i was listening to a podcast and the guy said something that made sense. if you put 100k into the s&p and it does 10% in a year, that’s 10k. even 15–20% is like 15–20k. that’s not really life-changing money. yeah it’s solid growth, but it’s not flipping your lifestyle.
so it made me wonder… if the “safe” returns don’t really move the needle in the short term, why do most people invest so conservatively? is it just about protecting wealth and compounding over decades or are people too scared of riskier plays?
If 10% returns aren’t life-changing, why do most people invest so conservatively?
byu/savingrace0262 instocks
Posted by savingrace0262
32 Comments
Better to make little money & have a lot of money long term, than try to make a lot of money & end up with no money long term
Its about compounding over decades
Compound it over 20 years and compare that to a checking account… then add additional monthly contributions.
Most people don’t invest for significant gain in a year. Most people are looking to build retirement through consistent long term investments and compounding interest.
Compound interest my guy. 10% over one year isn’t life changing. 10% per year for 30 years can be.
And yes, risk abatement. If it’s your retirement or something, gambling on risky plays is a good way to live off social security when you hit 65.
A 10% return might not be life changing, but a 10% loss can be devastating. People invest conservatively because for most it’s better to build up slowly over many years vs risking and losing everything on a hail mary.
Most people aren’t in it for the upside of 10% annualized returns. They are in it for the massively mitigated risk when shooting for something reasonable like 10% annualized returns on their savings.
Conservation of capital
100 dollars profit is way better than 100 dollars lost.
Because it is life changing. It’s just later in life. You realize that saving conservatively and investing conservatively produce massive safe results when you go to retire. 10k a year in savings at 10% growth a year for 45 years is 7.5 million dollars.
Don’t treat the market like a slot machine, but it is possible to find outliers.
10% return for 1 year? Nothing. 10% compounding return for 40 years? Generational wealth (more or less).
1. Because 100% losses are life-changing
2. 10% compounds over time. At 10%, your initial investment doubles after 7-8 years and would ~100x over someone’s lifetime of investing (1.1 ^ 48).
3. 10% is significantly better than the average rate of inflation, so at 10% per year, you are not losing money.
What commoner has 100k to risk on a potential 10x penny stock? Common folk have to work for a living and therefore invest for retirement.
100k at 10% for just 10 years it turns into 250k.
Doing this for every year your alive will turn into life changing amounts of money later on.
Rule 1 don’t loss money. Rule 2 don’t forget rule 1. If you can find a higher SAFE return do it. It’s hard to do. Higher risk higher chance to loss money
Because the math behind “all risk” or “no risk” is pretty hard to explain to people.
If anyone could pick a 10x or a 20x on a 1 year time horizon everyone would. But you can’t. And doing that 2, 3, 4 times in a row? Chances decrease probably exponentially.
Most people don’t want to lose the capital they have worked hard in the first place to earn to put into investments. So they balance the risk-reward spectrum.
If you can pull off 10% consistently, and couple that with continuing to add new capital which then also achieves that 10%, it does become a solid amount. I’m at a point now where I can take a 5% position in a single security which may 10x, and that would move the needle quite a bit; the flip side is if I lose it it will sting, but it’s not going to cost me everything.
Saying meh to 10% gains a year? It’s a long game, 10% a year is a gift and not a guarantee. That’s doubling your money in about 7 years, pretty pretty good
Sounds like the podcast hosts have an agenda. 10k isn’t enough to live on so you need more than 100k when you go into retirement. 10% of 1 million is 100k which 100k per year every year can be life changing money. You can’t guarantee 10% every year so you probably need multiple million to be able to withdraw 100k annually. The issue isn’t the rate of return, it’s the principal balance.
If someone guaranteed me 10% returns forever i would take that in a heartbeat. 10% compounding would be life changing. Are majority of ppl here 20 years old and just looking to find the next nvidia?
When you earn $100K in one year on a million you’ll think that’s pretty good.
I aim for 2-3% per week with my meme stock portfolio
Imagine if you play lottery tickets or go to a c4sino!!!
Eh. Investing into an etf or broad index fund is inherently designed to preserve wealth. Creation of real wealth is created by concentration. Problem is, most people arent portfolio managers, so they settle for etfs. Still better than a bank.
Year 1? True
Year 2? You get 10% on that 10% you received in Year 1.
Interest on interest (also known as compound interest) is incredibly powerful.
Because compound interest exists. This is what 4% looks like in 5 years:
100,000 -> 104,000 (4%) -> 108,160 (8.1%) -> 112,486 (12.5%) -> 116,985 (17%)
See the trend of growth? In 2 decades, you double that money, by doing nothing. The increase for 10% is even bigger. This is why horizon matters. The longer the horizon, the greater the return is on conservative investments.
This is why you invest conservatively for part of the portfolio.
The other portion could be for riskier investment. A “mere” 10k isn’t alot, but it’s better than taking a loss.
I’m looking for it to be life changing 30 years from now not next year
How old are you? This seems like something a 17 year old would wonder about. The money compounding over decades is where the gains are. That $100,000 you mention at 10% annually is $259k at the end of 10 years, and $673k in 20. That $100k invested could be worth more, it could also be worth significantly less. Almost nobody, including the smartest investors in the world with advantages you will never have beat the market over long periods of time. If your goal is life changing money in some very small amount of time, why not put the $100k in lottery tickets?
Because most people doesn’t need to have life changing money, most people that has pareoney to invest is already living a comfortable life, they just need to compound the profit to see if they can live a bit better.
Only poor people always think about life changing money and take too much risk to a point they basically just gambling and lose everything and never accumulate any wealth
If you’re going to gamble then gamble early
Because there is no get rich quick scheme that works. There is a great get rich slow scheme that works like a well-oiled machine. You just crapped on it. That is why it continues to work.
Also utility value of money, but if time value of money isn’t making sense, then utility value of money is going to be a challenging topic.