Young Investor's Over Confidence

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ballons
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Re: Young Investor's Over Confidence

Post by ballons »

BillWalters wrote: Mon May 03, 2021 5:55 pm This is a great post.

The boomers had enormous advantages and chose not to pay it forward, and now their children are suffering for it.

Nobody likes taking a hard look in the mirror. Listening to boomers who paid $500/semester for college, bought their first house for $40,000 and are now enjoying pensions that no longer exist lecture their kids about working harder is pretty hard to do with a straight face.
Meme stocks and crypto are a metaphorical middle finger to boomers. Half believe that is the way forward to investing, the other half just want boomers to fall victim to FOMO so they can cash out and switch to "boomer stonks."
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watchnerd
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Re: Young Investor's Over Confidence

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dboeger1 wrote: Mon May 03, 2021 5:45 pm I think this is an interesting point. As a younger millennial, I've heard all the negative stereotypes, but I think the way many of us navigate life is changing rapidly for a variety of reasons. One of the byproducts of that is high concentration, not just in investments, but also in career and life choices. I feel like I'm the closest in my peer group to living what I would consider to be a typical (admittedly white) middle-class American's lifestyle from when I was little. But the thing is, I graduated with no debt from a top-tier university with what turned out to be a highly desirable degree in a booming field, maintained a high savings rate with strict net worth targets before having children, got married to a spouse who also ended up making good money, and could barely afford our first start home last year at age 28-29, and only because a very specific opportunity came on the market at the precise intersection of rock-bottom mortgage rates and pandemic uncertainty. The vast majority of my friends are nowhere near us on most of these fronts, and the ones who are better off than us were the absolute top tier in both school and work, which is how they managed to get outstanding incomes and big pre-IPO stock options at high-flying tech startups. That path is objectively not viable for the vast majority of people, and the lives that those friends can afford largely resemble pretty run-of-the-mill middle-class lifestyles in cheaper locations where options for that level of compensation are usually much more limited.

The bulk of my millennial friends and family have simply given up and conceded that they may never achieve the lifestyles they grew up with. Some of them simply YOLO spend all of their money on travel and other experiences. Others have decided not to marry and/or have kids. Others invest in 100% stocks because they have no intention of buying a house until they're much older and can relocate somewhere cheaper. Others have bought rural land and are trying out alternative lifestyles such as tiny houses, RV living, or off-grid homesteading. Others are fearful of social unrest and have poured money into what look like armories in their closets. Others have pursued higher education such as PhD tracks paid for through RA/TA work, not even so much for their passion in the field, but as a means of delaying entering the workforce and in hopes of landing a prestigious, high-paying job in the future. I knew pre-med students back in college who swore that if they didn't get perfect grades, they wouldn't get into Harvard Med and their lives would be over. They balked whenever adults told them that there were, in fact, other respectable medical schools that would lead to high-paying doctor jobs. I also know a number of immigrants who came over as foreign students and broke up with their boyfriends/girlfriends back in their home country because they decided to pursue American citizenship and the lover back home refused to commit their relationship to that timeline. I've known a number of us who got married much later than desired, even after having kids, simply because they wanted a lavish wedding but couldn't justify the expense early on.

I realize I'm painting broad strokes and these things don't apply to every millennial, but for all the stereotypes of millennials being lazy, ungrateful, living in parents' basements, etc., there sure are a lot of us struggling to to make our way in the world with less than what our parents had, and not all of the same paths to success that our parents used are still as available or affordable as they were back then.
Most of that maps to my cohort experience at a similar age (Gen X).

Except the armories.
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Re: Young Investor's Over Confidence

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ballons wrote: Mon May 03, 2021 6:23 pm

Meme stocks and crypto are a metaphorical middle finger to boomers. Half believe that is the way forward to investing, the other half just want boomers to fall victim to FOMO so they can cash out and switch to "boomer stonks."
What does boomers falling victim to FOMO mean, in practice, and how do they benefit?
Last edited by watchnerd on Mon May 03, 2021 6:31 pm, edited 1 time in total.
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Williams57
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Re: Young Investor's Over Confidence

Post by Williams57 »

ballons wrote: Mon May 03, 2021 6:17 pm
jmch1990 wrote: Tue Apr 27, 2021 10:08 pm As a millennial, the only thing I can say with absolute confidence is that we have little to no confidence in anything.
That is extraordinarily dangerous thinking.
Why? Things are changing very fast these days. It's best not to attach yourself to one single way of thinking today.

On top everything, as someone in their 30's I don't even think I'll get to work to 65 because I don't believe my employer would want me after 55, due to technological advancements, and other reasons or excuses. Some people do not understand FIRE millennials asking why they want it. While I do not necessarily want to retire early, I may be forced to, so I get it. Our employers have shown us loud and clear that we are disposable and easily replaceable. How can we have confidence in anything, and it doesn't serve us anyway anymore.
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Re: Young Investor's Over Confidence

Post by ballons »

watchnerd wrote: Mon May 03, 2021 6:30 pm
ballons wrote: Mon May 03, 2021 6:23 pm

Meme stocks and crypto are a metaphorical middle finger to boomers. Half believe that is the way forward to investing, the other half just want boomers to fall victim to FOMO so millennials can cash out and switch to "boomer stonks."
What does boomers falling victim to FOMO mean, in practice, and how do they benefit?
Fixed. A pump and dump scheme.
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watchnerd
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Re: Young Investor's Over Confidence

Post by watchnerd »

ballons wrote: Mon May 03, 2021 6:34 pm
watchnerd wrote: Mon May 03, 2021 6:30 pm
ballons wrote: Mon May 03, 2021 6:23 pm

Meme stocks and crypto are a metaphorical middle finger to boomers. Half believe that is the way forward to investing, the other half just want boomers to fall victim to FOMO so millennials can cash out and switch to "boomer stonks."
What does boomers falling victim to FOMO mean, in practice, and how do they benefit?
Fixed. A pump and dump scheme.
So the plan is....

