Comment by JKCalhoun
2 months ago
> They expect the problem to worsen. The stock market has climbed 23% this year...
The problem will resolve itself if (when?) the market crashes.
I remember the run up to the dot-com bust. I was too much of a bumpkin at the time to even know how I would trade stocks — but I listened to an acquaintance go on and on about how much he was making on the market.
At the time I guessed that he was much smarter than me — that it would take me years to become as investment-savvy as this guy was.
In time, especially after the next bubble in 2008 when I had become more savvy, I came to see this guy as having been in the market at a time when even a monkey throwing darts could look like Warren Buffet.
So too I think are many of today's investors. (I would include myself but perhaps not: I have been won over by Boglism, a balanced portfolio, infrequent trading, etc.)
The problem is that I have been seeing some version of the “crash imminent, sell everything” thesis for my entire life. Almost nobody who “saw the crash coming” in the case of the dotcom bubble, or covid, or the subprime crisis made any money, because almost nobody gets the timing or magnitude of the crash right. You can find YouTube channels that have been warning people that a crash is imminent for the last two years. If you had been out of the market for the last two years you would have missed historical gains, and for what? The magnitude of the crash you’re protecting yourself from would now have to be impractically huge for you to come out ahead.
Much better to just stay in the market, knowing that there will be crashes and you will have days where the numbers look awful, because they’ll look great again in a few years.
Agreed this sort of advice is standard - but many people don’t follow it because it’s boring.
One way to make this sort of advice “not boring” is to apply the advice to 90% of your net worth (or cash flow), but then give yourself permission to “gamble” with the other 10%.
For me, that has fulfilled my personal interest in playing around in the markets for fun while still building/growing a traditional “safe” portfolio at the same time.
This is the way. Boring is, well, boring. Slice off some small percentage to do high risk investments with to sate your FOMO. Buy GME, sell it for Doge, and short TSLA with that pool after inhaling too much r/WSB because you want to think you're a genius.
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I remember at one point a couple years ago, I saw a thread on the Bogleheads forum where people could basically call their shot on market crashes; they would post and timestamp when they exited the market and when they re-entered, so that people could go and calculate if the timing was correct or if they lost money by missing out on market growth.
I might not have the dates correct, but I remember the general strokes of one guy who decided in like 2017 or something that the market had topped out, the crash was coming any moment now, and he sold everything and called his shot. He missed out on three years of incredible gains, and then the market absolutely _crashed_ in early 2020. He got it right, by a very small amount; he had gotten more selling his positions than he would have gotten selling in march 2020. He buys back in at what ended up being the absolute nadir of the market in like april 2020 or something. The rare success story of timing the market, you love to see it.
And then a few days later, he decides that actually, no, the market still has more to drop, and he sells again. Oh well.
> He buys back in at what ended up being the absolute nadir of the market in like april 2020 or something. The rare success story of timing the market, you love to see it.
The stock market usually goes down faster than it goes up, which makes it slightly easier (well, less difficult anyway) to time the bottoms than to time the tops.
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Yes, the problem with market timing is it requires two decisions that for the marginal investor are inconsistent. That's why people who sell at a high fail to reenter at a low, and also why people who stay invested at the high remain fully invested long after prices revert to a much lower level.
This suggests the answer is... fundamental analysis, which neither camp is doing.....
This is the reason dollar-cost-averaging works. You buy less (shares) when the market is high, and more when it is low, without thinking about it and without trying to "time" your transactions (which almost always fails unless you have inside info).
It works in a sense of not timing the market. Lump sum beats dollar-cost averaging - because you have more time in market.
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If dollar-cost-averaging is so great, why don't professional asset managers use this strategy? (Hint: They don't.) I think dollar-cost-averaging is an idea promoted to non-professional investors to help them manage the psychological burden of (initial) paper losses after making an investment. Assuming that very short term stock market performance is essentially random (long term: it is not), then the day after you make an investment is roughly 50/50: Am I up or down? Recall: The human brain wants to avoid losses much more than gains.
