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

[TD_washingtonredskins]

3 hours ago, No Excuses said:

Most of the weed stocks are all Canadian companies and I am skeptical that they’ll make inroads in the US.

 

There’s a marijuana ETF called MSOS which bundles American weed companies. Keeping my eye on it as talks of decriminalization and federal legalization keeps heating up. 

I like this one too:

 

https://etfmg.com/funds/mj/

 

 

[Metalhead]

Last friday I finally got over some emotional attachment to two stocks and sold them off. My first ever major sells and it felt like I overcame a huge hurdle, almost liberating. This has allowed my to start diversifying into more sectors and ETFs and I have seen immediate positive growth. I am still a noob though and not getting too crazy. I already have FERS/TSP and a Vanguard Rollover IRA going.

 

Anyway, I had some questions about diversifying stocks. I use TDAmeritrade, btw.

 

Can you be too spread out?

 

Can you have too many different stocks/ETFs? For example I have 32 different stocks (several small OTC for funzies).

 

 

[Springfield]

Weed is where it’s at babes.

 

OGI, SNDL, TLRY, APHA. They’re getting pumped, next comes the dump. Don’t be a bag holder thinking they’ll bounce back.

 

got calls on lots of crazy **** hoping that weed keeps going for the rest of the week. Crossing my fingers.

 

 

12 hours ago, daveakl said:

So Robinhood froze me / labeled my account as a day trader.  What is another good app/site to use for casual trading?

You can only make 3 day trades in a week unless you have $25k invested. Pretty sure this goes for all platforms.

 

21 minutes ago, Metalhead said:

Last friday I finally got over some emotional attachment to two stocks and sold them off. My first ever major sells and it felt like I overcame a huge hurdle, almost liberating. This has allowed my to start diversifying into more sectors and ETFs and I have seen immediate positive growth. I am still a noob though and not getting too crazy. I already have FERS/TSP and a Vanguard Rollover IRA going.

 

Anyway, I had some questions about diversifying stocks. I use TDAmeritrade, btw.

 

Can you be too spread out?

 

Can you have too many different stocks/ETFs? For example I have 32 different stocks (several small OTC for funzies).

 

 

I think diversity is good. However that’s only if you’re holding long term and can keep track and dump things that are underperforming. At that point you might as well invest in an ETF or something else like that.

 

Depend on your strategy I suppose.

Edited February 11, 2021 by Springfield

[Metalhead]

14 minutes ago, Springfield said:

I think diversity is good. However that’s only if you’re holding long term and can keep track and dump things that are underperforming. At that point you might as well invest in an ETF or something else like that.

 

Depend on your strategy I suppose.

 

Thanks. I'm trying to develop a strategy now. I've had a very good week and most of my new stocks are intended to be long term.

 

I guess my dilemma is if something blows up within my self-imposed "sit" period, will I be willing to sell off and break my own rules? I could dump it into ETFs...that can't be all bad.

[Bonez3]

1 hour ago, Springfield said:

Weed is where it’s at babes.

 

OGI, SNDL, TLRY, APHA. They’re getting pumped, next comes the dump. Don’t be a bag holder thinking they’ll bounce back.

 

got calls on lots of crazy **** hoping that weed keeps going for the rest of the week. Crossing my fingers.

 

 

 

What does this even mean?!?!?

 

Buy or sell? or both

 

Help a noob

[Springfield]

1 hour ago, Bonez3 said:

What does this even mean?!?!?

 

Buy or sell? or both

 

Help a noob

The four stocks I listed above have been increasing in price drastically this entire week. Frankly, it’s similar to what happened to the price of GME, AMC, BB and NOK. There may be high long term upside in these weed stocks as the US legalizes at a federal level. That said, these are all Canadian companies and the sharp increase in price has a lot to do with speculation and market manipulation. What this means as a novice trader is that the price will probably increase drastically but also decrease drastically as well. This will happen apparently at random and without warning. Timing it so that you maximize your profit is incredibly difficult and if you buy in too late you stand a better chance of losing money as the stock falls back down to a more reasonable level.

 

I personally don’t see this run up lasting too much longer myself but it’s hard to say. Use caution when dealing with hot button, and thus highly volatile, stocks.

 

 

2 hours ago, Metalhead said:

 

Thanks. I'm trying to develop a strategy now. I've had a very good week and most of my new stocks are intended to be long term.

 

I guess my dilemma is if something blows up within my self-imposed "sit" period, will I be willing to sell off and break my own rules? I could dump it into ETFs...that can't be all bad.

