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Ask YC: How do you invest your money for long term growth?
11–20 of 53 posts
Re: Ask YC: How do you invest your money for long term growth?
#12I looked into this awhile back and quickly came to the conclusion, based on the several books I read, that it's silly to try to beat the market long term. "The Intelligent Investor" is the one that laid it out clearly to me. The main point is: the performance of narrow investments (specific stocks) can't be reliably predicted, but the market as a whole tends to grow over time. Therefore, invest in the market as a who…
Philip Greenspun (of Ars Digita fame) wrote a great guide on the subject:
http://philip.greenspun.com/materialism/money
He recommends index funds too, and explains the choice.
Re: Ask YC: How do you invest your money for long term growth?
#13The benefits of diversification are vastly overstated. Especially over long time periods, the benefits of buying e.g. your 5 best ideas rather than your 10 best ideas vastly outweigh the benefits of having less volatility. If you have time to do the research, do this: find companies that are either the low-cost provider, the most-loved brand, or have special government-protected status in their industry. Examples wou…
Do you follow this strategy yourself? If so, what is your portfolio right now?
Re: Ask YC: How do you invest your money for long term growth?
#14Traditionally, investing in a Small Cap Value eft or index fund would have earned you about 2% more than the market on average. It's the only asset class that has consistently beat the market over the last 100 years. I know several smart people in finance who use this long-term strategy.
Had you been doing this over the last three years, however, the results would not have been pretty.
Re: Ask YC: How do you invest your money for long term growth?
#15The benefits of diversification are vastly overstated. Especially over long time periods, the benefits of buying e.g. your 5 best ideas rather than your 10 best ideas vastly outweigh the benefits of having less volatility. If you have time to do the research, do this: find companies that are either the low-cost provider, the most-loved brand, or have special government-protected status in their industry. Examples wou…
Do you follow this strategy yourself? If so, what is your portfolio right now?
I follow that strategy with a portion of my funds, the majority is in a diversified index fund.
My top 3 picks a few months ago when I last looked at the market were GOOG, AAPL, TD.
Re: Ask YC: How do you invest your money for long term growth?
#16I looked into this awhile back and quickly came to the conclusion, based on the several books I read, that it's silly to try to beat the market long term. "The Intelligent Investor" is the one that laid it out clearly to me. The main point is: the performance of narrow investments (specific stocks) can't be reliably predicted, but the market as a whole tends to grow over time. Therefore, invest in the market as a who…
I am also a passive investor trying to capture full market returns. However, just investing in stocks exposes one to too much risk with no more return than if you spread your money across many asset classes that move in different directions at any given time. The Benefits of Low Correlation is a good summary: http://www.indexuniverse.com/component/content/article/6/322... And here is a summary of the summary: http://…
Thanks for the good links.
I was just wondering, what does the worst one year loss matter if you are investing over 30 years? The annualized rates given were positive, and the better one happened to have a smaller worst year number, but it shouldn't really matter. If a fund returns 13% annualized but had one year where it lost 90% of value (hypothetical here), I'd still choose it for the 13%.
I can see how this would matter if you are actively drawing on the funds... then a high volatility portfolio could be stressful and possibly dangerous, but if you are looking at a 30 year timeline, it doesn't matter.
Re: Ask YC: How do you invest your money for long term growth?
#17Invest 100% of your money in small-cap/value funds. They do best in the long run.
Invest 100% of your money in BRICs (Brazil, Russia, India, China). They have large, youthful populations with better prospects than America, Europe, or China.
I'm afraid that I don't know of any small-cap/value, BRIC funds. If anyone knows of any, I'd appreciate a pointer. Thanks.
Re: Ask YC: How do you invest your money for long term growth?
#18The benefits of diversification are vastly overstated. Especially over long time periods, the benefits of buying e.g. your 5 best ideas rather than your 10 best ideas vastly outweigh the benefits of having less volatility. If you have time to do the research, do this: find companies that are either the low-cost provider, the most-loved brand, or have special government-protected status in their industry. Examples wou…
Do you follow this strategy yourself? If so, what is your portfolio right now?
I do follow this strategy, but I also invest in weird little situations that don't fit into it (e.g. a small, post-bankrupt manufacturing company with a hugely overfunded pension, managed by a billionaire trader). I don't like to discuss specifics of what I invest in now. However, stuff I bought in the past includes NDAQ and IBA; huge mistakes include buying MOVI and MGAM (I sold for more or less unrelated reasons), and not-buying DAKT (I sold after a good earnings report -- it's up 150% since then) and not-buying AAPL (I was researching it, then they announced their first million songs sold through iTunes, the stock went up about 15%, and I said "Nahhh" and decided to wait for it to calm down. That was when it was at, uh, $9. Ouch).
I'm sure this is frustratingly vague.
If you start to pay attention to business -- not in the sense of reading the WSJ, but just looking at how consumers behave -- you'll eventually detect some companies that are either a) able to ask for a higher price than anybody else, or b) able to make acceptable stuff more cheaply than anybody else. About 99% of businesses are second-best or less at one of these things, and those businesses are fundamentally unable to grow without investing equivalent capital. The other 1% can usually have above-average growth without having to reinvest all of their earnings, or have steady earnings that are high compared to invested capital but that can't be easily grown. An example of the former would be a software company or a drug company -- it costs a lot to create a product, but the cost of selling it to a million people is not that much more than the cost of selling it to ten thousand. An example of the latter would be the gravel and sand business -- nobody is going to import ten tons of the stuff from overseas, or even across state lines, so it's basically a business made of hundreds of tiny local monopolies. Some of these are exceedingly well-managed; they pay dividends when their stock is high, and buy it back when their stock is low.
Re: Ask YC: How do you invest your money for long term growth?
#19I posted this yesterday: "The best investment advice you'll never get"
Re: Ask YC: How do you invest your money for long term growth?
#20Earlier quoted context omitted.
I am also a passive investor trying to capture full market returns. However, just investing in stocks exposes one to too much risk with no more return than if you spread your money across many asset classes that move in different directions at any given time. The Benefits of Low Correlation is a good summary: http://www.indexuniverse.com/component/content/article/6/322... And here is a summary of the summary: http://…
Thanks for the good links. I was just wondering, what does the worst one year loss matter if you are investing over 30 years? The annualized rates given were positive, and the better one happened to have a smaller worst year number, but it shouldn't really matter. If a fund returns 13% annualized but had one year where it lost 90% of value (hypothetical here), I'd still choose it for the 13%. I can see how this would…
It matters for two reasons. First, it gives some people (including myself) peace of mind that without it might otherwise prevent investment in some of these vehicles. Second, you will probably draw down (or switch into less volatile investments) eventually, and so it ups the probability that when you do you so all will be OK.
Of course, it also yields higher returns on average, so it is a win-win really.