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The Best Investment Advice You'll Never Get (2008)

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Re: The Best Investment Advice You'll Never Get (2008)

#111

Post by j_lev »

staplo wrote: post #91

I've been following (or, trying to follow) the index investing strategy for years on my own, and the final culmination of that was switching to betterment.com for my small savings and retirement accounts (no affiliation). They use MPT and a host of other things to take the decision making control out of the hands of the investor (except for risk tolerance) and provide a really great modern product to do that. And the…

The overwhelming opinion of the bogleheads crowd is that even these robo-advisers are ridiculously overpriced for what you get. And the fact that Wealthfront started as a sales portal for actively-managed (ie high-fee, high kickback) funds has tarred their image for a lot of people.

Re: The Best Investment Advice You'll Never Get (2008)

#112

Post by j_lev »

infinite8s wrote: post #19
jhulla wrote: post #9

Earlier quoted context omitted.

Asset diversification is more complicated than that. To a first order, yes stocks and bonds are inversely correlated. But it is not enough to hold just stocks and bonds. In order to maximize return over your preferred time frame (while minimizing risk), you have to examine the whole universe of investable assets, examine their volatility as well as correlations amongst themselves. From there, your goal is to assemble…

True, but for most people without 25M (ie most of us), is the arginal improvement in return on a 500k investment worth the extra complexity over a straight stock/bond mix? Unrelatedly, what are you thoughts on the permanent portfolio (if you've heard of it).

Not sure if this was directed at jhulla (and actually I was about to ask it to svachalek).

25% in physical PMs is hard to justify but generally speaking I think Browne's Permanent Portfolio is a good base. Perhaps 20% each of domestic equities, international equities, PMs, cash and long term bonds would be more realistic, with rebalance bands at 17/23.

Re: The Best Investment Advice You'll Never Get (2008)

#113

Post by devonkim »

sharkweek wrote: post #4

I loved the first bit of this; that Google invested the time in their employee's education of what was about to happen with sudden riches. I know it's starting to happen, but professional sports needs this same educational process. Recently watched the 30 for 30 documentary 'Broke' and it was so heartbreaking to see what happens to these athletes who have come from nothing, get a ton of cash all the sudden, and find…

The NBA passed a law a bit ago with this motivation. http://www.bloomberg.com/news/2012-07-12/nba-players-forced-...

Re: The Best Investment Advice You'll Never Get (2008)

#114

Post by thedufer »

encoderer wrote: post #38
thedufer wrote: post #35

Earlier quoted context omitted.

Statistically, professional investors don't beat the market. People aren't "downvot[ing] what they don't understand", they're downvoting demonstrably poor advice.

It's not about "beating the market." It's about retail investors underperforming professional asset managers AND underperforming the market. Tell me this: Other than reducing basis, what can you do to increase your chances of success in an investment? If success is defined as "not losing money"? One way to reduce basis is by selling covered calls on your stock positions, limiting potential profit but adding no additi…

Retail investors on average underperform the market, yes. Retail investors who only invest in index funds tie with the market (pretty much by definition) and those who think they can beat it drag the average down. You're generalizing over a group that has no homogeneity.

> You and retail investors as a class have been scared into thinking that it's "riskier" to spend $300 on a call spread in Tesla than it is to go out and buy 100 shares of TSLA for around $25,000.

Its like you're not reading any of the advice here. Its just as stupid to invest in an individual stock as to buy a call spread. If you're doing either, the bet you're making is "I know more about this subject than tens of thousands of professionals who have studied it for 100 hours per week for the last decade". Out of context, that's an obviously stupid bet except in very very rare circumstances†. So what about it being the stock market suddenly turns it around?

Index funds, on the other hand, definitionally track the market. Something which the professionals you think you can beat can't even do on average. This is the strategy that is being pushed, not buying a huge number of shares of a single risky company.

†Those circumstances are, in stock trading, largely illegal to act on.

Re: The Best Investment Advice You'll Never Get (2008)

#115

Post by pbreit »

sopooneo wrote: post #109
pbreit wrote: post #88

Also, pretty much guaranteed to improve outcomes for almost investor: 1) pay off your credit cards before investing 2) max out your IRA/401(k)

I agree. But I think then there is still some question of which funds to invest in of those available through your 401K.

Index funds, broader, the better. S&P 500 is a good start.

Re: The Best Investment Advice You'll Never Get (2008)

#117

Post by marktangotango »

falsedan wrote: post #86
mahyarm wrote: post #83

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…

Your numbers are off: - 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.

I agree with these guys, the real return is lower, and the years that are negative to 4% will be diminish your nest egg unless you eat raman in those years. A millionaire eatinv raman? Maybe.

Re: The Best Investment Advice You'll Never Get (2008)

#118

Post by m-i-l »

mahyarm wrote: post #83

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…

I think one of the points of the article is that investing in index funds isn't a full time job, so even if you are newly rich you don't have to either make managing your money a full time job or pay other people high fees to do it for you, i.e. you can keep your day job if you want (or "get on with building Google" in this case).

Re: The Best Investment Advice You'll Never Get (2008)

#119

Post by encoderer »

jcdavis wrote: post #74
encoderer wrote: post #66

Earlier quoted context omitted.

They're not mutually exclusive. For best results, you should invest in an index fund and sell covered calls on it every month. Also, there's no "risk" created from a covered call. That's the 'covered' part. There is the possibility that you could "miss out" on an up move, but the trade off is the certainty that you will collect premium every month. This is something that can be tested, and has been studied, and I enc…

Except there are S&P 500 Buy write indexes/ETFs, and they underperform over long periods of time.

Right, because having somebody else manage your money isn't as profitable as managing it yourself. You would agree with that I'm sure?

Re: The Best Investment Advice You'll Never Get (2008)

#120

Post by encoderer »

enraged_camel wrote: post #69
encoderer wrote: post #58

Earlier quoted context omitted.

Go argue with Random Walk and Efficient Market theory. It's not a notion I just made up.

I'm not saying those theories are wrong. My suspicion however is that you took that statement out of context and grossly misinterpreted it, and are using that misinterpretation as the basis for the terrible advice you're giving.

If you can articulate exactly why it's "terrible advice" i'll eat my hat.

Here's my advice: If you invest the time to learn how to use derivatives, you can be far more profitable than investing only in stocks (whether companies or index funds). And I've made a lot of money, not by making gambles but by trading a large number of small positions over a long timeline, selling option premium and earnings a fantastic return.

It's a fact that retail investors have under performed as a class. And I didn't invent any of the strategies i'm using, nor did TastyTrade (though they do a great job advocating for and researching them). And I absolutely am delighted to spread the word, even if it means debating people like yourself. Your motivation is, I suppose, an innate certainty in your own correctness. It doesn't seem to matter to you that we're debating a subject that I clearly have a lot more passion about and experience with. And your message to anybody reading is "I can't tell you exactly why this is all bad advice, I'm just sure that it is."

I'm certain that options or futures trading isn't for everybody. But you're certain that it's not right for anybody and you and others here have taken a "shout him down" approach that is very un-HN imho...

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