Author Topic: Why is active stock picking so taboo on here ?  (Read 22198 times)

NoStacheOhio

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Re: Why is active stock picking so taboo on here ?
« Reply #200 on: April 03, 2018, 10:05:08 AM »
Are you just trolling or what?

Why are you seeking external validation from a bunch of anonymous strangers? You claim to be exceedingly exceptional, having provided no evidence to support it.

If you're part of that 18%, then go buy some shit (stocks, sectors, whatever). Post your trades and net worth over time. Then we'll all tell you about the pleasant olfactory notes of your feces.

Scandium

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Re: Why is active stock picking so taboo on here ?
« Reply #201 on: April 03, 2018, 10:07:41 AM »
I am ok with value-based investing. As long as you are broadly diversified, keeping costs low, minimizing turnover, and not selling at a loss you are OK. Naive performance-chasing, selling at a loss, and waiting in lower-yielding cash are the things that will screw you.

Even then you will probably underperform the market once you factor in your time at an hourly rate.

It's not that timely to be honest.. and all I am simply doing is providing some common sense to the markets...

It's quite ironic that the people are calling me a market timer see the ones heavily all in on US ....this implies that you are trying to beat the market anyhow lol.

US is just over half the market at the end of the day and at such high levels I think the chances are it will pay to look at the other 45%

This is why I like small caps globally as they seem to do well even in economic crisis
Why do you assume all US based people here are only investing domestically? I know many, including myself, have ~50/50 US/international. As the wold market cap suggests. Yes, only going US stocks is making a bet on the US, I don't think many would dispute that.

Just because Bogle is 100% US doesn't mean people here follow it (though some do). If he lost half, Bogle would still have more money then he needs, he can afford to not be diversified. Many of us here don't. And he's also an old-school American exeptionalist.

It's also fantastically rude to come here and insult long-term members, who are extremely helpful to many and frankly know more than you do. So, you made up your own definition of market timing (going in and out of individual stocks). And that's not what you do so you're not market timing. Ok, you've justified your actions to yourself. Good for you. Now move on, you don't need to (and can't) justify it to us.

In summary, you attack a version of market timing you made up. And you attack "investing 100% US", which I haven't seen anyone recommend? How many horses do you feed with all that straw..?

i specifically said that about people calling me a market timer... which is not about most "long term contributors" so get your bloody facts right before coming on with your own BS - thanks

and i havent seen any intelligence or evidence other than regarding the "stock picking" part of my conversations that relates to anyone having better knowledge frankly other than the "your a market timer"  so again speak facts before claiming to be insulted - and im not impressed by your arrogant know it all frankly know nothing attitude


"(going in and out of individual stocks)" please tell me where i said this is not market timing? again more made up stuff - i take it you havent read much of this thread and as a result anything that doesnt fall in the conventional wisdom on here you have naturally assumed incorrectly and are another "market timer" accuser 

based on incredibly poor misquoted and factually incorrect response i will naturally assume you know F-all in the field of investment

Wow :O. Did someone shit in your corn flakes, or is there another reason you seem to be having a really bad day?? Even in heated discussions here this kind of excessive dickbaggery is uncalled for. Keep it up and I hope you get banned as just another troll. You have insulted several long-term members (since they all call you a market timer..), is that really a disputed fact??

ps: to clear up the confusion: you claim "going in and out of stocks" is the only form of market timing, per your definition. Since you're just under-investing in the US instead you say you're not market timing. Everyone else here disagree with that.

appleshampooid

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Re: Why is active stock picking so taboo on here ?
« Reply #202 on: April 03, 2018, 10:09:14 AM »
Just playing devil's advocate. If you have an IPS that states a certain allocation per sector, and your portfolio is out of whack given current market valuations of US large cap, you would be following your IPS to avoid that asset class with new investments until the percentages come back to your target.

OurTown

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Re: Why is active stock picking so taboo on here ?
« Reply #203 on: April 03, 2018, 10:14:03 AM »
Just playing devil's advocate. If you have an IPS that states a certain allocation per sector, and your portfolio is out of whack given current market valuations of US large cap, you would be following your IPS to avoid that asset class with new investments until the percentages come back to your target.

