The Money Mustache Community
Learning, Sharing, and Teaching => Investor Alley => Topic started by: mrpercentage on May 16, 2015, 08:40:40 AM
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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.
(http://i820.photobucket.com/albums/zz124/azwolf25/Screen%20Shot%202015-05-16%20at%207.10.42%20AM.jpg) (http://s820.photobucket.com/user/azwolf25/media/Screen%20Shot%202015-05-16%20at%207.10.42%20AM.jpg.html)
What what if you bought Apple?
(http://i820.photobucket.com/albums/zz124/azwolf25/Screen%20Shot%202015-05-16%20at%207.12.09%20AM.jpg) (http://s820.photobucket.com/user/azwolf25/media/Screen%20Shot%202015-05-16%20at%207.12.09%20AM.jpg.html)
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!!
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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.
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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.
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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...
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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.
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.
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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
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What if you were 50% GM and 50% Fannie Mae? Buy and hold only works if you chose winners
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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.
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
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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.
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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.
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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.
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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.
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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
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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.
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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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#2 and #4 directly contradict each other.
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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.
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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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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?
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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.
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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.
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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 :)
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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.
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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.
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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.
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Well put as usual Sol. I hope op catches this, for his sake.
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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.
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Buffett himself would tell you to buy low cost index funds. Why would you not listen to your idol?
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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?
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@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.
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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.
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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
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I don't think anyone is laughing. I think people are concerned.
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.
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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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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.
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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.
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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?
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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.
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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
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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.
I think it may actually become a very ligit strategy now
Oh come on, picking stocks in hindsight and being impressed with your brilliance?
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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.
(http://i820.photobucket.com/albums/zz124/azwolf25/IMG_1354.jpg) (http://s820.photobucket.com/user/azwolf25/media/IMG_1354.jpg.html)
(http://i820.photobucket.com/albums/zz124/azwolf25/IMG_1353.jpg) (http://s820.photobucket.com/user/azwolf25/media/IMG_1353.jpg.html)
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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.
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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
(http://i820.photobucket.com/albums/zz124/azwolf25/Screen%20Shot%202015-05-19%20at%2012.45.59%20AM.jpg) (http://s820.photobucket.com/user/azwolf25/media/Screen%20Shot%202015-05-19%20at%2012.45.59%20AM.jpg.html)
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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?
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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
(http://i820.photobucket.com/albums/zz124/azwolf25/Screen%20Shot%202015-05-19%20at%2012.45.59%20AM.jpg) (http://s820.photobucket.com/user/azwolf25/media/Screen%20Shot%202015-05-19%20at%2012.45.59%20AM.jpg.html)
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.
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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.
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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
(http://i820.photobucket.com/albums/zz124/azwolf25/Screen%20Shot%202015-05-19%20at%2012.45.59%20AM.jpg) (http://s820.photobucket.com/user/azwolf25/media/Screen%20Shot%202015-05-19%20at%2012.45.59%20AM.jpg.html)
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.
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Still winning stayed up to buy on the opening dip. Night
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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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Survivorship bias anyone?
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This forum is the best.
And sol is quite a gentleman.
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I will say that I actually believe that beating the market is possible, but I have ZERO confidence in anyone doing it off of their gut or "investing in companies they know". Humans have almost too many investing biases to count (certainly too many for me to write about in 1 post). The only strategies that I would trust to beat the market are systematic in security selection, allocation, and rebalancing.
First of all, I do not know exactly what your portfolio is, but if you have over 5% of your portfolio in any 1 company then you are playing with fire. I have read plenty of studies on diversification benefits of individual stock portfolios. Once you get to 50 companies (2% per company) there is little gain in adding more companies. Less than 20 is foolish.Personally I would get it up to at least 30-40 (and I would consider that a high concentration).
I think not rebalancing is also a huge mistake. Let's say you started your experiment in 1999 with 10 companies. 4 of your companies went bankrupt in the dot com crash (certainly plausible considering where most people would have concentrated their portfolios). Then 3 more went bankrupt in 2008. 2 more tech stocks "survived" but are virtually worthless. 1 company is doing well and is worth almost 10 times what you paid for it. So you are about "even" (even though the market is higher). However, you now have 100% of your experiment in 1 company. I think that even you would find this dangerous. The problem is that a significant amount of companies from 20 years ago are gone or our almost unnecessary with technology changes. Rebalancing allows you to change with the times for the new and up and coming companies.
I think that an equal weight SP 500 fund may be a good fit for you. It would allow higher exposure to some of the newer companies that may be more innovative and disruptive to our future. The cap weighted sp 500 funds are heavily concentrated it the mega cap companies that have already received most of their growth. Keep in mind that equal weighted funds have a little more volatility than cap weighted funds, but have also been shown to outperform over long stretches.
In summary, even though most people that have commented wouldn't endorse either of our philosophies, that doesn't mean that I would come close to implementing what you would discuss. I wouldn't go as far as to say it is the dumbest thing you could do, but there are some significantly increased risks to what you are discussing.
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This forum is the best.
And sol is quite a gentleman.
+1
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And sol is quite a gentleman.
We can use the gentlemanliness with which sol negatively reacts to a proposed investment strategy as a litmus test for its inadvisability. Sol's responses in this thread have been nearly devoid of sardonic subtext; on that basis alone, I conclude the proposed strategy is not only ill-advised, but piteous.
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The OP sounds like my dumb ass in 1999 ;)
I couldn't get enough of those Janus Funds back then.
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The OP sounds like my dumb ass in 1999 ;)
I couldn't get enough of those Janus Funds back then.
That's the disconnect that I've been hoping to describe. OP is sort of looking at 18 of the top performing companies over the last 15 years and saying "what if?". A lot of people are countering with a what about the crappy companies (which I agree with), but maybe we can look at the top performing companies from 1985-1999. Those are the companies that OP is really talking about. He thinks he's looking forward, but it's all looking backward.
Also, he spends a lot of time talking about buying during the dip and how his stocks are up more over the course of the day or 3-months. Those are pointless metrics.
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I'm guessing mr percentage is young, probably in his 20s, going through the arrogance phase most of us index funders did before we eventually got sense drilled into us.
I think new investors need the excitement of stock picking before they learn. It is quite cool to outperform the best fund managers and feel like an investing God, until you lose.
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I'm guessing mr percentage is young, probably in his 20s, going through the arrogance phase most of us index funders did before we eventually got sense drilled into us.
I think new investors need the excitement of stock picking before they learn. It is quite cool to outperform the best fund managers and feel like an investing God, until you lose.
Not me. I bought the damn index fund. It takes a remarkable amount of delusion to credit your hunches as being smarter than the combined resources of the biggest industry on Earth.
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You can’t connect the dots looking forward; you can only connect them looking backward. --Steve Jobs
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I'm guessing mr percentage is young, probably in his 20s, going through the arrogance phase most of us index funders did before we eventually got sense drilled into us.
I think new investors need the excitement of stock picking before they learn. It is quite cool to outperform the best fund managers and feel like an investing God, until you lose.
I didn't need to pick stocks, either. I simply read Random Walk then Common Sense on Mutual Funds, which convinced me that I probably wouldn't duplicate what I read in Beating the Street. Oh, I also took a personal finance class in college where we stock picked and did the monkey dartboard test.
The monkey won. By a lot (+4% vs +20%).
Also, sol is performing admirably in this thread. I'm nearly at wits' end because OP is talking about daily and monthly gyrations in the market (among other misguided thoughts). I think that the literature has pretty much put to bed the idea that day-trading works unless you're a robo hedge fund type...and even then I just read that most underperformed the S&P500 last year, while being considerably more volatile and risky.
OP - note how bdbrooks advocated for a reasonable version of how to beat the market. I obviously disagree and have a ton more questions for him, but this thread isn't about him. Based upon what bdbrooks just said, I think that he/she will probably do close to what the market does. I am nowhere near as confident with your situation - I just hope that you learn lessons cheaply and soon. I think I speak for us all in that we truly do want you to succeed and know why you're succeeding, not just attributing to skill what is better attributed to luck.
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I think I speak for us all in that we truly do want you to succeed and know why you're succeeding, not just attributing to skill what is better attributed to luck.
This.
MrP, I'm one of those rare heretics on this forum who thinks it is plausible to beat an index over a long period of time. You however, have not given me confidence you know what you need to know to do so (HINT: It isn't easy.) The indexers are making very strong points and have most of the academic financial community on their side. I salute them.
Humility is likely a key trait of individual investors who beat the market. I have a little (really little) but I 'earned' it by doing stupid a few times before I began taking risk seriously.
Proceed cautiously, sir.
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As long as you watch expenses (including spreads and taxes) and diversify enough to reduce most of the idiosyncratic risks, you will probably be ok (you can look into the research on how many issues it takes for that, but it ain't remotely as many as 500). If it will help you hold on in the next bear market to see people buying some Kleenex, drinking some Coke and buying some UA at DKS, versus seeing the quoted price of VTI, then its probably not a bad strategy for you. Just mind the costs like a hawk. Vanguard is going to set a low bogey especially when you factor in the income they make from securities lending. Just remember, the average investor's return must equal the market's return minus expenses.
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Humility is likely a key trait of individual investors who beat the market. I have a little (really little) but I 'earned' it by doing stupid a few times before I began taking risk seriously.
No, consistency is. It's easy to beat the market over a short term period.
But what I care about is not whether you beat the market this year, or next year, or even over the next five years.
It's beating the market over a timeline long enough to be relevant that matters. And all it takes is a few meaningful mistakes to undo all the gains you've made over years or a lifetime of doing so.
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Humility is likely a key trait of individual investors who beat the market. I have a little (really little) but I 'earned' it by doing stupid a few times before I began taking risk seriously.
No, consistency is. It's easy to beat the market over a short term period.
But what I care about is not whether you beat the market this year, or next year, or even over the next five years.
It's beating the market over a timeline long enough to be relevant that matters. And all it takes is a few meaningful mistakes to undo all the gains you've made over years or a lifetime of doing so.
I don't know if "beating the market" is so important. Sure, it's great if you know you can do it. But the problem is that no one does. And the only ways to do it are to take risks. Risks that could easily lead to you dramatically underperform the market. If you're buying single stocks, your risk of huge loss grows. No one expected Enron, Worldcom, Fannie Mae, Lehman Brothers, etc, to go to $0. It can happen.
I think what's most important is getting to meet your financial goals with a reasonable level of confidence and the ability to maintain that financial status throughout a very long retirement period. Taking undue risk can really hamper that goal.
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As long as you watch expenses (including spreads and taxes) and diversify enough to reduce most of the idiosyncratic risks, you will probably be ok (you can look into the research on how many issues it takes for that, but it ain't remotely as many as 500). If it will help you hold on in the next bear market to see people buying some Kleenex, drinking some Coke and buying some UA at DKS, versus seeing the quoted price of VTI, then its probably not a bad strategy for you. Just mind the costs like a hawk. Vanguard is going to set a low bogey especially when you factor in the income they make from securities lending. Just remember, the average investor's return must equal the market's return minus expenses.
You are the closest to actually pinning me down. I would have extreme difficulty making sacrifices to invest in "some index". My most begrudged investments are my mutual funds that are giving me a >12% return. I mean who could complain about that right? It's easier for me to buy a piece of a company I think is worth while. Im more interest and more willing to sacrifice. Im willing to throw down more. I feel like I own something.
On cost.. Robinhood charges me zero. I see 100% of the gain. I don't feel like Im being suckered by anyone. I am steering away from trading and towards investing. Make no mistake, Im still learning. I know I write a lot. I don't think I have earned any glory. I learn more by engaging in discussion. Im also backed with a pension so probably have a much higher tolerance for risk then most.
