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> You absolutely have lost money. You haven't realized the losses, but you are definitely poorer and should re-evaluate your risk tolerances based on your current worth.

They say long ago somewhere far away an astrologer managed to cause a panic by predicting a devastating volcano. People didn't just flee, they sold their homes for nothing, because they were convinced their homes would be under 3 feet of lava soon.

And that brings us to the key question - is your home worth less, just because everyone on the same streat is selling their houses for pennies? Isn't the opinion of the USGS slightly more important than the opinions of the real estate market?

Are your tulips worth less if you bought them in 1636 or were they fairly priced and we're just still waiting on the market to come back to rationality?

It's easy to say that the homes were undervalued in that situation with hindsight. If disaster had actually struck then those prices seem fair. Clearly some people sold their houses just before Pompeii and made out like bandits.

Yes, you can apply a rationale mindset to things and use statistics-based inferences to try and calculate what the "real" value of something is rather than what the current, "market-based" value is and, more often than not, that's likely to serve you better, but black swan events still occur plentifully over a human's lifespan and those events are incredibly difficult to factor in when you need to optimize your wealth for practical usability over a couple of decades.

> Are your tulips worth less if you bought them in 1636 or were they fairly priced and we're just still waiting on the market to come back to rationality?

When you’re broadly invested in the market (diversified portfolio), you’re basically saying to yourself that you are optimistic that the future will be better than today. There will be more prosperity, more peace, more human flourishing. If you believe those things, then it is rational to be invested.

If, on the other hand, you believe the future is doomed, then I supposed it could make sense to withdraw all your money in a defensive move and, I dunno, do something else with it.

I know which path I choose.

> You absolutely have lost money.

My point is the if you sell, you realize the loss. If you stay put, it will very likely be recovered AND have grown in time.

Do you disagree?

Yes , this is fundamentally an incomplete view , Japan index peaked in 1989 before peaking in again this year, if you bought at the peak it would have taken you 35 years to recover your money. Past performance is not indicative of future performance

I agree that, over a long enough timespan, human innovation is the key driving factor of the overall growth of the stock market and that maximizing exposure to this is the most reliable way to increase wealth.

There's absolutely no guarantees other than that. Yesterday's dip could be the start of the United States' "lost decade." The market could mirror the performance of the Nikkei 225's last 35 years where everyone is underwater for over a generation.

The recent overperformance of the US tech market is an exceptional scenario. People should not be encouraged to believe that if they buy into an exceptional scenario, and continue to blindly hold as their investments go underwater, that it's a sure thing that they will have more money at the time they are forced to exercise for life events. Especially in a time where many investors aren't picking broad, overarching index stocks.

The problem is you cannot know the future, so you need to make a bet.

What do you bet?

You bet that it becomes increasingly likely to regress to the mean as prices diverge and step in/out as you factor those odds into your bet.

The solution isn't binary. You don't have to be fully exposed/unexposed to the market all the time.

Sorry, I mean what do YOU personally bet specifically.

I keep the vast majority (~90%) of my money in total market index funds and do my best to forget about it.

The other 10% I play around with trying to time the market, taking active bets against specific stocks, etc. to sate the desire to feel in control / gamble and I rebalance the positions every couple of years.

The active positions have overperformed my buy-and-hold strategy for as long as I've been doing it. Our economy seems to be driven more on vibes than fundamentals and reading human emotion is more tractable than predicting the future, but it's also really stressful (and fun!) to do. I feel one of the biggest reasons to earn money is so one can spend less time thinking about money. So, I'm averse to having large, active positions since I start to think about my trades all the time and that feels innately unhealthy.

Did you know that 90% of gamblers quit before they win big? /s

Yes, it's wrong, and it's wrong on such a fundamental level I wonder if people who don't understand it have even given it a minute's thought.

You've lost money regardless of whether it is realized. You can even find a very simple contradiction in what realization even is: if you bought a stock at 100, double up at 90, and now it's 80 and you sell some, how much have you realized?

Your total net worth is the same regardless of whether you thought you realized a unit of -20 or -10.

> If you stay put, it will very likely be recovered AND have grown in time.

You should think about what risk of ruin is here. If your investments keep going down, what's your move? Double up, because it will likely bounce back? I may not agree that the market is efficient, in fact I make a living out of the inefficiencies, but the degree of inefficiency is close to a rounding error: the current price is a decent estimate of the value, incorporating all known information.

I’ve been in the market a very long time and have only withdrawn in order to purchase other assets as part of a proactive diversification strategy.

Very happy with the outcome so far from real experience.

I’m just trying to be helpful. I don’t have skin your financial success and I’m not trying to change your mind.

It’s a useful intuition pump for value investment (check out Benjamin Graham), it pre-dates meme trading. Due to loss aversion humans are irrational about negative price movements, so you need some cognitive strategy to counteract.

Here’s one example: if you have a 401k, CD, bond, or investment fund your investment is illiquid for some lockup period. Therefore you don’t have to mark-to-market every day.

As a matter of accounting facts, you are not forced to book the loss in this scenario.

This reasoning only makes sense if you weren’t already investing under the assumption of minor and major swings occurring.