Author Topic: "Investing should be boring"  (Read 27897 times)

k9

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Re: "Investing should be boring"
« Reply #100 on: October 26, 2015, 01:08:21 PM »
There are all sorts of private ways of making money that offer these sorts of opportunities and they don't necessarily have to involve high risk.  Some of them are very risky and some of them are a lot less risky.  Risk exists on a spectrum.
Would you care to give a list Mr-orange ? I have to admit my knowledge is quite limited in this field and I'm curious about that.

Kaspian

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Re: "Investing should be boring"
« Reply #101 on: October 26, 2015, 02:01:51 PM »
Our goal on MMM, forgive me if I'm wrong, is NOT to chase around the highest possible return every year or buy into flavour of the month speculation or investment strategies, or brag if we got 10% while indexers did 7%, or vice-versa.  We're not a bunch of wheelers-and-dealers in 10-gallon hats cheering around a roulette table.  We're supposed to come up with a rational plan involving (hopefully) 6-8% returns, stash our cash, and not brag or worry what the other guy's doing.  That's what indexing does for the majority of us.  It's good.  You know what's also exciting and fantastic investment strategy?  Picking the winning lottery ticket.  :(  To paraphrase others here:  "Well, everyone is different and it's worked very well for some".  Yeah, right, it has...  Still not prudent.

steveo

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Re: "Investing should be boring"
« Reply #102 on: October 26, 2015, 02:46:00 PM »
You say that's impossible to consistently beat the market this way. Can you point me to an example when this strategy would fail ?

I'll explain this in a couple of different ways.

1. No one has done this. Maybe Warren Buffet has and that is a maybe.
2. No one can consistently predict the future.

These are 2 facts that I don't think can really be disputed. If you look at those facts and then look at your comment that you can consistently beat the market you should be able to see that it is not going to happen.

You may think that you have an edge. I suggest you read about Long Term Capital Management. These guys had an edge plus they were geniuses. They had noble prize winning geniuses in their company. They didn't consistently beat the market and they went bust.

If you think you are different go for it.




steveo

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Re: "Investing should be boring"
« Reply #103 on: October 26, 2015, 02:53:56 PM »
The problem with your arguments as I see them, Mr_Orange, is that you seem to be making the case that beating the market is easy.  I think I may have recognized the issue -- as you've so abundantly made clear, you see and work with people who beat the market every day.  If I were surrounded by folks like that every day, my judgment may be clouded as well.  However, I personally have met zero angel investors, I don't know a single person who has made millions of dollars in factoring businesses, and I have never once underwritten a private deal of any sort.  And neither have the vast majority of people on this forum or across the world as a whole. 

The problem with this is that its not statistically valid. There is no experience over time to back it up. When you play that game (exotic investment options) you think everyone is beating the market but that isn't how it works. It honestly shows to me a lack of knowledge of how investing works.

Long Term Capital Management is a great example.

Its easy to come up with one off examples of people making money. The trick is consistency.
« Last Edit: October 26, 2015, 03:03:42 PM by steveo »

steveo

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Re: "Investing should be boring"
« Reply #104 on: October 26, 2015, 02:59:04 PM »
Yep, exactly, those guys who pursued their educations beyond most of their peers of the day and then dutifully recorded all the data of their experiments, published them in academic journals read by their colleagues, and continually pushed the knowledge of their fields forward with hard data, not anecdotes of personal beliefs. 

You want mr. orange to publish publicly his business records so he can help his competitors?

Put another way, these academics you speak of, when they first make a major discovery, and try to tell the blood letting doctors about it, and the blood letting doctors ask them "where's the data", can they claim that what they discovered is NOT personal anecdote?

I'm confused by your logic here

No worries - I'm not offended.

It's a thing called the scientific method.  You do experiments, you try to prove or disprove a hypothesis, you do it in a way that can be repeated by someone else.  Then someone else, unrelated to you, non-biased, repeats your experiment using the same or similar methods, and then validates your results.  Now actual data exists.  On the other hand, if they are unable to validate your results, then your findings are useless and simply become an anecdote.

Exactly. You also need to do it over time.

The reality is that stocks may not perform as well as they over the past 100 odd years. There is a lot more data though on stock investing over the longer term than things like angel investing or reading the market to determine when there is a discrepancy that you can read and others can't.

