Investments

[Slateman]

So, I started a thread about buying a BMW M3. The response that most interested me was that I should take the money from my next deployment and invest it.

The problem is, I have no idea how or in what. The only suggestion I've gotten is from my uncle, who is good with money. That was invest with USAA in "moderate growth investment account with medium or medium-low risk and the rest goes into a more liquid account like a money market account"

Someone on here suggested buying a house and leasing it out. The problems with that are

1. How do I collect rent if I'm not even in the same state?

2. How do I get something fixed?

3. I can't afford a house, nor a mortgage on one.

We really outta have an investment thread or something

[Mark The Homer]

http://en.wikipedia.org/wiki/Gold_as_an_investment

[da#1skinsfan]

Answers to 1 and 2 are get a property management company to do the work. Answer to #3 is on you...can you afford it? Look for a house in an area where foreclosures are up and selling prices are down. Buy, rent, collect, sell in 5 years. it doesnt sound to me like youve got the type of capital to make this work though.

the stock market is a good investment right now, although I personally feel it hasnt hit bottom. but trying to time the bottom will just force you to miss out. companies like ibm, apple, cisco, etc WILL go back up, its only a matter of time. food companies are a good buy right now too...people need food.

PS get an AMG. F the M3.

[WARLORD1863]

well it all depends what your goal is. Short term (within 5 years), medium term (5-15 years), or long term (15+). These aren't technical time-frames, just something I made up. I'm sure other investors will be more accurate with time frames.

There are different ways to invest for different goals.

[techboy]

http://en.wikipedia.org/wiki/Gold_as_an_investment

Investing in gold is a terrible idea. Gold, historically, exactly keeps up with inflation over the long term. That's what the "men's suit" thing gold bugs talk about means. Thus, it has, over the long term, a precisely ZERO real return. The only way to make money on gold is to succesfully time in and out of it (in before a jump, out before a fall), since in the short term, it's volatile. Unfortunately, study after study (which I have cited here many times) shows that it is effectively impossible to time the market like that. Add in costs (storage, and so on), and it's actually a long term NEGATIVE return.

In terms of investment, time frame IS important. If you're talking 20 or more years, the research shows that your best best is a broadly diversified portfolio of very low cost stock index funds, mixed with the right amount of bonds for your particular need, ability, and willingness to take risk.

Taxes are a factor here, too. You don't want to hold things like bonds or real estate funds in taxable accounts, unless they're munis.

[SC_RedskinsFan]

I invest in real estate Tax sales. You make 3% per quarter till the owner pays the bill. If they do not pay up in a year the property is yours. It ties your money up, but it is a good return.

I bought 37 properties at last years tax sale auction for $140,000.

[McD5]

Investing in gold is a terrible idea. Gold, historically, exactly keeps up with inflation over the long term. That's what the "men's suit" thing gold bugs talk about means. Thus, it has, over the long term, a precisely ZERO real return. The only way to make money on gold is to succesfully time in and out of it (in before a jump, out before a fall), since in the short term, it's volatile. Unfortunately, study after study (which I have cited here many times) shows that it is effectively impossible to time the market like that. Add in costs (storage, and so on), and it's actually a long term NEGATIVE return.

In terms of investment, time frame IS important. If you're talking 20 or more years, the research shows that your best best is a broadly diversified portfolio of very low cost stock index funds, mixed with the right amount of bonds for your particular need, ability, and willingness to take risk.

Taxes are a factor here, too. You don't want to hold things like bonds or real estate funds in taxable accounts, unless they're munis.

Absolutely incorrect above. If the last ten years in the market has taught anyone anything at all, it is that the buy and pray strategy doesn't work.

Even worse than that, is what some fools refer to as "dollar cost averaging", which amounts to buying what is going down, and selling what is going up.

Eventually, you have a portfolio of trash.

Best bet is to learn about market timing, and how to use it to your advantage.

www.vectorvest.com is a good start. They run a mini mutual fund of stocks.....never more than ten at a time, have never done worse than any of the market averages in any of the last fifteen years, and have returned roughly 85% each year over the most recent five years....while the buy and hold people lost their ass.

They don't recommend penny stocks......and will provide a comprehensive breakdown of every stock in the country.....as well as exact buy and sell points.

That is a great place to start. After that, if you have the time, you can improve even more through other market timers.

Good luck.

