[crdr]

^
Haha. Savage.

[Peregrine]

Opportunity cost - if I'm fantastic at something else (hypothetically, NBA star) and average or worse at financial speculation, any time I spend in the latter is an inefficient use of my time. Unless I enjoy picking stocks, I'm better off focusing my efforts on making money at my main thing (putting balls in baskets) and investing passively/paying someone else to manage my money.

For a guy who's in above average shape, is above average with women, and above average at making money, I say it's totally okay to throw money into index funds. At least he's not paying a stupid high MER or giving it to a guy promising 50% YoY on synthetic chihuahua feces cultivation.

Especially if financial markets bore the shit out of you. I mean, you even said it yourself, you don't mind looking at annual reports and company decks. Other people would rather insert toothpicks into their eyeballs.

Fact is, everyone's time is limited. You can't get good at everything. And financial speculation requires a significant time investment to get good at (and imo, an above average intelligence).

[Veloce]

Has nothing to do with "being better than the average man" and everything to do with risk management.

If you really want to talk about being better than the average man then that has to do with your overall financial health. Investing is just one part of that. Some guy that outperforms the S+P 500 but then spends 25% of his monthly income on a car payment...hey that's his life and his choice but not one that I aspire to.

Investing in index funds isn't defeatism, it's a choice that some investors actively choose because, having done the research, they've decided it's the more intelligent choice. There are plenty of smart, no doubt 'red-pill' guys, that invest in blue chip stocks and underperform against the indexes.

[SamuelBRoberts]

Where do you even go to put money into an index fund?

I've been wanting to do it and have no idea. I've been kind of on the fence, but OP's post has convinced me that it's a good idea.

[Thomas Jackson]

(07-14-2017 04:11 PM)SamuelBRoberts Wrote:  

Where do you even go to put money into an index fund?

I've been wanting to do it and have no idea. I've been kind of on the fence, but OP's post has convinced me that it's a good idea.

Vanguard has tons that are very low cost. Open up an account there.

[crdr]

Awesome commercial from Canadian Wealth Company

[SamuelBRoberts]

(07-14-2017 01:02 PM)Australia Sucks Wrote:  

Kavi, yes in the grand scheme of things I am still a "pleb" so to speak and I will never become an elite, but you are not really offering a solution/alternative. Being a pleb with a net worth of $2 million dollars is still better than being a pleb with a net worth of zero. You can't change the world that much, you just have to make the most of things.

Kavi what do you do with your money? Let me guess its all it bitcoins? Or is it all in gold bars buried in a secret location in your backyard?

If he's been putting all his money in bitcoins, unless he got into cryptocurrency in May he's a hell of a lot richer than you are...

[John Michael Kane]

Anyone considering investing in index funds should check out Schwab:

https://www.schwab.com/public/schwab/nn/...funds.html

Their fees are in line with Vanguard if not lower.

Still, I caution anyone to invest (or at least large amounts right now) as the stock market is overpriced as a whole and ready for a correction.

[Veloce]

(07-14-2017 04:37 PM)John Michael Kane Wrote:  

Anyone considering investing in index funds should check out Schwab:

https://www.schwab.com/public/schwab/nn/...funds.html

Their fees are in line with Vanguard if not lower.

Still, I caution anyone to invest (or at least large amounts right now) as the stock market is overpriced as a whole and ready for a correction.

100% agree. I've got a sizeable chunk of change waiting in a money market account, If I see a major correction then I'll dollar cost average back in.

In the meantime I'm putting 100% extra monthly income into my mortgage. My home value jumped considerably the past year and if I think it's poised to skyrocket in the next few based on the local market. I've got a lot more faith in my property than any stock.

And that's really the point. If you know a company as well as your own home and you think it's severely undervalued, by all means buy in. But your analysis should be based on hard tangibles, and not just a "feeling".

[John Michael Kane]

Stock prices have shot way up, but top-line revenue is mostly flat or small growth. The economy simply isn't growing as fast as stock prices. These companies aren't creating the massive values that drive huge valuations. Pretty much, there are very few bargains out there for individual stocks, and indexes are overpriced right now due to individual stocks within the index being overpriced. Putting money back into your home is a sound idea, especially if you a variable rate mortgage (hopefully not!) which is set to adjust upwards with interest rates. If anyone here has extra cash, I'd recommend paying down debt (especially high-interest debt) before considering investing.