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Ok, I have to reveal I am a bit of a hypocrite. Yesterday I bought 3000 shares of SDLP at $14.02 because I thought it was not tracking the positive gain in oil correctly, and today it corrected to the spike in oil so I sold it at $15.08. I still stand by my opinion that this is horse track type gambling, but damn it feels good to make $3000 in my Roth IRA in less than one day.
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I still stand by my opinion that this is horse track type gambling, but damn it feels good to make $3000 in my Roth IRA in less than one day.
Holding those two conflicting feelings simultaneously (the knowledge that I'm doing nothing more than gambling, along with the euphoria that comes from short-term "winning") would scare the fucking shit out of me.
Same as if, after surviving the terror of childhood with two alcoholic parents, I accidentally got drunk for the first time at age 30...and liked it....
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Holding those two conflicting feelings simultaneously (the knowledge that I'm doing nothing more than gambling, along with the euphoria that comes from short-term "winning") would scare the fucking shit out of me.
Same as if, after surviving the terror of childhood with two alcoholic parents, I accidentally got drunk for the first time at age 30...and liked it....
Yep. It has to be an addiction. I recognize it but the only thing I have been able to do in response is section off all of my gambling to one Roth IRA. Our other accounts have been in index funds for the past decade. I don't even make new contributions to this Roth...I made a deal that if I lose it all, I lose it all with no refills. Started with $1700 and it is now $74,000, although it was $80,000 last year before I lost a lot in oil.
But anyway, I should not have jumped down the OP's throat so much if my actions are not much better...glass houses and all.
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Ok, I have to reveal I am a bit of a hypocrite. Yesterday I bought 3000 shares of SDLP at $14.02 because I thought it was not tracking the positive gain in oil correctly, and today it corrected to the spike in oil so I sold it at $15.08. I still stand by my opinion that this is horse track type gambling, but damn it feels good to make $3000 in my Roth IRA in less than one day.
The market can stay irrational longer than you can stay solvent. In this case you didn't use some crazy leverage or short selling, so your risk was lower, but the point is the same.
How much have you done these kinds of trades? Have you tracked the success and failure vs an index, including transaction fees and bid/ask spreads?
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Ok, I have to reveal I am a bit of a hypocrite. Yesterday I bought 3000 shares of SDLP at $14.02 because I thought it was not tracking the positive gain in oil correctly, and today it corrected to the spike in oil so I sold it at $15.08. I still stand by my opinion that this is horse track type gambling, but damn it feels good to make $3000 in my Roth IRA in less than one day.
The market can stay irrational longer than you can stay solvent. In this case you didn't use some crazy leverage or short selling, so your risk was lower, but the point is the same.
How much have you done these kinds of trades? Have you tracked the success and failure vs an index, including transaction fees and bid/ask spreads?
I have not tracked year by year (I could probably try and get the records from E-trade but online they seem to only go back a few years). I started this account with $1700 rolled over from a 401K at a short term job. At the time I thought E-trade was cheap and unfortunately I have left it there instead of moving it to a cheaper broker. Some years I paid up to $700 in commissions on trades.
$1700 in 2001 (it might have been late 2000) and $74,000 today. Initially a lot of option trading but when I got it up to $10,000 I started doing more covered calls, deep spreads. I made a ton on Apple poor man's covered calls (couldn't afford the stock but could buy LEAPS and wrote near term calls against them over and over. Gilead was great to me (although had I just stayed with the Gilead stock I once had in there I would have a quarter million in the account).
$1700 to $74,000 in 14 years...what is that? 4200% return? About 30% a year compounded?
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Ok, I have to reveal I am a bit of a hypocrite. Yesterday I bought 3000 shares of SDLP at $14.02 because I thought it was not tracking the positive gain in oil correctly, and today it corrected to the spike in oil so I sold it at $15.08. I still stand by my opinion that this is horse track type gambling, but damn it feels good to make $3000 in my Roth IRA in less than one day.
The market can stay irrational longer than you can stay solvent. In this case you didn't use some crazy leverage or short selling, so your risk was lower, but the point is the same.
How much have you done these kinds of trades? Have you tracked the success and failure vs an index, including transaction fees and bid/ask spreads?
I have not tracked year by year (I could probably try and get the records from E-trade but online they seem to only go back a few years). I started this account with $1700 rolled over from a 401K at a short term job. At the time I thought E-trade was cheap and unfortunately I have left it there instead of moving it to a cheaper broker. Some years I paid up to $700 in commissions on trades.
$1700 in 2001 (it might have been late 2000) and $74,000 today. Initially a lot of option trading but when I got it up to $10,000 I started doing more covered calls, deep spreads. I made a ton on Apple poor man's covered calls (couldn't afford the stock but could buy LEAPS and wrote near term calls against them over and over. Gilead was great to me (although had I just stayed with the Gilead stock I once had in there I would have a quarter million in the account).
$1700 to $74,000 in 14 years...what is that? 4200% return? About 30% a year compounded?
Wow, sounds like you've done very well. Although we're ignoring any cost of time you spent on it--let's call it a hobby. Do you think you would recommend others to do this kind of thing? Do you think you just got lucky (say by happening not to hit the downside of some low frequency, but high loss events)? What makes someone who can yield positive returns (in addition to whatever time was required) vs an index?
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What makes someone who can yield positive returns vs an index?
The devil!! It's the devil giving RoG that power, in an effort to convince RoG to free him from the Roth cage that he's been trapped in! "Look RoG, we've done 30% returns for 15 years, through a market crash, various strategies, etc. It's pretty damn clear by now that it's not luck. You're a genius, and it would be foolish for you to NOT apply your genius to the rest of your portfolio!"
And of course that's the moment that, once freed from his cage, the devil says "LOLOLOL, looks like you just lost 90% of your whole portfolio, turns out it was all luck after all!"
So congrats to RoG for keeping that devil in his cage for as long as you have...that's some impressive determination!
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You had me so confused for a minute, because I associate RoG with RootofGood. :D
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The devil!! It's the devil giving RoG that power, in an effort to convince RoG to free him from the Roth cage that he's been trapped in! "Look RoG, we've done 30% returns for 15 years, through a market crash, various strategies, etc. It's pretty damn clear by now that it's not luck. You're a genius, and it would be foolish for you to NOT apply your genius to the rest of your portfolio!"
And of course that's the moment that, once freed from his cage, the devil says "LOLOLOL, looks like you just lost 90% of your whole portfolio, turns out it was all luck after all!"
So congrats to RoG for keeping that devil in his cage for as long as you have...that's some impressive determination!
Spot on. That devil is sitting there saying "what if you just went ahead and put that $1,000,000 you have sitting in that other account into this same gambling scheme?" You could be mega rich. Fortunately the other shoulder has wife, and wife can be a lot meaner than the devil if you piss her off.
But you have pinpointed the highest risk of all if one does not have that wife to battle the devil. One might think they are smart when all they are is just extremely lucky.
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Fortunately the other shoulder has wife, and wife can be a lot meaner than the devil if you piss her off.
My wife doesn't like my all the shares of MO I hold in our taxable account, but then I show her my YoC (>13%) on the first lot I bought in late 2008 and the dividend checks that roll in and she gets over it...
But my choice to go all stocks (except one mutual fund: LEXCX) was more driven to develop monthly income without having to deplete principal or appreciated shares to do it. I've got 15 companies, divided into groups of 5 on quarterly schedules, that I buy shares in on a monthly basis that's pretty well diversified, reasonably non-cyclical, and has a blended yield between 3.5-4% right now (twice what I'd get from an S&P500 Index Fund):
Group 1 (January, April, July, October):
Altria, Philip Morris International, Coca-Cola (except for the January check, which is paid in December), Kraft, Union Pacific
Group 2 (February, May, August, November):
Colgate-Palmolive, Procter & Gamble, Verizon, AT&T, Abbott Labs
Group 3 (March, June, September, December
Emerson Electric, 3M, Johnson & Johnson, McDonald's, IBM
I know it's easy to criticize the original list at the beginning of the thread as "cherry-picking" winners, but if it's obvious that certain industries have an established set of advantages that limits competition (railroads, telecoms, consumer brands, IP rights for Pharma), it seems to me to be a pretty straight forward task to build a rock solid portfolio. The youngest company in my portfolio is McDonald's (about 60 years), with the oldest being P&G (started as a candle/soap company in the early-mid 1800s); I think it's safe to say all will be around for a while because they make products or provide services that are essential to both the local and global economy. Moreover, all are listed in the US and have to comply with US securities laws, which while not perfect, at least allow a casual investor to review balance sheets and cash flow statements to watch for any abrupt changes in corporate performance in a relatively easy manner. I say if you're willing to be diligent, go for it with a concentrated stock portfolio, or at least go for a 50/50 mix of stocks/funds.
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I know it's easy to criticize the original list at the beginning of the thread as "cherry-picking" winners, but if it's obvious that certain industries have an established set of advantages that limits competition (railroads, telecoms, consumer brands, IP rights for Pharma), it seems to me to be a pretty straight forward task to build a rock solid portfolio. The youngest company in my portfolio is McDonald's (about 60 years), with the oldest being P&G (started as a candle/soap company in the early-mid 1800s); I think it's safe to say all will be around for a while because they make products or provide services that are essential to both the local and global economy. Moreover, all are listed in the US and have to comply with US securities laws, which while not perfect, at least allow a casual investor to review balance sheets and cash flow statements to watch for any abrupt changes in corporate performance in a relatively easy manner. I say if you're willing to be diligent, go for it with a concentrated stock portfolio, or at least go for a 50/50 mix of stocks/funds.
Back on topic, it is not exactly easy to pin down if advantages will limit competition in the long term (or even the medium term).
Kodak was around for over 100 years, once had 90% of the photographic film market, and was a pioneer in digital photography. Bust
Motorola has been around in some form for over 70 years, pioneered the mobile phone, and rather recently had lost so much money they had to split up and reorg. MSI currently pays a 2.3% dividend, but went through some tough times.
Nokia was dominant in the cell phone business, but had been around for over 140 years, used to pay a hell of a dividend, and now is only still alive because Microsoft is fucking stupid.
Bear Sterns was a financial titan for nearly 90 years....then bust.
I guess I am saying age and current market domination do not equal guaranteed future investment.
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Not age specifically, but more focused on specific industries
Kodak, Nokia, Motorola were tech companies whose revenues stagnated because they produce commoditized technology products ...in photography there was no barrier to entry for Fuji to start selling film in the US, or for digital cameras to be included on a phone. It's hard to build a new railroad, and nearly impossible to come up with new brands to compete with Coke, Tide, Colgate, or Marlboro. Same thing with IBM, I know everyone likes to talk about the ultra low-margin "cloud this, cloud that bs," but IBM's enterprise-focus and near global lock on the mainframe market (which drives very profitable sales/software contracts) has been going on for more than 60 years. It's not to say the companies in my portfolio are immune from mismanagement or stagnation, but companies that produce goods/services that are the "building blocks" of the economy typically enjoy remarkable stable and reliable revenue.
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I am not knocking your portfolio...those are good companies and most are likely to be around for decades or longer. They pay good dividends but mostly are slower growth now. Consumers are somewhat fickle...they have embraced fast casual dining with at least the outside appearance of healthy, like Chipotle. That stock, while paying no dividend, has beat the crap out of McDonalds stock price recently. Missing it in your portfolio means you have missed those high gains. This is what an index does, it captures the McDonalds AND the Chipotles.
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But my choice to go all stocks (except one mutual fund: LEXCX) was more driven to develop monthly income without having to deplete principal or appreciated shares to do it.
What's the point of this goal?
