The Money Mustache Community

Learning, Sharing, and Teaching => Investor Alley => Topic started by: K-ice on August 25, 2015, 12:41:26 AM

Title: My SO says investing is gambling. Help
Post by: K-ice on August 25, 2015, 12:41:26 AM
So my SO says investing is gambling.

There are some bad family experiences and most of their success is in RE so SO's not that interested in investing in stocks, ETF etc. RE is good, and we have some, but it is not that passive to manage.

We worked hard to pay off our mortgage and now I would love if we could put that mortgage payment towards saving AND investing.

I have been reading a lot and I have started investing with Vanguard. VAB, VXC, VCN (I'm in Canada but that shouldn't matter other than me saying "sorry" more than most ;))

I explain Vanguard ETFs are like a big basket of many stocks or bonds. They are like mutual funds but with lower fees. I explain that it is part of a "system" of balanced allocation and it is not like everything is in 1 stock. The average annual return is about 7%.

SO says gamblers use a "system" too.

I try to say, we don't need to time the market but just invest a bit each month and let it grow long term. I try to explain we are better to hold certain things in our tax sheltered accounts & we should be maxing those out.

Some days SO says "Sure, just do what you want with my money." But I don't feel a lot of faith or understanding.

I find it hard when SO is not interested in reading one tiny web page while I am dissecting all of MMM, Canadian couch potato & recalculating my own scenarios using  Antonacci's publication.

My questions are:

 What advice do you have to help convert the non-believers?

Do any of you have different investment strategies than your SO?
(Maybe SO should hold more bonds & less equities.)

Has any one article really stood out as an "ah ha" moment?

Thanks!



Title: Re: My SO says investing is gambling. Help
Post by: milesdividendmd on August 25, 2015, 01:05:21 AM
It sounds like you are up against a firm belief. That's a tough nut to crack.

Logic probably won't be helpful in this instance.

That being said real estate is great, but traditionally had not been as well compensated as investing in stocks.  One question I would pose is why SO thinks investing in stocks gambling? And why is investing in real estate not gambling? In both you are risking principal for expected returns (you just get paid better and take less liquidity/idiosyncratic risk with stocks.

But the real concern is the part where he says "just do what you want with my money."

That sounds very unhealthy to me and like a much bigger deal than investment strategy differences. Perhaps seperate bank accounts/ finances would help skirt these ownership issues, but I don't know. 
Title: Re: My SO says investing is gambling. Help
Post by: mrpercentage on August 25, 2015, 02:45:22 AM
Equity does swing all over the place and is uncomfortable for some. I think income would help. Income from government bonds or from conservative dividend fund/index. I would suggest having them actually payout so she can see the money coming into the bank account. Its hard to argue at money being thrown at you. Maybe a vanguard dividend index. That shouldn't kill you on taxes. You will be taxed for sure but seeing results helps-- some investing is better than none.

Best of luck. As it happens all the yields were just bumped up from the recent equity loss. Good time for dividend purchases.

Title: Re: My SO says investing is gambling. Help
Post by: Adventine on August 25, 2015, 04:50:57 AM
But the real concern is the part where he says "just do what you want with my money."

That sounds very unhealthy to me and like a much bigger deal than investment strategy differences. Perhaps seperate bank accounts/ finances would help skirt these ownership issues, but I don't know.

Agreed. This points to trust issues with you, OP. Not just issues with the concept of investing in stocks and bonds.
Title: Re: My SO says investing is gambling. Help
Post by: fb132 on August 25, 2015, 04:59:00 AM
There is not much you can do, he won't listen. However, he doesn't seem to care what you do with his money, so if you did invest, you can show him in a few years that you were right, but until then, you can't convince him of anything. He is 100% convinced that the stock market is gambling.
Title: Re: My SO says investing is gambling. Help
Post by: tiger002 on August 25, 2015, 06:24:10 AM
Maybe if you can show him that long tern, stocks have always gone up that could work. In a way, investing is kind of like gambling, but in this case, you have the mathematical advantage, not the house.
Title: Re: My SO says investing is gambling. Help
Post by: innerscorecard on August 25, 2015, 06:34:15 AM
He sounds not to different in kind though of course different in degree from many of the diehard indexers on this very board.
Title: Re: My SO says investing is gambling. Help
Post by: Miss Prim on August 25, 2015, 06:35:44 AM
I feel for you because I have somewhat of a similar problem with my husband.  He is okay with investing, but he insists on opening every statement and then complains if the funds drop!  I have to explain every time that the market goes up and down, but consistently over long periods of time goes up.  It gets to be annoying! 

If your SO lets you handle the investing, then just do what you need to do and try to ignore the remarks.  I sometimes think my husband  likes to complain just to argue as his parents fought all the time.  It's just something he is programed to do.  It's just noise!  Don't take the bait and keep doing what your doing. 

                                                                                                Miss Prim
Title: Re: My SO says investing is gambling. Help
Post by: Bob W on August 25, 2015, 07:06:34 AM
He is of course correct to a degree.  Stocks are not like they were in the past where they paid a decent dividend.   Real estate is a surer bet as you are running the business.   That said you might turn him on to some decent books.  Although I doubt he'll read them.   Good luck.
Title: Re: My SO says investing is gambling. Help
Post by: I'm a red panda on August 25, 2015, 07:23:29 AM
If your SO has a sincerely held belief against gambling, I would say that investing in the market is in conflict with that.

There isn't much to you can do to change the fact that returns are not  guaranteed. You will likely end up better off, but you might not.

I'd recommend by starting out with some safe investments, like a CD ladder with some of the money and more moderate ones with the rest, and ease into the idea of it.  You will ALWAYS lose to inflation if you hold cash- no gamble about it.
Title: Re: My SO says investing is gambling. Help
Post by: poorboyrichman on August 25, 2015, 07:31:05 AM
All forms of investment carry risks. This should form the basis of your argument if you are are open to debates, but don't assume you can change someone's mind through intelligent discussion. An individuals beliefs are formed by their unique understanding and experiences which will be remarkably different from your own. Debating money with a partner can be painful and fruitless. SO is not in charge of your finances, nor are you in command of theirs. However that does not mean you have to ignore her wishes/concerns.

The best way to change SOs opinion is to lead by example. If SO is comfortable, start off investing a small amount of your personal savings on a regular basis while withholding the rest of your savings in cash. The opportunity cost of withholding your capital at the early stages will be low. Invest 10% of your savings, whats the difference between 7% ROI on $1000 and $10,000?

Hint: Not much. Adjust to figures that work for you.

Hopefully over time you will be able to demonstrate a comfortable return and SO will see the benefits of your approach. Of course, we could be in for a lost decade of economic decline and you will look like a fool as her RE outperforms your plans wildly. It's a possibility. Just saying.
Title: Re: My SO says investing is gambling. Help
Post by: hodedofome on August 25, 2015, 08:40:05 AM
We are hard wired to believe that for things we don't like, we automatically put a higher risk on them. For things we do like, we automatically believe they are lower risk.

For instance, someone who loves airplanes will believe that flying a personal aircraft is low risk. Someone that doesn't like flying will think it's very risky.

Your SO comes from a family that doesn't know much about stock investing, or just doesn't like it for some reason. That means he/she will automatically believe stocks are very risky (they can be if you don't know what you're doing). I came from a family where stocks were treasured and held in high esteem, spoken about at Christmas dinner even, hence we have a lot of active investors in my family.

SO is comfortable with real estate because they have experience with that, hence believes it is low risk (it's not, if you don't know what you're doing). RE can be just as risky as stocks.

I would suggest having SO read some books on stock investing from Bogle or Malkiel, something geared for beginners. If SO won't even do that, then good luck. I know plenty of high earning professionals with all their money in bank accounts, because they don't know anything about investing and are not comfortable with the risk.
Title: Re: My SO says investing is gambling. Help
Post by: bobsmiley on August 25, 2015, 09:10:50 AM
in gambling, anytime someone profits it comes at the cost of someone else's suffering. That's not the case with stocks, when you win it's because the company won and everyone prospers or fails together - it's a team effort. You CAN gamble in the stock market by trying to profit from opposite swings but index investing is not gambling even though you may lose money.
Title: Re: My SO says investing is gambling. Help
Post by: BarkyardBQ on August 25, 2015, 09:22:06 AM
in gambling, anytime someone profits it comes at the cost of someone else's suffering. That's not the case with stocks, when you win it's because the company won and everyone prospers or fails together - it's a team effort. You CAN gamble in the stock market by trying to profit from opposite swings but index investing is not gambling even though you may lose money.