Please everyone note that there is a long-standing and somewhat pointless argument over whether or not DCA means “regular monthly contributions” versus “taking a lump sum contribution and dividing it up into contributions over time”.
Strictly speaking time in the market beats timing in the market. If you have a lump sum, the theoretically best option is to put it into an index fund today.
Most people in most situations don’t have one lump sum to invest, so recurrent monthly contributions to retirement accounts is the way to go (and what OP here is advocating).
So what you're saying is you avoid timing the market (which doesn't work) by timing when you buy shares? What?
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Dollar cost averaging does not work and has never worked. Because most assets have unlimited upside and unlimited downside. A stock or asset can go ballistic for decades like Apple or Bitcoin, or it can fall to zero value.
There are no mathematical ways of winning investing. If it was that easy, everybody would do it. You can only follow your heart and do your due diligence.
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The risk of a crash is why you stay out of single stock concentration and why you avoid day trading. Its not an argument to stay out of the market.
What do you think is the root cause for this kind of thinking? It is hard-wired from childhood, or borne of (difficult) experiences?
This assumes that you are talking about the US stock market. Most other stock markets are far slower to recover from economic downturns and crises. Why? Their economies are less dynamic and their political leaders are more fearful of difficult (economic policy) changes.
Lastly: The Nikkei 225 (Japan's most important equity index) peaked in 1990, then took 30+ years to recover.
Also: Look at Mainland China since it was opened to (direct) foreign investment in the last 15 years. Overall: The Mainland China economy has grown a lot, but their stock market is a terrible place to invest.
`What do you think is the root cause for this kind of thinking?`
It's probably quite advantageous to have some individuals irrationally hedging against catastrophe--even though they are likely to be wrong, when one of them is very occasionally right the humans survive.
I assume PP means they are staying out of leveraged bets and risky individual stocks.
Generally the saw it coming crowd is just sticking it in diversified index and bond funds and doing other things.
I just always buy and never sell until the leadership and the board of the company appear to be going full retard. And not in a good way like Netflix pivoting to streaming in 2006 but like HP in 2006. Haha.
What was the last sell you did?
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The market is people making bets on bubbles and crashes. That's how we get prices.
At any point or during any stretch of time, one of these sides will be correct.
Your point is that patience and discipline, not panic or overconfidence, are the real superpowers in investing
The Gov't / Federal Reserve has made it clear they will not let the value of assets drop significantly ever again. The entire planet's capital is now betting on US equities going up and to right forever, and all levers will be used and invented wholesale from nothing to keep that going.
The federal reserve literally just got through a monetary tightening policy that paid zero regard to the stock market.
The fed will juice to keep employment up and tighten to keep inflation down. They will not support stocks at the expense of those mandates
We're dealing with people who interpret the words "price stability" to mean "prices should increase exponentially, we'd consider it a serious problem if they stayed level". It seems a bit of a stretch to go from that to believing that their mandate constrains them somehow. Their mandate can be interpreted to mean whatever they want it to mean. They're a political beast, they're going to do whatever they can get away with politically while making life comfortable for the banks.
And I'd imagine the stock market is still fairly confident that rates are going back down. If we look at a chart of fed interest rates [0] the statistical evidence suggests we're going to see low rates in the near future. It'd be nice to buck the trend and have the US stay focused on prosperity but there isn't much evidence of it yet. The basic plan of high debt then inflating the debt away hasn't changed.
[0] https://fred.stlouisfed.org/series/fedfunds
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At some point though something will happen such that they can’t keep their fist on the scale, and then the market can correct suddenly.
Unfortunately government intervention makes it even more unpredictable when that will be.
This implies that a sustained crash will only happen if/when these two institutions are no longer capable of supporting the market. In effect, it's a bet against the US, which so far has been a losing one.
