Small losses in investments vs. inflation.

[UpTober]

Small losses in investments vs. inflation.

I have thought about this issue a lot and it is clearly evident in people's behavior that people are keeping money in the bank and the value of that money is gradually decreasing due to inflation. People do not have any tension about this issue but people get tense when they invest and after investing when they see that they are losing some amount due to temporary negative changes in the market. Yes, there may be some loss due to temporary changes in the market but that market becomes positive again, but why don't people worry about the amount of value they are permanently losing in fiat due to inflation. I think the permanent loss of inflation is much more serious than the small loss of investment.

[Faisal2202]

Hahaha. That's the trick, bro. When you are losing money to inflation, it does not even feel like you are losing because the number in your account stays the same. You must have seen that when people were visiting their dashboards during the Binance hack, they were seeing their money there, but that was just on the dashboard. There was nothing at the back. It's the same when you are losing money to inflation. You are actually influenced by the numbers. Imagine if the funds had not been there during the Binance hack.

Also, bro, there is a huge difference between losing money through investing and losing money due to inflation because inflation is not that volatile compared to your investment pair. For example, BTC is more volatile, which you can't argue with. But it depends on the currency, the economy, and the country when talking about inflation, and on the asset class when talking about investment.

So basically, it's all about a visibility problem, not a logical problem. Most people don't even care about inflation. They are okay with losing money, even if they don't realize that they are losing purchasing power. So I think it's more of a psychological impact of the visual numbers on the screen,

[Y3shot]

If you are investing in assets such as Bitcoin and the price of the market drops, this doesn't mean you have lost, except when you decide to sell your coin due to panic; this is when you have lost. When the market falls, it is not a loss; it is even an opportunity for you to accumulate more Bitcoin, but many misunderstand this and take it as a loss.

Inflation will not take any fraction out of your money. It is possible for the amount to be the same, but the value of the money can never be the same over time. However, people don't think of this; they only panic when they see a decrease in their money when the price of Bitcoin falls.

[Hypnotizer]

Small losses in investments vs. inflation.

I have thought about this issue a lot and it is clearly evident in people's behavior that people are keeping money in the bank and the value of that money is gradually decreasing due to inflation. People do not have any tension about this issue but people get tense when they invest and after investing when they see that they are losing some amount due to temporary negative changes in the market.
~

That’s just how human psychology works, because the investment fluctuation brings more uncertainty to the mind of the investor about the future while “saving in the bank” appears to be a safer side because of the certainty involved.

Inflation doesn’t happen overnight in most scenarios, it happens gradually and it’s often unnoticeable by most people, that’s the reason why people have peace of mind saving money while getting tense during a downturn in their investments.

[Joy_learns_crypto]

Small losses in investments vs. inflation.

I have thought about this issue a lot and it is clearly evident in people's behavior that people are keeping money in the bank and the value of that money is gradually decreasing due to inflation. People do not have any tension about this issue but people get tense when they invest and after investing when they see that they are losing some amount due to temporary negative changes in the market. Yes, there may be some loss due to temporary changes in the market but that market becomes positive again, but why don't people worry about the amount of value they are permanently losing in fiat due to inflation. I think the permanent loss of inflation is much more serious than the small loss of investment.

Could be safety, no guts to get daring or take risk, contentment with more earned maybe from a nine to five work and they only money they know how to get is their salary, it may have not got them to be wealthy but it has kept them going, they handle even more jobs to fund a moderate life for them and raise their family so any other route may to them be too risky.

In addition they could have heard about one person who lost everything to investment and that one person creates the prison they put themselves into, it's not about small losses vs inflation it's about uncertainty vs what they have been used to.

[SamReomo]

I have thought about this issue a lot and it is clearly evident in people's behavior that people are keeping money in the bank and the value of that money is gradually decreasing due to inflation. People do not have any tension about this issue but people get tense when they invest and after investing when they see that they are losing some amount due to temporary negative changes in the market.

