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.
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.
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
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.
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?