1. Juice up GME (a stock boomers don't pay attention to)
2. Sucker boomers into buying it
3. Dump, leaving boomers holding the bag
4. Profit!

Step 2 seems like a sticking point....

Unless, by boomers, they mean hedge funds.
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Re: Young Investor's Over Confidence

Post by ballons »

Williams57 wrote: Mon May 03, 2021 6:30 pm
ballons wrote: Mon May 03, 2021 6:17 pm
jmch1990 wrote: Tue Apr 27, 2021 10:08 pm As a millennial, the only thing I can say with absolute confidence is that we have little to no confidence in anything.
That is extraordinarily dangerous thinking.
Why? Things are changing very fast these days. It's best not to attach yourself to one single way of thinking today.

On top everything, as someone in their 30's I don't even think I'll get to work to 65 because I don't believe my employer would want me after 55, due to technological advancements, and other reasons or excuses. Some people do not understand FIRE millennials asking why they want it. While I do not necessarily want to retire early, I may be forced to, so I get it. Our employers have shown us loud and clear that we are disposable and easily replaceable. How can we have confidence in anything, and it doesn't serve us anyway anymore.
I was speaking towards the notion that an entire generation has no confidence in anything. Why save? Why work? Why vote? Why do anything? A crisis in confidence in everything is very bad since that spills over into politics and the economy.

FIRE is perfectly fine because such a person still has confidence.
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Re: Young Investor's Over Confidence

Post by Williams57 »

ballons wrote: Mon May 03, 2021 6:41 pm
Williams57 wrote: Mon May 03, 2021 6:30 pm
ballons wrote: Mon May 03, 2021 6:17 pm
jmch1990 wrote: Tue Apr 27, 2021 10:08 pm As a millennial, the only thing I can say with absolute confidence is that we have little to no confidence in anything.
That is extraordinarily dangerous thinking.
Why? Things are changing very fast these days. It's best not to attach yourself to one single way of thinking today.

On top everything, as someone in their 30's I don't even think I'll get to work to 65 because I don't believe my employer would want me after 55, due to technological advancements, and other reasons or excuses. Some people do not understand FIRE millennials asking why they want it. While I do not necessarily want to retire early, I may be forced to, so I get it. Our employers have shown us loud and clear that we are disposable and easily replaceable. How can we have confidence in anything, and it doesn't serve us anyway anymore.
I was speaking towards the notion that an entire generation has no confidence in anything. Why save? Why work? Why vote? Why do anything? A crisis in confidence in everything is very bad since that spills over into politics and the economy.

FIRE is perfectly fine because such a person still has confidence.
I see. I think I understand. I do the things you mention because I have hope. Not confidence.
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Re: Young Investor's Over Confidence

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Williams57 wrote: Mon May 03, 2021 6:30 pm
On top everything, as someone in their 30's I don't even think I'll get to work to 65 because I don't believe my employer would want me after 55, due to technological advancements, and other reasons or excuses.
As someone 51, I agree, at least in my industry.

My entire career in tech has been based on the idea that I won't be able to grow old in it.

Is that bad?

Nah, we've made enough to be comfortable for life, and I'll be able to retire far earlier than my middle-middle class parents (high school teacher, nurse).
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Re: Young Investor's Over Confidence

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watchnerd wrote: Mon May 03, 2021 6:37 pm
ballons wrote: Mon May 03, 2021 6:34 pm
watchnerd wrote: Mon May 03, 2021 6:30 pm
ballons wrote: Mon May 03, 2021 6:23 pm

Meme stocks and crypto are a metaphorical middle finger to boomers. Half believe that is the way forward to investing, the other half just want boomers to fall victim to FOMO so millennials can cash out and switch to "boomer stonks."
What does boomers falling victim to FOMO mean, in practice, and how do they benefit?
Fixed. A pump and dump scheme.
So the plan is....

1. Juice up GME (a stock boomers don't pay attention to)
2. Sucker boomers into buying it
3. Dump, leaving boomers holding the bag
4. Profit!

Step 2 seems like a sticking point....

Unless, by boomers, they mean hedge funds.
Whomever has money. Grandma, hedge funds, pensions. All that matters is their stonk / dogcoin moons and they cash out.
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Re: Young Investor's Over Confidence

Post by watchnerd »

ballons wrote: Mon May 03, 2021 6:49 pm

Whomever has money. Grandma, hedge funds, pensions. All that matters is their stonk / dogcoin moons and they cash out.
Are you hypothesizing?

