Author Topic: DIY growth stocks picking  (Read 10284 times)

cloud72

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Re: DIY mini growth fund
« Reply #50 on: January 21, 2020, 04:35:56 PM »

Do you trade or just buy and hold?  How many stocks do you hold?  Just curious.

Buy and hold. Longest hold is AAPL that I've been holding for >20 years (cost basis 2.87) I have sold some of this a couple times but now I'm just holding it.

I have 66 stocks at the moment, though 80% of my portfolio is in about 30 positions. I'm considering reducing that number down to about 30 or so since something that's <1% is not going to have a material effect. The difficulty is figuring out which 30 are my best ideas.

Good pick on Apple.I personally know someone who owned close to half million $ in Apple couple years ago. I haven't seen him in years.  he'll be very rich today if he still hold onto it.
 I wouldn't have the confidence to think Apple would grow to this stage without Steve Job. I guess there's a brand-loyalty created in the process. At this market cap, it's crazy to think it'll keep growing at 20% per year. It'll become a slow grower matching index return of 7% to 10%.

Figuring top 10 from 30 stocks is much harder than picking the best 160 out of 5000 stocks. That's the  reason I  use equal weight initially.  I will run into your problem if some positions grow too big in the future. Some will become multi-baggers. I think the top 10 holdings should allocate to those with further room to grow if max total return is the objective.Otherwise, choose the ones with longest staying potential regardless of growth rate.








cloud72

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Re: DIY mini growth fund
« Reply #51 on: January 21, 2020, 05:03:00 PM »
I for one, don't care what stocks you have in your "Mini Growth Fund", cause frankly they don't match my own rules for my own "fund".   (Cause news flash, everyone has their own "fund", some are just made up entirely of index funds, while others have stocks or other investments.)

I do however want to make a promise to all of us.   To report back, at least once a year on the progress, be it failure, success, or somewhere in between.   That to me is what matters.  I promise I won't ridicule you if it fails to meet your expectations, hell ya might even be able to give a lesson or two to some people here.

Sure, I can keep posting the result regularly. The problem is people want to see my full list of 160 stocks or they think the return number is meaningless.  I think they have meaning to show people what's possible as a stock picker.    I estimate the 30 stocks will also perform fairly well compared to the index return of 10%..  I can sure report back the result of the mysterious 160 stocks along with shared 30 stocks. There's no reason to lie about 160 here while the 30 stocks is a proof of concept for my big portfolio.




Tyson

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Re: DIY mini growth fund
« Reply #52 on: January 21, 2020, 05:06:34 PM »
So in 6 months, if these 30 stocks don’t out perform the market then you WON’T be posting stuff like “Yeah well my other her 130 stocks are crushing it!”?

PaulMaxime

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Re: DIY mini growth fund
« Reply #53 on: January 21, 2020, 07:05:41 PM »
Hey Cloud72.

This is a really unfriendly place for non-believers in the index uber alles religion here. I suggest this message board might suit you better. Please read a bunch before you start posting!

https://boards.fool.com/sauls-investing-discussions-120980.aspx

cloud72

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Re: DIY mini growth fund
« Reply #54 on: January 21, 2020, 07:45:39 PM »
Hey Cloud72.

This is a really unfriendly place for non-believers in the index uber alles religion here. I suggest this message board might suit you better. Please read a bunch before you start posting!

https://boards.fool.com/sauls-investing-discussions-120980.aspx

Thanks! I will check it out.   Is this your group?

First thing popped into my eye is: Coupa.  Coupa  is part of my portfolio.I just acquired a position this month!

PaulMaxime

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Re: DIY mini growth fund
« Reply #55 on: January 21, 2020, 08:28:31 PM »
Hey Cloud72.

This is a really unfriendly place for non-believers in the index uber alles religion here. I suggest this message board might suit you better. Please read a bunch before you start posting!

https://boards.fool.com/sauls-investing-discussions-120980.aspx


Thanks! I will check it out.   Is this your group?

First thing popped into my eye is: Coupa.  Coupa  is part of my portfolio.I just acquired a position this month!

No, not mine at all. It's a group of growth stock folks though.
« Last Edit: January 23, 2020, 09:06:58 AM by PaulMaxime »

lemonlyman

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Re: DIY mini growth fund
« Reply #56 on: January 22, 2020, 08:24:09 AM »
It's a unique strategy for sure. My question is how do Charlie Munger and Warren Buffett inspire your decisions when your fund is antithetical to their style? Since you've only spent a few minutes on each stock, you can't possibly know the quality of the business or the competitive environment they operate in. If it becomes obvious that one of your picks isn't as high a performer as you thought, do you remove it and choose another or are you going to hold these for a very long term?

cloud72

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Re: DIY mini growth fund
« Reply #57 on: January 22, 2020, 09:53:18 AM »
It's a unique strategy for sure. My question is how do Charlie Munger and Warren Buffett inspire your decisions when your fund is antithetical to their style? Since you've only spent a few minutes on each stock, you can't possibly know the quality of the business or the competitive environment they operate in. If it becomes obvious that one of your picks isn't as high a performer as you thought, do you remove it and choose another or are you going to hold these for a very long term?

My strategy is not 100% copy of anyone out there. It's a combination of a bit from many investors and some of my own thoughts.

Charlie and Warren:
Charlie Munger  inspired me most. I did not get much from Warren Buffett. His idea is too vague. Charlie Munger  is more straight to the point. My personality is more like Charlie's. I am an INTJ and I've read that many people think Charlie Munger is also INTJ. I recalled Charlie Munger mentioned: It's better to buy high quality businesses with fair price than buy mediocre business with good price.  This idea stuck with me.

I also recalled Charlie mentioned: create a few good variables and minimize/maximize them,use these variables as filter, the result will be very good. (e.g. Costco minimizes the price, passes savings to consumers, and they do very well. ) It's exactly what i did. I focus on the business result and stock performance. If business does well, stock will follow, quality businesses out performs in long term. I don't dig into too deep in businesses details because if the result is good, then the detail is also good. What worried me the most is: business ethic. I don't buy certain businesses out of ethical and personal reasons.   

Warren Buffett was more a Benjamin Graham style Value investor early on which he focused on beaten down stocks. I believe Charlie Munger influenced him to a more quality approach. BRK still does special situations. (I know BRK saved many companies in distressed and made a good profit but BRK later focused more on quality businesses. BRK is big  now and options are few. It's hard to find elephant sized quality business with fair price.  I understand it's tough for them to grow at this point.

I initially listened and followed Warren's idea of 20 buckets and bought just 30 stocks. I was doing ok for the past 10 years getting 13% return. Recently I realized I can do better,  I think in a huge market like US plus smaller market in Canada. Limit out self to 20 stocks, is like putting shackle to limit the choices of investment. My goal as a growth investor is to get 15% to 20% per year. In order to reach this number, I need to capture as many young stocks that will triple or more in 5 years. That means holding high growth businesses in early stage of their growth. I may not get into next Amazon, shopify but my chance is high if I own 160 evenly distributed growth stocks. Most of my portfolio will still be in well established businesses and about 10 to 20% are in early stage businesses that are growing rapidly.

I trying to find businesses that are growing rapidly and ALSO there's a huge crowd of investors buying it steadily in the long term. It's no use to buy something if no one else is interested.  Most likely, if you combine the high performances of a business and big crowd following, the market is likely correct to predict the next AMAZON or Shopify.

