Author Topic: What If You Just Picked Stocks... An Adventure Story  (Read 44622 times)

mrpercentage

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What If You Just Picked Stocks... An Adventure Story
« on: May 16, 2015, 08:40:40 AM »
Okay-- this has a twist, so I think it merits its own.

The year is 1999 and everyone is promising the end of the world. You decide that its best to be an optimist so you are gonna pick some stocks. The thing is you don't know what you are doing so it goes something like this:

1. Hey Warren Buffet knows what he is doing I will buy Berkshire Hathaway B.
2. Damn this Coke is good. I think I will buy some of that its been around since WWII right?
3. Nope I switched to Pepsi so I will buy that.
4. I think I will buy UPS they are better than the Postal Service.
5. Hey Lowes looks busy I think I will buy them.
6. My kid watches a #$%^ load of Disney. How about some of that.
7. Hey how about this Amazon company. They are neat.
8. Im selling stuff on Ebay so why not own some.
9. Hershey bars rule so Im buying some of that.
10. Fed Ex is just as good as UPS so I will get some.
11. I shop at Fry's and will never stop so I will buy some Kroger.
12. Hey this Starbucks is really good and its busy all the time.
13. There is a Wellsfargo in every $%^%^ing grocery store!!
14. Dillards is classy so why not?
15. Hell with it Macy's too.
16. Everyone is buying a Toyota
17. and a Honda
18. Cabelas is cool.

Now if you bought all that and held it what would it look like? Well the S&P 500 is the really thick red line.



What what if you bought Apple?



My point is.. it only takes one of those to make up for 3 crappy ones. This is how a Janitor makes $8,000,000
1. never sell
2. never rebalance
3. buy what you know
4. don't put all your eggs in one basket
5. use Robinhood for zero commission.
6. one, two, three... Go Buffet!!

forummm

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Re: What If You Just Picked Stocks... An Adventure Story
« Reply #1 on: May 16, 2015, 09:36:29 AM »
I don't know what your point is. But anyone can go back in time and point to some individual stocks that outperformed the index over that time period. The trick is to do it beforehand.

retireatbirth

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Re: What If You Just Picked Stocks... An Adventure Story
« Reply #2 on: May 16, 2015, 09:46:38 AM »
It's interesting that your first 18 stocks underperformed the index. Was that by design? I'd presume about 1/2 the large caps would outperform it while half would underperform it. That gives us an 0.0004% chance of doing so poorly to pick those 18 stocks. And, then presuming we were to pick a basket of 19 stocks, there's only a 4% chance we pick the top performing stock and a 17% chance we even pick a top 5 stock. I'll stick with the index.

Ohio Teacher

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Re: What If You Just Picked Stocks... An Adventure Story
« Reply #3 on: May 16, 2015, 09:58:04 AM »
I feel like there is some serious bias going on here.  If this thought process had really occurred in 1999, I find it hard to believe you wouldn't also think:
19. Hey, everyone's on the internet, how about some AOL?
20. Yahoo is huge, let's buy some of that too.
21. American cars matter too, let's go with GM.
22. Whoa pets.com!  Everyone has a pet, that is going to do well.
etc...


Indexer

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Re: What If You Just Picked Stocks... An Adventure Story
« Reply #4 on: May 16, 2015, 11:44:47 AM »
How would you know any of this in ADVANCE?

I can look at the past all day and look at the companies I could have bought.  I can then think of funny little ideas about how I would have picked those companies, but not the less performing ones(Blackberry to your Apple, Wachovia:Wells Fargo, Sears:Lowes, Yahoo:Amazon, Pets.com:Ebay, etc.). 

If you were actually in 1999 how did you pick these companies, especially the 3 tech companies & the one bank, but you managed to avoid the tech bubble(and all the companies that crashed), and you managed to pick a bank that actually came out of 2008 ok?  I HIGHLY doubt that if we took you back to 1999 you would have picked Apple.  In 1999 everyone was looking for the next Microsoft, and Apple was still the company Microsoft had walked all over.  Based on information available then you would have been more likely to pick Dell, Nokia, or Blackberry.

Quote
6. one, two, three... Go Buffet!!

