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Comment by xiaoma | Hacker News Reader

I suggest reading some of Siegel's books. There are good records going back two hundred years. The stock market has beaten every other asset class, every single decade between 1810 and now. You might make an argument that things will change due to a technological singularity, but stock performance has been remarkably consistent over the long run.

http://caps.fool.com/Blogs/1802-2009-performance-of/282249

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You (or Siegel) may suffer survivorship bias. Yes, the US stock market has performed well. But what about early Russian stocks, German stocks, French stocks? I'd venture a wild guess that investors got pretty much wiped out between 1917, say, and 1945?

Also, the chances are high that you can find some time grid for which "every single decade" will show whatever you want it to show. For example, between 2000 and 2010, US aggregate stock market performance is... roundabout zero?

I upvoted you for insightful analysis, but I think survivorship bias might be appropriate here. If the economy & political system changes the way it did in Russia, Germany, and France, it's basically moot where you've put your assets. You'll be wiped out either way; the important thing then is that you survive and can rebuild afterwards.

As one of my mentors once told me, "Optimize for the case where we aren't fucked, because if we are, there's nothing we can do about it." He was talking about software architecture and startups, but it applies to finance as well.

In some cases everything is equally bad, but not in others. In France, for example, the stock market was wiped out, but lots of other assets survived the war, especially property (land ownership wasn't generally interfered with), and portable valuables like gold and jewelry. So if you were picking places to put your money in 1935, there are definite winners and losers--- buying land was a good option.

Diversify across geographies, e.g. always hold positions in America, Europe, and China.

At first, I thought we had a misunderstanding but now that I see your point, I have to disagree.

Survivorship bias basically is a sampling error and, in this case, leads you to underestimate the risk of your investments, both of which are never a good thing. Moreover, in almost all cases, it's a tad fatalistic to say "there's nothing we can do about it". I mean, maybe if the world goes under, but anything short of that, I'd like to think there's always sth I can do about it (even if that's just trading one bias for another... ;)

Sampling error is when your sample doesn't match the properties of the population that you're trying to infer for. It's not sampling error if you actually meant to study only the population that you're looking at. I'm saying that when it comes to asset performance, "Countries with a stable political system and market economy" is a better sample than "all countries", at least when you're investing domestically.

The reason for this is that if your home country undergoes political turmoil, you'll need to special-case that anyway. It's very likely that your assets will be seized by force; it's fairly likely that you will be too, and potentially lose your life. Your priority is staying alive and getting out of the country, not preserving $X million in wealth. It's highly unlikely that the country you emigrate to will be able to recognize any claims you might have had on assets in a country in turmoil. The best you can do is to get out and have sufficient friends & skills to rebuild your life.

> I'm saying that when it comes to asset performance, "Countries with a stable political system and market economy" is a better sample than "all countries",

That's like saying "I'll buy only stocks that go up".

You didn't know, in 1900, that the 20th century would be America's.

That's fair enough. I suppose you might have some clues, like "Get the hell out of Germany when Hitler came to power", but yeah, you can't predict the future.

My lifetime might not be long enough for "the long run." Any longer than that and your 200 years means very little.

The argument is that stocks have been the best asset class investment in each decade for the last two hundred years, not that it takes two hundred years.

I'm going to guess that you'll live for at least another decade, and tell you to go right ahead and consider that the long run. If you've any multiples of decades, you're even more set.

That certainly isn't true. For example, stocks were not the best asset class in the 2000s (bonds did much better this past decade). The linked page is just giving broad "stocks are generally better", but isn't doing decade-by-decade comparisons (which would be interesting to see).

Granted. But aside from the last decade, the article does claim that stocks win. (from 1930 to 1996). The recent decade is astoundingly bad...especially considering all the neat, new things we've gained..

off the top of my head, US stocks in the 70s were also flat over about a decade; as they were in the 30s (counting from '29); and probably some other decade before that, but stocks were not mainstream then

> The argument is that stocks have been the best asset class investment in each decade for the last two hundred years, not that it takes two hundred years.

But that is factually incorrect. "stocks have been the best asset class investment in each decade for the last two hundred years" That is a totally incorrect statement.

To be proper I should post specific statistics rebutting this, but I don't have them at this time. If you are genuinely interested you can look it up yourself.

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