Financial Independence Retire Early (FIRE)

[hurfdurf]

Well, duh, of course it would be better if we just get insane growth every year forever and ever. That doesn't seem very likely to me at the moment though. Looks prices are hugely inflated which means a very long period of stagnation or a correction are likely. The point I'm making is if that is going to happen then I prefer correction to stagnation.

Is this not just a case of late stage capitalism. Inflation for the many, but profits funnelled up to the highest of the pyramid. That doesn’t mean these prices are inflated, they represent the massive difference between the companies in a position to enjoy the system as it is?

Or are you saying that yes that may be, but it’s not sustainable?

 

[D.P.]

The Tale of Two Toy Shops​

Once upon a time, there were two toy shops: Crashy’s Toys and Lazy’s Toys. Both shops sold magical blocks that could grow in value, but one day, everyone started saying the blocks were worth too much.

Crashy’s Toys panicked. “Oh no!” said the shop. The prices of the magical blocks fell FAST, like a ball rolling down a hill. For a while, the blocks were super cheap! Kids who brought the same amount of money each week (like little Alex, who brought £5 every Saturday) bought WAY more blocks while the prices were low. When the prices went back up later, Alex had so many blocks that they became rich!

Lazy’s Toys, on the other hand, didn’t crash. “We’ll just wait,” the shopkeeper said. Prices didn’t go up or down much; they just stayed the same. Kids like Alex still bought blocks each week, but they didn’t get as many because prices didn’t drop much. Over a long time, the blocks slowly grew in value, but it took MUCH longer for Alex to grow rich.

---

The Moral:​

If you save and invest every week, you might make more money if prices crash first (like at Crashy’s Toys) because you can buy lots of magical blocks for cheap. But if prices don’t drop (like at Lazy’s Toys), you’ll still grow your savings—it’ll just take more time!

Ehh, you really don't seem to understand how the stock market works at all.


Your example doesn't even make any sense since you seem to imply people are purchasing a physical commodity and hence are getting a discount at "Crashy", but this is false. A stock is a fractional ownership of a company, in Crashy's case the value of the company has crashed so the value of each stock is far lower, that is why you can buy more. This doesn't help you at all.

You have missed the most important part , how the 2 will grow going forwards. And this is where i see you have no understanding. You state of Crashy Toys:

When the prices went back up later,

ehh, how exactly will the prices go back up later? There is no automatic mechanism to do this. The stocks are priced much mower for a reason, to increase to pre-crash value will require growth.

Why do you think the stock price would ever even recover, or how long it would take? What happens if the stock for Crashy never returns to pre-crash value?

Of Lazy you you said

Over a long time, the blocks slowly grew in value

Why would Lazy's stocks grow slowly after the stagnation? Especially given their stock price didn't crash then evidently market investors didn't think their stock was over priced.



Moreover, Can you explain 1 single reason why there would be expected difference in stock growth between the 2? Let alone why this could possibly benefit Crashy vs Lazy.

 

[EvilRob]

ehh, how exactly will the prices go back up later? There is no automatic mechanism to do this. The stocks are priced much mower for a reason, to increase to pre-crash value will require growth.

Why do you think the stock price would ever even recover, or how long it would take? What happens if the stock for Crashy never returns to pre-crash value?

You've answered your own question . We're talking about investing in the market, not an individual stock. Think of Crashy's magic blocks as one "EFT" and Lazy's as another. When a market is overvalued, historically there are two main ways it can be corrected.

In a price decline correction scenario, the crash will bring the price back closer to the fundamental revenue, profitability and growth metrics of companies in the index tracked. The fundamentals of the companies will improve over time and the price will eventually return to and exceed pre crash value. Any ETF units you bought while the prices were lower increased in value and you obtain growth.
In a time correction scenario (stagnation), the price pretty much stays the same for as long as it takes for the fundamentals of the companies to catch up with the over inflated price. When that eventually happens, the price will start increasing again. But the price of any ETF units you bought until that happens stagnated and you did not get any growth during the correction period.

 

[throwaway4372]

There's a few cashback deals for platform transfers atm if anyone's planning a move it seems like a good time to do it.