People still believe in fiat more than any investments that is why they keep their money in banks, majority still don't know much about inflation and devaluation of a currency they only think that keeping their money in bank as fiat is safe.

If they don't change their mindset they won't be able to invest in assets like Bitcoin that can give them better profits in long term.

A good advice for investors is to invest and forget about your investment for a few years. Either you'll lose money from that investment or make good money from it. Those who invest and forget always end up making the most profit from the markets.

[tsaroz]

Small losses in investments vs. inflation.

I have thought about this issue a lot and it is clearly evident in people's behavior that people are keeping money in the bank and the value of that money is gradually decreasing due to inflation. People do not have any tension about this issue but people get tense when they invest and after investing when they see that they are losing some amount due to temporary negative changes in the market. Yes, there may be some loss due to temporary changes in the market but that market becomes positive again, but why don't people worry about the amount of value they are permanently losing in fiat due to inflation. I think the permanent loss of inflation is much more serious than the small loss of investment.

The two things are not directly comparable. People don't have personal control over inflation and they need savings, the loss of value due to inflation is minute and they know of the risks. While the impermanent loss on holdings during trading may have more immediate effects, for short term traders, the impermanent losses could become permanent quickly and for the long term traders too, it may limit the amount they'll be using to trade. Furthermore, the value you hold too suffers inflation as for almost all traders, the conversion is from fiat to crypto and back to fiat. i.e. buying some coins at $100 today and selling at $120 4 years later is also a loss with same inflation that affects your bank balance.

[Don Pedro Dinero]

Small losses in investments vs. inflation.

<...>

 I think the permanent loss of inflation is much more serious than the small loss of investment.

When you talk about a ‘small loss’, do you mean selling? Because it sounds as though you’re referring to unrealised losses – in other words, you’ve invested in Bitcoin, the stock market or gold, you see the price fall below what you invested, and you regard that as a loss. But if you don’t sell, it isn’t a real loss. So yes, it’s worth investing for the long term to beat inflation, and to ignore the dips. What’s more, if you practise dollar-cost averaging (DCA), even during major downturns you’ll still be in the black overall.

[Fortify]

Small losses in investments vs. inflation.

I have thought about this issue a lot and it is clearly evident in people's behavior that people are keeping money in the bank and the value of that money is gradually decreasing due to inflation. People do not have any tension about this issue but people get tense when they invest and after investing when they see that they are losing some amount due to temporary negative changes in the market. Yes, there may be some loss due to temporary changes in the market but that market becomes positive again, but why don't people worry about the amount of value they are permanently losing in fiat due to inflation. I think the permanent loss of inflation is much more serious than the small loss of investment.

What type of investing do you have in mind? You can call putting money into a savings account right now (which in many countries is actually above the inflation rate) a form of investing. It's essentially zero risk and giving good returns while the central bank rates are high. However that is wildly different from putting money into the stock market or even dropping money into way more risky ventures like trading alt coins. Every single person has a different risk appetite and tolerance, which is often grounded in their knowledge of the different types of investment options available. Generally most people will have index funds combined with bonds in their retirement portfolio - even if they don't manage it well or know about it. Since you say fiat has an inflation problem, an opposing argument when it comes to Bitcoin in particular it that the pool is capped at 21 million but every day bits of it at lost to dust or become forever unrecoverable for various reasons, which is an unknown amount but it reduces circulation. Some people might consider that a win, but it might actually put people off wider adoption in future due to circulation limitations.. no matter how many decimals you add on the end.

[Bluedrem]

Whenever an investor starts considering short-term losses as long-term losses, he will express dissatisfaction with the behavior of the market. But yes, as you said, fiat currency is constantly losing purchasing power, that is, the value of fiat is decreasing day by day due to inflation, so those who keep fiat deposits, although their amount of money will remain unchanged, may not realize the loss they are facing. But yes, when you invest your money in a business, your business capital will increase over time, which may be able to handle the outbreak of inflation. But it should also be remembered that there are both profit and loss in business, so if there is a small loss, you have to find out how to do better and work on it so that the business can improve more.

