Assuming you're planning for the long-term, why do people recommend gold or real estate against inflation and not just index funds, which should incorporate changes in the value of currency naturally?
Like, aren't commodities and real estate more prone to random shit happening?
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@ZachWeinersmith
The people who do the recommending stand to make money if other people buy those things.
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@ZachWeinersmith They are. The reason is that people don't understand this.
They have the idea that because there is only a finite amount of gold in the solar system while the govt can create money ex nihilo, the value of gold in inherent due to scarcity, while the value of money is just a meme. They are correct about money, but fail to recognise that gold is ALSO only valuable because we all agree it has value.
And real estate is just stock that you can grow food on.
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@Infrapink @ZachWeinersmith well, and that'll keep you from getting wet in the rain, cold in the winter, etc. Real estate does have some intrinsic value
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@Xoriff @Infrapink @ZachWeinersmith … being eaten by wild animals, or captured by IRS agents (maybe)
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@ZachWeinersmith
As an employee in the gold mining sector, I’d appreciate if you kept these kinds of questions to yourself. Thank you for understanding.
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@ZachWeinersmith absoLUTEly. To me, it’s more about the goldbug balancing internally all their disparate mistrusts of their financial system. Sprinkled with a soupçon of magical thinking.
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@aizuchi I wonder about that. Like, buying index funds is just too boring for people who have visions of a scary future? Or seems too obvious to be the smart move?
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@ZachWeinersmith People recommend gold because they think gold is Magic somehow. (Having spent ages in and around the financial industry, it really and truly is Magical Thinking and untethered from reality. Or even the fantasy they're Magically Thinking about, which is just... :facepalm: )
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@ZachWeinersmith The push for real estate is largely backward thinking. Folks see rich people and notice they have a lot of real estate and think the path is "real estate -> rich" rather than "rich -> real estate".
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@wordshaper @ZachWeinersmith
If gold were truly as valuable, why do these gold companies sell their stock for mere fiat currency? They must be saints, sacrificing their future wellbeing to save these savvy investors.
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@rk @ZachWeinersmith One of the many inconsistencies in the goldbug worldview! Also the fact that it's not been an actually-that-great investment over time, or that if an actual apocalypse happens you'd be much better off with farming/craft skills and community connections than a bag of shiny rocks.
At least it makes for good conductors in some circumstances so it's not totally useless.
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@ZachWeinersmith I'd say the general advice IS index funds, goldbugs are increasingly considered weird and wrong. Real estate, all I can say is 2008 + COVID + any fix to the US housing market would by definition drop housing prices by a good amount or at least stop them from rising.
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@TheZeldaZone @ZachWeinersmith
The thing I like about owning a house is that I get to live there. YMMV, of course.
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@Burn_this_ usually people mean investing in real estate stocks, though unfortunately directly buying homes is considered an "investment" which is a large part of the current housing problem in the US
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@ZachWeinersmith gold and real estate seem like... somewhat separate categories here? like, as far as i can tell, gold functions mostly as a scam vector under the current dispensation but owning land / buildings... well, there are plenty of real estate scams, but it seems like there's also a reason so many of the generationally wealthy types i meet are sort of vaguely "in real estate" or "development" or just function as large-scale landlords?
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@ZachWeinersmith Yeah preppers think stuff like gold and real estate have "intrinsic value" and if you argue that value is derived from other people needing or wanting a thing they start talking about the end times and how they need to be able to protect their gold and their land with guns.
So, I think it's more that gold and land are tactile and defensible.
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@ZachWeinersmith gold's value increases when the economy is doing poorly whereas an index fund wouldn't. So it's more something that would make sense to do if you're confident a crash is coming (you could also short stocks in that case). Someone who knows what they're doing might have gold as a small part of their portfolio so they don't lose everything if the economy goes to shit. But only someone who thinks tacticool gear is disaster preparedness thinks of gold as a retirement plan.
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@ZachWeinersmith like, most of the time, if you bet against the economy growing you will lose that bet. It's not enough to correctly guess that it will eventually crash. Because unless it's sometime soonish, you probably could have been in a way better place by the time a crash happens by investing in an index fund.
