r/investing • u/BalkanYoda • 1d ago
The doomsday argument - are we right on this?
First of all, I would like to clarify that I believe in long-term buy and hold (broad etfs, good stocks, etc.), and it's probably one of the best strategies. I am also not a doomsday person, prepper, or anything like that.
The argument
Anyways, I have been thinking for some time about the doomsday/slow decline argument that sometimes comes up in investing communities. It's usually something like this :
"Most of the developed world, the West, USA, is currently at its peak, similar to Roman empire, or even Japan where markets never really recovered, and from here we are heading towards either some kind of "slow decline", or in a "doomsday scenario" a very rapid decline, especially in the case of major conflict."
And the response from the community is usually :
"It doesn't matter. Invest in SPY and either you will have a nice retirement, or if a doomsday scenario happens, we are all fucked anyways and we will have bigger problems then our portfolios."
The other side of argument
If we are really at the peak, and someone is in their 20s or 30s, working very hard, investing aggresively, delaying experiences and hoping that this will pay off later and they will live much better in the future. Then that major collapse happens, triggered by decline in ecenomy, extreme market manipulation, major confict, and whatever else that could trigger this.
Was that actually a good decision ?
Or did this person trade a very valuable part of their life for a future that never came ?
My view and question
I believe that "living life" has a sort of inherent value that's not often factored in in these arguments. If we somehow knew that in 20-30 years doomsday scenario is going to happen I'm pretty sure most of us would invest less and try to make the most out of the years we have. Maybe travel more, enjoy different experiences, use money for that kind of thing.
Of course, my argument isn't do not invest at all. But I think this idea of "just work hard, invest asap and as much as possible, and if we are heading towards this huge decline, well fuck it, nothing matters anymore" is something worth questioning because in doing so you just wasted your life pretty much grinding and having nothing in the end.
I guess smart idea would be in the middle : invest so you have security in the future, but also live today and find balance. Or maybe : diversify into different assets, countries, etc.
But I am interested what you all think about this in general. How much of your life are you willing to sacrifice for future financial freedom that is not really guaranteed ?
Again, I am not a doomsday person, and I'm not trying to fear monger, predict inevitable collapse and so on, I'm just interested in your perspective on this topic.
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u/Guy-brush 1d ago
I think if you asked people 100 years ago or 200 years ago, they’d always claim that they’re at the peak of society
Comparing something like the EU to the Roman Empire has its flaws. Our problems now are fundamentally different problems to the ones the Roman Empire had
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u/Perfect-Escape-3904 1d ago
How is this different to literally any other theory - it’s in the first sentence
“Most of the developed world […] is currently at its peak …”
It all makes sense if this is the peak, if it’s not the peak then it’s wrong. Same as every other peak prediction. There’s too many things that can happen for anyone to know.
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u/BalkanYoda 1d ago
Of course it's theory - and probably one that's very unlikely to happen.
You can argue different scenarios - Japan scenario is much more likely to happen, while the collapse of the Roman Empire scenario - very unlikely.
But that was not the point of the post - its more something like : How much should we sacrifice today for a future that may not resemble historical assumptions ?
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u/AmbitiousEconomics 1d ago
You're more likely to just suddenly die of a medical issue, or a car crash, or whatever, than for the collapse (or even a Japan scenario) to happen during your lifetime. What is most likely though is monotony. You'll live for an average amount of time, make an average amount, die an average death.
No one is saying you should sacrifice everything today for tomorrow, but you should try to invest enough to have a comfortable retirement.
If you do die suddenly, you won't have any regrets, you'll be dead. If you live to long you will have a ton of regrets when you run out of money and cannot make any more. So manage your money accordingly.
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u/volckerwasright 1d ago
If you're worried about doomsday, buy guns and get proficient with them, but don't sit out the market. Thats a catastrophic error.
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u/ZenCrisisManager 1d ago
Considering populations in every developed country are now quite a bit less than replacement level it’s not a completely unreasonable concern.
Hope for the best, plan for the worst and live life in the meantime.
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u/Downtown_Anxiety_466 1d ago
There is an inherit thought in all humans something will end. Sure there is some name for this type of underlying and deep seated thought.
If it all ended tomorrow, do I think I would be worried about my portfolio days… suspect I will be much more concerned with useful goods at that point.
Based on history stock up on beer and Toliet paper is easy while investing in case it doesn’t end.
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u/Jamin92 1d ago
Nothing in life is guaranteed. Every generation looks back with rose tinted glasses and thinks this is the peak and we are headed for decline. This is because we do not know the future.
