In my experience, it seems that a lot of people have an un-stated gut feeling that "doing something" must out-perform passive dollar cost averaging a broad low-fee index ETF.

If we came up with some obfuscated mathematical dance that, if un-obfuscated, were obviously dollar cost averaging in a broad-based low-fee index ETF, I think it would be more popular.

Edit: There are also lots of investment strategies where people are short tail-risk and don't realize it or properly account for it. For instance, my dad is a pretty smart guy (practicing medical doctor who never got his undergrad degree because he crushed the MCATs and got into med school after 3 years of undergrad, back in the 1970s when med school was less competitive) but he's convinced that his gut-feeling covered calls out-perform a simple buy-and-hold (on a non-risk-adjusted basis). I don't doubt it's possible to out-perform on a risk-adjusted basis, and maybe even on a non-adjusted basis with careful enough analysis, but he's never performed any analysis on the opportunity cost that he has given up over the years. Without any attempts to model or otherwise estimate opportunity costs, I doubt it's likely he's actually out-performing. He sees that most days, he's out-performing, and in the rare cases where his calls get allocated, he just tells himself "well, at least the long stock position did very well". He's short the tail risk, but essentially largely ignores that part because it's hidden by the gains in his simultaneous long position. He feels good because he's doing extra work, and most days he's out-performing, so the gut feeling is that he's out-performing the market on a non-risk-adjusted basis.

Heh, I think that idea has a lot of promise. Casinos might offer some guidance here given how good they are at making games with fairly straightforward negative odds seem enticing.

We need some sort of responsible investing vehicle that includes gamification, intermittent reinforcement, and a tiny chance for a huge payoff.

> We need some sort of responsible investing vehicle that includes gamification, intermittent reinforcement, and a tiny chance for a huge payoff.

You’re basically describing options.

> You’re basically describing options.

Well, with vanilla options, you'd need a basket of options to both reasonably closely replicate performance of a broad index (the "responsible vehicle" part) and also a small percentage of the time hitting a big pay-out. Presumably, you'd want mostly short-duration at-the-money calls on a low-fee broad-index ETF (so they often end up owning the ETF), and a small number of deep out-of-the money puts and calls on volatile micro-cap single names to get that sweet sweet irregular reinforcement dopamine hit.

This is not investment advice.

I don't think investing in short-term at-the-money options would be a good strategy because you'd lose a lot to premiums. It'd be better package long positions on the low-fee ETFs mixed with some deep otm options as an investment vehicle. Love the concept!

Sorry, I thought we were talking about restricting ourselves to using strictly a basket of vanilla options.

I think perhaps micro-managing layered limit orders to try to squeeze the last penny out of multi-kilobuck index ETF purchases might be the right way to gamify responsible investing, though that does have the danger of soaking up hours during the workday, so there are negative consequences.

Maybe they way to go is lump-sum investing into some bond ETFs with gamified rebalancing into an age-appropriate mix of bond ETFs and broad equity index ETFs, following some pattern similar to value averaging for the rebalance, rather than cost averaging. It shouldn't actually be too hard to get something that has the right balance of feeling like real work, being relatively difficult to screw up (or the most common errors having little long-term effect), and out-performing dollar cost averaging.

This isn't investment advice, and even if it were, you shouldn't take investment advice from internet randos.

Premium Bonds in the UK are part of the way there https://www.nsandi.com/products/premium-bonds

Sounds like the lottery.

The problem is, when dealing with a zero (or negative) sum game, having a few big winners means you have lots of little losers, or a few big ones.

>Edit: There are also lots of investment strategies where people are short tail-risk and don't realize it or properly account for it. For instance, my dad is a pretty smart guy (practicing medical doctor who never got his undergrad degree because he crushed the MCATs and got into med school after 3 years of undergrad, back in the 1970s when med school was less competitive) but he's convinced that his gut-feeling covered calls out-perform a simple buy-and-hold (on a non-risk-adjusted basis).

Nice to see that's still around

https://old.reddit.com/r/thetagang/wiki/index

Not saying the strategy outperforms, but he should be aware that there are ETFs now covering the covered-call strategy - XYLD, RYLD, QYLD - which automate most of that at reasonable cost.

Extremely expensive 0.6% fee and certain to under-perform the index in the long run.

I'm sure he thinks he's better at selecting stocks and call strikes than a robo-index.