Read the Intelligent Investor.  Benjamin Graham(Buffet's mentor) wrote it.  Any follower of Graham(including Buffet) would have actually been bearish in 1999(Buffet was), and they would have avoided new 'hot stocks' like Amazon & Ebay. 

mrpercentage

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Re: What If You Just Picked Stocks... An Adventure Story
« Reply #5 on: May 16, 2015, 03:39:58 PM »
You wouldn't know before hand. You would buy what you know now just not all in the same place.

If you were 5% Apple and 95% GM-- you would 100% win.
If you were 10% Starbucks and 90% Fannie Mae-- you would 100% win.
If you were 20% Lowes and 80% (insert loser here)-- you would 100% win.

You see the genius of not rebalancing? For buy and hold to work you have to Hold

frugledoc

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Re: What If You Just Picked Stocks... An Adventure Story
« Reply #6 on: May 16, 2015, 03:55:57 PM »
What if you were 50% GM and 50% Fannie Mae?  Buy and hold only works if you chose winners

mrpercentage

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Re: What If You Just Picked Stocks... An Adventure Story
« Reply #7 on: May 16, 2015, 06:34:57 PM »
How would you know any of this in ADVANCE?

I can look at the past all day and look at the companies I could have bought.  I can then think of funny little ideas about how I would have picked those companies, but not the less performing ones(Blackberry to your Apple, Wachovia:Wells Fargo, Sears:Lowes, Yahoo:Amazon, Pets.com:Ebay, etc.). 

If you were actually in 1999 how did you pick these companies, especially the 3 tech companies & the one bank, but you managed to avoid the tech bubble(and all the companies that crashed), and you managed to pick a bank that actually came out of 2008 ok?  I HIGHLY doubt that if we took you back to 1999 you would have picked Apple.  In 1999 everyone was looking for the next Microsoft, and Apple was still the company Microsoft had walked all over.  Based on information available then you would have been more likely to pick Dell, Nokia, or Blackberry.

Quote
6. one, two, three... Go Buffet!!

Read the Intelligent Investor.  Benjamin Graham(Buffet's mentor) wrote it.  Any follower of Graham(including Buffet) would have actually been bearish in 1999(Buffet was), and they would have avoided new 'hot stocks' like Amazon & Ebay.
I will read that next. I was illustrating how many winners are out there if you refuse to sell. Buffet is still buying companies like coke. Companies that are right in your face today

forummm

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Re: What If You Just Picked Stocks... An Adventure Story
« Reply #8 on: May 16, 2015, 06:41:43 PM »
I will read that next. I was illustrating how many winners are out there if you refuse to sell. Buffet is still buying companies like coke. Companies that are right in your face today

Berkshire Hathaway hasn't bought a single share of Coke in over 20 years.

mrpercentage

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Re: What If You Just Picked Stocks... An Adventure Story
« Reply #9 on: May 16, 2015, 07:03:22 PM »
I said like Coke. How about Kraft? Or IBM? Big in your face companies right. Did he not say buy companies you like at the price you like and hold them for 20 years? Well I like everyone of those companies and would have likely invested in at least ten of them. Throw in some Ford and the makerss of Viagra (4hr erection commercial would have convinced me). Probably some Microsoft and Sony because of my Play Station 1 and 2 from years ago and maybe some Time Warner because of HBO and Paramount and Sea World and definitely Six Flags. I did drink a lot of Starbucks but I won't claim them or Apple because that wouldn't be fair. They didn't all out perform the 500 but I wouldn't need them to.
« Last Edit: May 16, 2015, 07:45:48 PM by mrpercentage »

mrpercentage

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Re: What If You Just Picked Stocks... An Adventure Story
« Reply #10 on: May 16, 2015, 07:34:22 PM »
It's interesting that your first 18 stocks underperformed the index. Was that by design? I'd presume about 1/2 the large caps would outperform it while half would underperform it. That gives us an 0.0004% chance of doing so poorly to pick those 18 stocks. And, then presuming we were to pick a basket of 19 stocks, there's only a 4% chance we pick the top performing stock and a 17% chance we even pick a top 5 stock. I'll stick with the index.
Everyone of them beat the index. The index is the thick line. Starbucks is the thin red. And yes that was by design. Some underperformed for years and if you sold them you would have lost. I picked those by design too. It shows holding for the long 20 year Buffet recommendation often wins even when everyone else is calling you a fool for years.

sol

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Re: What If You Just Picked Stocks... An Adventure Story
« Reply #11 on: May 16, 2015, 07:52:22 PM »
I love threads like this. 

