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And if I'm wrong and everyone is actually doing it, how is it sustainable in the long run? I mean, we can't all be millionaires.

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[-] rational_lib@lemmy.world 1 points 14 minutes ago

In my experience:

  • A lot of people do this with 401ks and such because many times there aren't many other options.
  • People I know who are serious investors with a lot of money tend to not invest much in the S&P 500 because they think of themselves as superior investors, but I don't know of anyone for whom this is actually true based on past performance.
  • I invest some 20% of my money in the S&P 500, which is probably not as much as I should. It's some combination of the above hubris, which is natural, wanting to be diversified, and enjoying gambling on individual stocks.
[-] CheeseNoodle@lemmy.world 15 points 7 hours ago

Because its gate kept, particularly outside the US we don't have any way to invest that doesn't require some fee, so you need to be rich enough that your investment will make you more than the monthly fee to the broker. Then as a non cajillionare if the particular fund your invested in goes bust you get completely fucked over because debts are paid out to the largest creditors first.

[-] peereboominc@lemm.ee 10 points 7 hours ago

Investing is something you do for the long run. Investing today and getting it all out in a month will probably make you lose money. The market will always go up and down but zooming out, it will go up. Investing in the long run will make you money. Investing in the short run, will make you vulnerable for market ups and downs.

So my tip is, invest a monthly a fixed amount of money every month (dollar-cost average) and don't touch it for the next 5 years. Yes, also keep your hands off it when the market is going down.

[-] LovableSidekick@lemmy.world 50 points 11 hours ago

If exercise makes you so healthy why doesn't everybody do it?

[-] TypicalHog@lemm.ee 5 points 6 hours ago

Cuz it's not a "surefire way to make money". In the 2000s it was flat or went down even for like a decade after the dot com bubble. When the AI bubble pops and the recession comes it might be like that again.

[-] Kolanaki@yiffit.net 21 points 9 hours ago

"You need money to make money."

[-] Blackmist@feddit.uk 19 points 9 hours ago

Because it needs spare money.

[-] aesthelete@lemmy.world 26 points 11 hours ago

Not everyone has money to do it, and not everyone knows you can do it. Also, as the dollar devalues most everyone will become a millionaire, but being a millionaire won't mean what it used to anymore -- which is already the case.

[-] adespoton@lemmy.ca 41 points 13 hours ago* (last edited 13 hours ago)

A large number of us CAN be millionaires. Which is a problem.

It took me roughly 40 years to become a millionaire. 40 years of investing in stable stocks and bonds and scrimping and living well below my means. I was finally able to afford to buy a house. Then the market boomed and suddenly I’m worth over a million.

Unfortunately, almost all of that is tied up in owning a small plot of land. If I sold it, I’d need to immediately use it to buy another small plot of land, or leave my city or go back to extortionate rent. And yet I need to pay monthly taxes on that land, or I no longer own it.

Where I used to spend $90/month on food, now I spend well over $500/month.

Essentially, if you’re over 55 and you’re not a millionaire and you’re living in a major city, you’re screwed because of inflation.

[-] rational_lib@lemmy.world 1 points 6 minutes ago

A large number of us CAN be millionaires.

It's actually technically correct that we all can be millionaires, at least on a household basis. The mean household wealth in the US was $1.06 million as of 2022, by now it's undoubtedly higher. So with a full redistribution of wealth every household would have over $1 million.

In reality though the median household wealth is just under $200k as of 2022, and doesn't rise as consistently so who knows where it is now.

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[-] partial_accumen@lemmy.world 102 points 15 hours ago

If investing in the S&P 500 is such a surefire way to make money, then why isn't everyone doing it?

First, lots and LOTS of people (and companies do it).

Three reasons people don't do it:

  1. Some people believe they can make even more money by putting it into something else (other riskier stocks, non stock investments like their own sole proprietor businesses, bitcoin, scratcher lottery tickets).
  2. Some people are entirely risk averse. If they can't SEE their money they don't trust where it is so they buy precious metals or stack cash up. Neither of these are good investments for returns, but are generally safer that index investing (which is what S&P500 is) if you need to sell on short notice.
  3. Investing anything requires money you don't have to spend somewhere else. Lots of people are at negative money, so they don't even have a dollar to invest.
[-] protist@mander.xyz 59 points 14 hours ago
  1. A ton of people rely on the advice of financial advisors who don't have their interests in mind and who sell them mutual fund packages with high expense ratios that do poorly long term. These people generally lack the financial knowledge to know any different.
[-] partial_accumen@lemmy.world 32 points 13 hours ago

I was one of these. I started my IRA in my 20s with what little money I could put into it. When I left a job I'd roll my 401k back into my IRA under the same Edward Jones advisor.

