No Stupid Questions
No such thing. Ask away!
!nostupidquestions is a community dedicated to being helpful and answering each others' questions on various topics.
The rules for posting and commenting, besides the rules defined here for lemmy.world, are as follows:
Rules (interactive)
Rule 1- All posts must be legitimate questions. All post titles must include a question.
All posts must be legitimate questions, and all post titles must include a question. Questions that are joke or trolling questions, memes, song lyrics as title, etc. are not allowed here. See Rule 6 for all exceptions.
Rule 2- Your question subject cannot be illegal or NSFW material.
Your question subject cannot be illegal or NSFW material. You will be warned first, banned second.
Rule 3- Do not seek mental, medical and professional help here.
Do not seek mental, medical and professional help here. Breaking this rule will not get you or your post removed, but it will put you at risk, and possibly in danger.
Rule 4- No self promotion or upvote-farming of any kind.
That's it.
Rule 5- No baiting or sealioning or promoting an agenda.
Questions which, instead of being of an innocuous nature, are specifically intended (based on reports and in the opinion of our crack moderation team) to bait users into ideological wars on charged political topics will be removed and the authors warned - or banned - depending on severity.
Rule 6- Regarding META posts and joke questions.
Provided it is about the community itself, you may post non-question posts using the [META] tag on your post title.
On fridays, you are allowed to post meme and troll questions, on the condition that it's in text format only, and conforms with our other rules. These posts MUST include the [NSQ Friday] tag in their title.
If you post a serious question on friday and are looking only for legitimate answers, then please include the [Serious] tag on your post. Irrelevant replies will then be removed by moderators.
Rule 7- You can't intentionally annoy, mock, or harass other members.
If you intentionally annoy, mock, harass, or discriminate against any individual member, you will be removed.
Likewise, if you are a member, sympathiser or a resemblant of a movement that is known to largely hate, mock, discriminate against, and/or want to take lives of a group of people, and you were provably vocal about your hate, then you will be banned on sight.
Rule 8- All comments should try to stay relevant to their parent content.
Rule 9- Reposts from other platforms are not allowed.
Let everyone have their own content.
Rule 10- Majority of bots aren't allowed to participate here.
Credits
Our breathtaking icon was bestowed upon us by @Cevilia!
The greatest banner of all time: by @TheOneWithTheHair!
view the rest of the comments
Any time you spend money on the chance to make money, it's gambling, IMO.
Lottery ticket? Gambling. Buying stock? Gambling. Sports betting? Buying into a poker game? Believe it or not, gambling (which is the only gambling I'll personally do since the game is still enjoyable even if I lose).
"Gambling " is so meaningless in this context.
I gamble with my life when I drive to the shops.
When you put your money in the bank, theres' a chance you'll make some interest, there's a chance you'll make a little more interest. Does that make it gambling?
Every day I wake up I gamble if I'll enjoy it or not.
Spreading out stock purchases across the market guarantees returns over the long run.
Buying one stock is gambling, buying a wide spread of stocks (or an index fund that does so) and holding them for years is investing.
I agree in principle, but technically it’s really just very low risk.
Buying into a total market index fund at 90yo could be considered high risk since it’s not unlikely for the market to go down with no time for you to recover.
But does that make it gambling?
Inflation exists, you're gambling every day on whether or not your money has the same value tomorrow, or even any value at all. Like you said, this conversation can easily break down into semantics.
diversification is a proven investment strategy to minimize risk versus expected reward. the goal of investing is to try to achieve financial goals while minimizing exposure to losses. gambling generally doesn't use goals or risk assessment or loss minimizing strategies. but im sure you could come up with definitions that blur this stuff.
The key phrase is 'over the long run' and 'holding them for years'. That 90yo wants to have long-ago moved their investments into bonds because, as you point out, a stock market downturn may not come back up before they die. Waiting out a downturn takes years and they are drawing down on their investments regularly.
No it doesn't.
It really kinda does.
At least as close as anything can be guaranteed in this world.
Buying into a broad market index fund (S&P500 or wider) and staying in for decades, will absolutely grow in value faster than inflation.
The key here is time.
Anything can go up or down on a daily, monthly, or even yearly basis; The longer your time horizon is, the more all that volatility gets evened out into a steady gentle climb upward. So much so that if you pick any 25 year period over the last 200 years, you won't find a single instance where the total value of all traded stocks was worth less at the end than at the start.