That's not quite true. When someone buys a stock, someone else had to sell. Someone is either sacrificing gains or taking a loss. This is why index funds are optimal, and the least risky way to invest, but anything that begins with 'risk' is a gamble.


OP, maybe you should work with your SO and establish an investment policy that works for both of you. How much to invest, what to invest in, and how to spread your assets between investing and real estate.
Title: Re: My SO says investing is gambling. Help
Post by: milesdividendmd on August 25, 2015, 09:32:00 AM

in gambling, anytime someone profits it comes at the cost of someone else's suffering. That's not the case with stocks, when you win it's because the company won and everyone prospers or fails together - it's a team effort. You CAN gamble in the stock market by trying to profit from opposite swings but index investing is not gambling even though you may lose money.

That's not quite true. When someone buys a stock, someone else had to sell. Someone is either sacrificing gains or taking a loss. This is why index funds are optimal, and the least risky way to invest, but anything that begins with 'risk' is a gamble.


OP, maybe you should work with your SO and establish an investment policy that works for both of you. How much to invest, what to invest in, and how to spread your assets between investing and real estate.

But with long term time horizons the pie is growing, so in absolute terms (historically) the gains have been real and the losses relative.

IE it is NOT a zero sum game.
Title: Re: My SO says investing is gambling. Help
Post by: gobius on August 25, 2015, 09:34:45 AM
But the real concern is the part where he says "just do what you want with my money."

That sounds very unhealthy to me and like a much bigger deal than investment strategy differences. Perhaps seperate bank accounts/ finances would help skirt these ownership issues, but I don't know.

Agreed. This points to trust issues with you, OP. Not just issues with the concept of investing in stocks and bonds.

Disagree.  Why would he trust OP with his money if he didn't trust the OP?  He doesn't trust buying stocks, but is willing to risk his money in something he doesn't trust because his spouse wants to do it.  They just disagree on the risk of stocks.

If my spouse was doing something that I considered gambling, I wouldn't trust her with my money unless it was small amounts (under $50).  Perhaps that's how OP can start, as someone said.  Use 5-10% of your savings.  You could even buy some REIT's, since that's buying stocks in real estate companies (something he may relate to a little more).
Title: Re: My SO says investing is gambling. Help
Post by: BarkyardBQ on August 25, 2015, 09:36:24 AM

in gambling, anytime someone profits it comes at the cost of someone else's suffering. That's not the case with stocks, when you win it's because the company won and everyone prospers or fails together - it's a team effort. You CAN gamble in the stock market by trying to profit from opposite swings but index investing is not gambling even though you may lose money.

That's not quite true. When someone buys a stock, someone else had to sell. Someone is either sacrificing gains or taking a loss. This is why index funds are optimal, and the least risky way to invest, but anything that begins with 'risk' is a gamble.


OP, maybe you should work with your SO and establish an investment policy that works for both of you. How much to invest, what to invest in, and how to spread your assets between investing and real estate.

But with long term time horizons the pie is growing, so in absolute terms (historically) the gains have been real and the losses relative.

IE it is NOT a zero sum game.

A good point.
Title: Re: My SO says investing is gambling. Help
Post by: gobius on August 25, 2015, 09:36:28 AM
VNQ is an ETF of REIT's you could start with.  Pays about 4%.
Title: Re: My SO says investing is gambling. Help
Post by: Dicey on August 25, 2015, 09:38:33 AM
So my SO says investing is gambling.

So I was going to say, get rid of the SO...

Until I saw this:

Quote
We worked hard to pay off our mortgage and now I would love if we could put that mortgage payment towards saving AND investing.

I see that you are committed to him even though you are not married. My advice is to back off immediately and completely. Let him invest his dollars in Real Estate or any way he wants and you can invest your dollars in Real Estate or any way you want. I'd be more worried if he was a spendthrift or a layabout, but it sounds like he has just chosen to take a different path, just like you have chosen not to get married. Don't mistake this for criticism, it's merely an observation based on the facts presented. In all relationships, the advice to choose your battles is well heeded.
Title: Re: My SO says investing is gambling. Help
Post by: gobius on August 25, 2015, 09:42:19 AM
So my SO says investing is gambling.

So I was going to say, get rid of the SO...

Until I saw this:

Quote
We worked hard to pay off our mortgage and now I would love if we could put that mortgage payment towards saving AND investing.

I see that you are committed to him even though you are not married. My advice is to back off immediately and completely. Let him invest his dollars in Real Estate or any way he wants and you can invest your dollars in Real Estate or any way you want. I'd be more worried if he was a spendthrift or a layabout, but it sounds like he has just chosen to take a different path, just like you have chosen not to get married. Don't mistake this for criticism, it's merely an observation based on the facts presented. In all relationships, the advice to choose your battles is well heeded.

I suppose I said "spouse" when OP never specified.  I guess OP never specified SO's gender either but I assumed it was a guy.

EDIT:  I agree with your post.
Title: Re: My SO says investing is gambling. Help
Post by: Dicey on August 25, 2015, 09:47:31 AM
I guess OP never specified SO's gender either but I assumed it was a guy.
LOL, that was my assumption as well, gobius. Fortunately, my advice is 100% gender neutral.
Title: Re: My SO says investing is gambling. Help
Post by: gobius on August 25, 2015, 09:51:40 AM
I guess OP never specified SO's gender either but I assumed it was a guy.
LOL, that was my assumption as well, gobius. Fortunately, my advice is 100% gender neutral.

Same here.  Not a big deal; just something I noticed after I typed my responses.
Title: Re: My SO says investing is gambling. Help
Post by: I'm a red panda on August 25, 2015, 09:54:22 AM
And why is investing in real estate not gambling? In both you are risking principal for expected returns (you just get paid better and take less liquidity/idiosyncratic risk with stocks.


Possibly because with real estate you get something tangible to hold.

So like "investing" in beanie babies was a stupid gamble, at the end, you are left with beanie babies.
Title: Re: My SO says investing is gambling. Help
Post by: Drakmon on August 25, 2015, 10:54:22 AM
My wife sort of felt this way for a long time, especially after I told her how much I lost in the 2000 crash.

It wasn't until this December, when she discovered and read all of MMM's posts, that she "caught the vision" of early retirement and realized investing is not evil/terrible.

If your SO can't "catch the vision" of FIRE, then they'll never undertake the effort to understand how investing works and why it's essential to achieving a FIRE goal. They'll continue operating from a place of fear, rather than logically approaching the issue as the means to reach a goal.
Title: Re: My SO says investing is gambling. Help
Post by: cloudsail on August 25, 2015, 11:39:32 AM
If your concern with RE is the non-passive nature, then get a good property management company.  Yes, you will end up paying them a good chunk of money, but it will make your rental properties true passive income.  Depends on what you're looking for.
Title: Re: My SO says investing is gambling. Help
Post by: zephyr911 on August 25, 2015, 12:04:42 PM

in gambling, anytime someone profits it comes at the cost of someone else's suffering. That's not the case with stocks, when you win it's because the company won and everyone prospers or fails together - it's a team effort. You CAN gamble in the stock market by trying to profit from opposite swings but index investing is not gambling even though you may lose money.

That's not quite true. When someone buys a stock, someone else had to sell. Someone is either sacrificing gains or taking a loss. This is why index funds are optimal, and the least risky way to invest, but anything that begins with 'risk' is a gamble.


OP, maybe you should work with your SO and establish an investment policy that works for both of you. How much to invest, what to invest in, and how to spread your assets between investing and real estate.

But with long term time horizons the pie is growing, so in absolute terms (historically) the gains have been real and the losses relative.