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The narrative about "fast-casual" replacing McDonald's (and other less-glitzy restaurants) is far overblown...MCD has grown revenues form 22.7 B to 27 B between 2009-2014, and has produced 30 B in net income for shareholders in that time frame. While Chipotle's sales growth has been impressive, MCD made more in net income in 2014 than Chipotle's cumulative net income while a public company; I'll take McDonald's any day of the week. Moreover, MCD can buy back and cancel stock with excess FCF, which allows the stock to appreciate over time even in periods of earnings stagnation (like right now during periods of USD strength). As far as outperformance, check the 10-yr chart (my benchmark of performance) of MCD vs SPY...and back in 2005 MCD was already the largest fast-food company in the world.
forummm, the goal is to be able to be done with my day-to-day job by 40 if I choose. My income stream will be recession-resistant, grow annually (all 15 companies have extremely long records of paying/increasing dividends above headline inflation), and satisfy my living expenses without having to worry about sell down principal during stock market corrections.
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I am not knocking your portfolio...those are good companies and most are likely to be around for decades or longer. They pay good dividends but mostly are slower growth now. Consumers are somewhat fickle...they have embraced fast casual dining with at least the outside appearance of healthy, like Chipotle. That stock, while paying no dividend, has beat the crap out of McDonalds stock price recently. Missing it in your portfolio means you have missed those high gains. This is what an index does, it captures the McDonalds AND the Chipotles.
Ironically, McDonalds used to own 90% of Chipotle.
http://www.bloomberg.com/bw/articles/2013-10-03/chipotle-the-one-that-got-away-from-mcdonalds
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Yep, although I read (I'll try and find the article) that part of the reason MCD sold out of its position in Chipotle was to remove some "overhang" on Chipotle's stock due to MCD still being the controlling shareholder back in 2006.
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I will say that I actually believe that beating the market is possible, but I have ZERO confidence in anyone doing it off of their gut or "investing in companies they know".
Beating the market IS possible - you only need two simple things...
1. OP investing strategy
2. 1.21 gigawatts
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I will say that I actually believe that beating the market is possible, but I have ZERO confidence in anyone doing it off of their gut or "investing in companies they know".
Beating the market IS possible - you only need two simple things...
1. OP investing strategy
2. 1.21 gigawatts
Maybe in 2040 you can walk into a 7-11 and buy uranium, but in 2015 it's a little hard to come by
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I will say that I actually believe that beating the market is possible, but I have ZERO confidence in anyone doing it off of their gut or "investing in companies they know".
Beating the market IS possible - you only need two simple things...
1. OP investing strategy
2. 1.21 gigawatts
Maybe in 2040 you can walk into a 7-11 and buy uranium, but in 2015 it's a little hard to come by
<nerd alert> The DeLorean uses plutonium. And garbage.</nerd alert>
I think the flux capacitor is the harder item to come by.
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I will say that I actually believe that beating the market is possible, but I have ZERO confidence in anyone doing it off of their gut or "investing in companies they know".
Beating the market IS possible - you only need two simple things...
1. OP investing strategy
2. 1.21 gigawatts
Maybe in 2040 you can walk into a 7-11 and buy uranium, but in 2015 it's a little hard to come by
<nerd alert> The DeLorean uses plutonium. And garbage.</nerd alert>
I think the flux capacitor is the harder item to come by.
Dammit!! <headdesk>
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I will say that I actually believe that beating the market is possible, but I have ZERO confidence in anyone doing it off of their gut or "investing in companies they know".
Beating the market IS possible - you only need two simple things...
1. OP investing strategy
2. 1.21 gigawatts
Maybe in 2040 you can walk into a 7-11 and buy uranium, but in 2015 it's a little hard to come by
<nerd alert> The DeLorean uses plutonium. And garbage.</nerd alert>
I think the flux capacitor is the harder item to come by.
Dammit!! <headdesk>
I think <headtoilet> is the key to developing the Flux Capacitor.
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Whoa, that's heavy.
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If you're going to take something back from the future, it should be a set of stock records and not a sports almanac. I never understood that part.
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If you're going to take something back from the future, it should be a set of stock records and not a sports almanac. I never understood that part.
You could make just as much with the sports almanac. Or lottery numbers. Or the stock records. If you possessed any of that information you could quickly become the richest person in history by a wide margin. Just think if you could have nailed your march madness bracket. You'd instantly become the most famous and richest person in history, and your wealth and fame would only continue to explode exponentially.
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I think <headtoilet> is the key to developing the Flux Capacitor.
(http://i.giphy.com/6dJaim7ELSxmE.gif)
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If you're going to take something back from the future, it should be a set of stock records and not a sports almanac. I never understood that part.
Well, one could argue that by buying stock, you're interfering in the very process, making it unpredictable a la Heisenberg. With sports betting, on the other hand, unless your bookie takes action based on your bets, your bets won't interfere with the outcome of the event.
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Recommend OP read http://www.amazon.com/Fooled-Randomness-Hidden-Markets-Incerto/dp/0812975219/ref=sr_1_1?ie=UTF8&qid=1432325137&sr=8-1&keywords=fooled+by+randomness
In order to beat the market over a long period of time you have to have an edge. If you don't know what your edge is, then you don't have one.
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Barton Biggs' dad was the chief investment officer of a bank who died early and left his mom a basket of growth stocks that he considered 'safe.' She never sold and just collected dividends:
“was worried about his health and inflation and suspected my mother would outlive him by a considerable number of years . . . So he constructed for my mother a portfolio of growth stocks (and cyclical growth stocks) such as Phillip Morris, Caterpillar, Exxon, Coca-Cola, AIG, IBM, Citicorp. Hewlett-Packard, Berkshire Hatheway, GE, Merck, Pfizer, and so on – nothing very imaginative, but solid, long-term companies you would want to sleep with. When she died two years ago [circa 2003] at age 95, her cost on many of these positions was actually less than the current dividend. My mother’s portfolio compounded over 32 years at 17% a year….I figure the purchasing power of her income stream compounded at roughly 12% per annum…..My brother Jeremy and I watched her list intently, and from time to time, we did weed out and replace a few companies that we thought were beginning to falter.”
Compound growth of the S&P 500 during the same timeframe was 11.58% (with dividends reinvested). Fantastic story, but I can bet most of the gains were from Berkshire, Phillip Morris and possibly Coca-Cola. There was obviously no way for Barton's dad to know which company would be a big winner, he just did the best he could. It also certainly didn't hurt that a world class analyst and hedge fund manager (Barton) was watching over the portfolio.
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If you're going to take something back from the future, it should be a set of stock records and not a sports almanac. I never understood that part.
Well, one could argue that by buying stock, you're interfering in the very process, making it unpredictable a la Heisenberg. With sports betting, on the other hand, unless your bookie takes action based on your bets, your bets won't interfere with the outcome of the event.
On the other hand, it being BTTF, as long as you bring something concrete back (eg, a book or a printout) it will change to match the new result.
PS, we are seriously impressive nerds.
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PS, we are seriously impressive nerds.
That's at least the second time today someone has said that about me on this forum..
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If you're going to take something back from the future, it should be a set of stock records and not a sports almanac. I never understood that part.
Well, one could argue that by buying stock, you're interfering in the very process, making it unpredictable a la Heisenberg. With sports betting, on the other hand, unless your bookie takes action based on your bets, your bets won't interfere with the outcome of the event.
On the other hand, it being BTTF, as long as you bring something concrete back (eg, a book or a printout) it will change to match the new result.
PS, we are seriously impressive nerds.
source?
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If you start making widely successful million dollar stock trades, it is very likely you will be investigated for fraud. If you just win a few powerball lotteries, it will be taken for granted that you are lucky.
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On the other hand, it being BTTF, as long as you bring something concrete back (eg, a book or a printout) it will change to match the new result.
PS, we are seriously impressive nerds.
source?
(http://images6.fanpop.com/image/photos/32400000/Back-to-the-Future-back-to-the-future-32402695-600-404.png)
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On the other hand, it being BTTF, as long as you bring something concrete back (eg, a book or a printout) it will change to match the new result.
PS, we are seriously impressive nerds.
source?
(http://images6.fanpop.com/image/photos/32400000/Back-to-the-Future-back-to-the-future-32402695-600-404.png)
Ah. I was under the impression we had moved out of the BTTF universe and were having a real discussion about our own universe.
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Ah. I was under the impression we had moved out of the BTTF universe and were having a real discussion about our own universe.
Never heard of it. Besides, this line of discussion is less fantasy-filled than the original discussion.
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If you're going to take something back from the future, it should be a set of stock records and not a sports almanac. I never understood that part.
You could make just as much with the sports almanac. Or lottery numbers. Or the stock records. If you possessed any of that information you could quickly become the richest person in history by a wide margin. Just think if you could have nailed your march madness bracket. You'd instantly become the most famous and richest person in history, and your wealth and fame would only continue to explode exponentially.
I think the market for sports betting is not liquid enough and games (of the nature to be commemorated in a sports almanac) are not frequent enough to support a movement of trillions of dollars to my pockets. Leverage is also more limited. However, if I knew just the daily closing value of the S&P 500 for just one year, I could be a trillionaire.
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If you're going to take something back from the future, it should be a set of stock records and not a sports almanac. I never understood that part.
Well, one could argue that by buying stock, you're interfering in the very process, making it unpredictable a la Heisenberg. With sports betting, on the other hand, unless your bookie takes action based on your bets, your bets won't interfere with the outcome of the event.
For very large bets, your bookie couldn't handle them, and the market would shift based on your bets. If you kept winning, bookies wouldn't take your bets anymore, and they would definitely start betting alongside you if it became obvious you never lost. For stocks, you can just be another anonymous trader in a giant pool of cash. You would move the markets some once you were moving tens of billions of dollars around, but huge stocks are incredibly liquid. Buffett was able to buy 10% of IBM in a few months without the market moving or people noticing.
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If you're going to take something back from the future, it should be a set of stock records and not a sports almanac. I never understood that part.
Well, one could argue that by buying stock, you're interfering in the very process, making it unpredictable a la Heisenberg. With sports betting, on the other hand, unless your bookie takes action based on your bets, your bets won't interfere with the outcome of the event.
For very large bets, your bookie couldn't handle them, and the market would shift based on your bets. If you kept winning, bookies wouldn't take your bets anymore, and they would definitely start betting alongside you if it became obvious you never lost. For stocks, you can just be another anonymous trader in a giant pool of cash. You would move the markets some once you were moving tens of billions of dollars around, but huge stocks are incredibly liquid. Buffett was able to buy 10% of IBM in a few months without the market moving or people noticing.
I misunderstood your point at first there. Although there would be some uncertainty added by buying stocks, the companies would still have the same intrinsic value at each point in time. And I would do market-level purchases instead of just individual stocks, assuming I had that information. Derivatives and other leveraged investments.
At some point if too much money is on one side of the sporting event, it becomes so overwhelmingly profitable to fix a game, that I can't imagine it not happening.
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Ok, so you take the DeLorean to the future and meet some dying person. You help them out and they give you their gold ring to thank you. Then, you go back to the past and meet the same person. Who is wearing the ring?
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Ok, so you take the DeLorean to the future and meet some dying person. You help them out and they give you their gold ring to thank you. Then, you go back to the past and meet the same person. Who is wearing the ring?
Ok, I think we have had our fun and need to get back to the topic and be serious.
I think I need to go buy lots of 3M stock because I used lots of post-it notes at work this week.
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Ok, so you take the DeLorean to the future and meet some dying person. You help them out and they give you their gold ring to thank you. Then, you go back to the past and meet the same person. Who is wearing the ring?
Ok, I think we have had our fun and need to get back to the topic and be serious.
I think I need to go buy lots of 3M stock because I used lots of post-it notes at work this week.
I'm sorry for helping side track the conversation into a fantasy that we can know what's going to happen in the future.
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Sometimes you can predict the future. Coronal holes in the sun emit solar wind. We can see the coronal hole 0.5 second after it happens. It takes 2.9 days for the solar wind to get here. And SOHO the satellite, will confirm the solar wind 42 minutes before it reaches earth. Hmm, now we have to figure out a way to trade on this! :-D
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To be more precise: a fantasy where any individual can reliably know better than any other human or computer what's going to happen to a chaotic system 20 years into the future.