The premise is "what if you could see the future and pick the best performing stocks?" and the answer, as usual, is "you can get really really rich."

But, of course, nobody was buying those perfect stocks in 1999.  The most traded stock of 1999 was AOL, which closed the year at about $87.50.  Any guesses what that's worth today?

I think this sort of analysis, focusing on the most traded stocks of 1999, is probably more representative of the returns a real investor might have realized since then than is the fantasy list presented in the OP.  My quick googling turned up a list of the most traded stocks of 1999, anyone want to repeat the OP's analysis for the top 18 of these?  Maybe even the top 5?

http://www.nyxdata.com/nysedata/asp/factbook/viewer_edition.asp?mode=table&key=457&category=3

There's some overlap between the two lists. (Disney, Coke, Pepsi) but also some investments that turned out to be real stinkers (AOL, Compaq, Citigroup).  Apple didn't make the top 50, but there sure are a bunch of other formerly high flying tech companies that have since crashed and burned.
« Last Edit: May 16, 2015, 07:59:11 PM by sol »

mrpercentage

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Re: What If You Just Picked Stocks... An Adventure Story
« Reply #12 on: May 16, 2015, 08:10:28 PM »
Good points. But take yourself back to 99 and think of 10 companies you frequently used then back test it with an equal portion in each

sol

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Re: What If You Just Picked Stocks... An Adventure Story
« Reply #13 on: May 16, 2015, 08:36:40 PM »
Good points. But take yourself back to 99 and think of 10 companies you frequently used then back test it with an equal portion in each

Oh man, that's a terrible idea.  My top 10 personal use companies of 1999 included lots of things you couldn't actually buy stock in (like naptser, linux, and altavista) and would have included things like IBM, HP, Compaq, and Texas Instruments on the technology side (which would not have worked out so well for me).  On the non-tech side it would be harder to pick, but it would have been stuff like regional grocery store chains and bike brands.  It certainly wouldn't have been Lowe's and Apple, that's for sure.  Those were second-rate also-rans in their respective industries at that point in time, if they had even made it onto the radar of a college kid.
« Last Edit: May 17, 2015, 04:31:33 PM by sol »

mrpercentage

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Re: What If You Just Picked Stocks... An Adventure Story
« Reply #14 on: May 16, 2015, 09:45:01 PM »
Well I'm following through with this logic. I won't be 100% picked stocks but I will add ABT, JNJ, and KMD to the list. That's baby formula, diapers, and such. No soda for you huh? I drank it like a mofo. Either brand a winner

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Re: What If You Just Picked Stocks... An Adventure Story
« Reply #15 on: May 17, 2015, 05:24:35 AM »
#2 and #4 directly contradict each other.

Rubic

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Re: What If You Just Picked Stocks... An Adventure Story
« Reply #16 on: May 17, 2015, 07:45:12 AM »
The year 1999 was a great year to back up the truck on Berkshire Hathaway.  The market had gone mad with the dot-coms and everybody thought Mr Buffett had just lost it, that he just didn't get tech companies.  But Berkshire was actually making money hand over fist (turbo-charged with insurance float) while many of the tech businesses already had their most optimistic futures baked into their evaluations.  Most importantly, you could then buy shares of Berkshire Hathaway with an incredible Margin of Safety for about 50 cents on the dollar.  These opportunities may arise only a few times in one's investing career.

The year 1999 was a poor time to purchase KO. I forget what the P/E was back then, but I remember thinking it was something near the 70's days of the "Nifty 50".  Depending on when you purchased Coke, you could have underperformed the S&P 500 even after holding it for the next decade, assuming you had that much patience.

So we have two outstanding companies in 1999, but with a big difference in outcomes.  The difference is the price which was paid, your Margin of Safety.  Identifying outstanding companies is the easy task.  Establishing their current/future value reliably is quite another.  Of the companies you mention above, have you established that you would be buying any them at a discount?  What makes your calculations better than other securities analysts?  I'm not being snarky, it's just that you should have quantifiable reasons for why your judgement is superior to the market's.

Roland of Gilead

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Re: What If You Just Picked Stocks... An Adventure Story
« Reply #17 on: May 17, 2015, 08:12:44 AM »
1999

hey, Radio Shack is like everywhere, load up on that

Nokia will be the dominant cell phone maker forever I bet

Kodak is name brand quality stuff...heck, they invented the digital camera...sign me up!

