> People have a lot of money right now and they want to buy financial assets with that money.
I am very far away from any kind of expert in this matter, but it seems to me people would be better off long term by investing their money into their own business. The lure of not doing anything and watching your pile in stocks grow is strong, but it can't really work long term for everyone. Eventually people need to produce something of value.
> I'm not comfortable investing the entirety into an index fund, given the current socio-political climate.
The government is printing an awful lot of money right now.
Keeping your money in cash isn’t a guaranteed return if inflation goes up significantly. You’re much better having it in assets with intrinsic value. (Stocks, real estate, etc)
I would suggest investing the money over the course of a couple years into an index fund, probably S&P 500 or total market.
Even if you invest at the worst possible times (right before crashes) you’ll come out way far ahead of leaving it in cash.
>AFAIK, historically it has always ended up better to remain invested in the market.
It always has. Historically everything goes up. What everybody forgets in this scenario is what if a sizeable chunk of your liquid assets are tied up in investments during a crash and you're 5-10 years to retirement? You're seriously going to wait another 10 years for the market to correct itself to then cash out so you don't lose any money? No you might even be dead before you even have the chance to use it.
I meant to put money in index funds right now. Not ongoing investment over a long time.
And going back further to my original point, if I had money in funds now I'd move it to Money Market accounts because the risk of a stock market downturn is big (1987/2001/2008 style). You are not Soros/Buffett/Munger or a multi-billion dollar hedge fund.
> There's also a good chance I could turn 500K into 5M-20M in 10 years with reasonably low risk investments.
I would very much like to know where you can find low-risk investments that are likely to net you 10x-40x returns in the span of 10 years.
(But overall I very much agree with your point that $500k now and $45M later can be a much much much better deal for someone than $0 now and $50M later. I would likely take that deal every single time.)
> Give the choice of waiting 40 years for not a huge payoff or gambling your 5K-10K of savings for a potential 10x return in a year or two, it's easy to rationalize the latter.
Indeed. For someone who can save $25/month, if they invest it on an index fund for 40 years, assuming 8% average/year, by the end they have about 87K. Adjusted for inflation 40 years from today, that's won't be much money.
So if you all have left is $25/mo, it's almost more rational to buy lottery tickets with it. Sure you'll almost certainly never win but the investing won't get you much either.
> If I have inflation fears, and I think we are in a stock bubble, where should I put my money.
Invest in the one thing you have the most control over -- yourself. Open or buy a business in a sector that has a clear path to profits (think laundromat, not some tech startup with unknown product market fit). Or get a degree for a new, higher paying career.
Otherwise you'll always be taking a bet on the federal reserve board, or Fortune 500 CEOs or wherever you decide to put your money.
>You will never, ever beat the market by making smart trades.
Agree. Just buy ticker VOO and get on with your life. Even Warren Buffet has said to buy 90% VOO and 10% bonds. And you will never be as good at this as Warren Buffett.
That said, I take 10% of my net worth and put it in a 'casino fund' where I can buy whatever I want. Startups, peer to peer nonsense, individual stocks, and so on.
> Investing is buying something that will generate returns, and cash cannot generate any return, kind of by definition.
During the hyperinflation of the 90s, if I bought US dollars and sold them a month later, I could have a return in the double digits. That looks like a good investment.
>And what I see is that historically, it's generally been a good idea to put money in the stock market.
I've been following the stock market since 1995 and have come to precisely the opposite conclusion
Why?
You have zero ability to predict the state of the market at the point that you need liquidity. So it doesn't matter if your portfolio increases for 20 years, if you need your liquidity during a crash, welp you're fucked.
Very sane advice, but unfortunately not always an option.
The likelihood of making real (not paper) life-changing money in a few years has considerably decreased in 5-10 years.
It will only come back with a good pace of IPOs and investor-positive acquisitions.
reply