I think too many people have too much to lose, and it would likely require a total civilizational collapse. Think about it this way. The market didn't collapse to nothing during World War I or World War II or the Great Depression.
> 3) the people who can trade the news fast will get out fast in the event of a crash, and the 401k people will be left holding the bag, which means that stock market volatility is essentially a way to transfer wealth from the middle class to the super wealthy. I’m not interested in that.
I'm not sure I'm following but willing to listen. The 401k people just...don't sell their 401ks and if there is a crash then they just wait until valuations return, meanwhile continuing to invest and buy shares of companies at a discount and also reap dividends, share buybacks, and other vehicles that increase shareholder value. Volatility would be more of a concern if you are in retirement or near retirement (which you may be), because it it could cause a disruption in your retirement plans or cash flow.
> To be frank I wish that 401ks didn’t exist at all and the government just increased social security payments a certain percentage every year
Personally I'd never want this. I'd actually prefer we got rid of social security. The government over time has shown me that it is completely inept at funding these plans. The problem is that it seems people are also unwilling or uninterested in saving and investing. Social security is projected to be underfunded pretty much forever, and I doubt that the population has the appetite for continued increases in taxation to fund it. I'm not sure you could tax people enough to pay for it.
But the 401k is not really the same thing as social security and I think it's a bit of an apples-to-oranges comparison. All it is, is the government not taxing some of your income so you can invest it. It's a pretty great plan and many people across the world envy it.
The only other thing I'd say here is that you could check out The Little Book of Common Sense Investing [1] and see if that changes your approach. I'm willing to bet others on Hacker News would endorse it as a must-read in the personal finance space.
Another thing to look at if you want to stay in the treasury space are TIPS, or Treasury Inflation-Protected Securities [2].
Money printers are going brrrr all over the world. Bitcoin, gold and equities are all good inflation-hedges. Cash is trash. Make sure you own things instead.
Bitcoin is not in the same category as equities, bonds, or commodities. It should only make up a tiny portion of ones portfolio unless their risk tolerance is far outside normal levels.
Not sure I understand your perspective on “things”. Most physical things depreciate worse than the impact of inflation on cash.
I think the idea is have a house instead of the money for it.
I kind of follow this sentiment. One could also say earn no more than you need and focus the rest of your time on something valuable to you. One hour extra spent working probably does not equal to one hour less working in 5-10 year.
You literally just strung together a bunch of meme-related buzzwords. There are serious concerns about inflation, and better ways to address those challenges than culty catechisms.
> Money printers are going brrrr all over the world. Bitcoin, gold and equities are all good inflation-hedges.
Inflation has been predicted since (at least) 2010:
> We believe the Federal Reserve's large-scale asset purchase plan (so-called "quantitative easing") should be reconsidered and discontinued. We do not believe such a plan is necessary or advisable under current circumstances. The planned asset purchases risk currency debasement and inflation, and we do not think they will achieve the Fed's objective of promoting employment.
anyone jumping in now should be prepared to lose nearly all of their money. That's no a prediction, but nobody can tell you where crypto is going to go from here, and past crashes have been swift and severe, which is fine as long as you can hodl for years.
There's a guy, PlanB (with the bitcoin B) who created a formula for estimtaing Bitcoin's price based on its emission, by correlating it with the price of other assets (mostly gold), called stock to flow. Here's a chart for it: https://www.lookintobitcoin.com/charts/stock-to-flow-model/
As a TL;DR, the price should stabilize around $100k after the current bullrun.
As interesting as that is, those models should not be taken as a basis for investing one's nest egg. If you rely on this money to secure yourself or your family, it should not be placed in risky and speculative assets that are difficult to value and have histories of wild price swings in both directions.
Your preparation should depend on what kind of time horizon you're dealing with. Long term horizon? Be aggressive. Short term? Be conservative.
Trying to time the market typically results in smaller gains (larger losses) than just going with it. I think there are some overvalued sectors, but I'm overall pretty bullish. We might see a "true" crash if we uncover some fundamental flaw with the banking system.
Click titles, possibly? Last market dip was Mar 2020, before that was 2008. They talk about it all the time.
Why is the market so high? my theory is lots of people on computers at home that have time and extra money to invest.
What to do? Hold investments that you have and buy more when it drops. I made 14% last year from buying after the big dip in March.
100% long US equities.