Have people told you this, personally?
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Re: Young Investor's Over Confidence

Post by ballons »

Williams57 wrote: Mon May 03, 2021 6:43 pm
ballons wrote: Mon May 03, 2021 6:41 pm
Williams57 wrote: Mon May 03, 2021 6:30 pm
ballons wrote: Mon May 03, 2021 6:17 pm
jmch1990 wrote: Tue Apr 27, 2021 10:08 pm As a millennial, the only thing I can say with absolute confidence is that we have little to no confidence in anything.
That is extraordinarily dangerous thinking.
Why? Things are changing very fast these days. It's best not to attach yourself to one single way of thinking today.

On top everything, as someone in their 30's I don't even think I'll get to work to 65 because I don't believe my employer would want me after 55, due to technological advancements, and other reasons or excuses. Some people do not understand FIRE millennials asking why they want it. While I do not necessarily want to retire early, I may be forced to, so I get it. Our employers have shown us loud and clear that we are disposable and easily replaceable. How can we have confidence in anything, and it doesn't serve us anyway anymore.
I was speaking towards the notion that an entire generation has no confidence in anything. Why save? Why work? Why vote? Why do anything? A crisis in confidence in everything is very bad since that spills over into politics and the economy.

FIRE is perfectly fine because such a person still has confidence.
I see. I think I understand. I do the things you mention because I have hope. Not confidence.
FIRE by definition means you have confidence in your long term retirement plans and the future. That is assuming you aren't 100% dogcoins.
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Re: Young Investor's Over Confidence

Post by Williams57 »

ballons wrote: Mon May 03, 2021 6:53 pm
Williams57 wrote: Mon May 03, 2021 6:43 pm
ballons wrote: Mon May 03, 2021 6:41 pm
Williams57 wrote: Mon May 03, 2021 6:30 pm
ballons wrote: Mon May 03, 2021 6:17 pm

That is extraordinarily dangerous thinking.
Why? Things are changing very fast these days. It's best not to attach yourself to one single way of thinking today.

On top everything, as someone in their 30's I don't even think I'll get to work to 65 because I don't believe my employer would want me after 55, due to technological advancements, and other reasons or excuses. Some people do not understand FIRE millennials asking why they want it. While I do not necessarily want to retire early, I may be forced to, so I get it. Our employers have shown us loud and clear that we are disposable and easily replaceable. How can we have confidence in anything, and it doesn't serve us anyway anymore.
I was speaking towards the notion that an entire generation has no confidence in anything. Why save? Why work? Why vote? Why do anything? A crisis in confidence in everything is very bad since that spills over into politics and the economy.

FIRE is perfectly fine because such a person still has confidence.
I see. I think I understand. I do the things you mention because I have hope. Not confidence.
FIRE by definition means you have confidence in your long term retirement plans and the future. That is assuming you aren't 100% dogcoins.
That's not how I see it. How I see is this - "I am doing what I can, what is under my control. What is not under my control is still a big unknown".
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Re: Young Investor's Over Confidence

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watchnerd wrote: Mon May 03, 2021 6:51 pm
ballons wrote: Mon May 03, 2021 6:49 pm

Whomever has money. Grandma, hedge funds, pensions. All that matters is their stonk / dogcoin moons and they cash out.
Are you hypothesizing?

Have people told you this, personally?
I think people are motivated by self-interest. You have implied they are motivated by hedge funds. Have they told you this, personally? Are you hypothesizing?
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Re: Young Investor's Over Confidence

Post by Williams57 »

watchnerd wrote: Mon May 03, 2021 6:46 pm
Williams57 wrote: Mon May 03, 2021 6:30 pm
On top everything, as someone in their 30's I don't even think I'll get to work to 65 because I don't believe my employer would want me after 55, due to technological advancements, and other reasons or excuses.
As someone 51, I agree, at least in my industry.

My entire career in tech has been based on the idea that I won't be able to grow old in it.

Is that bad?

Nah, we've made enough to be comfortable for life, and I'll be able to retire far earlier than my middle-middle class parents (high school teacher, nurse).
Good for you :D
How can it be otherwise when our jobs today is to eliminate our own jobs in the future? Lol. On a day to day basis may not as noticeable, but when you zoom out I think it's clearer.
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Re: Young Investor's Over Confidence

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ballons wrote: Mon May 03, 2021 7:01 pm

I think people are motivated by self-interest. You have implied they are motivated by hedge funds. Have they told you this, personally? Are you hypothesizing?
Yeah, I've read comments online with people gloating that hedge funds got caught in the GME short squeeze.

And heard hedge fund managers giving interviews on CNBC whining about it.
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Re: Young Investor's Over Confidence

Post by ballons »

Williams57 wrote: Mon May 03, 2021 6:58 pm That's not how I see it. How I see is this - "I am doing what I can, what is under my control. What is not under my control is still a big unknown".
To FIRE you must have massive confidence in your retirement plans, investments, politics, economy, etc. Things out of your control can still exist and be unknown. That doesn't change your confidence in FIRE.
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Re: Young Investor's Over Confidence

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Williams57 wrote: Mon May 03, 2021 7:04 pm
How can it be otherwise when our jobs today is to eliminate our own jobs in the future? Lol. On a day to day basis may not as noticeable, but when you zoom out I think it's clearer.
That's the history of work since the industrial revolution.
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Re: Young Investor's Over Confidence

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watchnerd wrote: Mon May 03, 2021 7:07 pm
ballons wrote: Mon May 03, 2021 7:01 pm

I think people are motivated by self-interest. You have implied they are motivated by hedge funds. Have they told you this, personally? Are you hypothesizing?
Yeah, I've read comments online with people gloating that hedge funds got caught in the GME short squeeze.