[da#1skinsfan]

I invest in real estate Tax sales. You make 3% per quarter till the owner pays the bill. If they do not pay up in a year the property is yours. It ties your money up, but it is a good return.

I bought 37 properties at last years tax sale auction for $140,000.

Can you elaborate on this? Where do you find the auction? What risks are involved? How much of a grace period do they get to pay? Do you know who the owners are and does it matter?

[techboy]

Absolutely incorrect above.

I thought you quit the last time I explained to you the research (and exposed your blatant erroneous information about how Buffet feels about market timing and index funds). Do you want to go over that again?

Well, okay...

The research overwhelmingly shows that market timing usually isn't going to get you anything but higher costs and lower returns.

Here's a good piece by Burton Malkiel, professor of economics at Princeton: Keep Your Money in the Market An excerpt:

It is very tempting to try to time the market. We all have 20/20 hindsight. It is clear that selling stocks a year ago would have been an excellent strategy. But neither individuals nor investment professionals can consistently time the market. The herd instinct is extraordinarily powerful. When the economy and the stock market were booming in early 2000, investors could easily convince themselves that prosperity would continue without interruption and that stocks catering to the "New Economy" were surefire tickets to wealth. Individuals poured more money into equity mutual-funds during the last quarter of 1999 and the first quarter of 2000 than ever before. And not only was the timing wrong but so was the selection of funds. The money flow was directed to the hot Internet funds. Investors liquidated "value" funds that owned less exciting businesses, whose stocks sold at only modest multiples of their earnings and book values.

The herd instinct works exactly the same way in bear markets. Nervous investors convince themselves that every "light at the end of the tunnel" is a train coming in the opposite direction. Panic is just as infectious as blind optimism. During the third quarter of 2002, which turned out to be the bottom of a punishing bear market, investors redeemed their mutual funds in droves. My own calculations show that in the aggregate, investors who moved money in and out of equity mutual-funds underperformed the buy-and-hold investors by almost three percentage points per year during the 1995-2007 period.

Emphasis mine.

Or, let's look at what David Swensen, himself a professor at Yale and manager of their uber-successful endowment has to say about it...

Swensen manages Yale University's endowment. Last year, he made a 28 percent return, adding a whopping $5 billion to Yale's endowment, which is now valued at $22 billion. And that wasn't a fluke: Over the past two decades, under Swensen's watch, Yale's endowment has grown an average of 16.8 percent a year, more than any university, foundation or pension fund.

In scary economic times like this, he cautions that individual investors shouldn't trust their instincts.

"The human tendency in this kind of environment is to do something — to make a change," he says.

Stocks seem risky, especially since they've been falling. Swensen says most people he talks to get nervous and want to sell stocks.

"And that's exactly the wrong reaction," he says. "Buying high and selling low is not a way to make money. It's not hard, right? It's very simple: You want to do the opposite."

Oh, well he's probably talking about amateurs, right? Surely the pros can manage it... Let's look at The Difficulty of Selecting Superior Mutual Fund Performance. The abstract:

-Much has been written about the management of mutual funds and active versus passive management. This study attempts to quantify the relative performance of actively managed large- and mid-cap domestic stock mutual funds with a passive strategy during a 20-year period, including 11 10-year rolling periods.

-During the study period, most actively managed large- and mid-cap mutual funds underperformed their respective passive strategies. While every period under review had mutual funds that outperformed the passive strategy, few funds did so consistently.

-Furthermore, predicting in advance which mutual funds would outperform was difficult, if not impossible, and the cost of selecting the "wrong" manager was high. These factors combined demonstrate the difficulty for financial planners to select superior performance.

-The study also reviewed the impact of taxes on large-cap investments.

Finally, the author provides recommendations for financial planners in discussing action steps regarding clients' portfolios.

Emphasis mine. Hey... if the pros can consistently time the market, why don't any of them produce consistently predicatable results?

Let's ask Professor Malkiel, who wrote a paper entitled The Efficient Market Hypothesis and its Critics. I'll just quote the introduction:

A generation ago, the efficient market hypothesis was widely accepted by academic financial economists; for example, see Eugene Fama’s (1970) influential survey article, “Efficient Capital Markets.” It was generally believed that securities markets were extremely efficient in reflecting information about individual stocks and about the stock market as a whole. The accepted view was that when information arises, the news spreads very quickly and is incorporated into the prices of securities without delay. Thus, neither technical analysis, which is the study of past stock prices in an attempt to predict future prices, nor even fundamental analysis, which is the analysis of financial information such as company earnings, asset values, etc., to help investors select “undervalued” stocks, would enable an investor to achieve returns greater than those that could be obtained by holding a randomly selected portfolio of individual stocks with comparable risk.