I just get the impression that facts and logic leave the building within these discussions. Back it up with robust data. Prove why you are smarter than the market. Prove that you are smarter than the people that ran and set-up LTCM. If you can't then its just a whole pile of BS.

steveo

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Re: "Investing should be boring"
« Reply #105 on: October 26, 2015, 03:02:57 PM »
Our goal on MMM, forgive me if I'm wrong, is NOT to chase around the highest possible return every year or buy into flavour of the month speculation or investment strategies, or brag if we got 10% while indexers did 7%, or vice-versa.  We're not a bunch of wheelers-and-dealers in 10-gallon hats cheering around a roulette table.  We're supposed to come up with a rational plan involving (hopefully) 6-8% returns, stash our cash, and not brag or worry what the other guy's doing.  That's what indexing does for the majority of us.  It's good.  You know what's also exciting and fantastic investment strategy?  Picking the winning lottery ticket.  :(  To paraphrase others here:  "Well, everyone is different and it's worked very well for some".  Yeah, right, it has...  Still not prudent.

100% spot on.

I personally don't need to be the smartest man in town. I can just use simple robust methods that have been proven to work. They might provide average returns but the guys chasing better than average returns (who think they are smarter) on average will not perform anywhere near as well as the average.

When you back up a simple proven approach to investing with a high savings rate you can do really really well financially on your own terms. That is why you can become FI and then RE if you choose too.

k9

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Re: "Investing should be boring"
« Reply #106 on: October 26, 2015, 03:21:33 PM »
You say that's impossible to consistently beat the market this way. Can you point me to an example when this strategy would fail ?

I'll explain this in a couple of different ways.

1. No one has done this. Maybe Warren Buffet has and that is a maybe.
2. No one can consistently predict the future.
The example I gave you doesn't rely on predicting the future, but on nothing more than buying on a sale (i.e predicting the present, which is far easier), as I just wrote about 5 times. You obviously don't read my messages (or you wouldn't keep telling me about prediction of the future), but consistently tell me I'm wrong. This is pretty rude, if you ask me, and I never understood why so many people on forums everywhere keep answering posts they don't take the time to read.

JoeP

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Re: "Investing should be boring"
« Reply #107 on: October 26, 2015, 03:25:47 PM »

EVERYONE STOP!  Let's all take a moment to sit in awe as we realize we just found the smartest man on the internet.  Congratulations Mr_Orange! 


Edit:  I should explain why -- he knows all about the stock market in ways that no other person could ever understand, especially misinformed lay folk like ourselves, he knows all about starting successful small businesses and he knows the reason that so many startups fail that nobody else ever seems to recognize in advance, he doesn't need "data" to prove anything that he knows, and even though your anecdotes arguing your positions are meaningless, his anecdotes are full of useful information that undoubtedly apply to every scenario.  Chapeau.  With such genius, talent, and broad network of fabulously wealthy market beaters with whom you interact every single day though, I'm quite surprised you bother arguing with us morons.  Seems like it would be below you.
This is precisely the type of garbage that happens on the internet all the time.  There are people that attack the poster while adding zero value to the conversation.  I'll leave it for others to examine what was presented and draw their conclusions from it. 

I'm never said my anecdotes were any more or less valuable than other poster's anecdotes.  That is a fantasy you made up.  Believe whatever you want to believe. 

mr_orange - please understand that by not providing your methodology for picking winning investments, you leave it up to us to believe you at your word.  Unless your goal is to get us to reach out to you privately and have you manage our investments which would call into question your intention for participating in this forum thread.  I'm sure duplicity isn't your intention and you are probably an upstanding person but it's our money you are asking us to gamble.  I prefer to make my financial decisions based on facts that I can verify through personal experimentation and 3rd party confirmation (I.E., have other replicated my results using the same formula/methodology).  We don't have your methodology so we can't possibly replicate your success or examine it's weaknesses.

You want mr. orange to publish publicly his business records so he can help his competitors?

So I should change my investment strategy from indexing, which has given me some very nice returns over 20+ years, based on mr_orange's word?  Or should I just fork over my money to mr_orange for him to manage...which begs the question - was his involvement in this thread a means of trying to fish for clients?  If he truly was trying to enlighten us why not provide the formula for his success?  A critical thinker must consider all the angles, methodologies, and motives for an argument to evaluate its merits properly.

I will agree there are some investors who seem to beat the market indices, such as Yale university's David Swensen.
http://news.yale.edu/2015/09/24/investment-return-115-brings-yale-endowment-value-256-billion

But these are rare exceptions, and it's very hard as a small investor to identify these opportunities.

Mr Swensen wrote a book regarding private investment:Unconventional Success: A Fundamental Approach to Personal Investment - http://www.amazon.com/gp/product/0743228383?keywords=david%20swensen&qid=1445892935&ref_=sr_1_1&sr=8-1.

