Reading HN comments about the stock market is like listening to a bunch of MBAs talk about software engineering.
I'm Too Risk-Averse for Index Investing
141–150 of 286 posts
Re: I'm Too Risk-Averse for Index Investing
#142[deleted]
Re: I'm Too Risk-Averse for Index Investing
#143Many international companies trade in U.S. public markets, even if they are foreign. Like the dollar, the U.S. stock exchanges are to some extent the international exchanges.
Re: I'm Too Risk-Averse for Index Investing
#144There'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…
> 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.
Yes and no. Inflation/markets going up is a way to prevent boomers/gen X from sitting on stacks of money hidden away as a rainy day fund. It does benefit newer generation as it allows them to be paid more than their parents and give them access to credit to do stuff like buy houses.
You want markets to keep going up, there is nothing good about deflation.
> I choose not to participate in "investing" because it's not investing. It's literally gambling. You can't control what a company does. You can't control if a pandemic hits just when you want to retire and your assets as cut in half.
You need to transition your assets progressively as you get older. If you hit 60 years old and your assets are still only in the S&P500 index then you have failed to diversify and yes, your high-risk portfolio is still high-risk. That's not gambling, that's poor planning. There are securities that can offer a lot more stability, at the cost of smaller overall returns.
> Instead of real retirement plans, higher guaranteed social security.. they have shifted nearly all the risk to the individuals and essentially forced them to just put money in the markets which artificially inflate the value of everything.
I've already addressed this above.
> And they just hope the ponzi scheme continues.
The stock market is not a Ponzi. The profits of the companies are what you are buying when taking a share of said company. It's an overall straightforward understanding. If you don't want to speculate on higher-risk assets such as tech stocks, you can buy banking/industrial/natural resources stocks which usually pay dividend based on their revenues.
Re: I'm Too Risk-Averse for Index Investing
#145Go to Fidelity.com and search for VTV (Vanguard Value Index Funds) Plot the stock price then select compare to SP500. You can select 1 year, 2 year, 5 year, 10 year, Max range What will you find? For all of those ranges SP500 outperformed VTV. The longer the the period, the larger the margin. As an example over 10 years SP500 went up 220% VTV went up 160% Now your choice is to trust paranoidvalueinvestor.substack.com…
Your time range is not long enough and it too skewed to a small number of companies that are dominating the sp500. For all of those espousing value investing in this HN discussion, try to read this pay-walled WSJ article one or another: https://www.wsj.com/articles/how-to-understand-this-crazy-ye...
Re: I'm Too Risk-Averse for Index Investing
#146Earlier quoted context omitted.
That depends on which country you live in. In my country (The Netherlands) you pay a fixed percentage of the value of your portfolio. Dividends are not taxed.
> Dividends are not taxed. I wish. But no, dividends are taxed: https://www.belastingdienst.nl/wps/wcm/connect/bldcontentnl/... What you probably miss is that dividend tax for non substantial holdings (less than 5% of the total stock) is withheld before being paid out.
and you have to care about where the index fund is domiciled. Otherwise you get dividend leakage. Some Vanguards are domiciled in Reland where 30% of dividends are withheld as taxes even though we need to pay just 15%. It might be difficult to get the difference back
Re: I'm Too Risk-Averse for Index Investing
#147If you assume that a bad bear market is a 40% drawdown, and since 2009 the S&P 500 has gained 20% on a good year, you only need just 2 good years or a mixture of some good and mediocre years to offset a bear market. So this means staying out of the market even for just 2-4 years may mean never having the chance to buy back at a lower price even in a bear market. Indeed, the market crashed in early 2020 due to Covid b…
> If you assume that a bad bear market is a 40% drawdown, and since 2009 the S&P 500 has gained 20% on a good year, you only need just 2 good years or a mixture of some good and mediocre years to offset a bear market.
This is one of the most basic mathematical errors you can make...
100 - (100 * 0.4) = 60
60 + (60 * 0.2) = 72 + (72 * 0.2) = 86.4
Re: I'm Too Risk-Averse for Index Investing
#148There'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.
> There's something really insidious about tying 401ks and other retirement accounts to the stock market. Insidious? That’s a bit rich. You can allocate money in your 401k however you want. It’s self-directed. If you don’t like stocks keep it in bonds or cash.
Most 401(k)s have around 20 options at most (of which half or more will be target date funds). My current employer's 401(k) steals $4.33/month from my account for management fees which is on top of the management fees for the individual funds' management fees.
Re: I'm Too Risk-Averse for Index Investing
#149Earlier 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…
>But how do you fund higher guaranteed social security? Did we forget we just changed the corporate tax rate from 35% to like 22%? We stop taxing self employed people social security/medicare after about ~140k.. where many crazy rich people make WAY more than that, so they could continue to contribute a hell of a lot of income. We have an insanity of tax loopholes.. including long-term capital gains which just incent…
I'm honestly not sure you understand what a Ponzi scheme is - it's when people at the bottom have to keep putting more money in to pay out people at the top. As you put it "tax people more, more money goes in, more money can go out." Exactly - you have to keep continually getting money from the people at the bottom (employees) via taxes to pay out to the people at the top (retirees). If you stop getting new money in the bottom, it collapses. If it collapses, people at the bottom get screwed. There is no way for a person at the bottom to make money unless more people come in beneath them.
You're describing fluctuations in the market as making it a Ponzi scheme, and you say "Money can literally disappear in that kind of system." That is incorrect. Money doesn't disappear when stock prices go down - stocks prices change based on people buying and selling. If you buy stock, your money gets transferred to the person selling it. Money doesn't disappear.
Re: I'm Too Risk-Averse for Index Investing
#150You 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.
All accumulating ETFs track total return indices. They are not usually talked about so much, but all index providers have provide total return indices.