[UncleOxidant]

My grandparents were children of the Depression and given their experience living through that they always considered the stock market to be gambling and thus never invested in the stock market. My parents absorbed that ethos and also never invested until they had to when they got a 401K (but they were well into their 50s)... then they liquidated their holdings as quickly as they could like they thought stocks were dirty, or something.

[coldpie]

> always considered the stock market to be gambling

I also feel this way, and all of the terminology and marketing around the stock market definitely reinforces this belief. I have my retirement put into one of those diversified retirement mutual fund things which I completely ignore, but other than that, I don't mess around with stock market stuff at all. The up & down junk, trying to decide when to buy or sell, all that stuff makes me feel terrible. Same feeling as going to a casino. Not my kind of fun. I don't want anything to do with it.

[cortesoft]

The tricky thing is that the stock market CAN be gambling, but it doesn't have to be.

Day trading is gambling. Buying triple levered ETFs is gambling.

Investing in a diversified index is NOT gambling, because it isn't a zero-sum game, where you have winners and losers. You are investing in the growth of the economy as a whole.

[daseiner1]

> Investing in a diversified index is NOT gambling, because it isn't a zero-sum game, where you have winners and losers. You are investing in the growth of the economy as a whole.

I’ve genuinely never understood why this is so unintuitive to many otherwise intelligent people I’ve known. Over a long enough time horizon (and with prudent management of risk as one ages/approaches retirement) serious increase in wealth is all but guaranteed short of the US absolutely collapsing. And if that happens, then we’d all have bigger fish to fry.

[cortesoft]

> all but guaranteed short of the US absolutely collapsing. And if that happens, then we’d all have bigger fish to fry.

I mostly agree with your assessment, but lots of governments have collapsed, and that doesn't mean that everyone loses EVERYTHING. Some people are able to retain some assets, if they have them in the right form.

I do think some of the hedges people take don't make sense, though... if your hedge is to keep a bunch of cash around, you aren't hedging against your risk because your risks are correlated - the event that will cause all your stocks to go to zero will also cause the dollar to go to zero.

If you are truly hedging against the collapse of the US, you would try to get assets that would survive that... lots of possibilities, and some of them make more sense than others, but all of them have their own risks, and some of those risks are way more correlated than people realize.

[Ekaros]

Because there are real world counter-examples take Japan and stock performance there.

It has worked to this point, but past returns are not guarantee of future returns. On other hand well both political parties really enjoy line going up, so even if it leads to inevitable destruction lot will be done to keep it going up.

[cortesoft]

By this definition EVERYTHING is gambling.

Take all your life savings into a savings account? Well, you could lose it all if the FDIC and your bank collapse.

Take it all into cash under your basement? You are gambling that you won't have a house fire, that you won't be robbed, etc.

Keeping US dollars at all is gambling that the US dollar retains value - there are plenty of examples of currencies completely collapsing.

[daseiner1]

your comment reminds me of when i interned at a large cloud services provider

i was very much infatuated by the idea of total reliability on a global scale and couldn't wait to talk about the CAP theorem with anyone who would listen. Read much of the research. I still love to flip through Designing Data-Intensive Applications by Martin Kleppmann occasionally.

As I was learning about said company's server racks there was a component that I asked an engineer on my team about – "Isn't that a single point of failure?"

He looked at me, exhausted and stressed out, and just said "Take it far enough, the Earth is a single point of failure."

I got the point.

[bregma]

It's because intelligent people understand the truth: the market can stay irrational longer than you can stay solvent and in the long run we're all dead.

There are no guarantees (other than maybe death and taxes). There's only the likelihood that as long as the market is rational you will make money in the long run. As soon as you start setting odds on success, it becomes gambling.

[daseiner1]

Investing in the market at-large, though, is based on so many presuppositions of general global order that I struggle to understand what the entire market being “irrational” over an investing period of 30-40 years would look like short of a new world war. And I mean that sincerely and without hyperbole.