The result in the past , and so far it confirmed my approach works.


Peter Lynch: I learned the important idea that business revenue/profit drives stock price. It's true most of time. I found this is not always true. Sometimes stock price is out of line with the fundamental. Then I thought : is there such thing is cult stock and googled: cult stock and this term came up!

Benjamin Graham: 10 years ago when I just started, I've read Benjamin's books, I've focused most of my energy on balance sheet, looking at numbers with out checking stock price performances or thinking about the whole business environment. I ended up buying many medico businesses going nowhere. It was not good result. 
  Now I think He's too academia and all theories and formulas... I think in a bigger picture at different angles. I don't think investing is an exact sciences for retails investors. Institutions need to be exact but not retails investors. I tried value investing in early years and didn't like it.  Now I think growth investing is best approach for buy and holder. I  had the  scary thought not long ago that for growth stocks, the higher it goes, the more it can crash! But the reality is not true. When growth stock slows down, it may drops 30% and reach a plateau but will not go back to beginning price. if a stock doubled, tripled, quadrupled and stock crashed 30%, the result is still very good. And in a diversified portfolio, not all growth stocks reach peaks at the same time so the performance is nice and smooth, going up steadily. People won't believe this is the case.

What if I am wrong: This is the problem with index/mutual funds. They hold on to losers. It's not unusual for an index fund/mutual funds to hold onto losers in decline or goes side line for 5 years. It's just doesn't make sense to me.
I estimate I could be wrong 5% to 10% of time.  Even Warren Buffett is wrong sometimes, you can read about his mistakes online. In my case, when I say I am wrong, it doesn't' mean the stock goes to zero. It means the stock doesn't performs as well as expected 15% to 20% per year in long term. If a stock goes nowhere for 2 to 3 years, I'll dig into it and find out what's wrong, is it temporary thing or long term issue?   and if it's short term, I'll hold it longer, max 5 years. If long term issue, I sell and switch to better stock.  I don't need to know the news of each stock right away. I'll wait it shows up on the stock price and find out later.  Stock market is smarter and more efficient than Benjamin knew back in the old days before internet.
and if I am wrong,  at 160 equal weighted numbers, each stock represents just 0.625% of the whole portfolio. anyone goes bad will be offset by most of them that goes correctly.   So far this year, 90% my stocks went up and only 10% went down. Year to date performances meet my expectation, slightly exceeded  my expectation.













« Last Edit: January 22, 2020, 11:05:17 AM by cloud72 »

StashingAway

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Re: DIY mini growth fund
« Reply #58 on: January 22, 2020, 10:14:18 AM »
Two things, first on your Meyers-Briggs. It's best to not bring it up lest many people take you less seriously:

https://en.wikipedia.org/wiki/Myers%E2%80%93Briggs_Type_Indicator#Criticism

Second, could you explain this quote of yours a bit more:

This is the problem with index/mutual funds. They hold on to losers. It's not unusual for an index fund/mutual funds to hold onto losers in decline or goes side line for 5 years.

I'm not sure you are looking at index funds the way most of us are. But it may just be your wording. Index funds don't "hold on" to anything. They don't care a lick about previous performance, good or bad. All they are is a representation of the market as a whole. So they couldn't possibly hold on to losers (or winners) if they aren't even aware of them as such.

It sounds like semantics, but it's essential to the philosophy of index funds to understand what they are and how they work. I am curious about your thoughts, because at some points you say that you don't look at market performance, just balance sheet and numbers, but in the same thought criticize holding on to poor performing stocks over the short term (1-5 years).  I say short term, because when investing in index funds, the philosophy is a 10+ year term commitment.

cloud72

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Re: DIY mini growth fund
« Reply #59 on: January 22, 2020, 10:55:28 AM »
Two things, first on your Meyers-Briggs. It's best to not bring it up lest many people take you less seriously:

https://en.wikipedia.org/wiki/Myers%E2%80%93Briggs_Type_Indicator#Criticism

Second, could you explain this quote of yours a bit more:

This is the problem with index/mutual funds. They hold on to losers. It's not unusual for an index fund/mutual funds to hold onto losers in decline or goes side line for 5 years.

I'm not sure you are looking at index funds the way most of us are. But it may just be your wording. Index funds don't "hold on" to anything. They don't care a lick about previous performance, good or bad. All they are is a representation of the market as a whole. So they couldn't possibly hold on to losers (or winners) if they aren't even aware of them as such.

It sounds like semantics, but it's essential to the philosophy of index funds to understand what they are and how they work. I am curious about your thoughts, because at some points you say that you don't look at market performance, just balance sheet and numbers, but in the same thought criticize holding on to poor performing stocks over the short term (1-5 years).  I say short term, because when investing in index funds, the philosophy is a 10+ year term commitment.

Re: Myers biggs_Type_Indicator
It's just for entertainment to know what type I am. I found it fairly accurate to describe my personality. It's a geeky alternative to horoscope.It has no huge impact on investing.  I used to read horoscope as a young kid.No more. )


You are correct on definition of index fund. I inserted the word too loosely.  Index funds don't  pick stocks. Index funds just match the holdings in the index.

Mutual fund picks stocks. It still doesn't change the fact that the whole market contains 90% mediocre stocks. In a picky investor's perspective,  index funds contain  mostly mediocre stocks.

It's fair to say there's a useful market for index fund: elderly people, people who don't know how to or have time to pick stocks, the  general public.  Because we can't have everyone buying the top 10% of the businesses world. There will be a natural equilibrium.

« Last Edit: January 22, 2020, 10:58:36 AM by cloud72 »

AdrianC

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Re: DIY mini growth fund
« Reply #60 on: January 23, 2020, 06:25:01 AM »
I initially listened and followed Warren's idea of 20 buckets and bought just 30 stocks. I was doing ok for the past 10 years getting 13% return.
2010-2019
SPY 13.44% CAGR
BRK.b 13.17% CAGR

Your track record isn't great - you matched the market and Berkshire - during a huge bull market for growth stocks.

Quote
Recently I realized I can do better,  I think in a huge market like US plus smaller market in Canada. Limit out self to 20 stocks, is like putting shackle to limit the choices of investment. My goal as a growth investor is to get 15% to 20% per year.
Do that for ten years and you'll be a superstar.

It looks like you're focused on momentum. That will probably work while the bull market continues. Do you have a plan to get out if we go into a bear market, or will you ride it out?

MustacheAndaHalf

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Re: DIY mini growth fund
« Reply #61 on: January 23, 2020, 06:43:17 AM »
https://www.ifa.com/articles/spiva_-year_2019_active_passive_scorecard/
That data shows about 90% of active funds trailing the S&P 1500 over the past 10-15 years.

You respond to that with metaphors about fruit.  First your trees being stolen, now throwing apples.  I will stoop to one fruit metaphor myself: you are cherry picking.

You keep saying "YTD" performance... in January.  To quote the experiment I ran in public for a few years:
"Overall record from 2/17 to 7/6 is +15.2% momentum experiment, +7.6% S&P 500."
https://forum.mrmoneymustache.com/investor-alley/playing-with-momentum/
I beat the S&P 500 for 4 months - but did I ultimately beat the S&P 500?  No.

In OP's situation, where I felt I could not disclose my investments, I'd use encryption to solve the problem.  Encrypt a list of stocks with a public key, so that only the private encryption key can unlock the list.  Then I'd post both the public key, and the result of encrypting my list of stocks.