[debeguiled]

Harry Browne made a killing speculating on gold in the 70's, and has said that he subscribed to every financial newsletter he could and saved it. When he later looked back over all of them, he found that no one had really, consistently beat the market with their advice over the long run.

Even though he made his millions speculating in gold, and spent a lot of time trying to figure out how to invest, he finally came to the conclusion that there are very very few people who beat the market over time, and while they are intelligent men, they were pitted against equally talented and intelligent men who had exactly the opposite strategy and lost, and as a result, may have been far more lucky than they would admit to.

In many areas, it is the people who would rather believe in themselves than the received wisdom who end up successful. Unfortunately, we never hear about the equally talented risk takers who believed in themselves who ended up failing on a massive scale.

The stock and bond markets are peopled by some of the most intelligent, successful college students who were given jobs and access to all the latest technology by employers, and can think faster and trade faster than anyone else on the planet. They also tend to born with a money making gift, that they have honed over the years.

Michael Jordan was arguably the best baller of all time, so why did he end up getting schooled and fleeced by common golf hustlers when he played their game? He was probably a better natural athlete than the people taking his money.

The reason is they played to his strength and made it a weakness. His belief in himself. They could use his own sense of his ability to dig deep and do what it takes to win, and get him to apply it to an endeavor in which he was overmatched.

Self improvement, believing in yourself is awesome, and will serve you well. If you don't already have a knack though, and are willing to put time into it, investing for yourself is like tossing a pet kitty into a jungle. They can't wait for you. Come on, champ, you can beat us.

AS, it is great you are doing well, though I would assume since you are young that your strategy hasn't been successful over multiple decades, which is the true measure here, since it won't do much good to be a killer for thirty years and then lose it all in your fifties.

I am glad you posted, because this is an important discussion to have, and it may well be that you have hit on a system to beat the market year in and year out over multiple decades. Datasheet would be awesome.

Just don't trash conservatism when it comes to protecting money people have worked hard for. As Harry Browne says, if you lose it, there is no guarantee you will be able to earn it all back again.

After Browne made his millions, he set out some rules for investing. They are much more conservative than yours, but I will quote them here for any member who is interested.

They make sense to me.

Here they are . . .

http://www.harrybrowne.org/articles/InvestmentRules.htm

Quote:

The 16 Golden Rules of Financial Safety
by Harry Browne
(Adapted from Fail-Safe Investing by Harry Browne)

When you read that one of the richest people in the world — someone like Bunker Hunt, John Connally, or Donald Trump — has declared bankruptcy or is in financial trouble, it's easy to feel a sense of futility about managing your own money.

If such a person—able to afford the best financial advice in the world—can be brought low by a bad investment or decision, what chance do you have?

But the wealthy individual didn't fail because he received bad advice or picked a poor investment. His undoing was that he violated some basic rule of life. If he had managed his investments the same way he manages his business and personal life, he probably wouldn't have lost his money.

To assure that you never share his fate, I've developed what I call "The 16 Golden Rules of Financial Safety." There's nothing mysterious or shocking about these rules; they simply apply to investments the kind of advice your mother gave you when you were little — the kind of advice you've most likely lived your life by.

If you abide by them, there's less than one chance in a million that you could lose all you have.


Your Career

Rule #1: Your career provides your wealth.

You most likely will make far more money from your business or profession than from your investments. Only very rarely does someone make a large fortune from investments.

Your investments can make your future more secure and your retirement more prosperous. But they can't take you from rags to riches. So don't take risks with complicated schemes in the hope of multiplying your capital quickly. Your investment plan should be aimed, first and foremost, at preserving what you have—preserving it from investment loss, government intervention, or mismanagement.

Your Wealth May Be Non-Replaceable

Rule #2: Don't assume you can replace your wealth.

The fact that you earned what you have doesn't mean that you could earn it again if you lost it. Markets and opportunities change, technology changes, laws change. Conditions today may be considerably different from what they were when you built the estate you have now. And as time passes, increasing regulation makes it harder and harder to amass a fortune.

So treat what you have as though you could never earn it again. Don't take chances with your wealth on the assumption that you could always get it back.

Investing vs. Speculating

Rule #3: Recognize the difference between investing and speculating.

