A weekly thread to discuss financial matters - from personal all the way up to global.
Ground Rules
- Remember that we're all just Internet randos. Don't bet your life savings on a hot tip from this thread.
- Keep culture war in the culture war thread. Yes, global events may impact our personal finances, but that does not mean we have to incessantly harp on culture war aspects here. If you are going to discuss it, please stick to the practical impacts of it on an individual level.
- Be kind. Remember that everyone here comes from different circumstances. We all have different resources available and different risk tolerances.
- Don't let the perfect be the enemy of the good. Better is better. Celebrate people when they take a step up and work to move their finances in the right direction. Don't flame out because they haven't followed what you consider the optimal path. Everybody has to start somewhere.
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Notes -
Can someone help me think about bonds properly? I’ve been buying FTBFX as part of a 20-30-50 portfolio and over the past like 5+ years my return is 0.25% or so—I’d have been better off with just money market. Are my expectations off? I get keeping some ballast for rebalancing but the bonds are just melting away it seems with inflation.
O_____O
I hope to god you are trolling, but I fear you are not.
You don't buy frickin' BONDS in 2020 or 2021, when the interest rate is close to zero and can only go up, making your bonds worth less, and when liquidity is being pumped like crazy from the central banks, inflating all equity valuations massively. You've taken a net loss from inflation and a massive opportunity cost.
I'm not a mod, but please don't lead with accusations of bad faith. It's clear you have a lot of experience in this area, and I fear you're assuming that the layman's level of expertise is much higher than it is.
If you're not a mod, don't try to mod. I leaned towards good faith, as you could see.
Though, I'll try to be a bit nicer in my tone. It's just bizarre to me how little care goes into some people's handling of their savings.
A lot of people just aren't really taught, so they go with "well, I heard this is good and simple", which is... often not the worst choice! The only thing my father ever really taught me about retirement was "get the company match, it's free money." The company was good enough to auto-invest in a TDF as a default. And then that got me started and gave me time to learn a bit more, both online, at the water cooler, and at the company sponsored "financial education" sessions. I'm still not saying I'm a genius, but I definitely know a lot more than I used to.
This is just a restatement of how little care people put in, not an explanation, though. Because, even as-of 20 years ago it was essentially trivial to teach oneself how to properly manage one's savings, and yet so many people even today stick to "well, I heard this is good and simple."
My pet theory is that people (certainly including myself) have weird hangups when it comes to things that clearly affect their status that prevents them from wanting to know too much, and so they proactively prevent themselves from learning even the most trivial of things. I see this in weight and diet as well, where people are hesitant to do the most basic work of measuring calories in/calories out before just declaring it too hard for them to lose weight.
This sounds interesting but I'm not sure I grok your idea. Please say more?
One thing I've definitely noticed in my own learning process is that the instincts and intuitions and emotions we developed on the savannah are very poorly suited for investing. It's a very unnatural country to travel in, and you have to learn the customs, leaving any prior conceptualizations behind.
There's also lots of possibly well-intended misinformation that we carry around. It can be a case of 'some knowledge is worse than no knowledge'. We hear BS like 'timing the market is impossible' (a bunch of fund managers failed at doing it in the 1980s and wanted to believe no one else could do it, and their refrain got stuck in the collective unconscious) despite the fact that we are not trying to be an uninvolved person who just DCAs into a passive index fund. It gets in the way when we're trying to take investing as an active interest.
We hear of 'market efficiency', as if this is some hard fact that tells you where a stock will or won't go, because supposedly everything is priced in immediately. If that's the case, why did NVDA go from 200 to like 700 in 3 months - was the market efficient at 200 or was it not?
We hear 'what goes up must come down' (a law of physics, not necessarily markets) which might well keep us from buying the strongest stock just because it has shown strength already. The Monte Carlo effect plays a trick on us here - we think that if 'up' has happened, then 'down' is more likely to happen next. But the reality is that the strongest stocks make new All Time Highs 100 times while the price is on the way from 100 to 200.
We hear 'past performance does not guarantee future results' and variations of this legal disclaimer, despite the fact that history rhymes in the markets like in most fields and precedents in previous successful stocks can help equip our perception. Etc etc. Many such things.
Everyone likes to believe themselves high status, despite the fact that, definitionally, only a small fraction of everyone can be high status. Conveniently, there's no simple metric that we can measure in any human by which we can determine their status. There's not even a set of metrics that we can input into a formula. But there are some metrics that are better than others, and money and looks are two of the better ones. They're gendered, but also, we've been taking that gendered-ness away for quite a few decades by now.
One's savings is obviously related to money, and weight is obviously related to looks. Managing either well tends to require learning a lot about the underlying systems in which these things exist, which inevitably also comes with it realization of one's own place in that system relative to others. Which translates to knowing more about one's own status. Which means risking learning that one is lower status than one believes oneself to be. Which is really unpleasant. So many people opt not to take the risk.
Managing my own weight was one of the harsher examples of this in my life. I was easily intelligent enough and educated enough about biology to know how to do so, but I didn't do so until my early 20s, when the simple painful physical reality of living as a
big fat fattyperson of obesity was too overwhelming for me to ignore anymore. I believe that my avoidance of doing the basic research on this topic was primarily due to trying to minimize my own knowledge about how ugly and low-status I was turning myself through my decisions about diet and exercise.There's also the more generic "people hate taking responsibility for their own future" that's just common among everyone in every context, which I think is synergistic to this. If you learn more about how to properly manage your savings, you might learn that you have more control over it than you thought. And with control comes responsibility. And who likes the idea of failing and then having no one to blame but oneself? So why risk thinking that way, when you can just use your ignorance to blame [the system] for your failures?
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