IE it is NOT a zero sum game.
Even better, you get a growing percentage of the growing pie, because rich retired motherfuckers are living off dividends while you reinvest yours and get more shares.
Title: Re: My SO says investing is gambling. Help
Post by: K-ice on August 25, 2015, 01:21:54 PM
OP here, thanks for all the advice.

I was intentionally ambiguous with "SO" to keep a bit of anonymity and avoid any gender bias.  Sorry, and no offence taken, if you think SO is DH or DW, maybe we are both DW, it doesn't matter ;) .

We have been together for 15y from starving (loan free) students to mortgage free parents so there is lots of trust, just different investment philosophies. Even from the start I handled the bills, I still do.  Back in the student apartment days SO said "Just tell me what I owe and I won't ask any questions." (I should have had more fun with that lol.) We do still have a large mortgage on one income property. We have a combination of separate and joint accounts depending on the use. 

When we had the primary residence mtg to pay off it was easy to be on the same page. (Although I read about Smith Maneuvers and know the math behind investing and slow mtg paydown is historically better.)

We are currently happy managing the RE on our own (SO does 90%, no 99%, of the work. I can't complain).  SO is expanding their consulting business and we both realise taking on more RE is not a good idea at this time.  We are also paying off the RE mtg slowly since interest is tax deductible and lower mortgage payments give us more flexibility with the extra income.  It may be a lump sum mtg payment later.

The advice with me doing my own thing with my savings, and SO doing their own thing is probably what will happen.  Although I feel putting the stash together is better and SO has no problem sitting on money in a friggin checking account. (Can I face punch them for this? )   

Just this morning I tried to explain the couch potato VAB, VCN, VXC and said you just invest in those three ETFs and choose your % based on risk.  So an 80y old probably wants 80% bonds 20% stocks while someone young and risky only wants 10% bonds and90% stocks. I was brushed off after less than 2min of discussion. 

@milesdividendmd I am getting into a dual momentum with my 3 Vanguard ETFs in my tax free account. My SO is very smart but I think their head would explode if I tried to explain dual momentum too.

I hope to be able to guide SO a bit and maybe get some savings into Bonds (VAB), Dividend stocks (VDY) and REIT (VRE) as suggested. I am thinking 60:20:20 may match their personality and the monthly dividend payments will be tangible (like rent :) ) .

Thanks for your help. I think I will have an easier sell with Dividend and REIT vs other equities.  I will give it a few days/weeks and talk again.  My timing is bad with all the doom and gloom in the news right now too.

Any other tips or personal stories on how you converted a non-believer or an all RE investor into equities would be great.

It is nice to see I am not the only other person with this issue. 








Title: Re: My SO says investing is gambling. Help
Post by: Wolf359 on August 25, 2015, 01:52:32 PM
You can't use math to convince someone who won't do math.

The best you can do is to lead by example.  It might add years to the journey, but the journey is still worth it. 

When your balances are high enough to prove you know what you're doing, it's possible your SO may change his/her mind.  Maybe not.
Title: Re: My SO says investing is gambling. Help
Post by: Jeremy E. on August 25, 2015, 02:09:01 PM
Option 1: Assuming you both work, I would let your Significant Other buy real estate with their money while you buy Vanguard ETFs through your tax sheltered account with your money. Let Significant Other do the work for their investments.
Option 2: Break it off with Significant Other and find someone who understands.
Title: Re: My SO says investing is gambling. Help
Post by: frugledoc on August 25, 2015, 02:09:51 PM
You should not be trying to push your SO into investing if they think it is gambling.

As soon as there is a paper loss they will resent you.  Most people do not have a high enough risk tolerance for long term investing in shares and should therefore avoid the market as they will just panic sell at the wrong time.
Title: Re: My SO says investing is gambling. Help
Post by: Frankies Girl on August 25, 2015, 02:23:00 PM
I haven't read all of the responses, but to me a few points stand out:

1. SO is basing their gambling analogy upon a small group of family members' experiences - not their own.
2. They generally don't want to deal with money/finances/investing at all and leave this all in the OP's lap
3. They have no interest in doing research or extended listening sessions from the OP to educate themselves on the subject. They take #1 as gospel and refuse to budge from their set opinion (which is actually not their own opinion - it's borrowed from said family members)

Based on the above, I'd say that the OP should just do what they think is best (investing in indexes as they see fit) with their shared money if the SO is in agreement that they really don't want to have to think about it at all. Explain to the SO that they are taking someone else's experiences as truth, without doing their own research, and that you (the OP) has done the research and would be happy to share the information and where you're getting that information from so the OP can make an INFORMED viewpoint. But if they refused to listen, or do any reading, then they should let you make the decisions since you did do research and are confident in the direction you should go as a family.

The SO's taking someone else's opinions as fact without listening and thinking about other points of view or doing their own basic research is at best closed-minded (and basically lazy). If they acknowledge that they are being lazy, then you can step in and do what you feel is correct - just like you currently do with managing the household finances.

But all of this is with the understanding that the SO is really just wanting to avoid dealing with the subject at all, and would prefer just not having to think about it (if they are adamantly opposed to investing at all and still refuse to do any independent reading/research, then let them do what they will with their own income, and invest yours as you see fit).

Since SO doesn't want to listen to the OP as far as what they have learned and want to teach to the SO, to make it easy on everyone involved, how about they agree that the OP is in charge of investing. And that OP is willing at any point in time to sit down with SO to explain things, but honestly it really seems like they are just stubborn and lazy when it comes to money, so maybe it is better for everyone's sake if the OP just takes charge.

In any case, the SO should at least listen and give more weight to the OP's opinions (over the ones expressed by extended family members) as they are in a committed relationship and there is love and trust there anyway, and the OP is already handling the finances and interested in doing the research on investing.

Finally, I have to point out that the SO maybe has family members that are kind of ignorant and make mistakes. Yes, some investing is gambling, but that doesn't mean ALL investing is - and the SO needs to understand that maybe they have some dumb-with-money family members.


Title: Re: My SO says investing is gambling. Help
Post by: Tyson on August 25, 2015, 02:28:02 PM
The stock market IS gambling if you try to put your money on individual companies.  This as almost certainly what the other family members did and that needs to be made clear and understood.  Once that's acknowledged that doing stocks that way is VERY risky, then and only then can you start to talk about index funds and looking at the overall trend/history of the stock market as a while, which is a LOT less risk.
Title: Re: My SO says investing is gambling. Help
Post by: EscapeVelocity2020 on August 25, 2015, 02:43:42 PM
It's going to be especially difficult to convince the SO that investing isn't gambling in the short run now that volatility is high, even with indexing.  The best thing you can do is lead by example, put as much as you can in your tax advantaged accounts for the next year or two, and then show SO the outcome (which hopefully reflects a gain, but at least should be a nice chunk of change).

I learned quite a bit from the Bogleheads.org forum after having my ass handed to me 'gambling' on some individual stocks before the tech meltdown in 2000.  The Bogleheads forum is focused on investing as has very knowledgeable, seasoned members.  No harm in re-posting this question there for a different angle. 

Good luck, for whatever reason, my SO has trusted me with the investments since before we were married.  Probably just because it isn't 'her thing' and I'm really into it.  Fortunately it has worked out much better since that one meltdown :)
Title: Re: My SO says investing is gambling. Help
Post by: SunshineGirl on August 26, 2015, 10:50:06 AM
I'd rather have a SO who is conservative than one who wants to take stupid risks with money. My mom, who is ruled by fear, never put any money in the stock market. I imagine her savings might be double what they are if she had, but she couldn't handle the risk. Instead, she worked at a low-paying job with a pension, and now that she has both her pension and SS, and has low expenses, she's doing just fine.

My point is: You DON'T have to invest in the market. It's not for everyone, and even though I do, I feel strongly that the market I invest in is far different than the one I invested in 10-15 years ago since all this high-frequency trading has taken hold.