After over more than 20 years I started questioning it. I asked for statements of all of my deposits. I took those dates and deposit amounts and plugged them into a basic historical simulator to see what would have happened if I put the same money into an S&P500 fund. My real investment account was over $40,000 lower than had I just put the money in myself into the S&P500. I dropped that advisor and transferred my entire balance into VTSAX and never looked back. Future deposits went into my own brokerage into boring index funds from then on.

I credit Edward Jones with making saving for retirement stupid easy for myself a dumb 22 year old at the time. However, I should have wised up sooner and it cost me at least $40,000 for my naïveté.

[-] subtext@lemmy.world 12 points 12 hours ago

The stock market and investing (at least investing for the average person) is supposed to seem hard, and complex, and impossible to understand because how else are those thousands of mid-level Edward Jones employees and their ilk supposed to make a living?? Has no one thought of their incredibly easy white collar jobs??!!?

[-] Someonelol@lemmy.dbzer0.com 6 points 13 hours ago

I'm definitely number 2. It takes a lot of effort to not sell shares after they go down even if it's been years.

[-] Tinidril@midwest.social 12 points 11 hours ago

If you are currently in the process of saving instead of withdrawing in retirement, then falling stock prices are just buying opportunities. If the grocery store puts eggs on sale, you wouldn't fret that the eggs currently in your fridge aren't worth as much.

When you think of it that way, it gets a lot easier to hang on after a crash, and you might start looking for ways to buy even more at bargain prices.

[-] Free_Opinions@feddit.uk 23 points 12 hours ago

Going to the gym and eating healthy is a surefire way to look good and have a longer healthspan too but most people aren't doing that either. Why? Probably because it takes time and effort.

Also I'm not sure how many people have the patience to not touch the money once you get into tens or hundreds of thousands. I could pay off my house with my savings but I wont.

[-] Azzu@lemm.ee 6 points 7 hours ago

I mean if your house credit interest is higher than the return of investment of the S&P500 then you probably should pay it off :D

[-] Free_Opinions@feddit.uk 5 points 5 hours ago

Yeah, but it's not.

[-] dhork@lemmy.world 50 points 15 hours ago* (last edited 15 hours ago)

It's not entirely without risk. 2008 saw the S&P lose over 30% for the year, and 2002 was over 20%. But it is up more often than down year-to-year, and it is usually up by at least 10%.

I found some good charts here, even though it is a EU site:

https://curvo.eu/backtest/en/market-index/sp-500?currency=usd

If you are investing for the long haul , you will take the occasional 30% haircut if you can get 10-20% the rest of the time. But it would suck if you got that 30% haircut just before you needed to sell....

[-] BombOmOm@lemmy.world 31 points 15 hours ago

If you got that 30% haircut just before you needed to sell

Yep. They key part is to invest for 20, 30, 40 years, where those consistent 10-20% gains compound and vastly outweigh the occasional 30% losses. Even if you had invested at the worst time in 2007, you are currently up 285%.

[-] ComradeMiao@lemmy.dbzer0.com 7 points 14 hours ago

Even if you had invested at the worst time? That is precisely the best time to invest!

[-] Bassman1805@lemmy.world 24 points 14 hours ago

"The worst time in 2007" would've been the peak before the bottom fell out in 2008.

The bottom is the second best time to invest, after "every 2 weeks when I get my paycheck, regardless of the noise in finance media"

[-] Modern_medicine_isnt@lemmy.world 11 points 14 hours ago

That worst was just before it fell (2008), not when it was already low.

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[-] Mubelotix@jlai.lu 2 points 8 hours ago

When I tell my friends to do it they instantly reject the idea. Which is why I forced 1200 students in my school to play a game where you invest in stocks (Github), and people are ranked by profit in a leaderboard. I control access to a tool they need, so I'm making them play. I hope that the most of them will realise they should have invested IRL once they see the profits over time

[-] TheButtonJustSpins@infosec.pub 28 points 15 hours ago

We can, though. Index funds invest in large swathes of companies - meaning that they are taking part in the productivity of the companies involved.

[-] JohnDClay@sh.itjust.works 21 points 15 hours ago* (last edited 15 hours ago)

I don't like investing in the S&P 500 because it's supporting the biggest most monopolistic companies out there. Russell 2000 helps, but it has CO2/sustainability concerns. But since big companies usually get bigger because the US has laughable anti trust/monopoly legislature, betting on the big ones is pretty safe.

As for sustainable in the long run, it lets those companies effectively have really low interest rates. It benefits big struggling companies like Boeing so they can borrow at low rates to prop up their business for a while. But with too much investment, you'd give even more leeway and safety nets to the biggest companies.

