351–360 of 433 posts
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> It's likely to be a "picking up pennies in front of a steamroller" type trade. What does that mean?
There are trades where you can make a small profit regularly, but on bad days you take huge losses. The huge losses outweigh all the potential profits by a large margin. Just like picking up pennies is a small gain while risking death to do so
There are all sorts of interesting facts you can pull out of this, like how if you missed the top 10 best days in the market from 1999-2019, your return was cut in half. If you missed the top 20 best days, you actually lost money: https://www.fool.com/investing/2019/04/11/what-happens-when-... Basically never mistake annualized return over a long period of time for your expected return in a given year (or day, etc).…
Nah, actually, I think that growing consistently with low variance over a long period of time means that the asset is objectively a good buy...
There are all sorts of interesting facts you can pull out of this, like how if you missed the top 10 best days in the market from 1999-2019, your return was cut in half. If you missed the top 20 best days, you actually lost money: https://www.fool.com/investing/2019/04/11/what-happens-when-... Basically never mistake annualized return over a long period of time for your expected return in a given year (or day, etc).…
Would I recommend timing the market? Most of the time, no. But a lot of people talk about the impact of the 10 best or worst days in the last 20 years, and I would say those "insane periods" do exhibit somewhat recognizable patterns that makes it possible to identify them and take advantage of.
I'm going to add that I did a rudimentary an analysis of the S&P 500 because everyone seems to be throwing their money into passive S&P500 low vehicle investments. I looked at every hold period since inception from 1 year holds / returns up to 40 year hold and returns. Timing is crucial for good returns - depending on when you put in and take out your money the returns can be negative (even in cases where you hold up…
> depending on when you put in and take out your money the returns can be negative (even in cases where you hold up to 15 years) Sorry, but unless you're talking about truly black swan circumstances like the Great Depression or the 2008 crash, I don't believe for a second that, over a 15 year timespan, holding the S&P will result in negative returns frequently enough that a typical investor has to concern themselves…
My point is that investing at the peak of the market will not generate returns unless you unload before the market goes down. Now who knows if the equity markets are going to get clipped (or rather when) ... timing is fickle.
Also, selling on good years makes your performance exceptionally good.
I guess TL; DR. Either sell in the good years around nowish if you've generated a return as equity markets are frothy or be prepared to hold a long time to generate a return [statement for S&P index not individual stocks] assuming the future follows some of the past patterns (sample size is small though to be fair).
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I think a lot of newcomers to stock investing in the past year have been given the wrong ideas about the stock market. When all of the headlines are about GameStop and Nokia and AMC and some kid who made it lost a lot of money on RobinHood, the stock market can feel like a place for gambling. Now that cryptocurrency prices are listed right next to stock prices, many people don’t even understand that stocks are owners…
The problem is options/derivatives trading. That is straight up gambling. There’s a meta market where you bet on the behavior of the market...
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I agree with this except I think if you know a stock or two is good, diversification is unnecessary. I’ve only had two stocks in my portfolio for the last ten years.
I am happy for you that your 2 picks have been good. But most likely you have been lucky (maybe you picked AMZN, TSLA). Modern portfolio theory states that diversification gets you closer to better returns on average with lower risk. [1] https://en.wikipedia.org/wiki/Modern_portfolio_theory#Divers...
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I agree with this except I think if you know a stock or two is good, diversification is unnecessary. I’ve only had two stocks in my portfolio for the last ten years.
Ultimately it's about risk (permanent loss) control, and if you've done the research into those couple of companies, have high confidence in their continued success, and are diligent in continuing to update your views, then it sounds like you're managing risk well. There's always the chance of unknown, idiosyncratic, and potentially disruptive factors though--from a financial planning and risk management perspective,…
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I agree with this except I think if you know a stock or two is good, diversification is unnecessary. I’ve only had two stocks in my portfolio for the last ten years.
Same for the lottery, if you just know which numbers are good then you only have to buy one or two tickets ever and you're set for life.
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The point of the trivia is arguing against trying to time the market. Lots of people predict crashes are coming, so shift money from equities to cash or bonds. Unless you can time it perfectly (you can't), it is better to hold because you don't know when the best or worst days are.
It’s such a fundamental contradiction you see it everywhere. The quote “buy low, sell high” says we should time the market. Even the classic “percentage of bonds to stocks should be your age” requires us to time the market. And if you just buy stock when you happen to have spare cash, that too is “timing the market.”