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> Most people don't think critically about their money This is a bit of a naive viewpoint. Take your example of putting money in the stock market, regardless o

> Most people don't think critically about their money This is a bit of a naive viewpoint. Take your example of putting money in the stock market, regardless of its health and structure: So I'll follow your advice and I'll think critically about it. I'm not an economist, but I'm technically and mathematically quite literate. And what I see is that historically, it's generally been a good idea to put money in the stock market. But of course that doesn't mean that will apply to the future. Except, how can I tell whether the stock market is in good health? Even as an academic researcher, that is a really hard problem. The best I can do is look at the past, and then take a risk. It's not my lack of critical thinking that is the problem. It's that it is a genuinely very hard problem.

NoboruWataya 3y ago
I would go so far as to say that thinking you, as a retail investor, can correctly judge the "health" of the market shows a lack of critical thinking.
- 2devnull 3y ago
  Thinking that critical thinking is a specific thing (what makes one thought “critical” vs any other?) shows a lack or critical thinking. Thinking critically is not.
- BeFlatXIII 3y ago
  It is equally naive to assume that a retail investor could judge which professional fund managers are scammers, which are rainmakers, and which have a real edge.
  - eru 3y ago
    That's why as a retail investor you put your money in low cost index funds. It's easy to compare costs of funds: you can find them in the prospectus and the funds advertise them. (If a fund makes it hard to find out the fees and costs, no need to sweat it: they are likely high, so you are safe avoiding that fund.)
breezeTrowel 3y ago
I don't think it's that hard. Just ask - is the S&P500 lower now than it was three months ago? If the answer is "yes" then maybe stay in cash and put that money in when the answer is "no". Alternatively, if you want to get "fancy", you can use the 50/200 SMA crossover to determine entry and exit points. It's a much safer bet than "buy and hold" since it avoids massive drawdowns.
- JW_00000 3y ago
  > is the S&P500 lower now than it was three months ago? If the answer is "yes" then maybe stay in cash and put that money in when the answer is "no". Wait, isn't that the wrong way round? You're waiting when it's low and buying when it's high?
  - breezeTrowel 3y ago
    "Buy low and sell high", while sounding good, is generally terrible advice since you only know what was "low" and "high" in retrospect. A stock (or an index, in this case) might hit a new low only for the price to crash even further. The same thing goes for highs. A stock or index making a new high may very well continue to rise. So, instead of "buy low and sell high" it tends to be a lot easier to "buy into strength and sell into weakness".
    - momirlan 3y ago
      it is actually easy to figure "high" and "low", based on price vs value of a certain stock. Warren Buffet has been doing it for a while. most people don't have that discipline and prefer momentum.
      - breezeTrowel 3y ago
        Correct me if I'm wrong but wasn't Warren Buffett an activist investor who'd find undervalued stocks from companies that had poor management and, once his partnerships gained enough control, fire the current management and replace it? Sounds like a far cry from "buy low, sell high".
AndrewKemendo 3y ago
>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.
- dublinben 3y ago
  What’s the alternative then? How have you invested for the last twenty years taking this into account?
  - AndrewKemendo 3y ago
    I'm the lead investor in all the things I want to do including all the companies or non-profits I've founded
- chii 3y ago
  > if you need your liquidity during a crash, welp you're fucked. But this simply means you didn't predict that you'd need the liquidity, which is easier than predicting the crash. You have to know that as you get older, you will likely need that liquidity more. Thus, you should be swapping illiquid assets over time, as you get older, bit by bit. Not doing it is equivalent to taking a bigger risk than you could afford to be taking.
  - AndrewKemendo 3y ago
    >But this simply means you didn't predict that you'd need the liquidity, which is easier than predicting the crash Oh how silly of me to forget that investors have target liquidation periods and that even the most 101 level of investor knows that Yet somehow something so basic as - predicting exactly when you are going to need your savings - eludes millions of people Get real
    - 3y ago
celtoid 3y ago
Using your example of the stock market, thinking critically about money also entails understanding how the stock market works. Most people don't understand how it's built in the first place. When buying a "stock", one is actually buying a derivative of a derivative. Extending the idea of thinking critically about money, it's a safe bet that a majority of the population have no idea how money itself is issued or who issues it. "Most investors when they buy a publicly traded stock believe that they own a part of some company. They think that somewhere there is a stock certificate or some indication of ownership that has their name on it, but this is not the case. When you buy a “stock” you are actually purchasing a security that affords certain entitlement rights related to registered stock which actual owners hold. The registered shares of a private company are directly owned by shareholders. In contrast, the registered shares of nearly all publicly traded equities are owned by Cede & Co., which is the nominee of the Depository Trust Company (DTC). (A nominee is a company whose name is given as having title to a stock, but does not receive the financial benefits of ownership.) Cede is a subsidiary of the Depository Trust Company (DTC) which is a subsidiary of the Depository Trust and Clearing Corporation (DTCC) and the DTCC is a private company owned by elite Wall Street firms and money center banks. If you need background or a refresher on DTC and DTCC, click on this link. Effectively, elite Wall Street firms and money center banks, not institutions and individual investors, own almost all of the registered shares of publicly traded companies in the US... Effectively, you are buying a financial derivative from brokers of a financial derivative they hold from Cede that is just a digital entry in your DTC account." [0] [0] https://smithonstocks.com/part-8-illegal-naked-shorting-series-who-or-what-is-cede-and-what-role-does-cede-play-in-the-trading-of-stocks/ https://smithonstocks.com/part-8-illegal-naked-shorting-seri...
- chii 3y ago
  The long winded post of your simply is just spreading a form of FUD. What does owning a stock mean, if it doesn't mean owning all entitlements, rights and obligations related to said stock? The technical financial structure is a bit irrelevant, since this structure is created to reduce transaction costs. It made ownership of stocks much more accessible, and thus, more people could buy into it. The idea you presented - that you don't really "own" the stock, because some other party is holding it in trust - is simply not true. After all, you do the same with the money in your bank account. Unless, of course, you're one of the few people remaining that hold out with hard cash, or even physical gold.
jovial_cavalier 3y ago
Most of my family is shocked that I haven't vested in a 401k account. The fact that I haven't decided to funnel upwards of 5% of my income straight into the big craps table elicits an almost medical concern from them. They come to me in hushed tones and ask why I'm making such an obvious mistake, so I ask them why they expect their portfolios to perform well, and of course they can't answer. I think that's what GP is talking about. I don't think it's unreasonable to put your money into stocks, but there are a ton of people in America that put a ton of money into the stock market without even getting to the point of doing some of the reasoning you do in your post.
- dgfitz 3y ago
  Can I ask how you have planned for the future/retirement, or are you one of the few who found a job you love and never work a day in your life?
  - SamoyedFurFluff 3y ago
    Even if you find a job you love it’s important to save. There is always a concern especially as one ages that they may become disabled in a way that severely impacted income
  - jovial_cavalier 3y ago
    The answer is that I have not, and I probably should. But my only point is that everyone seems to think that this solution is a slam dunk, and I just don't think it is.
    - freeone3000 3y ago
      A 401K account is tax-advantaged and can hold everything from mutual funds to T-bills. It is absolutely a mistake to not invest in one unless you never plan to withdraw.
- funklute 3y ago
  That is a fair point!
deleted 3y ago
[deleted]
Taek 3y ago
The problem is that the stock market is moving in an increasingly greater-fool direction. Companies that don't ever pay dividends, companies that don't yield control rights, companies that have extensive protections for the founders, etc. The problem with the stock market is not that its hard to tell whether you should be in or out. Its that there's so much pressure on the general population to own stock that the stock issuers can now get away with releasing essentially worthless stock (see Snapchat for an example) and still expect it to sell anyway.