[Frankolala]

Human feel save when their money is in the bank even though, the value depreciates overtime. They don't think about that, they're only concerned about the number. If inflation is eating up the value of the money you kept in the bank, you wouldn't know because you don't have a tool to check that. Unlike, bitcoin that the value is shown in USD. You can only know when you want to spend the money but still, you will feel less concerned. The rich ones are more concerned and that's why you see that they invest the money instead, of saving it in the bank.

[slapper]

I dont think laziness or fear are the only reasons, but you're definitely on the right track with the bank stuff. Not so sure about the market always recovering though.

Most people just suck at grasping the significance of slow changes. A stock price plummeting 10 percent in a single day ruins your whole week. A store selling the same product but charging 2 percent more each year goes largely unnoticed. Until one day you discover grocery bills have crept up, and even then you kind of shrug. Economists even have a name for this tendency, the money illusion. People think in terms of nominal amounts. If there's $1000 in your checking account today, and $1000 in your checking account in five years, your mind registers that the amount of your moolah is unchanged. After all, the numbers look the same on the screen, unlike your portfolio.

That's also why, in countries with high inflation rates, people aren't exactly taking it easy. They're running to dollars, gold, BTC, literally whatever will hold its value. That calm you noticed is kind of a stable economy perk tbh.

[Mrbluntzy]

The answer is simple, when the price or value of your asset drops, it will always be indicated in your portfolio that your asset has either dropped by a certain percentage. An example is if you buy a Bitcoin at $80k and the price drops by 20%, you will see it in your wallet but if you have the $80k fiat in your bank account and the value depreciates due to inflation, the negative signs will not reflect in your bank account. Therefore, if someone is seeing that their balance is still the same on their bank account, they will never feel bother but when imagine what will be the persons reaction when the bank sends them an unauthorized $10k debit notification? The person will call the bank immediately to know the reason for the debit, right? That's how some people react when their potential is showing red, they feel that their money is missing.

[Hamza2424]

You are actually influenced by the numbers. Imagine if the funds had not been there during the Binance hack.

Hmm, if everyone saw zero in their dashboards during the hack, no matter how much Binance convinced them that they would replenish the funds, the panic would spread for sure. But everything was contained in a way that even the scriptwriter would not have expected haha. By the way, there are no scriptwriters, that's just a joke.

As social media is full of these memes saying, "In every bear run, a bottom won't be created until there is a big black swan event or a hack occurs." Well, a black swan event had occurred previously, and now a hack too. But I think there is much more to see, maybe dragons haha.

[Z_MBFM]

Small losses in investments vs. inflation.

I have thought about this issue a lot and it is clearly evident in people's behavior that people are keeping money in the bank and the value of that money is gradually decreasing due to inflation. People do not have any tension about this issue but people get tense when they invest and after investing when they see that they are losing some amount due to temporary negative changes in the market. Yes, there may be some loss due to temporary changes in the market but that market becomes positive again, but why don't people worry about the amount of value they are permanently losing in fiat due to inflation. I think the permanent loss of inflation is much more serious than the small loss of investment.

Even if you make a small loss by investing, you will recover it later with profit, but when you keep money in the bank and get interest at a fixed rate that cannot cope with the inflation rate, then keeping money as savings will be more harmful than investing. Investment means risk, so in any investment, you have to accept that risk and invest. And when keeping money in the bank, everyone is sure that his money is safe, but even if his deposited money is safe, the value of his money is not safe. And sometimes it is seen that even in the case of bank bankruptcy, it is not completely risk-free because according to the insurance law, if the bank goes bankrupt, the customer gets a certain amount of compensation, not the whole money. So I think it is better to invest and that is what I do. Keeping money in the bank never seems profitable and safe to me.