Fuck diversity, I will just put 33% in each of those.

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Re: What If You Just Picked Stocks... An Adventure Story
« Reply #18 on: May 17, 2015, 08:50:45 AM »
1999

hey, Radio Shack is like everywhere, load up on that

Nokia will be the dominant cell phone maker forever I bet

Kodak is name brand quality stuff...heck, they invented the digital camera...sign me up!

Fuck diversity, I will just put 33% in each of those.

How about Circuit City?

K-mart is pretty cool, too!

I like Kinko's a lot, buy $10,000.

Side note: is anyone else thinking that if we just ignore the problem it will go away?
« Last Edit: May 17, 2015, 08:57:00 AM by NICE! »

forummm

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Re: What If You Just Picked Stocks... An Adventure Story
« Reply #19 on: May 17, 2015, 09:02:55 AM »
1999

hey, Radio Shack is like everywhere, load up on that

Nokia will be the dominant cell phone maker forever I bet

Kodak is name brand quality stuff...heck, they invented the digital camera...sign me up!

Fuck diversity, I will just put 33% in each of those.

I'm not quite as risk-embracing as you. I'll add Worldcom (they OWN the Internet--the actual network that everyone is using--it's going to be HUGE) and Enron (Everyone uses gas and electricity! They have $100 billion in annual revenues! The most innovative company ever!) and Tyco (They're on fire! They've bought 1,000 companies this decade!). I'll put 16.6% in all 6 of these.

bacchi

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Re: What If You Just Picked Stocks... An Adventure Story
« Reply #20 on: May 17, 2015, 11:02:11 AM »
I'm not quite as risk-embracing as you. I'll add Worldcom (they OWN the Internet--the actual network that everyone is using--it's going to be HUGE) and Enron (Everyone uses gas and electricity! They have $100 billion in annual revenues! The most innovative company ever!) and Tyco (They're on fire! They've bought 1,000 companies this decade!). I'll put 16.6% in all 6 of these.

I'll match Worldcom with Cisco. They make the internet run. What could go wrong? Maybe a little of Juniper Networks, too, in case Cisco lags behind the competition.


Dodge

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Re: What If You Just Picked Stocks... An Adventure Story
« Reply #21 on: May 17, 2015, 11:14:40 AM »
Side note: is anyone else thinking that if we just ignore the problem it will go away?

I have, but this site is full of people new to investing who have similar ideas (and might be too timid to put their thoughts out there), so engaging here might prevent 10 new market-timing threads a week.  Hmm, I wonder how quickly that compounds :)

Indexer

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Re: What If You Just Picked Stocks... An Adventure Story
« Reply #22 on: May 17, 2015, 11:19:15 AM »
1999

hey, Radio Shack is like everywhere, load up on that

Nokia will be the dominant cell phone maker forever I bet

Kodak is name brand quality stuff...heck, they invented the digital camera...sign me up!

Fuck diversity, I will just put 33% in each of those.

Forget Nokia!  Blackberry is the future.  Everyone is going to have a little personal computer as a phone, and Blackberry is already way ahead of everyone else.

forummm

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Re: What If You Just Picked Stocks... An Adventure Story
« Reply #23 on: May 17, 2015, 11:20:38 AM »
Side note: is anyone else thinking that if we just ignore the problem it will go away?

I have, but this site is full of people new to investing who have similar ideas (and might be too timid to put their thoughts out there), so engaging here might prevent 10 new market-timing threads a week.  Hmm, I wonder how quickly that compounds :)

Maybe I should start some of those threads to beat the market. If I start 10 and 3 do really well, then I just advertise the 3 and their success while deleting the other 7. Then I can trick people with my survivorship bias.

sol

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Re: What If You Just Picked Stocks... An Adventure Story
« Reply #24 on: May 17, 2015, 11:38:02 AM »
The sad part is that I'm pretty sure the OP is missing the point here.

So I'll spell it out for you.  People in this thread are laughing because no one in 1999 had any idea that Apple and Lowe's and Amazon would do so well.  The obvious market leaders from that year are mostly long forgotten failures, and those companies that the OP picked as huge success stories weren't on anyone's radar back then, or they were part of a much larger landscaping of competing companies that looked poised to do much better.  No one knew which of the milllions of companies traded that year would turn into magical profit-generating machines.  Most people who tried to guess, guessed wrong.

