The Money Mustache Community
Learning, Sharing, and Teaching => Investor Alley => Topic started by: oldtoyota on March 02, 2014, 08:13:03 PM
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From Warren Buffet:
"My money, I should add, is where my mouth is: What I advise here is essentially identical to certain instructions I've laid out in my will. One bequest provides that cash will be delivered to a trustee for my wife's benefit. (I have to use cash for individual bequests, because all of my Berkshire Hathaway shares will be fully distributed to certain philanthropic organizations over the 10 years following the closing of my estate.) My advice to the trustee could not be more simple: Put 10% of the cash in short-term government bonds and 90% in a very low-cost S&P 500 index fund. (I suggest Vanguard's.) I believe the trust's long-term results from this policy will be superior to those attained by most investors -- whether pension funds, institutions, or individuals -- who employ high-fee managers."
http://www.washingtonpost.com/blogs/wonkblog/wp/2014/02/24/warren-buffett-reveals-the-one-stock-fund-you-need-to-invest-in/
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Keep in mind he's suggesting this as the best option for someone with no investment experience/desire to manage their own investments (his wife).
Of course he does say results will be better than most pension funds, institutions, or individuals. My money is on him being right there too.
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Keep in mind he's suggesting this as the best option for someone with no investment experience/desire to manage their own investments (his wife).
Of course he does say results will be better than most pension funds, institutions, or individuals. My money is on him being right there too.
Yeah, frankly, it's the best choice for someone who isn't really involved. Frankly, it's my hands off strategy. I have a slightly more hands on strategy right now, but who knows what will eat up my time in the future? If I had kids, there's zero chance that I would do as much investment research as I currently do.
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Keep in mind he's suggesting this as the best option for someone with no investment experience/desire to manage their own investments (his wife).
Of course he does say results will be better than most pension funds, institutions, or individuals. My money is on him being right there too.
Yeah, frankly, it's the best choice for someone who isn't really involved. Frankly, it's my hands off strategy. I have a slightly more hands on strategy right now, but who knows what will eat up my time in the future? If I had kids, there's zero chance that I would do as much investment research as I currently do.
^+1. I like to have a portion of hands off and then a portion I am hands on both daily and weekly. I don't subscribe to the fact that one way is a slam dunk however the Index funds alone seem to deliver a consistent # historically. Which is why I have a large potion of my money in them.
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Warren Buffet is the greatest investor of our lifetimes. That being said, I take everything he says with a grain of salt. What he says and what he does are two different things. What he does in real life is buys entire companies, does private equity deals, loans money, buys and sells derivatives, uses leverage, gets special treatment from the government, etc etc. Berkshire Hathaway is really more like a multi-strategy hedge fund. Although from listening to him, he makes it sound so simple that anybody can do it.
That being said, index funds are what most people should be investing in. Although I'd diversify a bit more than 100% US stocks.
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For those of you who are very involved in micromanaging your investments, are you consistently beating the market? If not, why do you continue to do so?
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In order to outperform you have to first decide what is going to be the benchmark. For me, a worldwide allocation to stocks, bonds, real estate and commodities is probably a better benchmark than the S&P 500. Or perhaps a CTA index. In that sense, from the time I began trading while knowing what I was doing (which is 12/31/2012), I've definitely beaten those indexes. Have I beaten the S&P 500? No. And it would not be realistic with my current allocation to beat the S&P 500 after it had one of it's best years of all time. To really evaluate a strategy or an investor you would need much longer than 1 or 2 years of data. Not to mention, we haven't even taken return vs risk into account.
I will continue to trade my own account because I know, over the long haul, I will win. It's not a matter of hoping, I just know I will. To the person who has decided they will succeed, and won't give up...it's pretty difficult to beat that guy.
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Some of those who micromanage are involved with stock picks like Tesla Motors, Solar city, Netflix at $55/share, etc.
Buying undervalued companies, holding, and selling after a year or more for much more. Very risky play, but so is starting a business of any kind. Those who start the business get the perks of playing Commander and hiring "subordinates". (British term for employee). Much like those who start a blog and hire moderators to filter it to their liking.
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Some of those who micromanage are involved with stock picks like Tesla Motors, Solar city, Netflix at $55/share, etc.