Dollar cost average.
If anyone is fearful of a crash buy downside protection with put options to cover your long. Although why bet against US business in the long term (20+ years)?
If you were 100% Japanese equities (Nikkei), then you would have had a problem over the last few years, especially if you start at the 1989 peak. But a 60/40 JP-stocks/JP-bonds broke even. And a 30/30/40 portfolio of JP-stocks/non-JP-stocks/JP-bonds did very well:
Very good point on geographic diversity and over the long term is should work to investor advantage. In the short term, during a crash correlations are likely to be high and moves in EM more extreme (small exit doors).
However, my original point was that assuming things will be golden forever (or at least a very long time) usually ends badly.
To your follow up on allocations, unlike the past, a large bond holding is unlikely to save you this time (very limited price appreciation potential) and could go the other way when under stress (liquidity issues, forced redemptions to cover equity losses). It is harder to hide than ever before.
I've done well with rolling short term call options to catch upswings and long term puts to catch crashes. Essentially: straddles/strangles with a long-term put leg.
But consider that maybe the markets aren't the best place for value creation right now. The big economic question is M2 inflation. It's possible that the markets just flatline for twenty years to soak up all the money.
I'm long-term bullish BTC, but concerned about its mid-term (causal?) correlation with Tether.
I'm buying capital assets that inflate along with M2 and building productive assets that generate economic value, regardless of how that value is denominated.
one thought bouncing among friends - if there's risk that Tether gets killed (e.g. by NYAG regulators), then it flees into BTC before the window shuts. True, it shuts down the (relatively small) spigot of Tether money printing, but BTC is mostly growing because of legit buying pressure coming from large institutions, e.g. Morgan Stanley buys 10% stake in Microstrategy (MSTR) for their BTC stake.
Tether market cap is currently $24 billion and growing exponentially. BTC market cap is $700bn but that price is set on the margin by redditors buying $100 on a credit card, there is no depth to it. The Tether hypothesis is that ~all~ of the market cap of BTC is ultimately derived from thin marginal price on retail exchanges. You can't sell a billion of bitcoin for USD 1 billion, nobody has ever tried, there is not a buyer, and that's only .1% of the market cap. Any thin real cash in the ecosytem is exfiltrated by miners selling into retail to pay electricity bills. If Tether stops printing, retail stops buying, and there is no more cash for electric bills, network stops. This is both a game-over scenario for bitcoin as well as actually high likelyhood of happening due to action by US Government against Tether.
I have to see more data on this but my understanding is that Tether is already exiting to BTC and has been the single largest buyer for several weeks/months. Citation needed, this is a hypothesis that needs more evidentiary support for me to act on.
Illiquid markets tend to be more price sensitive to the decisions of the marginal buyer. This is most visible, IMO, in real estate where wealthy marginal bidders move comparable prices en masse on low volume.
Now let’s combine those ideas: if bitcoin is relatively illiquid and small group of wealthy buyers (banks, companies, other crypto assets) could issue treasury securities and roll the capital into BTC, what would we expect to see?
I think we’d see a big price run in an otherwise low-growth broader market.
This would tend to act as an M2 hedge for the early entrants and would be a very attractive move if their firm value was more or less “elastically attached” to the USD.
Generally speaking I want to be on the sell side of transactions so I can at least attempt to dictate pricing.
That means:
- buying wholesale, selling retail
- buying commodities, selling products
- buying fixed assets, selling leases
As a long-time computer programmer and technologist my advice to my younger self would be, “sell things the market wants, not things you think are awesome.”
There will never be a market crash, unless people stop putting in their work hours (the only things to cause this would be a major global war, natural disaster, or a black death -scale pandemic)
As long as work continues, there is still massive economical growth potential remaining as like half of the global population still barely participates.
I'm talking about a long-term crash(5+ years) btw. Minor dips don't matter in macro scale
We’ve been saying it for years. With governments printing money (even electronically), that seems unlikely. We’re at more risk of high inflation making our cash worthless and our salaries horribly out of sync with needs. Hyperinflation could also cause economic collapse, but it’s different than any crash we’ve seen in the US.
There’s a lot of uncertainty. Diversify. Dollar-cost average your purchases and sales.