In his book introduction he states "Evidence points overwhelmingly to the conclusion that active management of assets fails to produce satisfactory results for individual investors".  Since I just purchased the book I can't list the reasons behind his assertion but it looks to be an interesting read.  I find it ironic that the guy who beat the market starts out by cautioning others regarding trying to beat the market.
« Last Edit: October 26, 2015, 03:30:52 PM by JoeP »

k9

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Re: "Investing should be boring"
« Reply #108 on: October 26, 2015, 03:50:29 PM »
Kaspian, your post (I somewhat disagree with) is quite interesting.
Our goal on MMM, forgive me if I'm wrong, is NOT to chase around the highest possible return every year or buy into flavour of the month speculation or investment strategies, or brag if we got 10% while indexers did 7%, or vice-versa.  We're not a bunch of wheelers-and-dealers in 10-gallon hats cheering around a roulette table.  We're supposed to come up with a rational plan involving (hopefully) 6-8% returns, stash our cash, and not brag or worry what the other guy's doing.
Then I'm not sure what the purpose of "Investor alley" is. I'm not sure, either, why people are investing massively (if not 100%) in stock indexes, rather than, say, CDs, or just more balanced asset allocations, if they are not interested in "chasing the highest possible return every year". I'm not sure, either, why MMM is not 100% invested on the stock market. He seems to be invested in landlording, too, which is quite unmustachian, if I read your post correctly.

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You know what's also exciting and fantastic investment strategy?  Picking the winning lottery ticket.
I'm glad you mention lottery ticket, they are a good illustration of my point and, I guess, Mr_orange's. You know who always wins the lottery ? The guy selling the tickets. You know who always wins money at the casino ? The casino. Yet, their job involves totally random events, much more than stock market forecasting. How can they win so consistently ? They can't predict the future, but they have an edge. There is an asymetry. Asymetries can make money. That's the way retail shops make money, too : they buy cheap because they buy high volumes. They sell expensive because their customers want small volumes.

steveo

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Re: "Investing should be boring"
« Reply #109 on: October 26, 2015, 04:07:15 PM »
You say that's impossible to consistently beat the market this way. Can you point me to an example when this strategy would fail ?

I'll explain this in a couple of different ways.

1. No one has done this. Maybe Warren Buffet has and that is a maybe.
2. No one can consistently predict the future.
The example I gave you doesn't rely on predicting the future, but on nothing more than buying on a sale (i.e predicting the present, which is far easier), as I just wrote about 5 times. You obviously don't read my messages (or you wouldn't keep telling me about prediction of the future), but consistently tell me I'm wrong. This is pretty rude, if you ask me, and I never understood why so many people on forums everywhere keep answering posts they don't take the time to read.

You might find it rude but its reality. Are you buying something with the belief that the price will increase in the future ? You are. Therefore you are speculating. How about this - can you explain how you aren't speculating ?

steveo

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Re: "Investing should be boring"
« Reply #110 on: October 26, 2015, 04:20:46 PM »
Then I'm not sure what the purpose of "Investor alley" is. I'm not sure, either, why people are investing massively (if not 100%) in stock indexes, rather than, say, CDs, or just more balanced asset allocations, if they are not interested in "chasing the highest possible return every year". I'm not sure, either, why MMM is not 100% invested on the stock market. He seems to be invested in landlording, too, which is quite unmustachian, if I read your post correctly.

My take is that you need to go and read all about asset allocations and managing your portfolio. Personally I do not invest 100% in stocks. I think though you need to work this out for yourself.

The key point though is that you should determine your approach to investing. Tyler provides some calculations on various asset allocations. I think he uses the Permanent Portfolio. You though get to decide this for yourself. Whatever asset allocation you choose is really based on your risk profile.

There are a massive variety of boring investment portfolios that you can choose from. I don't think many if any really try to beat the market. The idea is to get the best risk based return that suits your temperament.

steveo

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Re: "Investing should be boring"
« Reply #111 on: October 26, 2015, 04:25:42 PM »
There is an asymetry. Asymetries can make money.

How do you pick that asymmetry ? What makes you more special than the market ? I think that this is the question that you have to answer. You also have to do this consistently over time so that your winners over time beat your losers. You can look really smart for a period of time but then you can have a big loss that means that overall you lose.