[giantg2]

It's unintuitive because it's technically not true. All that suff about time horizon is right, but there's a legitimate reason that the fine print on the perspectus says you could lose your entire investment.

[daseiner1]

I’ll allow that I have the misguided presumption that I’d’ve been so smart as to have pulled my money out of the market just before Black Monday in 1929. But I still stand by the belief that the “gamble”, if following the Vanguard model of DCA and prudently managing risk over time to gradually shift from stocks to more stable “receptacles of wealth” whether bonds/gold/cash, is only a gamble that the United States (and thereby the world economy) will not utterly collapse on the scale of world war.

[giantg2]

You're still gambling, you just have much better odds. Any perspectus will have fine print saying you could lose it all.

[cortesoft]

I consider it gambling when your expected value for your return is less than 1.

So, if you run a Casino, I wouldn't call it gambling because your expected value is greater than 1.

Everything is a 'gamble' in the sense that there is a chance of ruin. It is a gamble to drive your car to work, because you could die in a car accident. People don't normally call it gambling, though, because it doesn't fit what we mean when we say gambling - taking a sub 1 expected value risk for the chance of a big return.

[throw0101b]

> You're still gambling

Is running a plumbing business gambling? Is opening and running a restaurant gambling? (Sure there's risk in running a business but risk is not the same as gambling.)

Because owning stock is basically owning a slice of a business. Owning a unit of a S&P 500 ETF or mutual fund is owning a slice of five hundred businesses.

[cortesoft]

I think this is a difference between 'gambling' and 'taking a gamble', and some people are confusing the two in this thread.

Yes, it is a gamble to start a business, but it isn't gambling.

[giantg2]

You have agency over your business. You're just betting on a stock. You wouldn't own enough stock to have meaningful agency over it.

[throw0101b]

> You have agency over your business. You're just betting on a stock. You wouldn't own enough stock to have meaningful agency over it.

Yes you have more agency in deciding how to run the business, but you have little to no agency about the economic environment you're in. You're highly concentrated in one financial asset, which means any little hiccup can have huge repercussions for your life, especially since you probably only have one business in one particular economic niche.

Whereas if you own a portion of dozens/hundreds of businesses, you have less control of how they are run, but no one business doing badly will impact you as much, nor even one particular economic segment (energy, transportation, tech, agriculture). By owning a broad index of companies you are more diversified.

Further, with modern financial products you can diversify not just between market segments (S&P 500, Russell 3000), but across countries (which deals with the now do Japan retort).

[TheDong]

Gambling isn't about the chance to lose money, gambling is about the rush of feeling like you're taking risks, the thrill of winning, and the crash of feeling like you're losing.

As such, if you setup auto-invest into SPY and never look at it, you're not gambling. You don't know if you're winning, you're not thinking about it like a bet.

If you go with your definition of gambling then, well, taking your salary in USD is gambling because the USD, just like SPY, could go to zero and you lose it all.

[coldpie]

> it isn't a zero-sum game, where you have winners and losers

Seems like someone who bought any time since last August and wanted to sell now would be a loser, right? Is now a good time to buy? What if the tarriff horrorshow continues and Apr 2 looks like a cakewalk? Should I put off buying until some time later?

I hate all of this and want to spend my time any way else. So, I do.

[TheDong]

> someone who bought any time since last August and wanted to sell now would be a loser, right? Is now a good time to buy?

The parent is talking about longer term investing, about buying and holding diversified indexes for 10+ years.

Statistically, if you bought and held the S&P 500 for ~30 years, any day since its inception was a good day to buy.

So yes, last august was a good time to buy. Now is a good time to buy.

What the parent is talking about is the way of investing where you do not spend any real time on it.

The bare minimum time is to just setup an autoinvest in vanguard to buy some dollar amount of a broad index fund (like VFIAX) each month, and then never look at it again until you're ready to retire, or have to make a down payment or such.

When you take out money, you don't try to time that either, you just accept the rate is what it is at the time you sell, and only sell the amount you need.