When you invest, you accept the return the markets are paying investors in general. When you speculate, you attempt to beat that return — to do better than other investors are doing — through astute timing, forecasting, or stock selection, and with the implied belief that you're smarter than most other investors.

There's nothing wrong with speculating — provided you do it with money you can afford to lose. But the money that's precious to you shouldn't be risked on a bet that you can outperform other investors.

Forecasting the Future

Rule #4: No one can predict the future.

Events in the investment markets result from the decisions of millions of different people. Investor advisors have no more ability to predict the future actions of human beings than psychics and fortune-tellers do. And so events never unfold as we were so sure they would.

Yes, there have been forecasts that came true. But the only reason we notice them is because it's so exceptional for even one to come true. We forget about all the failed predictions because they're so commonplace.

No one can reliably tell you what stocks will do next year, whether we'll have more inflation, or how the economy will perform.

Investment Advice

Rule #5: No one can move you in and out of investments consistently with precise and profitable timing.

You'll hear about many Wall Street wizards, but the investment advisor with the perfect record up to now most likely will lose his touch the moment you start acting on his advice.

Investment advisors can be very valuable. A good advisor can help you understand how to do the things you know you need to do. He can help call your attention to risks you may have overlooked. And he can make you aware of new alternatives.

But no one can guarantee to have you always in the right place at the right time. And worse, attempts to do so can sometimes be fatal to your portfolio.

Trading Systems

Rule #6: No trading system will work as well in the future as it did in the past.

You'll come across many trading systems or indicators that seem always to have signaled correctly where your money should have been, but somehow the systems never come through when your money is on the line.

Operate on a Cash Basis

Rule #7: Don't use leverage.

When someone goes completely broke, it's almost always because he used borrowed money. In many cases, the individual was already quite rich, but he wanted to pyramid his fortune with borrowed money.

Using margin accounts or mortgages (for other than your home) puts you at risk to lose more than your original investment. If you handle all your investments on a cash basis, it's virtually impossible to lose everything—no matter what might happen in the world—especially if you follow the other rules given here.

Make Your Own Decisions

Rule #8: Don't let anyone make your decisions.

Many people lost their fortunes because they gave someone (a financial advisor or attorney) the authority to make their decisions and handle their money. The advisor may have taken too many chances, been dishonest, or simply incompetent. But, most of all, no advisor can be expected to treat your money with the same respect you do.

You don't need a money manager. Investing is complicated and difficult to understand only if you're trying to beat the market. You can preserve what you have with only a minimum understanding of investing. You can set up a worry-proof portfolio for yourself in one day — and then you need only one day a year to monitor it. Allowing the smartest person in the world to make your decisions for you isn't nearly as safe as setting up a safe portfolio for yourself.

Above all, never give anyone signature authority over money that's precious to you. If you should put money into an account for someone else to manage, it must be money you can afford to lose.

Understand What You Do

Rule #9: Don't ever do anything you don't understand.

Don't undertake any investment, speculation, or investment program that you don't understand. If you do, you may later discover risks you weren't aware of. Or your losses might turn out to be greater than the amount you invested.

It's better to leave your money in Treasury bills than to take chances with investments you don't fully comprehend. It doesn't matter that your brother-in-law, your best friend, or your favorite investment advisor understands some money-making scheme. It isn't his money at risk. If you don't understand it, don't do it.

Diversification

Rule #10: Don't depend on any one investment, institution, or person for your safety.

Every investment has its time in the sun — and its moment of shame. Precious metals ruled the roost in the 1970s while stocks and bonds were in disgrace. But then gold and silver became the losers of the 1980s and 1990s, while stocks and bonds multiplied their value. No one investment is good for all times. Even Treasury bills can lose real value during times of inflation.

And you can't rely on any single institution to protect your wealth for you. Old-line banks have failed and pension funds have folded. The company you think will keep your wealth safe might not be there when you're ready to withdraw your life savings.

We live in an uncertain world, and surprises are the norm. You shouldn't risk the chance that a single surprise will wipe out a large part of your holdings.

Balanced Portfolio

Rule #11: Create a bulletproof portfolio for protection.

For the money you need to take care of you for the rest of your life, set up a simple, balanced, diversified portfolio. I call this a "Permanent Portfolio" because once you set it up, you never need to rearrange the investment mix— even if your outlook for the future changes.