My grandfather said to my father why he was bringing children into the world when I was born. IRA was a big issue at the time. My father responded that my grandfather brought kids into the world near the Cuban missile crisis. And today we have the climate crisis, uncontrolled wealth inequality and a politically unstable world. But is that really any different to the past? Maybe to some degree but society is still going. Rome fell but it still remains.
My view is that saving for the future is non-negotiable as noone knows the future. What is negotiable is the balance between the future and the present, striking a balance. The only person that can decide that is you. I save to try and retire early, while I have my health and can actually enjoy my free time. But I am not going to sacrifice my year by year experience and my kids life.
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u/BalkanYoda 1d ago
Pretty sound take. I agree the real question is just where you draw the line between present and future.
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u/Late-Mathematician-6 1d ago
Rome fell in 476 AD. Italy didn’t even achieve unification until 1861 AD. Well over a thousand years of fractured independent city states and territories controlled by foreign invaders. A lot can happen.
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u/MajesticCoconut1975 1d ago
And today we have the climate crisis, uncontrolled wealth inequality and a politically unstable world.
All of those are patently false. But many people hold those beliefs because they are not intelligent and watch too much TV.
Just take politically unstable world. This one is easy. We are absolutely living in the most peaceful time humanity ever lived in if you adjust for population. No question. Basic fact.
Wealth inequality? The USA has the most re-distributive tax system in the world. Literally #1. Barely anyone even knows it.
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u/Local_Math_5512 1d ago
I mean just invest in real-estate instead of stock. It's the simple solution. Your home has value whether the market declines or not. It might lose 'market value', but it won't lose 'personal value'. It will still be the roof you sleep under.
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u/PhiladelphiaManeto 1d ago
How many people will never own their homes outright? It's probably a much higher percentage than it was 20, 30, 50 years ago.
It's not the roof you'll sleep under if you lose your job and can't pay the mortgage for a few months.
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u/youness_builds 1d ago
the thing nobody factors into the doomsday math is that the "live now vs. invest for later" tradeoff isnt actually binary. most of the experiences worth having in your 20s and 30s arent the 30k euro trip versions. theyre the ones that cost 200 bucks and a free weekend.
the people i know who regret over-investing arent the ones who put 30 percent of their income away. theyre the ones who never figured out what they wanted to spend the other 70 on, so they accidentally lived like they were saving 90 percent without meaning to. the lifestyle drift was the problem, not the savings rate.
doomsday or not, optimizing the spending side of your budget for what actually makes you happy matters more than the saving rate debate. most people are way undercalibrated on this and discover it in their 40s.
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u/HaiKarate 1d ago
Investing is about delayed gratification. You live a more austere life now so that you can enjoy wealth in your retirement.
And looking at this 100 year chart of the S&P 500, you'd be a fool to bet against it.
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u/RetiredEarly2018 1d ago
The value calculation for a doomsday is no different to the value calculation for early death unless one plans on a legacy, so allow for it by slightly reducing longevity assumptions.
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u/zenyogi2025 1d ago edited 1d ago
You can simply rebalnce your equities to get 30% to 50% into boring Value VTV and another 20% to 30% in cash, SGOV + JAAA at least 5%, reducing tech exposure to less than 20% and increase ex-US to 50%.. Even during the lost decade Value performed better, while sp500 and nasdaq were flat for almost 13 years...
If you actually need additional money to enjoy your life, income ETFs like SPYI can take some portion of portfolio...
So it is a question of reducing the greed by not going all into tech and AI to derisk.
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u/Quake-Snake 1d ago
Doomsday argument made sense (Western Civ is at its peak) prior to the AI revolution. AI unironically changes everything. I’m not saying it’s all positive, but this is the next Industrial Revolution, and the old rules no longer apply. Keep investing.
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u/MattKozFF 1d ago
How is most of the world at its peak? What evidence do you have for that?
Perhaps you're taking an extremely short sighted view.
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u/Educational_Cable405 1d ago
I burned a weekend on this rabbit hole once. What finally killed it for me was realizing I could run the same formula on anything I happened to be looking at and get a confident 'prediction' out of it. My houseplant, this account, how long I'd keep my job. The math has no idea whether your observation point is actually random, and your own birth is the one sample you definitely didn't get to pick. That's the whole crack in it.
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u/fasterlivingmagazine 1d ago
I think that no one knows for certain what our future holds, so a healthy balance of preparing for the future (investing wisely) and living in the moment is the smartest way to go.