I still think the key question that you need to answer (at least for yourself) is why are you more special than everyone else ? Then I think you need to prove this with data to back your belief up. Its easy to fool yourself.

k9

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Re: "Investing should be boring"
« Reply #112 on: October 26, 2015, 05:07:53 PM »
You might find it rude but its reality. Are you buying something with the belief that the price will increase in the future ? You are. Therefore you are speculating. How about this - can you explain how you aren't speculating ?
I already did but I'll try one more time. When I buy a gold coin on a garage sale at 80% of its value (because the seller doesn't really know what he's selling -- that's what I call asymetry; I'm "better" than that seller, and other customers that didn't see what a good deal it was, because I investigated the subject of gold, and XIXth century French gold coins more precisely, a lot and he didn't) and go sell it *on the same day* (or same few days, gold prices don't move that fast) to my local gold dealer, I am not betting whether prices will go up or down in the future.

If you can convince your employer that the $20 banknote he's giving you is not worth $20 but only 10, and therefore deserve twice as much, you make a pretty good deal, no matter how well the dollar performs on the next few days. Good luck with that one though ;)

Quote
The key point though is that you should determine your approach to investing. Tyler provides some calculations on various asset allocations. I think he uses the Permanent Portfolio. You though get to decide this for yourself. Whatever asset allocation you choose is really based on your risk profile.
I actually happen to implement a strategy very close to the PP (although a slightly modified one, for various reasons). I don't really do the "gold-on-sale" trick anymore because these deals tend to be very rare nowadays. Looks like the local XIXth-century-French-gold-coins market is getting efficient.

steveo

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Re: "Investing should be boring"
« Reply #113 on: October 26, 2015, 05:42:49 PM »
I already did but I'll try one more time. When I buy a gold coin on a garage sale at 80% of its value (because the seller doesn't really know what he's selling -- that's what I call asymetry; I'm "better" than that seller, and other customers that didn't see what a good deal it was, because I investigated the subject of gold, and XIXth century French gold coins more precisely, a lot and he didn't) and go sell it *on the same day* (or same few days, gold prices don't move that fast) to my local gold dealer, I am not betting whether prices will go up or down in the future.

Let me phrase this back to you. You basically can pick better than the market as a whole. You are that one in a billion person (probably under-exaggerating on my side) that picks better than everyone else.

You are basically smarter than the guys at LTCM. You are the new Warren Buffet.

Do you really believe this ? Do you have the facts to back you up ? Are you going to prove this over the course of your life ?

I actually happen to implement a strategy very close to the PP (although a slightly modified one, for various reasons). I don't really do the "gold-on-sale" trick anymore because these deals tend to be very rare nowadays. Looks like the local XIXth-century-French-gold-coins market is getting efficient.

Yep. This is actually what happens. The market tends to self-correct. This is what markets do. Its also why a simple robust approach works well and the guys that state they beat the market don't over time.

k9

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Re: "Investing should be boring"
« Reply #114 on: October 27, 2015, 03:58:32 AM »
I'm not 1 in a million. I just worked hard to know valuable information, and that information is worth money. Just like the guy that learns carpentry wins money thanks to his very knowledge of carpentry when there is something to repair on the roof, while the average joe has to pay someone to fix it.

But I have to agree with you it sounds a lot like work, more than investing. But that's pleasant and profitable work, and it can help one reach FIRE faster, just like plain-old index investing.

Just for the anecdote, about the $20 for $10 bucks. A few years ago, France decided to produce golden €100 coins; for collectors, but you could use them as any other coin or banknote. Of course, they were not worth €100 in gold, only about €75. But, from the moment they produced them to the moment they put them on the market, gold surged and they were worth something like €105 in gold, yet you only paid €100 for them. Of course, lots of people wanted to have them, but they were offered in very limited supply at post offices. Except I live in a very poor area, so I was the only one there buying those coins. I could get those coins, know they would never be worth less than what I paid, and hope to sell them up to €150 to collectors. No downside, a 50% potential upside. Oh man, those were the days.

That is another example of asymetry : France didn't see the surge in gold prices and I was advantaged geographically. That does not mean I have superpowers or what. That just happened to be a profitable deal that was guaranteed (for free) to have no downside.

Louisville

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Re: "Investing should be boring"
« Reply #115 on: October 28, 2015, 10:43:32 AM »
I'm not 1 in a million. I just worked hard to know valuable information, and that information is worth money. Just like the guy that learns carpentry wins money thanks to his very knowledge of carpentry when there is something to repair on the roof, while the average joe has to pay someone to fix it.

But I have to agree with you it sounds a lot like work, more than investing. But that's pleasant and profitable work, and it can help one reach FIRE faster, just like plain-old index investing.