Stocks mostly and parked cash on GLD, BND, and BNDX. I sold all the stocks in February and parked it in GLD which was great. Got back into stocks in the summer, so was a good twelve months. One thing, time in the market beats timing the market, I just got “lucky“ because things were obvious getting worse early in the year, the decisions weren’t difficult. As for a possible crash, I’ll park some cash maybe in BND and wait for opportunities.
Don't try to time the market. Read a book like "All About Asset Allocation", recognize that every time feels unique but it's really not, and choose a mix of assets that reflect your risk and reward profile. It's not rocket science.
If you've got 10+ years, keep it mostly in stocks. If you need it sooner, keep it mostly in bonds. Trust in the power of compound interest.
Prefer assets that have a logical reason to go up based on history, not fancy. Businesses and governments pay back bonds from their revenue. Businesses are worth more over time from improvements in efficiency and scale which raises the stock market. Stay away from assets that are basically speculative (gold, crypto, oil, metals, real estate). History shows that speculative investments tend to just track inflation over time, but since they're noisier people can find all kinds of short term patterns to justify investing. Don't fall for it.
If you have cash and dont need to sell stocks because of the crash, I would just start investing in safe stocks when they lost 20-25% of their value... Yeah it might go down further but noone knows.
You prepare for a risk by remaining within your circle of competence. That means, you never invest equity that you need in short-term span. Second, you make sure that your equity investments are diversified. Third, you only make equity investments if you understand - if not, you stick to diversified funds.
I'd like to quote Buffer from his Berkshire Hathway 2013 shareholder letter
> Most investors, of course, have not made the study of business prospects a priority in their lives. If wise, they will conclude that they do not know enough about specific businesses to predict their future earning power.
> I have good news for these non-professionals: The typical investor doesn’t need this skill. In aggregate, American business has done wonderfully over time and will continue to do so (though, most assuredly, in unpredictable fits and starts). In the 20th Century, the Dow Jones Industrials index advanced from 66 to 11,497, paying a rising stream of dividends to boot. The 21st Century will witness further gains, almost certain to be substantial. The goal of the non-professional should not be to pick winners – neither he nor his “helpers” can do that – but should rather be to own a cross-section of businesses that in aggregate are bound to do well. A low-cost S&P 500 index fund will achieve this goal.
> That’s the “what” of investing for the non-professional. The “when” is also important. The main danger is that the timid or beginning investor will enter the market at a time of extreme exuberance and then become disillusioned when paper losses occur. (Remember the late Barton Biggs’ observation: “A bull market is like sex. It feels best just before it ends.”) The antidote to that kind of mistiming is for an investor to accumulate shares over a long period and never to sell when the news is bad and stocks are well off their highs. Following those rules, the “know-nothing” investor who both diversifies and keeps his costs minimal is virtually certain to get satisfactory results. Indeed, the unsophisticated investor who is realistic about his shortcomings is likely to obtain better long- term results than the knowledgeable professional who is blind to even a single weakness.
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[ 38.5 ms ] story [ 403 ms ] threadI have a share portfolio that's 70/30 stocks/bonds because that suits my age and risk appetite. If it crashes I can live with losses, if the market goes up I can live with the missed opportunity.
I have some "gambling" money in a separate account that I buy risky stuff with. If I lose it all, cest la vie.
That's all anyone can do really.
(Edit, I should have been clear: my portfolio is in index funds, not individual stocks. The "gambling" money is in individual stocks ONLY because its gambling money not a real investment. Index funds are where 95% of us should be with 95% of our case IMHO.)
Of course, if you do that you'll lose out on more from missed opportunities than you save from missed crashes. Soneone who did that in 2008 would be perfectly safe right now. They'd have missed out on quadrupling their money. But they'd be perfectly prepared.
So you can do as suits you. But the best strategy is to have a mix of bonds and stock. Never more than 70% bonds (as risk goes UP past roughly that point). The more you are able to deal with big movements (up or down), the more stock.
This is what Warren Buffet and others have endorsed for normal every day humans like us. The mathematics backs it up.
I'm surprised you can't get a re-investing one.
I know outside of the US there is a concept of distributing vs accumulating funds (and in both cases you get the dividends, just in a different form): https://www.bogleheads.org/wiki/Comparison_of_accumulating_E...
As for example I haven’t seen any broker in Sweden that does cash payouts but like you said the money is probably going back to the investors just not as cash.
