While I agree with an indexing approach and follow one myself, classifying this in the same vein as income is a bit misleading, as another reply pointed out.
While income from side jobs can be irregular, returns from investments mainly concentrated in equities can be more volatile.
Volatility in the S&P 500 (as measured by the VIX) has been relatively quite low for the past few years, other than a few marked events. (US debt ceiling crisis, etc.) A chart of the S&P 500 shows more-or-less an upward trend over the past five years; certainly since the beginning of 2013 there have hardly been any wild swings.
This can lull investors into a false sense of security about the distributions of returns; just because returns have been steady (i.e. low volatility) over the past few years does not mean things will remain this way.
I don't dispute the long-term average yearly return of ~8%. What I am saying is that, as with many other things, averages don't tell the true story. One year, you could be down 30-40% in equities and another you could be up 30%. Getting a constant 8% return every year is unlikely.
For some long-term investors, they aren't concerned about the volatility and this is a perfectly rational thing. However, there are some people who cannot bear the volatility of such investments and will be in constant worry. Such individuals would likely have to apportion a higher percentage of their to less risky assets and perhaps miss out on some overall return.
I heard of many people freaking out just because the mini-correction that happened in mid-October. These sorts of people aren't cut out to be investing like this as they will panic and sell during downswings.
While income from side jobs can be irregular, returns from investments mainly concentrated in equities can be more volatile.
Volatility in the S&P 500 (as measured by the VIX) has been relatively quite low for the past few years, other than a few marked events. (US debt ceiling crisis, etc.) A chart of the S&P 500 shows more-or-less an upward trend over the past five years; certainly since the beginning of 2013 there have hardly been any wild swings.
This can lull investors into a false sense of security about the distributions of returns; just because returns have been steady (i.e. low volatility) over the past few years does not mean things will remain this way.
I don't dispute the long-term average yearly return of ~8%. What I am saying is that, as with many other things, averages don't tell the true story. One year, you could be down 30-40% in equities and another you could be up 30%. Getting a constant 8% return every year is unlikely.
For some long-term investors, they aren't concerned about the volatility and this is a perfectly rational thing. However, there are some people who cannot bear the volatility of such investments and will be in constant worry. Such individuals would likely have to apportion a higher percentage of their to less risky assets and perhaps miss out on some overall return.
I heard of many people freaking out just because the mini-correction that happened in mid-October. These sorts of people aren't cut out to be investing like this as they will panic and sell during downswings.