The efficient market hypothesis is associated with the idea of a “random walk,” which is a term loosely used in the finance literature to characterize a price series where all subsequent price changes represent random departures from previous prices. The logic of the random walk idea is that if the flow of information is unimpeded and information is immediately reflected in stock prices, then tomorrow’s price change will reflect only tomorrow’s news and will be independent of the price changes today. But news is by definition unpredictable and, thus, resulting price changes must be unpredictable and random. As a result, prices fully reflect all known information, and even uninformed investors buying a diversified portfolio at the tableau of prices given by the market will obtain a rate of return as generous as that achieved by the experts.

The way I put it in my book, A Random Walk Down Wall Street, first published in 1973, a blindfolded chimpanzee throwing darts at the Wall Street Journal could select a portfolio that would do as well as the experts. Of course, the advice was not literally to throw darts but instead to throw a towel over the stock pages – that is, to buy a broad-based index fund that bought and held all the stocks in the market and that charged very low expenses.

By the start of the twenty-first century, the intellectual dominance of the efficient market hypothesis had become far less universal. Many financial economists and statisticians began to believe that stock prices are at least partially predictable. A new breed of economists emphasized psychological and behavioral elements of stock-price determination, and came to believe that future stock prices are somewhat predictable on the basis of past stock price patterns as well as certain “fundamental” valuation metrics.

Moreover, many of these economists were even making the far more controversial claim that these predictable patterns enable investors to earn excess risk-adjusted rates of return.

This paper examines the attacks on the efficient market hypothesis and the belief that stock prices are partially predictable. While I make no attempt to present a complete survey of the purported regularities or anomalies in the stock market, I will describe the major statistical findings as well as their behavioral underpinnings, where relevant, and also examine the relationship between predictability and efficiency. I will also describe the major arguments of those who believe that markets are often irrational by analyzing the “crash of 1987,” the “Internet bubble” of the fin de siecle, and other specific irrationalities often mentioned by critics of efficiency. I conclude that our stock markets are far more efficient and far less predictable than some recent academic papers would have us believe. Moreover, the evidence is overwhelming that whatever anomalous behavior of stock prices may exist, it does not create a portfolio trading opportunity that enables investors to earn extraordinary risk adjusted returns.

Emphases mine.

Warren Buffet put it this way in a recent op-ed:

Let me be clear on one point: I can’t predict the short-term movements of the stock market. I haven’t the faintest idea as to whether stocks will be higher or lower a month — or a year — from now. What is likely, however, is that the market will move higher, perhaps substantially so, well before either sentiment or the economy turns up. So if you wait for the robins, spring will be over.

Or, here's a popular press article from William J. Bernstein, Why stock picking is a losing game. Two excerpts:

Imagine that the Man Upstairs is really, really pleased with you and has decided to make you fabulously wealthy. How would He do it? The simplest way would be to give you a bunch of no-brainer opportunities to make a killing on stocks and bonds. Then He'd put on this earth a host of suckers willing to take the opposite side of your bets.

Millions of investors - and their brokers - seem to believe their own personal version of this fantasy. Because whenever somebody tells you he has found a simple strategy for beating the market, what he's really saying is that the market, apart from him, is populated by patsies.

Consider, for example, newsletters with ranking systems that tell you when it's time to buy or sell a stock. You aren't the only one who can pad down to the library or click online to look up the latest ratings. If the newsletters worked, what rube would be willing to part with a stock rated "buy" and sell it to you? And who would buy it back from you when the mighty oracle pronounced a sell rating? (The newsletter writer must also be pretty clueless to be selling this priceless knowledge to total strangers for a few hundred bucks.)

Sometimes you'll spot an opportunity for a trade that seems screamingly obvious - and that's exactly when you'd better stop to ask yourself what's wrong with it.

The best way to win this game is to not play it. Stick with low-expense index funds - under 0.2% in annual charges - that simply own all of the market, both in the U.S. and abroad.

I'm sure you've heard that while it's fine to ride the market's gains when times are good, you need an expert stock picker when the bear roars. Wrong: Active money managers do not suddenly gain an extra 20 IQ point advantage over the rest of the market just because the Dow is falling. The record shows that their funds have trouble competing with the index in the bad times too.

