11–20 of 23 posts
Earlier quoted context omitted.
This one confused me as well when I learnt about it. For valuing an investment, you have to take into account the inflation that will happen, as well as the opportunity cost. So if you can earn 5% on your money, but inflation is 4%, you can turn $100 into $101 today-dollars in one year.
But why? If you don't invest then you turn the $100 into 96 today dollars. It seems to me that information is pretty much irrelevant.
Earlier quoted context omitted.
This one confused me as well when I learnt about it. For valuing an investment, you have to take into account the inflation that will happen, as well as the opportunity cost. So if you can earn 5% on your money, but inflation is 4%, you can turn $100 into $101 today-dollars in one year.
But why? If you don't invest then you turn the $100 into 96 today dollars. It seems to me that information is pretty much irrelevant.
You can use NPV to evaluate different options. If NPV of one investment is $1 and another is negative $4 then it is clear what the better investment is (all other things being equal). Do this for all your investment options and you can rank where to put your money. Of course, if isn’t that easy since two investments might have different terms, risk profiles, or different capital requirements.
One of the most important realizations I've had recently is the investing motto: "You can't beat the market, but you can beat the tax man". Don't try to be smart about your investments from the point of view of share pricing, P/E ratios, EBITDA, etc, etc. The legions of Harvard and MIT quants working on Wall Street are going to be better than you at figuring out what the stock price should be. Instead, get smart abou…
One of the most important realizations I've had recently is the investing motto: "You can't beat the market, but you can beat the tax man". Don't try to be smart about your investments from the point of view of share pricing, P/E ratios, EBITDA, etc, etc. The legions of Harvard and MIT quants working on Wall Street are going to be better than you at figuring out what the stock price should be. Instead, get smart abou…
This is not completely true. Legions of Harvard quants most likely do not possess your circle of competence, whatever it may be.
E.g. as a customer of various cloud services I am much better positioned than any quant at understanding cloud vendor's product and business, because I'm a user and customer so I can understand how some offerings are just better than others and I can safely predict winners in long term. You could likely predict AWS meteoric rise as a sysadmin in 2010.
E.g.2 people following the semiconductor market in depth knew from years that Intel was on its way down since the blatant issue of the 10nm node appeared in 2015+ and had many years to act on it. As a MBP Pro user yourself you could quickly see that the boiling hot trackpad burning your fingers combined with Apple's declared intention of moving to in house socs, combined with the comeback of AMD in data center market combined with cloud vendors working on their own socs put Intel more and more in the corner. And what did quants do? Kept buying Intel because they looked at balance sheets, not products.
Everyone has its circle of competence and can combine it with learning balance sheets and do their math. Point is almost no one does and does not go through the analysis part to value and price a business.
Finance moreover changed. 30%+ of stocks out there are held by passive funds. Even investment managers which are consistently pressured to stay in a delta from the benchmarks.
Investment opportunities are out there, what is needed is to practice continuous due diligence, stay in own's circle of competence and be patient. You can't be right consistently for the reasons you listed, but you only need to get it right few times.
One of the most important realizations I've had recently is the investing motto: "You can't beat the market, but you can beat the tax man". Don't try to be smart about your investments from the point of view of share pricing, P/E ratios, EBITDA, etc, etc. The legions of Harvard and MIT quants working on Wall Street are going to be better than you at figuring out what the stock price should be. Instead, get smart abou…
> The legions of Harvard and MIT quants working on Wall Street are going to be better than you at figuring out what the stock price should be. This is not completely true. Legions of Harvard quants most likely do not possess your circle of competence, whatever it may be. E.g. as a customer of various cloud services I am much better positioned than any quant at understanding cloud vendor's product and business, becaus…
this and Intel you mentioned are pretty unique and rare insights, maybe like a one-off windfall, not a consistent way to make money. I've been in tech for decades now and I'm still having a hard time reliably telling who will flop and who won't. Only in a very few cases it's so convincing to me that I would be willing to bet money on it.