And then, finally, if you want to not think about it much, hardly spend any time, but be slightly more diversified, you could do a 3-fund portfolio, setup autoinvest, and then adjust the autoinvest once a year to push it towards the desired balance. That's a few hours of initial setup time (reading Boggleheads wiki, setting up accounts and auto-invest), and then maybe 1 hour each year from then on (checking rough percent, adjusting auto-invest numbers to push more money towards anything that's lower than desired).

See: https://www.bogleheads.org/wiki/Getting_started and https://www.bogleheads.org/wiki/Three-fund_portfolio

[coldpie]

Like I said in my first comment, this is what I'm doing with my retirement account. I'd prefer not to, but everyone says it's the thing to do, so OK. Still feels like gambling, though: https://www.cnbc.com/2018/09/13/these-retirement-funds-took-...

[nemomarx]

as long as you don't sell during this period, the exact time you buy should wash out? 30 years from now it won't really matter that much how efficient your monthly payment was in a particular year is the strategy

[coldpie]

Like I said, I already have a retirement account that is doing this. I just keep the rest in high interest savings and CDs or whatever and not care about this stock market junk at all.

[ajmurmann]

IMO one of the communication issues is that there is more money to be made by media talking about individual stocks and how to time the market then by saying "buy SPY and forget about it".

[47282847]

I see the value in investing in and benefiting from the growth of a global economy. I despise having to do it in a way that only makes the large companies larger; real economic growth for me lies in small independent entrepreneurship, not in publicly held corporations.

[UK-AL]

But the reality doesn't really show that.

Most growth comes large highly capitalised companies with money to invest in expanding knowledge and capital.

The startup making it big is still relatively rare thing in the grand scheme things.

And the majority of small businesses struggle or stay the same size for ages because they're operating in competitive markets.

[47282847]

I am not talking about startups but classic entrepreneurship in non-tech areas, and it may be our definitions of growth also differs. From a systemic perspective, I am not a fan of cancerous growth. Not all growth is positive for the participants of a system.

[neutronicus]

It is, in fact, gambling.

However, unlike going to a casino, elected leaders are under enormous pressure to ensure positive expected value - which is precisely why "diversified retirement mutual fund things" are such a good idea for the public investor - they're basically saying "sign me up for EV, please and thank you".

Also unlike going to a casino, some stocks pay dividends and you would in principle receive a share of the proceeds (after paying creditors) if the company liquidates all its assets.

[psunavy03]

This mentality is why so many people stay poor.

[UncleOxidant]

How would you convince people that they aren't gambling when investing in stocks? It's easy to say that this fear will keep them poor, but how would you alleviate their fears? There certainly do seem to be features of the current market that seem quite akin to gambling. Are current price/earnings ratios warranted? What about market manipulation by tweets that we see from the current administration? It seems that insiders that are privy to certain information will do much better than your average investor. At some point, people don't want to be suckers and decide to no longer participate.

[psunavy03]

Because gambling is ultimately just betting on a random number generator that's actively weighted against you. Investing is betting on the competence of an executive team to run a business. One of these, you have no control over. The other one is a win-win situation. If the business does well, you do well.

It's like saying that because your sibling or friend ended up in a shitty relationship that you need to be celibate for your entire life . . . no, you don't. Just because Company A blew up doesn't mean Company B will.

And to be clear, I'm not a fan of stock picking as a core investment strategy, but I'm talking about dollar-cost averaging in equities (low-cost index funds) as opposed to stashing cash under the bed. Long-term, betting on the economy is free money.

[ryandrake]

By the strict definition of gambling, the grandparents are correct: Buying stocks (even a diversified mix of stocks) is technically "wagering something of value on an unknown future event." We don't know whether stocks will go up or down, individually or in aggregate. It is an unknown future event. For the last ~100 years, the S&P 500 has had positive returns 73% of years, but there is no reason to believe or disbelieve that this distribution will continue for the next 100 years.