Less competitive? I know a doctor who got his MD in 1952 as a 21 year old (18 months college), another who got it in the 70s as a 24 year (3 years college), and 2 who just graduated this year at 26 and 29 (4 years college each).

Listening to the stories, med school got progressively easier (1950: tons of WW2 vets on GI bill--older and deadly serious, only 1/3 made it through. 1970s: 2/3 made it through, most dropped first year. 2018: 95% made it through because the schools radically changed from weeding out to hyper-supportive)

Maybe Dad was just being modest when he told me that he couldn't have gotten into med school without an undergrad degree these days. Also note that I was talking about competitiveness of admissions, not competitiveness of the classes. You seem to mostly be commenting on the competitiveness of the classes.

Is ‘Hyper supportive’ a synonym for ‘universities realized they could make more money by making things easier’?

Isn't it still the case that nearly all med schools in the US are capacity constrained anyway? There's no sense in pandering for extra students you can't take on anyway, especially if it harms your program's reputation. More likely, they realized some aspects of med school nearly amounted to hazing, with little demonstrated educational benefit. (Again getting back to American culture's tendency to conflate difficult with beneficial.)

Yes, the supply is capped by residency spots available.

They reason they became hyper-supportive is because admissions have become insanely brutal, most poor performers have been screened out before they even apply. The marginal benefits of making the program even harder likely amounts to nothing more than hazing.

It’s simply politically untenable to kick out students during the program, given the already artificially constrained supply of newly minted physicians and regional shortages of talent.

I once read an article describing this basically as "farming" vs "trapping" tactics. For a farmer, there is basically always more work to do (weeding, sowing, harvesting, maintaining tools and buildings, looking after animals etc etc etc) and often more work directly results in more profit. Trapping on the other hand is not like that. Once you have set your traps, you must now sit still and wait. Checking every 5 minutes if an animal has walked into the trap yet is actually counterproductive.

The premise of the article was that investing is more like trapping than like farming. Since most of us come from societies with a long history of farming and the resulting cultural norms have permeated through said societies, many people feel like they "must do something" to tend to their investment crops properly.

I'll add my own speculation that in many western societies the industrialization and class warfare rhetoric has created a meme that "only work deserves compensation", implying that supplying capital is an unworthy state of existence. (See for example the many posts on HN decrying every single landlord as a parasite on society) If you want to invest but also want to hold on to your identity as a wholesome "middle class" American (definitely not one of those nefarious "elites" you keep reading about in the news!), just sticking your money in an index fund and doing nothing else may feel dangerously capitalist. Fiddling with it gives you some emotional satisfaction back by "working" on the investments.

That's an interesting premise, but as someone who does regular trapping for exotic pests, actual trapping is very much work.

You do your rounds (a lot of walking), pull out dead animals and carry them with you, re-bait your traps, repair traps as required, dump the dead animals, and repeat over and over again.

I guess there are other forms of trapping - more like hunting, a one off exercise to get that <whatever> - but I would hazard most professional trappers would see it as very much like work.

I agree that the actual "setting up traps" is work, but so is choosing investments (even if that is usually shunted off to an index fund these days).

My gist was more that in both investing and trapping there is a point where the positions are set up and there just isn't anything that you can do to make the process go faster. Not being able to make it go faster by putting in additional work seems to be psychologically difficult to cope with for many people.

> make it go faster by putting in additional work

I feel this is slightly wrong. I’ve observed the kinds of people most likely to lose their money in this way don’t want to put in additional “work”. They want (hope for) additional “woo”.

>Put your money in a broad index fund and don't look at it for 10 years.

That might be a dead strategy in 2022. After the 2008 crisis the fed discovered a miraculous economic cure: slowly print money and throw it into the economy, so people keep transacting with each other, and the GDP (and stocks) keep growing.

Turns out, most of this growth was on paper - fads, speculative investments, overvalued stocks. Now that the geopolitical shock has disrupted the endless stream of cheap stuff made elsewhere, turns out there's an abundance of dollars and shortage of everything else. There might be a rather non-trivial correction ahead of us.

There have been a ton of real technological advances since 2008 that is not just on paper. You could have also said the exact same thing in 2000.

