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What to know about the stock market (2007)

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Re: What to know about the stock market (2007)

#161

Post by frogpelt »

3pt14159 wrote: post #99
cehrlich wrote: post #85

This is a great article that explains markets (not just the stock market really) in an easy to understand way. The one thing I believe people should know about the stock market is: There are people with more capital, time, and knowledge than you who will consistently beat you. Picking individual investments is mostly a sucker's game. Buying tech stocks and/or crypto in the last couple of years has been a consistent e…

People keep telling me this, but I keep beating the market. It's been 20 years or so of applying very basic reasoning and getting ahead. 1. Commodities are bad long term bets because technology gets better. I remember people talking my ear off about peak oil and then the US turned into a net-exporter. Short term inelasticity, yes can sky rocket prices; but long term prices go down. 2. Physics based thinking. I knew e…

I would never argue with your success. And I do think you can pick solid companies and beat the market in the long run (mostly by avoiding the big losses).

But it’s not enough to pick winning industries. In every industry there are winners and losers. You have to pick winning industries and winning companies. And sometimes winners become losers. So there’s a timing aspect also.

EVs are going to succeed but I don’t think Tesla was ever a guaranteed success. And Tesla is not guaranteed to keep winning (though they have a great head start and very strong moat).

Re: What to know about the stock market (2007)

#162

Post by lr1970 »

shoto_io wrote: post #157
cehrlich wrote: post #85

This is a great article that explains markets (not just the stock market really) in an easy to understand way. The one thing I believe people should know about the stock market is: There are people with more capital, time, and knowledge than you who will consistently beat you. Picking individual investments is mostly a sucker's game. Buying tech stocks and/or crypto in the last couple of years has been a consistent e…

My stock advice for any rookie has always been the same: - Buy S&P ETFs, most preferably by Vanguard, because they are a non-profit and thus have very low fees - If you have a large sum of cash, go all-in immediately, don't wait for the perfect time - Now, just wait, ideally 10+ years, before looking into your account again

> Buy S&P ETFs, most preferably by Vanguard, because they are a non-profit and thus have very low fees

Vanguard is certainly a for-profit organization [0]. What, I think you wanted to say, that many of the Vanguard funds are index funds that do not have exuberant management fees.

[0] https://en.wikipedia.org/wiki/The_Vanguard_Group

Re: What to know about the stock market (2007)

#163

Post by tiborsaas »

WA wrote: post #32
tiborsaas wrote: post #28

Earlier quoted context omitted.

I thought the same, but then I've seen this article :) https://12ft.io/proxy?q=https%3A%2F%2Fqz.com%2F2108874%2Fthe...

That article is… useless. But actually, it shows exactly what the parent poster said: the real riches came only after you had a lot of capital. Sure, $1,000 to $85,000 is a great performance, but not life changing in itself.

How is having $1000 invested proving OP's point? There are lots of problems with this article if you take things in it at face value, but what you mentioned are not really. Why did you cherry-pick the 85k value?

I just posted this to show that at least the math can work even with extremely small amounts. Having lots of capital only buys you lower and lower risks.

Re: What to know about the stock market (2007)

#164

Post by lelandfe »

shoto_io wrote: post #157
cehrlich wrote: post #85

This is a great article that explains markets (not just the stock market really) in an easy to understand way. The one thing I believe people should know about the stock market is: There are people with more capital, time, and knowledge than you who will consistently beat you. Picking individual investments is mostly a sucker's game. Buying tech stocks and/or crypto in the last couple of years has been a consistent e…

My stock advice for any rookie has always been the same: - Buy S&P ETFs, most preferably by Vanguard, because they are a non-profit and thus have very low fees - If you have a large sum of cash, go all-in immediately, don't wait for the perfect time - Now, just wait, ideally 10+ years, before looking into your account again

This is great advice for a young rookie, Bogle would be proud. Folks later on in life may not have the timeline to stomach that risk, however.

Re: What to know about the stock market (2007)

#165

Post by iso1631 »

nly wrote: post #144
iso1631 wrote: post #65

Earlier quoted context omitted.

In the UK you can stick whatever you want into stocks and shares isas, if you can afford it. The problem is that housing costs rise to suck every spare penny of income from pretty much everyone so very few people have spare money to put into those isas.

Yes, for perspective relatively modest 3 bedroom houses in London are going up in price, every month, by more than the average person in the UK as a whole takes home. You can be in the top 1% by income in London and still simply not be able to afford a small family home. Home equity wealth inequality in crippling.

All the income from people in London is extracted by those owning the land, because you need to live somewhere to earn that money. It's basically monopoly, doesn't matter if you pass go and collect £200 or £2000, all that happens is the people owning the properties around the board take it until you run out (or if they want to extend the game

Re: What to know about the stock market (2007)

#166

Post by solatic »

3pt14159 wrote: post #99
cehrlich wrote: post #85

This is a great article that explains markets (not just the stock market really) in an easy to understand way. The one thing I believe people should know about the stock market is: There are people with more capital, time, and knowledge than you who will consistently beat you. Picking individual investments is mostly a sucker's game. Buying tech stocks and/or crypto in the last couple of years has been a consistent e…

People keep telling me this, but I keep beating the market. It's been 20 years or so of applying very basic reasoning and getting ahead. 1. Commodities are bad long term bets because technology gets better. I remember people talking my ear off about peak oil and then the US turned into a net-exporter. Short term inelasticity, yes can sky rocket prices; but long term prices go down. 2. Physics based thinking. I knew e…

> Why bother investing in GM through a broad index fund if I know for sure Tesla will eat their lunch?

