[Travel Museums]

It's too much work and too much risk for marginal returns. Maybe if you're risking other people's money in a large pool where everyone's only risking 10%. Oh wait that's a hedge fund managers job. Better yet just save the management fee and invest in the index.

I really hope I've killed any notion that passive index investing is defeatism. It's the smartest thing you can do with your money.

Are there other things you should also do? Yes.

Do I have tens of thousands in single stocks? Of course.

Do I have similar amounts in weird shit like crypto?
Yes.

Do I own real estate?
Check.

Do I have people working for me while I sleep.
Check.

Do I have online businesses?
Yup.

Do I have a professional degree and license to fall back on?
Yes.

You do realize there is no actual stock market anymore. There's no actual trading floors. It's all automated. 2/3 of the trades are computers running algorithms. You're going to beat that? Year after year??

No. NO.

[Australia Sucks]

Travel Museums do you realize that guys like me are not even playing the same game as computer run algorithms? They are mostly doing short term trading (not always, but mostly), sometimes as fast as a few seconds. Meanwhile I am holding stocks for years. What they do has almost zero impact on what I do. Algorithmic traders are more likely to impact the stock price on a very short-term time horizon but a stocks fundamentals are what mostly moves the stock price over the long-term time horizon which I invest.

In other words algorithms for the most part are short-term and compete with day traders etc. They do not compete directly with people like me who hold stocks for years at a time.

Over time spans of minutes, days, weeks or months, fundamentals typically are not the primary driver of stock prices. However over periods spanning years and decades company fundamentals such as revenues and cash flow/earnings, dividends, assets, etc are what ultimately drives stock prices.

I never said people should not own real estate or businesses, etc. I also own investments other than direct shares. My point was that people should consider investing a portion of their net worth in individual stocks so they can generate "alpha" compared to the index.

Your assertions of "active" investing being too much work and too much risk is merely an assertion without evidence to back it up. And before you rehash the old nugget that most people under-perform the index I have already addressed that multiple times in detail in this thread.

As for the returns being marginal plenty of Rooshv forum members including myself have made returns which are both large in dollar terms and far in excess of the index in percentage terms. In the 12 months ending 30th June 2017 (financial year in Australia) my parents self managed superannuation fund which I manage (think the equivalent of an IRA in the U.S.A.) generated a net return (without leverage) in the 35-40% range from individual stock picking. In the super fund I literally did not buy or sell as single share all year. I just sat on positions from previous years. Yeah, the return was totally marginal and not worth my time or the stress involved And before you ask I did not speculate on any high risk stocks like junior mining explorers or biotech startups. The money was invested in profitable dividend paying shares.

Almost nobody gets rich before their hair turns grey by index investing. So its not the smartest thing you can do, its merely the easiest thing you can do. Travel Museums why do you own any individual stocks at all if you think its too difficult and risky to beat the market? Why not have 100% of your stock market exposure in Index Funds/ETFs?

Most index fund investors will probably end up eating baked beans out of a tin during their retirement. That being said even for guys like me there is a use for index funds. If in the future I decide I want exposure to particular markets or sectors where its too much headache to buy individual stocks I may consider getting exposure through an index ETF. Examples would be emerging market ETFs or gold mining ETFs (I do not have enough knowledge about mining companies to pick individual mining stocks).

[BB1]

I urge all Forum members who have invested in a US index fund to read this GMO White paper released today :

"The S&P 500: Just Say No"

https://www.gmo.com/docs/default-source/...say-no.pdf

[Kid Twist]

From your paper, BB:

Quote:

While US equity bulls can point to stronger economic fundamentals in the US than those we see in
Europe and Japan, the issue for investors is not the relative health of the respective economies because
we know that economic growth has little to do with subsequent equity returns. Plus, anybody that
can pick up a newspaper can see the headlines and make that facile determination. The question for
investors is “What’s in the price?” And as we look at the US equity market, relative expectations seem
quite high and an awful lot appears to be in the price. However, international equities, while not cheap
in absolute terms, certainly suffer from poor expectations and much better pricing. Their currencies
also seem a bit cheaper relative to the dollar. Combine all this with significantly cheaper relative
valuations and we believe international equities look a damn sight better than their US counterparts.