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To be more precise: a fantasy where any individual can reliably know better than any other human or computer what's going to happen to a chaotic system 20 years into the future.
Well, technically with enough computing power and enough input data, you CAM tell what is going to happen to any system 20 years into the future. You could tell me the nanosecond a fly will be swatted by a child in a hut in Africa in the year 2047 if you had enough data and processing power.
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To be more precise: a fantasy where any individual can reliably know better than any other human or computer what's going to happen to a chaotic system 20 years into the future.
Well, technically with enough computing power and enough input data, you CAM tell what is going to happen to any system 20 years into the future. You could tell me the nanosecond a fly will be swatted by a child in a hut in Africa in the year 2047 if you had enough data and processing power.
You'd also need to develop an accurate model that can predict outcomes from this system that you can run the data through. And this doesn't necessarily fit the "better than any other human or computer" criterion. Unless you have a monopoly on some of these components.
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To be more precise: a fantasy where any individual can reliably know better than any other human or computer what's going to happen to a chaotic system 20 years into the future.
Well, technically with enough computing power and enough input data, you CAM tell what is going to happen to any system 20 years into the future. You could tell me the nanosecond a fly will be swatted by a child in a hut in Africa in the year 2047 if you had enough data and processing power.
Actually, you can't. Neither the fly-swatting child in Africa 20 years hence nor financial markets are deterministic systems. This is what forummm was alluding to when he described financial markets as a chaotic system.
http://en.wikipedia.org/wiki/Chaos_theory
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To be more precise: a fantasy where any individual can reliably know better than any other human or computer what's going to happen to a chaotic system 20 years into the future.
Well, technically with enough computing power and enough input data, you CAM tell what is going to happen to any system 20 years into the future. You could tell me the nanosecond a fly will be swatted by a child in a hut in Africa in the year 2047 if you had enough data and processing power.
Actually, you can't. Neither the fly-swatting child in Africa 20 years hence nor financial markets are deterministic systems. This is what forummm was alluding to when he described financial markets as a chaotic system.
http://en.wikipedia.org/wiki/Chaos_theory
Also, Roland's assertion can be used (and has been used) to argue that free will does not exist. If true, it would mean that everything that has ever happened and will ever happen has been fatalistically determined from the moment the universe came into being, and we have no control whatsoever over our own fates--i.e., when I think I'm making a choice (from the significant, like where to live, to the mundane, like which finger to use to pick my nose), I'm just suffering from the illusion that I made a choice when really I'm just carrying out the inevitable consequence of a cause-and-effect butterfly-effect-chain reaching back to the beginning of time.
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Also, Roland's assertion can be used (and has been used) to argue that free will does not exist. If true, it would mean that everything that has ever happened and will ever happen has been fatalistically determined from the moment the universe came into being, and we have no control whatsoever over our own fates--i.e., when I think I'm making a choice (from the significant, like where to live, to the mundane, like which finger to use to pick my nose), I'm just suffering from the illusion that I made a choice when really I'm just carrying out the inevitable consequence of a cause-and-effect butterfly-effect-chain reaching back to the beginning of time.
Determinism is not incompatible with free-will. I'm too lazy to look up the exact quote, but Dennett has said something to the effect that the hard part of talking about free-will is defining the concept, because once it is defined, it is typically trivial to determine whether we have it. Dennett's preferred definition is basically that an agent has free will if (and only if) the reason for its actions is determined primarily by factors internal to the agent rather than external to the agent. So for example, the choice to write this post was determined by some algorithm in my brain, not by somebody holding a gun to my head.
I believe Dennett's definition provides a platform for meaningful discussion that doesn't devolve into a debate about determinism. A definition of free-will based on lack of determinism doesn't make a whole lot of sense because the only sensible alternative to determinism is randomness, and it doesn't make sense to define free-will as being synonymous with randomness. The only other possibilities are magical concepts like souls or qualia, which I consider to be nonsense. If you accept physicalism (which I do), free-will can't meaningfully be defined in terms of a lack of determinism.
The real reason why a computer system can't be used to exactly predict the future (or probability distribution of futures) is that there are too many variables such that it's impossible to measure them all. In principle, with access to all the relevant information (which is impossible), either we could calculate the exact future, or (if the universe is random or has hidden variables) we could calculate the probability distribution of all possible futures -- that is to say we could write down a list of all possible futures along with the random chance that each occurs. There's no third option other than magic. Personally, I reject the existence of magic.
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The real reason why a computer system can't be used to exactly predict the future (or probability distribution of futures) is that there are too many variables such that it's impossible to measure them all. In principle, with access to all the relevant information (which is impossible), either we could calculate the exact future, or (if the universe is random or has hidden variables) we could calculate the probability distribution of all possible futures -- that is to say we could write down a list of all possible futures along with the random chance that each occurs. There's no third option other than magic. Personally, I reject the existence of magic.
OP was buying Disney. Maybe they know something we don't.
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So for example, the choice to write this post was determined by some algorithm in my brain, not by somebody holding a gun to my head.
Roland's argument necessarily implies that you couldn't not write that post -- you were fated to do so, because the firing of the synapses in your brain that led you to do so was caused by the sequence of events that caused them to do so tracing back to the beginning of time.
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So for example, the choice to write this post was determined by some algorithm in my brain, not by somebody holding a gun to my head.
Roland's argument necessarily implies that you couldn't not write that post -- you were fated to do so, because the firing of the synapses in your brain that led you to do so was caused by the sequence of events that caused them to do so tracing back to the beginning of time.
I agree, and I don't see how that is incompatible with free-will. I made that post out of free-will because no external agents directly forced me to write it. The fact that it may have been the only outcome is irrelevant to whether it was an exercise in free-will. Incidentally, this is a similar concept of free-will as adopted by the common law (for example, consider the defence of duress, codified at Penal Law § 40.00 (http://codes.lp.findlaw.com/nycode/PEN/ONE/C/40/40.00) in your home state of New York; duress negates the existence of free-will in making a given decision, even though again the only outcome may have involved the duress). Basically, my definition of free-will is synonymous with a lack of duress and a lack of other similar external factors (since as being confined in a jail cell).
Either I was fated to write that post since the beginning of the universe (as claimed by Roland), or at the beginning of the universe there was a probability distribution governing it and one outcome happened randomly according to the probability distribution as fixed at the beginning of time (as claimed by modern physics). Anything else is inconsistent with physicalism. (Note the subtle distinction here: Roland's post is probably physically inaccurate, but it's consistent with physicalism.) Either way, however, the post was an exercise in free-will because of the lack of duress and similar factors.
Philosophers who accept physicalism use different definitions of free-will from the one you seem to be using, although you haven't precisely stated your definition (as I discussed in my previous post). I suspect if you try to state your definition precisely, you'll discover either that you can't state it precisely or that it necessarily involves some magical device (such as souls or qualia).
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I suspect if you try to state your definition precisely, you'll discover either that you can't state it precisely or that it necessarily involves some magical device (such as souls or qualia).
Maybe that's right; if today were a workday instead of a holiday weekend, I'd get more enjoyment out of the diversion of thinking about it. But in my leisurely and intellectually-lazy current state, all I can muster is that it seems inconsistent to say that I have free will yet I have no control whatsoever over my decisions.
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I decided to see how my Scottrade account stacks up against the rest. Apparently Im elite
Unfortunately, I can't do this with Robinhood but by the numbers I have seen. I belong in the top 25% for sure.
(http://i820.photobucket.com/albums/zz124/azwolf25/IMG_1367.jpg) (http://s820.photobucket.com/user/azwolf25/media/IMG_1367.jpg.html)
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To be more precise: a fantasy where any individual can reliably know better than any other human or computer what's going to happen to a chaotic system 20 years into the future.
Well, technically with enough computing power and enough input data, you CAM tell what is going to happen to any system 20 years into the future. You could tell me the nanosecond a fly will be swatted by a child in a hut in Africa in the year 2047 if you had enough data and processing power.
I don't believe this has been proven; you are basically talking about an infinite dimensional system. Please don't hold your breath for this capability to arrive (or even the proof). Ray Kurzweil's latest estimate for a computer to pass the Turing test (http://en.wikipedia.org/wiki/Turing_test) is 2029; that is for a computer to fool you into thinking it is one person. Right now, we can't even accurately simulate the weather which is a chaotic dynamical system with no cognition.
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I don't believe this has been proven; you are basically talking about an infinite dimensional system. Please don't hold your breath for this capability to arrive (or even the proof). Ray Kurzweil's latest estimate for a computer to pass the Turing test (http://en.wikipedia.org/wiki/Turing_test) is 2029; that is for a computer to fool you into thinking it is one person. Right now, we can't even accurately simulate the weather which is a chaotic dynamical system with no cognition.
I didn't say it was possible today or even 500 years from now (or ever). It may be that the energy required to exactly calculate any future event in the Universe would equal or exceed the total energy available in that Universe. You also might need a big cooling fan.
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Fortunately the other shoulder has wife, and wife can be a lot meaner than the devil if you piss her off.
My wife doesn't like my all the shares of MO I hold in our taxable account, but then I show her my YoC (>13%) on the first lot I bought in late 2008 and the dividend checks that roll in and she gets over it...
But my choice to go all stocks (except one mutual fund: LEXCX) was more driven to develop monthly income without having to deplete principal or appreciated shares to do it. I've got 15 companies, divided into groups of 5 on quarterly schedules, that I buy shares in on a monthly basis that's pretty well diversified, reasonably non-cyclical, and has a blended yield between 3.5-4% right now (twice what I'd get from an S&P500 Index Fund):
Group 1 (January, April, July, October):
Altria, Philip Morris International, Coca-Cola (except for the January check, which is paid in December), Kraft, Union Pacific
Group 2 (February, May, August, November):
Colgate-Palmolive, Procter & Gamble, Verizon, AT&T, Abbott Labs
Group 3 (March, June, September, December
Emerson Electric, 3M, Johnson & Johnson, McDonald's, IBM
I know it's easy to criticize the original list at the beginning of the thread as "cherry-picking" winners, but if it's obvious that certain industries have an established set of advantages that limits competition (railroads, telecoms, consumer brands, IP rights for Pharma), it seems to me to be a pretty straight forward task to build a rock solid portfolio. The youngest company in my portfolio is McDonald's (about 60 years), with the oldest being P&G (started as a candle/soap company in the early-mid 1800s); I think it's safe to say all will be around for a while because they make products or provide services that are essential to both the local and global economy. Moreover, all are listed in the US and have to comply with US securities laws, which while not perfect, at least allow a casual investor to review balance sheets and cash flow statements to watch for any abrupt changes in corporate performance in a relatively easy manner. I say if you're willing to be diligent, go for it with a concentrated stock portfolio, or at least go for a 50/50 mix of stocks/funds.
Thank you for sharing this. I have a strong interest in mixing dividend and growth stocks. I have a large enough positions in Disney and Apple. I will take a look at some of these. I was also looking at Energizer because it keeps going and going.
I might mix in some index in my taxable. At the moment I really enjoy buying stocks. I feel like Im window shopping and every time one turns red it is on sale.
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Determinism is not incompatible with free-will. I'm too lazy to look up the exact quote, but Dennett has said something to the effect that the hard part of talking about free-will is defining the concept, because once it is defined, it is typically trivial to determine whether we have it. Dennett's preferred definition is basically that an agent has free will if (and only if) the reason for its actions is determined primarily by factors internal to the agent rather than external to the agent. So for example, the choice to write this post was determined by some algorithm in my brain, not by somebody holding a gun to my head.