Just for the anecdote, about the $20 for $10 bucks. A few years ago, France decided to produce golden €100 coins; for collectors, but you could use them as any other coin or banknote. Of course, they were not worth €100 in gold, only about €75. But, from the moment they produced them to the moment they put them on the market, gold surged and they were worth something like €105 in gold, yet you only paid €100 for them. Of course, lots of people wanted to have them, but they were offered in very limited supply at post offices. Except I live in a very poor area, so I was the only one there buying those coins. I could get those coins, know they would never be worth less than what I paid, and hope to sell them up to €150 to collectors. No downside, a 50% potential upside. Oh man, those were the days.

That is another example of asymetry : France didn't see the surge in gold prices and I was advantaged geographically. That does not mean I have superpowers or what. That just happened to be a profitable deal that was guaranteed (for free) to have no downside.
This (bolded) means it's a job, not investing.

Aphalite

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Re: "Investing should be boring"
« Reply #116 on: October 28, 2015, 12:48:19 PM »
This (bolded) means it's a job, not investing.

Sounds very similar to:

This (doing carpentry) means you still have a job, not retired

It baffles me that when it comes to life choices, people in this forum are all about being independent and thinking for yourself, but when it comes to investments, will defend to the death the OUTSOURCING of thinking

Louisville

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Re: "Investing should be boring"
« Reply #117 on: October 28, 2015, 01:51:37 PM »
This (bolded) means it's a job, not investing.

Sounds very similar to:

This (doing carpentry) means you still have a job, not retired

It baffles me that when it comes to life choices, people in this forum are all about being independent and thinking for yourself, but when it comes to investments, will defend to the death the OUTSOURCING of thinking
Outsource something, or DIY. For me, something I don't want to do that takes a lot of time and effort is a job.

steveo

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Re: "Investing should be boring"
« Reply #118 on: October 28, 2015, 02:16:04 PM »
It baffles me that when it comes to life choices, people in this forum are all about being independent and thinking for yourself, but when it comes to investments, will defend to the death the OUTSOURCING of thinking

I don't understand this. Are you stating that your thinking and therefore active non boring investing approach provides you with better returns. The reality is that when it comes to investing this is typically not true.

“…experts can’t beat the market because they are the market, before fees.” —Rick Ferri

I would also add that thinking can be as simple as coming up with a 1 or 2 fund index approach. The interesting part is that this approach is more likely to be successful than an active non-boring approach.

I'm not stating don't think. In fact the complete opposite. I'm stating think in the right way.

seattlecyclone

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Re: "Investing should be boring"
« Reply #119 on: October 28, 2015, 02:55:03 PM »
This (bolded) means it's a job, not investing.

Sounds very similar to:

This (doing carpentry) means you still have a job, not retired

It baffles me that when it comes to life choices, people in this forum are all about being independent and thinking for yourself, but when it comes to investments, will defend to the death the OUTSOURCING of thinking

If you need to do carpentry to keep putting food on the table, I agree that you're not retired. If you already have plenty of money and you're doing carpentry exactly as much as you want to and only because you want to, you can call yourself retired.

It's the same with investing. If you have to put considerable actual effort into your alternative investments for the foreseeable future in order to achieve acceptable returns from them, I don't think it's right to consider yourself financially independent. That doesn't mean that these other investments are a bad idea! It just means that a portion of the return you're getting is really a return on your labor and not a return on your capital. It's important to recognize this. If you can get a return of $100k/year from your labor working for someone else, or you could quit your job to manage your investments and beat the market to the tune of only $50k/year, that alternative investment may not be the quickest path to FI.

JoeP

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Re: "Investing should be boring"
« Reply #120 on: October 28, 2015, 05:35:45 PM »
This (bolded) means it's a job, not investing.

Sounds very similar to:

This (doing carpentry) means you still have a job, not retired

It baffles me that when it comes to life choices, people in this forum are all about being independent and thinking for yourself, but when it comes to investments, will defend to the death the OUTSOURCING of thinking

I favor indexing but that doesn't mean I have outsourced my thinking - far from it.  My choice of indexing was a deliberate selection after much analysis and reading.  When people who beat the market tell you that indexing is the best way to do it and analysis shows this to be true more often than not - why would I choose otherwise when I'm trying to maximize rewards and minimize risk?

Now there are people who regularly beat the market but they are on the far side of the bell curve.  Access to these financial wizards is expensive and requires massive up-front capital.  And I would also need to be happy about the fees they charge for their expertise.  And to replicate their success I would need to make finances/investment my full time job, have the temperament to ignore market fluctuations, have sufficient capital to overcome any mistakes, and access to a bevy of people/statistical models/super computers/analysis that isn't available to most people.