I think this misses the point as Martin Armstrong so often points out, it focuses way too much on domestic "problems" rather than the fact that people will do anything, especially very soon to come, to just get something on their investment or even better: hold serve. Japan QE'd more than anyone in history, Euro (ECB) is at negative interest rates, China isn't as solid with the yuan to the dollar still. What does that leave? The "irrational" US market continuing to climb.

International equities against a strong dollar and investment fleeing TO the USA? I can't even imagine where they are claiming the sources of these are. Watch the US pull back on fundamentals (Fed unwinding), but then soar to new heights afterwards.

I'm also on record now with BTC, regardless of what you think of it, being the hedge against worries about traditional markets. BTC is here to stay, I'm sad I didn't buy a lot at 2k, which I think was the clear not-so-cheap low that stabilized. It's going to $10k easy, I'll say that right now.

[456]

Here's a nice counterpoint to the GMO paper:

https://personal.vanguard.com/pdf/s287.pdf

From VG of course.

Excerpt:

Quote:

Appeal of portfolios using alternative strategies for structuring indexes

Proponents of strategies using alternative methodologies for constructing indexes believe that market-cap weighting inherently overweights overvalued stocks and underweights undervalued stocks, exposing investors to potentially lower returns with increased risk. If true that a stock’s price reflects pricing inefficiency (discussed later), it follows that overvalued stocks would represent a greater weight in a market-cap-weighted index relative to undervalued stocks. By focusing on market cap, traditional indexes are said to necessarily underperform strategies that focus on metrics other than company size (Siegel, 2006; Hsu, 2006). Indeed, as shown in Figure 4, on page 8, these alternative indexes would have significantly outperformed their traditional counterparts since January 2000, a period often referred to as the “lost decade,” in which large-cap stocks generally underperformed smaller-cap stocks, value stocks, and even other asset classes. This outperformance can be seen when we pair a given alternatively weighted index with its market-cap-weighted peer. However, as we demonstrate in subsequent sections, these alternative strategies do not constitute better indexes. Instead of capturing inefficiencies, they simply restructure the
exposures of existing benchmarks, capturing the effects of size and style that outperformed over this time period.


Are cap-weighted indexes inefficient?
If cap-weighted indexes were inefficient and easily bested by underweighting the largest companies,
it should be simple to identify a majority of actively managed funds that consistently outperform,
because active managers would only have to underweight or avoid the largest stocks in order to
outperform their benchmark. However, when we inspected the data compiled from existing Vanguard research, we found this not to be the case...

...

Both the logic and assumptions of the mispricing argument are subject to criticism. First, one must assume securities are indeed subject to systematic mispricing, and that those mispricings can be captured by generally avoiding large companies (see the text box on page 7). Second, even if stocks were systematically mispriced, proponents of such strategies are implicitly assuming that they have the tools to divine the securities’ correct value and thus benefit from the arbitrage opportunity.

There are some great graphics and charts in there too -- click the link above if interested. There are also better quotes than what I hastily pasted as well.



(Not really addressing GMO's stance about US vs ex-US, but interesting argument against criticisms of market-cap-weighted indexing versus equal or other styles).

[BB1]

(08-16-2017 01:16 PM)Kid Twist Wrote:  

I'm also on record now with BTC, regardless of what you think of it, being the hedge against worries about traditional markets. BTC is here to stay, I'm sad I didn't buy a lot at 2k, which I think was the clear not-so-cheap low that stabilized. It's going to $10k easy, I'll say that right now.

The current crypto market has to many uninformed people getting involved, and FOMO.

I suggest you read "Extraordinary Popular Delusions and the Madness of Crowds" first published in 1841!!