In the end, it all comes down to someone's personality and who they are inherently. 
Title: Re: My SO says investing is gambling. Help
Post by: Shinplaster on August 26, 2015, 12:51:28 PM
For a first baby step, have you looked into market-linked GIC's?   I won't use them at the moment, because the return is usually capped, and the banks of course always win.  I can do better on my own.   But, if he's risk averse, it guarantees the principal.  He can't lose his initial capital.  If the markets do well, he will get some return, and most probably a lot better than what a normal GIC is offering right now (which is pretty much nothing!).   He would get to dabble in the market, without the gambling part.  All of the Canadian banks offer these, with different rates and conditions.    We did use this when I had our son's college fund invested.  It was comforting to know that we wouldn't suddenly lose a bundle, and in the end, we got 8% returns, so not bad.  (This was a back in the early 2000s though).
Title: Re: My SO says investing is gambling. Help
Post by: Dicey on August 26, 2015, 01:34:47 PM
I hope to be able to guide SO a bit and maybe get some savings into Bonds (VAB), Dividend stocks (VDY) and REIT (VRE) as suggested. I am thinking 60:20:20 may match their personality and the monthly dividend payments will be tangible (like rent :) ) .

Thanks for your help. I think I will have an easier sell with Dividend and REIT vs other equities.  I will give it a few days/weeks and talk again.  My timing is bad with all the doom and gloom in the news right now too.

Two quick thoughts for you k-ice, based on the comments pulled from your response.

Using REITS may overweight your overall portfolio, since you own rental property. I avoid them because I have enough exposure (home and rental property) in that sector outside my equity portfolio. Just sayin'.

When interest rates rise, bond prices fall, period. The more/faster interest rates rise, the more/faster bonds fall. We are historically overdue for a correction. Is there anyone who believes the Feds are not going to raise rates in the near-ish future? Bonds tend to be perceived as safer than stocks because they are less volatile, but they are tied to interest rates and are not without risk. IMHO a lot of people have been lulled into a false sense of bond security in the last decade. Since your SO is risk averse, I'd stay away from bonds for now. Just my two cents.

My vote is still for each of you do what you are comfortable with individually. I so not see any true advantage of putting your money together. Sorry if this sounds harsh, but it reads to me that you want to have more control over SO's money, which may or may not be something to think about and discuss.

As to SO's gender, meh. I believe mustachianism as a concept is 100% gender neutral.
Title: Re: My SO says investing is gambling. Help
Post by: Tjat on August 28, 2015, 05:50:52 AM
Cave and agree that investing is exactly like gambling. However, it's the one game where the odds are in your favor (over the long term). Or you could say the one game where the longer you play, the greater your chance of "winning."

You could also look at historical returns. I'd get precise numbers, but i think if you look at the market in terms of rolling-20-year periods, the worst return was 2.5%. The best was 15%.

Title: Re: My SO says investing is gambling. Help
Post by: cerebus on August 28, 2015, 06:44:56 AM
If your SO feels that it's 'their' money you're playing with, that's the fundamental issue you have. If you earn your money and they earn theirs, you can just separate the finances out. Don't let yourself get into a position where, like now, the market takes a dip and they resent you because it looks like they are losing all their money on your gamble. They seem like they might be a bit passive aggressive about it which can end up getting unpleasant if it comes out.

So, I think have that talk with them. Say that you're unwilling to put yourself into a position where your management of their money could compromise your relationship. Ask them to do some research with you, but if they won't, just suggest a division of finances and make your personal plans to FIRE based on your own money. At least you don't have a partner who blows their cash, so it could be much, much worse. You're still on basically the same mindset when it comes to money management.
Title: Re: My SO says investing is gambling. Help
Post by: Scandium on August 28, 2015, 09:06:07 AM
I feel for you because I have somewhat of a similar problem with my husband.  He is okay with investing, but he insists on opening every statement and then complains if the funds drop!  I have to explain every time that the market goes up and down, but consistently over long periods of time goes up.  It gets to be annoying! 

Really, some people still get paper statements? Just set them all to email statements to your address and problem solved? My wife couldn't care less about the statements so don't even look at them, guess that's good.
Title: Re: My SO says investing is gambling. Help
Post by: fb132 on August 28, 2015, 10:13:04 AM
For a first baby step, have you looked into market-linked GIC's?   I won't use them at the moment, because the return is usually capped, and the banks of course always win.  I can do better on my own.   But, if he's risk averse, it guarantees the principal.  He can't lose his initial capital.  If the markets do well, he will get some return, and most probably a lot better than what a normal GIC is offering right now (which is pretty much nothing!).   He would get to dabble in the market, without the gambling part.  All of the Canadian banks offer these, with different rates and conditions.    We did use this when I had our son's college fund invested.  It was comforting to know that we wouldn't suddenly lose a bundle, and in the end, we got 8% returns, so not bad.  (This was a back in the early 2000s though).
If he is worried, he should do like Shinplaster just said. I am not a fan of those, but for someone with big fears, I think it's the best solution, you make money (although their is a cap) and you never lose money.
Title: Re: My SO says investing is gambling. Help
Post by: adamwoods137 on August 28, 2015, 04:44:39 PM
Just this morning I tried to explain the couch potato VAB, VCN, VXC and said you just invest in those three ETFs and choose your % based on risk.  So an 80y old probably wants 80% bonds 20% stocks while someone young and risky only wants 10% bonds and90% stocks. I was brushed off after less than 2min of discussion. 

This, in my view, is exactly wrong and is exactly why you are getting the brush off.  The discussion you're having is far too abstract.  Stocks are not simply positive expected-value bets, nor are they expected returns with a given variance.  Those are abstractions (albeit true ones!) of what a stock actually is.  Those abstractions sound a lot like gambling. The fundamental question you need to ask yourself is, does my SO grok that a stock is proportional ownership in an actual company.  Your SO is why dividend investors exist.  Dividend investing, while not necessarily return maximizing, has very important behavioral advantages.  For example, if you participate in Proctor and Gamble's dividend reinvestment plan and have dividends sent to you in cash the difference between investing and gambling becomes stark.  Real estate isn't gambling to your SO because (s)he can go see the house, and the check (s)he gets in the mail reinforces the reality of it.  An index fund is too abstract.  My advice is to drop the complicated portfolio plan.  Pick 20 dividend reinvestment plans with low fees in different sectors, and start contributing to them.  You can optimize for fees, and set-up, but the key points are that you get adequate diversification (1000's of stocks is flatly unnecessary) and your SO gets mailed physical checks.  It is entirely possible that you will underperform the market (though outperformance is probably about as likely), but you will probably outperform a savings account.  Once your SO gets comfortable with this, then you circle back around to this mutual fund business.  If you want any help getting set up with dividend reinvestment plans, or some arrows towards ones with reasonable fees shoot me a pm.  As always the real profits in investing generally are not found perfecting the details of the portfolio (EMH largely saves you here), but perfecting the behavior of the person who controls the portfolio.
Title: Re: My SO says investing is gambling. Help
Post by: libertarian4321 on August 30, 2015, 06:06:00 AM
Casino gambling is "gambling" where it can easily be mathematically that, over time, YOU WILL LOSE MONEY to an almost 100% certainty.  That's why casino's exist- they know the people who use them will lose money.

Investing is "gambling" where it can be show to an almost 100% certainty that over the long term, you will make money.
Title: Re: My SO says investing is gambling. Help
Post by: WorkingToBeFIREd on August 30, 2015, 07:05:37 AM
What about a back-tested hypothetical portfolio based on dollars you were planning to invest when these conversations first started, compared to having money sit in the checking account?  I.E., if we would've put $10k into the Couch Potato allocation back on this date, we would have $X.  That same money in the checking account is worth $Y.  Naturally, if the time horizon is small, recent events aren't going to help your case much.  :)

Still could be some trust issues, but agree with posters above....perhaps leading by example and dividing investment strategies could be a start and would demonstrate how it works.  Some people are "show me" versus "tell me".
Title: Re: My SO says investing is gambling. Help
Post by: Tyson on August 30, 2015, 10:05:18 AM
I also think it's important to find out what the relatives did that led to a bad outcome.  If that can be understood then I think you are more likely to make headway.  Fear is not rational, most of the time.  If you can bring the cause of the fear to the forefront, it has a much better chance of being ameliorated.