I believe Dennett's definition provides a platform for meaningful discussion that doesn't devolve into a debate about determinism. A definition of free-will based on lack of determinism doesn't make a whole lot of sense because the only sensible alternative to determinism is randomness, and it doesn't make sense to define free-will as being synonymous with randomness. The only other possibilities are magical concepts like souls or qualia, which I consider to be nonsense. If you accept physicalism (which I do), free-will can't meaningfully be defined in terms of a lack of determinism.
The real reason why a computer system can't be used to exactly predict the future (or probability distribution of futures) is that there are too many variables such that it's impossible to measure them all. In principle, with access to all the relevant information (which is impossible), either we could calculate the exact future, or (if the universe is random or has hidden variables) we could calculate the probability distribution of all possible futures -- that is to say we could write down a list of all possible futures along with the random chance that each occurs. There's no third option other than magic. Personally, I reject the existence of magic.
This is the type of determinism I'm flirting with in my own philosophical beliefs. I used to be a pure free will guy that outright rejected any discussion of determinism, like Neo's positions in this scene https://www.youtube.com/watch?v=tMF2iyoCAh8 (https://www.youtube.com/watch?v=tMF2iyoCAh8):
"Don't worry about it. As soon as you step outside that door, you'll start feeling better. You'll remember you don't believe in any of this fate crap. You're in control of your own life. Remember?"
Neo's thoughts on the matter are a bit basic here, as were mine. I think that we have free will, but it is of course quite constrained by others' actions, circumstances, chance, etc.
I don't consider souls to be nonsense and I'd avoid using words like nonsense to characterize beliefs held by billions.
Back to the OT, I don't think we're going to get anywhere in this discussion. We've sent tons of bits and bytes at this dude and he isn't listening. Maybe it is determinism? Ha!
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Also, Roland's assertion can be used (and has been used) to argue that free will does not exist. If true, it would mean that everything that has ever happened and will ever happen has been fatalistically determined from the moment the universe came into being, and we have no control whatsoever over our own fates--i.e., when I think I'm making a choice (from the significant, like where to live, to the mundane, like which finger to use to pick my nose), I'm just suffering from the illusion that I made a choice when really I'm just carrying out the inevitable consequence of a cause-and-effect butterfly-effect-chain reaching back to the beginning of time.
There's no third option other than magic. Personally, I reject the existence of magic.
"Genius is magical not physical. If you don't have the magic, no amount of wishing will make it so."-- The Gambler.
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"Genius is magical not physical. If you don't have the magic, no amount of wishing will make it so."-- The Gambler.
What does that quote mean to you?
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I like this quote about genius a little better; I'm sure most have heard of it.
Genius is one percent inspiration and ninety-nine percent perspiration.
- Thomas A. Edison
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I do like that one better.
I meant if you are saying it is luck or a gift of mine then I can't share it. However, I think it's possible to pick winning companies. I don't think I will outperform the market every year but since my investments are built on the previous ones I will not have to.
I don't think the odds are as bad as people make it. In the end if you made money you win right. If you try some stocks there is a chance you will lose money. But there is a 100% chance that you will not get 1,800,000% (like Buffet) if you pick index.
But you are not Buffet Mr P... Is that what you say? Well I only need to be 1/10th of Buffet to really make serious gains over time.
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I don't think the odds are as bad as people make it.
What do *you* think the odds are that the average stock picker will beat index performance?
In the end if you made money you win right.
Not if I could have made more money by taking a much less risky path.
If you try some stocks there is a chance you will lose money.
Including a non-trivial chance that you will lose *all* of your investment in any given stock.
But there is a 100% chance that you will not get 1,800,000% (like Buffet) if you pick index.
False. You will very likely get that kind of return. You simply won't get it in a compressed timeframe.
But you are not Buffet Mr P... Is that what you say? Well I only need to be 1/10th of Buffet to really make serious gains over time.
What do you think your personal chances are of achieving 1/10th of Buffett's performance? What do you think the average stock-pickers chances are of achieving 1/10th of Buffett's performance?
Metaphor time: Go out tomorrow and sprint-- and I mean all out fast as you can, maximum pace, 5/min a mile or under-- 10K. You will very likely be puking before the end of the first couple of miles unless you are an olympic-class athlete. Now rest up a few days and jog the 10K nice and easy, at a pace that makes you feel that it is ever so slightly too easy. You will finish in a decent time-- likely FASTER than your sprint-then-puke-then-walk performance. This is analogous to what we're talking about here. The distances we are all trying to cover are simply too far to try to sprint them.
What really troubles me is that nearly everything you write in this thread is an empty platitude. It's a quote or other feel-good the-more-you-know saying that makes you feel like you're taking a brave stand but has no real intellectual content. I have yet to see you-- in this thread or any other-- give a detailed technical analysis of *any* stock. I mean a real, quantitative analysis. No hyperbole whatsoever, but a hard numbers analysis. After pages and pages of what I'm seeing, I can only conclude that you lack the knowledge to provide one. That's no skin off my back, but it should give *you* pause.
How old are you, and how long have you been investing? All you report is the performance of your investments over days or months-- easy peasy. Show us years. Show us decades. THEN we might be able to decide whether you're a prodigy (which is something you seem to be claiming). What I'm seeing is you sprinting the first couple of hundred yards and then turning to the pack and shouting "I don't know what's wrong with you idiots, this running shit's easy!"
http://m.runnersworld.com/boston-marathon/who-was-the-dad-leading-the-boston-marathon-at-mile-one
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I'm 36. That shouldn't matter though. Technically I started in 2008. My mother says she has never seen someone with my timing and she was I in the industry for a while. She also said I shouldn't let it get to my head. I could be incredibly lucky. But that luck never follows me to a casino so I don't gamble at all.
Touché on time frame. I have nothing to say to that. Great analogy
Some could be hubris on my part. I made a lot investing in the wrong vehicle (mutual funds) for my kids. I have made a lot at least 2-3 years of gains in a short period with stocks. Hell I made a whole year of treasury bond gains in 2 days. Some might think I'm a fool for flipping stock at a 4% gain but I don't. Look index is science. It works and it's repeatable. Art is better but it's hard to teach because you have to have something to start with. Some out there have it and they know they do.
Tell the artist his painting sucks because he can't teach a robot to paint one on its own. I'm saying that as an actual artist. I paint and encourage others to try it
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I'm 36. That shouldn't matter though. Technically I started in 2008. My mother says she has never seen someone with my timing and she was I in the industry for a while. She also said I shouldn't let it get to my head. I could be incredibly lucky. But that luck never follows me to a casino so I don't gamble at all.
Touché on time frame. I have nothing to say to that. Great analogy
Some could be hubris on my part. I made a lot investing in the wrong vehicle (mutual funds) for my kids. I have made a lot at least 2-3 years of gains in a short period with stocks. Hell I made a whole year of treasury bond gains in 2 days. Some might think I'm a fool for flipping stock at a 4% gain but I don't. Look index is science. It works and it's repeatable. Art is better but it's hard to teach because you have to have something to start with. Some out there have it and they know they do.
Tell the artist his painting sucks because he can't teach a robot to paint one on its own. I'm saying that as an actual artist. I paint and encourage others to try it
It's easy to make money during a huge bull market. I did it too. We all did.
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The slow steady path of the indexer is the way to go to build wealth while limiting risk BUT the fastest way to huge wealth is to take on heavy risk. This is why the powerball winner is worth $180,000,000 and the indexer is worth $1,000,000.
If someone is ok with a much higher risk, individual stocks or leverage are ways to achieve that. Leverage is probably better since you can just leverage a broad index and remove diversity risk. There is some benefit to individual stocks to gain higher reward if you are doing certain option trades, as the option premiums can be quite a bit more attractive on "high flying" stocks. Apple was a great example back pre-split. It made up a big part of the S&P 500 index, but you could get quite a bit higher option premium for selling covered calls on the stock than selling covered calls on the index. I think at one point it was about 4 times the premium for a similar % in the money covered call. Maybe part of that was people gambling on the options looking for a quick score...it was great selling those calls to them.
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Powerball winner is worth $180 million, except the cash value is actually, say, $90 million, and then after taxes, say, $45 million. The average Powerball player has a negative expected value from their Powerball "investments".
On average, you're more likely to be killed driving to buy a ticket (2 miles RT) than to win the jackpot if you buy one ticket.
If I kept working until 67, I would most likely have way more than a Powerball winner, even adjusting for inflation. That's the power of indexing and compound growth.
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I just threw the Powerball example out there as the ultimate in high risk, high reward. Even $45mil (it would be more than that) after cash lump sum and taxes on a two dollar investment is a hell of a return.
The average stock picker is going to lose to the indexer. There will be people who have big losses, even total losses who pick the wrong individual stocks. By the same logic there will be people who beat the crap out of the index and pick exactly the right stocks, just like there is always eventually a person who picks the correct Powerball numbers.
If you have $2 to invest, you are never going to get to $45 million in an index.
If you have $100,000 to invest, you are likely to not get $1,000,000 in a decade by index investing but there is a chance (much better than Powerball odds) that you can turn $100,000 into $1,000,000 or more by getting in early on the next Tesla, Netflix, Apple.
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You summed it up pretty well RoG.
Up 20% in a couple of days with RCPT, 5% with BA, 4% with SNSS, holy crap amounts with DIS, ESCA, and AAPL. Everyone likes to bring up stocks that have failed that I can honestly say I would have never considered. Not saying it won't happen but I must have extreme luck with almost every pick if the odds are not in my favor. And I don't believe in rebalancing because if you snag the next Starbucks you will never see the ten bag if you keep selling off peices of your biggest money maker to buy losers. It might work for index but it seems insane for stocks. If you want to rebalance buy into something else don't sell your best asset.
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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 have a friend, a Certified Financial Analyst at the time, who got a couple invested in bonds (safer, right) of those exact companies. As one of his colleages said later "THE Trifecta"
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If you have $100,000 to invest, you are likely to not get $1,000,000 in a decade by index investing but there is a chance (much better than Powerball odds) that you can turn $100,000 into $1,000,000 or more by getting in early on the next Tesla, Netflix, Apple.
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I didn't say it was a good idea to risk $100k to try and make $1 million, but there are people who do it every day and some succeed. Probability almost guarantees that some will succeed. A lot will fail and most will not beat the index with its much lower risk.
Still, you can't go out and say nobody wins at individual stocks because that is just as false as saying everyone wins. When Las Vegas Sands went down to a buck in '08 or '09 and Sheldon invested heavily, he sure looks good 6 years later when it is $51.
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http://www.nytimes.com/2014/07/27/your-money/heads-or-tails-either-way-you-might-beat-a-stock-picker.html
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http://www.nytimes.com/2014/07/27/your-money/heads-or-tails-either-way-you-might-beat-a-stock-picker.html
Yes, exactly that. You can't really come on this forum and state "I have invested $100,000 in XYZ corp because I am smarter than everyone else and know I will beat the index returns with my XYZ corp returns". I mean, you can do that, but we will think you are stupid.
What you can do is say "I have invested $100,000 in XYZ corp in the hope that it is a 10 bagger and will exceed any possible return I could make in an index. I really just am gambling but I do have a shot at making big bucks here"
I have no problem with someone investing in an individual company with assets they can afford to lose. A few of them WILL make big returns...the math backs that.
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So to summarize mrpercentage has been investing since 2008, his mom has never seen such a talented stock picker, and he's making mad money with his picks. Hate to break it to mrpercentage but everyone has been making money hand over fist since 2008. It would be difficult to invest during that time frame and not have fantastic results. To pair it with the runners analogy, it's like you've been sprinting the first couple miles of a marathon with a god damn hurricane at your back.
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I don't think the odds are as bad as people make it. In the end if you made money you win right. If you try some stocks there is a chance you will lose money. But there is a 100% chance that you will not get 1,800,000% (like Buffet) if you pick index.
But you are not Buffet Mr P... Is that what you say? Well I only need to be 1/10th of Buffet to really make serious gains over time.
If you like Buffet so much, and you want to copy his results.... why don't you try investing like he does?