[Kid Twist]

(08-17-2017 04:55 AM)BB1 Wrote:  

(08-16-2017 01:16 PM)Kid Twist Wrote:  

I'm also on record now with BTC, regardless of what you think of it, being the hedge against worries about traditional markets. BTC is here to stay, I'm sad I didn't buy a lot at 2k, which I think was the clear not-so-cheap low that stabilized. It's going to $10k easy, I'll say that right now.

The current crypto market has to many uninformed people getting involved, and FOMO.

I suggest you read "Extraordinary Popular Delusions and the Madness of Crowds" first published in 1841!!

That's why I'm focusing on the biggest, which is just one of a great many. Madness can still render profits, though "timing" is always an issue of dispute, especially in investment and stock discussions.

[MaceTyrell]

I believe an index fund is great as a benchmark in the beginning investor's portfolio. I like splitting my portfolio in 5 companies/funds, and often keep 20% of my portfolio in an index fund when I can't find a compelling enough 5th company.

This index fund is typically sector themed, of a sector I have some knowledge of (Consumer Retail, Consumer Staples, Tech, Media, Telecom, Industrials).

[Kid Twist]

Any top picks moving forward, boys? I'm still waiting to get in ... and getting out of debt completely in the meantime.

[456]

VTI or VTSAX

[Peregrine]

http://wallstreetplayboys.com/time-to-ma...-own-book/

/thread

[kbell]

vtsmx (total market) or VFINX (SP500) for a beginning index? I just oppended my first account. Vsmxt is 69 a share and SP500 is close to 236.

[Travel Museums]

Index funds aren’t going to MAKE you rich. It’s still a solid move. You keep your money ahead of inflation, while having a fair degree of immunity to any one company or industry tanking.

It’s not sexy. No girl is gonna be impressed you invest in them. But it’s stress free. It can even be TAX FREE. What more can you ask from a passive investment??

Yes you CAN earn a passive income on these equities. For 99% of people this doesn’t happen until to retirement.

Don’t let that scare you. The problem is if you don’t start investing while young, you won’t have much in retirement. So you won’t have a passive income. Nor will you have a large enough nest egg to drawn down upon as you near death (or leave to your kids).

You shouldn’t invest everything into ETF/Index’s. But it should be a nice junk of you’re portfolio.

If you look at a lot of industries the major growth can be attributed to a few big companies like Facebook, Netflix, Amazon etc. it’s fairly safe to passively invest directly in these stocks. Everyone knows and uses their services.

However unless you invest in an mid to small cap ETF it will be hard to get exposure to the more emergent companies that provide services to these big companies or may overtake them somehow. How would you even know they exist and what they do etc. Not without a lot of time doing research. So how valuable is your time as a young man?

If your job is investing maybe it doesn’t take YOU all that much extra time to research. But for your average doctor, lawyer, teacher, farmer, waiter, etc it’s going to take a fairly big chunk of time and learning to do that kind of direct investing unless it’s a common sense thing that made newspaper headlines.

That’s why I invest in both. Netflix for example I directly scooped up stock after Quixster blunder. Then watched it zoom back up. That was a no brainer. That’s relatively rare though. It’s more of a long term confidence investment in household name companies. For exposure to anything smaller I like ETFs bc it mitigates my risk.

But again, the ETF follows a set formula. So even though they might be 10% into Netflix theyre not gonna scoop up a whole bunch when something like that happens. That’s where you use common sense and directly invest. Make your huge profit. Sell. Now you have play money for crypto. The confidence in my passive investment income stream allows me to play in things like crypto.

Now say you told me you were a businessman and you wanted to put everything into growing your business. I’d say it’s risky. But if you want to get rich that’s what you should do.

Sweat equity can pay off big time. Then when you’re rich and have a few million to invest and you just want to travel I’d still say put it in ETFs and Index.

As for the stock picking and day trading thing. I really don’t understand what some of these arguments are about. If you are good enough to consistently beat the equivalent broad basket it’s a shame you’re only managing your parents nest egg. Several Wall Street firms would love to hire you.

And again, how valuable is your time? Id imagine to do this consistently you’re basically locked down to a computer. All your free time in front of a Bloomberg terminal, wandering through corn fields to check out the crops, high stress levels? Why? To earn slightly more for two other people? That’s crazy. You should start your own firm. Send me your numbers.