Kinda, but a lot of them are about manufacturing more cheap stuff in China. Most technological advances not involving that are about skirting the regulations/antitrust laws (AirBnB, Uber, Google Ads) or using dark patterns to manipulate attention (Meta).

You are distracted by clickbait news and ignoring important advances made since 2008, a few examples which is just scratching the surface because there is a ton I am personally not even aware of:

* Greatly reduced cost of solar panels and batteries * Things like uber/doordash made taxis / takeout way more efficient * Transitioning to electric vehicles. In 2008 I'd pay $50/week for fuel, now I pay $10/week to travel the same distance in my electric car. Not to mention savings in oil changes/maintenance * mRNA vaccines nonexistent in 2008 * Significant progress towards autonomous vehicles, if that comes to fruition on a large scale it will transform our society

>> there's an abundance of dollars

Slightly different perspective here - there is an abundance of debt that spends like dollars. Government debt and some pension debt is nearly unserviceable in some States and countries, so there will be a dollar short squeeze in attempt to get dollars to pay the debt. Yep, seems counter-intuitive at first glance that the USD short squeeze will increase the dollar appetite.

This is spot on. What worked in the last 10, 20 or 30 years isn’t guaranteed to continue to work. Market cycles, if it does cycle, is closer to 100 years than mere decades. ETFs, 60/40, 4%, etc. have become a cult mantra that blinds investors to critically consider alternative realities.

Nothing has changed. There is still an abundance of capital. Interest rates have known only one direction and that is down.

You do know the Fed has been raising rates all year, and have signaled they will keep doing it through the end of this year, right?

Or are you suggesting on a long enough timeline it's just going to go right back to zero again? If so, then yeah you might be right there.

At least the US never got down to negative interest rates, like they've had in europe for the past eight years. I can't imagine having money being taken away for parking it in a 'savings account' (of course inflation is practically the same thing, but negative interest rates still seem worse to me, especially since they also have high inflation over there right now).

Something beyond a regression to the mean?

What do you suggest?

Bonds might become a thing again with the interest rates above 3%.

Bonds will take a hit if interest rates keep rising. (Look at how they’ve done year to date.)

If you want to actually hedge your investments, use a collar.

https://www.investopedia.com/articles/active-trading/011515/...

Existing long-term bonds take a hit. Because if today you can get a 6% bond maturing in 2030, nobody will buy your 3% bond unless you price it down accordingly.

But if you keep getting them in 1-year increments as long as you expect the rates to rise, you just keep cashing out at maturity and reinvesting at the yield rate of the day.

There's a meaningful difference between putting <10% of your portfolio into a speculative investment versus 100%. If your speculative investments moon anyways, 10% * a large number = still a large number, and you didn't bet the farm. It's a good way to fulfill one's desire to be an active investor, while largely acknowledging most of us won't beat the S&P-- I know the active portion of my own portfolio (no crypto) has underperformed the index.

One of my experiences is that nobody tells you what to do next. They don't know.

If your speculative investment moons then your portfolio has risen to 95-99% speculative investment. At least thats a consistent case in crypto or a super quick and awesome private equity exit, both of which have multiple thousands of percentage gains.

So the people following that kind of risk allocation advice might already be starting from that second state. Rebalancing is an option, but its lame when everything has such high correlations to each other. And rebalancing when? Anytime the speculative investment goes over 10% of the portfolio? After you let it ride and its price got stable for a few days? Waiting a year or more for lower tax treatment on the rebalancing sells?

Yes, there are people who rebalance when that happens. I'm not one of those people (I probably should be, but I'm not), but there are people who definitely do rebalance their portfolios whenever it gets out of whack.

Wealth concentration happens when the long term return on capital exceeds the growth rate of the economy according to Thomas Piketty.

The wealth obviously concentrates with those, that have the most assets and least amount of spending in relation to their total income.

When you think about this, this system is inherently injust if r<g is true, which is the reason why politicians and economists are addicted to growth. Capital must dictate the growth rate of the economy instead of people dictating the growth rate that they want.

Now, under this perspective you have found the secret cheat code on how to get richer automatically. There obvious problems for every day people. Exponential growth is really slow in the beginning so most people never get to the point where their money is growing as much as a get rich quick scheme would promise every single year.

The other problem is that they are human beings that need food and shelter which means living expenses are a big portion of their income meaning they don't have much to invest in the first place. It would be better if you didn't have to pay capital gains to the rich.