I would say the odds aren't that bad if you are investing the way Buffet & Graham would tell you to. The problem is your investing style is basically the opposite of Buffet.
Buffet = lots of math
Mr P= "I must have extreme luck"
Buffet = look at valuations and company balance sheets
Mr P = it's a gift, I can't share it.
Buffet = buy and hold unless something substantially changes about the company's business
Mr P = "Some might think I'm a fool for flipping stock at a 4% gain but I don't."
Buffet = avoid 'hot' companies
Mr P = look at APPLE! Its up 25,000%!
Analogy: Your playing Soccer, you hate basketball, and you are saying your idol is Michael Jordan and you want to be just like Mike.
So...
If you are going to try to do what Buffet did... even 1/10 of it... try investing like him.
Or find someone to use as an example of a super investor who has an investing style similar to yours.
Or follow Buffet's advice which is buy an index fund.....
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Cute. I am convinced now that nothing I say will find approval because I am going my own way. It's cool. I will be the black sheep and sing Sinatra doing it.
So far I've got:
Your too young
You got D's in high school
You haven't been investing long enough
Your method sucks
You have no method
You piss me off
You haven't written an in depth step by step manual how to do it. Therefore you haven't thought this out
Read more and do what they say even though you are making more then they are
Sell your mutual funds even though they are giving >12% returns
Invest everything you have even though i think the market might take a hit.
Holy Bias Batman! I think I will buy more Disney if it dips below 108 and gamble on companies with lots of customers who treat them well and have a bright future
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Lets talk diversification then.. lets look at the following examples.
(http://i820.photobucket.com/albums/zz124/azwolf25/IMG_1371.jpg) (http://s820.photobucket.com/user/azwolf25/media/IMG_1371.jpg.html)(http://i820.photobucket.com/albums/zz124/azwolf25/IMG_1370.jpg) (http://s820.photobucket.com/user/azwolf25/media/IMG_1370.jpg.html)
who the hell is that guy?... okay how about Buffet
(http://i820.photobucket.com/albums/zz124/azwolf25/IMG_1368.jpg) (http://s820.photobucket.com/user/azwolf25/media/IMG_1368.jpg.html)(http://i820.photobucket.com/albums/zz124/azwolf25/IMG_1369.jpg) (http://s820.photobucket.com/user/azwolf25/media/IMG_1369.jpg.html)
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Nobody here is trying to make you feel bad about yourself. Quite the opposite. They're trying to prevent you from making costly mistakes. It's obvious at this point you're probably not going to listen.
If your method is to trust your instincts, fine. Say so and let's all move on. You are throwing everything at the wall and seeing what sticks. Do you or do you not perform a consistent (meaning you do the same analysis every time, and can articulate how to perform it) numerical analysis on a security before purchasing it? If yes, then show your work. If no, then it is luck by definition. It seems from what you've said that you think you are genius or magic. Your words, not mine. If it's genius, magic, or luck, then please, please, please say so so that we can stop trying to use logic-based arguments to try to help you.
Buffet and others have proven that they can do this successfully. They are famous because it is so rare. If it were easy, everyone would do it. One difference between you and those people is that those people can perform a concrete, numbers-based analysis of a stock, and use a consistent and thorough method to determine which to buy.
How about another sports analogy? Would you presume after winning a couple of boxing matches that you could win the heavyweight championship? Probably not. It would be equally ludicrous to show us pictures of Tyson and Ali and say "See, these guys did it!"
You are not Tyson. You are not Ali. You are not Buffett. You are you. Maybe you could have that kind of performance, maybe you can't-- but the chances that you can beat the market over an entire lifetime are vanishingly slim.
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Most of BRK is not represented on your app. The stock portfolio is a fraction of what their dozens of other businesses are worth.
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I am not Buffet but I do follow his advice. I buy companies I like at the price I like and will hold my core holdings for probably 20 years unless I think they are losing their winning qualities. I have about the same percentage Disney as he has Wellsfargo. I can not replicate other investment strategies because the capital is not there. No buying private businesses and such.
This is not throwing stuff at the wall. You are speaking as if I woke up one morning and rolled the dice and it said Disney and Im all-- fuck it, lets do this. Ah, no...
You can't prove anything without just doing it, and you can't judge by past results, so-- how exactly can I un-Bogle this? It seems like a logical loop to me.
I also said if I was 1/10th of Buffet and that index is science. Those are glowing reviews and respect. I never said I would pass Buffet. I said if I earned even a meager fraction of what he did it would surpass an index. I will surpass an index. If I didn't believe this I wouldn't be doing what Im doing. I will probably also use index as both support and during times of indecisiveness.
And magic, well, I don't believe in Gandalf but I do think its there. Every gift shows it, every birth, every sunset, every supernova, birds flying by means of evolution, if it can be done it will be done-- and Im doing it.
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And magic, well, I don't believe in Gandalf but I do think its there. Every gift shows it, every birth, every sunset, every supernova, birds flying by means of evolution, if it can be done it will be done-- and Im doing it.
Great. Cool. Magic. Got it.
Pack up your stuff, guys, we're done here.
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Ok, Mr %, before I pack my suitcase I'll give you a few topics to go read about:
- Since you mentioned Jeremy Grantham and the screenshot shows he is the pioneer of mean reversion you should read about it.
- Since you mentioned Buffett read Benjamin Graham's The Intelligent Investor on value investing.
- capital market line - I'll give you a hint. You can earn a higher return but with commensurately more risk. And you really, really need to understand what risk means and the meaning of the saying "If you can't stand the heat, stay out of the kitchen." Since you've only been investing since after 2008 crash the oven in the kitchen hasn't even been turned on. :-D
- Sharpe ratio
- efficient market theory
- alpha
- behavioral finance
You can start with Wikipedia. If you really get into it you can find courses on MIT's Open Courseware. Here is the Finance Theory I (http://ocw.mit.edu/courses/sloan-school-of-management/15-401-finance-theory-i-fall-2008/) class.
Believe it or not, everyone posting here is actually trying to help. If you want to invest in individual stocks, go for it. I still do it with about 4% of my portfolio. But it is not magic, it is a lot of hard work.
Good luck! This is my last post here, my bag's are packed and I have another thread to catch. :-)
EDIT: Left out one thing - the part of your Scottrade screenshot that stood out the most to me was Your investments are too concentrated.
EDIT: Ok, just one more. :-) I just found this article, My seven biggest investment regrets (http://www.telegraph.co.uk/finance/personalfinance/investing/11288292/My-seven-biggest-investing-regrets.html), and I thought you would like to read it since he mentions your favorite Frank Sinatra song.
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mrpercentage, what do you hope to achieve through this thread? You're not explaining any repeatable method for picking stocks, just mentioning some stocks that you have picked that have done well based on your own intuition. Maybe you are some sort of investing genius who can intuit good stock picks without performing any kind of rigorous analysis on the underlying businesses. If so, good for you! The rest of us aren't, and we know it. Are you trying to gloat? Your methods, while they may work for you, are not broadly applicable to the average investor.
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I think everyone is making things too complicated. I quoted Buffet. Here is another Buffet quote " they miss the Forrest for the trees."
Good companies win and the longer you hold a good company the less it's entry price means. Good companies can and often do beat the market. The first 9 out of 10 I thought of have. Evaluations matter but they are the trees, the company is the forrest.
I truly believe that. The End
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I think everyone is making things too complicated. I quoted Buffet. Here is another Buffet quote " they miss the Forrest for the trees."
Another Buffett quote:
"Only when the tide goes out do you discover who's been swimming naked."
And not to be pedantic, but if you're referring to Warren Buffett in your posts, his last name has two T's.
Kind regards.
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I appreciate that sort of correction. Tell me if I have a booger too. Really I would tell you. I make more mistakes typing on my phone too.
On the tide going out-- that quote has leverage all over it. I learned that with CURE. Dips hurt on leverage. Cramer says don't do it. I agree
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You like Cramer a lot. Do you take all his advice, or pick and choose?
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I think everyone is making things too complicated. I quoted Buffet. Here is another Buffet quote " they miss the Forrest for the trees."
Another Buffett quote:
"Only when the tide goes out do you discover who's been swimming naked."
And not to be pedantic, but if you're referring to Warren Buffett in your posts, his last name has two T's.
Kind regards.
The word 'forest' is typically not capitalized and spelled with a single r as well. It's good to see that the quality of care Mr. Percentage spends on his investments shows through in other facets of his life.
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I think everyone is making things too complicated. I quoted Buffet. Here is another Buffet quote " they miss the Forrest for the trees."
Another Buffett quote:
"Only when the tide goes out do you discover who's been swimming naked."
And not to be pedantic, but if you're referring to Warren Buffett in your posts, his last name has two T's.
Kind regards.
The word 'forest' is typically capitalized and spelled with a single r as well. It's good to see that the quality of care Mr. Percentage spends on his investments shows through in other facets of his life.
Forrest is a name too.
http://en.wikipedia.org/wiki/Asa_Earl_Carter
Forrest Gump
Forrest Whitaker
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Was Buffett talking about a man named Forrest that people were missing for the trees?
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Was Buffett talking about a man named Forrest that people were missing for the trees?
Camouflage.
(http://forestgumpapush.weebly.com/uploads/3/4/5/8/3458251/1307345831.jpg)
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(http://i.guim.co.uk/static/w-620/h--/q-95/sys-images/Guardian/Pix/pictures/2013/11/15/1384538056817/Forest-Whitaker-009.jpg)
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Wow...so I just realized that the "Cramer" everyone keeps talking about is not the "Kramer" from Seinfeld. Some of the conversations make a bit more sense...haha. I guess it shows how disconnected I am from TV these days... Although my guess is listening to Kramer isn't much worse than Cramer, but I don't really know the latter.
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Wow...so I just realized that the "Cramer" everyone keeps talking about is not the "Kramer" from Seinfeld. Some of the conversations make a bit more sense...haha. I guess it shows how disconnected I am from TV these days... Although my guess is listening to Kramer isn't much worse than Cramer, but I don't really know the latter.
More than a few listen to George Costanza when also listening to Cramer (referencing the episode where George does everything opposite of what he would normally choose and has a perfect day)
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Wow...so I just realized that the "Cramer" everyone keeps talking about is not the "Kramer" from Seinfeld. Some of the conversations make a bit more sense...haha. I guess it shows how disconnected I am from TV these days... Although my guess is listening to Kramer isn't much worse than Cramer, but I don't really know the latter.
Funny observation. They are both oddballs that make sudden movements, yell a lot, and are laughed at by millions.
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Wow...so I just realized that the "Cramer" everyone keeps talking about is not the "Kramer" from Seinfeld. Some of the conversations make a bit more sense...haha. I guess it shows how disconnected I am from TV these days... Although my guess is listening to Kramer isn't much worse than Cramer, but I don't really know the latter.
Funny observation. They are both oddballs that make sudden movements, yell a lot, and are laughed at by millions.
(http://rainiernew.wpengine.com/yurts/wp-content/uploads/sites/2/2014/01/The_more_you_know_banner.jpg)
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Survivorship bias anyone?
When I was in high school, my Mom took $5,000 of my money and my sister's money and put half of it in Lucent and half of it in Pfizer.
One of us made a lot of money, the other lost it all.
I was the one who lost it all. Even though I knew that IBM stock was the entire reason my college was paid for, it was still a long time before I forgave the stock market. I wish someone would have told me about index funds 10-15 years ago.
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Survivorship bias anyone?
When I was in high school, my Mom took $5,000 of my money and my sister's money and put half of it in Lucent and half of it in Pfizer.
One of us made a lot of money, the other lost it all.
I was the one who lost it all. Even though I knew that IBM stock was the entire reason my college was paid for, it was still a long time before I forgave the stock market. I wish someone would have told me about index funds 10-15 years ago.
