I want to invest for long term wealth, not short term money. I see everywhere that apparently, you can just invest in the S&P 500 and forget about your money and it will grow like crazy by the time you retire! But if that was the case, everyone would be doing it. I dont buy that its as simple as putting money in and leaving it.. Whats the catch?
Whats the catch? Investing in SPY and forgetting about it for X years
byu/West-Amphibian-2343 ininvesting
Posted by West-Amphibian-2343
21 Comments
Everyone is doing it. There’s no catch. Historically s&p goes up overtime. It may recede some years but it’s completely normal. If the market were to have a massive crash, I think we will have far bigger problems to deal with than not having any money.
There is no catch. S&P 500 is how you retire early. Many people don’t invest because either they don’t have the capital to invest or are not educated in finance enough to know about it. Or they simply don’t want to invest
Everyone IS doing it. Most people invest most of their money in index funds through IRAs and 401ks. Like, almost everyone.
no catch.
however, “grow like crazy” is a bit of an overstatement, if you factor in inflation.
But it’s definitely much better than storing it under your pillow.
There are also other places/indexes to invest your money. S&P 500 is fine. But also educate yourself as it is YOUR money.
15 ish years ago I moved money into a tech fund. It worked out very well. Recently I made another move that’s working out too. How long will it work?? I’ll monitor the return and change accordingly. Again, there are other ways to invest.
Might be big Illuminati orchestrated crash one of these days. That’s what some think at least
The catch is you need patience and a strong stomach for stock crashes
1) it takes 40 years .. most people want to get rich when they’re young and healthy
2) even if you’re willing to wait the S&P 500 may not move or make any money for 10 years and you’ll get fed up and try something more risky.
The S&P 500 returned 10%+ annualized for the last fitfy years.
The “catch” is that there are large draw-downs and lengthy underwater periods (during which many folks do the wrong thing: sell when they should be buying).
For example, the S&P was *underwater* for more than six years from Sep 2000 until Nov 2006 during the dot com crash.
You can reduce the draw downs and shorten the underwater periods by holding uncorrelated assets like gold, t-bills, and bonds.
I left my job in the US in 1995 and moved to Europe. I had $60k in a company 401K. It was converted to an IRA and I did not add to it or touch it until I retired in 2019. It was invested mostly in the S&P 500 but also some in Mid and Small caps and some in a money market account. In 2019 my $60k IRA had grown to $475k. Looking back, I wish it all had been invested in the S&P 500. Just sharing my experience for what it is worth.
The catch is you can’t panic sell when the stock market crashes and you lose more than half of your net worth. For example: 1929, 1973–1974, 2000-2002, 2008.
Next 5 prob 10 years, gold and silver will outperform s&p by a large factor.
So long as the fed keeps printing money like monopoly and so long as govt continues their massive deficits, this will be true .
Can’t quite understand why people would choose an index fund.
thats what everyone does. the catch is pe is at all time highs, many think it can drop signifigantly, but no one know when, or how or what
The catch is that a lot of people freak out when the money they put in shrinks by 20-30% every decade or so and by 30-40% every other decade. They freak out even more when the amounts get large.
Market pullbacks happen most people think they can deal with it but in truth they can’t.
I know a pullback is coming as does most everyone else. But no one knows exactly when could be next year or the after but it will happen. It’s really hard seeing your balance drop by as much as you make in a month. Even harder if it’s as much as you make in a year.
Don’t do stocks until you learn more.
Ill explain anyways. The sp500 is the top 500 most valuable companies. They print money. Its designed to grow. Now go read about the companies under it since never invest in things you dont understand.
The catch is you get rich… in 20 years after you have developed a frugal mentality and no longer desire the flashy things that getting rich quick beget.
Nobody can see your financial freedom the way they can see a Lambo and a Rolex. The best part is. You won’t want those after a while anyway.
Knowing you and your family are set is the reward
Read The Simple Path to Wealth by JL Collins. I’m not saying you need to blindly follow the book, but he makes a lot of good points and covers 95% of what the average investor needs to know
Head over to r/Bogleheads and learn a bit about mutual funds. SPY is the 500 top companies, but there are other mutual funds that perform better.
Vanguard mutual funds is what you want. You diversify and split the investment into a few different markets. Say, US, international, tech, finance, etc. and so if tech has a bad year, but finance has a good year, you’re investment is safe, and when tech bounces back you’re doing great.
Many hundreds of millions of people have done just that.
It’s about finding a way to get a risk adjusted return that can consistently outpace inflation and doing enough diligent savings to have some spare funds from your working years to sustain in your non working ones and making use of various government tax benefits to encourage retirement planning.
That’s really about the size of it at the 10,000 ft level.
The catch is you are betting on America or American exceptionalism
Just about every 401k has exposure to the S&P
The catch is the entire thesis is based on “historically it went up” which is a weak thesis.
Especially when other markets have gone down and stayed down for a long time (e.g. Japan took 30 years to recover its high, China is still below its 2007 high).
They will tell you “oh you are buying companies” but the thesis is essentially the same as crypto i.e “line goes up”. And line goes up until it doesn’t.
You are going in with no downside protection. You dont’ even know what the downside is. And when you are 50% down, they’ll tell you to DCA i.e keep the faith and dump more money into the fire. At this point, you belong to a cult.