Finally, always remember what your father told you about playing poker: If you look around the table and don't see a patsy, then you're the patsy.

So how should we invest, knowing all that? More Buffet...

"The best way in my view is to just buy a low-cost index fund and keep buying it regularly over time, because you'll be buying into a wonderful industry, which in effect is all of American industry," Buffett told CNBC anchor Liz Claman.

and

"I have nothing against ETFs, but I really think an index fund that just charges a few basis points for management is pretty hard to beat," Buffett said. "You put it away, you have nobody encouraging you to trade it next week or next month ... your broker isn't going to be on you."

and

Numerous academic studies have shown that individual investors have a bad track record at timing stock-market moves, often because they chase recent performance to their detriment, essentially buying high and selling low.

Huh.

[Ford]

Absolutely incorrect above. If the last ten years in the market has taught anyone anything at all, it is that the buy and pray strategy doesn't work.

Even worse than that, is what some fools refer to as "dollar cost averaging", which amounts to buying what is going down, and selling what is going up.

Eventually, you have a portfolio of trash.

Best bet is to learn about market timing, and how to use it to your advantage.

www.vectorvest.com is a good start. They run a mini mutual fund of stocks.....never more than ten at a time, have never done worse than any of the market averages in any of the last fifteen years, and have returned roughly 85% each year over the most recent five years....while the buy and hold people lost their ass.

They don't recommend penny stocks......and will provide a comprehensive breakdown of every stock in the country.....as well as exact buy and sell points.

That is a great place to start. After that, if you have the time, you can improve even more through other market timers.

Good luck.

A) You don't understand what dollar cost averaging is. I'm not advocating using it necessarily, but it isn't as you describe it.

Market timing isn't investing. It's speculation/white collar gambling and you're going to lose out in the long term. Have fun dealing with the ridiculous costs of active "investing" while enjoying poorer performance chasing returns that are unattainable on any consistent basis.

Take Techboy's advice, you'll be much better off.

[techboy]

Oh, and to more directly answer the question, you could do a lot worse than the sample portfolio from the Swensen article I linked earlier.

One thing you should ignore, though, is talk about the "last few years" or how this or that fund "is winning 15 years straight". Put a hundred thousand people in a room flipping coins, and someone will probably hit heads 100 times in a row. Is that skill? How can you tell? How do you know when that "skill" is going to suddenly run out, like happened to a guy like Bill Miller, who had an incredible 15 year track record, and then fell off a cliff in the last little while?

The funny thing is, studies show that random chance predicts that there should actually be more successes than there are even now.

[dockeryfan]

Investing in gold is a terrible idea. Gold, historically, exactly keeps up with inflation over the long term.

Actually, every portfolio should have some percentage of cash, and gold will not lose to inflation, so it retains it's value. In 2000, I got some good advice to get out of the stock market and buy Canadian gold. That turned out to be some excellent advice.

My only problem with you, techboy, is that you always talk about index funds and long term investments, but you never recommend specific funds. Because there are so many index funds out there, it makes your investment advice ring a little hollow. Recommending "index funds" is akin to someone saying "buy low sell high".

[techboy]

A) You don't understand what dollar cost averaging is. I'm not advocating using it necessarily, but it isn't as you describe it.

Market timing isn't investing. It's speculation/white collar gambling and you're going to lose out in the long term. Have fun dealing with the ridiculous costs of active "investing" while enjoying poorer performance chasing returns that are unattainable on any consistent basis.

Take Techboy's advice, you'll be much better off.

McD5 isn't an investor. He's a gambler. I'm glad he's done well.

[McD5]

McD5 isn't an investor. He's a gambler. I'm glad he's done well.

Buying and holding stocks is a flawed strategy. The fact that stock prices are back to 10-year lows is a sordid reminder of that. Dollar-averaging has indeed been ineffective over the last ten years and it is not good advice for anyone. Since it entails buying stocks going down in price, dollar-averaging is a sucker's game.

Legendary money manager, Bill Miller, destroyed his reputation as a premier fund manager by buying Citigroup, AIG, Freddie Mac, Wachovia, Bear Stearns, Washington Mutual, Countrywide Financial and other stocks as they were getting crushed. His fund dropped 58% this year and he now says he's working on new strategies to improve performance.

You simply cannot be this stupid. Actually, if you are holding index funds, you are. Your fund is about to buy you more shares of Citigroup, and other financial stocks as they continue to tank, and cut dividends.

