Let's talk about investing! Stock market, ETF, etc.

[China]

Is 100% of your net worth in the stock market?

 

I doubt anybody has 100% of their net worth in the stock market.

[techboy]

I doubt anybody has 100% of their net worth in the stock market.

You'd be wrong. I know of several people on investing boards I frequent that keep their entire portfolio in stocks, because theoretically it provides the highest risk based return. I think it's crazy, but there you go.

There are even people that advocate for having MORE than 100% invested in stocks, which led to this fascinating and ultimately instructive thread, where someone tried the "mortgage your retirement" strategy, documenting step by step, and unlike McD5, stuck around when things went terribly wrong and documented that too. Stand up guy.

[chipwhich]

I hope that helps.

 

Helps a lot.

 

You seem to get hung up on investing for retirement when I keep discussing investing discretionary funds.  You also keep posting links to documentation which really doesn't matter to my point.  I don't know why your intent on arguing and calling what I do suboptimal.  For you it might be suboptimal, for me I make a lot of money.  The key is discretionary funds.

I am turning 50 this year, I put $2000 a month into a 401K, I have Vanguard retirement accounts, I have money invested in coins, gold, real estate, etc.  I have seen my retirement accounts destroyed in 2008/2009 time frame.

 

I don't need any more money going into index funds.

 

What people choose to do with their discretionary funds is a different discussion than what they do to invest for retirement.

 

As far as your posted links, I do these trades all the time.  As for my BP example.  I purchased BP in December on a limit order at $36.  If I weren't a buy and hold kind of guy I could have sold the stock in 4-5 months with a 20% increase in value additionally 1 maybe 2 dividend payouts.  It may be sub optimal to you, but for me it's optimal and doable.  My only issue is I don't have enough expendable income to buy as much as I want.  Like I said, I buy junk, but stuff I know.  I miss out on more stocks than I have money to invest in.  Stocks that everyone on this board can relate too.  I stupidly didn't buy Netflix when those smarter than me in the market dumped the stock for trash because Netflix had considered dividing itself into 2 companies.  I didn't pull the trigger because I didn't have cash at the time.  A $5000 investment at that time would have been worth about $65,000 in less than 3 years.  I pulled the trigger on trash under $1 like SIRI, and Ford when they were nearing bankruptcy.  Some call it gambling, I call it bargain hunting.

 

I am a hoarder, I collect stocks.  My discretionary portfolio is well diversified, I am my own fund manager. It doesn't work for everyone, but everyone doesn't invest like I do.  In the professional stock pickers junk pile.

 

All of your links are focused more on day traders and stock buyers who buy stuff unlike what I do....buy junk...buy what you know...prosper.

Edited July 3, 2015 by chipwhich

[techboy]

I don't know why your intent on arguing and calling what I do suboptimal.

To be fair, I've never tried to pick on you specifically. I just share the general research. You're the one that keeps insisting on bringing up your own personal approach as just as good or better, which is when I point out that the best information we have says you're wrong.

I guess you don't like the state of academia, but that's not my fault. If you weren't so defensive about it, it'd never come up at all.

What people choose to do with their discretionary funds is a different discussion than what they do to invest for retirement.

Those are some amazing cognitive gymnastics, but money doesn't know where it's been allocated. The best approach is the best approach, whether it's in an IRA or what you call a "sandbox" account.

If you derive enough enjoyment from your efforts to make up in the loss of expected return, then more power to you, but you shouldn't fool yourself on this point.

 

My discretionary portfolio is well diversified, I am my own fund manager.

I'd suggest you read The 15 Stock Diversification Myth. Here's the conclusion:

The reason is simple: a grossly disproportionate fraction of the total return came from a very few "superstocks" like Dell Computer, which increased in value over 550 times. If you didn’t have one of the half-dozen or so of these in your portfolio, then you badly lagged the market. (The odds of owing one of the 10 superstocks are approximately one in six.) Of course, by owning only 15 stocks you also increase your chances of becoming fabulously rich. But unfortunately, in investing, it is all too often true that the same things that maximize your chances of getting rich also maximize your chances of getting poor.

