I'm interested to hear people's opinions. I have read the Boglehead guide and have immersed myself quite a bit in the markets, investing, and personal finance. I totally understand that in looking at the past, US stock market indices have been more or less the best performers over time, and if you extrapolate the past to the future, it's a no-brainer for a young person to get as much money in the market as soon as possible. But on the flip side, one of the very first lessons of playing in the stock market is that it is forward-looking, and the past has no bearing on the future.
So for a young person investing today, there will likely be corrections/crashes, maybe a recession or two, and maybe even a depression or two before they retire. But prevailing logic is to just hold tight, as the stock market will eventually rebound from those events and WILL rise again, and in the end, growth will be recognized.
But is perpetual growth of business' market cap beyond inflation levels really possible forever? On a finite planet, that seems highly unlikely. That doesn't necessarily mean THE ECONOMY IS DOOMED, or HERE COMES THE CRASH etc. - and maybe it's still 100, 200, or 300 years from now, but does anyone actually believe that business can just grow forever and that stock market index returns over long periods are going to continue at the rate we have seen in the relatively young history of the market?
There seem to be some embedded risk in holding stock market indices, even if you hang tight and ride out the crashes. A few examples:
-Finite supplies of fossil fuels. Fossil fuel usage correlates very strongly with economic growth.
-The global population (aka product markets) have grown substantially since the stock market's inception, likely contributing strongly to the growth. Population analyses do show that growth will continue until 2050-2100 or so, but it is yet to be seen what kind of buying power the additional people will have.
-The stock market has seen some incredible developments of technology that have changed the way just about everyone lives, and has really changed the entire planet. There will likely be more innovation coming, but did we already hit the "low hanging fruit" of invention, and should we expect slower progress from here? Have we already depleted the "low-hanging fruit" of easily retrievable materials and fossil fuels that made innovation so easy?
-When do environmental issues really start affecting the country/world to a point where we demand regulations and policies that slow economic growth for the sake of a more sustainable/healthy planet? There are some very serious problems with current methods of agriculture, depletion of fisheries, freshwater use, land use, fossil fuel use, and raw material use being unsustainable. Do we "tech" our way out of those problems, or do they really come to a head at some point? (Though it dominates the media, "global warming" is FAR from the only environmental issue we face. It doesn't even need to enter the discussion to take this stuff seriously)
Obviously this is a massive topic and there are a million points to make supporting either side. I'm curious where you all stand with this. Bullish? Bearish? Undecided and see both sides of the coin like me? Understand the risk, but realize there's really nowhere else to put your money for possible substantial gains? Do you see different risks in the different indices (Total stock market vs. S&P vs. Blue Chips vs. Large Cap vs. Small Cap etc.)?
Submitted April 12, 2017 at 04:06PM by JJMorse292 http://ift.tt/2oA2dGx