Because when you're investing in the whole market, you're investing in the whole society itself. And society is always doing everything it can to grow, produce, and consume more. That's what humans do. Random forces may slow or stop that, for a time; But as long a humanity exists, it will still be true.
Turns out "close to guaranteed" is in fact, not "guaranteed."
Here's my 25 how did they do:
(hint: they've all filed for bankruptcy at some point)
Again, look at the Nikkei from the 1990's - that's an entire index that was flat for 30 years. Hard to put off retirement for 30 years waiting for that index fund to pay off.
Don't bother dying on this hill, son, there's plenty of other, nicer hills to die on.
"All traded stocks" isn't "Any traded stock".
It's all of them collectively.
The 1990's was only 10 years. And that's also just Japan, which again isn't "All Traded Stocks".
If you had invested in the stock market (all stocks) in 1961, you would have lost 2% a year, every year for 20 years.
So $10000 in the market in 1961 was worth $6600 by 1981.
https://archive.nytimes.com/www.nytimes.com/interactive/2011/01/02/business/20110102-metrics-graphic.html
On that 20-year diagonal, there are only eight of the seventy squares that didn't have returns higher than inflation. And in every one of those few cases, holding just a few years longer made the investment outpace inflation. When even black swan events don't break the strategy, this simply is more confirmation that investing in an index fund for long periods of time is a proven strategy.
Note that light-red boxes are investments that outperformed inflation. No clue why they would color making more money than inflation red...
"25 years"
1961 to 1988. Inflation adjusted, it was 749 in 1961 and 723 in 1988.
27 years.
https://www.macrotrends.net/2324/sp-500-historical-chart-data
My challenge didn't include inflation. Though I did mention it prior to that, so it's an easy assumption to make.
That's also just the S&P500, which isn't even all US stocks, let alone international. But I did previously mention it as the minimum of "broad". I'll accept that as well.
So with some asterics, I congratulate you.
That always must be assumed. Otherwise you could claim Zimbabwe had the best return on investment over the past 20 years.
I don't disagree with the general point of, "there's no guarantee". But I think you can make an argument that taking the safest course available to you is not gambling.
When talking about longer time frames you have to account for inflation, holding on to your money instead of investing it is a risk in itself, which makes this entire conversation about semantics.
"Kinda" meaning not actually.
So not guaranteed then.
Yes. True. Just as not guaranteed as the sun rising tomorrow.
I'm glad you've realised that what you wrote was incorrect.
Lol.
Buying one lottery ticket is gambling. Buying 1,000 different lottery tickets is investing. Got it.
Unironically yes.
If you can expect your money back on buying thousands of lottery tickets, you are making an investment.
Buying enough lottery tickets to guarantee a payout just ensures you lose money as the house always takes a cut. Investing, unlike the lottery, has the benefit of not being a zero sum game. There is wealth generated and buying something like an index fund and holding for years puts you in the group making a profit along with everyone else.
Example: If you bought VTI (an index fund) just before the 2008 crash (and subsequently lost a bunch of value during the crash), you would still be up 257% today. And that isn't some outladish example; do the same with the S&P 500 and you are up 279% today. Purchasing for the long term and with a wide array of stocks is investing.
Edit: And in both of those examples you would be earning dividends the entire time as well, which is not part of the quoted %.
It depends. When there is no winner the earnings roll over which means you can make money. People have made millions buying thousands of tickets so they put rules in to stop it.
https://www.npr.org/2018/10/23/659988605/the-odds-of-winning-the-lottery-are-not-good-but-this-man-managed-to-flip-them
It's technically not a guarantee, it is certainly possible for the entire market to take a dump at once. Over the long term -- decades -- it has been profitable to invest in the US stock market even counting these downturns. Like they say in all the stock prospectuses, though, past performance is not a guarantee of future results.
Still, I'll take my chances with the market. At least if it goes to zero, I'll have a lot of company at the homeless shelter.
And this assumes the line will always trend up. Forever. Which we don’t know if it will or not.
We can't know for sure, but its historically been the case. In addition, the expectation for infinite growth stems a lot from continued research and development. We continue to make processes more efficient making products cheaper and easier for more people to buy. You can say that the econmy will stop growing at some point, but we just don't know when that may happen.
These are the kind of replies that make Lemmy great.
Low risk ≠ No risk