And putting your money to work in real estate or a business can result in massive returns but this also requires a lot of work and up-front capital.  But most people can start indexing by simply filling out a form with their employer and maybe even get a matching contribution to boot.  And apart from the work or up-front capital needed to succeed in real estate or being an entrepreneur, you have to hope that your business model is competitive and not made obsolete by the next big box store or service provider that tries to steal your customer base.

And MMM, who has real estate investments, had the capital and the knowledge to exploit it but he made some mistakes: http://www.mrmoneymustache.com/2012/02/01/mr-money-mustaches-big-mistake/.  How many people would want the headache or have the fortitude to withstand what MMM went through?

Different strokes for different folks.... And poor mr_orange - he walked away from the entire discussion when he didn't get his way.  But you have to admit that his "asymmetry" advantage was huge.  How many of us have a securities attorney partner, underwrite private deals, sell equity securities to crowdfunding investors, and run networking meetings locally where specialists present on their area of expertise?  Perhaps this level of asymmetry and experience gave mr_orange an expertise that can't be replicated so easily by those who would "outsource their thinking".  Let me see - how can I possibly gain the skill and experience of a securities attorney and a specialist who can make presentations on their area of expertise so I can in-source my thinking - how hard could it be???
« Last Edit: October 28, 2015, 05:39:15 PM by JoeP »

k9

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Re: "Investing should be boring"
« Reply #121 on: October 29, 2015, 11:12:18 AM »
I'm not 1 in a million. I just worked hard to know valuable information, [...]
This (bolded) means it's a job, not investing.
That's precisely the "no-free-lunch" part of it. That's the same as landlording, where you invest capital, time and effort to make your money grow faster than just by stock indexing. Is it worth it ? It depends on a lot of factors, for instance if you have a parti-time job you hate, it might be a good solution so that you can FIRE faster, while if you have a job that brings a lot of money but takes a lot of your time, you might be better at just letting compounded interest alone let your money grow. There is no one-size-fits-all answer.

Mighty-Dollar

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Re: "Investing should be boring"
« Reply #122 on: October 29, 2015, 09:30:40 PM »
you don't get to be a multi-millionaire quickly by "setting it and forgetting it".
Boring, par-for-the-course index funds is the smart way to invest. What is the alternative? Invest in actively managed funds? No thanks. Odds are stacked against you if you do that.

Also you don't "forget it" after you "set it". You re balance if your allocation ratio becomes out of balance.

Scandium

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Re: "Investing should be boring"
« Reply #123 on: October 30, 2015, 04:24:09 AM »
you don't get to be a multi-millionaire quickly by "setting it and forgetting it".
Boring, par-for-the-course index funds is the smart way to invest. What is the alternative? Invest in actively managed funds? No thanks. Odds are stacked against you if you do that.

Also you don't "forget it" after you "set it". You re balance if your allocation ratio becomes out of balance.
Apparently one alternative is to invest in gold coins on sale.. Although don't seem very appealing, or reliable, to me.

JetBlast

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Re: "Investing should be boring"
« Reply #124 on: October 30, 2015, 11:15:09 AM »

It baffles me that when it comes to life choices, people in this forum are all about being independent and thinking for yourself, but when it comes to investments, will defend to the death the OUTSOURCING of thinking
It strikes as odd as well. Many here have examined their personal situations, investing knowledge, performed research into different investments, and determined strict index investing is right for them. That's great. It's exactly how it should be, especially with a group that tends to be so independent-minded.

However, when newcomers to the site ask investing questions, many immediately offer up the orthodoxy of the strict index fund approach without understanding that poster's unique situation. Often those posters, after less time than they'd spend contemplating a new refrigerator, busy themselves with totally rearranging their financial life by moving all their money moved to Vanguard and investing in index funds (usually VTSAX). I assume this is what you mean by outsourcing of thinking.

While passive index investing is great advice for the majority on this site, it neglects many other investing opportunities that may be suitable for people with specialized knowledge and interest in a particular field.

seattlecyclone

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Re: "Investing should be boring"
« Reply #125 on: October 30, 2015, 11:19:03 AM »
While passive index investing is great advice for the majority on this site, it neglects many other investing opportunities that may be suitable for people with specialized knowledge and interest in a particular field.

I would posit that people who have specialized investing knowledge are already using that knowledge to make investments, and not asking for investing advice on this forum. For someone who is relatively clueless about investing, "put it all in index funds for now, and feel free to re-evaluate this decision as you learn more" is solid advice.

JetBlast

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Re: "Investing should be boring"
« Reply #126 on: October 30, 2015, 12:15:31 PM »
While passive index investing is great advice for the majority on this site, it neglects many other investing opportunities that may be suitable for people with specialized knowledge and interest in a particular field.

