Comment by DwnVoteHoneyPot | Hacker News Reader

Comment by DwnVoteHoneyPot | Hacker News Reader

DwnVoteHoneyPot

All that long-term data and presentation is lovely and all, but I disagree with the conclusion of "buying and holding has been a simple and straightforward way to build wealth".

Saying investing $1,000 in 1871 would be $22M now doesn't help me. Saying $1,000 in 1969 is now $23K doesn't help me - I wasn't alive then. It's not practical.

I didn't have $1,000 of savings until my late 20s. After paying for bachelors and masters, I had to borrow $500 from friend to eat and live until next pay check. Then car, house, furniture.

And if that $1,000 I invested in late 20s turns into $2,260 in 20 years - whoop-dee-doo, who cares.

Conclusion should be "buying and holding has been a simple and straightforward way to store wealth". But not going to build wealth unless I'm active - building resume, building business. In addition, I might as well take that $1,000 and swing for the fences and turn it into $10,000 or more looking for the next AAPL, GOOG etc. like venture capital.

I obviously can see your logic but I still think it's your best bet. I also think it's important to point out there's an order of importance. If you have low or no income you're first priority needs to be getting a higher paying job and or up skilling to enable you to get a higher paying job. From there assuming you got a decent job most of us will have a 401k option. You get a tax deduction, tax free growth and most importantly most of us get matching employer contributions of some form. If you put in enough to get the full match over the course of you're career you're going to end up ahead. If you have an HSA sames goes there. If you have a low enough income to qualify for the deduction on an IRA same goes there. Oh yea did I mention 529 for your kids future? Combining investing w/ special accounts that can grow tax free and offer tax deductions are going to maximize you're chances of overall success but again I agree all this is kind of riding on you being in a decent paying field and if you're not already that should be your first priority.

Yes, definitely need to optimize for the employer contributions and tax savings, but that wealth is still from the job. I guess disagree with the "look how much money you'll have from compounded returns!"... the timelines are too long to be practical in our life spans.

What you are overlooking is the risk aspect. If you are guaranteed a return of say 6 to 7%, you are looking at doubling the money in about 10 to 12 years. That kind of assurance means you can invest much more with specific goals in mind.

This is the reason people take a more balanced approach where they split their investments in say a 70-30 or 90-10 ratio and put a smaller percentage in short term high risk - high return investment.

Generally, the idea is to invest each year, and hold those investments over a long period of time.

You can use this calculator to run different scenarios.

https://themeasureofaplan.com/net-worth-scenario-tool/

Example inputs: a 25 year old with a starting net worth of $10k and who invests $7k per year over 40 years, at a 5% average annual return.

Output: net worth of $915k at age 65. This provides retirement spending of $37k per year (using a 4% safe withdrawal rate assumption).

If I start at 30 years old (as per my initial comment) with $10K and $7K per year, it shows $687K. At 4% withdrawal rate that is $27K per year in retirement. Of that $687K, I would have kicked in $255K of it as principal. Sure it's something, but that's over 35 year time frame. Wealth is going to come from other sources.

Doesn't really fit the "do what Warren Buffett did and be wealthy" narrative that people imply with buy-and-hold. Buffett made concentrated bets. He effectively used leveraged (using insurance premiums) to make bets. He prefers to be a business owner instead of shareholder (i know it's a subtle distinction). The Warren Buffett quotes people use to justify these strategies is misleading.

Warren Buffett is one of the greatest investors of all-time.

The average Joe can't expect to re-create his returns.

There's a reason why Buffett regularly recommends (and bets on) the S&P 500 as a solid investing strategy: https://www.investopedia.com/articles/investing/030916/buffe...

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