Stock Market Drops 1000 Points Because of Increase in Wages

[K. A. Pital]

I wouldn't call that "losing" money unless the interest rate itself is negative; e.g., $100 deposit decreases due to a -1% interest. Put it another way, the bank is charging you to simply store your cash (see Japan). The purchasing power of the dollar (or any fiat currency) simply decreases with inflation. That affects everyone and you cannot write that off as an investment loss.

How is that not losing money? The ability of prices to inflate rapidly can make saving as in "put money into bank account" useless. Imagine you're trying to save to buy an apartment without credit. If money isn't losing purchasing power, you can save at a constant rate, estimate the horizon and get there.

But cash is losing purchasing power, so "saving" like this is actually just having your saving depreciate in value, sometimes faster than they can accumulate to the necessary volume. It is, for all intents and purposes, losing money.

The fact that it "affects everyone" doesn't change much. It also mostly affects the working class, not the capitalist class, who by definition are heavily invested in capital, which normally appreciates in value.

[The Grim Squeaker]

Far less risky than real estate? *laughs* Which econ school teaches that? I would love to know, so that I know where to tell my friends to never set their foot in.

Eh, call me overly cautious, but I'd rather take a more certain, if less lucrative option than one that depends on semi-random stock market fluctuations that I freely admit I have a very limited understanding of.

The problem with "less lucrative" options is that you are bound to lose money if the ROI falls below inflation - which often happens to be the case with very "safe" investments, nevermind the maintenance etc. fees that happen regardless of which instrument you happen to invest in.

1. Long term, SP500 and the like beat out REITs in most cases.
2. I'm talking about a stock market index fund, not investing in just 1 company. in other words, a basket of the best eggs. That's the baseline to match/beat.

[Aether]

I wouldn't call that "losing" money unless the interest rate itself is negative; e.g., $100 deposit decreases due to a -1% interest. Put it another way, the bank is charging you to simply store your cash (see Japan). The purchasing power of the dollar (or any fiat currency) simply decreases with inflation. That affects everyone and you cannot write that off as an investment loss.

How is that not losing money? The ability of prices to inflate rapidly can make saving as in "put money into bank account" useless. Imagine you're trying to save to buy an apartment without credit. If money isn't losing purchasing power, you can save at a constant rate, estimate the horizon and get there.

But cash is losing purchasing power, so "saving" like this is actually just having your saving depreciate in value, sometimes faster than they can accumulate to the necessary volume. It is, for all intents and purposes, losing money.

The fact that it "affects everyone" doesn't change much. It also mostly affects the working class, not the capitalist class, who by definition are heavily invested in capital, which normally appreciates in value.

It's not considered losing money, because regardless of where you invest it; stock market, bank, in your mattress, etc. the purchasing power of the fiat currency has been reduced. It takes more cash to buy that loaf of bread, but not because you lost income; rather, it's a loss in purchasing power for everyone. Maintaining a standard of living isn't the same thing as losing income in investments. The Tax Man doesn't consider them equivalent.

[K. A. Pital]

It's not considered losing money, because regardless of where you invest it; stock market, bank, in your mattress, etc. the purchasing power of the fiat currency has been reduced. It takes more cash to buy that loaf of bread, but not because you lost income; rather, it's a loss in purchasing power for everyone. Maintaining a standard of living isn't the same thing as losing income in investments. The Tax Man doesn't consider them equivalent.

I couldn’t care less about what the Tax Man thinks. In practice, investment into an asset which appreciates in value is either increasing wealth (outpacing inflation) or maintaining same wealth (growth roughly trails inflation). Non-investment or investment into an asset which depreciates in value is losing wealth, as the absolute purchasing power of savings is thereby reduced. The fact that it is reduced because you left it as a cash sum is not changing that practical loss of purchasing power is losing. Inflation in general and hyperinflation in particular is loss. Sometimes governments accept it (usually after a severe round of extreme hyperinflation, for example) and may try to compensate their subjects for these losses, but most of the time they just ignore it, although life savings can be wiped out in days, and many other things can happen just because of a loss of purchasing power for everyone.

Failure to understand that leads to becoming poorer. If your real income is not growing but falling, you are becoming poorer. You are losing.

You cannot dismiss a decline in real income as “not losing your income” because this is exactly what happens

[K. A. Pital]

1. Long term, SP500 and the like beat out REITs in most cases.

I did not mean REITs but rather physical rental property. And it was about risk. You said stocks are less risky. How? Choosing a stock is a lot more complicated than choosing a reasonable ROI rental property, it is just a matter of fact.

[The Grim Squeaker]

1. Long term, SP500 and the like beat out REITs in most cases.

I did not mean REITs but rather physical rental property. And it was about risk. You said stocks are less risky. How? Choosing a stock is a lot more complicated than choosing a reasonable ROI rental property, it is just a matter of fact.

Choosing a stock market index (dow jones / sp500 / russel 5000, or national leading market index ) is a LOT easier than picking a REIT

[aerius]

Has anyone ever looked at a long term inflation adjusted chart for the stock markets?
http://www.macrotrends.net/2324/sp-500- ... chart-data

The myth that it provides guaranteed long term returns is bullshit. There's enough time periods where you're looking at over 20 years of zero gains, or worst case, over 50 years of nothing (1929 to 1983). It's actually worse since you're not buying all your shares right at the start, you are buying them in increments every year so you get to experience the joys of cost averaging. If you started investing in the mid 50s, you're not seeing ANY returns by the time you retire, chances are you're actually seeing a loss. Started in the 60s? Better hope you can hold on for 30 years or more.

Considering that the capital markets are currently more highly leveraged and bubble-licious than even 1929, do you really want to make the bet that a)you can get out in time when it implodes, and b)it'll recover to break-even by the time you need the money? The folks who keep parroting "8% annual returns" have never lived through stagflation or a real market crash. Not surprising since neither has happened in my lifetime, but go back a generation and it's a whole different story. Folks my age think "markets go up forever" is normal. It isn't. Reversion to mean will be a bitch, and a lot of folks are going to lose their shirts.