NoboruWataya 3y ago

I would go so far as to say that thinking you, as a retail investor, can correctly judge the "health" of the market shows a lack of critical thinking.

2devnull 3y ago
Thinking that critical thinking is a specific thing (what makes one thought “critical” vs any other?) shows a lack or critical thinking. Thinking critically is not.
BeFlatXIII 3y ago
It is equally naive to assume that a retail investor could judge which professional fund managers are scammers, which are rainmakers, and which have a real edge.
- eru 3y ago
  That's why as a retail investor you put your money in low cost index funds. It's easy to compare costs of funds: you can find them in the prospectus and the funds advertise them. (If a fund makes it hard to find out the fees and costs, no need to sweat it: they are likely high, so you are safe avoiding that fund.)

breezeTrowel 3y ago

I don't think it's that hard. Just ask - is the S&P500 lower now than it was three months ago? If the answer is "yes" then maybe stay in cash and put that money in when the answer is "no". Alternatively, if you want to get "fancy", you can use the 50/200 SMA crossover to determine entry and exit points. It's a much safer bet than "buy and hold" since it avoids massive drawdowns.

JW_00000 3y ago
> is the S&P500 lower now than it was three months ago? If the answer is "yes" then maybe stay in cash and put that money in when the answer is "no". Wait, isn't that the wrong way round? You're waiting when it's low and buying when it's high?
- breezeTrowel 3y ago
  "Buy low and sell high", while sounding good, is generally terrible advice since you only know what was "low" and "high" in retrospect. A stock (or an index, in this case) might hit a new low only for the price to crash even further. The same thing goes for highs. A stock or index making a new high may very well continue to rise. So, instead of "buy low and sell high" it tends to be a lot easier to "buy into strength and sell into weakness".
  - momirlan 3y ago
    it is actually easy to figure "high" and "low", based on price vs value of a certain stock. Warren Buffet has been doing it for a while. most people don't have that discipline and prefer momentum.
    - breezeTrowel 3y ago
      Correct me if I'm wrong but wasn't Warren Buffett an activist investor who'd find undervalued stocks from companies that had poor management and, once his partnerships gained enough control, fire the current management and replace it? Sounds like a far cry from "buy low, sell high".