That's just your evidence-informed opinion speaking. What about the magic?
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Survivorship bias anyone?
When I was in high school, my Mom took $5,000 of my money and my sister's money and put half of it in Lucent and half of it in Pfizer.
One of us made a lot of money, the other lost it all.
I was the one who lost it all. Even though I knew that IBM stock was the entire reason my college was paid for, it was still a long time before I forgave the stock market. I wish someone would have told me about index funds 10-15 years ago.
That's just your evidence-informed opinion speaking. What about the magic?
That's really the problem here-- we're just muggles trying to understand. We didn't get our invitations to the Hogwarts school of witchcraft and investing.
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Survivorship bias anyone?
When I was in high school, my Mom took $5,000 of my money and my sister's money and put half of it in Lucent and half of it in Pfizer.
One of us made a lot of money, the other lost it all.
I was the one who lost it all. Even though I knew that IBM stock was the entire reason my college was paid for, it was still a long time before I forgave the stock market. I wish someone would have told me about index funds 10-15 years ago.
That's just your evidence-informed opinion speaking. What about the magic?
Obligatory stock picking representation -
(http://media.giphy.com/media/11a9K7FLvTD9Kw/giphy.gif)
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Survivorship bias anyone?
When I was in high school, my Mom took $5,000 of my money and my sister's money and put half of it in Lucent and half of it in Pfizer.
One of us made a lot of money, the other lost it all.
I was the one who lost it all. Even though I knew that IBM stock was the entire reason my college was paid for, it was still a long time before I forgave the stock market. I wish someone would have told me about index funds 10-15 years ago.
That's just your evidence-informed opinion speaking. What about the magic?
Obligatory stock picking representation -
(http://media.giphy.com/media/11a9K7FLvTD9Kw/giphy.gif)
I can't be the only one who has "Final Countdown" playing in my head when I look at that.
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I can't be the only one who has "Final Countdown" playing in my head when I look at that.
Nope ;)
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The word 'forest' is typically capitalized and spelled with a single r as well. It's good to see that the quality of care Mr. Percentage spends on his investments shows through in other facets of his life.
Let he who is without sin.... ;)
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I can't be the only one who has "Final Countdown" playing in my head when I look at that.
If investments go to hell, there is always money in the banana stand.
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The word 'forest' is typically capitalized and spelled with a single r as well. It's good to see that the quality of care Mr. Percentage spends on his investments shows through in other facets of his life.
Let he who is without sin.... ;)
(https://s-media-cache-ak0.pinimg.com/236x/90/67/a0/9067a01aac0b4762281e9471c596774a.jpg)
Dunno where 'not' went in my post, but have fixed the error that you pointed out.
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@OP
The problem seems to be that you haven't specified your method for stock picking.
therefore the magic references
Any sufficiently advanced technology is indistinguishable from magic. Arthur C. Clarke
I'll place my method out for example and forum abuse.
caveat: this method is only used for <4% of portfolio.
find Vsiax portfolio list.
choose the 50 stocks about 100 from the bottom ie #600to 650 of the list of 750
(yields a micro-cap value list)
choose only those that have $1 denominated put options
(crappy stocks, slims the pick list down considerably )
sell cash covered put options on final list stock(s)
(similar to limit order, but you get paid to do so.)
if options expire, repeat the ---sell cash covered put options
get assigned the stock.
hold
results-- 1000% in 2years or 0.00% in less than three months
average? about market avg. but MUCH more exciting :-)
I call it "the advanced monkey-dart method"
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Holy hannah OP are you really going to continue deflecting and covering your ears yelling "la la la la"?
Just answer what people have been trying to get out of you in every. single. thread.
Break down, in a detailed fashion, a few stocks and why you like them. Break down, in a detailed fashion, your understanding of volatility.
Stop telling us BS about how Cramer likes this stock, your Mom said you're awesome, or how we're all lemmings. Those are all meaningless statements. Give us some hard data to judge the actual merits or demerits of your approach. You do realize that none of us are taking you seriously because you consistently refuse to do this? In fact, I expect that you will reply to my post with some rehash of the things you've said over and over again.
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Holy hannah OP are you really going to continue deflecting and covering your ears yelling "la la la la"?
Just answer what people have been trying to get out of you in every. single. thread.
Break down, in a detailed fashion, a few stocks and why you like them. Break down, in a detailed fashion, your understanding of volatility.
Stop telling us BS about how Cramer likes this stock, your Mom said you're awesome, or how we're all lemmings. Those are all meaningless statements. Give us some hard data to judge the actual merits or demerits of your approach. You do realize that none of us are taking you seriously because you consistently refuse to do this? In fact, I expect that you will reply to my post with some rehash of the things you've said over and over again.
In before picture of a bar graph.
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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.
I really like this quote. I think it also applies to the practice of medicine. Reminds me to stay humble.
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Holy hannah OP are you really going to continue deflecting and covering your ears yelling "la la la la"?
Just answer what people have been trying to get out of you in every. single. thread.
Break down, in a detailed fashion, a few stocks and why you like them. Break down, in a detailed fashion, your understanding of volatility.
Stop telling us BS about how Cramer likes this stock, your Mom said you're awesome, or how we're all lemmings. Those are all meaningless statements. Give us some hard data to judge the actual merits or demerits of your approach. You do realize that none of us are taking you seriously because you consistently refuse to do this? In fact, I expect that you will reply to my post with some rehash of the things you've said over and over again.
Geez-ass
Common sense
Have fucking guts
Don't be afraid to die
When this forum likes to laugh at you
Stick the results right in their eyes
Disney-- its obvious.. it has every condition to go cult.. look at Netflix.. think content.. Disney is closing parks because they are too full. They aren't open in China yet. China has millions of new investment accounts. Most new investors buy Disney for their kids. China has a shitload of kids
Apple-- seriously, get serious
JPM-- seriously, get serious
BRK-B.. the Buffett cult and serious results. Im not even looking at the numbers.
F-- 3.8% dividend, it is seriously underplayed right now. Just look at every report. Sure its not cult, but its safe, slightly undervalued with a big ass dividend. Im not looking for a rocket. Its my rock
PAH-- because I like to speculate.. It's pure bet. Serial acquirers have a good track record. I like the CEO.
NM-- because I like to speculate.. Its pure bet and its book is around 11x its price with a 6% dividend.
BA-- because it acquired McDonald Douglas, because its in the space race, because it builds airplanes, because it has a big dick. Bo does if you remember the old Nike commercial.
I sold everything else.. Thats is it. That is all it will probably be this year. Im building those, and am currently drinking. That is as raw as it gets. You have seen my brain.
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Disney-- its obvious.. it has every condition to go cult.. look at Netflix.. think content.. Disney is closing parks because they are too full. They aren't open in China yet. China has millions of new investment accounts. Most new investors buy Disney for their kids. China has a shitload of kids
I think this is the point everyone is trying to make...why is it obvious? None of the reasons you gave suggests disney is going to outperform based on it's current market price. In fact I suspect all these "obvious" signs are already baked into the price of disney, and I suspect everyone else here thinks the same. I have no reason to suspect I am smarter and more able to pick up on "obvious", or even non obvious, signs that a company is going to perform well in the future than everyone else that has access to that information (which is Billions of other people).
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It is painfully obvious at this point: The OP does no rigorous numerical analysis. Fine. The OP does not employ a logic based decision making process, so it's unrealistic to expect him to respond to logic-based arguments that it's a bad idea.
OP, I'm sure it's clear at this point, but the problem we have with your method is *not* the picking of individual stocks. It's the total reliance on intuition to do so versus at least some semblance of a consistent mathematical analysis. It's your right to do what you want. We just happen to think it's crazy. Sadly, I think me saying we think you're acting crazily will only *strengthen* your resolve to do it this way, because you see it as a badge of honor rather than a warning sign. But, ask yourself-- of the "crazy ones," how many are Steve Jobs, and how many are just plain crazy?
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(http://i.giphy.com/iaBiPW3vAOi0E.gif)
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That's it I'm taking my stock picking advice and going home.
(http://i.kinja-img.com/gawker-media/image/upload/s--3n_Ez_5W--/c_fit,fl_progressive,q_80,w_320/bjn74wpdkwz9dnnno3cm.gif)
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OP, I'm sure it's clear at this point, but the problem we have with your method is *not* the picking of individual stocks. It's the total reliance on intuition to do so versus at least some semblance of a consistent mathematical analysis. It's your right to do what you want. We just happen to think it's crazy. Sadly, I think me saying we think you're acting crazily will only *strengthen* your resolve to do it this way, because you see it as a badge of honor rather than a warning sign. But, ask yourself-- of the "crazy ones," how many are Steve Jobs, and how many are just plain crazy?
Hmmm, well, if I was picking stocks today to invest in 16 years in the past- I think I'd pick on intuition as well. I'd intuitively pick stocks that haven't failed in the meantime.
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Part of the beauty of stock picking is that it doesn't require rigorous technical analysis, just making the right decisions.
Reams and reams of supporting analysis always boil down to a simple buy or sell decision, and any schmuck can make that decision. OP has demonstrated that quite clearly.
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The way I read this, the approach seems to be full of contradictions and impossible to replicate. Get serious, go with your feelings, look at numbers, don't look at numbers, speculate. This seems to be very much based on personal whims. I know this is not at all how Buffett invests. He spends about 14 hours a day, every day, for 70 years, reading financial reports and other data, and talks at length with CEOs about their businesses, digging in to find the edge. And he still picks losers from time to time.
I hope your good luck continues, mrpercentage. But the evidence says that it's highly likely some of your picks will be underperformers, and your portfolio may end up lagging the market overall. And since you are selling occasionally to take profits, the taxes you pay will also make it more difficult for you to beat a buy-and-hold strategy. Buffett almost never sells anything.
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Apple-- seriously, get serious
JPM-- seriously, get serious
So here's the thing. You are saying these are good companies, so that's why you don't need any more analysis.
But them being good companies has nothing to do with if their stock is appropriately priced or overpriced.
If Apple was suddenly 1000/share (from its current 130), but everything else about the company remained the same, would you still buy it? What if it was 1 million/share?
If it was $1/share (and all else remained the same), you'd jump all over it. It's a steal. Probably even at $100/share it's a good deal. But there's a price where it doesn't make sense to buy, and if your analysis is "the company is good," you can still be making bad investing decisions.
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I of course cannot predict the future, but 15 years from now, I imagine someone who bought Apple today will not do as well as someone who bought Apple in 1999. Because that was picking it before it was one, if not the, top company in the world.
And that is the problem with this method. It relied on knowing which companies have performed exceptionally over the last decade and a half. Good thing the OP didn't put a bunch of his money in Enron, Geocities, Sharper Image, Polaroid, or Pets.com. All things that looked pretty good in 1999.
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Both Disney and Netflix are entertainers. Does anything make sense about the difference between these two PE's? Im mean does Netflix even have physical assets anywhere close to Disney?
(http://i820.photobucket.com/albums/zz124/azwolf25/IMG_1380.jpg) (http://s820.photobucket.com/user/azwolf25/media/IMG_1380.jpg.html)(http://i820.photobucket.com/albums/zz124/azwolf25/IMG_1381.jpg) (http://s820.photobucket.com/user/azwolf25/media/IMG_1381.jpg.html)
Doesn't make sense does it. Neither does Shake Shack.
If you haven't bowed to Mickey. You will. Just wait until China has a taste, and wait until those Shake Shack portfolio managers are sitting in the theaters watching Star Wars. You think they are going to stop buying. Nope. Not a chance in hell. I think they are trying to short themselves into a bigger spot right now.
You should pay attention to price, and if your alarm bells go off. Stay away.