In 5 years, I'd post the public key.  Everyone could then:
(1) decrypt the list of stocks and see what they were
(2) re-encrypt the list with the public key, and verify it matches the encrypted contents that were posted earlier.

As you can see from Apple vs FBI, encryption is very hard to break.  It's certainly good enough to protect a list of stocks, and allow that list to be verified later.

Anyways, I'm glad you are comparing your performance against the S&P 500.

appleshampooid

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Re: DIY mini growth fund
« Reply #62 on: January 23, 2020, 07:07:55 AM »
In OP's situation, where I felt I could not disclose my investments, I'd use encryption to solve the problem.  Encrypt a list of stocks with a public key, so that only the private encryption key can unlock the list.  Then I'd post both the public key, and the result of encrypting my list of stocks.

In 5 years, I'd post the public key.  Everyone could then:
(1) decrypt the list of stocks and see what they were
(2) re-encrypt the list with the public key, and verify it matches the encrypted contents that were posted earlier.

As you can see from Apple vs FBI, encryption is very hard to break.  It's certainly good enough to protect a list of stocks, and allow that list to be verified later.
This is a great idea!

ysette9

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Re: DIY mini growth fund
« Reply #63 on: January 23, 2020, 07:26:26 AM »
Reading this thread I am turn between amusement and disgust at the “confidence of a mediocre white man” so massively on display.

From what I can tell OP doesn’t want to share the whole portfolio because he is afraid everyone will like on board and ruin the party? Or something like that. Trust us: no one is going to copy you. Most of us take to heart the data showing that stock pickers almost always underperform, and the rest have their own strategy.

EvenSteven

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Re: DIY mini growth fund
« Reply #64 on: January 23, 2020, 08:28:41 AM »
Quote
He has thoughts that don't agree with yours so he is mediocre and overconfident and white.

After reading the thread, you really think the only reason to think the OP is overconfident and will be a mediocre stock picker is because he has thoughts that don't agree? Really?

EvenSteven

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Re: DIY mini growth fund
« Reply #65 on: January 23, 2020, 08:33:32 AM »
Quote
He has thoughts that don't agree with yours so he is mediocre and overconfident and white.

After reading the thread, you really think the only reason to think the OP is overconfident and will be a mediocre stock picker is because he has thoughts that don't agree? Really?

Is this directed at me?  Seems like it can't be, it is a non sequitur.


I got it from where you said: "He has thoughts that don't agree with yours so he is mediocre and overconfident"

Davnasty

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Re: DIY mini growth fund
« Reply #66 on: January 23, 2020, 10:02:01 AM »
Can we all just agree that there was no need to bring sex and/or race into this thread and get back to...

whatever it is we were doing :)

Tyson

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Re: DIY mini growth fund
« Reply #67 on: January 23, 2020, 10:06:33 AM »
Reading through the OP's posts again, let me see if I can summarize what's been said.

OP:  I have a super secret way to pick awesome stocks

MMM Forum:  Oh, what is it?

OP:  I can't tell you.  But I can tell you that I've picked 160 stocks using this method.

MMM Forum:  Oh, what are they?

OP:  I can't tell you. 

MMM Forum:  Then how can anyone know if you're right?

OP:  Here's 30. 

MMM Forum:  That's not nearly enough.

OP:  That's all you get so you don't steal my ideas.

MMM Forum:  Well OK then...

utaca

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Re: DIY mini growth fund
« Reply #68 on: January 23, 2020, 11:24:42 AM »
Reading through the OP's posts again, let me see if I can summarize what's been said.

OP:  I have a super secret way to pick awesome stocks

MMM Forum:  Oh, what is it?

OP:  I can't tell you.  But I can tell you that I've picked 160 stocks using this method.

MMM Forum:  Oh, what are they?

OP:  I can't tell you. 

MMM Forum:  Then how can anyone know if you're right?

OP:  Here's 30. 

MMM Forum:  That's not nearly enough.

OP:  That's all you get so you don't steal my ideas.

MMM Forum:  Well OK then...

You're totally misrepresenting OP. He has repeatedly advised of his genius, infallible, god-tier stock picking solution: buy the good stocks, avoid the mediocre and bad stocks. I'm absolutely stunned that no one has ever thought of this before.

ysette9

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Re: DIY mini growth fund
« Reply #69 on: January 23, 2020, 11:48:45 AM »
No, it is ysette who has decided these prejudicial things about OP, plainly stated in what I originally quoted from her.
I think this is a case of printed word losing meaning due to lack of tone/body language/etc. The expression was in quotes because it is a quoted expression that I have heard going around to describe overconfidence. I found the expression amusing but I can see that others may not. I was not calling the OP white or male or mediocre, I was commenting on his overconfidence.

The_Dude

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Re: DIY mini growth fund
« Reply #70 on: January 23, 2020, 12:30:21 PM »
First of all please include dividends and compare the total return of your portfolio and your chosen benchmarks.  I'm not a dividend investor either but it makes no sense to not look at total return and instead only at price appreciation.

Second, I really don't understand individual investors that measure their performance using time weighted returns.  It makes sense for an index or mutual fund because it eliminates the impact of cash flows which are beyond the control of the manager.  However, an individual investor absolutely controls the timing of cash flows and should be judged accordingly.  Dollar weighted returns are more appropriate.  Especially, if you continue to make slight tweaks to your holdings.  Most professional money managers of pension plans, sovereign wealth funds or large endowment funds are evaluated on dollar weighted returns.  Because those managers are responsible for decisions of when to buy and sell.


StashingAway

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Re: DIY mini growth fund
« Reply #71 on: January 23, 2020, 12:40:49 PM »
Re: Myers biggs_Type_Indicator
It's just for entertainment to know what type I am. I found it fairly accurate to describe my personality. It's a geeky alternative to horoscope.It has no huge impact on investing.  I used to read horoscope as a young kid.No more. )


I dunno, you seem to think having the same horosco.. I mean self reported "personality indicator"... as Benjamin Grahm has some relevence other than entertainment? Emphasis mine, but you do assert that it has some impact, albeit not a huge one. So follow up question... does being a Pisces have any impact on investing? 

Rimu05

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Re: DIY mini growth fund
« Reply #72 on: January 23, 2020, 12:59:39 PM »
Besides, 30%/year is nothing. I made 276% last year with only a few minutes of work a week.

No, I'm not going to disclose my method except that it uses derivatives. You'll just have to trust me.


Thanks for sharing.
I don't use options, don't short stocks, dont buy leveraged ETF etc...You get the ideas.
I just buy high quality businesses and sit on my ass and wait.  Much simpler and less work.

How do you determine a "high quality" business. Is there any fundamental analysis involved as to which company will generate growth or are you basing this on empirical returns? Also, I am of the opinion that 157 stocks will drag down your returns. My guess is you are diversified across many industries and some are far more cyclical than others.

I actually like this experiment but it also seems a little shoddy because well, you don't seem to actually have a strategy and no "buying high quality business" isn't a strategy. It's the same thing as the buy low, sell high mantra. I also am not sure what you are basing your returns on. Is it the average returns of all the companies you have invested in? Are those returns based on a specific time frame because that will also often skew your returns.