I understand your frustration. Many investors feel the same way. Many things we were taught were incorrect, and now people have no idea what to do.

When Bill Miller and Warren B are losing over 50% of life savings in one single year......I would think intelligent people could see this is not the way to go.

You will have one more chance to exit these funds.....as the dow begins to climb again starting next week. It may even get back to 10,000-10,500. That is a great opportunity for you to exit, before an incredibly large drop, back to the 5-6k range.

If you haven't learned already, that should clear up any lingering questions you may still have about index funds or dollar cost averaging when you see the dow at 6k later this year.

10-10.5 first......5-6k next.

[SC_RedskinsFan]

Can you elaborate on this? Where do you find the auction? What risks are involved? How much of a grace period do they get to pay? Do you know who the owners are and does it matter?

Every county in every state may be different. I go to the auction in Beaufort SC. A property owners taxes are due in January. If they have not paid them by the first tuesday after the first monday in October they go up for auction.

The opening bid is last years tax plus this years tax, plus fees. The maximum amout of interest you can make on a property is the opening bid, or (So if a property opens at say $1500 that is your cap of interest you can make on it. The way i bid is so i can make 10% if the property if it goes a year. So my max bid on that property would be $15,000.)

Once a property is sold the owner has 1 year to "redeem" it. They must pay all taxes, and your interest. You earn interest at 3% per quarter, as of the first day of the quarter. So if the redeem the day after the tax sale you still have made 3% in 1 day. When a property gets redeemed you get you amount that you bid back plus you interest.

If a property owner does not redeem after 1 year the property is yours free and clear. If there was a morgage on it, it will be wiped out.

I only buy land so i do not have to deal with people that live in the houses.

Last year i only bought 2 properties, one redeemed with one week left, so i made 12% on that one, and the other one did not redeem, so i own that property now. This year i had a lot more money to work with so i got more properties.

This only works if you have cash to work with, not using money that is tied to a loan.

All of the land that i buy, if when i get it i can at least double my money when i sell it, if not triple it or more.

[techboy]

Actually, every portfolio should have some percentage of cash, and gold will not lose to inflation, so it retains it's value. In 2000, I got some good advice to get out of the stock market and buy Canadian gold. That turned out to be some excellent advice.

With all due respect, you got lucky.

That being said, depending on which investment professional one follows, there might be a place for commodities as a whole as a hedge against inflation, as well as a non-correlated asset that can improve overall portfolio returns in small amounts. (See here and here for a debate on the issue, though I side with Ferri).

Personally, I prefer TIPS as an inflation hedge, especially now as they seem to have a large liquidity premium built in, and I don't need liquidity.

My only problem with you, techboy, is that you always talk about index funds and long term investments, but you never recommend specific funds. Because there are so many index funds out there, it makes your investment advice ring a little hollow. Recommending "index funds" is akin to someone saying "buy low sell high".

Honestly, no one's ever asked me for specific funds.

The sample portfolio laid out in the Swensen article is a great, simple, boradly diversified low-cost portfolio, and names specific funds.

I'd start with Vanguard (or DFA if one has access), and only venture outside those when necessary (when Vanguard doesn't cover a specifically desired asset class, like International Small Value or soemthing).

This page from Altruist Financial Advisors was one source I used. Click on an asset class and they break down a variety of funds/etfs. They also have a great Reading Room with scads of studies and articles.

I hesitate to make specific recommendations because I'm not a financial advisor, I just did a lot of research for myself, and it's important to do one's own research. That reading room is a great place to start, by the way.

[McD5]

A) You don't understand what dollar cost averaging is. I'm not advocating using it necessarily, but it isn't as you describe it.

Market timing isn't investing. It's speculation/white collar gambling and you're going to lose out in the long term. Have fun dealing with the ridiculous costs of active "investing" while enjoying poorer performance chasing returns that are unattainable on any consistent basis.

Take Techboy's advice, you'll be much better off.

Dollar cost averaging is the failed practice of buying more shares of crap as they drop, and buying fewer shares of assets that are performing well.

Bill Miller, and index fund investors are now finding out what dollar cost averaging is.

And Market Timing is anything but speculation. Online commissions are cheap these days....allowing people to only invest in what they like.

"Speculation" is buying and holding the market....believing that the system, the companies involved, and the ceos are working for your benefit. That is the craziest thing of all, as people have finally learned.

