Comment by galaxyLogic | Hacker News Reader

Comment by galaxyLogic | Hacker News Reader

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Problem with "long term investing" as I see it is that to realize the gains you must get out of the market at approximately the correct time. That is difficult psychologically because if you have been able to increase your worth by doing what you have been doing so far you are likely to keep on doing it. Then one day the next crash comes. All of a sudden having been a long term investor does not help so much any more.

You need to be a long-term investor for a limited term. But hard to know when that term is over.

So I think when markets go up you should seriously consider taking some money out and using it for leisure and travel and education investing in yourself. But taking money out and spending it is not usually considered prudent investing. Especially because taking money out means you must pay taxes on it. So you stay in the market and soon most of your long-term gains are wiped out, and you have to be a "long term investor" all over again.

You should clearly have a purpose for your investing goals and adjust your investing style based on risk.

So if your goal is retirement and you're 30, you can tolerate higher risk because if the market crashes, you've got 30 years to wait for it to recover. If you're 60 and retiring in a few years, your risk tolerance is low. And you can slowly adjust your portfolio in between.

This a very popular idea but I don't fully accept it. Goals and desires are not static. They are path dependent and adaptive. I want a funding scheme that's able to fund that.

So you want high returns with little to no risk?

Doesn’t exist. Sorry bud.

You think you are entitled to returns just because you took a risk ? Sorry bud, sad to break it to you but it does not work that way.

That's the idea that I am criticizing. Risk might be necessary, but never sufficient.

BTW I don't think, you think that way, but neither should you. Gratuitous condescension poisons the well.

I never said I "think [I am] entitled to returns just because [I] took a risk". There is no entitled, it's simply a trade-off.

It's a basic precept of investing. In a very simplified way - higher returns require higher risk of invested capital - why else would you invest in something higher risk unless the return justifies it? And likewise, people will accept lower returns if they know the risk is low.

Nobody is doing payday loans at prime because the risk isn't justified by the return.

When you start looking at portfolio allocation across multiple investments, it gets more complicated because you can actually achieve the same return at lower risk through diversification across classes of assets.

But to answer your original question - the only way to guarantee short-term and long-term positive returns (as you put it "if my goals change, I don't want to lose money") is to invest in low risk investments. Low risk investments mean low returns.

> I never said I "think [I am] entitled to returns just because

Exactly! Why did you think I said anything about not taking risks. I didn't say that either. I was misinterpreting on purpose to show yours.

> "if my goals change, I don't want to lose money"

I did not say that either. I vehemently agree with everything else that you said.

Ok, then I misunderstood and am very confused.

You said "This a very popular idea but I don't fully accept it. Goals and desires are not static. They are path dependent and adaptive. I want a funding scheme that's able to fund that."

Which I interpret as "I reject the idea of setting some financial goal decades into the future. I want a scheme that is flexible and can accommodate changes to how I want to use my money."

How is that different than "If my goals change, I don't want to lose money."?

The best sort of discussions are those where each is happy with the other's rewording of their position. I certainly do not reject setting financial goals decades into the future. I do not like ('like' and 'reject' aren't synonyms) investment discipline that are strictly fixated on some goal I had in the past. I would rather have an adaptive trade off of risk to return depending on where I am right now financially. Some goal I had ten years ago may not be as relevant in my current state. I wouldn't want to let go of a favorable opportunity by pulling out the money, just because a goal that I had set in the past has been met.

> How is that different than "If my goals change, I don't want to lose money."?

… and I don't see at all how they are equivalent. I might be willing accept the possibility of losing some money if there is a notable increase in the possibility of meeting my updated goal.

I doubt that we have any fundamental disagreement. You have a good day.

I'm still confused as hell.

The core problem here is that nobody understood your original comment or the follow ups. It isn't clear what you are criticizing or what alternative you want.

if you have a large enough sum of money (i.e., $50m USD ) you can stay invested all the time and withdraw a small sum of money each year like $300k

With $50m if your portfolio averages 4% a year you would be clearing $2m then pulling out $300k for 1.7 gain. You only pay tax on the income withdrawn

The real baller move for someone worth 50M+ with rates as low as they have been, is take out loans against the 50M to live off of. Pay back the loans with rates less than the annualized market returns. Also limits/pushes out cap gain taxes.

Right, take out a mortgage. That is tax deductible

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