However, if you are going for that living off other people's work strategy, you should be aware that the road is long and the rewards are only reaped at the end. Oh, and everyone will hate you.

Mmm, Thomas Piketty.

Were you able to read the whole book? I was really enthralled by the main points and graphs made near the beginning but was wondering if there were further insights because its a bit of a slog.

> It's not that they want to get rich quick. They just want to make a lot of money really fast.

In their defence, I feel like this is fuelled by media FUD as well as FOMO from the ever-widening wealth gap.

A combination of inflation and unaffordable housing along with stagnant wages means that even with everyone in the family working jobs, you can’t even afford a yearly vacation.

If the wealthy elites don’t realise that this isn’t sustainable, I’m not sure where we will be in a few years…

I agree, which is why everyone who lives off an income rather than assets (which is ~99.5% of us) should be a leftist and support labor organization as that is the only thing that'll actually improve their material conditions.

And I mean leftist in the actual sense, not a feckless liberal in the US Democratic Party sense who still ultimately exist to defend the capital-owning class.

The so-called Great Resignation and worker shortage was really the first increase in real wages many had seen in 40 years. And what's happened since? Massive inflation, particularly of essentials like housing. That's not an accident. The system is designed such that a budget shortfall is built into your existence. A workforce that is living paycheck-to-paycheck and barely hanging on is a compliant workforce. They're definitely showing up to work and not making trouble. That's the point.

Working people of any race, gender, sexual orientation or age have way more in common with each other than they do with the capital-owning class who routinely create wedge issues to avoid any sort of class solidarity.

But people don't want to hear that either.

>I agree, which is why everyone who lives off an income rather than assets (which is ~99.5% of us)

I think you're greatly underestimating how many people can "live off [...] assets". This page shows household net worth by percentile[1]. Based off that, you can probably live off investments starting at around the 90th percentile ($61k annual income with 5% withdraw rate), if you live modestly in a low CoL state. Once you get around the 95th percentile you can probably live comfortably in a high CoL state ($129k/year, translates to 87th percentile in california), and by the time you get to the 99th percentile, you can probably live as well as dual earner households with high paying careers ($555k).

[1] https://dqydj.com/average-median-top-net-worth-percentiles/

[2] https://dqydj.com/income-percentile-by-state-calculator/

> I think you're greatly underestimating how many people can "live off [...] assets"

1% of households are worth >$11m? Is that really true? I have trouble believing that but it could be true.

Either way, all it does is change it so that 95% of people should be leftists.

Also FWIW living off those assets at the lower percentiles that you mention doesn't factor in inflation, which is currently more than the 5% returns you mentioned. And a real return of 5% is a somewhat more aggressive strategy. It's more likely (and suggested) that at a certain point portfolios should become defensive as a amssive drop is way more impactful than a large positive gain.

It's also worth noting that these net worth figures include your net house value. You're not making a return on that money. In fact it's costing you money. Sure you could not own, get a return on that money instead and rent instead but that opens you up to other risks (eg as we're seeing now with massive rent hikes).

> Based off that, you can probably live off investments starting at around the 90th percentile ($61k annual income with 5% withdraw rate), if you live modestly in a low CoL state.

I don't understand how that math works. Could you break it down for me?

The theory goes that a 4.5% draw rate from your capital will ensure your capital is preserved (relative to inflation average of 2.5%) for ever provided it grows at 7% a year in the long run. This is an achievable long term capital growth rate.

If you can live of $61k a year then you will need 61,000 / 0.045 = $1,355,555 of investments to deliver $61k a year without degrading the value of the capital relative to inflation.

I guess the 90th percentile refers to the fact that 10% of people in the US have this amount invested or more.

> I guess the 90th percentile refers to the fact that 10% of people in the US have this amount invested or more.

I think the 10% number is referring to something a bit different. The stats referenced are net worth, which in most cases is significantly composed of someone’s house & other property which doesn’t easily provide a passive income and 401ks which aren’t accessible. I’d be surprised if the number of people who have $1.3M in normal investments is greater than 1%.

Exactly, people aren’t always stupid, they’re desperate. Investing in index funds at ~6% average return (or thereabouts) does nothing meaningful for people who are priced out by the 10-15% y/y gains on housing, or are living paycheck to paycheck due to inflation.