Active managers don't beat the market long term and they have a whole research team reporting the fundamentals. I can't imagine doing this myself based on 157 companies. There are a lot of companies that appear "high quality" but if someone took a closer look, they have mediocre fundamentals.

For instance, I am constantly puzzled by Tesla's stock price. Then again, prices are based on investor expectations and nothing more.

Nonetheless, would be interesting to see how this goes.

cloud72

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Re: DIY mini growth fund
« Reply #73 on: January 23, 2020, 03:53:55 PM »
Reading through the OP's posts again, let me see if I can summarize what's been said.

OP:  I have a super secret way to pick awesome stocks

MMM Forum:  Oh, what is it?

OP:  I can't tell you.  But I can tell you that I've picked 160 stocks using this method.

MMM Forum:  Oh, what are they?

OP:  I can't tell you. 

MMM Forum:  Then how can anyone know if you're right?

OP:  Here's 30. 

MMM Forum:  That's not nearly enough.

OP:  That's all you get so you don't steal my ideas.

MMM Forum:  Well OK then...

You're totally misrepresenting OP. He has repeatedly advised of his genius, infallible, god-tier stock picking solution: buy the good stocks, avoid the mediocre and bad stocks. I'm absolutely stunned that no one has ever thought of this before.

I also put a big question mark: why don't the hedge fund/mutual fund managers only buy the highest quality stocks? As far as I know, most of their holdings are still mediocre. I guess I am one of the pickiest stock picker in the world.  Most of fund managers' picks don't pass my quality standard. So if I look at a mutual fund, I can easily exclude 90% of the holdings.

I already briefly explained how I define: "High quality stocks" .  I already mentioned a bit before. It seems nobody paid attention. It's so simple that nobody believes it.



« Last Edit: January 23, 2020, 04:05:58 PM by cloud72 »

cloud72

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Re: DIY mini growth fund
« Reply #74 on: January 23, 2020, 04:01:16 PM »
Reading this thread I am turn between amusement and disgust at the “confidence of a mediocre white man” so massively on display.

From what I can tell OP doesn’t want to share the whole portfolio because he is afraid everyone will like on board and ruin the party? Or something like that. Trust us: no one is going to copy you. Most of us take to heart the data showing that stock pickers almost always underperform, and the rest have their own strategy.


 To me, an over confident person is defined as a non-capable person thinks he’s capable. Without understanding the whole situation, you can’t label a person as over-confident just because he’s sure about himself through life experiences and knowledge. 
« Last Edit: January 23, 2020, 04:03:32 PM by cloud72 »

cloud72

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Re: DIY mini growth fund
« Reply #75 on: January 23, 2020, 04:10:25 PM »
First of all please include dividends and compare the total return of your portfolio and your chosen benchmarks.  I'm not a dividend investor either but it makes no sense to not look at total return and instead only at price appreciation.

Second, I really don't understand individual investors that measure their performance using time weighted returns.  It makes sense for an index or mutual fund because it eliminates the impact of cash flows which are beyond the control of the manager.  However, an individual investor absolutely controls the timing of cash flows and should be judged accordingly.  Dollar weighted returns are more appropriate.  Especially, if you continue to make slight tweaks to your holdings.  Most professional money managers of pension plans, sovereign wealth funds or large endowment funds are evaluated on dollar weighted returns.  Because those managers are responsible for decisions of when to buy and sell.

Dividend is insignificant. It's around 1% for my portfolio and SP 500 is 2% at the moment.

My portfolio will be 99% the same throughout the year, very low turn over.  And for the 30 stocks I posted, I won't change them at all. No change to name and share numbers.

I think time weighted return is better than money weighted return whether for individual investors or fund managers.
The reason is if we use time weighted return, it measures the performances of the underlying stocks. If we use money weighted return, then it includes the effect of: timing, short term trading.

I am a buy and hold so i want to measure my return using time weighted method. I don't want my return to  include the effects of short term trading, and luck on timing.
« Last Edit: January 23, 2020, 04:16:54 PM by cloud72 »

ysette9

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Re: DIY mini growth fund
« Reply #76 on: January 23, 2020, 04:11:14 PM »
We understand that we have seen many people like you before with similar confidence in their secret sauce stock picking algorithm who mostly fail to deliver on their expected returns. We understand that 90% of professionals who pick stocks for a living fail to beat or track the market. We also know that the only real way to settle your particular situation is for you to be transparent with your stock picks (all of them) and to track them over the next 10-20 years. Since you aren’t forthcoming for Reasons then there seems to be no way for you to convince any of us that you really are as talented and extraordinary as you think.

cloud72

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Re: DIY mini growth fund
« Reply #77 on: January 23, 2020, 04:13:19 PM »
Reading through the OP's posts again, let me see if I can summarize what's been said.

OP:  I have a super secret way to pick awesome stocks

MMM Forum:  Oh, what is it?

OP:  I can't tell you.  But I can tell you that I've picked 160 stocks using this method.

MMM Forum:  Oh, what are they?

OP:  I can't tell you. 

MMM Forum:  Then how can anyone know if you're right?

OP:  Here's 30. 

MMM Forum:  That's not nearly enough.

OP:  That's all you get so you don't steal my ideas.

MMM Forum:  Well OK then...

When survey companies do a survey, they survey a group of people. They don't survey everyone. A decent number of sample will represent the result of the whole population with a high probability.

30 stocks is a decent number. These stocks have a high chance(90% chance) of beating the SP500 for the next couple years without changing any holdings.  If some are losers they'll become insignificant as the winners keep growing.


cloud72

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Re: DIY mini growth fund
« Reply #78 on: January 23, 2020, 04:18:53 PM »
We understand that we have seen many people like you before with similar confidence in their secret sauce stock picking algorithm who mostly fail to deliver on their expected returns. We understand that 90% of professionals who pick stocks for a living fail to beat or track the market. We also know that the only real way to settle your particular situation is for you to be transparent with your stock picks (all of them) and to track them over the next 10-20 years. Since you aren’t forthcoming for Reasons then there seems to be no way for you to convince any of us that you really are as talented and extraordinary as you think.

What if I tell you the 30 stocks will out perform the SP500 for at least the next 5 years? Not necessary every year but total returns in 5 years.

« Last Edit: January 23, 2020, 04:22:12 PM by cloud72 »

ysette9

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Re: DIY mini growth fund
« Reply #79 on: January 23, 2020, 04:25:58 PM »
We understand that we have seen many people like you before with similar confidence in their secret sauce stock picking algorithm who mostly fail to deliver on their expected returns. We understand that 90% of professionals who pick stocks for a living fail to beat or track the market. We also know that the only real way to settle your particular situation is for you to be transparent with your stock picks (all of them) and to track them over the next 10-20 years. Since you aren’t forthcoming for Reasons then there seems to be no way for you to convince any of us that you really are as talented and extraordinary as you think.

What if I tell you the 30 stocks will out perform the SP500 for at least the next 5 years? Not necessary every year but total returns in 5 years.
You can tell me anything you want. You are telling me anything you want. I’m saying I don’t believe you for the simple reason that you cannot see into the future. Data and studies and history say that there is a vanishingly small chance that you can indeed predict the future. Lots of very smart people with more time and education and experience and resources than you fail to do this every day.

cloud72

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Re: DIY mini growth fund
« Reply #80 on: January 23, 2020, 04:38:38 PM »
I initially listened and followed Warren's idea of 20 buckets and bought just 30 stocks. I was doing ok for the past 10 years getting 13% return.
2010-2019
SPY 13.44% CAGR
BRK.b 13.17% CAGR

Your track record isn't great - you matched the market and Berkshire - during a huge bull market for growth stocks.