Title: Re: My SO says investing is gambling. Help
Post by: TheOldestYoungMan on August 31, 2015, 03:02:44 PM
Well...first I'd say, investing is gambling.  It 100% is gambling.  It's a very sophisticated, well hedged betting system involving collateralized wagers, where everyone, both the dealer and the players, are betting on the economy with money they can afford to lose.

I know this to be absolutely true, and I am totally against gambling as a form of entertainment, but I came to be an investor.  Here's my thought process:

There are two scenarios, that every outcome can be loosely categorized under.  Either everything is going to be fine, or everything is not going to be fine.

There is nothing you can do with your money that will help in a "not going to be fine" scenario.  It isn't going to matter if you have a lot of money or not any at all, it is going to matter if you know how to make fire or grow your own food.  So you hedge against the "is not going to be fine" by acquiring skills and knowledge.

If everything is going to be fine, then having money will be nice, and investing that money is the only hope you have of staving off inflation.  I think real estate investing, for a disciplined and active participant, is the best way to go.  I don't have time right now to actively manage properties, and so I just do low cost index funds.

I don't know if that will help you in your discussion with your SO, but they sound like me and this is the thought process that led me to be comfortable with investing.  It is a reasonable alternative to real estate, and gives your money a chance to grow so you can buy some real estate investments once you do have time.  There's also barrier to entry in a real estate investment.  It can take a couple years to save up enough for each new venture, but you can buy new stocks every paycheck.  What do you do with the savings in the interim?


Title: Re: My SO says investing is gambling. Help
Post by: k9 on September 02, 2015, 04:43:36 AM
When people talk about stock investing as gambling, they are referring to the everyday (well, every nanosecond nowadays) valuations and girations. They think about trading, about those sharks waiting for you to buy to sell that crappy stock, and vice versa.

Then, why not talk SO about buy&holding dividend aristocrats ? I kinda consider them like something intermediate between RE and stocks.

Like rental real estate, you don't care about their daily market value. You don't care about events like 2008. What you care about is the monthly / yearly payment. You invest in a business that produces an income, not in a piece of paper that you hope will produce a benefit when sold later. You will probably never sell them and pass them to you children and grandchildren. Sure, you don't own the whole business here, so you can be a victim of bad management, and they generally offer a smaller yield, but div aristocrats have unique advantages too :


That might be a good compromise between indexing and physical RE. What do you think ?
Title: Re: My SO says investing is gambling. Help
Post by: poorboyrichman on September 03, 2015, 08:09:51 AM
There's a lot of misinformation on this thread and statements like 'index investing isn't risky if you buy and hold therefore SO is wrong and OP is right' isn't very helpful. Let me please remind you all any form of investment involves risk, duh. Index investing is just like any other form of investment and is risky, don't ever believe 100% the markets will always grow. We could be sitting near at the top of the market right now. There's a lot of money to be made in the worlds biggest casino and 'the house' will defend it to the end, after all the house never loses as your the one putting capital at risk. 'Index always wins' is the MMM community dogma, much like the 'apple iphone 6 is the best phone ever' is the dogma of the hyper-consumer. I'm not here to bash MMM and believe he has sincere intentions and his principles are sound but even he has a vested interest in index funds as he takes a referrals from betterment et al. I am not saying he has been corrupted by cashing in, nor am I saying index investing has no part in everyone's portfolio, so hear me out.

Just like RE, index funds could 'fail'. The trinity study which suggests a 4% withdrawal is safe indefinitely hasn't taken into account the future, and any retirement/investment strategy that assumes that the past will simply repeat itself is open to the possibility of failure. This is your gamble. Will it? Won't it? Who knows. For this reason return on investment might be leading you astray. 10% annualised returns is great while the going is good, but what happens when your investment reverses for 30 years right as you take your retirement? I'm afraid retirement will be over before you can say "school's out!".

RE or Indexing? Which one will win the day? It's impossible to know because the future hasn't happened yet. One is fictional wealth based on 1s and 0s on a network of computers, and the other is bricks and motar. As such they have very different risk profiles, so it's not easy to compare risk.

Both markets are directly linked to the amount of easy money in circulation. Quick recap on economics 101, almost your wealth is fictional. Unless you directly own land or means of production, you wealth is imaginary if SHTF. I digress, when people have disposable income, they park it in RE, REITs, Index Funds, individual shares, gold whatever... during a recession, both RE and stock markets crash. Why? Because there's less easy money floating around and normal consumers are worried about their cash flow (oh no, I lost my job now I need to sell everything at a distressed price so I can feed the kids!). Now someone with plenty of savings know's this might be a good time to buy shares or RE, so they do. If everyone behaved like this the markets would be a hell of a lot more stable, but let's face it. The human race is stupid, it ain't gonna happen.

So, RE or Index funds? You're asking the wrong question. Why not both? Even better why don't you choose a portfolio that won't crash every time there's a recession? Who know's if the future holds prosperity or doom and gloom like the global economy that requires exponential growth in a world of limited resources...

Ever heard of harry browne's permanent portfolio?

25% stocks for prosperity
25% cash for recession
25% gold for inflation
25% long term bonds for deflation

When one or more parts of the portfolio are distressed by market corrections the others leaps into action. Imagine a scenario where the global economy is contracting because of an energy crisis. You just FIRE'd and the timing is terrible, your index portfolio dropped 60pct and it will take 20 years for the economy to recover because of energy shortages (or whatever apocalyptic scenario is more to your flavour). Inflation is rampant because of energy price hikes and the government is printing $$$ to pay for all the people out of work. Gold shoots up in value because people no longer trust the dollar.

The PP is simple, all you need to do is rebalance your portfolio on an annual basis and you can in theory weather all of these economic climates with a fancy pants return to boot (you were in it to win it in every market). Add real estate to keep SO happy. Sure's it's not passive, but it's another way of diversifying which is always a good thing.

http://www.amazon.com/The-Permanent-Portfolio-Long-Term-Investment/dp/1118288254

Going all in on RED or BLACK is speculation, IOW, gambling. Why not match your bets? Traditionally the wealthy stayed wealthy because they control the means of production, now the wealth has been shared out a bit more (hello middle classes) there is opportunity to make money on the markets, though those that succumb to the allure of one chip or another are likely to end up in the pour house when their luck runs out.
Title: Re: My SO says investing is gambling. Help
Post by: Kaspian on September 03, 2015, 12:34:35 PM
I'd say:  Investing is investing.  Speculation is gambling.  One involves a solid plan based on historic data while the other depends on predicting the future from gut feelings, rumors, etc.
Title: Re: My SO says investing is gambling. Help
Post by: NoraLenderbee on September 03, 2015, 03:34:17 PM
Quote
The trinity study which suggests a 4% withdrawal is safe indefinitely hasn't taken into account the future, and any retirement/investment strategy that assumes that the past will simply repeat itself is open to the possibility of failure.

Well, of course the Trinity study doesn't take the future into account. The Trinity study is based on the past just like every other study. It simply indicates that *if* the future resembles the past, 4% is a SWR. The Permanent Portfolio is equally based on the events of the past and is viable *if* the future resembles it.

Quote
25% stocks for prosperity
25% cash for recession
25% gold for inflation
25% long term bonds for deflation

I see no land or means of production in this portfolio. 50% is what you call imaginary. 25% is in an inert metal that has an imaginary value--which happens to be lower today (inflation-adjusted price) than it was 35 years ago. How is this less vulnerable to a recession than a sensible allocation such as one based on index funds?

http://www.macrotrends.net/1333/historical-gold-prices-100-year-chart
Title: Re: My SO says investing is gambling. Help
Post by: mtn on September 03, 2015, 03:58:03 PM
Time for a bunch of REIT's?
Title: Re: My SO says investing is gambling. Help
Post by: StockBeard on September 03, 2015, 04:06:41 PM
Has any one article really stood out as an "ah ha" moment?
When a friend my SO trusted told her "this is how I became rich". She would only trust people she knew, so random blog articles on the web didn't help much.
Maybe getting her a book such as "Your Money or your life", which to some extent feels less spammy than (what SO might consider to be ) random websites?
Title: Re: My SO says investing is gambling. Help
Post by: Melody on September 03, 2015, 05:34:14 PM
There is a mmm article where he likens investing in an index fund to be an "investment in the ingenuity of mankind" I'd try rehashing that concept. Also the $1 invested in an index in 1870 argument (worth $900k today).
Title: Re: My SO says investing is gambling. Help
Post by: k9 on September 04, 2015, 04:45:10 AM
Survivorship bias and recency bias spotted.

