Ask HN: How to start learning about investments?

> Dude I’m too busy to argue with you, I literally used to regularly interact with people making these returns.

I don't doubt that many people have managed to accomplish good returns. But you have to do it for the ~30 years to build a nest egg for (e.g.) retirement, and then another 20-30 years post-retirement to preserve said nest egg.

But there's a huge problem:

> Instead, I am going to argue that you shouldn’t pick stocks because of the existential dilemma of doing so. The existential dilemma is simple—how do you know if you are good at picking individual stocks? In most domains, the amount of time it takes to judge whether someone has skill in that domain is relatively short.

> For example, any competent basketball coach could tell you whether someone was skilled at shooting within the course of 10 minutes. Yes, it’s possible to get lucky and make a bunch of shots early on, but eventually they will trend toward their actual shooting percentage. The same is true in a technical field like computer programming. Within a short period of time, a good programmer would be able to tell if someone doesn’t know what they are talking about. […]

> But, what about stock picking? How long would it take to determine if someone is a good stock picker?

> An hour? A week? A year?

> Try multiple years, and even then you still may not know for sure. The issue is that causality is harder to determine with stock picking than with other domains. When you shoot a basketball or write a computer program, the result comes immediately after the action. The ball goes in the hoop or it doesn’t. The program runs correctly or it doesn’t. But, with stock picking, you make a decision now and have to wait for it to pay off. The feedback loop can take years.

[…]

> Just imagine how nerve-racking this must be when [temporary underperformance] finally happens. Yes, you had skill in the past, but what about now? Is your underperformance a normal lull that even the best investors experience, or have you lost your touch? Of course, losing your touch in any endeavor isn’t easy, but it’s so much harder when you don’t know if you have lost it.

* https://ofdollarsanddata.com/why-you-shouldnt-pick-individua...

If people think they'll be able to meet their goals picking stocks successfully for several decades, they are free to try. But in my estimation the odds are not on their side. I prefer to play the odds. ¯\_(ツ)_/¯

> Accepting index returns basically means keeping up with inflation […]

Inflation has been <3% over the last ten years in the US. The S&P 500 (for one) has returned much more than that on an annual basis. Even with the 'Lost Decade' of the S&P 500 in the 2000s, simply having 20% bonds (and perhaps rebalancing) would have been sufficient to overcome inflation.

Nassim Taleb’s Barbell strategy has really changed my thinking on this. In a nutshell, you put 85-90% of your portfolio in super conservative low-risk investments that at least beat inflation, 10-15% in aggressive speculation with very high potential payoffs (like WSB short squeezes), and nothing in the middle!

Why? Black Swans. Taleb says:

"If you know that you are vulnerable to prediction errors, and accept that most risk measures are flawed, then your strategy is to be as hyper-conservative and hyper-aggressive as you can be, instead of being mildly aggressive or conservative."

The "moderate middle" isn't as safe as you think it is, thus, it's not compensating you enough for the risk. The conservative side of the barbell will protect you from a negative black swan, and the aggressive side will expose you to positive ones.

Edit: I am a bit sad that I got downvoted. What's wrong with a contrarian opinion? I'm not suggesting we should all pick stocks. I'm saying there's not enough data to know conclusively that one couldn't outperform the market.

> What are the odds that you are of those 1%? (Hint: you're probably not in that group.)

Again, this was research on day trading (for which I didn't supply the source, sorry for that). It was not about buying and holding with at least for a 5 year horizon. That's what I meant with we have too little data. Day trading is not investing.

> What are the odds that you manage to pick those few stocks that produce those returns?

As I've learned with poker: only play on tables where you see fish. Which translates to: only play games that you are sure that you can win. The hard part is to not enter any games that you're not fully sure about of winning. And yes, there are not many games that you can win at all. But when you see one, you go at it aggressive and win. It's easier to say than to do it (based on my poker experience).

I'm not saying that people can beat the market. But I still believe even after all this that it's hard to say that people aren't beating the market. We need data of actual accounts over long time horizons. IMO that's the only way that question can be answered. Unfortunately, that's unrealistic since it's a feature that the stock market is anonymous and private to other market participants.

I feel there's a feedback loop going on where everyone echoes each other that you can't beat the market. And I feel that echo is stronger than the actual evidence. Don't get me wrong, the evidence that I see is quite compelling. But it isn't foolproof and it has many gaps. It's about as compelling as the efficient market hypothesis. Yes, in general markets are efficient, but why does it take 5 to 15 minutes for information to be incorporated into a stable price? That means if you'd trade at minute 2, you're almost guaranteed to make money [2]. I don't have sources for this, but these are my observations. This is even more true in the crypto markets where academics are saying that markets aren't fully efficient.

The only thing I can say with regards to the whole "you can't outperform the market" rhetoric is this: if you want to invest safely, then don't try to outperform the market. There is enough research that it's a dangerous endeavour. So is starting a startup (from a financial standpoint). However, that doesn't mean it's impossible to outperform the market, or create a great financially successful startup for that matter.

[1] According to Graham, he mentions it in his book The Intelligent Investor.

[2] Every time when I look at day price information and see a news event priced in, I notice it takes at least 5 minutes in many cases. It's never instant.

But what if the next years will be different from the past years? What if we are reaching a point where the system breaks for good? My procrastinator brain likes to put some existential dread out there. Can I just answer it with "if it will break we will be fucked anyway"?