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@ZachWeinersmith Just a matter of scarcity?
Gold and real estate have scarcity enforced by the law of conservation of mass and geography respectively. In contrast, index funds are based on company stock which can be multiplied by decisions of certain people. Ideally, wealthy would rather their money be controlled by no one except themselves.
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@ZachWeinersmith It depends on your threat model. Reasonable financial planning will feature diversified assets, mostly index funds with other stuff sprinkled in (and the random stuff will likely be indexes of, say, commercial real estate). The fundamental assumption is that things will generally continue into the future.
Gold bugs, in contrast, assume the primary threat is societal collapse. Gold, they assume, can be traded, if fiat money had gone away. Why not stock up iguns and ammo, though.
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@ZachWeinersmith I think there's a mis-guided belief that both have "inherent" value and are less subject to government interference or currency manipulation.
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@ZachWeinersmith index funds are boring, uncomplicated, and cheap, so selling them to people can't be made into a lucrative career of augur reading.
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@proprietous We should invent some kind of alloy that's indexed to SPY and sell it to preppers just to save them from themselves.
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@ZachWeinersmith I don't know, dragons seem to be living the dream in their giant mountain dungeons full of mounds of gold
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@ZachWeinersmith
Simple - You can't build a shiny hoard out of index funds!
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@ZachWeinersmith
Gold especially is popular with people who distrust their government.
I bet land also has dreams of being an independent sovereign state attached to it.
Index funds require trusting your states financial regulatory regime, and who wants to do that.
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@ZachWeinersmith
For the preppers who expect a collapse of civilization, gold and real estate appeal as things that may still have value after stocks and bonds (like cash) become mere pieces of paper. I don't think that this is entirely wrong; the magic of gold is strong enough in our culture that it could survive a collapse; and while a title deed will become worthless paper, land that you live on and can defend (hence the guns) would remain valuable.
But trading these online without taking possession, obviously isn't enough for that. And simply as a hedge against inflation, no. Still, I think that there may be some borrowed cachet from preparing for ultimate doom.
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@ZachWeinersmith Magical thinking and being able to have and hold what they own and not something in a bank that can't be accessed when [insert feared entity here] comes for them or their money.
Or at least that is what my conspiracy-minded family member says.
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@ZachWeinersmith one can physically hold gold and physically defend real estate. If you're planning for a true distopian future, your index fund is easier for the government to seize.
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@ZachWeinersmith You can't build a house on an index fund. And gold just looks pretty.
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@ZachWeinersmith
Because in the long term people see corporate malfeasance as more likely than physical destruction of assets?
As my bookkeeper wife says CEO == Chief Embezzlement Officer.
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@ZachWeinersmith
I've heard the term 'Nutjob metals' refer to Gold, Silver, Tin(cans) and lead(bullets) - I'd say it came from watching too much of The Walking Dead, but that's an effect, not a cause.
Feels more like a storytelling problem: people have a hard time visualizing an actual disaster because they make bad stories. How do you get DRAMATIC TENSION over not being able to drink the water or invasive mold?
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@ZachWeinersmith I wish I could get a loan with the same rates and terms for index funds that I could get for a house.
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@ZachWeinersmith
Real estate: "They ain't makin' no more land." Said by people who have apparently never heard of land fill and/or volcanoes.
Gold: Failure of imagination, I guess. As gold bugs have been selling it as a hedge against inflation/currency collapse since at least early last century.
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@ZachWeinersmith If inflation is caused by 'money printing' to pay debts in other currencies, then exit your currency as much as possible (gold). Same if economy's production has fallen (you've been invaded).
If inflation is caused by too much demand (young demographics, capital intensive new tech, exiting war or pandemic) then buy assets tied to a growing economy.
But if you think inflation is always caused by money printing, then you buy gold because your currency is dooomed.
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@ZachWeinersmith
It's useful to have a small amount of capital allocated to something that is not so correlated with the rest of the market. You set allocations (x% in A, y% in B) and periodically rebalance, selling some of what you have too much of and buying what you have too little of. That way, you end up selling what's rising (sell high) and buying what's stagnating (buy low). That works best when there's some variation instead of your whole portfolio moving in lock step.
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