Me I think Mickey is safe as long as you don't panic on a dip. Of course for someone reading this a year from now it might be a different story. You might not want to start a position then. I think Apple is safe for at least a couple years. My speculation positions (PAH,NM) are my smallest ones. Im not telling you to buy these companies. Im telling you many can and will beat the 500. Everyone has to find their own way and I wouldn't start with more than you are willing to lose. If that is zero. Don't do it.
Develop intuitive understanding in all things-- the Book of Five Rings
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He's been telling you guys the answer all along. If you just read old martial arts books you'll understand how to invest and truly see Disney for the gem that it is.
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I actually own a lot of stock and have owned Disney since 2013 when I bought it at $63.50, but I actually agree with a lot of people here. I think you missed the major run from Disney. I'd wait for a pullback. Everything is baked in right now, especially with the Star Wars moving coming up. I could see a pullback after Star Wars as people forget about the Shanghai opening. That's when I would be looking. I think between $95-100 would be a great strike price.
I prefer a mixture of index funds and stock. There are certainly inefficiencies in the market, when a company has a bad quarter or gets bad news which is overreacted on. That's when I buy. Gilead was my favorite example. In late November Abbvie came out with Viekira Pak and the market crushed Gilead. If you had done just a bit of research you would have read about the superiority of 1 pill/ day vs 8 in actual cure rates because of patient's forgetting to take more pills. Gilead got crushed from 110 to 88 in a few days. 6 months later it's back up to $113 and the market itself has been essentially stagnant.
But for most people that don't do the research, or don't want to index funds are definitely the way to go and I have them in all of my 401ks and typically my immediate Roth deposits are in them too until I see a better investment opportunity.
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Sorry for being a little late to the party. This post would have fit better in this thread last week. I hope I'm not too late - allow me to embarrass myself:
The year is 1999, I'm 29, work in the software industry and make more money than I can reasonably spend. I think I'll open up one of these new Roth IRA accounts and put some money in the stock market. I've never bought individual stocks before (although I had always put money in the company sponsored retirement plans). The technology sector is obviously going to be huge forever. I work with the stuff daily. I'll just buy what I know.
Here's what I knew:
1. The internet is obviously going to be huge (it's 1999, everyone knows that). But I have a hard time believing that Microsoft will control the software market for servers like they have controlled the software market for desktops. There will be a new king of server software.
2. Computer gaming is already big and is going to get bigger. The company that can produce better and more life-like graphics is going to win big.
3. Mobile phones are going to be big business. This may have already been true to everyone in '99. I was late to the party, but even I knew this by now. (I remember in the late 80s when my Dad's work bought him a cell phone. I thought that sounded terrible. Work can always get ahold of you no matter where you are - why don't they just chain you to the desk! But by '99 I had had cell phone for 4+ years. There could be no doubt how big this was going to be.)
4. Time-shifted TV viewing was going to be massive. I had one of these boxes and once they caught on they'd be in every house in the US.
Ok, maybe not ground-breaking realizations, but I'm not certain they were clear to everyone in '99. Even so, I worked with the tech everyday, if anyone was going to be able to pick winners it was me. Here is what I bought.
1. RHAT - RedHat. They were the company that was going to monetize linux and linux already ran a lot of the servers on the internet.
2. SGI - Silicon Graphics. I worked with these machines. They were AMAZING graphics machines. No one else was even close.
3. VZ - Verizon. The biggest name in cell phones in the mid-atlantic. (I'm not certain if I bought them the day of the 30 year high for the stock or the month before).
4. TIVO - TiVo. I owned a Tivo box. How they are not one of the biggest companies on the planet, I still do not know.
5. ONMY - Omnisky. I admit that I didn't work with their tech. But they had something to do with wireless internet, had some sort of deal with Palm Computers and were in all the business magazines. Can't lose really.
After 2 years that $2,000 of stock was worth $1,400. It only got (much) worse. I consider myself thankful that I was cured of stock picking before I had serious money in it. Index-based mutual funds for me. Currently trying to talk myself out of working OMY.
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Sorry for being a little late to the party. This post would have fit better in this thread last week. I hope I'm not too late - allow me to embarrass myself:
The year is 1999, I'm 29, work in the software industry and make more money than I can reasonably spend. I think I'll open up one of these new Roth IRA accounts and put some money in the stock market. I've never bought individual stocks before (although I had always put money in the company sponsored retirement plans). The technology sector is obviously going to be huge forever. I work with the stuff daily. I'll just buy what I know.
Here's what I knew:
1. The internet is obviously going to be huge (it's 1999, everyone knows that). But I have a hard time believing that Microsoft will control the software market for servers like they have controlled the software market for desktops. There will be a new king of server software.
2. Computer gaming is already big and is going to get bigger. The company that can produce better and more life-like graphics is going to win big.
3. Mobile phones are going to be big business. This may have already been true to everyone in '99. I was late to the party, but even I knew this by now. (I remember in the late 80s when my Dad's work bought him a cell phone. I thought that sounded terrible. Work can always get ahold of you no matter where you are - why don't they just chain you to the desk! But by '99 I had had cell phone for 4+ years. There could be no doubt how big this was going to be.)
4. Time-shifted TV viewing was going to be massive. I had one of these boxes and once they caught on they'd be in every house in the US.
Ok, maybe not ground-breaking realizations, but I'm not certain they were clear to everyone in '99. Even so, I worked with the tech everyday, if anyone was going to be able to pick winners it was me. Here is what I bought.
1. RHAT - RedHat. They were the company that was going to monetize linux and linux already ran a lot of the servers on the internet.
2. SGI - Silicon Graphics. I worked with these machines. They were AMAZING graphics machines. No one else was even close.
3. VZ - Verizon. The biggest name in cell phones in the mid-atlantic. (I'm not certain if I bought them the day of the 30 year high for the stock or the month before).
4. TIVO - TiVo. I owned a Tivo box. How they are not one of the biggest companies on the planet, I still do not know.
5. ONMY - Omnisky. I admit that I didn't work with their tech. But they had something to do with wireless internet, had some sort of deal with Palm Computers and were in all the business magazines. Can't lose really.
After 2 years that $2,000 of stock was worth $1,400. It only got worse. I consider myself thankful that I was cured of stock picking before I had serious money in it. Index-based mutual funds for me. Currently trying to talk myself out of working OMY.
Your problem was you were all tech and you got in at the height of the bubble.
diversification applies to sectors, not just companies, which is one reason index funds are so useful, they force people to diversify across sectors as the average person typically buys what they know, which is typically all in one or two sectors.
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I love it when people can't explain away stocks like Netflix and Tesla. If you model doesn't work with reality then it may be wrong. I guess Netflix's gains for the next 100 years are not priced in yet. Disney who is absolutely killing it, nah, they are too high-- Star Wars is over rated, ESPN sucks, what's ABC 15 anyway, China what? That's nothing, been beating the 500 for how long-- nope it's priced in-- what? the parks are full and saying you can't come in even though they just raised the price, no I think I will buy Shake Shack at 40,000,000 a truck.
It's demand and Disney will have it for a long time. Shit if they just rerelease the original unaltered theatrical versions of 4,5,&6 on blue ray they will make hundreds of millions. You know what that version goes for used on Amazon in regular dvd? $100. Look it up. Theatrical version with crossed light sabers in blue on cover. $100 for a used dvd. Lucas lost his touch but it's cool Disney has got this
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I love it when people can't explain away stocks like Netflix and Tesla. If you model doesn't work with reality then it may be wrong. I guess Netflix's gains for the next 100 years are not priced in yet. Disney who is absolutely killing it, nah, they are too high-- Star Wars is over rated, ESPN sucks, what's ABC 15 anyway, China what? That's nothing, been beating the 500 for how long-- nope it's priced in-- what? the parks are full and saying you can't come in even though they just raised the price, no I think I will buy Shake Shack at 40,000,000 a truck.
It's demand and Disney will have it for a long time. Shit if they just rerelease the original unaltered theatrical versions of 4,5,&6 on blue ray they will make hundreds of millions. You know what that version goes for used on Amazon in regular dvd? $100. Look it up. Theatrical version with crossed light sabers in blue on cover. $100 for a used dvd. Lucas lost his touch but it's cool Disney has got this
You're straight up trolling now.
Literally no one has said those things I bolded.
You're being ridiculous.
We're saying that you should have some evaluation method to determine if it's too high.
Are you saying it's impossible for it to be too high? Clearly not, as you made the ambiguous statement "You should pay attention to price, and if your alarm bells go off. Stay away." -- We're saying that's not a real method to follow, and following your gut leads to losing lots of money versus having a real plan.
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I still think OP might just be a troll. But to be fair I do think doing "fundamental analysis" of a stock is nonsense for retail investors. 10s of thousands of some of the best paid people on the planet, with billions on the line have already analyzed many (most?) stocks in every possible way. What could I possibly hope to uncover? If all these millions of people say a stock is worth $38.79542 t right now, then the only logical conclusion to me is that it's probably worth exactly that.
The only reason I'd buy stocks with my "play money" would be speculative bets. Something that may or may not go big and anybody guess is equally good. Think early on tesla (I almost bought it at $30..), Netflix, gogo.
I really don't see the point of buying massive blue chip companies that are so scrutinized, and whose growth often just follow the market.
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I still think OP might just be a troll. But to be fair I do think doing "fundamental analysis" of a stock is nonsense for retail investors. 10s of thousands of some of the best paid people on the planet, with billions on the line have already analyzed many (most?) stocks in every possible way. What could I possibly hope to uncover? If all these millions of people say a stock is worth $38.79542 t right now, then the only logical conclusion to me is that it's probably worth exactly that.
The only reason I'd buy stocks with my "play money" would be speculative bets. Something that may or may not go big and anybody guess is equally good. Think early on tesla (I almost bought it at $30..), Netflix, gogo.
I really don't see the point of buying massive blue chip companies that are so scrutinized, and whose growth often just follow the market.
I agree with you on OP being a troll.
The only counterpoint I will provide for retail investors vs. "experts" is that you have to keep in mind we don't all have the same goals, which can provide some opportunities. For example, mutual funds have to track the market & beat it or they will lose customers. Which means they need to be ohhh there every quarter. The easiest way to do that is become the market. I, on the other hand don't care if my stock outperforms the market every quarter all I care about is that it outperforms over the next 5-10 years. Time horizons really impact the experts because of consumer expectations, they shouldn't impact you.
Another thing is hedge funds and mutual funds try to lock in gains at the end of the year, this may cause larger dips in otherwise great companies that are completely unrelated to the market perception or quality of the equity.
Examples recently are Gilead and Union Pacific. Gilead dropped dramatically after some news that was overblown. What likely happened is hedge funds and mutual funds dropped it to lock in end of year gains and they saw better opportunities for growth over the next 3-6 months. It was a very smart decision for them because it traded flat for 5-6 months. But, I don't care about 6 months, I care about 5-10 years. I bought on the dip and am up 25% since late November, most of the movement has been in the last month though.
UNP dropped 20% because of short term concerns with railways as coal and oil consumption has stalled. Hedge funds and mutual funds sold it to find short term growth in greener pastures. Makes perfect sense for them as their customers expect immediate returns. Do you think Union Pacific became a company worth 20% less because of a somewhat down quarter? Perhaps, but maybe not.
It took me a long time to see the market like this and it does take some work. It most certainly is not for everybody. For some reason or another my quant background has made me really enjoy the market and I spend 3-4 hours a day looking at this stuff.
Like I said earlier for most people an index is most definitely a better option and I still hold the majority of my retirement in index funds, but there are competing priorities in the market that cause temporary inefficiencies and make otherwise expensive companies inexpensive for short periods of time.
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MOD NOTE: So with nearly universal agreement that the OP either is a troll, or cannot coherently state an actual strategy, I don't see a point to this thread staying open--it's just leading to more trolling/frustration.
I'm going to lock it. If you feel there is something substantial in here that you want to discuss, feel free to start a new thread on that topic. As always, PM me or another mod with any concerns.
Cheers!