AndrewKemendo 3y ago

>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.

dublinben 3y ago
What’s the alternative then? How have you invested for the last twenty years taking this into account?
- AndrewKemendo 3y ago
  I'm the lead investor in all the things I want to do including all the companies or non-profits I've founded
chii 3y ago
> if you need your liquidity during a crash, welp you're fucked. But this simply means you didn't predict that you'd need the liquidity, which is easier than predicting the crash. You have to know that as you get older, you will likely need that liquidity more. Thus, you should be swapping illiquid assets over time, as you get older, bit by bit. Not doing it is equivalent to taking a bigger risk than you could afford to be taking.
- AndrewKemendo 3y ago
  >But this simply means you didn't predict that you'd need the liquidity, which is easier than predicting the crash Oh how silly of me to forget that investors have target liquidation periods and that even the most 101 level of investor knows that Yet somehow something so basic as - predicting exactly when you are going to need your savings - eludes millions of people Get real
  - 3y ago

celtoid 3y ago

Using your example of the stock market, thinking critically about money also entails understanding how the stock market works. Most people don't understand how it's built in the first place. When buying a "stock", one is actually buying a derivative of a derivative. Extending the idea of thinking critically about money, it's a safe bet that a majority of the population have no idea how money itself is issued or who issues it. "Most investors when they buy a publicly traded stock believe that they own a part of some company. They think that somewhere there is a stock certificate or some indication of ownership that has their name on it, but this is not the case. When you buy a “stock” you are actually purchasing a security that affords certain entitlement rights related to registered stock which actual owners hold. The registered shares of a private company are directly owned by shareholders. In contrast, the registered shares of nearly all publicly traded equities are owned by Cede & Co., which is the nominee of the Depository Trust Company (DTC). (A nominee is a company whose name is given as having title to a stock, but does not receive the financial benefits of ownership.) Cede is a subsidiary of the Depository Trust Company (DTC) which is a subsidiary of the Depository Trust and Clearing Corporation (DTCC) and the DTCC is a private company owned by elite Wall Street firms and money center banks. If you need background or a refresher on DTC and DTCC, click on this link. Effectively, elite Wall Street firms and money center banks, not institutions and individual investors, own almost all of the registered shares of publicly traded companies in the US... Effectively, you are buying a financial derivative from brokers of a financial derivative they hold from Cede that is just a digital entry in your DTC account." [0] [0] https://smithonstocks.com/part-8-illegal-naked-shorting-series-who-or-what-is-cede-and-what-role-does-cede-play-in-the-trading-of-stocks/ https://smithonstocks.com/part-8-illegal-naked-shorting-seri...

chii 3y ago
The long winded post of your simply is just spreading a form of FUD. What does owning a stock mean, if it doesn't mean owning all entitlements, rights and obligations related to said stock? The technical financial structure is a bit irrelevant, since this structure is created to reduce transaction costs. It made ownership of stocks much more accessible, and thus, more people could buy into it. The idea you presented - that you don't really "own" the stock, because some other party is holding it in trust - is simply not true. After all, you do the same with the money in your bank account. Unless, of course, you're one of the few people remaining that hold out with hard cash, or even physical gold.

jovial_cavalier 3y ago

Most of my family is shocked that I haven't vested in a 401k account. The fact that I haven't decided to funnel upwards of 5% of my income straight into the big craps table elicits an almost medical concern from them. They come to me in hushed tones and ask why I'm making such an obvious mistake, so I ask them why they expect their portfolios to perform well, and of course they can't answer. I think that's what GP is talking about. I don't think it's unreasonable to put your money into stocks, but there are a ton of people in America that put a ton of money into the stock market without even getting to the point of doing some of the reasoning you do in your post.

dgfitz 3y ago
Can I ask how you have planned for the future/retirement, or are you one of the few who found a job you love and never work a day in your life?
- SamoyedFurFluff 3y ago
  Even if you find a job you love it’s important to save. There is always a concern especially as one ages that they may become disabled in a way that severely impacted income
- jovial_cavalier 3y ago
  The answer is that I have not, and I probably should. But my only point is that everyone seems to think that this solution is a slam dunk, and I just don't think it is.
  - freeone3000 3y ago
    A 401K account is tax-advantaged and can hold everything from mutual funds to T-bills. It is absolutely a mistake to not invest in one unless you never plan to withdraw.
funklute 3y ago
That is a fair point!

deleted 3y ago

[deleted]

Taek 3y ago

The problem is that the stock market is moving in an increasingly greater-fool direction. Companies that don't ever pay dividends, companies that don't yield control rights, companies that have extensive protections for the founders, etc. The problem with the stock market is not that its hard to tell whether you should be in or out. Its that there's so much pressure on the general population to own stock that the stock issuers can now get away with releasing essentially worthless stock (see Snapchat for an example) and still expect it to sell anyway.