I am kind of shocked by the uniformity of answers here, so I will add a dissenting voice.
In the current economic climate, it is pretty much a waste "investing" in anything until you have, say, an 8-figure sum in cash laying around doing nothing. I don't have that, so I am not bothering with "investing". I put "investing" in quotes because I feel the word tends to be perversely used; people really mean speculation, that is, gambling with negligible effects in terms of real-world wealth creation, but the gambling happens on such a huge scale that it distorts market prices hugely. Real investing is when you put money directly into something in order to enable the creation of something that wouldn't have been possible without your capital (as the YC folks do).
Stocks are terrible. If you look at market histories, corrected for inflation (actual inflation, not government-reported inflation, which is always understated, as the government benefits by understating it -- so normalize against something like an alternative inflation index or else straight-up commodities) then the S&P, DJIA, etc have actually not grown in 15 years. 15 years!! I know all of the "just buy an index fund" seems like good advice -- and it did used to be -- but in modern conditions that is no longer true. On top of this fact, pile on the risk of another market crash due to the USA's still-precarious economic situation, and stocks are clearly just not worth being in. (People are starting to realize this; there have been net outflows from equities most of the time for the past 40 weeks, and insider-selling-to-buying ratios are consistently huge.)
You can put money in bonds, but then it is locked up and you have a lot of inflation risk, so then you'd be aiming at short-term bonds, which are going to yield less.
Really what has happened is that US economic policy has become very hostile toward people who are responsible and save money, as an incidental effect of the desire to stimulate consumption (which mainly means taking on more debt and keeping rates tremendously low because if they ever become not-low now, debt burden is going to crush the economy.)
The upshot is that you are better off taking the mental energy you would have expended on "investing" and subsequently worrying about your money, and instead funneling it into your creative endeavors. You will make more money that way, especially when you take a long-term view. (Think about Einstein and the story about him having a closet of identical suits; except what I am talking about here is way less extreme and way more obvious.)
I have a rant about how peoples' "investing" according to the modern American model is actively making the world a much worse place than it ought to be, but this post is already long enough.
Your long rant basically says don't invest money at all, just keep cash in your mattress?
Who in their right mind would follow this advice? Let's say we don't worry at all about saving money, and just funnel our energy into "creative endeavors." If those creative endeavors are profitable, what are you going to do with the money?
It doesn't take a lot of energy to setup a 401k or Roth IRA. It doesn't take a lot of energy to pick an asset allocation that protects you from most risks. For example, a bond allocation will protect your money during a period of deflation, while a gold allocation will protect your money during periods of inflation. A stock allocation will grow your money during periods of prosperity. Just pick a good allocation and rebalance yearly. It should only take you a couple hours a year to worry about it, and you'll be exponentially better off at retirement than someone who stuck all their cash in a mattress.
Your long rant basically says don't invest money at all, just keep cash in your mattress?
That's pretty clearly not what was said.
The upshot is that you are better off taking the mental energy you would have expended on "investing" and subsequently worrying about your money, and instead funneling it into your creative endeavors
I actually do have a 401k (as well as an additional retirement fund), but I only have those things because I have surplus money sitting around. The problem with something like a 401k is that there is a heavy opportunity cost: you don't get to use that money, ever, until you retire. If there were something productive you could have done with the money instead, that were still relatively safe, maybe you should have done that! (Especially in the current climate of seemingly-perpetually-low interest rates).
If creative endeavors are profitable, you can use the resulting money to fuel more creative endeavors, thus making the world a better place. Keeping money in a bank account or publicly-traded stock does not particularly make the world a better place.
Once I got approximately into the f-you money level of income, it became crystal clear how fictitious money is in the first place. I wake up one morning, and bam, I am wealthy! Why? Because someone said so and typed a number into a computer. Okay... that's kind of weird.
Given that money is so fictitious and somewhat meaningless, it is a shame to give into primal hoarding impulses, just so one can see the number in one's bank account go up like a high score in a video game. It's much better to make like Elon Musk and use your money for what it is: a way to wield influence to make the world more like you would like it to be.
> you don't get to use that money, ever, until you retire
You can typically loan to yourself, especially for things like first home ownership (considering the average age here, most of us are probably in that bucket).
>In the current economic climate, it is pretty much a waste "investing" in anything until you have, say, an 8-figure sum in cash laying around doing nothing.
Why do you say that? It is clear that money can be made investing with less than an 8-figure sum. For instance, the Vanguard S&P500 index fund returned 22% last year and 10.66% since its introduction in 1976. The fund minimum is $3,000.
Those are two very-selective samples. How much did the S&P return from 2000 to 2011? If you look at a chart of an index fund dating back to the 1970s, they certainly look like things that were following an upward trend, which got goosed steeper a couple of times, until everything blew up in 1998 and now there is chaos and unpredictability. 1998-2011 is over 1/3 of the period from 1971 to 2011 so one can't really regard this as a blip!
Yes, money "can" clearly be made investing, if you time the market and are lucky. I am disputing the idea that stocks will always generally go up. I think this used to be true but may have changed. Much like "housing prices always go up", which was shown to be absurd.
Everyone who rode out the recession without panicking has made their money back. I've made a good deal of money over the last 5 years with nothing more than 2 ETFs and automatic contributions each week (dollar cost averaging), and percent based rebalacing. So I do maybe 2 or 3 things a year above and beyond the automatic deductions.
It's really not difficult, and its not all that risky. Check out the Truth About Money by Ric Edelman, or just listen to some of his free podcasts.
In the current economic climate, it is pretty much a waste "investing" in anything until you have, say, an 8-figure sum in cash laying around doing nothing. I don't have that, so I am not bothering with "investing". I put "investing" in quotes because I feel the word tends to be perversely used; people really mean speculation, that is, gambling with negligible effects in terms of real-world wealth creation, but the gambling happens on such a huge scale that it distorts market prices hugely. Real investing is when you put money directly into something in order to enable the creation of something that wouldn't have been possible without your capital (as the YC folks do).
Stocks are terrible. If you look at market histories, corrected for inflation (actual inflation, not government-reported inflation, which is always understated, as the government benefits by understating it -- so normalize against something like an alternative inflation index or else straight-up commodities) then the S&P, DJIA, etc have actually not grown in 15 years. 15 years!! I know all of the "just buy an index fund" seems like good advice -- and it did used to be -- but in modern conditions that is no longer true. On top of this fact, pile on the risk of another market crash due to the USA's still-precarious economic situation, and stocks are clearly just not worth being in. (People are starting to realize this; there have been net outflows from equities most of the time for the past 40 weeks, and insider-selling-to-buying ratios are consistently huge.)
You can put money in bonds, but then it is locked up and you have a lot of inflation risk, so then you'd be aiming at short-term bonds, which are going to yield less.
Really what has happened is that US economic policy has become very hostile toward people who are responsible and save money, as an incidental effect of the desire to stimulate consumption (which mainly means taking on more debt and keeping rates tremendously low because if they ever become not-low now, debt burden is going to crush the economy.)
The upshot is that you are better off taking the mental energy you would have expended on "investing" and subsequently worrying about your money, and instead funneling it into your creative endeavors. You will make more money that way, especially when you take a long-term view. (Think about Einstein and the story about him having a closet of identical suits; except what I am talking about here is way less extreme and way more obvious.)
I have a rant about how peoples' "investing" according to the modern American model is actively making the world a much worse place than it ought to be, but this post is already long enough.