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How to Lose Money

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Re: How to Lose Money

#61

Post by superbcarrot »

tim333 wrote: post #56
superbcarrot wrote: post #35

Earlier quoted context omitted.

> A Comp Sci./Eng. degree is pretty much guaranteed to get you a decently paying job. This has been the case in the recent past and is probably still true right now but the trend won't last forever.

Has there ever been a glut of unemployed Comp Sci./Eng grads? I think it's limited by the work being hard and perhaps a bit unglamorous.

No there hasn't but historically there haven't been that many graduates to begin with. I'm trying to make the point that we're finally approaching a stage when the supply of graduates will be higher than the demand in the market. The growth in tech from the past 20 years won't last forever and the advice to just get a CS degree will be harmful in the near future.

I don't have first-hand perspective on this but my impression is that this is already happening in India to some extent with so many young people getting engineering/CS degrees because they see them as a way out of poverty only to realize that the demand just isn't there.

Re: How to Lose Money

#62

Post by sillysaurusx »

KMag wrote: post #18
A12-B wrote: post #4

Damn, am I the only one who does adequate research before I dive into things? I mean, buying patents for a dog alarm before knowing your customer? Really? Losing money on trading i understand because it's a very seductive venture and it's mostly just gambling that you can hedge slightly with some smart info. Otherwise, yeah, some of these things can only happen when you already have too much money to play with. Someo…

> seductive venture and it's mostly just gambling that you can hedge slightly with some smart info I think part of it is the populist meme that professional investors don't really know what they're doing and accidentally make money hand-over-fist. Yes, it has been shown that free stock tips are on average no better than monkeys throwing darts, and most hedge funds under-preform the S&P 500 in risk-adjusted returns. I…

I didn’t understand any of your last paragraph. Did he beat the S&P?

Re: How to Lose Money

#63

Post by nojito »

ChrisMarshallNY wrote: post #43
superbcarrot wrote: post #35

Earlier quoted context omitted.

> A Comp Sci./Eng. degree is pretty much guaranteed to get you a decently paying job. This has been the case in the recent past and is probably still true right now but the trend won't last forever.

In the 1980s/90s, a medical degree was the “sure bet” way to a six-figure income. The result was a huge flood of doctors that were... not the best , and some fairly dodgy medical schools. Of course, this also ended up pushing malpractice insurance (and tuition) into six figures, so I guess we achieved balance. We’re starting to see some similar stuff, going on, now, in software development. There’s some... not the be…

This is just not true.

Residency slots have not changed much if at all in decades due to the AMA.

It wasn’t until the late 00s do we see any meaningful uptick in medical graduates.

Re: How to Lose Money

#64

Post by ssharp »

xondono wrote: post #51
aphextron wrote: post #5

>The nice thing about options is that there isn’t just one way to lose money. No, you can lose money in many different ways – far more than I can write on this page. This is the most important lesson of options. It's never just a coin flip. You have an unimaginably huge number of factors riding against your success. It's not even remotely close to a 50/50 win/lose scenario. There are a million ways to lose, and just…

tbh, the problem with options is that you can loose a lot of money that you don't have . People start to play with strategies without fully grasping how they work, and especially how exposed you are if you sell naked options. It's very easy to fall into the trap of creating an option strategy that even if it has good odds, will require a massive amount of margin. If this happens to you on a regular retail account, yo…

This is easily avoided by not writing option contracts. If you're new to options and are ready to start exploring with real money, you should only be buying them and then selling them, not writing new ones.

The exact same thing can be said for shorting stocks and, to a lesser extent, buying stocks on margin. I'm happy to say after getting margin-called in 2008, I haven't been since! Writing options and shorting makes you way more likely to expose the rest of your portfolio to that risk.

Re: How to Lose Money

#65

Post by everyone »

A lot of these like 'Write a Book' do not involve actually losing money. They are in fact earning money, just at a lower rate than the author demands.

Re: How to Lose Money

#66

Post by KMag »

sillysaurusx wrote: post #62
KMag wrote: post #18

Earlier quoted context omitted.

> seductive venture and it's mostly just gambling that you can hedge slightly with some smart info I think part of it is the populist meme that professional investors don't really know what they're doing and accidentally make money hand-over-fist. Yes, it has been shown that free stock tips are on average no better than monkeys throwing darts, and most hedge funds under-preform the S&P 500 in risk-adjusted returns. I…

I didn’t understand any of your last paragraph. Did he beat the S&P?

No, he didn't beat the S&P, but holding some investment in the S&P and some in his fund beat the S&P in risk-adjusted returns (Sortino ratio, Shapre ratio, etc.).

As I mentioned, look up portfolio optimization in Post-Modern Portfolio Theory or Modern Portfolio Theory for details, but the gist is that

  Var(aX + bY) = a^2 * Var(X) + b^2 * Var(Y) + 2ab * Cov(X,Y)
His fund was essentially uncorrelated with the S&P, so Cov(X,Y) was approximately zero. MPT uses Var(aX + bY + ... )^0.5 as its risk measure, and PMPT uses downside_variance^0.5.

Re: How to Lose Money

#67

Post by skinnymuch »

dannyw wrote: post #59
aphextron wrote: post #5

>The nice thing about options is that there isn’t just one way to lose money. No, you can lose money in many different ways – far more than I can write on this page. This is the most important lesson of options. It's never just a coin flip. You have an unimaginably huge number of factors riding against your success. It's not even remotely close to a 50/50 win/lose scenario. There are a million ways to lose, and just…

Earlier last year around May, when the stock market seemed to pick up after the COVID crash, I purchased a number of deep OTM LEAPs (long expiry options; until early this year). They were incredibly cheap. I often had trouble finding a market maker for those. I only chucked about $2000 in, but these options have grossed $15,000 in realised returns and $25,000 in unrealised returns. Options allowed me to make a “bet”…

Congrats! I sometimes will do what I should not do and do regret day dreaming of if I had done more than just think about what you actually did back around same time.

Re: How to Lose Money

#68

Post by jannes »

sillysaurusx wrote: post #62
KMag wrote: post #18

Earlier quoted context omitted.

> seductive venture and it's mostly just gambling that you can hedge slightly with some smart info I think part of it is the populist meme that professional investors don't really know what they're doing and accidentally make money hand-over-fist. Yes, it has been shown that free stock tips are on average no better than monkeys throwing darts, and most hedge funds under-preform the S&P 500 in risk-adjusted returns. I…

I didn’t understand any of your last paragraph. Did he beat the S&P?

https://en.wikipedia.org/wiki/Absolute_return

Re: How to Lose Money

#69

Post by asicsp »

everyone wrote: post #65

A lot of these like 'Write a Book' do not involve actually losing money. They are in fact earning money, just at a lower rate than the author demands.

Assuming writing tools and research such as computer, books, internet, etc are treated as freely available, you can still lose money if you are paying for professional services such as book cover, editing, etc.

Re: How to Lose Money

#70

Post by reverend_gonzo »

sillysaurusx wrote: post #62
KMag wrote: post #18

Earlier quoted context omitted.

> seductive venture and it's mostly just gambling that you can hedge slightly with some smart info I think part of it is the populist meme that professional investors don't really know what they're doing and accidentally make money hand-over-fist. Yes, it has been shown that free stock tips are on average no better than monkeys throwing darts, and most hedge funds under-preform the S&P 500 in risk-adjusted returns. I…

I didn’t understand any of your last paragraph. Did he beat the S&P?

No. Because that wasn’t his goal.
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