(no subject)

[cblj_backup]

Man, economics is hard.

Nourishing the brain is a constant process, especially for someone like me whose brain does not retain stuff very well. One of the ways I find new stuff to temporarily pack into my head is through inherited magazine subscriptions from people who don't work here anymore. Currently I "subscribe" to ARTnews, The New Yorker (I think this one's about to expire), and Fortune. Could be worse, could be Forbes. Seriously, fuck Forbes.

But I do read Fortune, because it's about economics, and I don't know much about economics.

There are very few things I can't comprehend at least a portion of, if I put my mind to it, but anything past long division is a mystical ancient rite to me. Economics stands at this weird midpoint between sociology and mathematics, which makes it a struggle, but not downright impenetrable like most math is.

I mean, for example, I don't understand the stock market. But then apparently nobody else does either, so I feel heartened. I find it kind of hilarious that our entire economic system is based on something that reacts to mass emotion, but I suppose there's a certain romance in that. I'm less amused by the fact that all my 401K investment information reminds me that investing is risky and I could lose money. Really? That's great, because I'm being legally forced to gamble 3% of my yearly income on it. Who thought up that genius plan? So I treat that money like it doesn't exist, and that makes investing a lot more fun.

I do spend a lot of time googling stuff like "what is a national interest rate" and "how do dividend stocks work". I sure hope the internet's not lying to me.

Comments

[concretesphinx.livejournal.com]

You don't have to invest in the stock market with your 401K if you don't want to. Usually when people are younger they put your money in the stock market because it's high risk/high return and you can afford to take more risks when you don't need the money for a while. But you absolutely can talk to the investment company that handles your retirement account and have it put in bonds and securities and funds that have little to no risk with a lower potential return.

[copperbadge.livejournal.com]

Well, no, but even bonds apparently aren't secure? I have a "safety" bond that I shift money into periodically, but even that has the warning notice on it.

[mediumajaxwench.livejournal.com]

There are no guarantees in investing, unless you're putting everything in a savings account insured by the federal government, and even then there's always a small chance that the government will do something extremely stupid and kill the FDIC. If there weren't any risk there wouldn't be any return, but you need the return in order to make up for the loss of value due to inflation.

The best way to make sure yourself secure is to make sure your portfolio is diversified - so that the small chance of losing money on anything is spread out among a lot of anythings. This doesn't just mean having lots of different kinds of stocks, but having some stocks and some bonds and some securities, and different kinds of each and so on.

And take comfort that you're saving now, time gives you security too because the stock market does gain lots of value over time. See the graph in the middle of this page (http://www.freerepublic.com/focus/f-chat/2085951/posts) for an idea of how it gains value over time. You may lose money in the short term, but not as much as you will make in the long term, which you can see because the stock market as a whole has gained a lot more value in the last twenty years than it lost in even the most recent really nasty recession.

Because money is itself a giant fiction that we tell ourselves about how things have value, it's not something that you can ever derive one hundred percent total certainty of security from. But you can get pretty close by diversifying and investing early.