Why do people in developed countries still fall into the "debt trap" ?

tomar

Ad Honoris
Jan 2011
14,030
I think I'm going to wait for the market to drop and then buy lots of cheap index funds - but I'm a lot more fiscally conservative than many. Some people prefer a more active investment strategy.
If you expect the market to drop you can "sell short" or use "put" options.... i.e make a bet on the market falling (as opposed to the usual bet that the market will be rising)...
 

tomar

Ad Honoris
Jan 2011
14,030
Investments must be made in the long term. You don't invest your capital and expect a big return every single year, and should not be surprised if some years produce a loss. Maybe share price drops can be regarded as chances to top up, while times of strong growth may be a time to cash in your profit before the inevitable drop.
Yes you do... if you invest in a stock that does nothing for you for a year (which is a reasonably long period) you've lost time and money (you could have invested your money in a stock that performed better and gave dividends)... In the case of BH it returned nothing in a year that saw a strong economy and strong DJ.. that is rather worrying

As for the "long term" theory it does not always work... The Nikkei (japanese stocks) is still BELOW its 1991 level (almost 30 years) and well below its peak in 1989

In 2011 it was at about the same level as in 1982, and 80% below its peak
 

Futurist

Ad Honoris
May 2014
22,722
SoCal
Student loans.
Yep, and as Bryan Caplan says, a lot of education in the West nowadays appear to be signaling as opposed to having intrinsic value. Basically, it's telling prominent people in the West (the elites, basically) something along the lines of "Hey, look at how smart and how much of a work-horse I am!"
 
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fascinating

Ad Honorem
Dec 2011
2,415
Yes you do... if you invest in a stock that does nothing for you for a year (which is a reasonably long period) you've lost time and money (you could have invested your money in a stock that performed better and gave dividends)... In the case of BH it returned nothing in a year that saw a strong economy and strong DJ.. that is rather worrying

As for the "long term" theory it does not always work... The Nikkei (japanese stocks) is still BELOW its 1991 level (almost 30 years) and well below its peak in 1989

In 2011 it was at about the same level as in 1982, and 80% below its peak
On the other hand, BH is 30% higher than it was 5 years ago, it has tripled in the past 10 years, and is at least 40 times as high as it was in 1991.
 

tomar

Ad Honoris
Jan 2011
14,030
On the other hand, BH is 30% higher than it was 5 years ago, it has tripled in the past 10 years, and is at least 40 times as high as it was in 1991.
30% over 5 years is not that much..... Consider that real estate prices in the US have increased more than that in many places in the same period... For example in Florida the median price went from about $160K in dec 2014 to about $260k now (a 60% increase)... So had one invested in a florida property 5 years ago and rented it out (roughly 10% yearly return on rent), one would have doubled their investment vs only 30% in BH..... Warren Buffet did not get filthy rich by distributing money to the likes of me and you....

Also the Dow Jones was roughly 18 000 5 years ago vs almost 28 000 now, a 50%+ difference.... So BH performance is lousy