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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)

#21

Post by bidirectional »

DoingIsLearning wrote: post #15
rlayton2 wrote: post #9

Earlier quoted context omitted.

I think like lots of things... If you expect to do better than other people, be prepared to know more or do more then them. Many people dedicate their lives to learning the stock market and what to do. It's unlikely someone can beat them with doing the bare minimum research. Not saying there isn't shady stuff going on too. There definitely is, but even if there wasn't it is a skill based game.

> Many people dedicate their lives to learning the stock market and what to do. It's unlikely someone can beat them with doing the bare minimum research. This hints at some sort of deserved meritocracy that just doesn't exist. Funding is king nowadays when a large fraction of trades happen via HFT. Implying that all you need is knowledge in order to reach wealth is misleading at best.

HFT is irrelevant, those firms basically compete with themselves and there's really not all that much money in it anyway. They're just providing liquidity and can basically be ignored 99% of the time.

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

#22

Post by bidirectional »

alexb_ wrote: post #19
rlayton2 wrote: post #9

Earlier quoted context omitted.

I think like lots of things... If you expect to do better than other people, be prepared to know more or do more then them. Many people dedicate their lives to learning the stock market and what to do. It's unlikely someone can beat them with doing the bare minimum research. Not saying there isn't shady stuff going on too. There definitely is, but even if there wasn't it is a skill based game.

Monkeys throwing darts have produced better results than most hedge funds.

They definitely haven't. The paper I think you're alluding to showed that monkeys picking 30 random stocks from a 1000 stock universe performed better than a capitalisation-weighted index of the 1000 stocks. However the former will obviously have greater exposure to small-cap stocks, which were known to outperform the bigger stocks.

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

#23

Post by benmanns »

gokhan wrote: post #13
wcoenen wrote: post #4

One interesting thing about "highest bid" and "lowest ask" prices is that they can sometimes move up and down for days without a transaction ever happening. This can be observed in certain illiquid markets, e.g. for a specific bond of a company. In those cases, the "last trade price" is meaningless and it's very important to instead look at the bids and asks in the order book.

Why? Clearly, no one is actually willing to trade at those prices. Sometimes, one illogical price in illiquid markets drive the orderbook to illogical extremes. Without a transaction, all are meaningless.

Bids and asks are making bold predictions about the current value of an asset. If they are wrong then anyone can enter the market and make a profit. Bid/ask of 99.90/100.10 means that the true value of the asset is between 99.90 and 100.10, because if it was really worth $100.20 someone would come in and buy up all the offers through $100.19 (give or take a bit for risk management, fees, and minimum profit targets). Usually what happens though in these markets is that the bid/ask is $95/$105 and true value is something like $101 but no buyer wants to pay a $4 spread and no seller wants to pay a $6 spread, so no trades happen. The last price could be $90 from back when the asset was $90/$100 true value around $95 and someone really needed to get out and was willing to pay (or didn’t know).

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

#24

Post by cinntaile »

zirobi wrote: post #10
ushakov wrote: post #8

the only thing you should know about the Stock Market: it favors those with more capital, if you don’t have much to begin with, don’t expect making life-changing amounts

Unless you know the market better than everyone else, having more capital can just as easily be a way to lose faster. Most of the smart money is in hedge funds anyway.

But hedge funds don't tend to make a lot of money for the investor?

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

#25

Post by bidirectional »

pjc50 wrote: post #16
sdevonoes wrote: post #11

Am I the only one in HN who is not into the stock market? I live in Western Europe and I would say 75% of my acquaintances don't do stock market. People I have known in the past (old people) didn't do stock market either. They all seem to have lived a normal life (decent jobs, decent house, decent family). Nothing extravagant but they got enough money to be "happy" in life.

Do any of them have private pensions? In the UK almost everyone will have been moved over to a "defined contribution" pension whose value is determined by the stock market, usually in the form of a "stakeholder pension". I don't "do" the stock market but I do have such a pension. And every few months sweep spare cash out of my current account into an index fund. Effectively I pay people to worry about this stuff on m…

Even with DB schemes their funding often relies on exposure to equities.