If the O’Neal data are generalizable to stocks, and I believe that they are, then even 100 stocks are not nearly enough to eliminate this very important source of financial risk.

So, yes, Virginia, you can eliminate nonsytematic portfolio risk, as defined by Modern Portfolio Theory, with a relatively few stocks. It’s just that nonsystematic risk is only a small part of the puzzle. Fifteen stocks is not enough. Thirty is not enough. Even 200 is not enough. The only way to truly minimize the risks of stock ownership is by owning the whole market.

All of your links are focused more on day traders and stock buyers who buy stuff unlike what I do...

If you believe that, you haven't read them closely enough. The research absolutely includes what you do.

[chipwhich]

If you derive enough enjoyment from your efforts to make up in the loss of expected return, then more power to you, but you shouldn't fool yourself on this point.

 

 

I beat your index funds all day long.  I have been doing this for a long time.

[HOF44]

I beat your index funds all day long.  I have been doing this for a long time.

What I don't get is why you are not using all your funds to invest in this manner. If you are that successful at it why not use all the funds you have after your employer match on your 401k. If I could produce that kind of consistent success picking stocks I would.

[chipwhich]

What I don't get is why you are not using all your funds to invest in this manner. If you are that successful at it why not use all the funds you have after your employer match on your 401k. If I could produce that kind of consistent success picking stocks I would.

 

Well for 1, I don't have that many junk stocks sitting around waiting to buy.  Usually 1 or 2 a year.  For 2, buying 1000 shares of Ford stock at $1 or $2 a share isn't a risk that worries me.  Putting my entire retirement on Ford would be stupid.  Buying 5000 shares of SIRI < $1 isn't something I would bet my retirement on either.

 

I never said I was smarter than the market.  But what I do in my sandbox is money I could afford to lose if I screw up.  So far it has paid off.  Other people on the board can do it too, you just have to watch.

 

 

[HOF44]

Well for 1, I don't have that many junk stocks sitting around waiting to buy.  Usually 1 or 2 a year.  For 2, buying 1000 shares of Ford stock at $1 or $2 a share isn't a risk that worries me.  Putting my entire retirement on Ford would be stupid.  Buying 5000 shares of SIRI < $1 isn't something I would bet my retirement on either.

 

I never said I was smarter than the market.  But what I do in my sandbox is money I could afford to lose if I screw up.  So far it has paid off.  Other people on the board can do it too, you just have to watch.

If I had your success rate picking junk I'd dump it all in there.

[techboy]

I beat your index funds all day long.  I have been doing this for a long time.

So did Bill Miller.

Until he didn't.

Hope it works out better for you.

[Elessar78]

That's the thing. It's been apples to oranges. Techboy is talking about a whole portfolio and chip is talking about "play money". Even some of the sound/conservative approaches I've read aren't against taking a small percentage of your portfolio and putting it into more speculative plays. 

 

In a way, and I'm being very generous here, chip is doing a buffet-esque approach in that he buys undervalued stocks. Ford's not going anywhere. Drugstore retail isn't going anywhere. As an aside, the owners of the company I used to work for where heavily invested in land development around CVS properties for that reason. They're in the Forbes 500. 

 

"Junk" is one thing. Ford, basically a too big to fail company, and has a long track record isn't very likely to go out of business. It isn't exactly junk, just timely underpriced at one time. 

 

It's just like Buffet says, be bold when others are fearful, be cautious when others are bold. Also recessions are the time when stocks go "on sale"—stock up. 

[chipwhich]

So did Bill Miller.

Until he didn't.

Hope it works out better for you.

 

Cute.

 

1)  A lot of people lost money back then.  Not sure why you would post an article just after one of the biggest crashes in stock market history.

