I would figure investing it is better than buying crappy food or holding dollars that are losing purchasing power. Maybe there was no VOO or VCSH decades ago, but it is an easy no brainer nowadays.
The 2010s were a great decade for stocks, the 2020s might not be. That too changes the psychology.
The good times in stocks were supported by very low interest rates, which some people call "financial repression" -- despite that there was tremendous demand for "stablecoins" (government bonds) even at negative real interest rates.
Even if you believe conditions are right for technological and social progress, interest rates will be a headwind for the stock market if they revert to the mean.
I hear this a lot. Its true that stock returns relative to inflation weren't great, but what was better? I mean, cash lost a huge percentage of its value. Stocks seemed to pace inflation.
Were bonds a better investment during this period?
Harry Browne, who ran for president as a libertarian suggested using gold as a hedge
https://www.investopedia.com/terms/p/permanent-portfolio.asp
The "all weather" fund from Bridgewater is similar in thinking but substitutes inflation-protected bonds for gold.
If you couldn’t turn a profit during practically the best time for tech startups in 2020-21, I can’t see how you can turn a profit when money is much tighter.
Online/software-heavy services, tend to be fairly short runway (nothing like the decade plus typical for biotech firms), but still aren't generally zero runway to profitability.
4 trillion more and doubled since the start of 2020 is crazy.
You would have to wait for stocks to double to break even, which can be a long time.
Your argument always assumes you pick a point in time and never consider new information or fundamental information. Such as, there were less computers doing things in the world yesterday than today and there'll be more tomorrow. Seems like a reasonable investment over the medium term.
Isn’t that more of a class distinction than a decision for most people? The rich will invest either way, and the poor won’t. Both will buy food. The economy still runs on consumption (which is kinda required for investment to even work, right?)
> it is an easy no brained nowadays
I’m a little skittish on making new investments at the moment, and it seems to be going around? You’re saying that’s obviously foolish and people should be investing right now despite potential indicators of a recession?
There are more than two classes. The bottom 60% might be running on fumes, but the 60% to 70% might be thinking about foregoing spending $2k on a road trip that they can choose to invest instead, and the 70% to 80% might be thinking about a $4k Hawaii trip that they would forego. And the 80% to 90% might avoid $10k on an international destination. And the 90% to 95% might choose to invest $5k in the market instead of buying first class seats and put an extra $50k in an IRA as opposed to a new car.
> You’re saying that’s obviously foolish and people should be investing right now despite potential indicators of a recession?
Yes. Buy low, sell high. If you need to sell within a few years, then stick to cash or bonds. Although, what I actually meant by “easy no brainer” is that it is dead simple to invest in all equities at basically no cost due to the availability of extremely low cost broad market ETFs like VOO. Anyone can invest in the whole market for cheap within seconds of logging into their brokerage account.
As I wrote in another comment, for money you need within a year or two, stick it in an FDIC insured saving account, for money within a few years, put it in VCSH, and for money you do not need for a long time, put it in VOO or VTI or similar and forget about it.
On the flip side, eating at McDonalds in the first place is generally speaking a class indicator. I assumed that was the reason @PaulHoule used McDonalds. Foregoing McDonalds is quite unlikely to result in having enough cash to invest in something else. You still have to eat, and a lot of foods are more expensive than McDonalds even from a typical grocery store.
If it’s a year to a few years, high quality bond ETFs likes VCSH should do the job.
If it’s further out than that, then sink the money into broad market equity ETFs.
And, who knows, we may have already experienced the bottom.