And heard hedge fund managers giving interviews on CNBC whining about it.
Are you suggesting that the people investing in meme stonks and dogcoins vet who they sell to? How do they know they aren't hurting a grandma? If they are, will they reject all their profit? I find your theory highly unbelievable.
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Re: Young Investor's Over Confidence

Post by Lowlim »

For anyone who has sold a significant portion of their equities during a downturn, how did you decide when to get back in?
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Re: Young Investor's Over Confidence

Post by Uniswap »

The children now love luxury; they have bad manners, contempt for authority; they show disrespect for elders and love chatter in place of exercise. Children are now tyrants, not the servants of their households. They no longer rise when elders enter the room. They contradict their parents, chatter before company, gobble up dainties at the table, cross their legs, and tyrannize their teachers.

- Socrates
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Re: Young Investor's Over Confidence

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ballons wrote: Mon May 03, 2021 7:13 pm

Are you suggesting that the people investing in meme stonks and dogcoins vet who they sell to? How do they know they aren't hurting a grandma? If they are, will they reject all their profit? I find your theory highly unbelievable.
It's impossible to vet who buys a stock.

It's also fairly unlikely that grandma is buying GME.

So if the plot is "pump and dump GME to get grandma's pension", it seems poorly conceived and hard to target that victim.
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Re: Young Investor's Over Confidence

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watchnerd wrote: Mon May 03, 2021 7:20 pm
ballons wrote: Mon May 03, 2021 7:13 pm

Are you suggesting that the people investing in meme stonks and dogcoins vet who they sell to? How do they know they aren't hurting a grandma? If they are, will they reject all their profit? I find your theory highly unbelievable.
It's impossible to vet who buys a stock.

It's also fairly unlikely that grandma is buying GME.

So if the plot is "pump and dump GME to get grandma's pension", it seems poorly conceived and hard to target that victim.

I don’t think anybody thinks grandma is buying GME. The idea is more the pension fund is investing in a hedge fund that is playing in it. Of course thinking you are stealing grandma’s pension is both cruel and misguided, and the market is not the zero sum game that many newbies imagine.
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Re: Young Investor's Over Confidence

Post by ballons »

watchnerd wrote: Mon May 03, 2021 7:20 pm
ballons wrote: Mon May 03, 2021 7:13 pm

Are you suggesting that the people investing in meme stonks and dogcoins vet who they sell to? How do they know they aren't hurting a grandma? If they are, will they reject all their profit? I find your theory highly unbelievable.
It's impossible to vet who buys a stock.

It's also fairly unlikely that grandma is buying GME.

So if the plot is "pump and dump GME to get grandma's pension", it seems poorly conceived and hard to target that victim.
So there is no way to target only hedge funds despite what watchnerd reads on the internet or sees on CNBC? Your theory did not pan out.

You aren't listening. I said they are motivated by self-interest and they don't care who the bag-holder ends up being. They will not be returning their profit.
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Re: Young Investor's Over Confidence

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ballons wrote: Mon May 03, 2021 7:28 pm

So there is no way to target only hedge funds despite what watchnerd reads on the internet or sees on CNBC? Your theory did not pan out.

You aren't listening. I said they are motivated by self-interest and they don't care who the bag-holder ends up being. They will not be returning their profit.
LOL...I'm not the one with the theory!

SMH
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Re: Young Investor's Over Confidence

Post by garlandwhizzer »

Some of young investor over confidence and preference for high risk/high reward approaches is a response to the difficult situation they find themselves in. Swinging for the fences is in a way desperation. It demonstrates little faith in more boring traditional approaches to investing success. Put simply, I thing many younger investors don't believe numbers will work out for them.

Frankly, I think my generation, Baby Boomers, have been the massive recipients of pure lucky timing. My parents grew in the Great Depression, lived through very hard economic times which persisted 12 years before WW2. The depressed subsistence economy on main street did not improve until well after WW2 was over, about 18 years total of struggle to just get food on the table and a roof over your head. Many got neither. As adults they had to fight the greatest threat not only to the US but to western civilization itself with Hitler. We have had wars since then, but nothing like the challenges that Hitler and Japan offered. During the same time frame there were the Holocaust and Stalin's repeated purges which in sum killed about 10 million innocent civilians, not to mention the 30+ million WW2 war dead. These issues dwarf any problems we've had since. Boomers parents got screwed. Boomers got the rewards.