Its not so hard to see why people feel their only option is riskier bets.

>does nothing meaningful for people who are priced out by the 10-15% y/y gains on housing

Housing never had gains that high. Looking at the rise from the last trough (ie. 2009 to today) works out to 5.3% annualized nationwide[1]. Meanwhile the Vanguard Total Stock Market Index Fund returned 12.4% in the same time period. If you look around at a few different metros, there are many cities that return higher (eg. 7.5% for LA[2]), but none are anywhere close to returns for the index fund. The best I found was arizona[3] with 9.1%.

[1] https://fred.stlouisfed.org/series/CSUSHPINSA

[2] https://fred.stlouisfed.org/series/LXXRSA

[3] https://fred.stlouisfed.org/series/PHXRSA

This is the key that is overlooked a lot. Taking /biz as an example, the sentiment is rife that crypto is their one and only shot to make it out of the hole. Couple that with the "how much do you make" threads that show a lot of them earn somewhere in the $15-$30 per hour range and you can see why these moonshots are (in their view) their only hope.

If the most they can scrape together is $5k of capital, then it needs to 10x to provide them with a meaningful change.

Don't forget self funded retirement. I'd rather not be "in the market" at all due to the risk, but just saving money has become a pointless exercise.

Just remind them of Warren buffets 10 year bet on index funds, and he made that right before the 2008 collapse. Still won.

The problem is:

Ask most people today and they’ll tell you Internet stocks were overvalued in 1998. But then you take their IRR since then and you realize you could open a hedge fund and be a billionaire just by buying the ones that were big enough to get time magazine covers, even if you bought at the absolute peak (there are literal billionaires who did basically just this!)

So now you have this thing that feels a lot like the internet, especially to lay people, and it’s not totally unreasonable for them to think “this could happen again.”

It’s just that crypto is way stupider than the internet and is unlikely to have a similar impact, so they’re probably wrong.

> even if you bought at the absolute peak

If you bought CSCO at its peak in 2000, you're still underwater today 22 years later.

I think index funds are better seen as "savings" than "investments" in most people's mind.

Do people actually think this? ie. "it's not investing unless there's a chance of you making 10x returns"?

In my experience, it doesn't seem to be the chance of big returns, but rather the gut feeling of actively "doing something" to invest, vs. a very passive simple strategy of dollar cost averaging a low-fee broad index ETF. I think particularly in popular American culture, we often feel like it's more moral to actively make every penny, and have an aversion to passively earning money. Landlords are demonized, etc.

Yeah, this is bang on the money. And of course the financial institutions who make more money in fees when people are active vs. passively holding an index for decades, do what they can with marketing to support this idea.

"savings" implies that you can withdraw it at any time without loss, which definitely isn't the case with index fund investments. You should only "withdraw" in times of high market prices.

people see investments as something that returns 10x - so i say rather than calling index investing "savings", we should call the 10x type investments "speculation" or gambling.

I've literally never heard of anyone referring to index funds that way. You're not making any sense at all.

People don't refer to gold, or buying a house a "saving" either, but they definitely see it as safe haven values, and not as their money being "actively" invested (even as they do bear risks and are fiscally categorized as investments).

For people I talked to, beating inflation was their base goal.

I assume when people say savings they mean investments. Because it would be stupid not to invest a large cash position.

You would be surprised at the number of generally math-savvy (at least “enough”) people who have an irrational fear of “what if it goes down?” and fritter away decades of substantial growth (with each foregone decade skipping roughlh modeled as a missed doubling).

Savings accounts and similar are the appropriate place to put cash you’re saving for a specific purpose or for emergency funds. You don’t want to invest something you will or could need access to in the short term.

> Put your money in a broad index fund and don't look at it for 10 years.

You should check on their investments accounts on a regular basis.

If your bank or brokerage makes an error, there is likely a limited period of time during which it can be fixed.

Also, if you do not have activity on your bank or investment accounts for a period of time, the contents may be escheated by a state and investments may be sold automatically.

Planet Money had an episode about escheatment a couple of years ago: https://www.npr.org/transcripts/799345159 They mention that Delaware, where the person's broker was incorporated escheats investments after three years.

I think you can allocate 1 to 5% of your investment money into more risky bets. I did with crypto and was lucky enough to do very well. If I lost my 1%, that was part of the game. The benefit/risk at the time was worth it.