How could you invest 1$ in indexes in 1870 ? Not only index funds did not exist, but even the very concept of stock market index was not invented yet.

Not only that, bu investing in the US economy in 1870 was very speculative. At this time, the US was just an emerging country that just  went through a civil war and a sovereign default.
Title: Re: My SO says investing is gambling. Help
Post by: poorboyrichman on September 04, 2015, 07:18:50 AM
@NoraLenderbee, you are picking at one part of the portfolio (gold) during an unprecedented period of western prosperity which has been fuelled by cheap energy and debt expansion. All parts of the portfolio cannot be winners at the same time. That is the reason it works. You then go on to imply that strategy is flawed on the basis of one component. Did you even bother to look into it in more detail before you shunned it in favour of your own ideology? Your returns are safe now matter what happens.

It doesn't matter what withdrawal rate you choose, 4% is based on returns was safe in the good old days of cheap energy and debt expansion, but those were both one way tickets to the good times. In period of economic distress or even just a bit of stagnation, in order to retire you'll need a safer withdrawal rate whichever strategy you follow, 3%, 2% or even 1%, regardless your capital is still safer with the PP in the long run.

I appreciate I haven't quite distilled the intricacies of the strategy down into a handy bite sized paragraph, further reading on your part is required. Hence the link to the book, it does a better job at explaining why it works in all economic climates better than I can.

Yes, the strategy assumes that society isn't about to be up-heaved and the west will not succumb to socialism, communism, technocrat-ism, authoritarianism or any other political model that aims to seize your assets. Though it will do a good job of weathering any storms capitalism throws at us.

It's a low risk portfolio compared with a 100% equities, or say 60% stocks and 40% bonds index funds and the reason I shared it is that OP's SO might feel more comfortable knowing that their capital is less exposed to volatile markets and safer than purely index funds or RE strategies in the long run.

This chart below speaks for itself, play close attention to the periods of bubble bursting 2002, 2008:

(http://crawlingroad.com/blog/wp-content/uploads/2012/06/PermanentPortfolio.1972-2011.png)
Title: Re: My SO says investing is gambling. Help
Post by: thd7t on September 04, 2015, 08:42:55 AM
@NoraLenderbee, you are picking at one part of the portfolio (gold) during an unprecedented period of western prosperity which has been fuelled by cheap energy and debt expansion. All parts of the portfolio cannot be winners at the same time. That is the reason it works. You then go on to imply that strategy is flawed on the basis of one component. Did you even bother to look into it in more detail before you shunned it in favour of your own ideology? Your returns are safe now matter what happens.

It doesn't matter what withdrawal rate you choose, 4% is based on returns was safe in the good old days of cheap energy and debt expansion, but those were both one way tickets to the good times. In period of economic distress or even just a bit of stagnation, in order to retire you'll need a safer withdrawal rate whichever strategy you follow, 3%, 2% or even 1%, regardless your capital is still safer with the PP in the long run.

I appreciate I haven't quite distilled the intricacies of the strategy down into a handy bite sized paragraph, further reading on your part is required. Hence the link to the book, it does a better job at explaining why it works in all economic climates better than I can.

Yes, the strategy assumes that society isn't about to be up-heaved and the west will not succumb to socialism, communism, technocrat-ism, authoritarianism or any other political model that aims to seize your assets. Though it will do a good job of weathering any storms capitalism throws at us.

It's a low risk portfolio compared with a 100% equities, or say 60% stocks and 40% bonds index funds and the reason I shared it is that OP's SO might feel more comfortable knowing that their capital is less exposed to volatile markets and safer than purely index funds or RE strategies in the long run.

This chart below speaks for itself, play close attention to the periods of bubble bursting 2002, 2008:

(http://crawlingroad.com/blog/wp-content/uploads/2012/06/PermanentPortfolio.1972-2011.png)
Speaking of bubbles bursting, I notice that your gold chart stops in 2011, which makes it look really good.  In fact, it looks great if you stop in 2011.  If you add in the last four years, the 33% drop without recovery makes it look pretty rough, particularly matched with the 33% gains in the DJIA or the 50% gains in the S&P500 during the same time (including the recent correction).
Title: Re: My SO says investing is gambling. Help
Post by: poorboyrichman on September 04, 2015, 08:46:07 AM
Speaking of bubbles bursting, I notice that your gold chart stops in 2011, which makes it look really good.  In fact, it looks great if you stop in 2011.  If you add in the last four years, the 33% drop without recovery makes it look pretty rough, particularly matched with the 33% gains in the DJIA or the 50% gains in the S&P500 during the same time (including the recent correction).

It's not my chart and it is a bit aged now so I won't speculate on recent performance but my best guess is that this didn't effect the overall value of the portfolio, as when one part falls, another is sure to have risen. That's why you see the nice smooth blue line for the PP.

If all four markets are corrected simultaneously, you've experienced a massive event of wealth destruction which is unavoidable in any circumstance.
Title: Re: My SO says investing is gambling. Help
Post by: thd7t on September 04, 2015, 08:52:47 AM
Speaking of bubbles bursting, I notice that your gold chart stops in 2011, which makes it look really good.  In fact, it looks great if you stop in 2011.  If you add in the last four years, the 33% drop without recovery makes it look pretty rough, particularly matched with the 33% gains in the DJIA or the 50% gains in the S&P500 during the same time (including the recent correction).

It's not my chart and it is a bit aged now so I won't speculate on recent performance but my best guess is that this didn't effect the overall value of the portfolio, as when one part falls, another is sure to have risen. That's why you see the nice smooth blue line for the PP.
Sorry about that.  I do think that the diversified portfolio has value, but because you appeared to be responding to a critique of gold as a part of the portfolio, I thought that it was important to show the data that included its bubble bursting.  I apologize for misinterpreting that.  However the chart also demonstrates that, with a brief exeption during 2008, stocks outperformed the PP.  I know that many people find the reduced volatility comforting, but I'd be interested to see how a stock/bond mix performs on the same chart (you reference this).
Title: Re: My SO says investing is gambling. Help
Post by: poorboyrichman on September 04, 2015, 09:03:45 AM
Over the short term you probably find some years an index portfolio might be valued higher, but as you can see in the chart eventually the markets become more rational (reflects actual value) and the PP catches up.

Or to put it in other words, if you're into swing/day trading you can make more using 100% index in stocks by buying and selling at the right time, but that's active investing, not passive.

Morning star has a good example here which you can manipulate to your heart's content. I'm not sure who manages that fund, how well they adhere to the stratergy though. I can see the allocations are currently out of whack, but as I say you only need to rebalance annually unless there have been huge swings.

http://www.morningstar.com/funds/XNAS/PRPFX/quote.html

Edit: Oh and I wouldn't pay a fund manager to manage this for you, they are eating at your gains so manage it yourself. That means there's slightly more effort required than an index fund, but were talking a hour a year or something daft.
Title: Re: My SO says investing is gambling. Help
Post by: Jacob F on September 04, 2015, 10:08:26 AM
How do you store the physical gold and are the substantial purchasing / selling costs included into this PP? Also, how does this portfolio fare in currency revolutions? Coming from Europe, I know that stocks outperformed Bonds, Cash and Gold for centuries while cash and bonds even went to complete zero during currency regime changes. How can your portfolio remain competitive under these circumstances (since it's not impossible that the dollar will eventually break - you have significant survivorship bias in your chart computation if it's only focussing on USD denominated assets)? This also doesn't necessarily trigger a SHTF scenario since companies will continue to exist through these rough times, as numerous very old companies in Europe, Japan etc. show us.