Buying undervalued companies, holding, and selling after a year or more for much more. Very risky play, but so is starting a business of any kind. Those who start the business get the perks of playing Commander and hiring "subordinates". (British term for employee). Much like those who start a blog and hire moderators to filter it to their liking.
I think what you mean to say is, buying volatile stocks in companies involved in speculative technologies is risky, but has the the potential for high reward. The point of buying undervalued companies (high and steady earnings relative to value) is that it delivers good return at low risk.
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Some of those who micromanage are involved with stock picks like Tesla Motors, Solar city, Netflix at $55/share, etc.
Buying undervalued companies, holding, and selling after a year or more for much more. Very risky play, but so is starting a business of any kind. Those who start the business get the perks of playing Commander and hiring "subordinates". (British term for employee). Much like those who start a blog and hire moderators to filter it to their liking.
My big regret is not buying more Tesla at $26/share...
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Some of those who micromanage are involved with stock picks like Tesla Motors, Solar city, Netflix at $55/share, etc.
Buying undervalued companies, holding, and selling after a year or more for much more. Very risky play, but so is starting a business of any kind. Those who start the business get the perks of playing Commander and hiring "subordinates". (British term for employee). Much like those who start a blog and hire moderators to filter it to their liking.
My big regret is not buying more Tesla at $26/share...
Tesla could have also gone to $5/share and never have gone up. Have a methodology that tells you what to buy, how much to buy, and when to sell. Stick to that methodology and don't worry about the stocks that 'might have been.' There will always be a new Tesla in the future. Perhaps you'll hook the big one on that day. There will also be plenty of stocks that never go anywhere, or go to 0. The future is unknowable so don't kick yourself for not knowing that TSLA would be a 10 bagger.
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For those of you who are very involved in micromanaging your investments, are you consistently beating the market? If not, why do you continue to do so?
For some there's more to it than just "beating the market".
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For those of you who are very involved in micromanaging your investments, are you consistently beating the market? If not, why do you continue to do so?
For some there's more to it than just "beating the market".
Like what? Is it a hobby or something?
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For those of you who are very involved in micromanaging your investments, are you consistently beating the market? If not, why do you continue to do so?
For some there's more to it than just "beating the market".
Like what? Is it a hobby or something?
For some people, sure. But I don't think I was clear.
"Beating the market" doesn't even mean anything without some context. What market are you measuring against, the S&P 500? U.S. Stock market? World ex-US Stock market? Complete World Stock market? How does your risk vs return compare to the person next to you? Do you invest in a higher percentage of bonds to protect principal, with the consequence that during a bull run your portfolio grows 1.5% slower than someone who is 100% in equities? Does that mean you are losing? Or do you take more risk for ultimately greater return? When do you look at that return, in the middle of a bull run (right now when everything is up up up) or in 5 years when we have a 20% correction? How about a 50% collapse like in 2008/9? What if someone invests in blue chip stocks that gives them a return that lags the greater U.S. market during this bull run... but will keep more value and give off more dividends during a bear market. Did they lose to "the market" while the market had greater value, but win after equities pulled back and they can live off dividends without touching the principal?
I'm not trying to be difficult here, but there is more than one way to invest to achieve your goals. We focus too much on things like total return at any given point, when we should be focusing on what matters... accumulating enough wealth/assets to achieve financial independence, and if you desire, retire early. For some people, index investing works. For others, dividend growth. There are people on these forums, and MMM is one of them, who rely on rental income to partially (or totally?) fund their retirement. That's awesome for them. Myself, I wouldn't touch it with a ten foot pole. But they sure aren't doing it wrong. I wonder if their portfolio is beating the market. Who cares?
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I'm not trying to be difficult here, but there is more than one way to invest to achieve your goals. We focus too much on things like total return at any given point, when we should be focusing on what matters... accumulating enough wealth/assets to achieve financial independence, and if you desire, retire early. For some people, index investing works. For others, dividend growth. There are people on these forums, and MMM is one of them, who rely on rental income to partially (or totally?) fund their retirement. That's awesome for them. Myself, I wouldn't touch it with a ten foot pole. But they sure aren't doing it wrong. I wonder if their portfolio is beating the market. Who cares?