Because even bad stocks are an essential component of a balanced portfolio if they reduce overall portfolio beta (volatility).

The name of the game isn't pure gains, because the gains are not guaranteed. You want to make gains and hold onto them.

And no, you don't know for sure that Tesla will eat their lunch. You have a very high level of confidence that they will. So does the rest of the market, that's why Tesla is trading at a huge premium relative to its financial fundamentals. But this wasn't always the case, and there were more than a few times when Elon Musk brought Tesla to the brink of bankruptcy. If you were confident that Tesla was going to pull through, even back then, you either a) knew something the market didn't, b) were mistaken/wrong (but luck pulled through for you in the end), or c) you were reckless / irrational.

Re: What to know about the stock market (2007)

#167

Post by tjader »

lr1970 wrote: post #162
shoto_io wrote: post #157

Earlier quoted context omitted.

My stock advice for any rookie has always been the same: - Buy S&P ETFs, most preferably by Vanguard, because they are a non-profit and thus have very low fees - If you have a large sum of cash, go all-in immediately, don't wait for the perfect time - Now, just wait, ideally 10+ years, before looking into your account again

> Buy S&P ETFs, most preferably by Vanguard, because they are a non-profit and thus have very low fees Vanguard is certainly a for-profit organization [0]. What, I think you wanted to say, that many of the Vanguard funds are index funds that do not have exuberant management fees. [0] https://en.wikipedia.org/wiki/The_Vanguard_Group

He probably meant to say that Vanguard is owned by the funds themselves, not by some external private entity. That makes their incentives be more aligned with making the funds cheap and efficient.

Re: What to know about the stock market (2007)

#168

Post by taneq »

3pt14159 wrote: post #99
cehrlich wrote: post #85

This is a great article that explains markets (not just the stock market really) in an easy to understand way. The one thing I believe people should know about the stock market is: There are people with more capital, time, and knowledge than you who will consistently beat you. Picking individual investments is mostly a sucker's game. Buying tech stocks and/or crypto in the last couple of years has been a consistent e…

People keep telling me this, but I keep beating the market. It's been 20 years or so of applying very basic reasoning and getting ahead. 1. Commodities are bad long term bets because technology gets better. I remember people talking my ear off about peak oil and then the US turned into a net-exporter. Short term inelasticity, yes can sky rocket prices; but long term prices go down. 2. Physics based thinking. I knew e…

> People keep telling me this, but I keep beating the market. It's been 20 years or so of applying very basic reasoning and getting ahead.

Remember, you don't have to beat those super smart well resourced AAA-grade investors. You just have to beat the average schmuck with some skin in the game.

Re: What to know about the stock market (2007)

#169

Post by shubb »

iso1631 wrote: post #65
pembrook wrote: post #50

Earlier quoted context omitted.

Europeans can have the luxury of not worrying about investing since many European countries offer livable pensions (for now…the demographic future for this isn’t looking so good). However, this isn’t as great as it sounds. While the European model for healthcare and education is better, their pension schemes are arguably a much worse deal than what Americans can have. In Europe, you’re basically paying the government…

In the UK you can stick whatever you want into stocks and shares isas, if you can afford it. The problem is that housing costs rise to suck every spare penny of income from pretty much everyone so very few people have spare money to put into those isas.

I am very worried (UK) that the government retirement safety net may not be there for us, as the retirement age is being pushed up beyond 70 but I am not sure most people can work full time that long without health issues.

Nor can we assume that the exceptional stock market returns of the past 15 years will be repeated, which means we need to save more for the same result.

I feel great pressure to earn a high wage in order to save a lot of it into a pension. This feel like a matter of survival.

Re: What to know about the stock market (2007)

#170

Post by lelandfe »

andriesm wrote: post #113
ericmay wrote: post #102

Earlier quoted context omitted.

> Picking individual investments is mostly a sucker's game. Kind of. What you have to remember is what game you’re playing. While financial firms can outspend and out-research you at an individual level, they can’t take the same risks you can or move as quickly as you can. If I decide I want to go all-in on some company I can just do that. Your friendly neighborhood hedge fund? Not so much. Most people should buy ind…

I agree - most people should buy low cost index funds but that is not enough - they have to space it out as monthly contributions over many years. If you put all your money in at thr wrong moment, like say the Nasdaq in 99 then you waited 13 years just to break even. But if you bought monthly you would have done very well because you averaged into the market. The alternative is if you really understand valuations, di…

Isn’t dollar cost averaging fundamentally valuing “timing the market” over “time in the market?”

I’d need to do a Monte Carlo to provide hard evidence but I’m fairly sure that lump sum investing is, on average, going to provide the greatest return. For people just starting out in investment, whose appetite for risk is high, that seems the way to go.

Edit: Leggio and Lien (2001):

> We find DCA [dollar-cost averaging] consistently remains an inferior investing strategy to Lump Sum investing using the risk-adjusted performance measures.

> The failure of DCA as an optimal investing strategy for all assets and portfolios considered is likely because DCA is a conservative investing strategy best suited for investors interested in a forced savings plan that avoids the consumption of earnings.

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