2)  I survived that period just fine.

3)  If I lose my sandbox, I will have a lot more to worry about in my retirement accounts, because if my sandbox fails, my retirement accounts will fail too.

 

Like I said you aren't 100% invested in your optimal approach to building your portfolio, neither am I.

 

Oh, and for your reading pleasure.

 

http://www.wsj.com/articles/mutual-fund-king-bill-miller-makes-comeback-1404095931

[Dont Taze Me Bro]

Ok, Chip and techboy.  Only one way to settle this guys.......DANCE OFF!!

 

 

NSFW

 

[tshile]

Techboy is talking about a whole portfolio and chip is talking about "play money". Even some of the sound/conservative approaches I've read aren't against taking a small percentage of your portfolio and putting it into more speculative plays. 

 

^^^ this.

 

Does anyone have a book to recommend on this? My wife and I have 401ks and we have a family friend who knows enough that I'm happy with his advice. He completely changed the way our retirement was growing, so I'm good there. So I'm fine (for now) in regards to the retirement stuff.

 

He helped me pick my first stocks when I opened an account with play money. Biggest problem was I put 1/2 of my money in an index fund and not the whole thing I've done reasonably well all things considered, but I hate pestering him about stocks regularly (as opposed to mutual fund adjustments a few times a year).

 

I'm not looking for a gimicky This is how you beat the market! book. I'm a fan of dividend investing in quality companies that are undervalued; ie: not super risky, more (trying to be) smart and boring. I'm looking for something that is a crash course on metrics to look at (what they mean, why they are important, how they can be misused), some information on how to obtain information and where, how to find undervalued stocks, and other basics.

 

I'd prefer it to not a text book, but I'm not against text books (i read text books if it's worth it... yeah...), but something that has lots of this kind of stuff.

Edited July 3, 2015 by tshile

[techboy]

Even some of the sound/conservative approaches I've read aren't against taking a small percentage of your portfolio and putting it into more speculative plays.

The main reason for that is that behavioral economists know that it's nearly impossible for many people to avoid attempting to beat the market, so it allows those people to scratch that itch without jeapordizing their retirement.

 

In a way, and I'm being very generous here, chip is doing a buffet-esque approach in that he buys undervalued stocks.

That's an accurate assessment. It's also what Bill Miller did.

 

1)  A lot of people lost money back then.  Not sure why you would post an article just after one of the biggest crashes in stock market history.

I posted that article because it show why one person supposedly outsmarting the market, even for a long time, doesn't necessarily mean that it's skill or that it will continue.

Research trumps personal stories, and in a stadium full of people flipping quarters, someone's going to get heads 15 times in a row.

And keep in mind that his fund didn't just lose money. It severely underperformed even the falling market averages to the point that all of those years of supposedly skilled market beating performance were wiped out.

His investors would have been thrilled to lose what the indexes lost.

 

Like I said you aren't 100% invested in your optimal approach to building your portfolio

Yes, I am. the only slightly suboptimal portion of my portfolio is that I give up perhaps .05% in expense ratios by holding bond funds instead of laddering individual treasuries myself, and that's a deliberate decision to pay a little more for simplicity.

 

Oh, and for your reading pleasure.

Yeah, I know. It must be nice to be able to just take over another fund without having to worry about the people that lost their shirts. Hedge fund managers are famous for that too... they make big bets, and if they win, they take their 2 and 20 and get rich and famous, and if they lose, they just close the fund, let the holders eat the loss, and try again elsewhere.

I'd also point out that it doesn't change the underlying point, which is that Bill Miller was seen as someone that could consistently beat the market.

Until he couldn't.

 

Does anyone have a book to recommend on this?

There are several book recommendations in my first post in this thread, but it sounds like you're looking for something specifically on attempting to identify undervalued stocks and so on, in which case the giant is still Benjamin Graham's The Intelligent Investor: The Definitive Book on Value Investing. A Book of Practical Counsel.