I would also like to have a look into the computation of this chart, since the portfolio seems to be constantly outperforming 3 of his composites, which means it's constantly faring way better than 75% of what it's made up from. This seems odd even when rebalancing effects / lucky market timing is taken into account. This would actually show extreme risk-adjusted outperformance toward several major asset classes. At the same time many scientific studies over the course of time on portfolio management / efficient market hypothesis etc. haven't shown major economic (cost adjusted) inefficiencies in financial markets in the recent past (starting 1970ies at least)
Title: Re: My SO says investing is gambling. Help
Post by: Jacob F on September 04, 2015, 10:25:20 AM
Over the short term you probably find some years an index portfolio might be valued higher, but as you can see in the chart eventually the markets become more rational (reflects actual value) and the PP catches up.

Or to put it in other words, if you're into swing/day trading you can make more using 100% index in stocks by buying and selling at the right time, but that's active investing, not passive.

Morning star has a good example here which you can manipulate to your heart's content. I'm not sure who manages that fund, how well they adhere to the stratergy though. I can see the allocations are currently out of whack, but as I say you only need to rebalance annually unless there have been huge swings.

http://www.morningstar.com/funds/XNAS/PRPFX/quote.html

Edit: Oh and I wouldn't pay a fund manager to manage this for you, they are eating at your gains so manage it yourself. That means there's slightly more effort required than an index fund, but were talking a hour a year or something daft.

Okay this looks more realistic. Coming from 1986 (Maximum Data time frame - 10.000 USD investment) and benchmarking this fund to the S&P 500 you'd have 68.035 USD in the Permanent Portfolio and 140.834 USD in the S&P500.
That's 6.8 % p.a. for the fund and 9.5% for the S&P. Looks like a reasonable trade-off for the way lower Volatility of the Fund, but I would still opt for way more Stocks at a younger age than the PP would go with. For a retirement Portfolio however, it does quite well I'd say.
Title: Re: My SO says investing is gambling. Help
Post by: TheOldestYoungMan on September 04, 2015, 10:41:47 AM
25% of your portfolio is in just one thing.  That's madness anyway you slice it.  If you want to hold precious metals, probably pick more than one.

In 1855 Aluminum was more expensive than gold or platinum.

http://sam.davyson.com/as/physics/aluminium/siteus/history.html

Today it is...not.

If tomorrow someone comes up with a way to mine/produce/extract a million pounds of gold per year out of...I don't know...seawater...or the aether, then your portfolio takes a 25% hit.  It may not be very likely, but everything was impossible until someone figured out how to do it.

I can watch youtube on my phone.
Title: Re: My SO says investing is gambling. Help
Post by: NoraLenderbee on September 04, 2015, 11:02:59 AM
@NoraLenderbee, you are picking at one part of the portfolio (gold) during an unprecedented period of western prosperity which has been fuelled by cheap energy and debt expansion. All parts of the portfolio cannot be winners at the same time. That is the reason it works. You then go on to imply that strategy is flawed on the basis of one component. Did you even bother to look into it in more detail before you shunned it in favour of your own ideology? Your returns are safe now matter what happens.

I don't think the strategy is flawed, particularly. I think your argument is tendentious and specious. You criticized the Trinity study for being based on the past. On what is the PP based, if not the past? You can't know the future.

As for gold, you are claiming that the past 35 years of gold prices are anomalous and won't be repeated. Cheap energy and debt expansion are still with us and may be for a long time to come. Meanwhile, anyone who invested in gold at the last peak would still be behind, despite several major recessions since then (1981-82, 1991, 2001, 2008).

Quote
It doesn't matter what withdrawal rate you choose, 4% is based on returns was safe in the good old days of cheap energy and debt expansion, but those were both one way tickets to the good times. In period of economic distress or even just a bit of stagnation, in order to retire you'll need a safer withdrawal rate whichever strategy you follow, 3%, 2% or even 1%, regardless your capital is still safer with the PP in the long run.

On what do you base the claim that the PP is safer? That gold has been a good hedge in the past? Didn't you just say that relying on the past is bad?

Quote
Yes, the strategy assumes that society isn't about to be up-heaved and the west will not succumb to socialism, communism, technocrat-ism, authoritarianism or any other political model that aims to seize your assets.

Exactly as the Trinity study assumes.

I don't think the PP is a bad portfolio. It is one of several decent alternatives (like indexing, etc.). However, you are claiming it is far safer. I pointed out that it's based on the same basic data as the strategies you decry, and that one-fourth of it has proven to be the opposite for the past two generations. Who's being ideological here?
Title: Re: My SO says investing is gambling. Help
Post by: Dicey on September 04, 2015, 11:53:00 AM
I think your argument is tendentious and specious.
I think this phrase is sublime. May I borrow it, please?
Title: Re: My SO says investing is gambling. Help
Post by: NoraLenderbee on September 04, 2015, 12:43:24 PM
I think your argument is tendentious and specious.
I think this phrase is sublime. May I borrow it, please?

But of course! (Wait, please sign this royalties contract . . .)
Title: Re: My SO says investing is gambling. Help
Post by: k9 on September 04, 2015, 12:45:49 PM
25% of your portfolio is in just one thing.  That's madness anyway you slice it.  If you want to hold precious metals, probably pick more than one.

25% is scaring you ? You would be astonished to know how many people gave more than 2/3 (sometimes close to 100%) of their wealth to Vanguard (or any other single financial institution), especially in the MMM community.

Lots of small RE investors have more than 1/4 of the wealth in one rental property, too, for obvious reasons.

Having less than 25% of your wealth in one asset is more an exception than a rule, AFAIK.
Title: Re: My SO says investing is gambling. Help
Post by: TheOldestYoungMan on September 04, 2015, 01:11:40 PM
25% of your portfolio is in just one thing.  That's madness anyway you slice it.  If you want to hold precious metals, probably pick more than one.

25% is scaring you ? You would be astonished to know how many people gave more than 2/3 (sometimes close to 100%) of their wealth to Vanguard (or any other single financial institution), especially in the MMM community.

Lots of small RE investors have more than 1/4 of the wealth in one rental property, too, for obvious reasons.

Having less than 25% of your wealth in one asset is more an exception than a rule, AFAIK.

Even if 100% of your wealth is in the hands of Vanguard, it isn't really in the hands of Vanguard.  Vanguard isn't structured that way.

They aren't taking your money and offering you a piece of paper, little vanguard vouchers.  It's a reasonable question to ask, and you should, "why is Vanguard different from Bernie Madoff."  This question has an answer and you need to understand it if you do business with Vanguard.

There are other financial institutions where this might be a valid objection, but it reveals a profound failure to understand how Vanguard in particular is organized.

And if a small RE investor planned to have 100% of their portfolio tied up in less than 6-10 properties I would absolutely raise a similar objection.  I know many on their way to their goal end up with over 25% in one property at some point, but the biggest point of failure in RE investment is exactly that, you end up with large percentages in one place.  This risk is somewhat mitigated by the fact that while you could take losses, you have insurance and are unlikely to take a 100% loss at any one property.

As far as a general rule, what I've heard is that you don't want to have any more than FOUR percent of your portfolio tied up in any one asset, if possible.  So I have to make an exception to that rule for almost any RE investor, but to have 25% in one particular precious metal, that is unconscionably irresponsible advice.  Particularly when there are dozens of ways to diversify that gold holding to achieve the objective.
Title: Re: My SO says investing is gambling. Help
Post by: TomTX on September 04, 2015, 01:33:24 PM
25% of your portfolio is in just one thing.  That's madness anyway you slice it.  If you want to hold precious metals, probably pick more than one.

25% is scaring you ? You would be astonished to know how many people gave more than 2/3 (sometimes close to 100%) of their wealth to Vanguard (or any other single financial institution), especially in the MMM community.

Lots of small RE investors have more than 1/4 of the wealth in one rental property, too, for obvious reasons.

Having less than 25% of your wealth in one asset is more an exception than a rule, AFAIK.

You have a fundamental misunderstanding of how investing in a Vanguard index fund works.

It's not uncommon - I see lots of folks trying to scatter a couple thousand bucks each across dozens of funds. Fundamentally wrong.
Title: Re: My SO says investing is gambling. Help
Post by: NorCal on September 04, 2015, 02:42:19 PM
In trying to solve the original problem (instead of esoteric debates on investment philosophies), I'm going to take a contrary view here.