For Boomers starting out at the end of this, things were different. The economy are the markets have had their problems intermittently, but over the long haul it was an unprecedented run of robust dynamic economic growth and prosperity, relatively less war and international conflict, and totally unprecedented massive appreciation of equity and real estate markets especially since 1982 "the death of equities." Baby Boomers without college educations were able to get and hold secure jobs that allowed them to buy homes, wives could stay at home rather than needing to take a second job, and they could pay for their kids to go to college which in those days was cheap. As for the Boomers who did go to college, many of us who invested regularly and wisely over the years have gotten wealthy far beyond our fondest dreams as teenagers. So much wealth has flowed to the top these days that we have bid up the prices of stocks, bonds, real estate and collectables so much that future expected returns are much more muted than what we experienced. Our success has made it a bit harder for future generations to have similar success because they can't afford homes and often can't afford college education without taking on massive debt.

So I understand why young people now are not as optimistic as we were when we were young. Wages for most workers have stagnated for 30+ years. Many college grads emerge with massive educational debt and face a tough job market. We graduated with little or no debt and a great job market. Jobs no longer offer defined benefits in retirement as many did a few decades ago. Everything goes through cycles and the future for younger people now does not seem to me to be as favorable as it was to us in the past, certainly the Boomers who recognized opportunity when they saw it.

Pure luck has a great deal more influence on investment outcomes than many perceive IMO. Those who are starting their investing careers now may not find it as easy to be successful as it was for the Boomers. That does not mean however that it's wise to gamble on high risk/high reward assets with a substantial portion of the portfolio. IMO the best approach these days as it has been in the past is to hold as much broadly diversified equity as you can stomach through a bad bear market, use bonds as your anchor in an equity hurricane, avoid alternates, and limit play money long shots to 4% - 5% of the portfolio. That boring approach has always worked well in the past and will continue to do so going forward IMO. The final thing is to acquire as much education and technical skill as you can which may allow youin the future to take advantage of opportunities which have a way of showing up unexpectedly from time to time.

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Re: Young Investor's Over Confidence

Post by ballons »

watchnerd wrote: Mon May 03, 2021 7:32 pm
ballons wrote: Mon May 03, 2021 7:28 pm

So there is no way to target only hedge funds despite what watchnerd reads on the internet or sees on CNBC? Your theory did not pan out.

You aren't listening. I said they are motivated by self-interest and they don't care who the bag-holder ends up being. They will not be returning their profit.
LOL...I'm not the one with the theory!

SMH
So why did you mention hedge funds and CNBC?
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Re: Young Investor's Over Confidence

Post by watchnerd »

ballons wrote: Mon May 03, 2021 8:03 pm

So why did you mention hedge funds and CNBC?
You said:
Meme stocks and crypto are a metaphorical middle finger to boomers. Half believe that is the way forward to investing, the other half just want boomers to fall victim to FOMO so millennials can cash out and switch to "boomer stonks."
i.e. you said they "want boomers to fall victim"

It was your theory they want to specifically victimize boomers, not mine.

I then questioned the logic of this given boomers don't own a lot of GME. Unless, by boomers, one meant hedge fund managers, who *did* / were shorting GME.
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Re: Young Investor's Over Confidence

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Uniswap wrote: Mon May 03, 2021 7:16 pm The children now love luxury; they have bad manners, contempt for authority; they show disrespect for elders and love chatter in place of exercise. Children are now tyrants, not the servants of their households. They no longer rise when elders enter the room. They contradict their parents, chatter before company, gobble up dainties at the table, cross their legs, and tyrannize their teachers.

- Socrates
Love that. There is a similar passage in the Iliad.
“TE OCCIDERE POSSUNT SED TE EDERE NON POSSUNT NEFAS EST"
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Re: Young Investor's Over Confidence

Post by BillWalters »

garlandwhizzer wrote: Mon May 03, 2021 7:59 pm Some of young investor over confidence and preference for high risk/high reward approaches is a response to the difficult situation they find themselves in. Swinging for the fences is in a way desperation. It demonstrates little faith in more boring traditional approaches to investing success. Put simply, I thing many younger investors don't believe numbers will work out for them.

Frankly, I think my generation, Baby Boomers, have been the massive recipients of pure lucky timing. My parents grew in the Great Depression, lived through very hard economic times which persisted 12 years before WW2. The depressed subsistence economy on main street did not improve until well after WW2 was over, about 18 years total of struggle to just get food on the table and a roof over your head. Many got neither. As adults they had to fight the greatest threat not only to the US but to western civilization itself with Hitler. We have had wars since then, but nothing like the challenges that Hitler and Japan offered. During the same time frame there were the Holocaust and Stalin's repeated purges which in sum killed about 10 million innocent civilians, not to mention the 30+ million WW2 war dead. These issues dwarf any problems we've had since. Boomers parents got screwed. Boomers got the rewards.

For Boomers starting out at the end of this, things were different. The economy are the markets have had their problems intermittently, but over the long haul it was an unprecedented run of robust dynamic economic growth and prosperity, relatively less war and international conflict, and totally unprecedented massive appreciation of equity and real estate markets especially since 1982 "the death of equities." Baby Boomers without college educations were able to get and hold secure jobs that allowed them to buy homes, wives could stay at home rather than needing to take a second job, and they could pay for their kids to go to college which in those days was cheap. As for the Boomers who did go to college, many of us who invested regularly and wisely over the years have gotten wealthy far beyond our fondest dreams as teenagers. So much wealth has flowed to the top these days that we have bid up the prices of stocks, bonds, real estate and collectables so much that future expected returns are much more muted than what we experienced. Our success has made it a bit harder for future generations to have similar success because they can't afford homes and often can't afford college education without taking on massive debt.

