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The wealth-building thread

Chromatischism

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And you also picked a specific time frame.

Bitcoin could go down and stay down for a while. It could continually go up or down for years. Someone else might introduce something that makes it obsolete. Any number of things could happen. Cryptocurrency is a new and immature form of exchange.

Maybe 10 years from now you will be proven right. Right now your statement is simply conjecture.
Let's be clear: all investments can go down.

But with adoption increasing and supply decreasing, I would not be betting against it.

https://finance.yahoo.com/news/bitcoin-becomes-best-performing-asset-132208120.html

https://cointelegraph.com/news/gold...-without-bitcoin-bloomberg-strategist-asserts
 

MRC01

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... Entry level workers, especially those without a high school education, at minimum wage, can barely survive. My WAG (wild-eyed guess) is that an hourly rate of $12.50 might allow for a tiny savings. I would be interested in other’s assessment of such wage.
As of a few years ago, a $15/hr wage could not afford a two-bedroom apartment in any state in the United States. That is sticking within the guideline of not spending more than 30% of your income on housing. It is only going to get worse.
Pursuing this would derail this thread and lead to a contentious political discussion. No thanks! I will say that in my youth, I worked minimum wage jobs. Never for long, because if you show up reliably and do the work, you get promoted quickly. And I could not afford an apartment, so I had roommates for several years to share the expenses. This is not all that unusual, I think most people have experienced this.
 

HiFidFan

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And a year ago it was $5k. But thanks for the cherry picking :)

You're quoting a specific time period in which lots of turmoil surrounding China caused a pause to the bull run. It also got a little ahead of itself so it could use some time to cool off. Those issues being resolved, it resumed at the end of July/beginning of August. Those who were watching closely bought at the bottom...for a nice 100-500% on some investments since then.

What, specifically, was the tip off back at the June/July bottom, for those that were "watching closely"?

And it's funny how you bristle at me "cherry picking" a time frame. And your response is to. . . cherry pick a time frame :facepalm:
 
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Colonel7

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The same is true of gold and many other assets. Holding crypto tokens isn't much different than holding stocks in terms of investment mechanics. At the end of the day there's market cap, total value locked, supply, adoption, growth, etc.

For crypto, your comments about use as currency is true for Bitcoin. It found its best use as a store of value. It will be interesting to see how El Salvador gets on with it as currency. It's rather extraordinary that 10 years ago people were buying ramen and pizza with it like it was play money. Fast forward to today and we see its value and personally, I wouldn't spend an appreciating asset now that we know what it is.

However Bitcoin is far from the only crypto project. And, there are many more use cases than currency for crypto. Look up how Ethereum, Polkadot, or Solana work and you'll see. Digital art, smart contracts, decentralized lending and borrowing, and many other uses.
Many of these strategies depend on people's tolerance for risk and timing (real estate; leverage; willingness to bet on higher returns and staying in stocks close to retirement etc.), but crypto is very high risk. They're not all (or necessarily any) going to be successful and around for a fair number of decades. And crypto has a super-high policy risk. It will become more and more financially regulated, or legislation will affect it (there's something current; hint hint). And when grandma and grandpa go bust it always happens.. And mining has a carbon policy risk from its energy intensiveness. Does this mean people can't make great returns short-term or over a couple years? Of course not.
 

Colonel7

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Yet "by other means" is exactly the sort of thing I wish to know about, because the mantras of "Spend less, beware of consumer debt, max out your 401(k), buy index funds" are well-trodden ground, and while you can amass a decent amount of money via capital gains in this manner, the taxes are merely deferred, if that. And when the time comes to make withdrawals from said 401(k), you will likely be depleting your asset, not generating income from it.
I think this is the difference here. Consistent, proven savings strategies will get you through retirement without worrying about money, which would be great for 90% of people. It's boring but it works for those purposes. It probably won't make you wealthy or rich by being in the top 10% of net worth. If that's your goal than you're probably interested in riskier strategies or for some it means they did not start saving or investing until very late.

It's like staying healthy. Years ago I heard a cardiovascular researcher from Harvard on NPR say this in relation to giving advice. The best advice is to have consistently healthy, balanced meals and exercise that could just be walking, and to do everything in moderation. This will work for 90% of people and helps to also reduce risk of cancer and things like diabetes etc. He said it's just boring compared to the fads and latest trends in dieting and exercise.
 