I bought AMC when it was $2.12 as a good value buy. I didn’t buy a ton though, as it was just something to have a piece of. When it popped, it jumped up to $20 a share and if I would have cashed out I could have made several hundred or thousand dollars profit. I didn’t though and I’m still holding. Doesn’t hurt as much though since I’m still in the green. I’ll probably buy more if it gets back down to $3 a share or so. I believe that AMC is a good long term investment.

 

Kinda a double edged sword. Hindsight is always 20/20.

Edited February 11, 2021 by Springfield

[techboy]

Many of the people in this thread are making terrible decisions because you are in the grips of a pretty strong congnitive bias*, and it scares me, because the days of pensions are over and you're playing with your future. The 2020 research I referenced above is yet another example of what the research shows repeatedly: Almost nobody, including experts, can time the market/pick stocks successfully, predictably, and consistently, and especially when individual investors try, they generally end up getting much worse returns than they would have gotten just by investing in the indexes, as boring as that is.

 

Daniel Kahneman is a Nobel Laureate in economics, but his training is in psychology. I highly recommend his book Thinking, Fast and Slow in general, but most relevant here is his work on The Illusion of Stock Picking Skill. Everyone stock picking and market timing should read this article, but here's one relevant excerpt:

 

"Although professionals are able to extract a considerable amount of wealth from amateurs, few stock pickers, if any, have the skill needed to beat the market consistently, year after year. The diagnostic for the existence of any skill is the consistency of individual differences in achievement. The logic is simple: if individual differences in any one year are due entirely to luck, the ranking of investors and funds will vary erratically and the year-to-year correlation will be zero. Where there is skill, however, the rankings will be more stable. The persistence of individual differences is the measure by which we confirm the existence of skill among golfers, orthodontists or speedy toll collectors on the turnpike.

 

Mutual funds are run by highly experienced and hard-working professionals who buy and sell stocks to achieve the best possible results for their clients. Nevertheless, the evidence from more than 50 years of research is conclusive: for a large majority of fund managers, the selection of stocks is more like rolling dice than like playing poker. At least two out of every three mutual funds underperform the overall market in any given year.

 

More important, the year-to-year correlation among the outcomes of mutual funds is very small, barely different from zero. The funds that were successful in any given year were mostly lucky; they had a good roll of the dice. There is general agreement among researchers that this is true for nearly all stock pickers, whether they know it or not — and most do not. The subjective experience of traders is that they are making sensible, educated guesses in a situation of great uncertainty. In highly efficient markets, however, educated guesses are not more accurate than blind guesses.

 

Facts that challenge such basic assumptions — and thereby threaten people’s livelihood and self-esteem — are simply not absorbed. The mind does not digest them. This is particularly true of statistical studies of performance, which provide general facts that people will ignore if they conflict with their personal experience."

 

Emphasis mine. You guys think you can do it, but you can't. Period.

 

*Obviously this excludes people like @Corcaighwho invest in indexes, or some others that use indexing in retirement funds but have "play money" accounts where they do this kind of thing, making it more like a trip to Vegas with a budget.

 

13 hours ago, Metalhead said:

Can you be too spread out?

 

The purpose of diversification is to remove single stock risk, because risk that can be diversified away is not compensated. That being noted, if you're going to go the suboptimal route of stock picking, diversification is going to dilute your wins and magnify your losses. It'd be like a guy I knew in high school who used to buy literal boxes of lottery tickets because he thought it would help him win more. He couldn't understand that he was engaging in a net negative expectation game and that buying more just locked in his chances of losing, like a reverse Vegas.

 

12 hours ago, Metalhead said:

 

Thanks. I'm trying to develop a strategy now.

 

I'd highly recommend indexing: There's a good (and free) e-book about how to invest for your future here: https://www.etf.com/docs/IfYouCan.pdf 

 

Good luck everyone.

Edited February 11, 2021 by techboy

[ClaytoAli]

@techboy spot on comments, loved it!

[techboy]

23 minutes ago, ClaytoAli said:

@techboy spot on comments, loved it!

 

Thanks. Unfortunately cognitive biases are pretty hard to shake, so I don't know how much impact those comments had on the intended audience. This story from the same Kahneman article really hit home for me:

 

"Some years after my introduction to the world of finance, I had an unusual opportunity to examine the illusion of skill up close. I was invited to speak to a group of investment advisers in a firm that provided financial advice and other services to very wealthy clients. I asked for some data to prepare my presentation and was granted a small treasure: a spreadsheet summarizing the investment outcomes of some 25 anonymous wealth advisers, for eight consecutive years. The advisers’ scores for each year were the main determinant of their year-end bonuses. It was a simple matter to rank the advisers by their performance and to answer a question: Did the same advisers consistently achieve better returns for their clients year after year? Did some advisers consistently display more skill than others?