Apple was a washed up disaster in 1999.  The Newton had just been discontinued and the first iMac, the stupid bubbly plastic one, had just debuted to terrible reviews.  The ipod was still years away.  The stock had shown a little run up during the tech bubble, like every other tech stock, but in 2001 it would crash to less than half of its 1998 pre-bubble value and would stay there for years and years to come.  WinXP was already being touted as the future of personal computing. 

Which is just to point out that in 1999 NOBODY knew Apple would grow to be the most valuable corporation in all of human history.  Not even Steve Jobs.  It was, for decades, always second fiddle to more serious technology companies.  Many of those companies are now worthless.

If you think you can look at today's landscape and predict which of today's technology giants will be worthless in 15 years, and which obscure tech company that everyone knows about (but nobody expects to ever do anything) is about to become a stock market superstar, then you too can get fabulously rich like the hypothetical crystal ball investor in the original post up top.  I'd like to hear your predictions.

Icecreamarsenal

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Re: What If You Just Picked Stocks... An Adventure Story
« Reply #25 on: May 17, 2015, 03:22:01 PM »
Well put as usual Sol. I hope op catches this, for his sake.

forummm

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Re: What If You Just Picked Stocks... An Adventure Story
« Reply #26 on: May 17, 2015, 03:35:43 PM »
If you think you can look at today's landscape and predict which of today's technology giants will be worthless in 15 years, and which obscure tech company that everyone knows about (but nobody expects to ever do anything) is about to become a stock market superstar, then you too can get fabulously rich like the hypothetical crystal ball investor in the original post up top.  I'd like to hear your predictions.

Or which companies like Facebook that didn't even exist in the minds of their creators then, but are now worth >$100 billion.

AlexK

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Re: What If You Just Picked Stocks... An Adventure Story
« Reply #27 on: May 17, 2015, 03:52:03 PM »
Buffett himself would tell you to buy low cost index funds. Why would you not listen to your idol?

forummm

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Re: What If You Just Picked Stocks... An Adventure Story
« Reply #28 on: May 17, 2015, 04:13:23 PM »
Buffett himself would tell you to buy low cost index funds. Why would you not listen to your idol?

But what if you're a better investor than Buffett?

mrpercentage

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Re: What If You Just Picked Stocks... An Adventure Story
« Reply #29 on: May 17, 2015, 06:54:33 PM »
@sol-- laugh it's cool. My point is 1999 was apparently a bad time to buy. Y2K and all. These stocks went through 2 bad markets and arguably 3. You get paid by the amount of uncertainty you are able to handle and your ability to honor long time commitments in all things. That is true in careers; it's true in stocks. Funny thing is you would have called me a loser then just like you think I'm a loser now. Oh wait over all my stock purchases are up 5% in 3 months and some were just purchased killing my return rate.

@rubic--I'm not saying the method described is better. In my example security analysis is not even used. I remember seeing Apple in an Internet cafe on the movie "the Beach" in February 2000. Apple wasn't off the map. Apple just came back on the map with their colorful all in one iMacs. If I bought stock when I switched to all Apple that would have been 2007. Here: https://youtu.be/L8KmI0Htu6w?t=1h32m57s the audio is distorted but point is made

There is nothing wrong with an index. Just like there is nothing wrong with picking a few stocks and holding them forever. There will always be someone to call you a loser either way.
« Last Edit: May 17, 2015, 07:16:08 PM by mrpercentage »

sol

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Re: What If You Just Picked Stocks... An Adventure Story
« Reply #30 on: May 17, 2015, 07:25:21 PM »
you would have called me a loser then just like you think I'm a loser now.

I don't think you're a loser.  I think you're an eager and enthusiastic investor with dreams of fabulous riches, and I think those dreams have colored your perspective on how hard stock picking really is. 