The portfolio should assure that your wealth will survive any event — including an event that would be devastating to any individual element within the portfolio. In other words, this portfolio should protect you no matter what the future brings.

It isn't difficult or complicated to have such a portfolio this safe. You can achieve a great deal of diversification with a surprisingly simple portfolio.

Speculation

Rule #12: Speculate only with money you can afford to lose.

If you want to try to beat the market, set up a second — separate — portfolio with which you can speculate to your heart's content. But make sure this portfolio contains no more of your wealth than you can afford to lose.

I call this second pool of money a "Variable Portfolio" because its investments will vary as your outlook for the future changes. It might be all or part in stocks or gold or something else — whatever looks good at any time — or just in cash. You can take chances with the Variable Portfolio because you know that, whatever happens, no loss can be devastating. You can lose only the money you've already decided isn't precious to you.

International Diversification

Rule #13: Keep some assets outside the country in which you live.

Don't allow everything you own to be where your government can touch it. By having something outside the reach of your government, you'll be less vulnerable — and you'll feel less vulnerable. You'll no longer have to worry so much about what the government will do next.

For example, maintaining a foreign bank account is quite simple; it's little different from having a mail or Internet account with an American bank or broker.

Tax Shelters

Rule #14: Beware of tax-avoidance schemes.

Tax rates are still low enough in the U.S. that you might gain very little from the risk and effort of constructing elaborate tax shelters. And a great deal of money has been lost by people who hoped to beat the tax system. The losses came from investments that provided special tax advantages but didn't make economic sense, and from tax shelters that were disallowed by the IRS — incurring penalties and interest on top of the liabilities.

There are a number of simple ways available to minimize taxes — through such things as IRAs and 401(k) plans. These plans are effective but non-controversial. They won't come back to haunt you.

Enjoyment

Rule #15: Enjoy yourself with a budget for pleasure.

Your wealth is of no value if you can't enjoy it. But it's easy to spend too much while the money's flowing in. To enjoy your wealth, establish a budget of money that you can spend yearly without concern. If you stay within that amount, you can feel free to blow the money on cars, trips, anything you want — knowing that you aren't blowing your future.

When in Doubt . . .

Rule #16: Whenever you're in doubt about a course of action, it is always better to err on the side of safety.

If you pass up an opportunity to increase your fortune, another one will be along soon enough. But if you lose your life savings just once, you might never get a chance to replace it.

The Rules of Life

The rules of safe investing are little different from the rules of life: recognize that you live in an uncertain world, don't expect the impossible, and don't trust strangers. If you apply to your investments the same realistic attitude that produced your present wealth, you needn't fear that you'll ever go broke.

AS, you may be one of the exceptional ones who beats the market, and as they say down there, good on you, mate.

I don't think, however, that being conservative with your life savings is defeatist.

It is just a lost value called prudence.

[polar]

OP, you seem to me as someone who has gotten lucky by riding the Australian market as it trends ever-upwards, and suffer from illusory superiority as a result.

The other side of investing is risk management. Roulette wheels can double your money in one spin. Does that make them a good investment?

Portfolio managers get paid to accomplish certain things, typically such as following a tightly defined benchmark. Many hedge funds are paid to produce a certain absolute return no matter their market, or a return that is similar or less than their market, but with much less risk. Only a minority of managers (select hedge funds) have near-total discretion in the assets they can hold. Even then, they are restricted from holding more than 2-3% of their portfolio in a single asset, more than x% in a single sector, etc., spend lots of time modeling risks and returns in various scenarios, and stay awake at night thinking about how to protect client money in a bear market.

There are a lot of fund managers who don't cover their fees and are "closet indexers," and they are often hard to tell apart from good managers who really deliver value. That doesn't mean there are a lot of foundational concepts based on high-level math that go into play when it comes to optimizing risk and return.

You're holding just three stocks in your portfolio. This tells me you know nothing about concentration risk. Furthermore, how risky are those three stocks compared to the market? How protected are you from a market crash tomorrow? Can you afford to risk a market correction?

Anyone can be a successful "investor" in a bull market. To paraphrase Buffett, it's when low tide hits that you find out who's left with their pants off.

[Yeti]

(07-14-2017 04:17 PM)Thomas Jackson Wrote:  

(07-14-2017 04:11 PM)SamuelBRoberts Wrote:  

Where do you even go to put money into an index fund?

