Personal Finance

I agree with most of what you're getting at, but want to make a few clarifications where I think you've used loose language.

They can help in the short term but in the long term, they are a waste of money

You missed one glaring benefit of bonds, though you hinted at it.

One of the main benefits of bonds is that they're largely uncorrelated to stocks, and often negatively correlated (i.e. bonds often go up when stocks go down). So if you're regularly rebalancing between stocks and bonds, the net impact should be a reduction in volatility (risk) over a long period.

Historically this strategy has underperformed 100% stocks over most periods, but that reduced volatility can also be a psychological benefit and reduce panic selling in a downturn. And apparently a lot of people choose to sell during downturns, so the general advice to include bonds in your portfolio is still likely good.

However, a 60/40 split is too conservative for most investors. I think most people will see some benefit in lower risk with 10% bonds, which also doesn't cause much of a drag on investments. That said, I'm 100% stocks for now, and I intend to keep it that way until I'm closer to retirement, but I'll always advise others to put some bonds in their portfolio.

The only use for 401ks is to take advantage of any matching policies

This language is way too strong for me. The (over simplified) priority should be:

1. 401k match
2. HSA
3. IRA
4. 401k w/o match
5. Taxable brokerage

The 401k offers incredible tax benefits, but so does the IRA, and the IRA gives the investor more control. However, I will always recommend investing in a 401k beyond the match, but I'll recommend an IRA to take priority.

Just go down the list with the money you can afford to invest. Don't avoid investing in a 401k, but don't prioritize it until you exhaust other tax advantaged options.

I couldn't get past the pay wall to read the article buy I don't put much stock in people trying to forecast the future. They have no clue what the future brings.

With that said, I don't think were seeing any more turmoil than at other points in history. If you look back at history there have been major disruptions about every decade (give or take) with more minor static in between. Covid, financial crisis, 911, gulf wars, oil embargo, Vietnam war, Korean war...etc.

People that thrive over time have their investments diversified and adjust as circumstances dictate. Setting and forgetting may not yield optimal returns but you'd probably do just fine long term. The key phrase is long term. I'm talking 40-50 years not just a few years.

Can't read this specific article, but I'll point out that the "4% rule" and similar strategies mostly come from historical analysis of only the US stock market and US treasuries. The 4% rule really only works in the US, Canada, and Australia - developed nations that weren't destroyed by WWI and WWII. The rest of the world has had "once in a generation" catastrophes every 20-ish years, which is just about once every generation. And not little micro-catastrophes like Covid or 2008 that recover after a couple years.

If you've only been saving since 2019, that is approximately no time at all. They may tell you that, on average, the stock market returns 8-10%/year, which might make you think that some of your savings should be up 40%, but that's not how it works. (US) stock market averaged 8% after inflation, 10% including inflation, through the 20th century, but its actual, annual return is more like 10±12%. You need a lot of years to average out that much variability.

The financial industry makes its money on fear. On people scared to make their own decisions, so turn to a professional; or people scared of the future so they do desperate, emotion-driven trades. The financial media are there to propagate that fear. Add to that going into an election year with a Democratic President, and you're going to see mountains of negative economic sentiment and outlook.

Welcome to a life of investing. I started investing in '08 and everything that was a once in a generation crash. And in '10 when the market recovered, so many thought it wasn't real. And as the market kept going up '11-'15, so many kept claiming the crash was coming so it was smart to change your investments. I saw so many run for the hills in the dips in '15 and '16 and then completely miss the run up over the next few years. I have some colleagues that panicked following the COVID19 dip, and never got back in and missed the recovery and new all time highs.

The truth is your entire lifetime of investing, it will always feel like this time is different. This time it's obvious we're about to crash or it's obvious we're about to go on a run or it's riskier than it's always been. I'm not going to tell you the market is going to be up in the next year, or next five years, or next ten. But since the late 1800s, a great strategy has been to just keeping investing over time and not trying to time the market.

Initially, your swings of hundreds of dollars will keep you up at night, but if you keep at it, eventually those swings will be in the thousands or tens of thousands and you'll be able to handle them better. I can't promise you you'll win with this type of set it and forget it strategy, but there has yet to be a period of a couple of decades in US History than you haven't ended up a winner if you have that long term horizon.

You are looking at it the wrong way, Because the market has traded mostly sideways for a while that means that the market is underpriced compared to what it should be. That is when you should be more willing to invest. I know it seems counterintuitive. This article explains the concept better than I can.

Since ~2019, the SP500 has gone up 45%. That is the equivalent of a 8.5% compound interest rate or 11% simple interest rate per year. If you're portfolio accounts are under performing that by a big margin than you might want to switch Funds and/or account providers.

There are always gloomy articles and headlines meant to convince you to sell. Because they want to buy your stocks on the cheap.

Control what you can control.

I'm a risk-averse person, so I've always favored reducing expenses. Definitely no debt of any kind at that point. Assets in good condition: hopefully 2 relatively new cars (unless my city gets better urbanism over the next few decades), a house, relatively new roof, appliances, etc. No major repairs or renovations expected, just basic maintenance for a solid 20-30 years.

Between my mortgage, student loans, and car payment today that's about 60% of today's budget that I won't have to worry about in retirement. That just leaves food, utilities, clothes, maintenance costs, etc. If things go well I will be able to live in relative luxury (eating fine food at restaurants, traveling, etc).

From there, the performance of my investments and state of my savings (along with my health) will determine my lifestyle. Maybe I end up spending my twilight years in my house catching up on the backlog of books, videogames, and movies I never got around to. I can live with that.

Things are down right now, so of course your balance will reflect that. If you keep investing on a regular basis, the dollar-cost averaging will come into affect over time.

I didn't read the article, but it seems like they are saying that the way money works is changing. Money, stocks, mutual funds... it's all the same as it has always been. The risk/reward can change, but there's no way to predict that.

Yes, I was wondering about the same thing. However, I haven't been active in relevant communities since a few months after the covid crash. So, I don't know "what's up" with the market.

But I think ETFs are still valid. Due to the once-in-a-lifetime events of the past years, I think it's just many companies having difficulties and a similar amount of other companies doing great. Hence the sideways trend. Or its just the rich controlling the trading being more conservative and buying out everytime they can.

The first part is true, but most people have decent options on their 401k. Usually there's an S&P 500 fund with a low expense ratio (<0.10%), and often an international fund with competitive fees (<0.20%). They usually also have expensive funds, so don't pick those and instead pick the lower cost index funds. If your desired split is expensive in your 401k, you can balance it in your other investment accounts like an IRA.