[ameliaquining]

By that definition, everything is gambling, because all activities involve risk. Even keeping your money in an FDIC-insured bank account doesn't protect against inflation risk, or against the risk of the U.S. government or financial system collapsing. So this definition of "gambling" is useless for practical purposes and we should pick a better one (or just stop using the word in this kind of discourse, since it tends to confuse people and provoke semantic disputes).

[scottyah]

> "wagering something of value on an unknown future event." But that's so broad, every meal is a gamble. Taking opportunity cost into account as something of value, and the fact that the future is uncertain, literally every action is a gamble.

[coldpie]

> as opposed to stashing cash under the bed.

There are more options than this. My savings account gives something above 4.5%, and if that rate does go down, there's CDs and stuff like that. And I assure you, I'm not poor, lol :)

[ryandrake]

> My savings account gives something above 4.5%

Have you checked recently? Short term Treasury yields are hovering around 4% now, so I'd be surprised if HYSAs are yielding more than that today.

[psunavy03]

With a strategy like that, you're still not going to be nearly as rich as you could be, but you do you.

[UncleOxidant]

> Investing is betting on the competence of an executive team to run a business. One of these, you have no control over.

But again, you're asking people to have a lot of trust in this executive team. Unless we have the legal and regulatory framework that can enforce that trust it all becomes very sketchy. And right now it seems like the legal and regulatory frameworks are under attack. It's becoming more a game of "who you know" and favor currying. That kind of erosion of trust is really dangerous for the markets.

[maest]

> Investing is betting on the competence of an executive team to run a business.

Incorrect. Public markets investing (which is what you're talking about here) is about betting that the market is undervaluing some business. This is fundamentally different from "betting on an exec team". The price matters a lot.

I mean, there's also some risk premia and some liquidity risk that you're being paid for, I guess.

But "betting on the competence of an exec team" is just wrong.

[psunavy03]

The point is that you are betting on the fundamentals of a business. Or a basket of businesses. And it's not just about whether a business is under/overvalued. That matters for growth stocks, but there are also stocks you can make scads of money on over the long term because they are boring, stable businesses that pay a consistent dividend you can then reinvest. Or boring, stable low-cost index funds that just track the market.

Gambling is the total opposite of that. Investing in an equity is saying "I have reason to believe this business or basket of businesses will continue to return profits to their shareholders." And you can do research into their financials, their industry, and so forth to make an informed decision. Gambling is just that . . . random chance in a game that's ultimately rigged against you. Investing is almost the opposite of gambling.

[bombcar]

The best argument I've been able to find is when they're offered a company match in their 401(k) or similar.

Basically - total market index funds have very low cost, and the entire market has very rarely gone down 50%, and eventually recovered.

Since your company is matching you 50% (or 100%) on your contributions, if the market goes down you're losing "house money/free money" you wouldn't have otherwise.

Then after years and years they just get used to it.

[throw0101b]

> How would you convince people that they aren't gambling when investing in stocks?

How about:

> But in a casino the longer you play, the higher your chances of walking away a loser since the house has the edge.

> The stock market is the opposite of a casino. The longer you play, the higher your odds of success in terms of experiencing positive returns on your capital.

* https://awealthofcommonsense.com/2023/05/the-stock-market-is...

* https://www.cfainstitute.org/insights/articles/investing-vs-...

[saltcured]

It may not be possible, but you need to get people to realize that thinking in absolutes is not principled, it is naive.

All of our existence involves gambling in the sense of balancing probabilistic risks. You need something more nuanced to distinguish gambling (the moral vice) from risk management (the inescapable survival tool).

[bregma]

> How would you convince people that they aren't gambling when investing in stocks?

Same way you convince them betting on the ponies is not gambling. If you pick a sure thing you're guaranteed to make money. All you need is a system.

[lr4444lr]

I don't understand why this is being downvoted. This is exactly the mentality that Jack Bogle promoted: stay out of individual stocks, load up on a diversified stock index fund that pivots gradually toward stabler assets like bonds as you age.