Quote
Recently I realized I can do better,  I think in a huge market like US plus smaller market in Canada. Limit out self to 20 stocks, is like putting shackle to limit the choices of investment. My goal as a growth investor is to get 15% to 20% per year.
Do that for ten years and you'll be a superstar.

It looks like you're focused on momentum. That will probably work while the bull market continues. Do you have a plan to get out if we go into a bear market, or will you ride it out?

Note the difference between old and now:
Old portfolio:  Dividend focused. Only buy Dividend stocks that frequently increase their dividend, 80% Canadian. 20% US.  Target return: 12%.  Meanwhile: Canadian stock index TSX returned 7%.
New portfolio:
Growth focusd.  90% US and 10% Canadian. Target return: 15% to 20%.


People always like to throw out fancy theories and words. Like Survivor bias, now momentum.

People buying Berkshire stock are focused on momentum too. Momentum of BRK's quality.  BRK has high quality but doesn't have the high growth rate I expected so I don't own BRK.

 There are two  types of momentum: 1. price momentum and 2. business performance momentum. I have a feeling momentum ETF focused on price momentum only. e.g. They buy into Amazon, Facebook, Apple etc. Not me. I don't own any of those big cap stocks that experienced huge price increase during the past 10 years. I don't buy a stock simply because they went up a lot in the past. I only buy small/mid cap stocks that were growing and are still growing fast.

  There's nothing wrong to follow the business performance momentum.  For example, one of my holding is:  Paycom Software, Inc. (PAYC).It returned 60% per year during the past 6 years. It was just added to SP500 index today.  It may not repeat the exact same growth rate in the future but high growth rate doesn't just suddenly vanish.  I own some businesses that have been growing for several decades.. It beats the heck out of many stocks going nowhere for 5 years. e.g. oil stocks.   I have large numbers of stocks like Paycom which are profitable and growing fast.
« Last Edit: January 23, 2020, 04:48:26 PM by cloud72 »

cloud72

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Re: DIY mini growth fund
« Reply #81 on: January 23, 2020, 04:55:30 PM »
It seems  people here don't care about individual stocks. What's the point to even share the 30 stocks.. Nobody will look at how they perform. No comments on the 30 stocks whatever.






« Last Edit: January 23, 2020, 05:00:12 PM by cloud72 »

PaulMaxime

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Re: DIY mini growth fund
« Reply #82 on: January 23, 2020, 05:25:11 PM »

  There's nothing wrong to follow the business performance momentum.  For example, one of my holding is:  Paycom Software, Inc. (PAYC).It returned 60% per year during the past 6 years. It was just added to SP500 index today.  It may not repeat the exact same growth rate in the future but high growth rate doesn't just suddenly vanish.  I own some businesses that have been growing for several decades.. It beats the heck out of many stocks going nowhere for 5 years. e.g. oil stocks.   I have large numbers of stocks like Paycom which are profitable and growing fast.

Good one. PAYC is my second largest holding after AAPL. I'm up a total of 434% now but I've also bought more a couple times.

Let the losers become irrelevant and add more to the winners. When I see a company is succeeding I will buy more of that. I generally start out with a 1% position or so and then if things go well I'll add or if like NFLX (30x) or AAPL (100x) it will become large on its own. This leads to compounding of multi-bagger returns over time. Other companies I tend to buy more of regularly are MA (6 buys) and MELI (4 buys). Oh SHOP and AYX....

I think you do need to be careful to realize that it's not always up and to the right. During the last crash it was hard to hold on and even to buy more as the world was falling apart. But I believe that you can do it. 20-30% per year might be unrealistic but I think 15-20 is possible over time and if you can hang on through the inevitable downturns.


cloud72

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Re: DIY mini growth fund
« Reply #83 on: January 23, 2020, 06:21:31 PM »

  There's nothing wrong to follow the business performance momentum.  For example, one of my holding is:  Paycom Software, Inc. (PAYC).It returned 60% per year during the past 6 years. It was just added to SP500 index today.  It may not repeat the exact same growth rate in the future but high growth rate doesn't just suddenly vanish.  I own some businesses that have been growing for several decades.. It beats the heck out of many stocks going nowhere for 5 years. e.g. oil stocks.   I have large numbers of stocks like Paycom which are profitable and growing fast.

Good one. PAYC is my second largest holding after AAPL. I'm up a total of 434% now but I've also bought more a couple times.

Let the losers become irrelevant and add more to the winners. When I see a company is succeeding I will buy more of that. I generally start out with a 1% position or so and then if things go well I'll add or if like NFLX (30x) or AAPL (100x) it will become large on its own. This leads to compounding of multi-bagger returns over time. Other companies I tend to buy more of regularly are MA (6 buys) and MELI (4 buys). Oh SHOP and AYX....

I think you do need to be careful to realize that it's not always up and to the right. During the last crash it was hard to hold on and even to buy more as the world was falling apart. But I believe that you can do it. 20-30% per year might be unrealistic but I think 15-20 is possible over time and if you can hang on through the inevitable downturns.

Since my new portfolio was just formed this month. I did not enjoy their returns from the past couple years.  My strategy is simply focused on the quality of business. My target return % is just a target, it's a aiming point to filter out the slow grower.  I don't worry if the end result is slightly less or  slightly more. I am confident I'll reach my overall goal. Otherwise, I won't stop looking for a job.  It's amazing how good the stocks are in my portfolio. Paycomc is just one small example... out of 160...   Yes there are that many growth stocks out there.   I even found 2 growth stocks in Australian market but gave up the idea after I realizing there's no loan value for stocks outside of Canada and US.

What you are doing makes perfect sense. It's like watering flowers.. I'll be careful if one position gets too big. There's concentration risk.  My style is: once I established a position. I will only gradually sell and won't add to it because I am in withdrawal mode now.

Yes, there's a risk for me right now. If it drops more than 50% this year. I'll suffer some lost. However, the chance is small and I'll quickly DE-leverage.   Psychologically speaking, I am not afraid of market drops. 2008 came soon after I just started investing,  i did the right thing and kept buying the REIT.. Yes, I kept buying even the REIT ETF dropped 50% in value.... Talk about catching the falling knife with skills. I probably doubled the money on the REIT but my capital was small back then so made something like few thousands.  Now, I can make that in 1 month from the growth stocks. It's up almost $30k this month alone.  Compound interest is amazing!

So we are in the same frequency. I do own: SHOP and AYX. I am in a full growth strategy now.   To share couple more of my high performers: RNG, CDLX,APPF.  Look at RNG's performance, how beautiful!  Buffett said he regret missing out on Amazon.  There are lots of small Amazon out there. Not all my holdings are new tech stocks.  Most of my holdings are matured business. Look at this one: Exponent, Inc. (EXPO). It's been growing for 30 years!  It's performance is same as its name: exponential! That's how my expected 20% is not unrealistic.   People living in a well have no idea what kind of world is out there.


BTW: Is that group free ? or I have to pay a subscription?  The problem I have now is there are too many opportunities and not enough capital. I have to resist not to add more stocks...  I reached the limit.