While your point about everyone finding their own investing path is well taken, that doesn't mean you shouldn't do a reckoning and see if what you're doing is adding value vs a passive porfolio. For instance, if you've dedicated 40% of your portfolio to individual dividend stocks, you could easily compare that portion of your portfolio to a high dividend focused ETF. Perhaps you're under-performing, have higher volatility, or exactly mirroring it's performance, meaning that all your hours of research are essentially for naught.
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While your point about everyone finding their own investing path is well taken, that doesn't mean you shouldn't do a reckoning and see if what you're doing is adding value vs a passive porfolio. For instance, if you've dedicated 40% of your portfolio to individual dividend stocks, you could easily compare that portion of your portfolio to a high dividend focused ETF. Perhaps you're under-performing, have higher volatility, or exactly mirroring it's performance, meaning that all your hours of research are essentially for naught.
I totally agree. There's more than one way to invest and "make money", but obviously you should be attempting to do the best you can at whatever method or methods you choose. Unless you're only breaking even and still enjoy spending time researching stocks, in which case I guess you're the type of person who enjoys investing as a hobby. I, on the other hand, would like to believe my efforts are helping me achieve something beyond just killing time, hah.
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I personally am not actively trading so that I can match the S&P 500. I want to trounce the SPoos in the dirt and pee on the remains. But that's just me.
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For those of you who are very involved in micromanaging your investments, are you consistently beating the market? If not, why do you continue to do so?
For some there's more to it than just "beating the market".
Like what? Is it a hobby or something?
For some people, sure. But I don't think I was clear.
"Beating the market" doesn't even mean anything without some context. What market are you measuring against, the S&P 500? U.S. Stock market? World ex-US Stock market? Complete World Stock market? How does your risk vs return compare to the person next to you? Do you invest in a higher percentage of bonds to protect principal, with the consequence that during a bull run your portfolio grows 1.5% slower than someone who is 100% in equities? Does that mean you are losing? Or do you take more risk for ultimately greater return? When do you look at that return, in the middle of a bull run (right now when everything is up up up) or in 5 years when we have a 20% correction? How about a 50% collapse like in 2008/9? What if someone invests in blue chip stocks that gives them a return that lags the greater U.S. market during this bull run... but will keep more value and give off more dividends during a bear market. Did they lose to "the market" while the market had greater value, but win after equities pulled back and they can live off dividends without touching the principal?
I'm not trying to be difficult here, but there is more than one way to invest to achieve your goals. We focus too much on things like total return at any given point, when we should be focusing on what matters... accumulating enough wealth/assets to achieve financial independence, and if you desire, retire early. For some people, index investing works. For others, dividend growth. There are people on these forums, and MMM is one of them, who rely on rental income to partially (or totally?) fund their retirement. That's awesome for them. Myself, I wouldn't touch it with a ten foot pole. But they sure aren't doing it wrong. I wonder if their portfolio is beating the market. Who cares?
I was specifically thinking of the S&P500. I never think in the short term, especially as short as one year. I am more concerned with my return over 40+ years. I guess if you're planning to retire soon your thinking would be different, but then I'm not sure micromanaging your invests would be any safer if that is your goal. I just can't see the advantage here. It seems to me that most of the big wins are simply going to be luck, and you'll face as many big losses. Can you point out anyone who has consistently picked winners and avoided losers?
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Can you point out anyone who has consistently picked winners and avoided losers?
Not really. I don't follow any one person's stock picks over any significant period of time. I'm too busy focusing on my own :)
That said, noone in the world can pick all winners and avoid any losers no matter what strategy they're following. The key for any successful investor is to minimize the losers and the losers impact on your returns.
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I used to micromanage investments. I bought individual stocks. I did well, but I never purchased enough to make a killing. I kept some, dumped some, and mostly use index funds.
At present, I spend my time expanding my skills and working to earn more $$ so that I can save more in index funds. This may or may not be a better ROI than the other way around. In my case, it's working out well. =-)
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For those of you who are very involved in micromanaging your investments, are you consistently beating the market? If not, why do you continue to do so?
For some there's more to it than just "beating the market".
Like what? Is it a hobby or something?
ya it's a hobby of mine for sure, i play small positions on otc boards, aka scam stocks, i am talking about really small positions, like 500 to 1000. It's really fun. It's like vegas on my computer !
it brings me great pleasure when the scam stocks bring other people's money to me :D