[Redskins Diehard]

In short I would suggest you first fully fund a Roth Ira with a Index fund. And then put whatever you have left in a Taxable Index fund. S&P500 for both to get started.

For a long answer I would suggest you read what Techboy posts...ask him questions...and follow his advice.

[PeterMP]

Dollar cost averaging is the failed practice of buying more shares of crap as they drop, and buying fewer shares of assets that are performing well.

Bill Miller, and index fund investors are now finding out what dollar cost averaging is.

And Market Timing is anything but speculation. Online commissions are cheap these days....allowing people to only invest in what they like.

"Speculation" is buying and holding the market....believing that the system, the companies involved, and the ceos are working for your benefit. That is the craziest thing of all, as people have finally learned.

I don't know about your link, but have you considered the possiblity that their "method" picks "winners" because enough people are using it and that drives the price of those stocks.

I was involved in another company that was based on market timing for individual investors a little bit and after studying the system and analyzing the results, I became convinced that the fact their "method" was suggesting the stock was in fact driving the stock.

I decided that you could make a pretty penny by knowing what stocks they were going to suggest (via their method) ahead of time, but that long term using their "method" and suggestions was really a crap shot.

Have you considered why somebody that has a method for predicting winning stocks would share it?

[techboy]

Buying and holding stocks is a flawed strategy. The fact that stock prices are back to 10-year lows is a sordid reminder of that. Dollar-averaging has indeed been ineffective over the last ten years and it is not good advice for anyone. Since it entails buying stocks going down in price, dollar-averaging is a sucker's game.

What you don't seem to get is that stock investing is not gambling. It's not about this year's return, or even this decade's return. Money needed in the short term should not be in stocks.

Stock investing is about the next twenty or thirty years, and times like this should thrill young accumulating investors (like me, for instance). Valuations are down, so future expected returns are up. Stocks are cheap. It is precisely times like this that buy and hold makes money.

"A short quiz: If you plan to eat hamburgers throughout your life and are not a cattle producer, should you wish for higher or lower prices for beef? Likewise, if you are going to buy a car from time to time but are not an auto manufacturer, should you prefer higher or lower car prices? These questions, of course, answer themselves.

But now for the final exam: If you expect to be a net saver during the next five years, should you hope for a higher or lower stock market during that period? Many investors get this one wrong. Even though they are going to be net buyers of stocks for many years to come, they are elated when stock prices rise and depressed when they fall. In effect, they rejoice because prices have risen for the "hamburgers" they will soon be buying. This reaction makes no sense. Only those who will be sellers of equities in the near future should be happy at seeing stocks rise. Prospective purchasers should much prefer sinking prices. "

-Warren Buffet

What you don't seem to understand is that times like this are precisely why stocks make money. Investors are compensated for risk. The more risk, the higher the payout. It's why over time, Treasuries pay out far less than stocks. They're safe. Of course, that risk comes because sometimes, stocks go down like this. If they didn't, there'd be no risk, and so no risk premium.

Anyway, I'm going to assume that you haven't actually thought through the economic implications of the announcement that "buy and hold is dead".

This betrays a fundamental misunderstanding of what stock actually is. In the final analysis, stock is not a gamble on a pyramid scheme, where we jump in when it goes up and hope to jump out before it crashes again (though bubbles do occur and some people play it that way).

No, at its very heart, stock is an investment in real companies with real prospect for growth, and in exchange for taking on some of the risks of that company, the investor is rewarded with some of the profits with that growth.

Benjamin Graham once said that the stock market in the short term is a voting machine, and in the long term is a weighting machine.

What you are suggesting with the idea that buy and hold is a sucker's strategy is that the risk premium paid to investors is going to disappear, and thus investment in companies will cease. In this scenario, the economy totally collapses, cats and dogs live together, total chaos.

No, while it is true that any individual company and stock can crash, as a whole, as long as the economy is growing and companies need new capital, stocks will as a whole pay off.

Probably not as much as they have over the last period, but most sober economists I've read expect roughly a 3 to 5% real return on stocks in the very long run (in other words, after accounting for inflation, and ignoring any short term fluctuations). And, the truth is, that almost has to happen, because if it doesn't, it means that companies are not growing, the economy is dead, and we should all be investing in gold and guns (and bullets!), because we're living in Mad Max territory (and all your wonderful profits from gambling will be useless to you).

I have a leather jacket, so all I need is a shotgun.