If you’re ten or more years from retirement, the overwhelming likelihood is that a crash simply does not matter. A drop in prices only matters when you’re buying (good) or selling (bad). Everything in between is noise that only affects you on paper. Selling due to a crash is the ideal way to lock in losses. Just contribute to your retirement accounts as normal, regardless of what the market is doing. If anything, feel happy you’re getting a discount on your regular purchases.
If you’re nearing retirement, the answer is that you should be gradually shifting over time from riskier assets to more conservative ones. While young you might be at and 80:20 ratio of stock market index funds to bond market index funds, but nearing retirement that might flip to 60:40 with the remaining 10% in fixed-income assets (exact numbers are determined by your personal risk threshold and not meant as absolutes). For most people, a Target Retirement fund is probably the best choice here since they’re fire-and-forget.
As an anecdote, I have a friend who felt very strongly that a crash was imminent in early 2018. He argued passionately that markets would drop, and wouldn’t it be great to be in a position to be able to swoop back in and grab everything at a discount when this happened? I bet beers that the S&P would be greater than or equal to its current price (~2715) on Jan 1 2019. He also sold everything and held cash.
Well, as luck would have it, there was a “crash”. Based on the exact timing of our bet, I ended up losing by a few dollars (it was at ~2700) and had to buy him beers. He stayed in cash while I’ve continued buying. If he’d had perfect knowledge and changed course at rock bottom, he would have squeezed out an extra 8% return. In practice, he’s actually lost out on a 40%+ return that required simply doing nothing. I think my strategy has pretty soundly won in retrospect.
https://www.investopedia.com/ask/answers/040915/does-sp-500-...
I’m prepared for the risk of a market crash by maintaining a market posture that matches my risk tolerance and investing horizon.
Edit to add: “are you preparing for a market crash?” is another way of saying “are you confident you can time the market?” I’m not.
And I think that if someone could confidently time the market, they would be unlikely to be vocal about it. Announcing the future if the market is likely to change it.
Honestly I think that’s what some crash predictors are trying to do. They’re long bitcoin or gold, or short the market, and if they can get everyone else to go along with them now, they’ll make money now.
Though this is not a failsafe solution, as the two have been often correlated lately. Also, it requires a crazy high risk tolerance.
The problem is that I worry any market crash would be associated with inflation in the current economic environment, so the old solution of going long on cash/usbonds doesn't seem viable to me anymore.
This may be never, or may not be on your time horizon. Be careful.
The other thing you're missing out on is cash dividends. It's not like "stock goes down I lose exactly the amount the stock goes down every time".
I would personally never recommend this investment strategy (100% Treasuries) under any circumstances. When evaluating risk, you have to consider that not making any money is also risky. Markets go up, markets go down. If markets evaporated (this has never happened) then your T-bills will be worthless because we'll be eating beans and freezing to death.
Don't make the mistake of thinking that skipping the crashes and surges are of equal weight. Even if you took all your money and invested at the very top of the market in 2007/2008 right before the crash, you'd have more money than you do now.
I hope this doesn't come across as mean-spirited. I genuinely want you and others to read this and of course have a discussion but also learn more about investing and risk/reward.
Please reach out if you want to chat. If you find this annoying or unhelpful I understand and wish you the best of luck.
1) I believe that the chance of a stock market crash within 2 years is greater than 50/50. That’s only a guess of course.
2) the downside of losing my life savings would be far more devastating than the upside of doubling them- the risk/reward profile is extremely asymmetrical.
3) the people who can trade the news fast will get out fast in the event of a crash, and the 401k people will be left holding the bag, which means that stock market volatility is essentially a way to transfer wealth from the middle class to the super wealthy. I’m not interested in that.
To be frank I wish that 401ks didn’t exist at all and the government just increased social security payments a certain percentage every year. If the economy is growing as fast as the payments then it shouldn’t be an issue right? The fact that I am essentially forced to play poker with my retirement account is very frustrating. The whole point of saving money for retirement is to reduce risk, it’s supposed to make me feel secure not give me one more thing to worry about.
But, my wife has all her 401k in stocks, so between the two of us we’re still split 50/50, so I guess I exaggerate when I say it’s all t bills.
So that’s my thinking.
Right. It's a guess. But it's no more good of a guess than the stock market won't crash. Just keep that in mind.
> 2) the downside of losing my life savings would be far more devastating than the upside of doubling them- the risk/reward profile is extremely asymmetrical.