« Last Edit: January 23, 2020, 06:26:31 PM by cloud72 »

PaulMaxime

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Re: DIY mini growth fund
« Reply #84 on: January 23, 2020, 06:55:34 PM »


BTW: Is that group free ? or I have to pay a subscription?  The problem I have now is there are too many opportunities and not enough capital. I have to resist not to add more stocks...  I reached the limit.

That particular message board is free. Saul's board is a wealth of growth investing knowledge.

I would recommend paying something like $100 per year for a Motley Fool Rule Breakers subscription though. It would be worth your while. Also listen to the Rule Breaker Investing podcast. Even if you don't buy a single stock there's a lot that you can learn from them.

index

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Re: DIY mini growth fund
« Reply #85 on: January 24, 2020, 09:35:23 AM »
And yes, I only spent a few minutes for each  stock to make a decision  to buy below 30 stocks to beat the market...

I wish I had known getting above average returns was as easy as running a stock screen looking for growth and small to mid cap size, then glancing at the chart and reading the company description to make sure I had no moral opposition to their business.   

Also, you should probably be using the Russell 2000 Growth Index as your benchmark not the S&P 500 because the S&P 500 represents a different market capitalization and profile compared to what you are attempting. If the goal is to show you are better than just buy the index, then choose the right index.

cloud72

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Re: DIY mini growth fund
« Reply #86 on: January 24, 2020, 09:58:13 AM »
And yes, I only spent a few minutes for each  stock to make a decision  to buy below 30 stocks to beat the market...

I wish I had known getting above average returns was as easy as running a stock screen looking for growth and small to mid cap size, then glancing at the chart and reading the company description to make sure I had no moral opposition to their business.   

Also, you should probably be using the Russell 2000 Growth Index as your benchmark not the S&P 500 because the S&P 500 represents a different market capitalization and profile compared to what you are attempting. If the goal is to show you are better than just buy the index, then choose the right index.

You're right. I'll take a look at Russell 2000 Growth Index.


Scandium

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Re: DIY mini growth fund
« Reply #87 on: January 24, 2020, 10:53:52 AM »
I often make the joke that stock picking is really easy. You just buy stocks that will go up in value, and don't buy stocks that will go down in value.

But this seems to be the extent of the OPs "advice" on stock picking, and made in earnest.
You are unfairly belittling the OP.  You have ignored his sage advice to avoid investing in North Korean stocks.
Quote
Let's take countries as example, picking countries as picking stock, so I do "back testing" and exclude North Korea from my portfolio because they had such a horrible track record from the past couple decades and include US in my portfolio because US had a great track record in the past 100 years.  Is this back testing method good method ? Yes

Come on now! OP also sagely and prophetically advised not to invest in Tulips! Only 380 years after the crash..

Blueberries

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Re: DIY growth stocks picking
« Reply #88 on: January 28, 2020, 09:34:45 AM »
I will fully admit I haven't read this entire thread.  Feel free to disregard every bit of it, but the below is just something I threw together that I think you should consider.  It's not written in order of importance.

1.)  This is not the forum to discuss stock picking.  You will find better trading discourse in a forum tailored to stock picking, trading, etc.  There is zero benefit to engaging in discussions on active trading in a forum that doesn't believe in it.  You will not change anyone's mind, even if you become the world's best trader.

2.)  Trading is psychology on display, especially with the use of technical analysis where you can visually see price and volume over long periods of time.  You will do best to act like a robot (emotionless) and it's easier to robotically trade if you use mathematically sound rules. 

3.)  I don't care how good you think you are, you will be wrong.  A lot.  Many of the best traders in the world are wrong 50% of the time.  They make money because they understand that the market and technical analysis is based on probabilities.  They employ risk management that is usually mathematically based.  When they're wrong, they take much lower losses than their gains.  I think Paul Tudor Jones employs a 5-1 risk/reward.  Some use a 3-1 risk/reward ratio.  This is true even if they are holding for long periods of time.

4.)  Be aware of the volatility in growth stocks.  This is both an asset and a liability.  This is what enables you to make quite a bit of money when you're right.  But, when you're wrong and/or when the market corrects, watch out!  If you have a bear market where indices are down 20%+?  Your stocks may fall 30-40%.  Some will take years to come back, years in which you'll have dead money if you don't employ proper risk management.  Some will never come back.  Risk management is one of the most important aspect of successful growth trading.  If you're coming from a value mindset, this will go against everything you currently believe. 

5.)  Concentration is important, though this will vary based on the size of your account.  As your balance grows, you will have to adjust.

6.)  You will need to employ trading rules.  You very likely won't want to.  Because of our emotions and the inability to predict markets, you need to.  You won't want to employ risk management because "stocks go up", and you won't want to admit that you're wrong even though you will be wrong.  In fact, be prepared to do all the research in the world, find the best entry, and still get stopped out of a trade with a loss.  Once you take your loss, be prepared to watch that stock turn right around and show you that it's ready now.  A few things can happen.  You won't get back in because you're fearful of another loss.  You'll get back in but go light and it'll make a huge move.  You'll get back in and go very heavy trying to "get back" at the market and you'll take another loss.  You'll get back in, the stock will reverse, but you'll stay in, assuming it will come back again, and then you'll watch it go down each day and you'll be helpless to act.  Another thing can happen - you'll convince yourself that "they all come back" so you won't sell when you should and then you'll experience the most gut-wrenching loss of your career.  Risk management is important.  Not every trade works, not every trade will be a ten bagger, and the market will test you.  Your rules will help remove the emotion from trading.  Losing money in the market, if done properly, is no different than a homeowner's insurance policy that goes unused - you lose the premium, but you've insured yourself against a life-changing loss.

7.)  It's not a get rich quick scheme.  Trading, if done well and consistently, can be very financially rewarding.  You can beat the market, but don't expect it to happen Year 1.  Like any other profession, it will take years of study to get to a place of consistency.  I can't recall who said it, but a famous trader said, "Trading is an upstream swim against human nature."  You will need to overcome your natural instincts to become a successful trader.  Again, rules will help you do that.


StashingAway

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Re: DIY growth stocks picking
« Reply #89 on: January 28, 2020, 09:57:42 AM »
This is a fun thread, even if it's just to re-iterate things we have come to learn about stocks and psychology.

Blueberries, your comment reminded me of a tangential thought:

It is statistically illogical to base the quality of a decision on the outcome it produces. You could make a decision that is 90% "correct" and by the product of variability, you end up with an undesirable outcome. This was demonstrated on a national level in 2016: Trump was polling with a 30% or so chance of winning at the end. People mistook that to mean that he had 30% of the vote, which would have meant a landslide for Hillary. In actuality, it meant that roughly 1 in 3 times that election scenario was run, Trump would win (according to the polls). That's really good odds for compared to 30% of the vote. It's not something I would sign up for in a life or death scenario, but many newscasters and public were flabbergasted. They blamed the polls for being inaccurate, when really they could have likely been quite accurate and we just got a roll of the uncertainty dice that favored Trump.

This line of thinking; basing the quality of your decision on the outcome that it produces, can lead to a lot of excitement and confidence in stock picking. If your only measure of how you make decisions is the short term outcome they produce, then you likely haven't delved deep enough into the statistics.