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Chromatischism

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Pursuing this would derail this thread and lead to a contentious political discussion. No thanks! I will say that in my youth, I worked minimum wage jobs. Never for long, because if you show up reliably and do the work, you get promoted quickly. And I could not afford an apartment, so I had roommates for several years to share the expenses. This is not all that unusual, I think most people have experienced this.
It's not political, it's just data.

https://reports.nlihc.org/oor
 

Chromatischism

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What, specifically, was the tip off back at the June/July bottom, for those that were "watching closely"?

And it's funny how you bristle at me "cherry picking" a time frame. And your response is to. . . cherry pick a time frame :facepalm:
Sure, it's all based on time. But 1 year and 10 years is a lot more fair than choosing a 1-month period.

The bottom in late July couldn't be precisely predicted, however there were signs things were going to turn around soon. It was just a matter of time. In the Blockchain world there is a lot more data available than for securities. People look at what are called "on-chain metrics" such as usage, who is buying and selling, the quantity of an asset increasing or decreasing in supply on exchanges, as well as various bits of news since that can have big impacts (April/May selloff for example).

So based on the metrics available, retracement levels, news (china negatively affecting sentiment and causing hesitancy, including from institutional investors and how that situation resolved itself, adoption news, project progress and launch schedules, etc) you can just start dollar cost averaging in when you perceive things to be a "good deal" relative to future projections. You aren't just sitting there with a big wad ready to drop. Well, some are. But since it's very hard to know an exact top or bottom, you just DCA in the region and you'll do ok even if it's not perfect.

You can bet that when ESG compliance is ironed out, much more institutional money will start coming in.

So, DCA in when things are down, DCA out when things run up quickly, and hold your long term convictions. It's really no different than equities, only the amount of data we have available for each differs. And don't expect to be perfect.
 
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HiFidFan

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Pursuing this would derail this thread and lead to a contentious political discussion. No thanks! I will say that in my youth, I worked minimum wage jobs. Never for long, because if you show up reliably and do the work, you get promoted quickly. And I could not afford an apartment, so I had roommates for several years to share the expenses. This is not all that unusual, I think most people have experienced this.

Anything and everything can be made to be 'political' if one chooses. How about we choose not to do that. Deal?

Wages haven't kept up with GDP for about 50 years (they tracked pretty much in lockstep from WWII until the early 70s). People like to peg minimum wage to inflation. That is a mistake IMO, wages should be pegged to GDP. If wages kept up with GDP, minimum wage would be in the low $20/hr range today. Nothing contentious about math.

Screen Shot 2021-09-14 at 11.20.00 AM.png
 
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Jim Matthews

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HiFidFan

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Sure, it's all based on time. But 1 year and 10 years is a lot more fair than choosing a 1-month period.

The bottom in late July couldn't be precisely predicted, however there were signs things were going to turn around soon. It was just a matter of time. In the Blockchain world there is a lot more data available than for securities. People look at what are called "on-chain metrics" such as usage, who is buying and selling, the quantity of an asset increasing or decreasing in supply on exchanges, as well as various bits of news since that can have big impacts (April/May selloff for example).

So based on the metrics available, retracement levels, news (china negatively affecting sentiment and causing hesitancy, including from institutional investors and how that situation resolved itself, adoption news, project progress and launch schedules, etc) you can just start dollar cost averaging in when you perceive things to be a "good deal" relative to future projections. You aren't just sitting there with a big wad ready to drop. Well, some are. But since it's very hard to know an exact top or bottom, you just DCA in the region and you'll do ok even if it's not perfect.

You can bet that when ESG compliance is ironed out, much more institutional money will start coming in.

So, DCA in when things are down, DCA out when things run up quickly, and hold your long term convictions. It's really no different than equities, only the amount of data we have available for each differs. And don't expect to be perfect.

It sounds like your "watching closely. . .buy at the bottom" narrative has morphed into "dollar cost averaging".

Good advice.
 

PatentLawyer

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@HiFidFan , interested in your theory for tying minimum wage to GDP rather than inflation? It is an interesting concept, and you're forcing me to think about it. :)
 

ahofer

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Peter Lynch destroyed indexes. Actively managed funds can be better than indexes. You don't need 500 companies. Of course, choose carefully. And you don't have to stay with the same ones forever.

