80% of it is the world's largest and longest-running Ponzi scheme. Because it's a Ponzi scheme, it brings negative expected value (maybe the other 20% cancels it out, maybe not). But because it's the world's largest and longest-running, you'd better participate because the chance it collapses at the exact moment you didn't invest but everyone else did is pretty low, and you can't let them outcompete you in the short term. You have a significant chance of not being the bottom tier of the Ponzi, unfortunately. If you do invest and it does crash, you're no worse off than everyone else.
That's for general market trends. Individual stocks also make no sense. You could buy and hold some very stable company's stock but you're making a relative pittance compared to just, like, changing jobs or something. Expected compound interest is not high enough to justify the risk of a catastrophic crash; also if you think a crash will happen any time in the next forever, you're better off holding cash or low-risk bonds until after the crash and jumping in then, as that will more than make up for the compound interest you make up on.
In the past, compound interest has been significantly higher than expected, and very much worth it, but only due to survivorship bias. There are many reasons to think the next 60 years won't be anything like the last 60.
>Expected compound interest is not high enough to justify the risk of a catastrophic crash
That's just not the case. It may be a lower yield world, but you can still find companies with relatively stable and growing 10-15% cashflow to EV ratio even in the US. Outside of the US old-school "easy" Value is still very much alive as well.
What you were advocating for is market timing, and market timing demonstrably does not add alpha unless it's done very mindfully, mostly because the opportunity cost of sitting out is great. If you look at core alpha sources through a factor lens like trend following, most of the profit comes from participating in the big trends (read, most of the easy returns come from "expensive" getting "more expensive/"overbought"). From another lens that takes into account fragility/crashes - vol trading - selling vol is paradoxically highest sharpe when vol is low and most vulnerable to severe disruption.
Part of what you're disregarding is how market participants are far more sophisticated today than they were even 20 years ago. If you're building a 60/40, it doesn't look attractive, but even accounting for survivorship bias, the baseline has risen.
The "crash case" remains relatively similar when it comes to portfolio planning - you need to prepare for 60% crashes, and 10-year "lost decades." The tools to manage that equity risk and still access smooth returns are far more powerful and accessible than they were in the past though.
That's for general market trends. Individual stocks also make no sense. You could buy and hold some very stable company's stock but you're making a relative pittance compared to just, like, changing jobs or something. Expected compound interest is not high enough to justify the risk of a catastrophic crash; also if you think a crash will happen any time in the next forever, you're better off holding cash or low-risk bonds until after the crash and jumping in then, as that will more than make up for the compound interest you make up on.
In the past, compound interest has been significantly higher than expected, and very much worth it, but only due to survivorship bias. There are many reasons to think the next 60 years won't be anything like the last 60.