Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

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

modernluxury.com

Post reply on HN
Print view View original

41–50 of 129 posts

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

#41

Post by richard_cubano »

enraged_camel wrote: post #33
MCRed wrote: post #12

Regarding "Don't beat the market", Warren Buffet says "The game is really easy when your opponent decides not to play". Unfortunately, giving up has a lot of appeal: It means it's not your fault you didn't beat the market. It lets people say the game is rigged and take comfort. How many times have you seen buying company stock compared to gambling? Even though, on its face this comparison is ludicrous. (Especially he…

>>Regarding "Don't beat the market", Warren Buffet says "The game is really easy when your opponent decides not to play". Except Warren Buffet himself is a huge proponent of low-cost index funds, and recommends them for the average person. You really can't use him as an example because he's at the extreme end of the spectrum: wealthy to the point where managing his wealth is his full-time job. He has decades of exper…

Or you could, uh, buy Berkshire Hathaway...

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

#42

Post by vellum »

Apocryphon wrote: post #24

General question about index funds: if a market is about to go into a steep correction or even a recession, wouldn't it be more advantageous to invest in specific stable stocks, rather than an index fund that tracks the entire market?

That's what Wall Street calls "trying to catch a falling knife". You want to wait until after recovery starts, because you have no idea how far the price is going to fall. Of course, figuring out whether it's an actual recovery vs. a pit stop on the way to the bottom, is another issue.

http://www.investopedia.com/terms/f/fallingknife.asp

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

#43

Post by [deleted] »

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…

[deleted]

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

#44

Post by ryandrake »

jhulla wrote: post #7

Assuming you believe the underlying assumptions (and they very well may not be true), modern portfolio theory allows you to build a mathematically ideal portfolio for a given amount of risk. The math behind MPT might be hand waved as followed: goal seek a maximum portfolio return by combining assets with minimal correlation under a fixed risk scenario. In the end, you will have portfolio that will give you the maximu…

> So what is the amateur person worth $25M to do today?

A person worth $25M already has it made. They could light $1,000 a day on fire for the rest of their lives and still not go broke. Their investment options aren't really so interesting because only deliberate idiocy could destroy their retirement.

I think a more useful question is, what is the amateur person worth $25K to do today? Or the young person with negative net worth? The usual "just dump it into the stock market and pray" seems very risky. Sure, long-term the overall stock market expected to go up on average, but that is if you can survive the variance. Netted out over the years, I'd guess that I've pretty much lost money on the stock market, and I'm skeptical of someone with a simple answer that amounts to "hand your money to Wall Street".

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

#46

Post by spott »

jhulla wrote: post #7

Assuming you believe the underlying assumptions (and they very well may not be true), modern portfolio theory allows you to build a mathematically ideal portfolio for a given amount of risk. The math behind MPT might be hand waved as followed: goal seek a maximum portfolio return by combining assets with minimal correlation under a fixed risk scenario. In the end, you will have portfolio that will give you the maximu…

How is MPT supposed to determine the risk in an individual security? The human element, and the number of variables under consideration seems to pretty much require MPT to be restated as "an approximation to a mathematically ideal portfolio for a given amount of risk". On the other hand, I don't know MPT at all. Can you give any info on how risk is quantified so well?

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

#47

Post by hkmurakami »

bradleyjg wrote: post #40
hkmurakami wrote: post #31

Earlier quoted context omitted.

IMHO, the quality of people you will find at your local retail branch of an ibank (think BoAML, JPMChase, WF/Wachovia, etc.) is still very shoddy and suspect. These are the channels that people have immediate access to and think of visiting, even if you have $25MM. For these retail operations, iirc the threshold is $50MM before you are shipped off to a proper PWM team at HQ. >You will have no shortage of white gloved…

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.

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

#48

Post by chollida1 »

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…

http://www.theglobeandmail.com/globe-investor/funds-and-etfs...

Look you're an adult and free to do as you please but I'll try any way, please don't sell covered calls. Its very easy to make money and fool yourself into thinking you can beat the market.

Its really the worst of all possible worlds...

you have to hold the stock but don't get the upside when it rises. you have to hold the stock but still loose if it falls by more than the premium you still have the down side of being long the stock.

All you're doing is collecting pennies infront of the steam roller that is the market.

The reason indexing works is that you are always invested when the market has its big moves up. With covered calls you can't participate on the big moves up but you still get hammered when the market moves down.

The reason people do it is that the market can be calm for months and then move.

So you get:

small income in month 1

small income in month 2

then suddenly you either miss a 25% move up by the market as you get exercised on your calls or the market drops and you lose as the market falls 15% and you've lost not only the premium from writing your calls but also some of your principle as well.

Or put in laymans terms, the down side far outweighs the upside.

Also be careful here:

> Buying stock is a 50/50 bet. (Random Walk theory; Efficient Market). The price can either go up or down. There's no reason a retail investor should not tilt those odds a few points in their favor the same way professional traders do every day.

Please note this is just wrong.

There are actually 3 outcomes, which you should know if writing covered calls because you are essentially betting on the third option, which is that the stock stays flat, ie it doesn't move.

My whole point is that selling covered calls does tilt the odds, just not in your favour:(

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

#49

Post by serve_yay »

MCRed wrote: post #12

Regarding "Don't beat the market", Warren Buffet says "The game is really easy when your opponent decides not to play". Unfortunately, giving up has a lot of appeal: It means it's not your fault you didn't beat the market. It lets people say the game is rigged and take comfort. How many times have you seen buying company stock compared to gambling? Even though, on its face this comparison is ludicrous. (Especially he…

I don't think it's impossible for anyone to make money in the stock market, I just think it's impossible for me. OK, not impossible but it still strikes me as rather foolish to try. And I'm not even uninitiated, I used to work at one of the companies mentioned in this article.
Post reply on HN