I won't bore you with the disclaimers or warnings.

Edited July 3, 2015 by techboy

[chipwhich]

I posted that article because it show why one person supposedly outsmarting the market, even for a long time, doesn't necessarily mean that it's skill or that it will continue.

 

Silly. 

 

Maybe you should try reading my posts instead of your robotic agenda.  Again, I beat your indexes year after year in my sandbox.  But I get ya, I'll be careful out there.

 

You remind me of myself probably 20 years ago?  I had friends who were mortgage bankers and doing home loans and refinancing.  I kept saying "that won't last long", "rates will rise and loans will cease", when the housing market crashed I thought sure some of my friends would suffer.  Even until today, some of them are still in the mortgage business and doing well.

 

It's ok to just say, congrats you did well.  My first stock was Atlantic Richfield when I was 12.   My parents took my savings and we bought it together.  Might have been before you were born, or when you were a youngin.  I made a lot of money on that stock.  That was 37 years ago.  I don't think anything you can quote from your investing websites will scare me into submission of using my discretionary income on my investing strategy.  Perhaps you could learn instead of always trying to teach.  It's ok to say you are wrong.

[Forehead]

I'll say this, I'm more on the Techboy side of things, but being able to take advantage of the TSP keep my expense ratios at rock bottom.  I'm at about an 85% stock indexes, 15% safety (fixed income and government treasury) mix, will probably change those a bit as I get older, but it has generally worked, I think I've averaged 14% return over the past 5-6 years.

 

I'll say this, I have one Chipwich style regret.  A few years ago, one of the big Pharma stocks took a bath for some reason, I don't even remember what.  Maybe it was Pfizer?  One of them anyway.  It was trading for pennies relative to its usual value, and I was eyeing it but didn't have much cash laying around to make a play.  It rebounded big time.

[Elessar78]

 

Does anyone have a book to recommend on this? M

 Unconventional Success by David Swensen is great but it's not an easy read. Swensen manages Yale's endowment and has done very well (as posts in this thread have noted past success doesn't guarantee it in the future). It's his "suggestion" for the individual investor despite being an institutional investor based on data he has collected and studied. 

 

I'll try to boil it down from memory:

1. Asset allocation

2. Taxes

3. Fees

 

As investors we're searching for "real returns". Day traders or those who freqently buy and sell, lose some of their returns to taxes. Day traders and those that have their stocks in mutual funds with high fees, again, eat away at returns. 

 

So say, your return was 12% but your tax hit was 2% and you lost another 2% from "management fees" (advertising, overhead, etc) then your real return is 8%. A low cost mutual fund has like a .05% mgmt fee. You should ask yourself why the heck would you want to be saddled with the cost of advertising for the mutual fund. Exactly. Once again, the decades of data show that mutual fund managers are no better than blind luck, so why should you pay a high price for their expertise?

 

Asset allocation is just a fancy term for "don't put all your eggs in one basket". For example, based on age, split them up 80/20. 80% stocks and 20% bonds. Within that split your stocks, say, 50% in US and 30% in international. The thinking is that if one area takes a hit, you don't lose everything. 

 

The First Book of Investing by Samuel Case is one I bought in my twenties when I got interested in this. It's a fantastic primer that's an easy read. It'll communicate the basics. 

 

The Intelligent Investor by Benjamin Graham will be a good read for value investing. BG is one of Buffet's mentors when he started out and he cites him constantly. 

Edited July 3, 2015 by Elessar78

[tshile]

There are several book recommendations in my first post in this thread, but it sounds like you're looking for something specifically on attempting to identify undervalued stocks and so on, in which case the giant is still Benjamin Graham's The Intelligent Investor: The Definitive Book on Value Investing. A Book of Practical Counsel.

I won't bore you with the disclaimers or warnings.