[-] ComradeMiao@lemmy.dbzer0.com 3 points 14 hours ago

Last green index fund I invested in lost 50% during covid. Luckily I got out. I don’t see why the common person should worry about each individual stocks ethics within a large index fund. Our individual choice does little but ride us of huge potential gains for our retirement. I agree with your point but think it hurts us more than them.

Disagreement aside, why do you say Russell 2000 helps?

[-] Meron35@lemmy.world 8 points 12 hours ago

If it makes you feel better many green index funds aren't green at all, and simply manipulate their holdings around audit and reporting times, in a phenomenon known as green window dressing.

Green Window Dressing by Gianpaolo Parise, Mirco Rubin :: SSRN - https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4459352

[-] JohnDClay@sh.itjust.works 4 points 14 hours ago* (last edited 14 hours ago)

We want to hold the owners of Amazon or oil companies accountable, and what makes them the owners of they hold a lot of stocks. Holding fewer stocks seems like you're enabling the companies, just at a much much lower amount.

Russell 2000 is the top 3000 companies minus the top 1000 companies. So it doesn't invest in the really big ones.

[-] Grandwolf319@sh.itjust.works 22 points 15 hours ago

Not everyone is actually aware of this.

And in a way, lots of people are doing it through their retirement savings via mutual funds.

[-] AnyOldName3@lemmy.world 13 points 14 hours ago

Something I've not seen mentioned here yet is that one of the reasons it's such an effective way to make money is specifically because loads of people are buying into it. When you buy a stock (or a derivative like an S&P 500 index tracking fund), it increases its price. If you're just one person with a normal-person amount of money, it won't be enough to register, but if you're part of a group of millions of people, or an investor with billions at your disposal, it'll make a visible difference, and if people see that happening consistently, they'll want to join in and there'll be a positive feedback loop. It only stops when there's a big enough panic that lots of investors can no longer afford to maintain their investment and have to sell at the same time, and then you can even get a positive feedback loop in the other direction when people see the price plummeting and decide they need to sell before it plummets any further.

Stocks are supposed to represent the value of a company's current assets and expected future profits, but this kind of feedback loop muddies the water. With something like Bitcoin, which intentionally has no inherent value, because enough people have agreed to pretend otherwise, it's gained effective value, and can be exchanged for money, or in some cases, goods and services. That'll remain the case until everyone agrees that they don't want Bitcoin, so could go on forever.

[-] vin@lemmynsfw.com 1 points 4 hours ago

There a many traders acting as price finding mechanism for individual stocks. The situation you described is not so as evidenced by companies getting added to and removed from various indexes

[-] Nighed@feddit.uk 5 points 7 hours ago

This is particularly concerning to me with most of the wealth belonging to generations that are now retiring and selling off their stocks to fund their retirement.

That + climate change + authoritarian/strong man government's looking more likely makes me nervous about the long term stock market.

I guess that's not new though.

The PE ratio is 30 currently which feels high....

[-] bamboo@lemmy.blahaj.zone 8 points 13 hours ago

Nothing is surefire, but I've seen the S&P 500 informally considered the baseline, especially when comparing actively managed funds. If you're paying more and under performing the S&P 500, even if making a profit, you're loosing out.

With regard to the point about everyone being millionaires, from a macro economic lens, all the dividends you receive from investing in the S&P 500 is because they're charging more than enough for a product to cover operating costs, business expenses, etc and still have enough to pay out share holders. This means someone somewhere is loosing out, and that money is being transferred from them to you through the companies.

[-] litchralee@sh.itjust.works 12 points 14 hours ago* (last edited 14 hours ago)

To start, I'm assuming you're talking about low-cost index funds tracking the S&P500. All of the "actively managed" funds tracking an index are, IMO, farces designed to extract money for the fund managers rather than delivering value to the (index fund) share holders. A passively-managed index fund is a fairly boring (and cheap) operation to manage, primarily buying and selling shares to keep the same proportions as the tracked index, be it the popular S&P500, the CRSP Total US Market index, or any other imaginable index. The low-cost appears in the very low expense ratio, some measured in single-digit hundreds of 1 percent (eg 0.04% for VTSAX).

As for whether an index fund tracking American large-cap stocks is a "sure fire" investment, absolutely not. Any investment needs to be viewed in terms of its appropriateness, such as being properly diversified (within one's abilities) and the timescale must match one's financial objectives. The conventional adage is that everyone would like to win the lottery, but when pressed for a more specific answer, most would say that they just want to live without worrying about finding an income. That is to say, they're just looking for "enough".

Practical financial advice aims to sustainably achieve "enough", usually framed in terms of retirement but quite frankly, the process works for all sorts of goals, such as saving for higher education for oneself or a child, buying a car, building a marriage dowry, or planning to support aging parents. What's distinct with these scenarios are: the amount needed, and the time remaining to achieve that amount.

