/biz/ - Business & Finance

>>12184049
For the average joe, yes.

Its not risk free but the probability of permanant capital loss decreases based on a lower price paid for your ETF and a longer holding period.

Is it redpilled? Well if you just want to save for a comfy retirement, sure but you won't get rich.

>>12184049
This is what I have been trying to figure out lately. So far I'm leaning towards the idea that buy and hold can fuck you over if there is a long term downtrend.

https://realinvestmentadvice.com/the-myths-of-stocks-for-the-long-run-part-i/

>>12184084
Yes, like I said it depends on the price you pay compared to underlying value (which is a function of unpredictable long term trends). Its much easier to assess risk/reward in a single stock than the entire index. If interest rates are mostly <4% for the next 30 years, stocks are cheap.

>>12184098
A single stock may be easier to assess, but that's still an extremely risky play. Even the Amazon's of the world got destroyed in the dot com bubble. I've tried picking individual stocks before and I'm terrible at it.

It seems like stocks are pretty high right now based on things like the Shiller PE.
http://www.multpl.com/shiller-pe/

>>12184084
If you're buying consistently over time then most of your money is still up even during long term downtrends, but that guy's graphs ignore that fact. He just looks at it as if all the money was put in at the peak.

Play around with different values on https://www.firecalc.com and you'll see how well the buy and hold strategy actually works for the long term at different points in history.

>>12184049
I would diversify more than just the s&p500, but its a relatively safe way to build up net worth over time

>>12184049
how likely is it for the american stock market to get nikkei minajed though?

>>12184084
Even his own picture shows exponential growth once you include dividend returns

>>12184459

>>12184049
Vti nigga

Equity markets are essentially dumping ground for "smart money" (VC / PE / Family Office). For average Joe, unless an Apple or Google wave was caught early, it's hard to make substantial wealth and loss of capital is likely as you don't have informational asymmetry enjoyed by institutional investors or HNIs. Thus it's hard to value equities in general (retail level) unless it pays dividends.

Thus beyond broad ETFs, a good strategy may be -

1. 10%-15%: BioTech / Solid Crypto ("make-it or break it")
2. 90%-85%: Dividend-paying bluechips with strong competitive advantages (aristocrates) + some niche (recession-proof: agedcare / childcare etc.) equity REITs
3. Reinvest dividends and push a small part to #1 (bioTech / Crypto).

Other than this, without dividends, investing in most of the micro/small-cap/mid-cap is basically gambling.

>>12184438
youch pic related

>>12184468
>Loses
Yeah, not about to take advice from that guy.

what is a mutual fund and will investing in it save me when we turn to cannibalism

>>12184084
>person involved in financial management and active funds tells people not to invest passively

huh really niggled my noggin there

>>12184049
invest globally, done right it barely affects returns and lowers volatility
https://www.bogleheads.org/wiki/Three-fund_portfolio
>>12184438
the stock markets take a 50% dump every 20 years on average.
even then what you should actually be worried about is missing out on another market passing the S&P in growth.

>>12184049

This is unironically THE way to invest, and none of the idiots on this board understand that. It's so fucking easy to get rich and takes no luck or skill, just discipline.

The vast majority of traders aren't profitable, and the ones that are rarely beat the S&P 500 long term. Plus you spend your life stressed af watching squiggly lines on your computer monitor. Oh, and you're a brainlet, but refuse to admit it, so you don't realize you're just fish food for actual people who know what the fuck they're doing.

The other hidden secret: you get to live your fucking life. Another giant crash? Who fucking cares, just keep investing. You don't have to worry about this shit, you can go have fun and enjoy yourself.

>>12184766
Thats probably because <1% of retail investors and <5% of institutional investors know how to properly value a company.

That being said, trying to making sustainably achieving above average returns in public equities is extremely difficult even if you can value companies properly. You're much better off focusing on small businesses, microcaps if you want to generate alpha. Generally the more complicated the deal, the better the opportunities.

Buying a distressed gas station in your area for 1/3 of its calculated intrinsic value is more likely to provide you >20% returns than trying to intellectually jerk off against the massive investment community whether GE is worth $9/share or $12/share.

