[jjice]

As children of the depression, where did your grandparents get the knowledge to invest in the market? From what I've seen, lots of people weren't keen on the market after growing up through the depression. Good on your grandparents.

[UncleOxidant]

Agreed, that generation generally viewed the stock market as gambling and thus didn't tend to invest. I'm not sure I can blame them for coming to that conclusion after living through the Roaring 20s bubble and the ensuing Depression.

[chii]

> that generation generally viewed the stock market as gambling and thus didn't tend to invest

which, i reckon, might've been what made returns high as that cohort didn't invest as much while prices were down, and thus made more returns as prices grew in the future.

The recent growth in people (esp. young people) investing (from it being easier than ever, to availability of information about investing) would make prices grow higher faster. This, i predict, means future returns are actually going to be lower for this generation.

[bad_haircut72]

Since everyone "knows" index funds are the way to go, thats what everyone does, which IMHO is one of the reasons why stocks are so overvalued

[no_wizard]

>Since everyone "knows" index funds are the way to go, thats what everyone does, which IMHO is one of the reasons why stocks are so overvalued

Its been general knowledge for a long time. Even more so now, yes, but even before the internet. Famously Warren Buffett has proclaimed that the average person should be investing in index funds for many decades, for example. Bogle published his methodologies like 40 years ago. Value investing was also well understood (and is what made Warren Buffett a billionaire).

Neither of which of these strategies have seemed to overtake the public en masse, even as investing has become easier. There seems to be some disconnect in the human brain that most people can't seem to get their act together with investing[0].

Anecdotally I have been a big Boglehead for quite some time, and long talked people's ear off about it, which inevitably means I'm talking about investing in index funds (the 'holy bogle trinity'[1]). Yet, while I continue to build wealth this way, nobody I know has followed this sound advice, even as I have openly shown that its reasonably sound and likely better than most other forms of investing.

Instead, people buy stock in specific companies, or still trade crypto, or see themselves as day traders etc. with all kinds of predictable (and mixed) results.

There seems to be some allure in the human mind that drives it. I'm not entirely sure what it is, but passive index fund investing while sound, and certainly well known, isn't as 'hot' as it should be.

All this is to say, I don't think its overvalued at all. I think its still undervalued relative to performance

[0]: even when given all the knowledge and tools, though financial literacy isn't great in the US, its not the only reason behind this.

[1]: The three fund portfolio: https://www.bogleheads.org/wiki/Three-fund_portfolio

[chii]

> I'm not entirely sure what it is, but passive index fund investing while sound, and certainly well known, isn't as 'hot' as it should be.

and i'm glad for it, since i am still accumulating, and i'd prefer it if the prices aren't too high. If other people fail to heed good advice when they here it, they also deserve to get whatever they get in the future.

[UncleOxidant]

And companies getting onto an index seems potentially fraught with corruption when so much money is at stake. Is there a publicized algorithm that determines which companies get into an index or are palms greased?

That said, I mostly invest in indexes even though I have concerns. I've just done much better over the years with index investing than investing in single stocks. Diversification is maximized in index investing.

[chii]

> getting onto an index

the S&P 500 index is hand picked (by some committee iirc) at S&P.

But there's only 1 type of index fund - the total market, cap-weighted index fund - that's worth investing in as a passive investor. Not any specific index that excludes some stocks while including others.

[tonyhart7]

well it is a "gambling" tho, they are right but you cant avoid that like you still need to invest some of money into that

[dmoy]

The way it worked for my grandpa, who also lived through the depression was basically this:

1. Living through the depression made him singularly focused on money, to the point where that's basically all he talked about

2. Throughout life, he tried everything to hustle money - normal job, individual stock tracking, index funds sure, but then also hustling collectibles at garage sales (especially rare coins, because, you know, they are also money), a wide ranging used car sales operation (he'd drive 10 hours cross multiple states to get a good deal on a car to flip), etc etc.

3. He also was pretty good with math (money is numbers), and wasn't dumb, so in the very long run he kept rough track, and realized that of all the things, index funds probably did the best, and also took like zero time. But at least he had his kinda fun doing it.

So when before I went to college (even at age 12), he'd call us up and tell us to go to a good but cheap state school, and study something like engineering that makes a good income.

So then after I graduated (from a good and cheap state school, with two engineering degrees, and also a CS degree), and got a real job, his phone calls changed to telling me to invest in the S&P 500 with as much as I could, and ignore crashes. (He would also call and try to predict crashes, some he missed (dot com), some of which he got right (2007-8), and some of which were basically fiction (2013, 2015).

So I lived like a monk for 5+ years and still live pretty frugally. I think the highest I've ever spent on my income is 50% of after tax, and it used to be more like 20-25% before house+kid.

On the plus side, working for a long time at a >50% savings rate means you're much more immune to short term work shenanigans like layoffs.

On the down side, you gotta resist buying new stuff all the time, which can be hard when there's lots of cool stuff.