I've been wanting to do it and have no idea. I've been kind of on the fence, but OP's post has convinced me that it's a good idea.

Vanguard has tons that are very low cost. Open up an account there.

VTSAX specifically is a good, general index fund. You can't really go wrong by having it as your default, or at least a good starting point.

[Veloce]

(07-14-2017 04:49 PM)John Michael Kane Wrote:  

Stock prices have shot way up, but top-line revenue is mostly flat or small growth. The economy simply isn't growing as fast as stock prices. These companies aren't creating the massive values that drive huge valuations. Pretty much, there are very few bargains out there for individual stocks, and indexes are overpriced right now due to individual stocks within the index being overpriced. Putting money back into your home is a sound idea, especially if you a variable rate mortgage (hopefully not!) which is set to adjust upwards with interest rates. If anyone here has extra cash, I'd recommend paying down debt (especially high-interest debt) before considering investing.

I did a 4% 30 year fixed, on average I put in an extra $1000 against the principal monthly. After I got the principal below 78% I started getting refi offers but it was some marginal bs like .5% which didn't even cover the closing costs I don't think, not worth my time unless they offer at least 1% lower.

[Digimata]

(07-14-2017 05:24 PM)polar Wrote:  

You're holding just three stocks in your portfolio. This tells me you know nothing about concentration risk. Furthermore, how risky are those three stocks compared to the market? How protected are you from a market crash tomorrow? Can you afford to risk a market correction?

Anyone can be a successful "investor" in a bull market. To paraphrase Buffett, it's when low tide hits that you find out who's left with their pants off.

Polar, you of all should know when one diversifies too much, all they get in the end is the index. And that's paraphrasing Buffett as well.

The rest of your concerns are moot. If one is long and there is a market crash, you are getting hit regardless. You show evidence if a nuke goes off in NY tomorrow all betas don't go to 1.

[John Michael Kane]

(07-14-2017 05:51 PM)Veloce Wrote:  

(07-14-2017 04:49 PM)John Michael Kane Wrote:  

Stock prices have shot way up, but top-line revenue is mostly flat or small growth. The economy simply isn't growing as fast as stock prices. These companies aren't creating the massive values that drive huge valuations. Pretty much, there are very few bargains out there for individual stocks, and indexes are overpriced right now due to individual stocks within the index being overpriced. Putting money back into your home is a sound idea, especially if you a variable rate mortgage (hopefully not!) which is set to adjust upwards with interest rates. If anyone here has extra cash, I'd recommend paying down debt (especially high-interest debt) before considering investing.

I did a 4% 30 year fixed, on average I put in an extra $1000 against the principal monthly. After I got the principal below 78% I started getting refi offers but it was some marginal bs like .5% which didn't even cover the closing costs I don't think, not worth my time unless they offer at least 1% lower.

Re-fi almost never makes sense for people, with two exceptions:

You have a variable rate mortgage is that going upwards and you can't afford your payments OR you had a very bad fixed rate mortgage and your credit has now improved and can re-fi.

The problem with re-fi's is that most loans are structured such that the first several years you are paying mostly interest and escrow, very little against the principal. It is very important to look at the overall payment structure over the life of a loan to see if re-fi makes sense.

In most cases (and including yours), the answer is almost all of the time "no". Your current mortgage, with plenty of extra cash thrown at it monthly, is a better option. Keep it up.

[polar]

(07-14-2017 06:33 PM)Digimata Wrote:  

(07-14-2017 05:24 PM)polar Wrote:  

You're holding just three stocks in your portfolio. This tells me you know nothing about concentration risk. Furthermore, how risky are those three stocks compared to the market? How protected are you from a market crash tomorrow? Can you afford to risk a market correction?

Anyone can be a successful "investor" in a bull market. To paraphrase Buffett, it's when low tide hits that you find out who's left with their pants off.

Polar, you of all should know when one diversifies too much, all they get in the end is the index. And that's paraphrasing Buffett as well.

The rest of your concerns are moot. If one is long and there is a market crash, you are getting hit regardless. You show evidence if a nuke goes off in NY tomorrow all betas don't go to 1.

Reductio ad absurdum. You show evidence that a nuke is going off in NY tomorrow. I'll show you companies with operations beyond NYC.

