> regular purchases of broad market index funds remain a sensible way to build long-term wealth. But it's important to understand that even this strategy is fundamentally speculative, betting that the overall market will continue to rise over time based on historical patterns.
Because most companies have moved away from defined benefit plans (e.g. pensions) to defined contribution plans (e.g. 401k) for retirement plans, workers in the U.S. rely on the market to go up over time for their retirement. The Fed tracks the equity market as one of the key metrics for financial stability. Buying broad market index is still a speculation, especially short to medium term (S&P 500 frequently goes down 20% once in a while), but given this retirement mechanism, I wouldn't call it a speculation per se in the long term.
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Although I agree with the sentiments in the post, in reality the lines between investing, speculating, trading are all kind of blurred. I suppose the frustration comes when one sees normal people throwing the term around, which I understand. But professionally, you can't have investing without speculating, trading, and sometimes even gambling. At the end of the day you are making expected value judgement whether that be through cash flow and dividend or price appreciation. And capital flow from "investor" to "producer" is also not very straight forward in many instances and involves many parties.
An extreme example would be: (1) Is it gambling to bet money if someone offers you 3 to 1 on a fair coin flip? (2) Is it investing if you participate in a seed round of a company that is so obviously a bad valuation or bad deal?
One may draw the distinction on what is productive for the real economy, but the economy is circular and money flows. And who makes the judgement call for what is productive and what is not.
> regular purchases of broad market index funds remain a sensible way to build long-term wealth. But it's important to understand that even this strategy is fundamentally speculative, betting that the overall market will continue to rise over time based on historical patterns.
Without a reasonable expectation of growth, the concept of investment in someone else's business would never have been conceived.
Gambling exists though and from a raw numbers POV you have a net expectation of losing money doing it. I'd expect investment to be at least as irrational in some cases so I don't think a reasonable expectation of growth is necessary. See for example investment into the 'metaverse' and VR.
Agreed, but it's hard to have honesty when there's an incentive towards saying "I'm an investor" as a way to exaggerate one's role.
Most of the time I can imagine "speculator" seeming grander is when it's such a speculative/chaotic market that it seems preferable to present as cunning and connected, as opposed to careful or knowledgeable.
> regular purchases of broad market index funds remain a sensible way to build long-term wealth. But it's important to understand that even this strategy is fundamentally speculative, betting that the overall market will continue to rise over time based on historical patterns.
Because most companies have moved away from defined benefit plans (e.g. pensions) to defined contribution plans (e.g. 401k) for retirement plans, workers in the U.S. rely on the market to go up over time for their retirement. The Fed tracks the equity market as one of the key metrics for financial stability. Buying broad market index is still a speculation, especially short to medium term (S&P 500 frequently goes down 20% once in a while), but given this retirement mechanism, I wouldn't call it a speculation per se in the long term.
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Although I agree with the sentiments in the post, in reality the lines between investing, speculating, trading are all kind of blurred. I suppose the frustration comes when one sees normal people throwing the term around, which I understand. But professionally, you can't have investing without speculating, trading, and sometimes even gambling. At the end of the day you are making expected value judgement whether that be through cash flow and dividend or price appreciation. And capital flow from "investor" to "producer" is also not very straight forward in many instances and involves many parties.
An extreme example would be: (1) Is it gambling to bet money if someone offers you 3 to 1 on a fair coin flip? (2) Is it investing if you participate in a seed round of a company that is so obviously a bad valuation or bad deal?
One may draw the distinction on what is productive for the real economy, but the economy is circular and money flows. And who makes the judgement call for what is productive and what is not.
> regular purchases of broad market index funds remain a sensible way to build long-term wealth. But it's important to understand that even this strategy is fundamentally speculative, betting that the overall market will continue to rise over time based on historical patterns.
Without a reasonable expectation of growth, the concept of investment in someone else's business would never have been conceived.
Gambling exists though and from a raw numbers POV you have a net expectation of losing money doing it. I'd expect investment to be at least as irrational in some cases so I don't think a reasonable expectation of growth is necessary. See for example investment into the 'metaverse' and VR.
Agreed, but it's hard to have honesty when there's an incentive towards saying "I'm an investor" as a way to exaggerate one's role.
Most of the time I can imagine "speculator" seeming grander is when it's such a speculative/chaotic market that it seems preferable to present as cunning and connected, as opposed to careful or knowledgeable.
They misspelt gambling