So I understand why young people now are not as optimistic as we were when we were young. Wages for most workers have stagnated for 30+ years. Many college grads emerge with massive educational debt and face a tough job market. We graduated with little or no debt and a great job market. Jobs no longer offer defined benefits in retirement as many did a few decades ago. Everything goes through cycles and the future for younger people now does not seem to me to be as favorable as it was to us in the past, certainly the Boomers who recognized opportunity when they saw it.

Pure luck has a great deal more influence on investment outcomes than many perceive IMO. Those who are starting their investing careers now may not find it as easy to be successful as it was for the Boomers. That does not mean however that it's wise to gamble on high risk/high reward assets with a substantial portion of the portfolio. IMO the best approach these days as it has been in the past is to hold as much broadly diversified equity as you can stomach through a bad bear market, use bonds as your anchor in an equity hurricane, avoid alternates, and limit play money long shots to 4% - 5% of the portfolio. That boring approach has always worked well in the past and will continue to do so going forward IMO. The final thing is to acquire as much education and technical skill as you can which may allow youin the future to take advantage of opportunities which have a way of showing up unexpectedly from time to time.

Garland Whizzer
+1, fantastic post.
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watchnerd
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Re: Young Investor's Over Confidence

Post by watchnerd »

garlandwhizzer wrote: Mon May 03, 2021 7:59 pm Some of young investor over confidence and preference for high risk/high reward approaches is a response to the difficult situation they find themselves in. Swinging for the fences is in a way desperation. It demonstrates little faith in more boring traditional approaches to investing success. Put simply, I thing many younger investors don't believe numbers will work out for them.

Frankly, I think my generation, Baby Boomers, have been the massive recipients of pure lucky timing. My parents grew in the Great Depression, lived through very hard economic times which persisted 12 years before WW2. The depressed subsistence economy on main street did not improve until well after WW2 was over, about 18 years total of struggle to just get food on the table and a roof over your head. Many got neither. As adults they had to fight the greatest threat not only to the US but to western civilization itself with Hitler. We have had wars since then, but nothing like the challenges that Hitler and Japan offered. During the same time frame there were the Holocaust and Stalin's repeated purges which in sum killed about 10 million innocent civilians, not to mention the 30+ million WW2 war dead. These issues dwarf any problems we've had since. Boomers parents got screwed. Boomers got the rewards.

For Boomers starting out at the end of this, things were different. The economy are the markets have had their problems intermittently, but over the long haul it was an unprecedented run of robust dynamic economic growth and prosperity, relatively less war and international conflict, and totally unprecedented massive appreciation of equity and real estate markets especially since 1982 "the death of equities." Baby Boomers without college educations were able to get and hold secure jobs that allowed them to buy homes, wives could stay at home rather than needing to take a second job, and they could pay for their kids to go to college which in those days was cheap. As for the Boomers who did go to college, many of us who invested regularly and wisely over the years have gotten wealthy far beyond our fondest dreams as teenagers. So much wealth has flowed to the top these days that we have bid up the prices of stocks, bonds, real estate and collectables so much that future expected returns are much more muted than what we experienced. Our success has made it a bit harder for future generations to have similar success because they can't afford homes and often can't afford college education without taking on massive debt.

So I understand why young people now are not as optimistic as we were when we were young. Wages for most workers have stagnated for 30+ years. Many college grads emerge with massive educational debt and face a tough job market. We graduated with little or no debt and a great job market. Jobs no longer offer defined benefits in retirement as many did a few decades ago. Everything goes through cycles and the future for younger people now does not seem to me to be as favorable as it was to us in the past, certainly the Boomers who recognized opportunity when they saw it.

Pure luck has a great deal more influence on investment outcomes than many perceive IMO. Those who are starting their investing careers now may not find it as easy to be successful as it was for the Boomers. That does not mean however that it's wise to gamble on high risk/high reward assets with a substantial portion of the portfolio. IMO the best approach these days as it has been in the past is to hold as much broadly diversified equity as you can stomach through a bad bear market, use bonds as your anchor in an equity hurricane, avoid alternates, and limit play money long shots to 4% - 5% of the portfolio. That boring approach has always worked well in the past and will continue to do so going forward IMO. The final thing is to acquire as much education and technical skill as you can which may allow youin the future to take advantage of opportunities which have a way of showing up unexpectedly from time to time.

Garland Whizzer
Well, I don't know who your 'we' is.

Those of us not young, but born after the Boomers, were not optimistic, either.

Born into the 1970s economy, watching the Rust Belt grow when were in high school (cue Billy Joel's "Allentown), destruction of pensions by the time we entered the work force, etc etc.

Nobody before or after the Boomers got the same fortuitous economic circumstances they did.

But you just gotta deal with the hand fate gives you and be resilient.

Life's a biotch, has been for most of human history.

And no matter how I slice it, I have it better than my ancestors 100 years ago.
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Re: Young Investor's Over Confidence

Post by skierincolorado »

Millennial here. 2008 happened while I was in college and scarred me. Because of 2008 I have been underinvested most of my adult life at 80-85% equities, instead of the 100-150%+ that a person my age and job skills should be. Always expecting the next crash so I could go 100%. When the crash finally did happen last year, I needed the cash to buy a house and didn't know how to leverage yet.