There's a lot of diversification to be done to go from 3 stocks to the S&P. 30ish stocks is sufficient to reduce your idiosyncratic risk. And unless you have the same weights as the index, you'll still end with different results. Given a moderately diversified portfolio, most of your results come from sector weighting anyway.

Yes, you will still get hit in a market crash. Yes, conditional correlation in a market crash. But there's a reason hedge funds were originally intended to hedge downside risk. You can pay for downside protection, and barring the Apocalypse, you'll receive a payout.

[SlickyBoy]

Considering nearly 50% of all stock holdings under management in the US (that is, holdings managed on behalf of institutional investors) is in index funds, no, I don't think it's defeatism at all. It's a wise strategy considering most actively managed funds wind up underperforming the index and costing more in the process.

[SlickyBoy]

(07-14-2017 07:14 PM)John Michael Kane Wrote:  

(07-14-2017 05:51 PM)Veloce Wrote:  

(07-14-2017 04:49 PM)John Michael Kane Wrote:  

Stock prices have shot way up, but top-line revenue is mostly flat or small growth. The economy simply isn't growing as fast as stock prices. These companies aren't creating the massive values that drive huge valuations. Pretty much, there are very few bargains out there for individual stocks, and indexes are overpriced right now due to individual stocks within the index being overpriced. Putting money back into your home is a sound idea, especially if you a variable rate mortgage (hopefully not!) which is set to adjust upwards with interest rates. If anyone here has extra cash, I'd recommend paying down debt (especially high-interest debt) before considering investing.

I did a 4% 30 year fixed, on average I put in an extra $1000 against the principal monthly. After I got the principal below 78% I started getting refi offers but it was some marginal bs like .5% which didn't even cover the closing costs I don't think, not worth my time unless they offer at least 1% lower.

Re-fi almost never makes sense for people, with two exceptions:

You have a variable rate mortgage is that going upwards and you can't afford your payments OR you had a very bad fixed rate mortgage and your credit has now improved and can re-fi.

The problem with re-fi's is that most loans are structured such that the first several years you are paying mostly interest and escrow, very little against the principal. It is very important to look at the overall payment structure over the life of a loan to see if re-fi makes sense.

In most cases (and including yours), the answer is almost all of the time "no". Your current mortgage, with plenty of extra cash thrown at it monthly, is a better option. Keep it up.

Good advice. One thing to keep in mind with a refi is you are essentially closing on a house all over again. So your assumption was correct - unless you're going to drop down a full point or more, by the time you get done with the costs (like paying closing costs again), you may not save any money in the long run. There are exceptions such as the IRRRL for a VA loan (assuming you were eligible and took out one of those) but generally JMK hit the nail on the head. I'd be wary of most unsolicited mailers anyway as the ones I get always seem to be from shady outfits promising unrealistic numbers - but maybe I'm being targeted. Hm.....

[John Michael Kane]

Unsolicited mailers are often scammers and shady "legit" businesses trying to one up you on something. Usually if you need a mortgage, a credit union will give you the best rates.

[BB1]

There are proven strategies that will beat index investing returns. Unfortunately most financial planners, talking heads, and so called experts do not understand this.

There is a lot of academic research which shows there are market anomalies that can be exploited to beat an index approach.

Some of that research has been recognized with Nobels in economic science — William Sharpe in 1990 and Eugene Fama in 2013.

One of their findings is that value outperforms growth, rewarding those who identify stocks with lower PE ratios and other metrics that suggest they’re undervalued. Another factor is momentum, in which stocks that are already outperforming market averages continue to do so.

[Digimata]

(07-14-2017 07:40 PM)polar Wrote:  

Reductio ad absurdum. You show evidence that a nuke is going off in NY tomorrow. I'll show you companies with operations beyond NYC.

There's a lot of diversification to be done to go from 3 stocks to the S&P. 30ish stocks is sufficient to reduce your idiosyncratic risk. And unless you have the same weights as the index, you'll still end with different results.

Agree and disagree. Diversification is good, but up to a point. As per the link below diminishing returns kick in after about 5-6 equities. I don't have the study with me and couldn't care to look it up so here it is: http://www.investopedia.com/articles/sto...cation.asp

For retail IMO, unless you are +-200 basis points, your in line with the index. Retail should be focusing on absolute gains, not relative gains anyways.