There's more to assets than US equities, the Fed would be far more concerned with serious weakness in the Treasury market, and Treasuries often move inverse of US equities.
I wonder if this sets up a moral hazard that only exacerbates a possibly coming crash. People assume the Fed will prevent assets from dropping, which makes them bid up asset prices to even higher levels that even the Fed is incapable of maintaining.
Yea, except the inflation we encountered in the last 3 years were directly from trying to keep asset values from dropping. They are at their ropes end. There really isn't that much room between mass inflation vs. the rich keeping their numbers infinity growing.
That’s a fundamental misunderstanding of asset prices vs interest rates.
Exactly. The "crash" can happen via exploding inflation, or falling markets. Either way results in the same thing.
Certainly hope they’ll keep going to the right…
> At the time I guessed that he was much smarter than me — that it would take me years to become as investment-savvy as this guy was.
You lucked out by mistakingly believing he was intelligent. The classic scenario is when your neighbor is obviously an idiot, making tremendous amounts of money in the market, and you have to explain to your spouse why you can't/won't emulate them. That's when even bright, (normally) level-headed people start piling in before the bubble bursts.
Indeed, most frustrating is when someone (stupid) is proven right, even though they used completely wrong reasoning (in spirit of Gettier problem).
There’s a common saying in the investing world that applies here: “confusing strategy with outcome.” The outcome may be good, as it was in this case, even though the strategy was terrible. But most people get them confused and think it’s the strategy (going all in on bitcoin or TSLA options or whatever) that was good and won them their riches.
> The problem will resolve itself if (when?) the market crashes.
Someone said something like, Everyone thinks they're a genius, when the market only goes up.
Although, one thing different now is the heavy throughout-the-day manipulation of retail investors, effectively making strong social groups and identities around it.
That wasn't a thing when, say, ETrade started, and lots of people dabbled, and found it was hard to lose money, just trading around different companies, with little understanding of how things even supposedly work, much less how things actually worked.
Today, from what I occasionally glimpse, you've got all these supposed skills you're applying as a retail investor/sheep/pawn (including various degrees of snake oil, or thinking you're going to be one of the smarter people on a pump/dump scheme that leaves others holding the bag), and constant social groups where people even self-deprecatingly celebrate huge day-trading losses. Like a wholesome support group that actively encourages you to stick with the bad habit, rather than encourages you to stay sober.
So maybe, when the next big culling comes, you'll have lots of people who can somehow still get margin accounts, and will say, "Blood in the streets, and I'm missing 3 limbs, but, hey, stocks are on sale!" And a thundering chorus of other addicts, and their manipulators, encouraging them.
(Disclosures: S&P 500 ETF with low expense ratio in tax-advantaged, plus an emergency fund that goes nowhere near the market. :)
I've yet to really land on my opinion of the idea of a pending market crash with how much money printing has gone on.
All the standard indicators I look at really line up with the idea that a crash should be coming, or should already have happened. Companies aren't valued based on the fundamentals anymore, for example, and yet here we are.
Its starting to feel more like the perpetually increasing market, despite the fundamentals, is a sign of how weak printing and inflation is making the dollar. Stocks can go up when the companies are worth more (ideally because they are producing more), but prices can also go up because the currency used to value the stocks is taking a serious hit.
The worst is the crypto gamblers thinking they are "investing". If they make even the smallest profit you'll never hear the end of it.
>> They expect the problem to worsen. The stock market has climbed 23% this year... > >The problem will resolve itself if (when?) the market crashes.
This sounds like a terrible way to "solve" the problem
This is easy to say but the reality is being a monkey and throwing money in the market over the last 15 years would have made you f u money. Yet most people never did it. So who is the genius: the guy who remains on the sidelines and eventually is proved right or the guy who remained in the market and did face a brutal correction. One thing I've learned about myself is that I'll never be the guy on the right end of that mid curve meme so I might as well lean in on being on the left.