In addition to being overly cautious investing, I was also overly cautious in taking career/educational risks after college. I just didn't think people could get jobs just by being smart and competent (turns out you can). I saw how smart people I knew struggled to find jobs in the early 2010s. So I didn't try.

Yes I know people like me finally becoming 'risk-on' is a sign the next crash is coming. But we don't know when. And when it does I will weather it at 100%+ equities, as I did in 2020. My investments are still less than 3 year income.
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Re: Young Investor's Over Confidence

Post by Slacker »

garlandwhizzer wrote: Mon May 03, 2021 7:59 pm Some of young investor over confidence and preference for high risk/high reward approaches is a response to the difficult situation they find themselves in. Swinging for the fences is in a way desperation. It demonstrates little faith in more boring traditional approaches to investing success. Put simply, I thing many younger investors don't believe numbers will work out for them...

Garland Whizzer
A younger coworker of mine has been "swinging for the fences" most of the time I've known him. He lives a kind of YOLO lifestyle, certainly not beneath his means. Meanwhile, I told him all about my boring plan to invest every pay day in index funds.
Lately he's been telling me about his exciting adventures in trading altcoins and trying to jump into AMC, NOK, and other meme stocks.

If he does hit a jackpot, I just hope he figures out how to make it last.
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Re: Young Investor's Over Confidence

Post by watchnerd »

Slacker wrote: Mon May 03, 2021 10:45 pm

A younger coworker of mine has been "swinging for the fences" most of the time I've known him. He lives a kind of YOLO lifestyle, certainly not beneath his means. Meanwhile, I told him all about my boring plan to invest every pay day in index funds.
Lately he's been telling me about his exciting adventures in trading altcoins and trying to jump into AMC, NOK, and other meme stocks.

If he does hit a jackpot, I just hope he figures out how to make it last.

“Because nobody wants to get rich slow.”
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Re: Young Investor's Over Confidence

Post by Monsterflockster »

DNeal wrote: Tue Apr 27, 2021 2:50 pm Congratulations are in order to all the Millennials and Gen Z that started or are all on their way to financial independence. I am decades long investor and a Boglehead for quite some time. I have noticed many posts about a million dollar threshold and are considering loosen up on their savings and spending more. As someone that was 100% invested in equities at the time saw my retirement accounts drop nearly 50%, I thought I could handle that until it actually happened. It's easy to under estimate how you might react. For most Millennials and Gen Z in their investing lives they have never seen a serious downturn, let alone a long term downturn. I would recommend a year in emergency funds. Your tax deferred account are just that tax deferred. You will probably owe a considerable amount of tax when the deaccumalation phase starts. I would consider your mortgaged home a liability not an asset. 100% equities? Maybe, but I would have a glide path down and might consider an all in one target retirement fund. I'll leave with this very simple advice. Live below your means.
Rather than congratulatory or cautionary the tone seems more, “get off my lawn” but I get what you’re saying. Sadly many have to learn from experience. The posts here of taking equity out of their home, cash out refinance to invest is nothing more than gambling to me. But I don’t have the stomach to bet the house so to speak. I’m fairly conservative but I’d add that you should only invest what you can lose.
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Re: Young Investor's Over Confidence

Post by watchnerd »

Monsterflockster wrote: Mon May 03, 2021 11:05 pm Rather than congratulatory or cautionary the tone seems more, “get off my lawn” but I get what you’re saying. Sadly many have to learn from experience. The posts here of taking equity out of their home, cash out refinance to invest is nothing more than gambling to me. But I don’t have the stomach to bet the house so to speak. I’m fairly conservative but I’d add that you should only invest what you can lose.
Egads.

If that becomes widespread, we could end up with a mini mortgage crisis and a stock bust at the same time.
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Re: Young Investor's Over Confidence

Post by getthatmarshmallow »

Godot wrote: Wed Apr 28, 2021 5:54 pm
jarjarM wrote: Tue Apr 27, 2021 8:32 pm Gen X gets ignore no matter which way to argument goes, it's like they don't even exist :twisted:
Who?
They're the boomers' older children whom they ignored, as opposed to their younger children, whom they detest.

I don't think there's a lot of data to support the idea that all boomers are prudent investors while all millennials just like the stonk - unless the millennials are somehow the retirees with no assets beyond the house I keep hearing about. (Tricky kids!)
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Re: Young Investor's Over Confidence

Post by watchnerd »

getthatmarshmallow wrote: Tue May 04, 2021 8:46 am
Godot wrote: Wed Apr 28, 2021 5:54 pm
jarjarM wrote: Tue Apr 27, 2021 8:32 pm Gen X gets ignore no matter which way to argument goes, it's like they don't even exist :twisted:
Who?
They're the boomers' older children whom they ignored, as opposed to their younger children, whom they detest.
Actually, Gen X are mostly not the children of the boomers.