[worldwidetraveler]

(10-12-2017 05:23 PM)Travel Museums Wrote:  

It’s not sexy. No girl is gonna be impressed you invest in them.

This is true... index funds would cockblock me every time. I had to change it up to something more sexy. Now when I am getting last minute resistance, I pull out my stock portfolio and able to push through to that sexy time we all love.

[MrTickle]

(08-17-2017 04:55 AM)BB1 Wrote:  

(08-16-2017 01:16 PM)Kid Twist Wrote:  

I'm also on record now with BTC, regardless of what you think of it, being the hedge against worries about traditional markets. BTC is here to stay, I'm sad I didn't buy a lot at 2k, which I think was the clear not-so-cheap low that stabilized. It's going to $10k easy, I'll say that right now.

The current crypto market has to many uninformed people getting involved, and FOMO.

I suggest you read "Extraordinary Popular Delusions and the Madness of Crowds" first published in 1841!!

An absolute must for any investor. Two examples from the book spring to mind 1) People selling tulip bulbs for the same price as a house and 2) Someone setting up a secret company doing secret things, getting a load of investors to part with cash and then disappearing never to be seen again all within a day.

There will always be bubbles and mania the question is are you smart enough to see the next bubble. At this moment in time, everything seems to be a bubble to me or I am just not that smart.

[qwertyuiop]

If you guys can identify short term high growth stocks (See mnkd HMNY and more you can make some money). However you guys make fun of /r/wallstreetbets there are guys who overall make money and do alright trading options.

Otherwise keeping your money in the S&P if there is nothing else you are doing with it.

[qwertyuiop]

(08-02-2017 09:28 PM)Travel Museums Wrote:  

It's too much work and too much risk for marginal returns. Maybe if you're risking other people's money in a large pool where everyone's only risking 10%. Oh wait that's a hedge fund managers job. Better yet just save the management fee and invest in the index.

I really hope I've killed any notion that passive index investing is defeatism. It's the smartest thing you can do with your money.

Are there other things you should also do? Yes.

Do I have tens of thousands in single stocks? Of course.

Do I have similar amounts in weird shit like crypto?
Yes.

Do I own real estate?
Check.

Do I have people working for me while I sleep.
Check.

Do I have online businesses?
Yup.

Do I have a professional degree and license to fall back on?
Yes.

You do realize there is no actual stock market anymore. There's no actual trading floors. It's all automated. 2/3 of the trades are computers running algorithms. You're going to beat that? Year after year??

No. NO.

This guy gets it.

[Travel Museums]

The comment about it being sexy was tongue in cheek. But actually I talked about crypto with a cold approach bang who replied “you’re sexy”. And it was even the excuse to bring her upstairs. “Don’t you want to see my bitcoin investments (bawhahaha)?” “I do”.

Try that with mutual funds. Not gonna work unless maybe you’re in Africa.

[churros]

(10-13-2017 09:19 AM)Travel Museums Wrote:  

The comment about it being sexy was tongue in cheek. But actually I talked about crypto with a cold approach bang who replied “you’re sexy”. And it was even the excuse to bring her upstairs. “Don’t you want to see my bitcoin investments (bawhahaha)?” “I do”.

Try that with mutual funds. Not gonna work unless maybe you’re in Africa.

Newbie question. What site in particular do you use to invest in these companies? Let's say I wanted to buy stocks in Ryanair, which is likely seeing a massive dip right now. Where do I go?

[Peregrine]

(10-13-2017 09:34 AM)churros Wrote:  

(10-13-2017 09:19 AM)Travel Museums Wrote:  

The comment about it being sexy was tongue in cheek. But actually I talked about crypto with a cold approach bang who replied “you’re sexy”. And it was even the excuse to bring her upstairs. “Don’t you want to see my bitcoin investments (bawhahaha)?” “I do”.

Try that with mutual funds. Not gonna work unless maybe you’re in Africa.

