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Save like a pessimist, invest like an optimist

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Re: Save like a pessimist, invest like an optimist

#101

Post by skybrian »

el_nahual wrote: post #87

I'm a foreigner that's lived in the US since college. Half of my friends and family are american and the rest foreign. There's a huge cultural difference between both sides' approach to wealth. My american f&f (outside of silicon valley) think of wealth in terms of "saving for retirement." 401ks, tax strategies, etfs, stocks etc. It's very passive, probably "correct", and very unambitious. The foreign side is totally…

Interesting. In what countries would you say that being a boss is a common ambition, and what kinds of businesses do you mean?

Re: Save like a pessimist, invest like an optimist

#102

Post by Moodles »

loxs wrote: post #61
Moodles wrote: post #6

Earlier quoted context omitted.

I actually have a somewhat controversial opinion (that shouldn’t be controversial because it’s all math, but it still is regardless) that, after you save 5-6x your emergency fund, you don’t need an emergency fund at all and you’re better off investing it all in a total market index fund. The reason being that even if there is a market crash, you’ll still be able to afford the emergency since you’ve saved multiples of…

This sounds true if you only optimize for (hedge against) one risk only - stock market crash. To me, an emergency fund is a hedge against various different risks like these (I am guilty of not being prepared for all of them): 1. A pandemic. For this I was ready even before we thought it's indeed possible - I have funds in several different banks (debit cards) that allow me to not have to visit a bank physically for s…

purple goggles?

Re: Save like a pessimist, invest like an optimist

#103

Post by sokoloff »

Moodles wrote: post #93
sokoloff wrote: post #37

Earlier quoted context omitted.

That’s another use of margin. Invest 100% (but not more). Emergency hits and you can withdraw cash without selling stocks (up to a point).

I mean honestly, using a credit card for a month before interest hits is usually fine too? My credit limit is like 50k or something ridiculous across all my cards. Not to mention when all in on stocks you can sell for better long-term capital gains tax treatment or even tax loss harvest losses too, which you can't do with a savings account. And ETFs are actually pretty liquid: I can sell and withdraw in a few days if…

Yes, but then you need cash to pay off the credit card, which is cheaper to pull from your margin available than to let the credit card charge you interest.

Re: Save like a pessimist, invest like an optimist

#104

Post by akiselev »

el_nahual wrote: post #87

I'm a foreigner that's lived in the US since college. Half of my friends and family are american and the rest foreign. There's a huge cultural difference between both sides' approach to wealth. My american f&f (outside of silicon valley) think of wealth in terms of "saving for retirement." 401ks, tax strategies, etfs, stocks etc. It's very passive, probably "correct", and very unambitious. The foreign side is totally…

> This cultural difference is reflected in a desire to escape "wages" as soon as possible, not necessarily "save for retirement".

I don't think it has to do with that necessarily (at least in my cohort), it's just that many immigrants come from nations who haven't had stability in their financial systems, if they even had one to begin with. A business has tangible roots in a community and can generate revenue when there's a monetary collapse, which is much easier for someone to trust if they haven't grown up in a stable economy. My old country doesn't even have 30 year mortgages, for example. If it did, mortgages expiring now would have been signed right as the iron curtain was coming down, which drastically changed the Eastern bloc's financial systems almost over night.

Re: Save like a pessimist, invest like an optimist

#105

Post by paulryanrogers »

fennecfoxen wrote: post #100
yojo wrote: post #39

I’m skeptical of the closing claim that exponential growth keeps happening forever. Yes, you can grow GDP 2% for 200 years, that results in an economy 50x the start size. Expand it to 1000 years and you’re talking about an economy 400 million times as large. After 2100 years you’re up to an economy a QUINTILLION times as large. At some point the exponential curve has to go S-shaped. Maybe we’re still in the happy exp…

> At some point the exponential curve has to go S-shaped. In principle yes, of course. In practice, you are imagining a world in which we never expand our civilization into space and across the galaxy, because otherwise you would be looking at the S curve and thinking "wow, this thing has only just gotten started" and marveling at what lies ahead.

Our space-ward expansion has some hard physics limits. And we've not yet eclipsed what was already done decades ago. And even settling Mars will require more sustainable lifestyles than most first world citizens now enjoy.

Re: Save like a pessimist, invest like an optimist

#107

Post by dstick »

ericmay wrote: post #42
yojo wrote: post #39

I’m skeptical of the closing claim that exponential growth keeps happening forever. Yes, you can grow GDP 2% for 200 years, that results in an economy 50x the start size. Expand it to 1000 years and you’re talking about an economy 400 million times as large. After 2100 years you’re up to an economy a QUINTILLION times as large. At some point the exponential curve has to go S-shaped. Maybe we’re still in the happy exp…

Well, eventually what will happen is countries will disappear, wars will destroy things, and other events will wipe out economies, savings, or entire companies. The growth model will probably always be exponential, but from time to time things will reset to 0.

While I agree with your sentiment, how has this worked in the past? Did things reset to 0 during WW1 and 2?

Re: Save like a pessimist, invest like an optimist

#108

Post by zamfi »

dstick wrote: post #107
ericmay wrote: post #42

Earlier quoted context omitted.

Well, eventually what will happen is countries will disappear, wars will destroy things, and other events will wipe out economies, savings, or entire companies. The growth model will probably always be exponential, but from time to time things will reset to 0.

While I agree with your sentiment, how has this worked in the past? Did things reset to 0 during WW1 and 2?

In much of Europe and east Asia, yes! Germany and Japan in particular were bombed basically to 0...

Re: Save like a pessimist, invest like an optimist

#109

Post by darkerside »

el_nahual wrote: post #87

I'm a foreigner that's lived in the US since college. Half of my friends and family are american and the rest foreign. There's a huge cultural difference between both sides' approach to wealth. My american f&f (outside of silicon valley) think of wealth in terms of "saving for retirement." 401ks, tax strategies, etfs, stocks etc. It's very passive, probably "correct", and very unambitious. The foreign side is totally…

> The owner of a business with 200k in revenue is higher status than a McKinsey employee with a 500k salary.

What makes you say that?

Re: Save like a pessimist, invest like an optimist

#110

Post by xchaotic »

ivalm wrote: post #71
yojo wrote: post #57

Earlier quoted context omitted.

I threw out some numbers to set a baseline of “this can’t go on forever.” I don’t pretend to know when it starts to transition, or the speed of the transition. The fact that the rate of growth will someday slow means assumptions you make about your 401k may or may not hold if we happen to be at the wrong point on the curve.

But humans also don’t have infinite demand on production. If we have a sufficiently high amount of production per capita (ie we are post-scarcity) then growth becomes irrelevant (especially if overall population isn’t growing, which with current trends seems reasonable). At that point the only thing is to ensure that output distribution is sufficiently equitable. We can then have millions of years of stable happy hum…

The rich will not give away their stuff. You’d probably have to give away 90% of your wealth to be level with the rest of the world. Also it is communism and it doesn’t work in practice.
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