But even there, the most boring strategy works best: hold on to it for several years and sell a part when it becomes too big.

I tried timing the market on stocks and crypto, but it basically can't compete with just holding it.

The biggest problem is of course that you hear these stories how some people made a crazy amount of money, and then "why didn't you know about it?". But you never hear about the people who made nothing.

My current advice would be put, all money in bitcoin and don't look at it till the beginning on 2025. Then put a sale offer for 6x the price for what you bought for to get a conservative return on your investment.

Than wait few years for the next crypto crash and when you read heading "Bitcoin is dead" it's time to buy again.

https://mobile.twitter.com/cz_binance/status/153864715281303...

Unless you believe, that this time it'll be different.

As the cost of energy rises, the energy to mine crypto rises, while the value of crypto keeps decreasing, I wonder if there's an inflection point where e.g. bitcoin just implodes and vanished because mining is losing money?

Bitcoin mining difficulty adjusts to the available mining power.

When price of Bitcoin drops. Some miners quit because it's no longer profitable for them. The ones that remain get more of mined Bitcoin for themselves so profitability of their operation increases. Difficulty of mining increases so that blocks are still mined roughly at constant rate.

Network can operate regardless of how many or how few Bitcoin miners operate.

> There's no fundamental belief in blockchain technology.

For skeptics, sure. But there are many investors who hold crypto precisely because they believe in the technology.

> Put your money in a broad index fund and don't look at it for 10 years.

This is a good safe and low risk bet. It doesn’t invalidate an investment thesis based on crypto currencies and blockchain tech. Crypto is higher risk and higher maintenance, potentially higher returns, and better suited to those who want to manage their own portfolios.

But the technology doesn't actually work for anything useful (besides tax evasion). Cryptocurrency is a zero-sum ponzi scheme; for someone to win, others have to lose. With stocks, there are on average more winners than losers because new value is being created.

Is it really a good way to evade taxes? Each transaction is recorded publicly on-chain forever. User would have to be very careful with their on-chain privacy and very determined to skirt the legal system. The average crypto user will begrudgingly pay their crypto taxes to avoid having to live the life of a criminal, and would happily welcome more frictionless ways of having taxes recorded and collected on-chain.

> Cryptocurrency is a zero-sum ponzi scheme

This is repeated a lot on HN but it is easy to refute. A user can purchase $1000 of DAI and send this to another person in the world within 30-60 seconds, without the beneficiary needing to set up a USD bank account or disclose private data to a third party. The beneficiary can decide to hold this asset or exchange it to another asset such as fiat, gold, ETH, food. These are not zero-sum games - they are more comparable to a PayPal exchange than a zero-sum game.

> With stocks, there are on average more winners than losers because new value is being created.

This is questionable. Many stocks are overpriced far beyond their intrinsic value. The expectation that they will continue to go up forever and provide returns depends on people continuing to buy them at higher and higher prices, just like crypto. Some investors do not feel that NFLX and META will continue to go up in value forever, as the price already exceeds their value.

And when you own stock, you cannot do much except hodl and sell. When you own ETH, you can hodl and sell, but also use the token to send transactions to the network and interact with smart contracts.

> A user can purchase $1000 of DAI and send this to another person in the world within 30-60 seconds, without the beneficiary needing to set up a USD bank account or disclose private data to a third party.

Your “refutation” is leaving out some key details:

1. You do in fact have to deal with legal requirements - it’s a requirement for converting into useful money and tax evasion has serious consequences in most of the world.

2. Replacing Western Union has some appeals but it’s not enough to justify the returns which blockchain salespeople have been claiming, especially when the established player can cut margins easily and blockchain users need a fairly large just to compensate for currency conversion and increased risk.

The Ponzi claims aren’t because someone is claiming that they can beat PayPal’s overhead by 2% — it’s from all of the people claiming double or triple digit returns which are obviously unsustainable, and hand waving questions away claiming that you should just buy now before the price goes up.

> And when you own stock, you cannot do much except hodl and sell

My dividend income suggests you might be leaving something out here too.

20% returns as you see in Terra is probably ponzi-like, but ETH protocol is not promising free yield for doing nothing, or doubling or tripling your investments.

> You do in fact have to deal with legal requirements - it’s a requirement for converting into useful money and tax evasion has serious consequences in most of the world.