For a mid-20s newly-employed knowledge worker (eg mechanical engineer), they have about 40 years until retirement age. Time is a very valuable asset, because time can overcome short-term problems like economic recessions or high interest rates. Even if a recession strikes just prior to turning 65, the nest egg will have grown with 40 years of dividends prior to the recession taking a small haircut. Alternatively, starting one's career in a recession means post-recovery investments will bolster the savings.

The large-cap index funds (like S&P500) are high risk, high reward. For someone with a long time horizon and a good savings rate like a young professional, large-cap makes a lot of sense. But having only large-cap would be wholly inappropriate for a retired octogenarian who just needs to draw a steady income to pay their living expenses. After all, having already gotten so far in life, the meaning of "enough" changed from "high growth of nest egg" to "drawing down the nest". So this retired person would probably have gradually swapped out most their index funds for things like bonds, which pay less in dividends but are steady even through recessions and bad times. But they might still keep a small portion in large-cap, in case they live longer than expected.

For a longer discussion about investing according to one's definition of "enough", I would recommend reading some pages from the Bogleheads community, like this one: https://www.bogleheads.org/wiki/Bogleheads%C2%AE_investment_philosophy

[-] bluGill@fedia.io 9 points 14 hours ago

there are reasonable odds that one of a couple will live 30 years after retireing (oiten there is an age difference so just expected lifespan may get you 20). Retired people should still have some long term investments. Not 100% like a 30 year old but not zero.

[-] litchralee@sh.itjust.works 5 points 14 hours ago* (last edited 14 hours ago)

You're absolutely right; I meant to write it from the perspective of having 100% large-cap, which would be quite bizarre for an octogenarian (unless they immortal?). I've amended my answer to make that clearer.

Also, I've realized that I didn't touch upon non-personal investment. That is to say, institutional investors like university or charitable endowments, or sovereign pension funds. The simple answer is that they essentially have an indefinite lifespan, and so play an entirely different game than personal investors or even millionaire/billionaire investors.

[-] BombOmOm@lemmy.world 12 points 15 hours ago* (last edited 15 hours ago)

Put money into index funds every paycheck and don't sell them for 30 years. Compounding returns are damn strong. And yes, lots of people do it, it is the most straightforward and common strategy.

Investing money generates more production and profits, it is very much so not a zero-sum game. There is good reason the average standard of living has increased dramatically over history, and it has increased faster in modern economies with strong monetary availability and movement, something investing directly contributes to.

[-] muntedcrocodile@lemm.ee 7 points 14 hours ago

Most people dont invest. It sustainable in the long run cos their is a limited supply the more people who buy the more expensive it is for anyone else to buy.

[-] bluGill@fedia.io 6 points 14 hours ago

Well you need to put a fair amount in for a long time to get that millionair. If you are 20 now you can get there by 40 by maxing out your 401h, but if you are 75 now maxing out the 401k may not have got you there. Many young people have student loans so they can't max out the 401k and have enough to live. There is also saving for a house in there. And only about 50% even have a 401k option - ira limits are such that I'm not sure you can get to a million with them. Many people also don't make much even if you get a 401k at fast food (30 years ago they gave you that after 10 years in the store I worked in - when you maxed out and didn't get raises)

last but perhaps most important there is opportnity cost. several of my classmates have died in accidents long before they could retire. death rates from non accidents start to raise around 60-65 so even if you retire you may not have long to enjoy that wealth. For all of the above people they should have saved zero and enjoyed life young. Of course odds are you will retire but don't pin all your hopes on life after, start living now. Even if God tells you that you will live to 100, your body will start to have issuse starting between 40 and 55 - there are some activites it will be too late if you don't do them young - so go climb that mountain if you want.

We can all be millionaires if we just inflate the currency 🤓

[-] Semi_Hemi_Demigod@lemmy.world 5 points 15 hours ago

we can’t all be millionaires.

Zimbabweans would like a word

[-] Chozo@fedia.io 4 points 15 hours ago

We can't all be Zimbabweans.

[-] adespoton@lemmy.ca 2 points 13 hours ago

hold my alcoholic beverage of choice….

[-] Crumbgrabber@lemm.ee 3 points 13 hours ago
[-] HobbitFoot@thelemmy.club 3 points 14 hours ago

It doesn't make you a millionaire, it just gives you a better rate of return over a savings account.

[-] Free_Opinions@feddit.uk 4 points 12 hours ago* (last edited 12 hours ago)

If you start young and keep investing every month then it will make you a millionaire untill the age of 60.

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this post was submitted on 24 Dec 2024
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