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Comment by misnamed | Hacker News Reader

Stocks are shares in profitable companies. They have risks, sure, but they also have expected returns based on sound fundamentals and a long history of generating income.

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Exactly my point. They add certain value to the economy and have fundamentals. From my understanding, I don't even consider Gold (a limited resource) a long-term investment.

Gold is a good portfolio asset for reducing overall risk in a long term investment strategy. You can beat the market over time with less risk by holding the S&P 500 and gold and weighting each according to respective volatility. This also has a lower beta exposure than just holding stocks.

Gold (and commodities more generally) have fundamentals - just different ones from equities. You can't take advantage of the universe of sound investment opportunities if you restrict your attention to equities.

We have fairly little data on gold as a freely available modern asset class (around 50 years), but yes, in small amounts it can limit volatility and potentially even increase returns (or at least: risk-adjusted returns). That said, over the long haul, independently, it has tended to roughly track inflation. I'm not against it, just see it as something of limited utility to an ordinary investor.

Technically, everyone in the U.S. was an investor in gold up until 1971 since USD was supposedly backed 1-1 by gold :)

It's a little trickier than that, but yes, that's why I mentioned 50 years. Before that gold was a different animal.

Using minimum variance optimization with gold and spy produces a portfolio that is often 50% or more of gold. This beats the risk adjusted return of spy by a reasonable margin.

So I guess the point I'm making is that often a lot of gold makes sense too.

You could say the same about Ethereum's ETH. It's a capital asset that when staked to validate blocks generates an expected return. You can discount those expected returns to the present like you would with any business.

Investing in profitable companies by itself does not generate above average returns. Only 1 of the original companies of the Dow Jones is still in it today, G.E. and it's performance as investment has been below average the past 20 years.

> Only 1 of the original companies of the Dow Jones is still in it today

Small companies become bigger, driving returns. That's why you don't just buy the DJIA but rather index the whole market. Of course there will be turnover - the point isn't to lock into any one stock - don't look for the needle, buy the haystack (i.e. a broader-market index).

If you want to include crypto in the haystack, sure, fine, whatever, but at market weights, it's going to be a very small portion of the investable market of stocks, bonds, cash and other asset classes. At some point, it's enough to just keep it simple and broad. A fraction of percent of this or that won't make or break a diversified portfolio.

That depends on how good you are at finding needles :)

The thing not many people seem to talk about is that the 20th century had unprecedented growth in terms of population around the world (which has slowed significantly in the last few decades, although the effects usually lag by quite a bit - when the children enter the workforce and such). We're making up for some of it with technological progress, but ultimately what impact that makes is up to everyone to think about individually (look at Japan as a potential leading indicator of what demographic change can do).

Statistically, everyone trading across all different asset classes evens out, so ... sure, if you're consistently good at finding needles, power to you. Most people aren't. Many people however think they are. I prefer not to worry about it either way.

>Stocks are shares in profitable companies.

Not always, tons of companies are losing money but the share price goes up.

Sure, not always. To clarify: I mean stocks are shares in companies, which generally generate profits. Yes, some companies may not, or may even go under, but none of this is an issue if you hold a diversified set of stock and bond indexes for the long haul (I'm talking about equities as an asset class, not any one stock). Stocks are stakes in companies - bonds pay a risk premium - crypto, gold, etc... don't generate income, which by definition makes them speculative.

>bonds pay a risk premium - crypto, gold, etc... don't generate income, which by definition makes them speculative.

What about staking? In this case, you're providing a service to the network and being compensated for it.

I know what it means but have no idea how profitable it is or whether those profits are guaranteed or fleeting. Best I can tell it's like any service (business, not investment): depending on demand and competition, you can make money for a time, then stop at some point. So far that has never been an issue for people investing in the global stock market (i.e. the global stock market persists even as individual stocks, sectors, industries, even whole countries have crashed in the past).

>depending on demand and competition, you can make money for a time, then stop at some point.

This is literally anything economic on planet Earth.

>So far that has never been an issue for people investing in the global stock market

the global stock market is at its highest valuation ever, good luck with that. I'll keep buying Ethereum

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