I would posit that people who have specialized investing knowledge are already using that knowledge to make investments, and not asking for investing advice on this forum. For someone who is relatively clueless about investing, "put it all in index funds for now, and feel free to re-evaluate this decision as you learn more" is solid advice.

I agree that most cases this is probably true.  Not all, but likely a vast majority. I'm sure there are people that visit the site due to the attractiveness of FIRE and MMMs message, that poke their head into the investing forums to see what people here suggest even thought they're doing just fine on their own. The ease of something like a three fund index portfolio could be attractive even to someone that has specialized knowledge in an area that could be more lucrative. Switching could even be right for them, as it depends on the trade off between the time to use your knowledge in investing versus a slightly longer road to FI with little to no effort in investing. But there's no "one size fits all" solution. Some times this forum feels like there is that solution, indexing, and anything else is a grave error that must be corrected.

I think the bigger issue is a failure to understand an individual's situation before offering the advice to move everything into index funds. For example, my wife had a brokerage account from before we met, with funds selected based on her father's subscription to The No-Load Fund Investor newsletter. They have significant unrealized capital gains that would be taxed if she exchanged to index funds. She also has shares of General Electric that her father bought for her when she was six years old. We're talking more than a quarter century of compounding. Each original share is now worth twelve due to stock splits. Again, the tax implications are significant if they are sold and parked in VTSAX.

This is where the outsourcing of thinking can cause real problems. My wife isn't particularly interested in investing. In truth, indexing is perfect for her personality.  That combination of a simple to follow plan and relative lack of investing knowledge is precisely the sort of person that would be attracted to an indexing strategy, but could get hurt by following the orthodox advice without giving it a lot of thought. Indexing is perfect for her but shifting to an all indexing strategy would be a costly mistake.

Kaspian

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Re: "Investing should be boring"
« Reply #127 on: October 30, 2015, 12:35:29 PM »
Kaspian, your post (I somewhat disagree with) is quite interesting.
Our goal on MMM, forgive me if I'm wrong, is NOT to chase around the highest possible return every year or buy into flavour of the month speculation or investment strategies, or brag if we got 10% while indexers did 7%, or vice-versa.  We're not a bunch of wheelers-and-dealers in 10-gallon hats cheering around a roulette table.  We're supposed to come up with a rational plan involving (hopefully) 6-8% returns, stash our cash, and not brag or worry what the other guy's doing.
Then I'm not sure what the purpose of "Investor alley" is. I'm not sure, either, why people are investing massively (if not 100%) in stock indexes, rather than, say, CDs, or just more balanced asset allocations, if they are not interested in "chasing the highest possible return every year". I'm not sure, either, why MMM is not 100% invested on the stock market. He seems to be invested in landlording, too, which is quite unmustachian, if I read your post correctly.

I assumed "Investor Alley" was created to help people setup their portfolios, asset allocations, risk tolerance, etc.  Not to extoll the virtues of inventing a Ponzi scheme, investing in Dubai hotels, or buying a race horse.  (All of which could be considered "smart" and "beating the index" if you did them right.  Brag and recommend to others?  Probably not a good idea.)

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Re: "Investing should be boring"
« Reply #128 on: October 30, 2015, 12:47:42 PM »

It baffles me that when it comes to life choices, people in this forum are all about being independent and thinking for yourself, but when it comes to investments, will defend to the death the OUTSOURCING of thinking
It strikes as odd as well. Many here have examined their personal situations, investing knowledge, performed research into different investments, and determined strict index investing is right for them. That's great. It's exactly how it should be, especially with a group that tends to be so independent-minded.

However, when newcomers to the site ask investing questions, many immediately offer up the orthodoxy of the strict index fund approach without understanding that poster's unique situation. Often those posters, after less time than they'd spend contemplating a new refrigerator, busy themselves with totally rearranging their financial life by moving all their money moved to Vanguard and investing in index funds (usually VTSAX). I assume this is what you mean by outsourcing of thinking.

While passive index investing is great advice for the majority on this site, it neglects many other investing opportunities that may be suitable for people with specialized knowledge and interest in a particular field.

Because the alternatives mentioned here are to "invest" (I'd say gambling, but whatever) in stuff like gold coins, rare art or loans to people so shady that banks won't touch them. The knowledge  required to do this with any time of success is so rare (1%?) that the people who have it probably already know. It's pretty safe to assume that anyone that ask a questions here is as good as 100% likely not one of them.

