High net worth investors v average retail investors

Exodi

Type_45 said:

Exodi said:

Type_45 said:

Invest in assets which go up in value

Doh, why didn't I think of that?

How's your portfolio doing YTD?

Mine is up.

Yet you're promoting investing in bonds? Interesting.

Type_45

MK62 said:

The thing is, all this is armageddon talk......for a well diversified equities portfolio to fall to zero, as Linton said, would mean a total collapse of the world as we know it......no more companies, no supermarkets to buy anything in, nothing for them to sell even if they did still exist as there'd be no companies left to make anything for them to sell......
Individual companies will rise and fall, some will disappear......nobody would argue otherwise..... that's why you don't invest in just one or two companies.
Incidentally, a US investor who bought gold in 1980, would, on an inflation adjusted basis, still be waiting for it to go back up today, 42 years later. A UK investor would have fared better, but this would have been mostly down to GBP v USD, rather than gold itself......

I don't agree with the premise of your argument.  That being that a collapsed stock market means Armageddon.  

Investors may want to portray it as such to scare everyone into keeping the gravy train going so that they can personally profit from it.  But in reality the only Armageddon would be investors' portfolios.  

If you're talking about what impact a collapsed bond market would have, that's a whole other conversation.  The bond market is 20x bigger than the stock market.

Type_45

Exodi said:

Type_45 said:

Exodi said:

Type_45 said:

Invest in assets which go up in value

Doh, why didn't I think of that?

How's your portfolio doing YTD?

Mine is up.

Yet you're promoting investing in bonds? Interesting.

No I'm not.  Not at all.  I don't hold any bonds.  Haven't done for a couple of years.

Type_45

Linton said:

Type_45 said:

MK62 said:

Type_45 said:

coyrls said:

Type_45 said:

eskbanker said:

Even if there was any validity in those wild sweeping generalisations about what different types of investors are assumed to buy, the fundamental question would remain: so what?

The "so what" is explained toward the end of the video.  "If you want to be wealthy, invest as the wealthy invest".

Why?  Did they invest that way before they were wealthy or after?  Before they were wealthy they would have been in the 80% who invest differently or were they perhaps born wealthy?  In which case the advice should be to be born wealthy.

Take from it whatever you want.  What I took from it is:  What the wealthy invest in can never go to zero.  What the average retail investor invests in CAN go to zero.


This, I feel, is why the transfer of wealth from bottom to top keeps happening.

Investing in something which "can never go to zero" is not the same as risk free.....unless you are claiming that these assets cannot fall in value either.......
Also, investing in bonds does not necessarily mean getting your money back........and it's certainly not risk free.....especially when you also factor inflation in.

It kind of is.  Real estate, precious metals etc will never go to zero.  And if their value drops you just hold on to it and it will go back up again.  It's as risk-free as it gets.  

Why not?  If no-one wants them they have no value.

Do you know what shares are?  Companies are owned by their shareholders.  The only way a company's shares could be of zero value would be if the company had no assets and was not able to make a profit which implies the company would either be nationalised or cease to exist.

Are you really forecasting a world where no private sector businesses exist?  In such a world where would wealth come from? How will the rich become richer if all they can do is to trade gold and land between themselves?

The stock market is not the same thing as the real economy.  If the stock market crashes it doesn't mean there are no shops or private businesses.  It simply means the stock market has crashed.

Section62

Type_45 said:

Prism said:

Bill Gates is a good example of a HNW individual - net worth around $130bn

Real estate - $166m 
Cars - $650k
Art - $130m

Cascade - $30bn - mostly equities
Bill and Melinda Gates Foundation - $50bn - charity
Microsoft stock - $26bn
Other stuff - $19bn - this bit is vague, but could be cash.

Still looks like a high equity exposure to me and very little in real estate, cars and art

Bill Gates is also the largest owner of farmland in America.  

We don't know what he owns.  That breakdown of his assets isn't worth a fig.

You acknowledge it is difficult to find out the extent of what one exceptionally high-profile individual owns. Yet confidently stated (without sources) -

The average retail investor:
- 80% equities

??

Malthusian

Type_45 said:

Land will always have value. It's where people live. It where energy comes from. It's where food comes from. Even animals fight over territory. 

Animal territory has no value. For something to have value you need a social contract and legal system that says that the owner of the land is whoever paid for it, and if anyone tries to take it by force, the full force of the police and military descends upon them. If whoever owns the land is whoever last won a mano-a-mano fight nearby, it is worth nothing. 
In a post-apocalyptic scenario where society has collapsed and all equities have "gone to zero", land has also "gone to zero". 
If you disagree, I have some Zimbabwean land to sell you. Don't worry about those Zanu PF members over there, just buy the dip!
In a pre-apocalyptic scenario the value of land fluctuates like any other real asset, and the statement "land is risk-free" is nonsense, which can be trivially verified via any number of property indices.