I'm just trying to remind everyone that "buy Apple and Amazon in 1999 and get super rich" isn't exactly the kind of actionable plan someone can follow today, because we don't know what the big winners of the next fifteen years will be.  I'm sure some of them don't even exist yet.

mrpercentage

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Re: What If You Just Picked Stocks... An Adventure Story
« Reply #31 on: May 17, 2015, 08:34:19 PM »
That's fair Sol. I just don't think it's right to compare buying and holding index to trading stocks. If you do apples to apples individual stocks can often win. You might not sleep as well watching some go to zero but in the end, 20 years later, a couple of good choices will absolutely win. Maybe not filthy rich but better than the 500

Indexer

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Re: What If You Just Picked Stocks... An Adventure Story
« Reply #32 on: May 17, 2015, 08:52:56 PM »
I don't think anyone is laughing.  I think people are concerned.   

Quote from: mrpercentage
In my example security analysis is not even used.

Red flag?  You are winging it.  You are talking about building a portfolio of 'individual' stocks based on no research whatsoever.  Investing in anything other than a target retirement (index)fund or having a low cost investment advisor(fee only... not a broker) requires serious WORK on your part.  If you try to jump in based solely on what has done well in the 'past' that is recipe for disaster.   This is the EXACT behavior that Buffet is always warning people against. 

Indexing(or mutual funds in general):  This strategy requires some work on the front end, but it is easy to maintain.  You need to figure out your AA(based on goals/risk tolerance/time/etc.), and then rebalance.  Rebalancing is HUGE.  When you rebalance a portfolio you are by design selling high and buying low.  You can be 100% stocks and still rebalance.  You keep the sub asset allocations(international, domestic, small, large, etc.) in line.  So you end up buying more international when it is cheap, and you buy more large caps when they are cheap, etc.

Individual stocks:  This is a TON of work.  You can't wing it.  Graham(and Buffet) would tell you never to buy a company even if it is the GREATEST company on Earth unless you can buy it at a good value.  An amazing company can still be too expensive, and a terrible company can be traded at less than it is really worth.  What you pay matters.  Buffet doesn't just look at the stuff you can easily find online.  He reads the annual reports, the tax statements, etc.  He also pays attention to price, and sometimes he won't buy anything... because there is nothing worth buying at that time at that price(1999 would be a great example of this).

A lot of people with no training, no experience, and who aren't ready to put in the work try to play the stock market.  Of all the people competing in the market this is the group most likely to lose their shirts.  You are on an investing forum asking for opinions.... I think many of us are concerned because you are winging it. 

It isn't just a difference of strategy.  There are guys on here who have a completely different investing philosophy than I.  I like indexing, most of my allocation is fixed based on my goals, but I get tactical with about 10% of the portfolio.  Some guys are 100% fixed indexing.  Some people like playing ETFs using either tactical allocations or even trying to market time using technical analysis.  Some people actually pick individual stocks, and while I don't agree with their strategy from talking to them I can tell they have done their homework.  Apple went up a lot in the past, and I own an Apple computer..... is not doing your homework.
« Last Edit: May 17, 2015, 08:55:27 PM by Indexer »

mrpercentage

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Re: What If You Just Picked Stocks... An Adventure Story
« Reply #33 on: May 17, 2015, 09:21:08 PM »
Okay its irresponsible to show someone winning without doing homework. For God sakes when it comes to giving something your money.. especially a lot of it-- do homework. If this includes Q's, crowd psychology, ratio's, the news, the sector, the time of year of what not.. Im with you.

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Re: What If You Just Picked Stocks... An Adventure Story
« Reply #34 on: May 18, 2015, 12:44:00 AM »
I really think you should listen to sol, he's staying remarkably level-headed when myself and a few others are on the verge of losing our ability to be nice.

Whenever you reply, it seems to me that you conveniently ignore anything that asks you to expound upon your points and explain your underlying ideas. Read the last part of sol's post and respond to that, but don't just list 15 with some witty sentence like 'my kid likes Disney so let's buy that.' Give us some actual analysis. We don't need to hear that Coke tastes good. We know.

Indexer

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Re: What If You Just Picked Stocks... An Adventure Story
« Reply #35 on: May 18, 2015, 05:44:15 PM »
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Okay its irresponsible to show someone winning without doing homework.

Did you actually do these trades in 1999?  If the answer is no then you can't claim anyone is winning. 

If someone actually did these trades and they did homework and they could justify it... I would say they did a good job, and maybe they should keep investing their own money. 