The example of taxable cap gains is rather silly. People always mention the tax cost of moving funds, and ask people to do the math. And if the cost are high new investments should still be sent to index funds.

steveo

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Re: "Investing should be boring"
« Reply #129 on: October 30, 2015, 08:37:41 PM »
I assumed "Investor Alley" was created to help people setup their portfolios, asset allocations, risk tolerance, etc.  Not to extoll the virtues of inventing a Ponzi scheme, investing in Dubai hotels, or buying a race horse.  (All of which could be considered "smart" and "beating the index" if you did them right.  Brag and recommend to others?  Probably not a good idea.)

Exactly. This is what gets me about this discussion. The smart idea is to use index funds and think about the real questions - what indexes too invest in, what asset allocation to utilise and what your risk tolerance is.

I'm starting to think that the thread title is wrong. Investing shouldn't be boring. It should be interesting and it should be rational and based on the most accurate data that you can get.

One of the goals is to avoid the cruddy investment options that people often believe aren't boring and can beat the market. Well typically they don't so the smart investor doesn't put their money into those schemes.

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Re: "Investing should be boring"
« Reply #130 on: November 02, 2015, 04:56:53 AM »
Apparently one alternative is to invest in gold coins on sale.. Although don't seem very appealing, or reliable, to me.
Just like for any kind of business-meets-investment: don't do that, unless you really want to spend time on that. But there's money to be done.

It's like renovating a piece of real-estate you bought on sale: it can bring a lot of money, but it really sucks if you don't like those things (i.e worse than boring).

k9

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Re: "Investing should be boring"
« Reply #131 on: November 02, 2015, 05:15:10 AM »
Anyway, I give up. There is a "smart people only use index funds" dogma in this community I can't fight. You can't fight religious beliefs.

The most ironic thing is that MMM himself is not all-in on stock indices, yet almost everybody on his website's forum brags this is the only sane thing to do, to the point of calling a part-time retail business "gambling".

Disclaimer : I think index funds are a great asset to own and invest in. They have the best personal time to return ratio, by far. As it has been said there, they are probably the best answer to the question "I'm an investing noob, what should I invest in ?" But they are not the alpha and omega of investing. They have specific drawbacks and risks often overlooked (and I think most investors shouting here that they are the only smart bet aren't even aware of them). Use with caution, like any other investment. Learn the alternatives, use them or learn why you don't want to own them.

Scandium

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Re: "Investing should be boring"
« Reply #132 on: November 02, 2015, 07:17:42 AM »
Anyway, I give up. There is a "smart people only use index funds" dogma in this community I can't fight. You can't fight religious beliefs.

The most ironic thing is that MMM himself is not all-in on stock indices, yet almost everybody on his website's forum brags this is the only sane thing to do, to the point of calling a part-time retail business "gambling".

It's been said over and over; MMM's heretical deviation from the true path, and into real estate, is work (and from what I read a lot of it). Not just investing. My wife and I work at least 50 hr/s week and have a kid. I have no time to fix leaky toilets for my tenants. You said yourself that gold coin shopping require a lot of knowledge, and presumably traveling around to find deals. Again; work, not (just) investing.

Mr Orange, from what I've gathered from his refusal to be specific, lends money to property developers. He claims this is not risky as long as you know the project, the company and the local economy (I think some of those are more unknowlable that he makes it out to be, but whatever).  This is clearly work.

I'm not sure anyone disagree with you a whole lot. Yes, if you put in a lot of work an knowledge you can, maybe, do better than an index through various means. But it's not passive. Hard to pair with a full-time corporate job. Require knowledge and is almost always more work. And I think more risky than many of the "loans to sketchy contractors are great investments" crowd make it out to be.


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Re: "Investing should be boring"
« Reply #133 on: November 05, 2015, 08:30:19 AM »
MMM has construction skills that give him a leg up in investing in rental real estate, and he has knowledge of property values in his neighborhood.
The point of some of the posters is that specialized knowledge enables one to make more money than index funds. The money you make from that skill set (landlording), could then be reinvested into the business such as buying more rental real estate, or if no great opportunities exist, then investing the money into the passive index funds.

k9

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Re: "Investing should be boring"
« Reply #134 on: November 09, 2015, 03:02:42 PM »
Yes. Most people are conflating "passive investing" with "investing". Passive investing produces good returns. *Some* non-passive investing forms provide better returns, but require work. Others require work and produce worse returns (avoid those).

Louisville

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Re: "Investing should be boring"
« Reply #135 on: November 10, 2015, 09:17:10 AM »
Yes. Most people are conflating "passive investing" with "investing". Passive investing produces good returns. *Some* non-passive investing forms provide better returns, but require work. Others require work and produce worse returns (avoid those).
This sums up the entire thread to me.