Which is re-balancing rather than market timing.  As long as you don't fiddle with the numbers in order to time the market!  My domestic/international ratio is 2:1, not because I think that has any objective significance, but rather because the math is easy to calculate and I am not tempted to play games based on what I think is going to happen.

caracarn

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Re: Why is active stock picking so taboo on here ?
« Reply #204 on: April 03, 2018, 10:18:46 AM »

Telecaster

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Re: Why is active stock picking so taboo on here ?
« Reply #205 on: April 03, 2018, 10:59:49 AM »
Asset allocation is a completely different question than stock picking. I can see where you're coming from Jamese20. It all makes sense now but you've got to bear in mind your audience. I'm assuming 90% of people on these boards are from the US/Canada. They are extremely likely to have the vast majority of their stock portfolio in the US market. I would if I was a US citizen living there. That's why VTSAX is quoted so much on here. In the US its not marketed as a US fund but a total stock market fund. We think of a total stock market fund as something that invests globally. You may have had more success on the UK board if you had an allocation question.

So for US people they don't really care about any thoughts of the US being overvalued. That for them is market timing. They will just keep buying regularly and be quite happy being primarily in their home market. I'm assuming most US people are at least 80% invested in the US. Please any US people jump in here if I'm talking nonsense there.

If you are not talking about dancing in and out of the market and you are wanting to invest in index funds then I can see where you're coming from, but from a UK perspective. We are not likely to invest 90% of our portfolio in the FTSE100 as a US person may in their total stock market fund. We are also not going to be 90% in the US either. Most Vanguard global trackers here in the UK will have 50-60% allocated to the US. If you think that's too high then that's fine. Most global funds won't suit you. I think you have a couple of options:

1. Vanguard LifeStrategy 100 is approx 40% in the US
2. You use separate UK, Europe, US, Japan, Asia-Pacific, Emerging markets and Bond tracker funds to allocate exactly what you want to each geographical area.

However option 2 takes more effort to manage and you lose some of the simplicity with regards to rebalancing of a global tracker. You then also have the issue of when do you decide one of the regions is now undervalued and which is overvalued in order to rebalance appropriately. Also why do you think you know better than Vanguard do in how they have allocated their LifeStrategy fund for example?

Excellent points.  There are two parallel conversations going on, one of which is about portfolio construction.   And if you look at Bogleheads or wherever, there are tons of different example portfolios.   Which is to say, there is no consensus on a single-best portfolio.  Certainly, a non-US person would approach portfolio construction differently that a US person.   On various threads here at MMM, you might (or might not) get a bit of push back if you suggested say, international stocks, but only a bit.  Because after all, most big US companies have operations overseas, so there is some international exposure that way.  But others might say Europe stocks aren't correlated well with US stocks, so there's a benefit in that regard. 

Similarly, lots of people here like the simplicity of owning just VTSAX (and maybe some bonds).  However, that's a large cap strategy, and backtesting shows a blend of large and small caps increases returns )but also increases volatility).   So, I don't think the conversation should end at 100% VTSAX.  But some disagree.  Point is, there are lots of logical ways to construct a portfolio. 

However (and this is the other part of the conversation)  IMO it is not logical or valid to construct a portfolio based on current P/E ratio.  As I mentioned above, P/E is at best weak predictor of future returns, and P/Es can be wacky in either direction for very long periods of time.  And lets say that OP is correct, and US markets tank relative to the rest of the world.  Then what do you do?  Look at P/Es again and adjust?   How often do you do that?   And what are the thresholds for adjustment?  And are the adjustments time-based (say, yearly), or value based, dependent on P/Es?  And final question:  Do we know that this type P/E-based construction even works?   You can see there is a lot to this, and I can see lots of ways to blow your fingers off. 

If there is one immutable rule of investing it is that the less you fiddle with your portfolio, the better your returns.  Trying to pick winning markets ahead of time will require lots of fiddling.  Caveat investor.


HBFIRE

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Re: Why is active stock picking so taboo on here ?
« Reply #206 on: April 03, 2018, 11:08:57 AM »
On various threads here at MMM, you might (or might not) get a bit of push back if you suggested say, international stocks, but only a bit.  Because after all, most big US companies have operations overseas, so there is some international exposure that way. 



Whenever someone thinks along these lines "US companies do business overseas, so thats international!", I point them to this excellent post by who I consider the most prolific contributor on the forum:

https://forum.mrmoneymustache.com/investor-alley/statistics-personal-experience-and-risk-management/msg629210/#msg629210

Jamese20

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Re: Why is active stock picking so taboo on here ?
« Reply #207 on: April 03, 2018, 11:15:45 AM »
Asset allocation is a completely different question than stock picking. I can see where you're coming from Jamese20. It all makes sense now but you've got to bear in mind your audience. I'm assuming 90% of people on these boards are from the US/Canada. They are extremely likely to have the vast majority of their stock portfolio in the US market. I would if I was a US citizen living there. That's why VTSAX is quoted so much on here. In the US its not marketed as a US fund but a total stock market fund. We think of a total stock market fund as something that invests globally. You may have had more success on the UK board if you had an allocation question.