I've worked as a software engineer for various investment banks. The best quote and investment advice I've heard on those engagements is "Only monkey's pick bottoms"
Middle of the road, risk managed funds are our best chance of financial success, not individually predicting the market dynamics.
A market crash won’t be a silver bullet. I’ve known several gambling addicts and that’s not how addiction works. They don’t just stop because they lose a bunch of money. They always hold out hope they’ll be able to win everything back “next time”.
The SPY and QQQ charts zoomed out are starting to look like the biggest parabola of all time in markets. 1999 is just a blip on this monster.
Seeing all kinds of warning signs from family members who never traded or got into crypto until just this past 6 months.
Change the chart to logarithmic scaling. You need to use log scaling for long term stock market charts
The dotcom crash was huge in terms of the percentage drop
Nasdaq crashed 84%.
https://www.tradingview.com/x/xm2zypvg/
> Seeing all kinds of warning signs from family members who never traded or got into crypto until just this past 6 months.
That's just jealousy, Those who sit on the sidelines complain the most. Like I said in my previous post if you didn't see it. I see it as that the barrier to entry for making money has never been lower. Right now, it’s one of the best times in history for anyone to start earning, not just the Wall Street elites. Thanks to AI tools and online platforms, it’s easier than ever. Every week, new tools are being launched, some even claiming returns as high as 400%. Take the NexusTrade guy on Reddit as an example. He created his own investment tool and is now in conversations with Wall Street professionals.
It’s so accessible now that with just $100, you could invest in a stock like NVIDIA, double your money in a week, then reinvest across multiple stocks and multiply it again. Suddenly, $100 turns into $2,500 in no time.
I get your point about everyone making money, but why is that a bad thing? Isn’t it great that anyone can do it? These platforms are practically making money for you, whether you’re at work, at home, or even asleep. Like someone once said, “If you can’t make money while you sleep, you’ll work until you die.”
It’s never been easier to earn significant amounts of money, and it doesn’t look like this trend is slowing down anytime soon.
> you could invest in a stock like NVIDIA, double your money in a week
NASDAQ: NVDA (3.09%) past month
I thought people HN know better than random "traders" on reddit/YouTube/TikTok
Chat Jippity is that you?
Personally I got into this when the stock market crashed in 2020 and I made shit loads. There are big winners during crashes too, some of the biggest wins.
Yeah currently young adults are screwed when it comes to gambling addiction.
They were children in the heyday of abusive loot boxes and cs go gambling.
Turned 18 right around when sports betting apps became legal.
In their early 20s crypto exploded.
Now, apps like yotta prey on them. Stock trading apps make it easy to dump your money on tsla.
Is going to be rough
I have to disagree with you. Comparing long-term, passive investors to short-term speculators seems unfair and simplistic to me.
I thought we were talking exclusively about short-term speculators.
Oh? Perhaps I misunderstood when you said "infrequent trading".
I'm also wondering why I'm getting downvoted but this is the Internet for me :)
Illusion of genius
[dead]
I see it as that the barrier to entry for making money has never been lower. Right now, it’s one of the best times in history for anyone to start earning, not just the Wall Street elites. Thanks to AI tools and online platforms, it’s easier than ever. Every week, new tools are being launched, some even claiming returns as high as 400%.
Take the NexusTrade guy on Reddit as an example. He created his own investment tool and is now in conversations with Wall Street professionals.
It’s so accessible now that with just $100, you could invest in a stock like NVIDIA, double your money in a week, then reinvest across multiple stocks and multiply it again. Suddenly, $100 turns into $2,500 in no time.
I get your point about everyone making money, but why is that a bad thing? Isn’t it great that anyone can do it? These platforms are practically making money for you, whether you’re at work, at home, or even asleep. Like someone once said, “If you can’t make money while you sleep, you’ll work until you die.”
It’s never been easier to earn significant amounts of money, and it doesn’t look like this trend is slowing down anytime soon.
You could also have invested in SMCI at its high of $113. it's now down at $34.