I'm Too Risk-Averse for Index Investing • Hacker News Board

Re: I'm Too Risk-Averse for Index Investing

#81

Post by scarface74 » Fri, Mar 18, 2022, 2:41 PM UTC

brightball wrote: post #8

impostervt wrote: post #2

Buying value stocks may be better than buying an index, but identifying value stocks is hard and time consuming. Wouldn't the average investor be better off buying index funds, since the average investor does not have the time, inclination, or training to find value stocks?

All completely true. The average investor should probably be using a financial advisor. One of the biggest reasons that most of these funds work is the volume of people in the US with 401k plans that have fund-only options. Every pay period the stocks in these funds get automatically purchased without many decisions involved so you're going to continue seeing them steadily and safely increase. Ultimately, investing b…

No one should be using a financial advisory unless they are a fiduciary who gets paid based on the amount of assets under management.

Most people don’t need a financial advisor when they are in the accumulation phase. After paying off high interest debt, save 3-6 months in retirement, put as much as you can in an index fund or a target date fund in a 401K and call it a day.

Most people can’t afford to max out their retirement plans. After you do that, then a fiduciary advisor might come in handy.

Re: I'm Too Risk-Averse for Index Investing

#82

Post by lordnacho » Fri, Mar 18, 2022, 2:43 PM UTC

joosters wrote: post #12

You can't look at a chart of an index price and simply say "it's down from the peak, I would have lost money". If you do that, you are forgetting that stocks pay dividends, and they aren't included in the index price. Instead, you should be looking at index tracking fund / ETF prices, which will include the value of dividends (and also account for fees).

If you have a Bloomberg terminal, you can look up the corresponding total return indices. German DAX is a rare example of a total return index IIRC.

I don't think it changes his conclusions much, the indices can easily fluctuate by more than what you bank in dividends.

Re: I'm Too Risk-Averse for Index Investing

#83

Post by throw0101a » Fri, Mar 18, 2022, 2:43 PM UTC

dbsmith83 wrote: post #4

impostervt wrote: post #2

Buying value stocks may be better than buying an index, but identifying value stocks is hard and time consuming. Wouldn't the average investor be better off buying index funds, since the average investor does not have the time, inclination, or training to find value stocks?

You can always just let someone else do the research and buy shares of Berkshire Hathaway

Berkshire Hathaway has under-performed the S&P 500 for >10 years now. And one of the main reasons why they're doing so well at all is probably because they have a sizeable holding of AAPL.

Re: I'm Too Risk-Averse for Index Investing

#84

Post by scarface74 » Fri, Mar 18, 2022, 2:43 PM UTC

assbuttbuttass wrote: post #15

There's something really insidious about tying 401ks and other retirement accounts to the stock market. People including myself end up with a large portion of our assets essentially gambled on the future success of US corporations. It gives some false legitimacy to this idea that our media is constantly pushing, that if the stock market is going well then regular Americans are doing well.

Do you have an alternative? Would you trust the government to manage it?

Re: I'm Too Risk-Averse for Index Investing

#85

Post by batshit_beaver » Fri, Mar 18, 2022, 2:43 PM UTC

JKCalhoun wrote: post #54

awillen wrote: post #49

Earlier quoted context omitted.

But how do you fund higher guaranteed social security? You need more money, which means either higher taxes or more people earning taxable money. The speed of population growth is declining, which is a big problem for the latter, and the former clearly has its limits. You're saying stocks are a Ponzi scheme, but as a solution you're proposing something that constantly needs more people paying in money or it will coll…

Agree with you. To be sure government and our Corporate overlords have demurred responsibility and put retirement planning on the backs of us clueless workers. But every other proposal sounds worse or unworkable.

Name a non Northern-european country that does retirement better than US.

Re: I'm Too Risk-Averse for Index Investing

#86

Post by erehweb » Fri, Mar 18, 2022, 2:44 PM UTC

On the one hand, it seems reasonable that you could do better than average by doing some value investing. On the other hand, if you had done that, you'd have missed out on the big gains in Gamestop and AMC. Would you do better by constructing a portfolio that excludes them, now we know they're meme stocks? Maybe, but they're not that big, so any gains you get by excluding them are going to be minimal. And now they have enough money to diversify and perhaps turn things around and justify their value. Better to just buy the index.

Re: I'm Too Risk-Averse for Index Investing

#87

Post by drcongo » Fri, Mar 18, 2022, 2:44 PM UTC

politelemon wrote: post #59

k2enemy wrote: post #47

Earlier quoted context omitted.

I spent half the article trying to figure out if it was some kind of clever pun. But no, they are just using the wrong word.

The word they chose was averse one

Much verse

Re: I'm Too Risk-Averse for Index Investing

#88

Post by scarface74 » Fri, Mar 18, 2022, 2:45 PM UTC

eatsyourtacos wrote: post #39

assbuttbuttass wrote: post #15

There's something really insidious about tying 401ks and other retirement accounts to the stock market. People including myself end up with a large portion of our assets essentially gambled on the future success of US corporations. It gives some false legitimacy to this idea that our media is constantly pushing, that if the stock market is going well then regular Americans are doing well.

This is 1000000% true. The entire system is completely broken. It is literally designed to make the markets keep going up, which as usual benefits the wealthy far more than the average person. And people who are even middle class barely really benefit from it. While the lower class and poor don't benefit at all. I choose not to participate in "investing" because it's not investing. It's literally gambling. You can't…

You mean “guaranteed social security” by a government that keeps borrowing more money and spending social security funds just as they do regular tax income?

You have a lot more faith in our government than I do.

If you choose not to invest, do you keep all of your money in a savings account that loses value to inflation?

Re: I'm Too Risk-Averse for Index Investing

#89

Post by satellite2 » Fri, Mar 18, 2022, 2:46 PM UTC

All the indices he is comparing the USA to (Japan, France, etc...) are not total return index. The S&P500 is total return (includes reinvesting the dividends). If you take the total return version of those indices, they also look exponential (but with less return than the US). So I'm not sure his point stands.

Re: I'm Too Risk-Averse for Index Investing

#90

Post by tommiegannert » Fri, Mar 18, 2022, 2:47 PM UTC

1. Invest your money. Ownership is important. Owning a private business might be best, but the public market is less work.

2. Think about how much time you want to spend on anything more complicated than stocks and cash. Three-fund portfolio? Individual stocks? Which ones? Compare the opportunity cost of you spending that time compared to something else.

3. Read https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3805927 from last year [1], and realize that a 25 year old book was based on bad data. It might be true that stocks outperform bonds right now, but that's not the whole history. It also seems to confirm that all correlations go towards 1 in crises.

I'm at (3). Not sure what (4) is, but I'm sure (5) is "Profit!!!"

[1] Credit to https://dumbwealth.com/2021/06/23/bonds-for-the-long-run/ for introducing me to the paper.