 

To find the answer, I computed the correlations between the rankings of advisers in different years, comparing Year 1 with Year 2, Year 1 with Year 3 and so on up through Year 7 with Year 8. That yielded 28 correlations, one for each pair of years. While I was prepared to find little year-to-year consistency, I was still surprised to find that the average of the 28 correlations was .01. In other words, zero. The stability that would indicate differences in skill was not to be found. The results resembled what you would expect from a dice-rolling contest, not a game of skill.

 

No one in the firm seemed to be aware of the nature of the game that its stock pickers were playing. The advisers themselves felt they were competent professionals performing a task that was difficult but not impossible, and their superiors agreed. On the evening before the seminar, Richard Thaler and I had dinner with some of the top executives of the firm, the people who decide on the size of bonuses. We asked them to guess the year-to-year correlation in the rankings of individual advisers. They thought they knew what was coming and smiled as they said, “not very high” or “performance certainly fluctuates.” It quickly became clear, however, that no one expected the average correlation to be zero.

 

What we told the directors of the firm was that, at least when it came to building portfolios, the firm was rewarding luck as if it were skill. This should have been shocking news to them, but it was not. There was no sign that they disbelieved us. How could they? After all, we had analyzed their own results, and they were certainly sophisticated enough to appreciate their implications, which we politely refrained from spelling out. We all went on calmly with our dinner, and I am quite sure that both our findings and their implications were quickly swept under the rug and that life in the firm went on just as before. The illusion of skill is not only an individual aberration; it is deeply ingrained in the culture of the industry. Facts that challenge such basic assumptions — and thereby threaten people’s livelihood and self-esteem — are simply not absorbed. The mind does not digest them. This is particularly true of statistical studies of performance, which provide general facts that people will ignore if they conflict with their personal experience.

 

The next morning, we reported the findings to the advisers, and their response was equally bland. Their personal experience of exercising careful professional judgment on complex problems was far more compelling to them than an obscure statistical result. When we were done, one executive I dined with the previous evening drove me to the airport. He told me, with a trace of defensiveness, “I have done very well for the firm, and no one can take that away from me.” I smiled and said nothing. But I thought, privately: Well, I took it away from you this morning. If your success was due mostly to chance, how much credit are you entitled to take for it?"

 

Emphasis mine again.

[skinfan2k]

keep investing in SPACs!

[Springfield]

This is a casino sir

[gbear]

Techboy is absolutely spot on.  

 

The only exception I know of for consistently beating the stock market are funds that can buy closed end funds to capture discounts.  This fund is run by a family friend, and it has crushed me all but one year...when I lost less than it did: Shaker Financial  It should probably be noted that funds like this typically have huge buy-ins, and thus they are out of reach for most of us ordinary investors.  

 

That said, I think it is still open for discussion whether ETF's can beat the stock market if you think an industry will go up faster than the stock market as a whole.  I think over time, everything returns to the mean as investors flock to them pushing the price up relative to its value/ability to produce returns.  The question is what is the "over time."  I don't know if it happens in an instant or a decade.  I suspect with computers doing more and more of the trading, the time frame for beating the average returns is shrinking rapidly.

 

[techboy]

5 minutes ago, gbear said:

 

The only exception I know of for consistently beating the stock market are funds that can buy closed end funds to capture discounts.  This fund is run by a family friend, and it has crushed me all but one year...when I lost less than it did: Shaker Financial  It should probably be noted that funds like this typically have huge buy-ins, and thus they are out of reach for most of us ordinary investors.  

 

That said, I think it is still open for discussion whether ETF's can beat the stock market if you think an industry will go up faster than the stock market as a whole.  I think over time, everything returns to the mean as investors flock to them pushing the price up relative to its value/ability to produce returns.  The question is what is the "over time."  I don't know if it happens in an instant or a decade.  I suspect with computers doing more and more of the trading, the time frame for beating the average returns is shrinking rapidly.

