Posted by roberdam 4 days ago
Especially the opening line:
"“What comes with the milk, leaves with the soul” — Russian proverb."
I love a good proverb. This one goes hard.
Now if only there’s an app that can teach delayed gratification.
I mean of course I understand that the phone can be removed by the suction mount, but thus also defeats the idle infotainment concept.
Also seen screen burn in...
“The first national bank of dad” is a book that suggests a similar approach and I believe it also advocates a 15% interest rate.
https://www.investopedia.com/ask/answers/042415/what-average...
And on top of that there's huuuuuuuuge variance over time. You have to scale in and out of the market over a very long time to actually get the ~7%. Any one time investment is just a straight up gamble. It's only in aggregate over a long time that you get something somewhat reliable. But then the numbers aren't that impressive. I understand why people are so fond of buying bigger or second houses instead. It's a shame because it drives up the price of housing making it less available for our young. We're basically saving for our future by robbing the future of our young. It's pretty dark to be honest.
But without leverage, long run return of residential real estate is like 3% after costs, which is less than equities but above bonds.
At least that’s what I tell myself as I go to sleep in my apartment, a non-homeowner watching people accumulate serious paper gains in their houses ;(
Source: a paper called the real return on everything.
The paper "the real return on everything" notably cuts off in 2010 and is talking about global averages, if you narrow it down to specific countries we can see stark differences. In the USA and UK you get 8.4% and 7.2% returns on equity, but only 6.03% and 5.36% returns on housing, a stark difference. Adding in mortage leverage adds on about a percent or so of return, thus still not bringing housing in-line with equities.
If we narrow our window to post 1980, we see in the UK returns of 9.34, 6.81 and 6.67 % for equity, housing and bonds. If we look at post 2010 in the uk, house prices have only stayed the same or decreased in real terms since then in the uk for instance, whilst equities have soared.
They also in the paper assume bond yields are roughly the same as mortage interest rates, which maybe was true for their data period, but hasn't been true since 2010 (https://www.housepricecrash.co.uk/forum/uploads/monthly_2022...)
Finally you can diversify equities globally, you cannot diversify your housing globally (if using leverage in a mortage).
While the housing market as a whole may go up, the likelihood that any individual house will go up probably varies more.
How do you get that much leverage from a brokerage to invest in equities? In the US we have something called Reg T, which basically says brokerages can only lend at 2:1 against securities in most cases.
Even most leveraged ETFs will generally stop at 3X.
Effective interest rate is something like 7-10%
> As my eldest son’s birthday was approaching, we suggested that instead of asking for physical gifts, he ask for their equivalent in money. That way, he gathered a decent amount of capital for his first investment adventure.
Yes, why would you want a toy or a book? Why waste time having fun or learning? You could instead watch a number go up slowly while you do nothing. Fun for the whole family, seconds at a time!
> Each day, as they watch their small fund grow, they grasp the magic of compound interest — and that, more than any gift, is a lesson I hope will stay with them for life.
This feels like raising finance dude bros and gambling addicts. There is no “magic” to compound interest, no one should have “watch money accumulate” as a life goal.
This seems hyperbolic. Given that money doubles in roughly 10 years at a 10% rate of return, if kiddos are 10 years old they get two doublings by 30. To be a millionaire by 30 requires a present value investment of $250k per child.
That’s not what the article says. I explicitly quoted the relevant part. It’s not “a portion of their money”, this is not money they had lying around in an envelope that grandma gave them. This father is incentivising the kids to not get what they want for their birthday and instead ask for money with which they’ll do nothing but unrealistically watch grow for a period of time. That’s not a good core memory, no one looks fondly on “that birthday I had as a kid where I got nothing but a number on an app stated growing at a snail pace”.
> doesn't suddenly make investing bad.
That’s not the argument. Nowhere in my comment does it say investing is bad.
> This is such a wild take.
Any take is wild when you blatantly misrepresent it. Don’t straw man.
Also, learning to use Excel by playing fantasy stocks during the dot-com bubble, and having a Lycos homepage “Portfolio” widget just like my mom did is a fond memory for me, and zero people on Earth would call me a finance bro today.
> we suggested that instead of asking for physical gifts, he ask for their equivalent in money.
For their equivalent. In other words, the kid has to decide something they want then deliberately choose to not get it so they can “invest” it and see line go up.
It would’ve been different if this had instead been a case of “grandma just gave you an envelope with cash; if you don’t have plans for it, how about investing?”. Which works on many levels, they could’ve also spent some portion of the money on something they wanted then invested the surplus, or a myriad other options.
yeah definitely no learning happening here
> You could instead watch a number go up slowly while you do nothing.
and then...spend it on something nice?
> This feels like raising finance dude bros and gambling addicts.
This is a super reactive take speaking from no experience whatsoever. My own parents did something like this for us when we were in elementary/middle school and it taught me restraint in spending, not the opposite.
You have no idea what my experience is, please don’t assume.
> My own parents did something like this for us when we were in elementary/middle school and it taught me restraint in spending, not the opposite.
I’m glad it worked out for you. Truly. But don’t assume your experience is universal, because I unfortunately know for a fact it’s not. Also, the argument isn’t that it causes unrestrained spending, that’s not what financial dude bros are about. Excessive restraint in spending can also lead to unhappiness and an unhealthy attachment to money.
Then orchestrate an artificial bubble and crash
When older we can teach them what capitalism considers as investment. Capitalism is a longer word for greed. Money doesn’t work. Employees do. Customers pay. Both suffer to make greedy persons rich.
Give them a piggy bank. Teaches the concept of preparation.
To avoid things becoming evil, you just need to make sure that your interactions with other are cooperative and not zero sum, and not all investments are zero sum.
That's to say, I strongly disagree. It's almost never too early to teach this to children. As soon as children know money could be spent on exchange for things, they should begin to think about how money is made.
... but then again, animals also rape and murder each other. Is rape a part of human nature? I don't know, but I know we don't want it.
But we’ve brains and are social entities. I don’t think greed is necessity. But greed of other harm our needs. And we need to get greedy to get enough?
Examples: I want a nice bicycle. I need small house or nice flat. I enjoy good food from time to. I’m rather sure I don’t need a super-yacht, no swimming pool and no villa. I think stuff which I cannot keep myself clean is too much. If I cannot keep it clean myself it was greed?
But we’ve big dreams?
For the big dreams I would probably consider a cooperative society. These airliners are so expensive and suffer from not being used. Sharing them would be nice? Like…like owning airline stocks. Without the enforcement to gain money. Maybe some people enjoy flying it around, other maintaining it and others care about safety and passengers. Others maybe want fly to the moon. And others enjoy ships. Maybe sharing them deliberately makes sense?
I don't want to work until I'm dead. If that makes me greedy, so be it.
