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Comment by twoodfin | Hacker News Reader

If you’re getting 15% returns you better realize you’re exposed to something!

I have a friend who lost about $5k in the Terra crash. So not a lot, but he'd rather have $5k than zero. And when he was telling me about it before putting money in he was talking about the 15% thing and that it seemed like easy money, and I said something like "well unless the whole thing just goes to zero". And you could tell he just didn't see that as a possibility. Like he's not completely blind, he knew he could lose money, although mainly he was thinking about them not paying 15% and him being able to withdraw at any time. But he hadn't given any thought to the whole thing just collapsing.

People are not sufficiently educated about the value of things, vs. pricing, appreciation and so on.

Just the fact that anybody can think that you can get 15% "risk free" over long periods of time means that they are out of touch with reality.

Not to mention people thinking they will get 10x on their investments, without ludicrous amount of risk.

You can easily get (far more than) 15% return over a long period basically risk free by buying the S&P500, so it appears that you are the one who is out of touch with reality.

EDIT: How am I wrong?

The long run return on the S&P500 is more like 8%, not 15%.

I probably should have clarified that I meant yearly gains, I can see how that can be confusing to read for someone that doesn't spend time on these topics.

And the expected returns going forward from here are meh. Stocks are expensive because they were valued in a 1% interest rate environment and given current inflation that probably won't last.

If your friend only had $5k in total and threw them all in Terra then I guess the lesson he got in the crash is way more valuable than any savings he might have kept. He would have lost them anyway on the next shitcoin.

This was my main lesson. I lost some money on Terra/Luna - thankfully much less than $5k, but still enough to sting. Looking back, I can see that I really had no idea what I was getting myself into and it was mostly just FOMO.

Obviously I'd rather still have the money I lost, but in a sense I feel lucky. If Luna had waited an extra six months to collapse I would have become confident enough to put more money in, i.e. I'd have ended up losing even more. And I'll definitely be putting much, much more thought into any kind of crypto "investments" I make in future. The money I lost was a small price to pay for the lesson I've learned.

yes, I had similar lessons years ago with options, forex etc. (ok, yes... I needed more than one lesson :D) However, since I am a person that likes to "risk" their well-earned money, I think it's good that I have burnt my fingers early when I had less money. Now I have learnt that at the very least I should not put all my money into one bag. That's the biggest lesson: Split your investments. Split your accounts even. It doesn't rescue all your investments in a downturn but at least you'll likely never lose more than 50%.

In my experience in interfacing with unsophisticated investors, they aren’t aware of the risk.

Should they do more due diligence? Likely. Should there be regulation to protect the unsophisticated? Also likely. Speedrunning securities regulations, as one does.

Agree that if we’re going to have regulations to protect unsophisticated investors from obscured risk, these nonsense “yield farming” ventures should be at the top of the list.

It is heartbreaking to hear about people’s crypto losses. I was on a plane the other day next to a young lady invested (gambling really) only in crypto, Tesla, and 0DTE options (!!!). While not a financial advisor, and with appropriate disclaimers, I provided them with an Amazon gift link for your basic books about index investing and personal finance, as well as real broker recommendations (versus Robinhood).

The knowledge gap is real and incredibly worrisome, and this is real money these folks are losing. You don’t know what you don’t know.

Trouble is the yield farming stuff is all distributed and outside the ability of any given legal system to ban. Education may be better. Of course you can ban say US based entities from promoting them.

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