I never said otherwise. Buyer can purchase the DAI on a KYC exchange that is regulated by their government. The beneficiary can report taxes on income and capital gains as they do with other assets.

> Replacing Western Union has some appeals but it’s not enough to justify the returns which blockchain salespeople have been claiming, especially when the established player can cut margins easily and blockchain users need a fairly large just to compensate for currency conversion and increased risk.

This is now a subjective argument about what you feel is better or more valuable. To some people, reducing commission for global transfers to 0%, with 30-60s finality and better privacy features is all desirable and valuable.

> My dividend income suggests you might be leaving something out here too.

Not very compelling when you compare dividend income over the last 5 or 10 year period between crypto and stocks. The point is that just having an asset that generates yield based on speculative investments is not that useful, and it’s the sort of zero-sum game that everybody is mocking Terra and crypto for.

> 20% returns as you see in Terra is probably ponzi-like, but ETH protocol is not promising free yield for doing nothing, or doubling or tripling your investments.

The protocol isn't promising anything. The people promoting it are, however.

> > You do in fact have to deal with legal requirements - it’s a requirement for converting into useful money and tax evasion has serious consequences in most of the world.

> I never said otherwise. Buyer can purchase the DAI on a KYC exchange that is regulated by their government. The beneficiary can report taxes on income and capital gains as they do with other assets.

Here's what you said: “without the beneficiary needing to set up a USD bank account or disclose private data to a third party.” How is that true if you're not breaking KYC?

> > Replacing Western Union has some appeals but it’s not enough to justify the returns which blockchain salespeople have been claiming, especially when the established player can cut margins easily and blockchain users need a fairly large just to compensate for currency conversion and increased risk.

> This is now a subjective argument about what you feel is better or more valuable. To some people, reducing commission for global transfers to 0%, with 30-60s finality and better privacy features is all desirable and valuable.

It's an economic fact, not a subjective argument. If you're just cutting out a middleman, you're not going to be able to make a greater return than the middleman is currently taking. You could argue that this will unlock some kind of previous unviable economic activity which will dramatically increase volume, but that's a separate argument and needs some data supporting the idea that it's probable at a level which would provide the promised returns.

> reducing commission for global transfers to 0%,

You surely meant 0% plus the transaction and currency conversion fees on both ends, right?

> The protocol isn't promising anything. The people promoting it are, however.

Anchor's whitepaper and protocol promises ridiculous yield on USD pegged assets, and it is the basis for the entire Terra/Luna crash.[1] Nobody designing the ETH protocol is claiming that it provides USD pegged yield or will double or triple your investment. The closest thing written into the protocol is a return on the native ETH token for block producers - miners or stakers - receiving block rewards from the protocol and tips from user transactions.

Ignore the laser eye Michael Saylor's of the world who make ridiculous claims about these protocols that are unsubstantiated - try to look at the protocol design and spec.

> Here's what you said: “without the beneficiary needing to set up a USD bank account or disclose private data to a third party.” How is that true if you're not breaking KYC?

The sender sets up an account, the receiver only needs a 24 word seed phrase to receive the tokens. Maybe the receiver will need to declare this as a gift or income depending on context and their country's tax laws, sharing details with their government, but they are not having to share details to PayPal or another private company that would typically facilitate an international transaction like this.

> You surely meant 0% plus the transaction and currency conversion fees on both ends, right?

Depending on the use case, there may not be a fiat exchange. Another user might be happy to receive 1000 DAI, in which case there is no centralized exchange needed.

The transaction fees can be minimal through L2 - in cents - and are different than commissions and take-rates of processors like Western Union or PayPal. In ETH, most of the fee is burned, reducing total supply and providing value to the entire network. Another part of the fee is a tip to the block producers, which in a permissionless system can be any entity with enough capital at stake. Finally the fee is a fixed amount, not a percentage of total value being sent. Transaction fees are not perfect - a fee-free permissionless network is not possible - but some will find it preferable and more fairly distributed worldwide compared to how private payment processors currently extract rent.

[1] https://www.anchorprotocol.com/docs/anchor-v1.1.pdf

You keep missing important points of ops argument. maybe on purpose?

e.g. You claimed receivers would not need to 'disclose private data to a third party' but as op pointed out the receiver cannot get the DAI into the normal financial system without KYC.