Not sure how old you are, but if you're not near retirement age you wouldn't lose your life savings if you were invested in something like a total stock market index fund. If you lost all of your life savings, then the entire economy collapses (back to beans). Granted, it COULD be the case that the market crashes, say, 50% and doesn't recover for 20 or 30 years. But I think too many people have too much to lose, and it would likely require a total civilizational collapse. Think about it this way. The market didn't collapse to nothing during World War I or World War II or the Great Depression.
> 3) the people who can trade the news fast will get out fast in the event of a crash, and the 401k people will be left holding the bag, which means that stock market volatility is essentially a way to transfer wealth from the middle class to the super wealthy. I’m not interested in that.
I'm not sure I'm following but willing to listen. The 401k people just...don't sell their 401ks and if there is a crash then they just wait until valuations return, meanwhile continuing to invest and buy shares of companies at a discount and also reap dividends, share buybacks, and other vehicles that increase shareholder value. Volatility would be more of a concern if you are in retirement or near retirement (which you may be), because it it could cause a disruption in your retirement plans or cash flow.
> To be frank I wish that 401ks didn’t exist at all and the government just increased social security payments a certain percentage every year
Personally I'd never want this. I'd actually prefer we got rid of social security. The government over time has shown me that it is completely inept at funding these plans. The problem is that it seems people are also unwilling or uninterested in saving and investing. Social security is projected to be underfunded pretty much forever, and I doubt that the population has the appetite for continued increases in taxation to fund it. I'm not sure you could tax people enough to pay for it.
But the 401k is not really the same thing as social security and I think it's a bit of an apples-to-oranges comparison. All it is, is the government not taxing some of your income so you can invest it. It's a pretty great plan and many people across the world envy it.
The only other thing I'd say here is that you could check out The Little Book of Common Sense Investing [1] and see if that changes your approach. I'm willing to bet others on Hacker News would endorse it as a must-read in the personal finance space.
Another thing to look at if you want to stay in the treasury space are TIPS, or Treasury Inflation-Protected Securities [2].
[1]https://en.wikipedia.org/wiki/The_Little_Book_of_Common_Sens...
[2]https://www.investopedia.com/terms/t/tips.asp
How’d 100% treasuries do in your 401k over the same/similar time period?
Not sure I understand your perspective on “things”. Most physical things depreciate worse than the impact of inflation on cash.
I kind of follow this sentiment. One could also say earn no more than you need and focus the rest of your time on something valuable to you. One hour extra spent working probably does not equal to one hour less working in 5-10 year.
Inflation has been predicted since (at least) 2010:
> We believe the Federal Reserve's large-scale asset purchase plan (so-called "quantitative easing") should be reconsidered and discontinued. We do not believe such a plan is necessary or advisable under current circumstances. The planned asset purchases risk currency debasement and inflation, and we do not think they will achieve the Fed's objective of promoting employment.
* https://economics21.org/html/open-letter-ben-bernanke-287.ht...
Still waiting.
As a TL;DR, the price should stabilize around $100k after the current bullrun.
50% equities (where gains are derived)
25% gold (assumption that gold doesn't "crash")
25% cash (dry powder)
Trying to time the market typically results in smaller gains (larger losses) than just going with it. I think there are some overvalued sectors, but I'm overall pretty bullish. We might see a "true" crash if we uncover some fundamental flaw with the banking system.
* https://www.bogleheads.org/forum/viewtopic.php?t=265807
Investing only in the place you live, called "home country bias", is something to be avoided by everyone:
* https://www.vanguard.com/pdf/ISGGEB.pdf
* https://www.etf.com/sections/index-investor-corner/swedroe-h...
However, my original point was that assuming things will be golden forever (or at least a very long time) usually ends badly.
To your follow up on allocations, unlike the past, a large bond holding is unlikely to save you this time (very limited price appreciation potential) and could go the other way when under stress (liquidity issues, forced redemptions to cover equity losses). It is harder to hide than ever before.
Or the vaccines turn out to not be as good as we hope.
Or..
But consider that maybe the markets aren't the best place for value creation right now. The big economic question is M2 inflation. It's possible that the markets just flatline for twenty years to soak up all the money.
I'm long-term bullish BTC, but concerned about its mid-term (causal?) correlation with Tether.