Newbie question. What site in particular do you use to invest in these companies? Let's say I wanted to buy stocks in Ryanair, which is likely seeing a massive dip right now. Where do I go?

Any discount broker will do. Your short post was enough info for me to know that you have no business actively trading equities though.

Sounds harsh, but I'm saving you money.

[Razor Beast]

(10-13-2017 02:59 AM)MrTickle Wrote:  

(08-17-2017 04:55 AM)BB1 Wrote:  

(08-16-2017 01:16 PM)Kid Twist Wrote:  

I'm also on record now with BTC, regardless of what you think of it, being the hedge against worries about traditional markets. BTC is here to stay, I'm sad I didn't buy a lot at 2k, which I think was the clear not-so-cheap low that stabilized. It's going to $10k easy, I'll say that right now.

The current crypto market has to many uninformed people getting involved, and FOMO.

I suggest you read "Extraordinary Popular Delusions and the Madness of Crowds" first published in 1841!!

An absolute must for any investor. Two examples from the book spring to mind 1) People selling tulip bulbs for the same price as a house and 2) Someone setting up a secret company doing secret things, getting a load of investors to part with cash and then disappearing never to be seen again all within a day.

There will always be bubbles and mania the question is are you smart enough to see the next bubble. At this moment in time, everything seems to be a bubble to me or I am just not that smart.

No it definitely is a bubble. I think this year will end up being the blow off top of the market bubble. Bitcoin isn't worthless, but its massively overvalued. Most of the other coins are worthless.

The equity markets will probably crash because the markets can't handle all the passive index ETF investment going active all at once. Not enough liquidity to support all those outflows. That will be the start of a bear market that leads to a recession. I think a sudden crash in Tesla stock will be the canary that warn of the impending fall and the rest of the market will crash not too long after.

[Australia Sucks]

Razor beast I see your analysis of the coming market crash (unlikely in my opinion) completely omitted the two biggest drivers of stock prices. Company earnings (still rising) an interest rates (gradually rising but still very low for the foreseeable future) both of which are bullish for stocks. Yes, there are other drivers of stock prices but when the biggest two drivers are bullish its hard to argue for a crash.

Travel museums I reject your notion that beating the market via stock picking necessarily involves being glued to a screen. You can very occasionally make some long term buy/sell decisions and sit there with your feet up the rest of the time just doing some light investment reading (a few hours a week) and still outperform the market. Of course you have to build up a base level of knowledge over the years to get to that position (i.e. not a newbie).

Lots of retail investors (I mean in raw numbers not in percentage terms) can beat the market but it does not mean hedge funds will hire them. Two reasons: First reason is the strategy scale-able? Can they get the same performance managing billions of dollars and having lots of mandate constraints imposed on them? The second reason is ass covering. If you hire someone with a prestigious degree and a many years of industry experience to manage money even if he under-performs at least you can say "he looked good on paper, there was no way to know he would be a dud", whereas with a retail investor who has a good track record but lacks the qualifications, industry experience or connections if he under-performs then they look really stupid for hiring him.

[Razor Beast]

(10-14-2017 05:51 AM)Australia Sucks Wrote:  

Razor beast I see your analysis of the coming market crash (unlikely in my opinion) completely omitted the two biggest drivers of stock prices. Company earnings (still rising) an interest rates (gradually rising but still very low for the foreseeable future) both of which are bullish for stocks. Yes, there are other drivers of stock prices but when the biggest two drivers are bullish its hard to argue for a crash.

Your problem is your are looking in the rear view mirror rather than looking forward. No discussion of the quality of non-GAAP earnings and the widening gap between GAAP and non-GAAP earnings? Extreme malinvestment created as a result of easy monetary policy? Financial engineering that has propped up stock prices as a result of easy monetary policy is ending - share buybacks are falling 20% year over year, corporations have been the biggest buyer of stock by far since the financial crisis and you can't expect there will be an environment that will allow them to support stock prices like that again. Record short positioning in VIX derivatives with VIX at/near all time lows? Record investments in ETF's which won't be liquid enough to support an orderly exit if there is a sudden shock that puts the market into reverse? Unbalanced liquidity between ETF's and their underlying instruments? Surveyed investor sentiment in August being at euphoric levels not seen since the dot com bubble? Margin debt at all time highs? Retail investors positioned with the highest % of their assets in stocks ever? Malinvestment by pension funds to chase higher rates of return in an attempt to overcome underfunded pension plans with stock market at all time highs?

