81–90 of 129 posts
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Or you could, uh, buy Berkshire Hathaway...
At 214k a single stock, that doesnt seem very attainable.
https://www.google.com/finance?cid=9614464
the b shares are currently selling for $143/share
I think the key to picking individual stocks is the ability to evaluate companies in both a financial/quantitative and qualitative manner. This is easier said than done. But by no means impossible. Even Warren Buffett has said multiple times that if one has the skill to evaluate companies than they should pick individual companies and not choose an index fund because they will do far better with picking individual st…
I have a very bright friend who works for a hedge fund. He's a Stanford engineering grad with an MBA from a top 10 school, and he had considerable success in his engineering career before shifting to finance several years ago. He spends most of his waking life analyzing about six medtech companies. That's right, only six. One might assume that he knows a few things about each company. And yet, whenever he recommends…
Again, I generally agree with the advice of going with low-cost index funds for the vast majority of people. However, I do think that there are some people (albeit not many) with the right background, skills, training and commitment who can consistently beat the markets (ie., this was the thesis of Peter Lynch's book Beating the Street).
Lets assume the average return is %5, so if you make $200k/yr annually in your engineering craft, then you would need $4 million minimum to match the market for your salary, and probably at least $6 million before you would consider switching your career to 'managing your own money'.
I think the key to picking individual stocks is the ability to evaluate companies in both a financial/quantitative and qualitative manner. This is easier said than done. But by no means impossible. Even Warren Buffett has said multiple times that if one has the skill to evaluate companies than they should pick individual companies and not choose an index fund because they will do far better with picking individual st…
I have a very bright friend who works for a hedge fund. He's a Stanford engineering grad with an MBA from a top 10 school, and he had considerable success in his engineering career before shifting to finance several years ago. He spends most of his waking life analyzing about six medtech companies. That's right, only six. One might assume that he knows a few things about each company. And yet, whenever he recommends…
I guess I just feel bad for him :-|.
"The high failure rate should come as no surprise, given how hedge funds operate. There’s no working model, so they vary widely, but the basic idea is that they rely on risky, untraditional investment strategies—ranging from arbitrage to taking over floundering companies, as Lampert did—to make big money fast. "
No, that's not the basic idea at all. And untraditional doesn't have to mean risky (a market-neutral strategy is an example).
I don't think you should try to become a 'professional full time investor' and put everything in index funds until you reach the ratio of funds that would significantly beat your current salary, compared to the average returns of an index market portfolio. Lets assume the average return is %5, so if you make $200k/yr annually in your engineering craft, then you would need $4 million minimum to match the market for yo…
- average long-term return on the stock market is 8-12%
- full-time wealth management means no more tech job, means no need to live in the bay area, means $100k p.a. nets you a comfortable lifestyle
You're looking at $1-1.5MM before retiring to the quiet life.
It's really hard to do MPT on your own. I got really into finding a collection of 10-12 mutual funds that are in a collection of sectors. I also mixed it with a strategy of selling each fund when it went below its 12-month moving average, and buying back in when it went above. I backtested it a bit and read some studies and it seemed reasonable. Sacrifice a little upside to protect against more downside. It sure woul…
Earlier quoted context omitted.
At a minimum you should get a "fee only" adviser who has a fiduciary duty to you. You can still get bad advice, but at least you won't get corrupt advice.
I have seen very corrupt fee only estate planning advisors. This is unfortunately still not fool proof.
It's so orthodox even relatively straightforward ways of beating the index are largely ignored. Look up Falkenblog. He's got a thesis about it.
If I didn't run a hedge fund, I don't know what I'd do differently though. Costs are pretty high on individual accounts. One thing you can do is invest via spread betting, which is tax free in the uk. Also the sheer a mount of infrastructure, both in terms of financial data, modelling, and the systems used to execute strategies, makes it a bigger job than one person can do.