Only if they need to exchange to fiat, as I said previously.

> Depending on the use case, there may not be a fiat exchange. Another user might be happy to receive 1000 DAI, in which case there is no centralized exchange needed.

It’s true though, if you want to use the traditional financial system you are basically stuck uploading your photo ID to a private company’s website and hoping they won’t leak it. In many cases users are forced into this - paying taxes. We can only hope this won’t always be the case.

Im sorry but a high horse for betting on the slave traders vs betting on crypto. NUP. Money breeds money. the whales (1%ers) on index funds are doing it investing in the companies that are destroying the world. Displacing millions of people a year, causing corruption and famine, funneling offshore into tax havens.

Crypto has a LONG way to go before it gutters into the dirty tactics of the stock market.

Why you think someone trades the same stock 10 times per day? (i.e day trader). Isn't that greed? The advantage of crypto/defi done right is that at least you have some transparency and your positions won't be put on hold or liquidated arbitrary by someone like it happened on LME case or GME

Even if the on-chain stuff is transparent, there’s much less transparency in crypto/defi exchanges than any traditional investment firm.

It's ego and over-confidence. People think they can outperform the S&P500. They can't.

By definition, 50% of capital outperforms the SP500, which is an average.

What the Buffett bet was all about is that you don’t know WHO will outperform, and with fees being a net-drag, a basket of hedge funds will on average underperform due to the average of them being, average, and then negative due to fees.

Nope, nope, nope that's not how statistics works. Median != Mean

Also volatility matters, like a lot.

Median is obviously not mean. I never mentioned median anywhere. Where is the median of market return relevant here?

Yes, volatility matters and is why people generally prefer to get the lower volatility average market return. But that’s not very relevant to many peoples claims on here that SP500 outperforms most capital, which is obviously incorrect.

Not OP but I think the 50% of cases above or below only applies if you refer to the median (https://en.wikipedia.org/wiki/Median). If you refer to the average, or mean, the distribution could be different.

But I’ve never mentioned median. I’m stating that by definition, 50% of $ outperforms SP500. Sure that could be skewed, with a median underperforming, where in the extreme 1 participant has $20T outperforming and the other 1,000 collectively have $20T underperforming. But on average your $ has a 50/50 chance of under or over performing total market (and thus basically SP500) by throwing darts at a board.

But you mentioned average (mean). You can have the same average but different median, and only if you would talk about median it would be guaranteed that 50% of the cases are above and 50% under.

In the case you mentioned, with an average, there might be extreme outliers that make the average different from the median, thus rendering the assertion that 50% of the cases are above the average and 50% under false.

Thanks. I couldn't not bring myself to explain what a median is.

Which definition do you mean? SPX is a cap-weighted index, but that's very different from "50% of capital outperforms the index".

No point dropping such a useless comment without elaborating. This is effectively gatekeeping and I wouldn't be surprised if it's against HN guidelines

Yes they can and many do. It’s just not likely if you’re actively trading.

Of course some do, but there are just as many (and a bit more) that under perform. The average performance relative to the index matters.

Yes, but that’s not what the comment I’m replying to said. There seems to be some pervasive belief that absolutely no one ever beats the S&P500 index in the long run, which is obviously nonsense.

There is a chance to beat the market, just as there is a chance to beat the house.

Absolutely no normal person beats it except by dumb luck

If I spent the last 20 years allocating 90% of my savings to SPY, and the remaining 10% in a large-cap tech focussed index, I’ve outperformed SPY. Is that dumb luck or is it a pretty trivial implementation of a sensible investment thesis?

There’s nothing magical about some committee-curated collection of 500 US-only equities which means it outperforms every other option ipso facto.

If you were talking about a normal person actively managing a portfolio I’d be more inclined to agree.

Which are broad index funds?

I put a tiny amount of my savings in a pharma ETF last year and got destroyed almost as much as crypto. I hope it recovers soon.

Non industry specific

Total market / All world are very common.

Perhaps they knew what they were doing just as startup investors take a calculated risk that their doggy social networking site might not be the next big thing?

"calculated risk" is doing a lot of heavy lifting here. "Wishful thinking" is the more likely culprit

Sam Altman invested in Worldcoin. And VC’s are investing in crypto startups as well.

Is there a YC partner that has never invested in a crypto company? I would love to know.