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Comment by mancerayder

2 months ago

I agree.

I think the reality is the "don't try to be smart, do these low-risk things because statistically you're too stupid to beat the market" has logic to it, and stats to back it up. But the unspoken part is, "let the rich do that stuff, and their wealth advisors and folks on the golf courses".

So there's an elitist aspect to telling people to back off. We all know people who made a killing on individual stocks, either because they bought them or they worked at a company that issued them.

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mancerayder

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joshlemer  2 months ago

It's not really elitist. Picking individual stocks is essentially saying "I have brand new insight that nobody else has, and I'm going to earn profit by incorporating that knowledge into prices and be rewarded forgetting it right". This is clearly a very specialized activity, you shouldn't expect to be able to bring brand new, accurate insight, and out predict everyone else in the world, without a deep understanding of economics, finance, and expertise in the specific industry and the company you're trading in. It's no more elitist to say "most people should just buy index funds" than it is to say "most people should just get root canals done by dentists rather than doing it themselves".

  • mancerayder  2 months ago

    > without a deep understanding of economics, finance, and expertise in the specific industry and the company you're trading in.

    is in contradiction to

    >It's not really elitist.

    It's not wrong. But elitist is absolutely is. We're saying, only these people can do these things correctly. Is it true? It's subject to debate. You can be in IT, discover a software product at work and decide you think the company is worth investing in. Don't need an MBA for that.

    • joshlemer  2 months ago

      Well, buying stock in a company because you like their product is precisely the kind of bad stock picking strategy I'm talking about. The quality of a company's product is public information, so you should expect it to be priced in. Whether or not to pick any individual stock should be made on the basis of whether that stock is over-valued or under-valued in the market, not if it's a good company overall. Amazing companies can be highly overvalued, and crap companies doing garbage work can be undervalued.

      Like I say, best to leave it to professionals. For some things it's fine for people to have a DIY spirit, like building a website or a cabinet. For other things, which can harm you if you mess up, it's better to leave it to the pro's... electricians, doctors, etc. We're talking about people's life savings here, they can easily lose everything and ruin their lives, not being able to take care of their family etc.

      4 replies →

    • kaibee  2 months ago

      > You can be in IT, discover a software product at work and decide you think the company is worth investing in.

      And then you can be still be wrong because you didn't appreciate that the company is operating a low-trust environment/switching costs are high/they didn't have enough industry contacts/competitors outmarketed.

  • skybrian  2 months ago

    Well… yes, index funds are a safe, default choice most people. And yet, a funny thing about investing, versus other things professionals do like dentistry, is that it doesn’t necessarily require any skill. Dumb luck sometimes works just as well as sophisticated analysis. What other professions are like that?

    I don’t think I had any particular insight into Google, but I worked there and never got around to exercising my options until I had to because they were going to expire. (Good thing HR sent me an email.) The slightly more sophisticated people were doing same-day sales and immediately diversifying, which I believe in, in principle. But I procrastinated, because it seemed like delaying was working out pretty well. Past performance is no guarantee, but why not wait a few months?

    I thought Google was doing well, but so did everyone else. It was conventional wisdom the whole time. Apparently conventional wisdom wasn’t priced in, though?

nixosbestos  2 months ago

So... literally survivorship bias, and insider trading. Great, neither of those make me think I'm arrogant or smart enough to day trade. Nothing about this is elitist.

I've made a killing on 'X' by getting in early and holding over the years. Not one single person in my life knows the details because I want zero responsibility for them getting wrapped up in it, and I know how hard it is for people to be patient and hold when they're chasing a high, I mean profits.