Type_45

Malthusian said:

Type_45 said:

Land will always have value. It's where people live. It where energy comes from. It's where food comes from. Even animals fight over territory. 

Animal territory has no value. For something to have value you need a social contract and legal system that says that the owner of the land is whoever paid for it, and if anyone tries to take it by force, the full force of the police and military descends upon them. If whoever owns the land is whoever last won a mano-a-mano fight nearby, it is worth nothing. 
In a post-apocalyptic scenario where society has collapsed and all equities have "gone to zero", land has also "gone to zero". 
If you disagree, I have some Zimbabwean land to sell you. Don't worry about those Zanu PF members over there, just buy the dip!
In a pre-apocalyptic scenario the value of land fluctuates like any other real asset, and the statement "land is risk-free" is nonsense, which can be trivially verified via any number of property indices.

This chestnut again.  The only apocalypse which will happen if stocks go to zero will be the portfolios of investors.  Yet those investors want the rest of us to believe that we all go down if their portfolios go down.  It's nonsense.

In the 2008 crash, years before I was an investor, I didn't even know that stocks went down by 50%.  It was just a normal day.  Sun still came up.  Birds sang as usual.

MK62

Type_45 said:

MK62 said:

The thing is, all this is armageddon talk......for a well diversified equities portfolio to fall to zero, as Linton said, would mean a total collapse of the world as we know it......no more companies, no supermarkets to buy anything in, nothing for them to sell even if they did still exist as there'd be no companies left to make anything for them to sell......
Individual companies will rise and fall, some will disappear......nobody would argue otherwise..... that's why you don't invest in just one or two companies.
Incidentally, a US investor who bought gold in 1980, would, on an inflation adjusted basis, still be waiting for it to go back up today, 42 years later. A UK investor would have fared better, but this would have been mostly down to GBP v USD, rather than gold itself......

I don't agree with the premise of your argument.  That being that a collapsed stock market means Armageddon.  

Investors may want to portray it as such to scare everyone into keeping the gravy train going so that they can personally profit from it.  But in reality the only Armageddon would be investors' portfolios.  

If you're talking about what impact a collapsed bond market would have, that's a whole other conversation.  The bond market is 20x bigger than the stock market.

The equity "stock market" has never fallen to zero.....for it to do so would indeed mean financial armageddon......all companies would have become worthless....and as long as companies are trading and making any money, or have the potential to make money, they will never be worthless.....the shares may crash of course....maybe even 80 or 90%, but if they all become worthless, it's game over.
incidentally, if a company is worthless, how would it pay it's bondholders, as by definition if it has any money, or any potential to make any money, it's not worthless.....

Type_45

MK62 said:

Type_45 said:

MK62 said:

The thing is, all this is armageddon talk......for a well diversified equities portfolio to fall to zero, as Linton said, would mean a total collapse of the world as we know it......no more companies, no supermarkets to buy anything in, nothing for them to sell even if they did still exist as there'd be no companies left to make anything for them to sell......
Individual companies will rise and fall, some will disappear......nobody would argue otherwise..... that's why you don't invest in just one or two companies.
Incidentally, a US investor who bought gold in 1980, would, on an inflation adjusted basis, still be waiting for it to go back up today, 42 years later. A UK investor would have fared better, but this would have been mostly down to GBP v USD, rather than gold itself......

I don't agree with the premise of your argument.  That being that a collapsed stock market means Armageddon.  

Investors may want to portray it as such to scare everyone into keeping the gravy train going so that they can personally profit from it.  But in reality the only Armageddon would be investors' portfolios.  

If you're talking about what impact a collapsed bond market would have, that's a whole other conversation.  The bond market is 20x bigger than the stock market.

The equity "stock market" has never fallen to zero.....for it to do so would indeed mean financial armageddon......all companies would have become worthless....and as long as companies are trading and making any money, or have the potential to make money, they will never be worthless.....the shares may crash of course....maybe even 80 or 90%, but if they all become worthless, it's game over.
incidentally, if a company is worthless, how would it pay it's bondholders, as by definition if it has any money, it's not worthless.....

I'm not interested in labouring over whether stocks go to zero, -90% or -80%.

The point of the interview I posted remains:  retail investors are taking those risks with the majority of their investable money.  The wealthy are not.

This smokescreen about how "if my portfolio goes to zero (or close to it) we're all going to be eating roadkill and fending off roaming gangs" is nonsense.

Section62

Type_45 said:

In the 2008 crash, years before I was an investor, I didn't even know that stocks went down by 50%.  It was just a normal day.  Sun still came up.  Birds sang as usual.

50% isn't zero.