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

#26

Post by bluecalm »

ushakov wrote: post #8

the only thing you should know about the Stock Market: it favors those with more capital, if you don’t have much to begin with, don’t expect making life-changing amounts

Why do you think so? I think it's the opposite. With little capital you have way more opportunities in medium/small/micro caps while someone like Warren Buffet has limited pool of possible investments as you can't pour billions into 100m company.

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

#27

Post by llampx »

sdevonoes wrote: post #11

Am I the only one in HN who is not into the stock market? I live in Western Europe and I would say 75% of my acquaintances don't do stock market. People I have known in the past (old people) didn't do stock market either. They all seem to have lived a normal life (decent jobs, decent house, decent family). Nothing extravagant but they got enough money to be "happy" in life.

I live in Germany and its the same. Not that that's a good thing. People here are old-fashioned and still believe in "Concrete gold."

Fact is, as soon as you've got a meaningful amount of wealth, you're going to want to invest it so you can either get income from it or grow the principal. It could be in a home, multiple properties, or the stock market.

> People I have known in the past (old people) didn't do stock market either. They all seem to have lived a normal life (decent jobs, decent house, decent family). Nothing extravagant but they got enough money to be "happy" in life.

No offense but you're going to have a tough time comparing to a boomer in terms of wealth generation and building if you're a millenial. I know people who got houses handed to them for very cheap 30-40 years ago, and those houses are worth tremendous amounts of money now. On top of that they have good pensions and insurance from a long time ago. Or they have a rental contract where they're paying 1/3rd of their neighbors so their expenses are low.

There's a great income and wealth divide in Europe between the haves and the have nots, and the haves are very good at keeping their wealth and passing it down to their heirs. Meanwhile in most European countries, punitive taxation makes it extremely difficult to move up in social class, even from middle class to upper middle class.

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

#28

Post by tiborsaas »

ushakov wrote: post #8

the only thing you should know about the Stock Market: it favors those with more capital, if you don’t have much to begin with, don’t expect making life-changing amounts

I thought the same, but then I've seen this article :)

https://12ft.io/proxy?q=https%3A%2F%2Fqz.com%2F2108874%2Fthe...

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

#29

Post by WA »

MrYellowP wrote: post #17

I have a book written by André Kostolany, which taught me one thing and I believe I've forgotten the rest, because only this one fundamentally matters: Don't hunt for rising stocks, but chase the falling stocks. Everything that goes down either eventually goes up again, or dies. While this sounds like it's not helpful, all that's required is figuring out if a company is likely going to die. Even without any manual re…

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I assume you have good intentions, but your post is severely lacking. One crucial thing with this strategy is time. WHEN is the time to buy a falling stock? While it is falling? Or when it is rasing again? Are we talking intraday or months?

On a long enough time frame, every company will go extinct and every stock will go to zero.

And your post is in direct contradiction of two other common stock insights:

- Don’t catch a falling knife

- The market is efficient. If a stock price goes down, there is probably a reason for it.

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

#30

Post by pasabagi »

MrYellowP wrote: post #18
sdevonoes wrote: post #11

Am I the only one in HN who is not into the stock market? I live in Western Europe and I would say 75% of my acquaintances don't do stock market. People I have known in the past (old people) didn't do stock market either. They all seem to have lived a normal life (decent jobs, decent house, decent family). Nothing extravagant but they got enough money to be "happy" in life.

It's all about the outside influence. When the media doesn't push it, people aren't going to do it. Don't believe it? When the media started pushing GME, people went and bought GME. When the media started pushing btc, people went and bought btc. Stocks aren't being encouraged, therefore most people don't do it and instead cluelessly dismiss it mostly as gambling. Same goes for cryptos. Right until the media pushes it…

It is also the case that professional traders make a lot of money out of retail investors. The percentage of retail investors that actually make money are, iirc, quite small. It doesn't make sense to do something when you don't have the time to get good at it, and being bad at it means you're going to lose money.

Sometimes you're forced to (when an investment is tied into a basic necessity, like a house), but you're always going to be at a disadvantage.

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