[da#1skinsfan]

Every county in every state may be different. I go to the auction in Beaufort SC. A property owners taxes are due in January. If they have not paid them by the first tuesday after the first monday in October they go up for auction.

The opening bid is last years tax plus this years tax, plus fees. The maximum amout of interest you can make on a property is the opening bid, or (So if a property opens at say $1500 that is your cap of interest you can make on it. The way i bid is so i can make 10% if the property if it goes a year. So my max bid on that property would be $15,000.)

Once a property is sold the owner has 1 year to "redeem" it. They must pay all taxes, and your interest. You earn interest at 3% per quarter, as of the first day of the quarter. So if the redeem the day after the tax sale you still have made 3% in 1 day. When a property gets redeemed you get you amount that you bid back plus you interest.

If a property owner does not redeem after 1 year the property is yours free and clear. If there was a morgage on it, it will be wiped out.

I only buy land so i do not have to deal with people that live in the houses.

Last year i only bought 2 properties, one redeemed with one week left, so i made 12% on that one, and the other one did not redeem, so i own that property now. This year i had a lot more money to work with so i got more properties.

This only works if you have cash to work with, not using money that is tied to a loan.

All of the land that i buy, if when i get it i can at least double my money when i sell it, if not triple it or more.

This is all extremely interesting, Ive never heard of it. Who is actually putting these properties up for auction, the banks? Why would they just give away a property for pennies if the owner doesnt pay a few grand in taxes?

So the scenario is...Bob Johnson of Mobile, AL didnt pay the taxes on his redneck palace. Taxes are $4k ($2k last yr $2k this yr) thats the opening bid. Its a decent place, so it goes for $25k - which would be the actual bid on the PROPERTY, and if the guy never pays your $4k in taxes back + interest, you pay $25k more and get the property, is that correct?

[techboy]

Bill Miller, and index fund investors are now finding out what dollar cost averaging is.

Are you even reading what you're writing? :doh:

Bill Miller is not an index investor. Bill Miller is the classic market timer. He runs the very famous (though now for the wrong reasons) Legg Mason Value fund, which until very recently could boast beating the S&P 500 15 years in a row (sound familiar?). He charges exorbitant fees on the understanding that he is able to time the market, and get in and out of stocks at the right time, thus making his investors money. Except, apparently, his streak ran out.

Larry Swedroe just put out Lessons the Market Taught Us in 2008. The entire article is great, but here's a quote that applies.

Lesson 1: Neither investment banks nor other active managers (including hedge funds) can protect investors from bear markets. All crystal balls are cloudy, which is why Warren Buffett concluded: “The only value of stock forecasters is to make fortune tellers look good.”(1)

If their money managers could protect you, why did firms like Lehman Brothers and Bear Stearns go belly up and Merrill Lynch have to be rescued by Bank of America? It is in the best interest of these firms to manage their risks well. Yet, they have clearly demonstrated that they cannot. As evidence of their lack of ability to forecast events consider that in 2008 Lehman spent $751 million buying back its own stock at an average price of $49.60 and Merrill Lynch spent $5.27 billion buying back its stock in 2007 at an average price of $84.88.(2)

We can only conclude that with all the conflicts of interest that exist between these firms and their clients there is no reason to think that they would manage their clients’ risks any better. Investors don’t need to pay Wall Street big fees to have their money managed. Large fees are only likely to make managers rich, not investors. Wall Street’s best skill is designing product that separates capital from owners.

Lesson 6: One of the more persistent myths is that active managers can protect you from bear markets. In 2008, the hardest hit sector was financial stocks. Financials comprise a significant portion of the asset class of value stocks. As benchmarks for the active managers we can use the Vanguard Small Value Index Fund that lost 32.1 percent and the Vanguard (Large) Value Fund that lost 36.0 percent.

The following is a list of the returns of some of the actively managed mutual funds with superstar value managers, four of whom were named by Morningstar in June 2008 as their recommendations to run value superstars, their recommendations (those are noted with *): Legg Mason Value Trust lost 55.1 percent; *Dodge & Cox lost 44.3 percent; Dreman Concentrated Value lost 49.5 percent; *Weitz Value lost 40.7 percent; *Schneider Value lost 55.0 percent; and *Columbia Value and Restructuring lost 47.6 percent.