It goes strongly against intuition, but in theory if you're picking stocks based on past performance and quality of companies and various other hypotheses about the market, you shouldn't even know the performance of your own portfolio. The best way to do this would be along the lines of simply picking your favored stocks from analysis, perhaps in a ratio, and have someone invest your funds for you. Then, promptly forget that you have any personal attachment to those stocks and re-balance regularly. This sounds insane because it would be darn near impossible for a human to remove emotion and attachment from the system, but it is what falls most in line with decision theory.

Davnasty

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Re: DIY growth stocks picking
« Reply #90 on: January 28, 2020, 10:31:26 AM »
It is statistically illogical to base the quality of a decision on the outcome it produces. You could make a decision that is 90% "correct" and by the product of variability, you end up with an undesirable outcome.

This is absolutely true, very important to understand, and incredibly difficult to convince someone of, especially if past outcomes support what they want to believe.

It's impossible to say whether OP's claims of past performance are true, but assuming they are, it's almost certainly the reason that they are so overconfident in this endeavor.

So far, by backtesting and daily price movement, They outperforms the index by a big margin. Why do I know it will work ahead of time? Because I've been using the same strategy for years! Except I was only buying dividend increasing stocks regardless of CAP size, missing out lots of growth stocks!

Another interesting thought about this situation, while OP will very likely fail to meet their target of 15-20%, they probably won't crash and burn either. Given the huge number of stocks they've chosen, they basically have a growth stock index fund. Their results should be watered down sufficiently that they won't be extreme one way or the other and will mostly depend on the performance of growth stock in general. Unless, of course, they abandon their buy and hold strategy when things don't look as rosy as they had hoped and start buying and selling on emotion to make up the difference. I would say this is OP's greatest risk.

I wish they would give the full portfolio, but even with just 30, I'm interested in this thread. Not because I want to know how OP's "strategy?" works out, but from a human psychology angle. I'm interested in how they will respond to whatever the future may hold.

jeroly

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Re: DIY growth stocks picking
« Reply #91 on: January 28, 2020, 10:52:38 AM »
It is statistically illogical to base the quality of a decision on the outcome it produces. You could make a decision that is 90% "correct" and by the product of variability, you end up with an undesirable outcome.

This is absolutely true, very important to understand, and incredibly difficult to convince someone of, especially if past outcomes support what they want to believe.

It's impossible to say whether OP's claims of past performance are true, but assuming they are, it's almost certainly the reason that they are so overconfident in this endeavor.

So far, by backtesting and daily price movement, They outperforms the index by a big margin. Why do I know it will work ahead of time? Because I've been using the same strategy for years! Except I was only buying dividend increasing stocks regardless of CAP size, missing out lots of growth stocks!

Another interesting thought about this situation, while OP will very likely fail to meet their target of 15-20%, they probably won't crash and burn either. Given the huge number of stocks they've chosen, they basically have a growth stock index fund. Their results should be watered down sufficiently that they won't be extreme one way or the other and will mostly depend on the performance of growth stock in general. Unless, of course, they abandon their buy and hold strategy when things don't look as rosy as they had hoped and start buying and selling on emotion to make up the difference. I would say this is OP's greatest risk.

I wish they would give the full portfolio, but even with just 30, I'm interested in this thread. Not because I want to know how OP's "strategy?" works out, but from a human psychology angle. I'm interested in how they will respond to whatever the future may hold.
Let's not forget that OP is likely dealing with very significant transaction costs... If they started with $300k and invested in 150 companies ($2,000 each) and pay $10/trade (not US broker so this is probably low) that's 0.5% each way, plus the bid/ask spread. 

So unlike an index fund...

high expenses
Misses out on emerging growth

And unlike a managed fund...

About as much research as a monkey throwing darts at IBD stock charts

Davnasty

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Re: DIY growth stocks picking
« Reply #92 on: January 28, 2020, 11:20:47 AM »
It is statistically illogical to base the quality of a decision on the outcome it produces. You could make a decision that is 90% "correct" and by the product of variability, you end up with an undesirable outcome.

This is absolutely true, very important to understand, and incredibly difficult to convince someone of, especially if past outcomes support what they want to believe.

It's impossible to say whether OP's claims of past performance are true, but assuming they are, it's almost certainly the reason that they are so overconfident in this endeavor.

So far, by backtesting and daily price movement, They outperforms the index by a big margin. Why do I know it will work ahead of time? Because I've been using the same strategy for years! Except I was only buying dividend increasing stocks regardless of CAP size, missing out lots of growth stocks!

Another interesting thought about this situation, while OP will very likely fail to meet their target of 15-20%, they probably won't crash and burn either. Given the huge number of stocks they've chosen, they basically have a growth stock index fund. Their results should be watered down sufficiently that they won't be extreme one way or the other and will mostly depend on the performance of growth stock in general. Unless, of course, they abandon their buy and hold strategy when things don't look as rosy as they had hoped and start buying and selling on emotion to make up the difference. I would say this is OP's greatest risk.

I wish they would give the full portfolio, but even with just 30, I'm interested in this thread. Not because I want to know how OP's "strategy?" works out, but from a human psychology angle. I'm interested in how they will respond to whatever the future may hold.
Let's not forget that OP is likely dealing with very significant transaction costs... If they started with $300k and invested in 150 companies ($2,000 each) and pay $10/trade (not US broker so this is probably low) that's 0.5% each way, plus the bid/ask spread. 

So unlike an index fund...

high expenses
Misses out on emerging growth

And unlike a managed fund...

About as much research as a monkey throwing darts at IBD stock charts

Don't knock the monkeys* :)

https://www.forbes.com/sites/rickferri/2012/12/20/any-monkey-can-beat-the-market/#160e1400630a

Quote
They repeated this processes every year, from 1964 to 2010, and tracked the results. The process replicated 100 monkeys throwing darts at the stock pages each year. Amazingly, on average, 98 of the 100 monkey portfolios beat the 1,000 stock capitalization weighted stock universe each year.

*unfortunately I could not find an experiment where researchers gave real darts to real monkeys :(

ysette9

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Re: DIY growth stocks picking
« Reply #93 on: January 28, 2020, 11:31:20 AM »
It is statistically illogical to base the quality of a decision on the outcome it produces. You could make a decision that is 90% "correct" and by the product of variability, you end up with an undesirable outcome.

This is absolutely true, very important to understand, and incredibly difficult to convince someone of, especially if past outcomes support what they want to believe.

It's impossible to say whether OP's claims of past performance are true, but assuming they are, it's almost certainly the reason that they are so overconfident in this endeavor.

So far, by backtesting and daily price movement, They outperforms the index by a big margin. Why do I know it will work ahead of time? Because I've been using the same strategy for years! Except I was only buying dividend increasing stocks regardless of CAP size, missing out lots of growth stocks!

Another interesting thought about this situation, while OP will very likely fail to meet their target of 15-20%, they probably won't crash and burn either. Given the huge number of stocks they've chosen, they basically have a growth stock index fund. Their results should be watered down sufficiently that they won't be extreme one way or the other and will mostly depend on the performance of growth stock in general. Unless, of course, they abandon their buy and hold strategy when things don't look as rosy as they had hoped and start buying and selling on emotion to make up the difference. I would say this is OP's greatest risk.

I wish they would give the full portfolio, but even with just 30, I'm interested in this thread. Not because I want to know how OP's "strategy?" works out, but from a human psychology angle. I'm interested in how they will respond to whatever the future may hold.
Let's not forget that OP is likely dealing with very significant transaction costs... If they started with $300k and invested in 150 companies ($2,000 each) and pay $10/trade (not US broker so this is probably low) that's 0.5% each way, plus the bid/ask spread. 