And while it is Reductio ad absurdum, your point above doesn't negate my point that corrs go to 1. And we both know my point to be true.

[MongolianAbroad]

(07-14-2017 10:54 AM)Australia Sucks Wrote:  

The short version summary of my post is that any reasonably intelligent person who puts in the work and has patience can outperform the stock market indexes by picking individual stocks, so why they throw in the towel and become a passive index investor?

Your premise is false.

The reality is:

1. Everyone's a "genius" in a bull market.
2. You generally hear only about people's good trades, not their bad trades.
3. The ego can be dependably counted on to lead millions of men to take a shot at actively trading the market, essentially legalized gambling, and getting fleeced.
4. Everyone has a plan until they get punched in the face.

I would give the OP some advice, but there's no point, his ego is too big to take it at this point in time. Index funds are fine and ETF's have lower fees and do something similar.

Trying to beat the market by playing the market isn't a sign of being a superior man, for 99.99% of men, it's a sign of having an ego that's going to get you taken for a ride.

My advice to everyone except for the OP regarding winning at active investing is to only invest in things in which you have a competitive edge which allows you to know the odds are in your favor, and incredibly so, and will yield yearly returns in the triple digits or higher. Also, never make a play that has a large chance of failing and could force you to leave the table permanently if it goes bad. You want to make plays that are virtually certain to pan out (you will know this due to your industry-specific knowledge that few others have) and that will give you yearly returns of 100% or more if they do, while costing you only your principal if they don't.

If you stick to the above, it's hard to lose. If instead you think you can beat the stock market or the bitcoin market or whatever other market because you're "reasonably intelligent, put in the work, and have patience," you are wrong.

There's an entire generation of young men who have never experienced a bear market who now think they are geniuses because they invested into this bull market, either via digital coins or the actual stock market, and they have basically been making other people's fortunes increase in value in real life while thinking they are making their own fortune increase in value, except when all is said and done, many of their increases will only be on paper. In the short term, some will have a net gain and some will have a net loss, but in the long term, the real losers will be all those "investors" who got a taste of making easy money via clicking on a mouse. In the long run, real life doesn't work that way, and it's a lesson learned best sooner rather than later.

If there's one thing that can be reliably depended on over the long term in real life, it's that losers don't win.

The worst market to have as your introduction to trading, be it the stock market or otherwise, is a bull market, because it will make you think this is easy and you are actually good at it, when in reality, this is just the part where they're lubing you up and you innocently have no idea what kind of violent fucking is coming your way.

[Australia Sucks]

Let me address some of the posts on this page.

(07-14-2017 03:19 PM)Peregrine Wrote:  

Opportunity cost - if I'm fantastic at something else (hypothetically, NBA star) and average or worse at financial speculation,

While opportunity cost is a real thing, its a bit of a straw man argument because most guys, including most Rooshv forum members are not some multi millionaire basketball player or established law firm partner, or brain surgeon, etc.

For most guys, including most on the forum putting the extra work into their investments which could lead to an extra substantial six figure some after a few decades will give a huge boost to their life. Sure if you have $100 million dollars why waste your time picking stocks? Getting an extra $3 million dollars in return is not going to add anything to your lifestyle. But for some cubicle drone earning $80,000 per year an extra $100,000 in wealth in a decade's time is a huge win. Most guys can afford to put in the time by prioritizing and cutting back a little on shit like internet browsing, porn, TV, drinking beers with friends, etc

What you are saying is almost the equivalent of some skinny guy who says "I'm good at game so why should I bother trying to put on muscle or going to the gym? I can just game more hours to pull more girls"

[bacon]

I think most people if they pick the 2 or so dominant companies each (think Proctor and Gamble for non discretionary or Chevron for Energy)from the 8-10 sectors of the economy (so a portfolio of 20 stocks) and hold on to those for decades will probably be just as good or better than if they held the money in an index fund like the S&P 500 for the same period of time.

But the problem for most investors is how they behave when they own the individual stocks as opposed to index funds. In this case, often the novice investor who owns individual stocks will be too active of an investor and overly emotional to the volatile moves of specific stocks in their portfolio. They might sell when a stock is low and only reenter a position again when the stock is back to high levels.

For a great many investors the appeal of index investing is not to do as good as the market. It is to take the emotion out of investing.

"The greatest enemies of the equity investor are expenses and emotions." -Warren Buffett