 

Thanks, yeah I guess I missed/forgot about the first post of yours

 

Not specifically undervalued, more a combination of long term, stable stocks that are currently undervalued. I think the description would be undervalued blue chippers. I have no problem with correclty-valued stocks either, just that there's more to make if you can identify them as undervalued (and you're right.)

 

I'd rather hold on to a stock for 1-3 years and make money than 10 years, because it sounds like more fun

[tshile]

 Unconventional Success by David Swensen is great but it's not an easy read. Swensen manages Yale's endowment and has done very well (as posts in this thread have noted past success doesn't guarantee it in the future). It's his "suggestion" for the individual investor despite being an institutional investor based on data he has collected and studied. 

...

Once again, the decades of data show that mutual fund managers are no better than blind luck, so why should you pay a high price for their expertise?

...

The First Book of Investing by Samuel Case is one I bought in my twenties when I got interested in this. It's a fantastic primer that's an easy read. It'll communicate the basics. 

 

The Intelligent Investor by Benjamin Graham will be a good read for value investing. BG is one of Buffet's mentors when he started out and he cites him constantly. 

 

Thanks

I've read enough primers to get the allocation, tax, and fee angle on it. That's why I'm at the point of looking for books. There's a lot of primers out there to get started (and most of them say essentially the same thing), and there's a lot of really good blog resources for staying current.

 

The problem is the gap between them. The primers don't tell me anything new, but the bloggers operate under the assumption that the reader meets some floor for understanding terms/concepts/etc and I'm... frequently below that floor.

 

Trying to fill that gap and I like reading, so I'll give some of these books a read through.

[techboy]

I don't think anything you can quote from your investing websites will scare me into submission of using my discretionary income on my investing strategy.

chipwich, this may come as something of a shock, but I never thought I'd be able to convince you to change your investment approach, and I'd frankly never even try. Note the complete absence of PMs on the subject.

You do you.

Please note, however, that this is a public message board, and it is possible for more people than just us to be reading the conversation we are having.

Not likely, but possible. 

[chipwhich]

chipwich, this may come as something of a shock, but I never thought I'd be able to convince you to change your investment approach, and I'd frankly never even try. Note the complete absence of PMs on the subject.

 

I will let you in on the next gold mine I have, I promise.  I know you wont follow my advice, but I will at least keep you informed.

[Springfield]

I will let you in on the next gold mine I have, I promise. I know you wont follow my advice, but I will at least keep you informed.

I would much enjoy that, thank you.

[jpage520]

I'm in with the couple of market n00bs on this post that is interested in seeing what stock trading is all about. I've read through this whole post and at times have felt as if it were written in a different language. THAT is the level of novice that I'm at here lol.

 

 

Spring- I checked the Play Store and didn't see Robinhood come up in any search. Is it IPhone only?

 

Taze- Have you done anymore? Any luck in getting any better after attempting to invest that $200?

 

To anyone willing to answer- In regards to taxes. What is the taxable threshold on returns? Or is every return taxed regardless of how small the amount is?

[Springfield]

Spring- I checked the Play Store and didn't see Robinhood come up in any search. Is it IPhone only?

It looks like it's iOS only for now. You can request to be a part of the Android beta.

Click the link below and there is a hyperlink on that page to request beta for android.

https://support.robinhood.com/hc/en-us/articles/202844889-Who-can-use-Robinhood-

[Springfield]

As far as today, I didn't do anything. Held FIT and waited for my funds to clear (Robinhood holds your funds for 3 days after you sell a stock). Looks like NUGT started to turn up, thus DUST dropped, but I worry that that is just a temporary correction. Another fun ETF to watch (but I haven't bought... Yet) is YANG. That's and ETF that is essentially betting against the Chinese market. Everyone and their mother seems to think that the Chinese market is about to plunge downward. YANG jumped up $7.00 today (or about 10%). But like techboy was saying, just because that particular ETF jumped up 10% today, doesn't mean that it is guaranteed to jump up again tomorrow. Am I reading that correct techboy?