I have never been a fan of buying stock given the 1/3 probability of making money (you only make money when your stock goes up and lose money when the particular stock has no movement or declines in value). In my opinion derivatives present a better alternative and I am particularly fond of stock options, which can be used for either speculation (bet on the performance of a company) or as a safety net on your long positions (like an insurance policy). With options you can make money when the market goes up, down or sideways based on your position. Something to consider, is that your exposure with stock options tends to be a fraction of what it would be if buying the underlying stock. Your exposure is limited (you can only lose as much money as you paid for the contracts) and your upside is "theoretically" unlimited.
If you are interested in learning about it. make sure to grab McMillan's "Option as an Strategic Investment"
http://www.amazon.com/Options-Strategic-Investment-Lawrence-...
Ask HN: Do you invest in the stock market?
41–50 of 74 posts
Re: Ask HN: Do you invest in the stock market?
#42Earlier quoted context omitted.
> I still think tech gives the best 50 year returns, as a sector. Why's that?
Because growth. Take a mature industry - what are the sources of potential upside? Growth, more customers, perhaps from new geographies/product categories Efficiency improvements and thence profitability Occasionally new product innovation. Being a mature industry though, the chance of a break out innovation, that changes the face of the industry, is low. So your growth path for the industry tends to be tied to GDP g…
The airline industry grew tremendously over the last 50 years, but you wouldn't know it from many stocks in that industry...
Re: Ask HN: Do you invest in the stock market?
#43I have invested in the stock market for about 1 year. Initially, I used options to leverage what little money I had and blew up my account. I learned three important lessons, of which I had read more than once prior to, but they are as follows:
1. Do not try to predict the market. Follow it. To be more specific, and less "duh", invest in securities that show (from a speculative standpoint) the potential to continue to move in a direction, but with "smart" money behind it. This brings me to 2.
2. It takes money to make money. This is not to say that it is impossible to turn $1,000 into $1M, just a lot less probable. When you are following the "smart" money, you are playing the game and the game is based on probability. The more money you have to invest, the more potential candidates you can hold. By cutting losses short and riding out the winners, you can make a considerable amount of money. Discipline and money management are the key here. Being right or wrong is not the way to look at investing; I tend to say, "I held the stocks that made me a profit, and sold the ones that didn't."
3. You will lose money, you will be in the wrong security and the worst time, and you will 2nd guess a great investment. It will happen over and over. You have to be mentally prepared to look past this. You have to be objective and you have to discipline your mind to treat loses as a necessary part of the game.
Well, to actually answer the question, I am invested in BAC, PFE, GE, and VZ. All of which are for testing purposes for a new strategy that makes us of technical analysis over a long(er) term.
I realize my knowledge is minimal, but I hope it helps.
Re: Ask HN: Do you invest in the stock market?
#44Wouldn't ever do it. Stock market is for suckers. (Based on reading Nassim Nicholas Taleb and conversations with people that worked on trading floors.)
Taleb is not a source of investing advice - unless you were interested in trading, in which case he has a few points.
Taleb is not a source of investing advice at all - he merely illustrates his philosophy with examples from finance as it's something he's more than familiar with.
Stock market is a fool's game by its nature.
Re: Ask HN: Do you invest in the stock market?
#45Wouldn't ever do it. Stock market is for suckers. (Based on reading Nassim Nicholas Taleb and conversations with people that worked on trading floors.)
Where would you put your money instead?
I'll worry about it when I have it. But my current thinking is along the lines of: 10-20% in highly speculative stuff (much more so than stocks) and the rest in super-safe stuff (much safer than stocks).
Re: Ask HN: Do you invest in the stock market?
#46The thing about investing in individual companies is that you're not betting on whether that company will grow or not. You're betting on whether the company will grow more than investment professionals expect it to. I have, consistently (over 10 years) invested in individual companies and beat the market, but I found that it just wasn't worth the time. So now I put my money in index funds. By the way: the biggest pre…
I think you're right, but only to an extent. I'd say the advantage the individual investor has over the investment professional, is that the professional has a time-frame of 1-3 years. So a lot of a stock's price reflects how the company is expected to grow/pay out over that period. If you are willing to take a longer term view, asking what's this company going to be doing in 10-20 years, and how is it priced relativ…
You certainly have advantages and disadvantages. I could say a lot about the different situations professionals and individuals are in, and I'd be happy to share any thoughts if you're interested. That said, I'd like to point out two things:
1. Most individuals do consistently worse than the market (so do most mutual funds, actually)
2. Most of Buffett's major successes, especially the early ones, have had nothing to do with his predictions of how a company would perform in the future. They were based on the difference between a company's current assets vs. its current stock price. Eg one of his major successes was in buying shares of Sanborn Map company when Sanborn had assets of $65 per share, but shares only cost $45 each [1].
It's still possible to invest using this method-known as value investing-but it's much harder today. The reason is that information is much more freely available. Eg in the Sanborn example above, it took Buffett a significant amount of research to find Sanborn and to realize that they were undervalued. Today all of that information is available to anyone online.
[1]: http://en.wikipedia.org/wiki/Warren_Buffett#Business_career
Re: Ask HN: Do you invest in the stock market?
#47Read "The Intelligent Investor" by Benjamin Graham.
^^ Well worth the read. Foundation book.
Re: Ask HN: Do you invest in the stock market?
#48Earlier quoted context omitted.
I worry about Apple. They've had a great run, but where can their next $billion market come from? To an extent, the current share price will be factoring in future growth on the same trajectory as we've observed over the last few years.
The question with AAPL is really do you think smartphones and tablets, as product segments unto themselves, have reached market saturation? I think we'll still see massive increases in the sheer number of smartphones and tablets sold, and I think AAPL will manage to retain a significant (not necessarily a majority) market share.
Many people feel the same way as you do, which means the information is very likely already in the current share price. Buying APPL stock today implies that you think apple will to better than current expectations, not current apple market share, etc...
Re: Ask HN: Do you invest in the stock market?
#49Read "The Intelligent Investor" by Benjamin Graham.
Also, John Kay's "The Long and the Short of It: finance and investment for normally intelligent people who are not in the industry".
Re: Ask HN: Do you invest in the stock market?
#50Wouldn't ever do it. Stock market is for suckers. (Based on reading Nassim Nicholas Taleb and conversations with people that worked on trading floors.)
This is what I tell myself, but I continually hear stories (friends of friends, of course) of people hitting it big and wonder if I just don't get it.
> I continually hear stories (friends of friends, of course) of people hitting it big and wonder if I just don't get it.
For every hitting it big, there is an opposite (and often larger) story of losing it big. Often by the same people -- except they are happy to tell you about their wins and don't talk so much about the losses.
It's not even a zero sum game -- the fees and spreads ("friction") are non-trivial.