So for US people they don't really care about any thoughts of the US being overvalued. That for them is market timing. They will just keep buying regularly and be quite happy being primarily in their home market. I'm assuming most US people are at least 80% invested in the US. Please any US people jump in here if I'm talking nonsense there.

If you are not talking about dancing in and out of the market and you are wanting to invest in index funds then I can see where you're coming from, but from a UK perspective. We are not likely to invest 90% of our portfolio in the FTSE100 as a US person may in their total stock market fund. We are also not going to be 90% in the US either. Most Vanguard global trackers here in the UK will have 50-60% allocated to the US. If you think that's too high then that's fine. Most global funds won't suit you. I think you have a couple of options:

1. Vanguard LifeStrategy 100 is approx 40% in the US
2. You use separate UK, Europe, US, Japan, Asia-Pacific, Emerging markets and Bond tracker funds to allocate exactly what you want to each geographical area.

However option 2 takes more effort to manage and you lose some of the simplicity with regards to rebalancing of a global tracker. You then also have the issue of when do you decide one of the regions is now undervalued and which is overvalued in order to rebalance appropriately. Also why do you think you know better than Vanguard do in how they have allocated their LifeStrategy fund for example?

Excellent points.  There are two parallel conversations going on, one of which is about portfolio construction.   And if you look at Bogleheads or wherever, there are tons of different example portfolios.   Which is to say, there is no consensus on a single-best portfolio.  Certainly, a non-US person would approach portfolio construction differently that a US person.   On various threads here at MMM, you might (or might not) get a bit of push back if you suggested say, international stocks, but only a bit.  Because after all, most big US companies have operations overseas, so there is some international exposure that way.  But others might say Europe stocks aren't correlated well with US stocks, so there's a benefit in that regard. 

Similarly, lots of people here like the simplicity of owning just VTSAX (and maybe some bonds).  However, that's a large cap strategy, and backtesting shows a blend of large and small caps increases returns )but also increases volatility).   So, I don't think the conversation should end at 100% VTSAX.  But some disagree.  Point is, there are lots of logical ways to construct a portfolio. 

However (and this is the other part of the conversation)  IMO it is not logical or valid to construct a portfolio based on current P/E ratio.  As I mentioned above, P/E is at best weak predictor of future returns, and P/Es can be wacky in either direction for very long periods of time.  And lets say that OP is correct, and US markets tank relative to the rest of the world.  Then what do you do?  Look at P/Es again and adjust?   How often do you do that?   And what are the thresholds for adjustment?  And are the adjustments time-based (say, yearly), or value based, dependent on P/Es?  And final question:  Do we know that this type P/E-based construction even works?   You can see there is a lot to this, and I can see lots of ways to blow your fingers off. 

If there is one immutable rule of investing it is that the less you fiddle with your portfolio, the better your returns.  Trying to pick winning markets ahead of time will require lots of fiddling.  Caveat investor.

thanks for a sensible answer and response it is much appreciated - its not just based on P/e - but when you look at extremes in either case it normally shows in the performance

im sorry but there are too many ignorant answers and high horse type responses to continue this for me now and wont be returning

simonsez

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Re: Why is active stock picking so taboo on here ?
« Reply #208 on: April 03, 2018, 11:26:55 AM »
Whenever someone thinks along these lines "US companies do business overseas, so thats international!", I point them to this excellent post by who I consider the most prolific contributor on the forum:

https://forum.mrmoneymustache.com/investor-alley/statistics-personal-experience-and-risk-management/msg629210/#msg629210
I thought ARS was the most prolific with over 27000 posts.  Dodge only has 790.  Very profound post though.  :-P

Seriously though, thanks for the link, good stuff.

HBFIRE

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Re: Why is active stock picking so taboo on here ?
« Reply #209 on: April 03, 2018, 11:30:20 AM »
Whenever someone thinks along these lines "US companies do business overseas, so thats international!", I point them to this excellent post by who I consider the most prolific contributor on the forum:

https://forum.mrmoneymustache.com/investor-alley/statistics-personal-experience-and-risk-management/msg629210/#msg629210
I thought ARS was the most prolific with over 27000 posts.  Dodge only has 790.  Very profound post though.  :-P

Seriously though, thanks for the link, good stuff.

Oh I wasn't basing it on volume, just quality.

But ARS has very high quality posts, love his stuff too.  He also introduced me to the game Avalon, so he gets points for that too hahah.
« Last Edit: April 03, 2018, 11:37:14 AM by dustinst22 »

Scandium

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Re: Why is active stock picking so taboo on here ?
« Reply #210 on: April 03, 2018, 11:36:32 AM »

im sorry but there are too many ignorant answers and high horse type responses to continue this for me now and wont be returning

ignorant answers = "people who don't agree with me (and dispute my nonsense with facts)"

Thanks for leaving. You won't be missed.