They're mostly the children of the Silent Generation, who were born before the end of WWII, 1928 - 1945.

i.e. the kids of the kids who were born during the Great Depression and WWII
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Re: Young Investor's Over Confidence

Post by rockstar »

exodusNH wrote: Mon May 03, 2021 11:55 am
rockstar wrote: Tue Apr 27, 2021 8:18 pm Why the push for retirement dated funds? These are super expensive in my 401k plan. I'm seeing these pop up a lot lately instead of the two low ER fund portfolio as the go to recommendation.
I obviously don't know what you're seeing for expense ratios vs index funds in the same 401K. Sometimes companies bury the 401K bookkeeping fees into the ERs. (They might do this by selecting funds that revenue share with the 401K management company.) If the pay the management company directly, you can get better and cheaper funds.

From a behavioral perspective, the target date funds (TDF) can prevent people from making mistakes. Using TDF also makes it easier for companies to show they were responsible with their employees' money. (I'm on my company's 401K committee. There's a lot of annual ceremony to make sure that you don't open your company up to lawsuits and/or fines.)
I have one S&P 500 fund with a ER of 0.03% in my 401K. All of the target dated funds in my 401k have ERs north of 1%.
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Re: Young Investor's Over Confidence

Post by firebirdparts »

watchnerd wrote: Mon May 03, 2021 6:37 pm
ballons wrote: Mon May 03, 2021 6:34 pm
watchnerd wrote: Mon May 03, 2021 6:30 pm
ballons wrote: Mon May 03, 2021 6:23 pm

Meme stocks and crypto are a metaphorical middle finger to boomers. Half believe that is the way forward to investing, the other half just want boomers to fall victim to FOMO so millennials can cash out and switch to "boomer stonks."
What does boomers falling victim to FOMO mean, in practice, and how do they benefit?
Fixed. A pump and dump scheme.
So the plan is....

1. Juice up GME (a stock boomers don't pay attention to)
2. Sucker boomers into buying it
3. Dump, leaving boomers holding the bag
4. Profit!

Step 2 seems like a sticking point....

Unless, by boomers, they mean hedge funds.
Just wait until Berkshire goes all in on crypto. Then we'll show 'em.

The moral of it is, I reckon, when you make up stuff, it's made up.
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Re: Young Investor's Over Confidence

Post by namajones »

Miriam2 wrote: Tue Apr 27, 2021 6:08 pm
Thank you, DNeal, for posting this - many good personal observations :happy

I second that. Also realize that when the market turns south in a big way, that job that you might have thought was secure suddenly could prove to be not so secure. And that mortgage that you could easily swing because of the job can suddenly become an anchor. And having all of your savings in stocks, after you lose your job and are looking at homelessness, can easily mean that you end up selling at the bottom.

Read some of the 2008 threads on this board.

2008/09 actually didn't scare me that much. In fact, at one point I inadvertently deposited my entire paycheck in my 401(k) at the end of 2008 (adjustment gone wrong) and considered it a happy accident. 2000, though, shook me to the core because I was young and dumb and had too much net worth tied up in individual "hot" stocks. I will likely be writing off those losses for the rest of my days.

All I can say is that the cost of college ain't nothing compared to the cost of financial lessons delivered by the Stock Market to greenhorns.

I will add that those who feel they have weathered bear markets because they lived through 08/09 and 2000 have gotten off easy. Those bear markets snapped right back, relatively speaking.

What are you gonna do when a real bear hits and the market stays down for 10, 15, 20 years? I believe that portfolios must be constructed with that type of "real bear" in mind.
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Re: Young Investor's Over Confidence

Post by ballons »

watchnerd wrote: Mon May 03, 2021 8:16 pm Unless, by boomers, one meant hedge fund managers, who *did* / were shorting GME.
ballons wrote: Mon May 03, 2021 6:49 pm Whomever has money. Grandma, hedge funds, pensions. All that matters is their stonk / dogcoin moons and they cash out.
You don't listen.
watchnerd wrote: Mon May 03, 2021 6:37 pm Unless, by boomers, they mean hedge funds.
Your theory about only targeting hedge funds did not pan out.
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Re: Young Investor's Over Confidence

Post by hnd »

Lowlim wrote: Mon May 03, 2021 7:15 pm For anyone who has sold a significant portion of their equities during a downturn, how did you decide when to get back in?
a personal friend sold everything after the giant dip last march. BEGAN DCA'ing back in in july. I'm not sure is full back in. is expecting another giant correction. he is in commercial lending specializing in breweries and restaurants. I think he extrapolated that market segment across all sectors.
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Re: Young Investor's Over Confidence

Post by exodusNH »

rockstar wrote: Tue May 04, 2021 10:50 am I have one S&P 500 fund with a ER of 0.03% in my 401K. All of the target dated funds in my 401k have ERs north of 1%.
I agree that's very expensive. Our target-date funds are all by Capital Group (American Funds). All are between 0.30% and 0.45%. Because you have that one option at 0.03%, though, it means that they're not burying the costs into the ER. (Otherwise, you'd see it at like 0.43% or something.)

If you're young enough, going all in on the 500 index fund isn't a terrible idea as long as you can tolerate the volatility. Your next company will likely have better options.

If you're with a small enough company, you may be able to get them to offer more options by asking.
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Re: Young Investor's Over Confidence

Post by txhill »

One benefit to all the memes that seem to drive young investors these days is that they're encouraging a buy and hold mentality. "Hodl" and "diamond hands" are good, "paper hands" are bad. That's something at least!
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