Of course, some actively managed value funds beat those benchmarks. However, how would you have known ahead of time which ones they would be? As the SEC’s required disclaimer states: Past performance is not a predictor of future performance. Thus, the prudent strategy is to use only passively managed funds.

Emphasis mine.

The best, brightest, and most highly paid experts in the world can't time the markets consistently.

Wall Street wants you to think you can, though, because they make money on fees and hidden costs like the bid-ask spread, every time someone trades.

[kubstix]

Invest in stem-cell stocks. ACTC, ASTM, STEM, CBAI, GNTA. I got in these penny stocks beginning of December and have averaged over 300% gains on some of these. Obama is going to lift the ban on federal funding for stem cell research. For them being penny stocks and being able to buy 100K+ shares...its a no brainer for long term. Stem cell is the future of our hospitals and medicine. Researchers are saying stem cell is as big as the creation of the first automobile.

[techboy]

Invest in stem-cell stocks. ACTC, ASTM, STEM, CBAI, GNTA. I got in these penny stocks beginning of December and have averaged over 300% gains on some of these. Obama is going to lift the ban on federal funding for stem cell research. For them being penny stocks and being able to buy 100K+ shares...its a no brainer for long term. Stem cell is the future of our hospitals and medicine. Researchers are saying stem cell is as big as the creation of the first automobile.

1. What is it that you know that the market doesn't? I guarantee it's not just this.

2. The market does not compensate investors for risk that can be diversified away. Individual company risk can be diversified away, so if you buy individual stocks, you're taking a risk you're not being paid for.

I like to be paid for my risks.

3. With penny stocks especially, you need to watch out for "pump and dump". There are people out there that will pump up a stock in investment newsletters and on message boards, then bail when it goes up (and it doesn't take much to move penny stocks), leaving the last people holding the bag.

I think this popular press article from William J. Bernstein, Why stock picking is a losing game bears repeating. Two excerpts:

Imagine that the Man Upstairs is really, really pleased with you and has decided to make you fabulously wealthy. How would He do it? The simplest way would be to give you a bunch of no-brainer opportunities to make a killing on stocks and bonds. Then He'd put on this earth a host of suckers willing to take the opposite side of your bets.

Millions of investors - and their brokers - seem to believe their own personal version of this fantasy. Because whenever somebody tells you he has found a simple strategy for beating the market, what he's really saying is that the market, apart from him, is populated by patsies.

Consider, for example, newsletters with ranking systems that tell you when it's time to buy or sell a stock. You aren't the only one who can pad down to the library or click online to look up the latest ratings. If the newsletters worked, what rube would be willing to part with a stock rated "buy" and sell it to you? And who would buy it back from you when the mighty oracle pronounced a sell rating? (The newsletter writer must also be pretty clueless to be selling this priceless knowledge to total strangers for a few hundred bucks.)

Sometimes you'll spot an opportunity for a trade that seems screamingly obvious - and that's exactly when you'd better stop to ask yourself what's wrong with it.

The best way to win this game is to not play it. Stick with low-expense index funds - under 0.2% in annual charges - that simply own all of the market, both in the U.S. and abroad.

I'm sure you've heard that while it's fine to ride the market's gains when times are good, you need an expert stock picker when the bear roars. Wrong: Active money managers do not suddenly gain an extra 20 IQ point advantage over the rest of the market just because the Dow is falling. The record shows that their funds have trouble competing with the index in the bad times too.

Finally, always remember what your father told you about playing poker: If you look around the table and don't see a patsy, then you're the patsy.

[kubstix]

1. What is it that you know that the market doesn't? I guarantee it's not just this.

2. The market does not compensate investors for risk that can be diversified away. Individual company risk can be diversified away, so if you buy individual stocks, you're taking a risk you're not being paid for.

I like to be paid for my risks.

3. With penny stocks especially, you need to watch out for "pump and dump". There are people out there that will pump up a stock in investment newsletters and on message boards, then bail when it goes up (and it doesn't take much to move penny stocks), leaving the last people holding the bag.

Really? Then explain how my relatives are rolling in money right now? Answer: Microsoft. Sorry bro but i'm willing to take my risks on the future of medicine. 300+% gains already before the ban is even lifted. I'm willing to take a risk on penny stocks. Take a look what Microsoft/Ford/ect was trading 'back in the day'. It all starts somewhere. If I lose then so be it....I didn't invest my entire life savings. The money you put in the market is money your willing to shrug your shoulders if you lose. So far I have not, but if I do....I learn a lesson.