At the end of the day, its much easier to outperform the market as a Ukrainian landlord than speculating on ultra high end Manhattan Real Estate.

>>12184079

>sure but you won't get rich

yeah but you probably won't get JUST'ed either and lose 99%

>>12184948
>Thats probably because <1% of retail investors and <5% of institutional investors know how to properly value a company.
lots of institutional investors know how to do their jobs properly, but the index is the average of everybody's performance. if you want to do better than average it's not enough to do a good job, you have to consistently do a better job than everybody else.
there's a reason why the number of "genius" investors are no larger than what you would expect from chance.

>>12184766
>tfw scientist
>tfw know I'm not high iq enough to invest on my own
>tfw just invest via S&P500 index funds
>tfw don't even care about muh gainz because it's the dividends I care about.
>tfw never going to retire because I love my career (How I feel currently, may change when I become old af)

>>12184371
Here's a graph comparing buy and hold vs moving out of the market whenever the S&P 500 declines below the 12-month moving average. Both start with $100k and add $625 a month. It's adjusted for inflation and dividends. A decade long period of no growth will completely wreck you.

>>12184468
Most investors don't have that long of a time frame. If you have say 30 solid years to invest, 13 years of no growth would fuck you.

>>12186111
You are hoping to roll good RNG when you withdraw. It's gambling at the end of the day and those dips cant be predicted.

yes of course.

the stock market will compound forever.

>>12186111
I'd be way more skeptical of that blog post. there's a much larger body of research showing that timing the market isn't effective. and it's not that hard to find a strategy that works retroactively.
>>12186125
that graph isn't showing 13 years of no growth, it's 13 years to get back to even. unless you're investing in a single lump sum, your regular contributions are growing at a decent rate.

>>12186207
I agree you can't call everything correctly, but what you're trying to do is find the long term trend. If the market starts to move up you can get back in. You don't have to be right 100% of the time.

Maybe there are better methods than what he showed in that example, but it's hard for me to accept that there is no way to deal with the inevitable long term bear market. I learned my lesson about hodl in crypto.

>>12186301
exponential DCA. you buy increasingly more the more down the market is.

>>12186267
>I'd be way more skeptical of that blog post. there's a much larger body of research showing that timing the market isn't effective. and it's not that hard to find a strategy that works retroactively.
I will keep researching, maybe you are right.

>that graph isn't showing 13 years of no growth, it's 13 years to get back to even. unless you're investing in a single lump sum, your regular contributions are growing at a decent rate.
Sure, you could be doing okay if you have your money in other places, but if you're 60/40 stocks like a lot of people recommend it's still going to be ugly. A period like that will end a ton of retirement hopes.

>>12186308
Is that a real thing that people recommend? I wouldn't have the cash for it anyway.

>>12186342
even if you invest right before the crash, buy and hold still averages out to ~7-10% growth over the long run. timing on the other hand risks missing out on growth altogether along with side stepping market losses, statistically you're no better off.
and market timing is something a lot of people spend a lot of money trying to figure out. and there's no evidence a single method can reliably pull it off.
https://awealthofcommonsense.com/2014/02/worlds-worst-market-timer/
>>12186357
lump sum, or investing as soon as possible is statistically your best bet, but most people aren't comfortable with it.

>>12184049
>is it risk free?
No. The stock market is capable of going down and staying down for decades. For example, Japan's Nikkei 225 index still hasn't re-achieved the highs it set back in the 1980s.

>redpilled?
Fuck no, it is an extremely normie investment. The only investment that is even bluer pilled would be a mutual fund with a stock/bond mix that auto-balances based on your age.

>is passively investing in the S&P 500 and holding for 40+ years the best way for average joes to invest?
No, but it is a damn good one. You could reduce your risk without sacrificing much in the way of gains by diversifying into international and mid-cap stocks. You may also want to consider diversifying into bonds if your risk tolerance drops as you age.

Look at using options for setting up collar strategies, you can manage it yourself and limit your risk to only 2-5% of your investment while still being able to collect dividends. At this point, most of the risk is credit risk - whether or not the company is able to remain solvent.

Also check out gold/silver mines. When the dollar hyperinflates from QE4, mine valuations go up in multiples.