 

 

1. Bill Miller was famous for beating the indexes every year. Until he didn't. I don't know Shaker Financial's specific story, but they're included in the research, buyable or not. Even if they can consistently beat the market, the research also shows that it is virtually impossible for even experts to pick such funds in advance. They may have done so in the past, but selecting them as a fund that will do so in the future is a sucker's game. (Yet another recent article on the topic: More Proof that Consultants Can't Pick Winning Funds)

 

2. There will always be sectors (and stocks) that are above the average, and sectors (and stocks) that are below. That's how averages work. The problem is selecting those in advance. If it could be done consistently, fund managers would have been doing it with or without ETFs, and the research wouldn't be as it is.

 

This is the danger of the cognitive bias Kahneman references... In most every field of human endeavor, working harder, doing more research, etc. pays off. It's counter-intuitive, but investing just doesn't work that way. We REALLY want it to, though.

 

Anyway, the research is there for people to consider if they want, so I'll stop yammering on about this, and let everyone get back to stock picking and market timing. 

[No Excuses]

Well managed Tech ETF’s will probably continue beating index funds on returns. ARKK is probably the best tech ETF and it has crushed VTI over the past five years. Should you put all of your money in just one sector, absolutely not. It’s good to have a healthy chunk of your portfolio safely parked in low risk index funds. It’s also beyond silly at this point to not see how tech is simply on a different playing field. Do what you want with your money, but if you think we are only headed towards more digitization and automation, you would probably do well to position some portion of your portfolio towards tech.

23 minutes ago, skinfan2k said:

keep investing in SPACs!

A lot of SPACs look like scams, be careful out there.

[China]

8 minutes ago, techboy said:

 

In most every field of human endeavor, working harder, doing more research, etc. pays off. It's counter-intuitive, but investing just doesn't work that way. We REALLY want it to, though.

 

Anyway, the research is there for people to consider if they want, so I'll stop yammering on about this, and let everyone get back to stock picking and market timing. 

 

Wait, should we listen to the research you provide, or is research counter-intuitive in investing?   

[gbear]

For reference, Shaker financial was started by a guy who worked for NSA as a code breaker.  He was analyzing markets for funds offered at a discount relative to their book values.  He wrote an algorithm to identify potential stocks, and then he went on to pick from the list of stocks identified.  Now, has the market caught up, and have others written newer better codes?  Maybe.  I note his firm does not always beat the S&P 500.  However, in the last 16 years, they have averaged 11.8 % return compared with the S&P's 9.7%. 

 

Also, I remember looking back when I started investing, and it seemed pretty well documented that over time small market indexes out performed the S&P 500.  It was explained as the payoff for the higher volatility.  Do you think that is still true?  I ask because when I was advising my dad, I told him that he should  put some of his long term money in a small market index and not look at it for at least 5 years. I have to admit, I put a portion of my investment money in small market indexes as well.  Also, I put some money in an international index as a hedge against a collapsing dollar.  

 

[Corcaigh]

48 minutes ago, No Excuses said:

Well managed Tech ETF’s will probably continue beating index funds on returns. ARKK is probably the best tech ETF and it has crushed VTI over the past five years. 
 

 

Be careful of recency bias.  And of course you get a healthy dose of tech stocks in the total market anyway.

 

Historically tech stocks crush the broader market during bull periods, but suffer much more during bear markets. I know of several people who were overly-greedy leading up to the dot com crash and destroyed their retirement, when with a broader index they would have been just fine.

• Since 1972, the Nasdaq 100 has experienced slightly higher annual returns (10.8%) than the S&P 500 (10.5%), but it has also experienced much higher volatility. 
• During the bull markets, the Nasdaq 100 has crushed the S&P 500 (the 1990s and the post-2008 market).
• However, during bear markets, the S&P 500 has performed much better than the Nasdaq 100 (1973-1974, early 2000s, the 2008 financial crisis).

https://fourpillarfreedom.com/sp-500-vs-nasdaq-100-which-index-is-better/

 

And another question is what is a tech company any more. Is Peleton? Is Tesla? Some financial services firms are pretty much pure tech plays at this point.

 

Edited February 11, 2021 by Corcaigh

[techboy]

26 minutes ago, gbear said:

Also, I remember looking back when I started investing, and it seemed pretty well documented that over time small market indexes out performed the S&P 500.  It was explained as the payoff for the higher volatility.  Do you think that is still true? 

 

Small and value tilts are kind of advanced indexing, so I don't normally go into them, but yes... Fama and French seemed to demonstrate (https://www.investopedia.com/terms/f/famaandfrenchthreefactormodel.asp) that small and value stocks will outperform versus the total market. This isn't necessarily an advantage, because the theory behind this outperformance is that these stocks are riskier, so it's not really a free lunch. You could accomplish the same thing by upping stock allocation. Some people use this to cut off "fat tail risk" by reducing their stock allocation but tilting more heavily, so most of their portfolio is safer in bonds and the like, but with similar average returns, at least in theory. As I said, it's pretty advanced indexing.