I'm afraid there isn't enough evidence for this across managers, he's an outlier. I dearly wish durable alpha were more possible in large cap stocks, but there just isn't good evidence (the type, for instance, we would accept in a blind test) that they can.
 

HiFidFan

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@HiFidFan , interested in your theory for tying minimum wage to GDP rather than inflation? It is an interesting concept, and you're forcing me to think about it. :)

I'm on my way out the door to physical therapy appt (bulging disc :mad:) and then I'm packing for my NY trip tomorrow (niece getting married this weekend :)). If I have time (I doubt it) I'll expand on the concept.

In the meantime, think about it and why it may or may not be a solid concept. I'd love to hear opinions.
 

ahofer

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levimax

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I'm afraid there isn't enough evidence for this across managers, he's an outlier. I dearly wish durable alpha were more possible in large cap stocks, but there just isn't good evidence (the type, for instance, we would accept in a blind test) that they can.
There is a LOT of evidence that actively managed funds underperform passive funds.
 

ahofer

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There is a LOT of evidence that actively managed funds underperform passive funds.

I agree. I'm just stating the claim more strictly. Did I imply otherwise?
 

blueone

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There is a LOT of evidence that actively managed funds underperform passive funds.

Not always. For example, the SPRD S&P500 ETF (SPY) returned 14.71% compounded over 10 years, while, just to choose one, the Fidelity Growth Company fund (FDGRX) returned 22.91% (21.18% load adjusted) compounded over 10 years. Unfortunately, FDGRX is a closed fund now, but it's not the #1 managed growth fund either. (Last I looked it was in the top ten, but I don't watch the rankings very closely.) I agree that for most investors passive funds are a good option, especially for people who don't pay much attention to their investments.

https://finance.yahoo.com/quote/SPY/performance/

https://finance.yahoo.com/quote/FDG...cimx2EVGVnVdeiTeKMWdpLcyYzphEWC-HWCmH1ezFvUUb

My impression from casual conversations is that most people suck at investing. I used to suck at it too, so I recognize the syndrome. If they ask me what I think I usually recommend index funds. If you're going to invest without a strategy, you might as well choose one where you might not win big, but you are unlikely to lose big either.
 

Pdxwayne

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Not always. For example, the SPRD S&P500 ETF (SPY) returned 14.71% compounded over 10 years, while, just to choose one, the Fidelity Growth Company fund (FDGRX) returned 22.91% (21.18% load adjusted) compounded over 10 years. Unfortunately, FDGRX is a closed fund now, but it's not the #1 managed growth fund either. (Last I looked it was in the top ten, but I don't watch the rankings very closely.) I agree that for most investors passive funds are a good option, especially for people who don't pay much attention to their investments.

https://finance.yahoo.com/quote/SPY/performance/

https://finance.yahoo.com/quote/FDG...cimx2EVGVnVdeiTeKMWdpLcyYzphEWC-HWCmH1ezFvUUb

My impression from casual conversations is that most people suck at investing. I used to suck at it too, so I recognize the syndrome. If they ask me what I think I usually recommend index funds. If you're going to invest without a strategy, you might as well choose one where you might not win big, but you are unlikely to lose big either.
You should compare apple to apple. S&P 500 is not "growth" fund. Is there another growth index fund that would match better? Maybe Nasdaq qqq index fund?
 

ahofer

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Not always.

The form of evidence is that the vast majority of active large-cap equity funds underperform their respective indexes (note that you are comparing products with different opportunity sets in your post). Outperformers are actually fewer, interestingly, than might occur randomly, but make more sense when you consider the fee, transaction, and cash burdens of portfolio management. The existence of a few funds that outperformed does not prove anything.

I tend to believe one could outperform by taking a private equity approach: buy good businesses for the long run, when they happen to be cheaper (e.g. Buffett, Watsa, etc.). But I have to be honest that my beliefs are statistically unfounded. Also, those guys have the ability to change the prospects of a company simply by getting involved. Few of us can do that.

Clearly, trying to look like the index yet add some selection/sector tilt/timing alpha (the approach taken by most active mutual funds and account managers) has been a losing strategy.
 
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