So unlike an index fund...

high expenses
Misses out on emerging growth

And unlike a managed fund...

About as much research as a monkey throwing darts at IBD stock charts
That is a good point. There are also tax implications of buying and selling. So OP needs to outperform the index just to stay even with the index

Tyson

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Re: DIY growth stocks picking
« Reply #94 on: January 28, 2020, 04:05:34 PM »
It is statistically illogical to base the quality of a decision on the outcome it produces. You could make a decision that is 90% "correct" and by the product of variability, you end up with an undesirable outcome.

This is absolutely true, very important to understand, and incredibly difficult to convince someone of, especially if past outcomes support what they want to believe.

It's impossible to say whether OP's claims of past performance are true, but assuming they are, it's almost certainly the reason that they are so overconfident in this endeavor.

So far, by backtesting and daily price movement, They outperforms the index by a big margin. Why do I know it will work ahead of time? Because I've been using the same strategy for years! Except I was only buying dividend increasing stocks regardless of CAP size, missing out lots of growth stocks!

Another interesting thought about this situation, while OP will very likely fail to meet their target of 15-20%, they probably won't crash and burn either. Given the huge number of stocks they've chosen, they basically have a growth stock index fund. Their results should be watered down sufficiently that they won't be extreme one way or the other and will mostly depend on the performance of growth stock in general. Unless, of course, they abandon their buy and hold strategy when things don't look as rosy as they had hoped and start buying and selling on emotion to make up the difference. I would say this is OP's greatest risk.

I wish they would give the full portfolio, but even with just 30, I'm interested in this thread. Not because I want to know how OP's "strategy?" works out, but from a human psychology angle. I'm interested in how they will respond to whatever the future may hold.
Let's not forget that OP is likely dealing with very significant transaction costs... If they started with $300k and invested in 150 companies ($2,000 each) and pay $10/trade (not US broker so this is probably low) that's 0.5% each way, plus the bid/ask spread. 

So unlike an index fund...

high expenses
Misses out on emerging growth

And unlike a managed fund...

About as much research as a monkey throwing darts at IBD stock charts
That is a good point. There are also tax implications of buying and selling. So OP needs to outperform the index just to stay even with the index

And, on top of all that, the amount of work and stress involved is just not worth it.  Hell, I read MMM as a way to get OFF the work/stress treadmill.  Seems like "active trading" is just another time/money/stress trap.  No thanks. 

Custom Concern

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Re: DIY growth stocks picking
« Reply #95 on: January 29, 2020, 09:30:57 AM »
Hi OP,
Kudos for trying a strategy that is contrarian to the forum's investing philosophy. I'm happy and excited to follow an approach that is different from the majority and my own. As an aside, do not mistake skepticism for criticism. I urge you to take the feedback you've received here seriously. As long as you respect and understand a perspective, you are of course free to disagree!

I have a few questions:
1) How was your starting fund of 300k acquired and what were you doing with it before this?

2) What is motivating you to create a custom portfolio? Why are you not satisfied with the returns of mutual growth indexes?

3a) Have you read William Bernstein's Intelligent Asset Allocator? He performs analyses with historical data that suggest allocating bonds and value stocks with growth stocks provide lower risk with higher return over long periods of time. Thoughts?

3b) Bernstein also shows that small-cap growth (SCG) stocks, i.e. the same class of stocks you have picked, have /historically/ performed worst than large-cap growth (LCG), small-cap value (SCV), and large-cap value (LCV), Figure 7-7. Here he calculates the growth of $1 invested into the tails of each from July 1927 to March 1998.

And quote
Quote
"Just as people purchase lottery tickets, which have a return of about -50%, on the off chance that they may win the grand prize, so too do investors invest in small, rapidly growing companies on the slim chance that they are getting in on the ground floor of the next Microsoft. In other words, this asset class [small-cap growth] makes up in entertainment value what it lacks in return."

Thoughts?

« Last Edit: January 29, 2020, 09:46:30 AM by Custom Concern »

GreenEggs

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Re: DIY growth stocks picking
« Reply #96 on: January 31, 2020, 12:16:19 AM »
This thread is so inspirational that I decided to try getting rich in the stock market too.  I don't know what I'm doing yet, but I've been reading and I'm really lucky.  I opened a Robbinhood account at deposited $500 dollars into it to learn with.  I'll start my own thread after I finish reading & start getting rich.  If it works I'll tell everybody what I read and which method(s) worked and which ones didn't.  If I go broke I'll let you all know and we can laugh at me. 


Since I don't know much about trading, besides reading, I've been looking at various stock screeners and charting websites.  Most of them are free for a month or so, then want you to pay for a subscription.  I decided that I liked Chartmill.com and began a subscription today (they sent a Cyber Monday discount a couple of days ago by mistake, so it was 50% off).  There's a lot of info that helps you decide which stocks have good technical setups and it has a built in position sizing tool that automatically tells you how much of your portfolio to risk & where to set the stop loss.  It seems to do a lot of the homework for you. 


Btw, I'm FIRE'd and have time on my hands at the moment.   :)

Simpli-Fi

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Re: DIY growth stocks picking
« Reply #97 on: January 31, 2020, 03:36:50 AM »
I look forward to reading GreenHam's new thread...because the MMM forum scared this guy off; I was curious where he would have landed.  I may just set up a morningstar portfolio and watch the 30 picks he had here

It's all about my Ego to prove myself. It's pointless to work for Ego,  I'll stop updating my posts. and see you all and take care.I'll go somewhere else with like-minded people.

My trick to kill a forum account is: change to a one time email with a password I won't remember, then change the password to something I won't remember. There's no way to get the account back.

In the end, I just want to say, yes I can beat the index with high certainty.
But if you are reading this, don't do anything stupid to ruin your financial well being.

MustacheAndaHalf

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Re: DIY mini growth fund
« Reply #98 on: January 31, 2020, 06:32:29 AM »
This is a really unfriendly place for non-believers in the index uber alles religion here.
When Copernicus demonstrated evidence that the Earth orbits the sun, the religion of the time rejected information because it was new.  Religion keeps it's faith, and rejects new evidence, where science incorporates evidence.

Historical data from many sources show indexing beats active approaches.  People who reject factual information seem more superstitious to me than the historical record on which passive indexing is based.

lemonlyman

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Re: DIY mini growth fund
« Reply #99 on: January 31, 2020, 08:27:34 AM »
This is a really unfriendly place for non-believers in the index uber alles religion here.
When Copernicus demonstrated evidence that the Earth orbits the sun, the religion of the time rejected information because it was new.  Religion keeps it's faith, and rejects new evidence, where science incorporates evidence.

Historical data from many sources show indexing beats active approaches.  People who reject factual information seem more superstitious to me than the historical record on which passive indexing is based.

The only flaw in index investing is there is no good way to project what it will do. Using the past to assume the future is a fallacy. Investors typically learn the fundamentals of a business and circumstances of its local market to make a projection of the return on investment. No one on Earth can possibly make a reasonable projection of a total market. Assuming 5-10% average for all time is faith. The OP showed no reasonable to way project what the future of the holdings would return. For someone who quoted Charlie Munger and Warren Buffett frequently, it's amazing what the OP ended up concluding would be a successful style.