Goldielocks

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Re: Why is active stock picking so taboo on here ?
« Reply #211 on: April 03, 2018, 12:13:12 PM »
I am ok with value-based investing. As long as you are broadly diversified, keeping costs low, minimizing turnover, and not selling at a loss you are OK. Naive performance-chasing, selling at a loss, and waiting in lower-yielding cash are the things that will screw you.

Even then you will probably underperform the market once you factor in your time at an hourly rate.


US is just over half the market at the end of the day and at such high levels I think the chances are it will pay to look at the other 45%

As a non-american, I have some perspective to talk on this point, I think.

The US may be only half the world market, but many, many of its large companies get revenues (often most of their revenues) from international sales.   Therefore, an investment in the US funds IS a much larger reflection of the world markets than it appears.

I agree that US does not reflect small cap international opportunities proportionally.... I personally have 30% US and 30% international which I think is better diversity of up and coming and strong international leaders... but I had to look closely at the US company exposure to the international sales to evaluate it.

Top 15 on the Fortune 50:

1. Walmart Stores
Double in revenues of the next largest.  25% of sales are international

2. Berkshire Hathaway

3. Apple:  USA is only about 1/3 of total sales revenues

4. ExxonMobile -- USA is only 20% (?) of total operations / sales

5. McKesson -- even McKesson gets 25% of its revenue from international..

6. UnitedHealth Group

7. CVS Health

8. General Motors

9. AT&T

10. Ford Motor

11. AmerisourceBergen

12. Amazon.com

13. General Electric

14. Verizon Communications

15. Cardinal Health

HBFIRE

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Re: Why is active stock picking so taboo on here ?
« Reply #212 on: April 03, 2018, 12:16:49 PM »


The US may be only half the world market, but many, many of its large companies get revenues (often most of their revenues) from international sales.   Therefore, an investment in the US funds IS a much larger reflection of the world markets than it appears.



The numbers have already included revenues overseas when calculating total US market share and market cap
« Last Edit: April 03, 2018, 12:52:18 PM by dustinst22 »

Goldielocks

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Re: Why is active stock picking so taboo on here ?
« Reply #213 on: April 03, 2018, 01:56:51 PM »


The US may be only half the world market, but many, many of its large companies get revenues (often most of their revenues) from international sales.   Therefore, an investment in the US funds IS a much larger reflection of the world markets than it appears.



The numbers have already included revenues overseas when calculating total US market share and market cap

Sorry, I missed your post upthread -- which numbers / index /calculations already adjust for total us market share?

Also,  note that even though I agree that the US Market exposure DOES mean you get some international exposure, I still only have 30% US in my allocation.

Scandium

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Re: Why is active stock picking so taboo on here ?
« Reply #214 on: April 03, 2018, 02:06:33 PM »


The US may be only half the world market, but many, many of its large companies get revenues (often most of their revenues) from international sales.   Therefore, an investment in the US funds IS a much larger reflection of the world markets than it appears.



The numbers have already included revenues overseas when calculating total US market share and market cap

Sorry, I missed your post upthread -- which numbers / index /calculations already adjust for total us market share?

Also,  note that even though I agree that the US Market exposure DOES mean you get some international exposure, I still only have 30% US in my allocation.

As is often pointed out this works the other way too. Samsung sells a lot to the US, so does that mean i don't need to own US stocks if I own Samsung? Or Toyota, Nestle and others?

Goldielocks

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Re: Why is active stock picking so taboo on here ?
« Reply #215 on: April 03, 2018, 02:36:30 PM »
I think the "don't worry about international exposure" is more for the one fund "set it and forget it" investor approach, especially for those with zero interest in re-balancing each year and want only one fund and maybe one bond fund or bond ladder.   

Because US has a significant exposure to international, it is not like you are wholly out of the market.

You are right that international holds US holdings, too.
 Samsung, Nestle are two international companies with very strong US prescence that I end up with quite a bit of in my international holdings, Samsung is about 25% US sales; Nestle USA is around 28% of sales revenue.

For the person wanting a single income fund -- if they were in Canada, I would recommend an international fund, perhaps EAFE or other world index.

If they were in the USA, I would recommend a USA based equity fund first, if you only want one fund. 
The key reason is that you want a sizable portion of your retirement invested in the dollar currency that you will retire in.  Canada's market is too small to ignore international stocks, but the USA is not.