If someone actually did these trades based on no research... I would say they were lucky and they shouldn't try to repeat this process.

ender

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Re: What If You Just Picked Stocks... An Adventure Story
« Reply #36 on: May 18, 2015, 07:22:00 PM »
Good points. But take yourself back to 99 and think of 10 companies you frequently used then back test it with an equal portion in each

How do you suggest avoiding recency bias while doing this?

forummm

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Re: What If You Just Picked Stocks... An Adventure Story
« Reply #37 on: May 18, 2015, 07:43:57 PM »
Good points. But take yourself back to 99 and think of 10 companies you frequently used then back test it with an equal portion in each

How do you suggest avoiding recency bias while doing this?

And bias in favor of the very biggest companies that have already grown a lot?

If I thought about it, I probably use products from over 100 (perhaps several hundred) companies I could identify. How do I narrow the list to 10? Just to send this post I'm using at least 2 utilities, 2 hardware manufacturers, 2 software companies, furniture from 3 retailers, clothes from 2 retailers, digesting food from 2 grocers, etc.

mrpercentage

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Re: What If You Just Picked Stocks... An Adventure Story
« Reply #38 on: May 18, 2015, 08:24:14 PM »
I found most of those companies thinking about 99. Not today. You wouldn't have to limit it to ten. Hypothetically I could buy 50 companies with $1000 using Robinhood now. That's why I think the rules are changing. I wouldn't be able to buy high cost per share companies like Netflix but $26 Mattel, $15 Ford or $100 Johnson and Johnson, $66 JP Morgan, or a $145 Berkshire Hathaway B-- no problem. I could build it a share at a time and buy the greatest value of my picks every month.

I think it may actually become a very ligit strategy now

ender

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Re: What If You Just Picked Stocks... An Adventure Story
« Reply #39 on: May 18, 2015, 08:34:33 PM »
I found most of those companies thinking about 99. Not today. You wouldn't have to limit it to ten. Hypothetically I could buy 50 companies with $1000 using Robinhood now. That's why I think the rules are changing. I wouldn't be able to buy high cost per share companies like Netflix but $26 Mattel, $15 Ford or $100 Johnson and Johnson, $66 JP Morgan, or a $145 Berkshire Hathaway B-- no problem. I could build it a share at a time and buy the greatest value of my picks every month.

You are biased in thinking of companies that existed in 99, but have been successful since then.

The problem comes that you will remember much fewer companies that were equally as "good to pick" in 99. Because they either didn't do well, were mediocre, or otherwise aren't in your mind now.

In fact, the .com bubble probably would have blown this strategy apart immediately in the years following your picking in 99 - just like many, many others had their brilliance blown away.

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I think it may actually become a very ligit strategy now

Oh come on, picking stocks in hindsight and being impressed with your brilliance?

mrpercentage

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Re: What If You Just Picked Stocks... An Adventure Story
« Reply #40 on: May 18, 2015, 09:14:40 PM »
Take note of today's 500 performance. Now look at the performance of my Robinhood account. That spread is quite common. Im building wealth a few and sometimes 1 share at a time.



Roland of Gilead

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Re: What If You Just Picked Stocks... An Adventure Story
« Reply #41 on: May 18, 2015, 09:29:22 PM »
Sigh, anyone can pick a few stocks and get lucky for awhile.

Last year I was up 70% in my trading account while the S&P500 was up just a few %.  I then bought heavily into some oil stocks because oil had crashed to the ridiculously low level of $80.   I ended up being about even with the S&P500.  Easy come easy go.

Maybe you will get lucky for a few years and then think you have it all figured out.  That is when you will decide to go all in.

mrpercentage

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Re: What If You Just Picked Stocks... An Adventure Story
« Reply #42 on: May 19, 2015, 02:10:14 AM »
My diversification looks like this.. it will be a little more balanced as I build into some positions and add some. I will heed your warning though. I will keep reading. I will keep learning


frugalnacho

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Re: What If You Just Picked Stocks... An Adventure Story
« Reply #43 on: May 19, 2015, 07:28:58 AM »
That's fair Sol. I just don't think it's right to compare buying and holding index to trading stocks. If you do apples to apples individual stocks can often win. You might not sleep as well watching some go to zero but in the end, 20 years later, a couple of good choices will absolutely win. Maybe not filthy rich but better than the 500

You realize that an index is just comprised of all the stocks in the index?  If there were no transaction fees, then all investor dollars would average out to the same return as the index fund, by definition.  What you are saying is that over a 20 year period you are going to be better than the vast majority of people investing.  You are going to have greater than average returns, and someone else is going to have less than average returns.  Makes me wonder why that other guy is going to buy all the turds and avoid all the great companies if it's so easy to just buy the winners like you suggest.