I'm buying capital assets that inflate along with M2 and building productive assets that generate economic value, regardless of how that value is denominated.
WDYT?
Tether market cap is currently $24 billion and growing exponentially. BTC market cap is $700bn but that price is set on the margin by redditors buying $100 on a credit card, there is no depth to it. The Tether hypothesis is that ~all~ of the market cap of BTC is ultimately derived from thin marginal price on retail exchanges. You can't sell a billion of bitcoin for USD 1 billion, nobody has ever tried, there is not a buyer, and that's only .1% of the market cap. Any thin real cash in the ecosytem is exfiltrated by miners selling into retail to pay electricity bills. If Tether stops printing, retail stops buying, and there is no more cash for electric bills, network stops. This is both a game-over scenario for bitcoin as well as actually high likelyhood of happening due to action by US Government against Tether.
Illiquid markets tend to be more price sensitive to the decisions of the marginal buyer. This is most visible, IMO, in real estate where wealthy marginal bidders move comparable prices en masse on low volume.
Now let’s combine those ideas: if bitcoin is relatively illiquid and small group of wealthy buyers (banks, companies, other crypto assets) could issue treasury securities and roll the capital into BTC, what would we expect to see?
I think we’d see a big price run in an otherwise low-growth broader market.
This would tend to act as an M2 hedge for the early entrants and would be a very attractive move if their firm value was more or less “elastically attached” to the USD.
Reminder: citation needed.
Starting a company where you can change prices is a better inflation hedge, IMO.
Anything where the deal requires lock-in at a fixed denomination for an extended period of time is exposed to inflation risk.
That means:
- buying wholesale, selling retail
- buying commodities, selling products
- buying fixed assets, selling leases
As a long-time computer programmer and technologist my advice to my younger self would be, “sell things the market wants, not things you think are awesome.”
As long as work continues, there is still massive economical growth potential remaining as like half of the global population still barely participates.
I'm talking about a long-term crash(5+ years) btw. Minor dips don't matter in macro scale
There’s a lot of uncertainty. Diversify. Dollar-cost average your purchases and sales.
If you've got 10+ years, keep it mostly in stocks. If you need it sooner, keep it mostly in bonds. Trust in the power of compound interest.
Prefer assets that have a logical reason to go up based on history, not fancy. Businesses and governments pay back bonds from their revenue. Businesses are worth more over time from improvements in efficiency and scale which raises the stock market. Stay away from assets that are basically speculative (gold, crypto, oil, metals, real estate). History shows that speculative investments tend to just track inflation over time, but since they're noisier people can find all kinds of short term patterns to justify investing. Don't fall for it.
1. Hold cash, deploy at bottom. 2. Hold long dated s&p put options. Sell at bottom.
Problems with these strategies:
1. Where is the bottom?
I'd like to quote Buffer from his Berkshire Hathway 2013 shareholder letter
> Most investors, of course, have not made the study of business prospects a priority in their lives. If wise, they will conclude that they do not know enough about specific businesses to predict their future earning power.
> I have good news for these non-professionals: The typical investor doesn’t need this skill. In aggregate, American business has done wonderfully over time and will continue to do so (though, most assuredly, in unpredictable fits and starts). In the 20th Century, the Dow Jones Industrials index advanced from 66 to 11,497, paying a rising stream of dividends to boot. The 21st Century will witness further gains, almost certain to be substantial. The goal of the non-professional should not be to pick winners – neither he nor his “helpers” can do that – but should rather be to own a cross-section of businesses that in aggregate are bound to do well. A low-cost S&P 500 index fund will achieve this goal.
> That’s the “what” of investing for the non-professional. The “when” is also important. The main danger is that the timid or beginning investor will enter the market at a time of extreme exuberance and then become disillusioned when paper losses occur. (Remember the late Barton Biggs’ observation: “A bull market is like sex. It feels best just before it ends.”) The antidote to that kind of mistiming is for an investor to accumulate shares over a long period and never to sell when the news is bad and stocks are well off their highs. Following those rules, the “know-nothing” investor who both diversifies and keeps his costs minimal is virtually certain to get satisfactory results. Indeed, the unsophisticated investor who is realistic about his shortcomings is likely to obtain better long- term results than the knowledgeable professional who is blind to even a single weakness.
https://www.berkshirehathaway.com/letters/2013ltr.pdf