[cmiles8]

Good advice. Ironically most long term folks that just buy low cost index funds and take a nap outperform most of the market stressing out daily on their next move. That’s the cruel reality of investing.

When you factor in the opportunity cost of all that stress and managing an active portfolio the percentage of successful active portfolio managers likely falls down to single digits.

Invest early, invest consistently and often in up or down markets, and the math says you will do very well.

[sph]

Though I keep wondering if the ‘invest consistently whether the market goes up or down’ defeats the point of a stock market in the first place.

People effectively keep throwing money at mediocre or failing endeavours, which magnifies any structural problem, and everything seems to keep going up whether it’s good news or bad news, until the bottom falls out.

My reading might be wrong, but since 2020 there is no bad news that seems to faze the market by an iota.

[pfortuny]

Well, that is what markets do: behave. Rationally or not.

The 1929 panic was also irrational but it happened. There is no way to solve that.

Panics happen and bubbles too, and in the meantime, very long term investments tend to grow (in average), as long as the economy works as expected (improving in average, long-term).

Of course, catastrophes are not impossible (the Black Death, the French Revolution, World Wars...).

[baal80spam]

> My reading might be wrong, but since 2020 there is no bad news that seems to faze the market by an iota.

Or maybe - because it's the bad news that sells - there is much more of the good (or neutral) news that outvalue the bad news, that is just unknown to you?

[blitzar]

Always bet on black at the roulette table, over and over and over again.

[plomme]

This has been my investment philosophy as well, but I'm starting to realize that this is forgetting that "past performance does not guarantee future results". It only works when the index goes up, and I don't see any fundamental reason that should be true on the long term. I don't know of a better alternative though.

[redwood]

Well the fundamental reason boils down to the idea that these companies that you're investing in employ a bunch of sophisticated professionals who wake up everyday aiming to grow the success of their businesses. In other words you're really investing in their potential. Compare that to for example something that's purely speculative like gold.. a useless piece of metal that just sits there. Buffett has really helped me see this difference

[plomme]

Does it follow that the price of the index should go up in perpetuity because workers are motivated?

[redwood]

I would expect the earnings and or growth of those companies to go up at the very least. Whether that translates to higher valuation for ownership shares in those companies is probably more a question of whether there's anything else more appealing out there to invest in. What's your take? What's more appealing?

[plomme]

I wish I knew! My money is still mostly in index funds and real estate.

My sneaking doubt is whether the index can keep growing, because doesn’t that depend on infinite growth based ultimately on mostly finite natural resources, manpower, and land? But maybe we can always extract and produce more with new technology, and that manpower may get leveraged or extended by AI and robotics. Or maybe just financial magic beyond my understanding.

Regardless I have been thinking a lot about what aging and declining populations might do to the economy in the medium-long term. I only know that I know nothing.

[redwood]

The way I look at it our economy has already decoupled from its physical inputs. That's what cyberspace and a Services based economy really enables. It's kind of cool. That's why I find the focus on climate impacts of data centers to be backwards since they're actually enabling the economy to grow without it being centered on physical input

[derf_]

> ...doesn’t that depend on infinite growth based ultimately on mostly finite natural resources, manpower, and land?

There is no practical limit to the price of the index. Shares may represent some claim on those things you mentioned, but shares outstanding have been steadily shrinking for decades, essentially since the dot-com boom [0]. Meanwhile, governments have been printing money like it's going out of style, and most of it has been ending up with the wealthy, who, lacking any practical way to spend it all on consumption, use it to bid up asset prices. It is no wonder that the price of a shrinking pool of actual resources [1] has risen dramatically when measured in a growing supply of money (which is only a relative resource, not a real one).

One could certainly look at the rise of the 401k as a retirement vehicle, and conclude that at some point those flows are going to reverse. One could also look at the US SSA statistics on the number of workers per retiree, and its trend over time, and paint a pretty grim picture, but is that enough to offset the combined forces of inflation and the compounding wealth of the ultra-wealthy?

Man, I don't know, either.

The good news is "nothing" is all you need to know to invest in an index fund.

[0] This has actually reversed recently with the AI boom, but it is the first time in a while that companies have tried harder to raise capital to grow the pie than to buy back shares to return cash to shareholders.

[1] Rather, a shrinking pool of claims on those resources, each claim increasing its value measured in real resources as companies buy back shares, an effect Buffett famously loves.

[WJW]

It's almost the inverse of a cruel reality? Just stick it all in low cost index funds and go to the beach. You'll do as good or better than 99% of actively invested funds. That's not cruel at all, that's actually a pretty comfy reality.