What else is about to come:

-ECB will be looking to start to taper soon
-Fed has already started balance sheet unwind this month which will steepen yield curve over time causing asset re-allocation out of stocks
-Fed has already made it clear they are hiking in December
-Yellen is likely getting replaced by Warsh in February, who is far more hawkish than Yellen and is an outspoken critic of easy monetary policy
-Trump is also seriously considering Taylor, who is a proponent of using a mathematical rule to set interest rates and who thinks that the current method for setting interest rates is flawed
-Fed's dot plot is still forecasting 3 rate hikes next year from what I remember, adding a hawkish Fed chair will cement them on this path and/or change Fed policy with respect to rate hikes in a hawkish way

-Massive expectation gap with respect to likelihood of fiscal policies having a beneficial affect on the market or even being implemented. Further Congressional gridlock is a certainty, and market doesn't reflect this at all

-Petroyuan oil futures contract backed by gold coming soon which completely bypasses need to use the dollar in foreign oil transactions and will begin to put the viability of the dollar as the reserve currency at risk. Market doesn't reflect this risk at all.

I could go on, but feel free to be blindsided.... You seem to have it all figured out. Not to mention Trump called the market a big bubble himself over a year ago. Yellen called equity valuations stretched what, 3-4 years ago now? How much is the market up since then? Good luck.


Edit: Would also like to extend an open invitation to any traders or active investors that want to talk markets. Feel free to PM.

[Razor Beast]

(10-14-2017 05:51 AM)Australia Sucks Wrote:  

Lots of retail investors (I mean in raw numbers not in percentage terms) can beat the market but it does not mean hedge funds will hire them. Two reasons: First reason is the strategy scale-able? Can they get the same performance managing billions of dollars and having lots of mandate constraints imposed on them? The second reason is ass covering. If you hire someone with a prestigious degree and a many years of industry experience to manage money even if he under-performs at least you can say "he looked good on paper, there was no way to know he would be a dud", whereas with a retail investor who has a good track record but lacks the qualifications, industry experience or connections if he under-performs then they look really stupid for hiring him.

No offense, but no random retail investor who can beat the market has any chance at breaking into an established hedge fund. If you were in the hedge fund industry you'd know this. They only hire people who go to the right schools, grew up in the right areas, were the son/daughter of someone important in the industry, etc. If not you will always be an outsider to them. It's kind of similar to how the super wealthy will only associate with other families and individuals of similar wealth and social standing. The only hope would be for someone to start their own fund, but that is very difficult to do because it's very rare to find someone who has the gift of being a great investor/trader as well as salesman with excellent people skills.

[Travel Museums]

Churros:
Nothing wrong with being new to investments. I would recommend you open a brokerage account at your bank. A lot of people here like Schwab for their low fees.

I’m not sure what exchange Ryanair is on. You may have to apply for foreign trading first depending on where you are. Schwab calls this a global account. Not hard to do. Just some paperwork.

Airlines are a notoriously bad investment, but who knows. You should dollar cost average on something like that.

Something like Netflix or Amazon is something everyone around the western world uses. Though I’ve read a bit about Ryan air making acquisitions they would turn it into a more mainstream air carrier so who knows. May be a good bet?

Australia? You beat the markets with only a few hours research? Are you only investing in the new big “blue chips” like amazon Apple Facebook? I don’t buy it. Even if that’s what you’re doinita not a balanced portfolio that I’d feel comfortable putting all my eggs in a few baskets like that.

If you’re saying you’re beating the broad baskets with your own broadly diversified investments you really should be managing other people’s money. Get licensed and make some real money in commissions. Fuck this 5-6% returns.