 

Personally, I eliminated tilts from my portfolio several years ago because often these funds cost a little more and the research has been iffy lately as to whether or not these historical advantages have been arbitraged away. 

 

If you DO pursue this, it needs to be a very long term approach because there are going to be a lot of years where it underperforms (this is called tracking risk), which can cause investors without an iron stomach to panic, eliminating any theoretical advantage to the approach.

[No Excuses]

 

15 minutes ago, Corcaigh said:

Historically tech stocks crush the broader market during bull periods, but suffer much more during bear markets. I know of several people who were overly-greedy leading up to the dot com crash and destroyed their retirement, when with a broader index they would have been just fine.

Not a problem when you are still ~40 years from retirement. 
 

I’ll switch to safer funds in a few decades but no reason not to ride the bull market and tech explosion right now and hold through bear markets. 

[gbear]

That is why I told my dad he had to be timing small market time frame to more than one market cycle to benefit from a small market index fund. You are being rewarded/paid for the willingness to absorb short term volatility. 

[Metalhead]

Ok, now ETF's. For example, something like ARKK that is at $150 a share, is that too high to get into? I would not be able to get too many shares at that price...would I be missing greater returns on a lower ETF? Basically, how does opportunity cost come into play?

 

@techboy just to be clear, I am not a gambler or looking to beat the market. I prefer "set it and forget it", but I do have some fun stuff that I can sell and then lockdown the gains by dumping into ETF's. It's apparently a rookie strategy (and I'm ignorant) but I've nearly tripled my investment already...and I want to preserve it and make good decisions. The total cash I have deposited in TDAmeritrade is less than someone's lawnmower, four-wheeler, or boat, which I own none.

[techboy]

24 minutes ago, Metalhead said:

Ok, now ETF's. For example, something like ARKK that is at $150 a share, is that too high to get into? I would not be able to get too many shares at that price...would I be missing greater returns on a lower ETF? Basically, how does opportunity cost come into play?

@techboy

 

There is no difference in returns between holding one share of stock that cost $100 that has returns of 10% and two shares of stock that cost $50 and return 10%.

 

An increasing number of brokers are even allowing fractional shares these days, so you could, for example, buy $100 of AAPL, even though its price is well higher.

2 hours ago, China said:

 

Wait, should we listen to the research you provide, or is research counter-intuitive in investing?   

 

You have caught me using imprecise language!

 

 

[TheGoodBits]

I think you’ve gotta take a look at the holdings of the ETF and decide if any are currently overvalued. I wouldn’t touch Tesla right now... and any ETF’s that are made up largely of Tesla are off limits for me for now. 
 

I’ve had good success the past few months with QQQJ, Invesco’s “next gen top 100” ETF. QQQ is their well established top 100 fund, while QQQJ is more focused on the next 100 (nasdaq 101-200), more oriented toward growth. Good mix of tech, biotech, pharma, etc. It’s been running way ahead of the SP500 since its inception (up 10.8% since Oct, annualized 28%). 

Edited February 11, 2021 by skinsfan_1215

[No Excuses]

5 minutes ago, skinsfan_1215 said:

I think you’ve gotta take a look at the holdings of the ETF and decide if any are currently overvalued. I wouldn’t touch Tesla right now... and any ETF’s that are made up largely of Tesla are off limits for me for now. 
 

I’ve had good success the past few months with QQQJ, Invesco’s “next gen top 100” ETF. QQQ is their well established top 100 fund, while QQQJ is more focused on the next 100 (nasdaq 101-200), more oriented toward growth. Good mix of tech, biotech, pharma, etc. It’s been running way ahead of the SP500 since its inception. 

TSLA is down 3.5% the last week and ARKK is still up 4.5% in the same time frame. 
 

The ARK ETF’s aren’t for everyone, but if you have a bullish outlook for tech in general, there’s few better options than their ETF’s for tech exposure. 

[Spaceman Spiff]

Not sure if this has been posted, but this is a sad story:

 

https://www.huffpost.com/entry/alex-kearns-robinhood-death-lawsuit_n_6022d4aac5b689330e3332af

 

Quote

Illinois Family Sues Robinhood Claiming Wrongful Death After Son’s Suicide

Alex Kearns’ parents say the 20-year-old was led to believe he’d lost $730,000 on stock trades made via the investment app prior to his death last year.