Earlier quoted context omitted.
This one confused me as well when I learnt about it. For valuing an investment, you have to take into account the inflation that will happen, as well as the opportunity cost. So if you can earn 5% on your money, but inflation is 4%, you can turn $100 into $101 today-dollars in one year.
But why? If you don't invest then you turn the $100 into 96 today dollars. It seems to me that information is pretty much irrelevant.
For an economist (and I'm not one so I don't know), they probably use the real growth rate of the economy in their calculations, because this is what the country in question has been shown to do with its money. The real growth rate takes growth and inflation into account.
Earlier quoted context omitted.
> The legions of Harvard and MIT quants working on Wall Street are going to be better than you at figuring out what the stock price should be. This is not completely true. Legions of Harvard quants most likely do not possess your circle of competence, whatever it may be. E.g. as a customer of various cloud services I am much better positioned than any quant at understanding cloud vendor's product and business, becaus…
> You could likely predict AWS meteoric rise as a sysadmin in 2010 this and Intel you mentioned are pretty unique and rare insights, maybe like a one-off windfall, not a consistent way to make money. I've been in tech for decades now and I'm still having a hard time reliably telling who will flop and who won't. Only in a very few cases it's so convincing to me that I would be willing to bet money on it.
Who said it was?
As per my last sentence my conclusion was that you only need to be right few times over your life time to buy a very good company that is mispriced for whatever reason and that retail investors hold often deep understandings of key industries that professional analysts don't.
If you're willing to do due diligence (and learn to do so which is far from trivial) and act you can definitely see good long term returns on a good number of picks.
Point is, stock markets only beat bonds in the long term, if you are in the stock market to do + some % in a short time it's gambling.
One of the most important realizations I've had recently is the investing motto: "You can't beat the market, but you can beat the tax man". Don't try to be smart about your investments from the point of view of share pricing, P/E ratios, EBITDA, etc, etc. The legions of Harvard and MIT quants working on Wall Street are going to be better than you at figuring out what the stock price should be. Instead, get smart abou…
I'm not convinced any of those things is "smart". For example, if LT cap gains is your lowest-rate taxable income, why would you want to offset it? I make sure when I have a cap loss for the year, I have no LT cap gains and keep it to around $3K (which offsets higher-tax-rate ordinary income). Loans against 401(k)s are rarely a good idea, you shouldn't put in money in the first place if you need it before retirement. And I've always thought that (assuming I have any pre-tax Trad IRA money, which would be the case if a ever leaving a job and rolling over the old 401k), it's more effective to use my annual $6K after tax money to pay tax on a larger Roth conversion than to simply go though extra steps to get the $6K into the Roth (greater leverage).
One of the most important realizations I've had recently is the investing motto: "You can't beat the market, but you can beat the tax man". Don't try to be smart about your investments from the point of view of share pricing, P/E ratios, EBITDA, etc, etc. The legions of Harvard and MIT quants working on Wall Street are going to be better than you at figuring out what the stock price should be. Instead, get smart abou…
One of the most important realizations I've had recently is the investing motto: "You can't beat the market, but you can beat the tax man". Don't try to be smart about your investments from the point of view of share pricing, P/E ratios, EBITDA, etc, etc. The legions of Harvard and MIT quants working on Wall Street are going to be better than you at figuring out what the stock price should be. Instead, get smart abou…
> Figure out how to do tax loss harvesting. Figure out what a back-door IRA is. Figure out how to take out a loan on your 401(k). I'm not convinced any of those things is "smart". For example, if LT cap gains is your lowest-rate taxable income, why would you want to offset it? I make sure when I have a cap loss for the year, I have no LT cap gains and keep it to around $3K (which offsets higher-tax-rate ordinary inco…
Re: 401(k), you are assuming knowledge of the future that nobody has.
Re: extra steps to do a Roth conversion, it's something that can be done in literally under 5 minutes, at $0 cost, if you have no other money in traditional IRA accounts, so I have no idea what you're talking about.