[wiredfool]

My Grandfather was young during the Great Depression, and his relationship with money was much different than I can imagine. His idea of diversified investments was cash in several different banks. He just didn't spend money if he didn't have to -- to the point of not wanting to get a cordless phone (which could be carried in his walker) because he had a perfectly good wired one in the phone nook.

When he died in his 90s, his car was the one he bought to visit my parents when I was born.

[JoshTriplett]

If you needed the money immediately, that's an understandable reaction to the Depression.

If you did dollar-cost averaging through the Depression, and didn't have any immediate need to withdraw, you'd have come out of it doing pretty well.

[bittercynic]

Many people aren't able to dollar-cost average through the times it would be most beneficial. There's a strong correlation between stocks getting cheaper and being temporarily unable to earn enough money to continue your usual investing.

[bregma]

How to become a millionaire:

1. Start with $10,000,000 2. Invest right before an economic downturn.

[BurningFrog]

It is gambling, but the kind where the odds are in your favor!

[giantg2]

They aren't wrong. It kind of is gambling, depending on how you do it. Even if you do it the smart way there's still some small risk. That's why the fine print on any perspectus says you could lose all of your investment.

[swatcoder]

Market/fund investment for us normal folk is so passive and disempowered that it really does amount to gambling. You put some share of your hard-earned wages in and hope for the best.

It's been shown to be a mostly rewarding strategy over the last century of so, averaged out at least, and so of course it's not really a foolish bet for most folks, but it's not the only way to secure one's financial health and isn't the ideal one for everybody.

Scrappy hustlers, skilled trade workers, and (SMB-scale) entrepreneurs in particular can often see a better return by investing in themselves and in ventures in their own community, where things are not so passive. Likewise, people with modest dreams and a preference for stability often might prefer securing a paid off house, car, etc before throwing too much money into the casino -- even on good bets. And others with strong and healthy family bonds benefit most by prioritizing enrichment and opportunity for family members who can be trusted to return the favor in less flush/capable times. etc

Many young people have only really been exposed to the idea of market investment as a retirement strategy, and its a good one for many, but there are a lot of roads to staying financially healthy through late life.

[solatic]

> entrepreneurs in particular can often see a better return by investing in themselves and in ventures in their own community, where things are not so passive.

You don't understand the power of diversification in portfolios. Yes, there are plenty of individual ventures that will return more than an index fund. But individual ventures are fundamentally volatile. They are volatile because human beings are not machines. People burn brightly and then burn out. People push hard and then fall sick. Cultures and institutions and trust are painstakingly built, and then wiped away in an instant by ideologues.

As an individual investor, you have your labor and your savings. You cannot productively diversify your labor, but you can diversify your savings.

[dinkblam]

yes, diversification is the basis for sound investing.

yet, if you look at all people and companies that have grown extremely rich extremely quickly, there is one very common factor: they didn't take money out of the company, but reinvested every single penny. thats the way you can outgrow your competition which doesn't do the same thing. failing businesses are often those that paid too much to their owners.

[solatic]

> reinvested every single penny. thats the way you can outgrow your competition which doesn't do the same thing

First of all, to reinvest, you need to have some profits in the first place. Even getting to the point of having any revenue at all, you're losing 90% of entrepreneurs just to get there. Second, among those 10% of entrepreneurs who get to the point where they have any revenue (let alone profits), it's sheer hubris to think that you are unique or special in reinvesting; most entrepreneurs are not seeking to take their goose's golden eggs while they are the size of peas.

There are very, very, very few entrepreneurs who pass survivor's bias to talk about their golden eggs.

[umbra07]

That's not being financially healthy. That's far closer to gambling than investing in a diversified portfolio is. Just because you add the potential for an extremely high return does not make a strategy financially healthy.

[UK-AL]

Plenty of businesses also fail. In fact a large chunk do.

