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Your strategy sounds like "pick winning stocks"? A strategy which has been show to produce (on average) worse returns than index investing.

Index investing has produced a ~200% return in the past 15 years (from 2007 peak to now). Not sure what you mean by "a chance of seeing a profit in your lifetime".

Parent has literally no idea what he's talking about. Investing in indexes has always worked. Always. Over all time periods. Since they existed.

Well indexes are a relatively new product (less than 100 years old).

All 20-30 years? Believe it or not, the history of investment spans more than the last 25 years. Also, there are some questions regarding the liquidity of ETFs during a major crash/selling session. It’s possible there could be a feedback loop of selling to deal with cashing out that results in price of the ETF going below net asset value.

There's a third strategy of "index minus bullshit stocks" where you would include both INTC and AMD stocks for risk hedging, but would leave out things with questionable sustainability like Uber and Netflix that otherwise made it into the index due to the speculative value.

There are plenty of value or dividend funds if that’s your philosophy

More or less. Of course, I am advocating to leave out any company where it does not fit this criteria: " are generating a lot of cash and a lot of profits, have a moat/USP/technology advantage, and are at the forefront of where the world is headed in terms of trends, or at least are following a sustainable trend".

You can try SPLV or similar but you miss the bubble inflating with these.

This strategy would miss some huge and unexpected gains. Tesla comes to mind (at least for the time being...)

On other hand it also avoids Tesla when it inevitably crashes to same ballpark as other automotive companies... No I really believe it is nothing special and will eventually come down.

There's a third strategy of "index minus bullshit stocks"

That's just stock picking but in reverse.

200% in 15 years didn't keep pace with my house assessment from county tax lady. And I got to use my house!

Kind of the opposite of diversification though. Houses burn down and neighborhoods change, sometimes for the worse. I knew someone that bought a house in 1972 for $70,000 and sold it in 2015 for about $70,000. Real estate is not all roses and candy.

No, it sounds like picking winning businesses. Big difference. Warren Buffet has said that he's a business picker, not a stock picker.

Yes, that is it essentially. You are looking at businesses which have cash flow and the other criteria mentioned above.

Warren Buffet buys a controlling position and changes how companies operate. He himself said "Your average investor should just invest in indexes".

So your advice is to be Warren Buffet?

>> Index investing will work, if you live for a long time.

Maybe. Those who own the Nikkei index are still waiting.

Ha ha. It did finally reach that old "peak" again, but I guess it took some 30 years :) A little over 10% for 30 years of patience.

Investing in stocks is risky you can lose most of your money. And some people do lose most of their money. That is the nature of probability.

I have a million dollar bet to make you...

I'm sorry, when did investing in indexes not work? No idea what you're talking about.

Index investing has really only existed in common practice since the 1970s. You can simulate back further and do imaginary index investing, but we really only have 50 years of actual history with it. It's a very young experiment.

One thing that a lot of people are worried about is if the surge of people and money getting blindly pumped into broad basket index funds as if it was a savings account (because those have negative real yield) will itself distort the market in weird and unpredictable ways. It's entirely possible that it breaks the entire system and creates the mother of all crashes.

This, pretty much. Whenever a new trend comes up, be it Bitcoin or index investing (both of which are poles apart in terms of risk), passionate people will defend them passionately. Good on you all. I posted it hoping to see HNers' original or novel thoughts about this (along with the expected defending of index investing).

It's pretty tough to figure out if there's over-exposure in index investments, and tougher still to untangle the expected fallout of that problem, if it exists. Some people have talked about it, and have been shouted down of course.

I've done a decent amount of reading on the topic and think I'm barely knowledgeable about the surface of it. I guess that's how it always is, though.

People burying their heads in the sand and thinking that index investing has no hidden black swans are the ones to be most scared of, though.