Although I have to wonder why you are investing at all.  Why didn't you just play 24-29-38-48-52-32 in the May 16, 2015 power ball drawing?  It's so obvious that 24-29-38-48-52-32 were the correct numbers to play, so why didn't you just invest your money there?

NICE!

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Re: What If You Just Picked Stocks... An Adventure Story
« Reply #44 on: May 19, 2015, 07:31:40 AM »
My diversification looks like this.. it will be a little more balanced as I build into some positions and add some. I will heed your warning though. I will keep reading. I will keep learning



This chart means nothing. As far as I'm concerned, you have 12% in melons, 17% in diapers, 30% in used Philosophy 101 textbooks, 9% in commercial lubricants, etc.

Although I have to wonder why you are investing at all.  Why didn't you just play 24-29-38-48-52-32 in the May 16, 2015 power ball drawing?  It's so obvious that 24-29-38-48-52-32 were the correct numbers to play, so why didn't you just invest your money there?

You hit the nail on the head, frugalnacho.

forummm

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Re: What If You Just Picked Stocks... An Adventure Story
« Reply #45 on: May 19, 2015, 08:46:51 AM »
That's fair Sol. I just don't think it's right to compare buying and holding index to trading stocks. If you do apples to apples individual stocks can often win. You might not sleep as well watching some go to zero but in the end, 20 years later, a couple of good choices will absolutely win. Maybe not filthy rich but better than the 500

You realize that an index is just comprised of all the stocks in the index?  If there were no transaction fees, then all investor dollars would average out to the same return as the index fund, by definition.  What you are saying is that over a 20 year period you are going to be better than the vast majority of people investing.  You are going to have greater than average returns, and someone else is going to have less than average returns.  Makes me wonder why that other guy is going to buy all the turds and avoid all the great companies if it's so easy to just buy the winners like you suggest.

Although I have to wonder why you are investing at all.  Why didn't you just play 24-29-38-48-52-32 in the May 16, 2015 power ball drawing?  It's so obvious that 24-29-38-48-52-32 were the correct numbers to play, so why didn't you just invest your money there?

24-29-38-48-52-32 are the numbers I remember using a lot last week.

forummm

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Re: What If You Just Picked Stocks... An Adventure Story
« Reply #46 on: May 19, 2015, 08:49:26 AM »
My diversification looks like this.. it will be a little more balanced as I build into some positions and add some. I will heed your warning though. I will keep reading. I will keep learning



This chart means nothing. As far as I'm concerned, you have 12% in melons, 17% in diapers, 30% in used Philosophy 101 textbooks, 9% in commercial lubricants, etc.


LMAO!

I'm too lazy to post my diversification, so you can just imagine 10,000 little slivers on the pie.

mrpercentage

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Re: What If You Just Picked Stocks... An Adventure Story
« Reply #47 on: May 19, 2015, 09:11:49 AM »
Still winning stayed up to buy on the opening dip. Night

Cpa Cat

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Re: What If You Just Picked Stocks... An Adventure Story
« Reply #48 on: May 19, 2015, 09:20:19 AM »
When I was first interested in investing, I read an investing book that advised "buy what you know." I had another book that told you how to pick stocks (PE ratio, debt-income, blah blah blah). So I would pick companies that were interesting to me, then I would look at their stats and make a decision. Totally smart, right?

It was a disaster. After two years of holding, I wised up and sold everything. Nearly everything except 3M was a loss. Had I held 3M longer, it would have continued to do well - but not as well as my fund portfolio.

I actually still own my shares of one of those companies. I think I bought for around $10/share - 100 shares. Somewhere around a share value of $1, they consolidated into 50 shares. At that point, I couldn't sell them, because when I tried, Etrade told me I had to use lots of at least 100. Now they're worth 12c per share.

They sit as a reminder of the error of my ways.

It's been nearly 10 years... Technically, every one of my stock picks still exists. They still under-performed my diversified portfolio.


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Re: What If You Just Picked Stocks... An Adventure Story
« Reply #49 on: May 19, 2015, 09:28:09 AM »
Survivorship bias anyone?