Your SO doesn't believe in the risk/reward profile of stocks.  You know what?  That's okay.  Everyone has different perceptions of risk vs. reward, and there isn't much sense forcing someone into something they're not comfortable with.  As two examples from my own life:

-During my time in the Army, I spent a portion of my life getting shot at by Iraqis and jumping out of airplanes.  I was completely okay with the risk/reward profile of my career.  However, I will never, ever, ride a motorcycle.  That's just too risky for me.  Everyone's comfort zone for risk is different, and that's okay.

-My dad recently retired from being a community college teacher.  His net worth is probably around $2M, and he's never owned a share of stock in his life.  He's dabbled in RE in a few instances, but never long term.  Stocks are only part of the picture.  How you save and live is more important.

My recommendation is finding things your SO IS comfortable in investing in.  Keep diversified no matter what.  But there are options out there that might fit his risk/reward profile that aren't intuitive.  Real Estate can be a great option, particularly if he's willing to do the work himself.  You can look into bond funds.  Heck, even look into those guaranteed-principal annuities.  You're guaranteed not to lose money, and you share in a small part of the market upside.  I wouldn't normally recommend these, but they might be great options for your case.
Title: Re: My SO says investing is gambling. Help
Post by: k9 on September 05, 2015, 05:06:09 AM
Even if 100% of your wealth is in the hands of Vanguard, it isn't really in the hands of Vanguard.  Vanguard isn't structured that way.

They aren't taking your money and offering you a piece of paper, little vanguard vouchers.  It's a reasonable question to ask, and you should, "why is Vanguard different from Bernie Madoff."  This question has an answer and you need to understand it if you do business with Vanguard.

There are other financial institutions where this might be a valid objection, but it reveals a profound failure to understand how Vanguard in particular is organized.
Well, I have to admit I don't know how Vanguard actually works. I don't even know if you can buy shares without going through a broker of some kind. But as long as the shares Vanguard manages for you aren't bought under your name, and as long as those Vanguard shares aren't stored under your name rather than your broker's, you don't really own them.

I have to take your words about Vanguard, but people often aren't aware that more of their money than they think is tied to a single (or a pair of) financial institution.

Quote
As far as a general rule, what I've heard is that you don't want to have any more than FOUR percent of your portfolio tied up in any one asset, if possible.  So I have to make an exception to that rule for almost any RE investor, but to have 25% in one particular precious metal, that is unconscionably irresponsible advice.  Particularly when there are dozens of ways to diversify that gold holding to achieve the objective.

I can understand that idea, although I think it is too extreme. Would an investor having, say, 5% of his wealth in TBills be in Jeopardy ?
Regarding gold, it is as much an asset class by itself as a single asset. Having 25% in a single gold ETF, or 25% as a single physical gold bar by be very dangerous, I have to agree, but sharing those 25% between different physical coins, stored at different places, and one or more ETF, seems a little safer. If owing only gold for these 25% seems too unsafe anyway, you can mitigate the risk bu investing in silver or swiss francs, too (the original PP had them, with gold), although they don't have exactly the same characteristics as gold.
Title: Re: My SO says investing is gambling. Help
Post by: Jags4186 on September 05, 2015, 06:05:56 AM
25% of your portfolio is in just one thing.  That's madness anyway you slice it.  If you want to hold precious metals, probably pick more than one.

In 1855 Aluminum was more expensive than gold or platinum.

http://sam.davyson.com/as/physics/aluminium/siteus/history.html

Today it is...not.

If tomorrow someone comes up with a way to mine/produce/extract a million pounds of gold per year out of...I don't know...seawater...or the aether, then your portfolio takes a 25% hit.  It may not be very likely, but everything was impossible until someone figured out how to do it.

I can watch youtube on my phone.

Gold is intrinsicly valued by humans across all civilizations over thousands of years.  This is why it is more valuable--in our minds, not neccesarily in spot metal prices--than other precious metals.  If someone tomorrow figured out a way to mine gold much more efficiently, it wouldn't matter in the long term because humans have an insatiable thirst for it. 

Besides, if you have 75% or 100% of your portfolio in stock index funds, say VTSAX, don't kid yourself.  You're investing in 1 thing, the US Economy.  The 3000 stocks in VTSAX still overall declined 40% in 2008.  And they declined 20% 3 years running back in 2000.
Title: Re: My SO says investing is gambling. Help
Post by: protostache on September 06, 2015, 11:32:21 AM
Even if 100% of your wealth is in the hands of Vanguard, it isn't really in the hands of Vanguard.  Vanguard isn't structured that way.

They aren't taking your money and offering you a piece of paper, little vanguard vouchers.  It's a reasonable question to ask, and you should, "why is Vanguard different from Bernie Madoff."  This question has an answer and you need to understand it if you do business with Vanguard.

There are other financial institutions where this might be a valid objection, but it reveals a profound failure to understand how Vanguard in particular is organized.
Well, I have to admit I don't know how Vanguard actually works. I don't even know if you can buy shares without going through a broker of some kind. But as long as the shares Vanguard manages for you aren't bought under your name, and as long as those Vanguard shares aren't stored under your name rather than your broker's, you don't really own them.

I have to take your words about Vanguard, but people often aren't aware that more of their money than they think is tied to a single (or a pair of) financial institution.


(replying just to this section)

You can and probably should invest in Vanguard funds directly through Vanguard, and when you do the shares of those mutual funds are held in your name.

Vanguard's structure is different than most other mutual fund families. Investors put money into a Vanguard mutual fund company (this part is typical) which is managed by the Vanguard management company (also typical). What's not typical is that the management company is owned by the fund companies. That is to say, there's no outside group profiting from management of Vanguard funds. Any profits flow back into the fund companies. This structure ensures management will be for the benefit of the fund companies and thus the fund investors.

https://about.vanguard.com/what-sets-vanguard-apart/why-ownership-matters/
Title: Re: My SO says investing is gambling. Help
Post by: k9 on September 09, 2015, 08:14:57 AM
Well, thanks a lot for all these information. I didn't know that, for sure, and it makes my original message about Vanguard look like crap now ;)
Title: Re: My SO says investing is gambling. Help
Post by: DoubleDown on September 09, 2015, 10:35:51 AM
The term "investing" is loaded. It can mean anything from highly speculative bets on individual stocks, to rock solid guaranteed (albeit small) returns in a CD. The former is gambling, the latter is not.

My advice to the OP would be to choose a very conservative asset allocation, with the majority (maybe 80%) in can't-lose investments like CD ladders, US treasuries, etc. Then she can truthfully tell her SO they are not gambling at all with the lion's share of their invested money, not in the least. Put a smaller portion (20%) into riskier ventures like a broad stock index. Over time, once the SO becomes comfortable with the idea that their investments are growing, they can tweak the allocation to a more reasonable level like 50-60, then 60-40 and so on.

Obviously this is less than optimal in terms of building wealth, but there will be no risk in losing and certainly beats stuffing the money in a mattress or a bank account earning 0.1%.
Title: Re: My SO says investing is gambling. Help
Post by: DoubleDown on September 09, 2015, 10:41:25 AM
Also, I'd recommend the OP tell her SO there is really only one proven way to lose in the long run: Inflation eroding your accumulated wealth. It is a non-negotiable fact he needs to be aware of. You will guaranteed lose to inflation if you do not invest in assets that bring a higher return than inflation, and it's likely the most common investing mistake people make (at least prior generations, maybe not as much with millennials, who knows).
Title: Re: My SO says investing is gambling. Help
Post by: Wolf359 on September 09, 2015, 02:04:09 PM
With all the doom and gloom in the market, your timing is bad when you're talking about using your SO's or joint funds.  However, your timing is great if you're just starting out yourself and want to demonstrate the benefits of investing.

When the market is tanking is the best time to buy.  If you're chunking your own money into the market while it's down, you can have your SO look at how well you did when the market is making new highs again. 

When your SO's money is involved, s/he will pay attention and feel the pain when it's down.  It takes baby steps to demonstrate that it is possible to make money in the market by going through a full market cycle.