It's also not known to many folks in concrete fields like engineering that some fields/disciplines are mostly total bs. Like, 90% of economics and finance is absolute nonsense.
Once you add those together, it's not surprising to see what you are seeing.
Even renters these days live in buildings largely financed by either banks, reits, private equity, etc and underpinned by securitization.
And when it comes to business lending the entanglements with corners of financial services that look nothing like mutual funds only get more extensive.
Just because you don’t know much about it doesn’t meant it’s nonsense.
But it’s true based ok numbers. All of these “professionals” as a whole are not beating passive investors.
Modern finance isn’t the reason we have credit cards. Those were common 30+ years ago.
Additionally, someone taking a vacation they can’t afford that they finance via credit cards is not an example of success.
Without contemporary (vs modern ) credit cards you don’t have airbnb, you don’t have online airline booking, you are not putting things on your visa in other states much less other countries. Credit cards have changed a LOT.
If you think debt is the main way credit cards enable travel you are missing a ton. But the fact is that is a key function too, regardless of whether you approve. Most of the country and world are not living as comfortably as folks on this board.
Appreciate what we have instead of dismissing a whole industry as useless. It seems useless until it goes away, sort of like the police, competent politicians, etc etc.
I’m a passive investor too but there needs to be some ACTIVity happening for those index funds to make money. Startups, restaurants, hair salons, housing developments, and factories don’t get any money without expensive humans you dismiss as useless making decisions in the field of financial services and economics.
The vast majority of finance is basic loans (as you call out). There is no 'sophisticated' financial theory involved, it's very basic.
The financial theory required to make corporate loans is also very basic - the complicated part is understanding the business so that one can make decent projections. For example, to make oil and gas loans you better have a very good understanding of oil and gas reservoirs, the engineering involved in drilling, pumping, fracking etc. Hell, the legal side of a corporate loan is more complex than the finance part. Even securitization is quite straightforward - there are just a lot of numbers.
You said most financial services and economics is useless but seem to be taking about a specific part of that world. Portfolio theory? Seriously? You’re clearly thinking that consumer retirement investing == financial services. Totally wrong.
“ Like, 90% of economics and finance is absolute nonsense.” -you
I disagree - you may be bitter from your experience but from where I sit this world falls apart without financial services in particular.
You can disagree, but you seem to have taken none of the courses... the vast majority of financial services are based on very basic financial theory developed 10 thousand years ago. I never said financial services are nonsense - the academic fields are largely nonsense.
Respectfully - you have something like Gell-Mann amnesia. Not quite the same, but similar. It seems like you know just enough to be dangerous, maybe enjoy the shallow knowledge, but can't go deep enough to realize the massive amount of nonsense. It's kind of lame to appeal to authority, but go through all Warren Buffett's letters to the shareholders - he also calls out the nonsense.
10% of financial and economic theory (at most...) powers 99% of financial services. People (like me..) take entire degrees in this stuff and one class would have more than sufficed. That is absolutely not true in computer science, for example.
I have no dog in this quarrel, but you seem to have agreed with the OP.
It’s mostly all fundamental/basic knowledge.
My grandparents did not own a credit card. My parents do not. We rent. We have around 30 paid days off plus “unlimited“ paid sick days and months of paid maternity leave. Just to name a few things that are so standard here that most people just consider them a given and nothing worth even mentioning. I am in my forties myself and expect never to need a credit line on my bank account or card. Each generation has built their own “wealth“ sufficient to live well, with no inheritance or property ownership, and with support from the next generation in the final decade - most of it coming from the public pension system built on the idea of solidarity and community, not individualism.
So: No, where I am, credit cards could disappear without much effect. They are far from required. They are a component of a system meant to push you into slavery.
My working theory is that the vast majority of portfolio and fund managers are full of hot air, but there are some at the top that are actually successfully using non-insider information that is not well known to their advantage quite successfully.
Unfortunately it also seems that investing in such plays is infeasible except for a select few, so I stick with index funds.
The thing is, most fields aren't basically zero sum (not strictly true, but true enough) like money management. So if you are the 90th percentile doctor or lawyer you are hugely valuable. 90th percentile money manager is losing v index fund.
Meaning, in 30 years, a whole 15% of your final net worth was stolen by that 0.5% fee alone. Half a percent a year at a time.
Compare that to Vanguards 0.03% - or in 30 years, less than 1% of your net worth stolen.
I'd rather give up 1% of my life savings than 15%. Especially when it's proven time and time again that you get nothing in return for that fee.
You surely don't normally expect people to be their own doctors, or electricians, or any sort of professional work themselves (other than their own field).
And yet, it is not the case for financial investment. This is counterintuitive, despite being absolutely true. But without decent exposure to the literature and education about it, it is very easy to not know or find it baffling that a low cost index fund is the optimal for the average person. Not to mention the myriad of tiktoks and finfluencers claiming otherwise!
Is it weird that I, thought by many to be a smart and worldly person, have zero clue what any of those "obvious" reasons would be? I have an engineering degree and I'd be my own engineer. I might get second opinions, i.e. chit chat with co-workers, but not for everything.
Index funds fueled this stock bubble. And BlackRock/Vanguard knew exactly how to play it. P/E makes no sense, and nothing else makes sense. Good luck.
A great tool to see the exact numbers for stocks over the last 150 years is http://www.moneychimp.com/features/market_cagr.htm The main takeaway is they fluctuate a lot, so if you need a guaranteed profit in 10 years they're not for you. But if you'll probably leave your money in 20 years, you'll probably double or quadruple your buying power by the end. That risk is why index ETFs with a retirement target year in the name shift your porfolio to treasury bonds, as the target year approaches.
There's a lot of people in your camp that think the stock market's a bubble. And there's a lot of people in the camp that AI is going to become a multiplier on the GDP, warranting further growth. And all these ideas are priced in.
I'm young with high risk tolerance so I'm still 100% stocks. But I still advise people to manage their own portfolio and just choose their ratio of index funds to treasury bond, according to risk tolerance. The tickers I'd use are VTI for stocks (risky but averaged 9.3% for 150 years) and VUSTX for treasury bonds (4.3%). Buying those two things is super simple - no manager siphoning off 0.5% (i.e. 10-15% by retirement) needed.