Is there a hard threshold? Do high risk investments such as penny stocks qualify as gambling? Do low risk investments? Annuities? Bonds? CDs?
This comment got me wondering.
Is it more to do with the venue? Stock markets and real estate vs casinos and the lottery?
Were the MIT Blackjack Team gambling or investing?
Is this just another semantic hotdogs are sandwiches discussion or is there an agreed threshold?
It really kinda does.
At least as close as anything can be guaranteed in this world.
Buying into a broad market index fund (S&P500 or wider) and staying in for decades, will absolutely grow in value faster than inflation.
The key here is time.
Anything can go up or down on a daily, monthly, or even yearly basis; The longer your time horizon is, the more all that volatility gets evened out into a steady gentle climb upward. So much so that if you pick any 25 year period over the last 200 years, you won’t find a single instance where the total value of all traded stocks was worth less at the end than at the start.
Because when you’re investing in the whole market, you’re investing in the whole society itself. And society is always doing everything it can to grow, produce, and consume more. That’s what humans do. Random forces may slow or stop that, for a time; But as long a humanity exists, it will still be true.
At least as close as anything can be guaranteed in this world
Turns out “close to guaranteed” is in fact, not “guaranteed.”
So much so that if you pick any 25 year period over the last 200 years, you won’t find a single instance where the total value of the all traded stocks was worth less at the end than at the start.
Here’s my 25 how did they do:
- Lehman Brothers Holdings Inc.
- Washington Mutual Inc.
- General Motors Corporation
- Enron Corporation
- WorldCom Inc.
- CIT Group Inc.
- Chrysler LLC
- Thornburg Mortgage Inc.
- Conseco Inc.
- MF Global Holdings Ltd.
- Energy Future Holdings Corp.
- Pacific Gas and Electric Company (PG&E)
- Toys “R” Us Inc.
- Sears Holdings Corporation
- Blockbuster Inc.
- Eastman Kodak Company
- American Airlines (AMR Corporation)
- Frontier Communications Corporation
- Hertz Global Holdings Inc.
- JC Penney
- Peabody Energy Corporation
- RadioShack Corporation
- Remington Outdoor Company
- Pier 1 Imports Inc.
- Purdue Pharma L.P.
(hint: they’ve all filed for bankruptcy at some point)
Again, look at the Nikkei from the 1990’s - that’s an entire index that was flat for 30 years. Hard to put off retirement for 30 years waiting for that index fund to pay off.
Don’t bother dying on this hill, son, there’s plenty of other, nicer hills to die on.
“All traded stocks” isn’t “Any traded stock”.
It’s all of them collectively.
Nikkei from the 1990’s - that’s an entire index that was flat for 30 years.
The 1990’s was only 10 years. And that’s also just Japan, which again isn’t “All Traded Stocks”.
If you had invested in the stock market (all stocks) in 1961, you would have lost 2% a year, every year for 20 years.
So $10000 in the market in 1961 was worth $6600 by 1981.
I don’t disagree with the general point of, “there’s no guarantee”. But I think you can make an argument that taking the safest course available to you is not gambling.
When talking about longer time frames you have to account for inflation, holding on to your money instead of investing it is a risk in itself, which makes this entire conversation about semantics.
kinda does
“Kinda” meaning not actually.
as close as anything can be guaranteed
So not guaranteed then.
