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Originally Posted by albionmoonlight
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The premise of the article is interesting and kindof cuts a little to the "great debate" my wife and I have had with regards to what to do with our long term savings (401k, etc). Frankly, neither of us can see a good way this ends up in the long term for our lifetime. And, at the end of the day, I really do think we're so much closer to triggering a dark age or at least some sort of catastrophic societal meltdown than anyone wants to admit. Explanation forthcoming below.
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Originally Posted by BishopMVP
Stocks can be fun, will swing the odds in your favor if you know what you are doing, and will generally offer slightly better returns long term, but I think the last couple years have proven that you can't predict the "100 year" events that can destroy a retirement plan - so similar to gambling it's only worth playing with money you can afford to lose. (Unless you can reverse-engineer the algorithms that a big trading house uses, in which case you could fleece them - and I do believe that will happen sooner or later.)
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These events are happening with more regularity than every 100 years, particularly as we keep picking apart market regulation. A big problem seems to be that everyone at this point is tied up in this "game" of sorts. Seemingly everyone's retirement is tied up in this giant scheme so you can't really unravel it. Frankly, I'd love to see an end to the stock market but that never will happen barring, again, some sort of societal collapse.
Your parenthetical situation is already happening. It seems as if there is "fast money" and "slow money" in my mind. Slow money is that which makes up most of our retirements. It is based on the article's premise that in the long run, you'll be better off with the stock market so you accept the risk and buy there. I've been to those groups that make those trades, tho- it's basically students just out of college doing the trading before the good ones move onto bigger and better things.
In the meantime, over the last 10 years, trading tools have exponentially increased in sophistication and it has been very easy to siphon money out of that slow money. So that extra money that you should get for risking your capital is just flying out the window to some parasites who really contribute nothing to the market except the ability to act quickly.
And, now SD- I've gotta ask you because I really have no idea and the above is a genuine concern to me going forward and I think this is the sort of thing you think about on a daily basis
At the end of the day, where does that leave the slow money? If all of their risk premium is being pulled out of the market, why even play? You'll make money for a while but you have to try and time the market, a fool's game, to avoid these crazy pitfalls because the only way you can really make money is to either accurately predict the upswings to make more money when things are going well or avoid the downswings.
However, if you end up in something steady- say, treasury bonds- you'll be lagging behind even inflation and be losing money. I mean, there's pretty much no risk there because if the government isn't paying out on their debt, we probably all have a lot bigger problems than what is happening to our 401K.
So, long term- what can you do if you're "slow money"?
SI