Starting a business is one of the most risky things you can do. Much more risky then having a diversified portfolio. However the rewards can be amazing given the relatively small chance it hits jackpot.

[bluedino]

Even right now a lot of people retire and then liquidate their 401k

I just don't get it. My father and father-in-law both did it.

[Retric]

I agree it’s a terrible strategy on average, but Money has diminishing marginal utility. Having 1/10th as much money is far worse than having 10x as much is better.

As such once people can lock in a reasonable retirement they often get really conservative.

[h2zizzle]

This is why high progressive tax rates, let alone high marginal tax rates, are justifiable. The less you earn, the lower a percentage of your earnings you can afford to lose before having to make drastic lifestyle changes. However, relatively low on the absolute income range for Western countries, you reach a point where you could lose 90% of your income, live in a high-cost-of-living area, and still experience negligible change in your circumstances. Tax rates should be based on analyzing where that point is.

[lotsofpulp]

I find earned income tax is never justifiable. Working should never cost you money. Marginal land value tax rates do make sense though (and marginal sales tax rates, but that’s harder to implement).

The current situation of low land value tax rates and high earned income tax rates leads to two old people living in excessively large lots while two young working people give up goals of having kids because they don’t want to raise them in a 1,000 square foot rental they don’t consider stable enough.

[h2zizzle]

>Working should never cost you money.

If I had a nickel for every time a recruitment process was jeopardized by my asking for the company to cover travel expenses to the interview, I would have two nickels. Which isn't a lot, but it's weird that it happened twice.

[47282847]

> Working should never cost you money.

And that’s the case as long as the income tax is at or less than 100%. Income taxes could well be collected from employers directly and never reach you (like some European countries do for roughly 50% taxes due). Ultimately what counts is how much your employment costs. Psychologically, it then may not feel like you are paying anything, because you don’t. You working supports public infrastructure for public benefit (which includes you again). Prefer to pay no taxes but having to build your own roads? Good luck with that.

[dragonwriter]

> And that’s the case as long as the income tax is at or less than 100%.

No, its true as long as taxes on income plus the necessary-but-non-deductible expenses associated with maintaining the job that would not be required otherwise are less than the pay for doing the job.

But income taxes aren't the only taxes on income (payroll taxes exist), and costs of work (added wardrobe costs imposed by dress codes and expectations, commute costs, added childcare costs) are real.

[lotsofpulp]

> Prefer to pay no taxes but having to build your own roads? Good luck with that.

I never implied preferring not to pay taxes. Marginal land value and consumption tax rates would set incentivizes properly.

Earned income tax is the rich and the old and their younger beneficiaries benefiting (rent seeking) off of others’ labor.

[giantg2]

Tax rates should also be based on what the public expenditure need is, not just maximum revenue.

[h2zizzle]

The redistributive effect of taxes is a feature, not a bug. Inequality distorts political and social dynamics. One of the functions of taxation is to make rich people less rich, and we shouldn't run from that.

[giantg2]

It doesn't seem like taxes are a cure for inequality. At least I don't see any examples of it.

[Retric]

That’s true up until the point of budget deficit.

[no_wizard]

This is why you might say, transition out of stocks being the majority of you portfolio to bonds.

To completely cash out - as in, not be invested at all - isn't wise.

[danans]

Did they need the money for life expenses?

[toast0]

Spending from your 401k is different than liquidating it (until the end... if you've got a month or a year of funds in the 401k and you take it all out, sure that's liquidated, but if it took you 10+ years to use it all up, it's not liquidating in casual conversation)

[danans]

> Spending from your 401k is different than liquidating it

Define "liquidating". Do you mean moving all investments in the 401k to cash and equivalents? That seems sensible if you don't want any more market-risk exposure going forward. Withdrawing everything at once seems ill-advised because you'll get hit with high taxes unless your 401k balance is really small.

[toast0]

I would assume this means take a full withdrawal of the 401k and dump it into a checking account.

> Even right now a lot of people retire and then liquidate their 401k