Post: #76

(07-15-2017 02:34 AM)Australia Sucks Wrote:  

(07-15-2017 01:04 AM)SamuelBRoberts Wrote:  

(07-15-2017 12:19 AM)Teutatis Wrote:  Only? That's a lot of money for a lot of people. Let's not start going all "pointy elbows" with sums of money now.

In any event, I think what's in order here is a datasheet from OP about how to learn how to beat the stock market in your spare time: what to learn, what to look at, how long it's going to take, what kinds of returns you can realistically expect. I'd love to read it, if he's willing to write it, and if he's not there's really no use for this thread.

SamuelBRoberts I am not totally opposed to the idea of eventually writing a datasheet about how to invest in stocks, but I do not want to seem arrogant.

Dude starts a thread about how most people are investing stocks wrong, and are giving into "defeatism", then says he doesn't want to seem arrogant.
Man that horse left the barn with your first post here in this thread.

I'm a believer that knowledge stands on its own, particularly in a forum where we have so many talented people (I know there are several day traders and technical analysts who read this section) so if your knowledge is good, and it's well-presented, it will be very well received. I know I'm very interested in learning how to invest, but I'm finding it a huge and complex subject that's extremely risky. So I would be interested in hearing what you have to say, as well as what the people I trust have to say about your ideas. I would imagine many other people would as well.

Post: #77

Digi the first time on this thread I mentioned investment performance because somebody asked me my track record.

(07-14-2017 11:46 AM)not_dead_yet Wrote:  Oddly enough, OP, there's no discussion of your track record when it comes to investments. Care to share that info with us?

Where did I make large claims? All I said is that I "beat" the stock market and its a very achievable thing to do and more guys on Rooshv should give it a try. Is that such a wild claim?

As for speculation over my current and future net worth you pretty much started that and I just replied. When I first talked about wanting $1 million to retire I did not mention my time-frame or brag about it.

Can you please refer specifically to any other "large claims" that I made?

Post: #78

SamuelB, thanks for the encouragement if I get at least another 2 well repped members who ask me to write datasheet about how to invest in stocks I will do it. I know there are way more successful and skilled investors than me on Rooshv so I'm a bit hesitant.

Post: #79

I don't get the negativity, Australia simply said that active beats passive investing, which as long as you have the time and inclination to do it is true, it's not a big mystery.

Post: #80

(07-14-2017 09:05 PM)Digimata Wrote:  

(07-14-2017 07:40 PM)polar Wrote:  Reductio ad absurdum. You show evidence that a nuke is going off in NY tomorrow. I'll show you companies with operations beyond NYC.

There's a lot of diversification to be done to go from 3 stocks to the S&P. 30ish stocks is sufficient to reduce your idiosyncratic risk. And unless you have the same weights as the index, you'll still end with different results.

Agree and disagree. Diversification is good, but up to a point. As per the link below diminishing returns kick in after about 5-6 equities. I don't have the study with me and couldn't care to look it up so here it is: http://www.investopedia.com/articles/sto...cation.asp

For retail IMO, unless you are +-200 basis points, your in line with the index. Retail should be focusing on absolute gains, not relative gains anyways.

And while it is Reductio ad absurdum, your point above doesn't negate my point that corrs go to 1. And we both know my point to be true.

Diversification means your results approach the result of the market. Average results aren't bad if you don't know what you're doing. Bottom line is there's a scale, the more investments you hold the less you get hurt by any one going under. But to bring this back to the OP, I think we can all agree that three single stocks is not diversified.

I don't know what you mean about retail.

Correlations will approach 1 in a broad market sell off - in the short term; a time frame of hours or days at worst. Barring the Apocalypse, however, correlations will not stay near one for long, as not all investments will be affected equally by an event, which the market will reflect. For instance, LVMH and Campbell will do much differently in a recession. The bottom line being, a long term investor is not significantly affected by short term market corrections, but stands to lose significantly from idiosyncrasies and lack of diversification. And we both know my point to be true.

Good day to you, sir.

Post: #81

(07-15-2017 09:08 AM)polar Wrote:  [quote='Digimata' pid='1611890' dateline='1500084305']
[quote='polar' pid='1611854' dateline='1500079217']
Reductio ad absurdum. You show evidence that a nuke is going off in NY tomorrow. I'll show you companies with operations beyond NYC.

I don't know what you mean about retail.

The bottom line being, a long term investor is not significantly affected by short term market corrections, but stands to lose significantly from idiosyncrasies and lack of diversification. And we both know my point to be true.

Good day to you, sir.

Firstly by "retail" investors I mean individual investors (interchangeable) as opposed to "wholesale/institutional" or "high net worth" investors. Nice straw man argument about "short-term" stock market corrections. The Japanese stock market index (Nikkei 225) is still way below its 1989 all time high of 38,916. The Nikkei 225 index is currently just over 20,000 (20,118.86 to be precise as at time of writing). Maybe (being optimistic here) in another ten years it will be at a record high again, hitting 40,000 and "investors" who invested in 1989 will finally have broken even, assuming they are still alive that is. Now obviously I am taking one of the most extreme examples out there, but the reality is that sometimes it can take a market decades to fully recover from a crash and make a new all time high. There are plenty of examples (not quite as severe though) of this in the U.S.A. also.

Also I again countered the point about the fact that I own three stocks after you glossed over it a second time. HOW MANY TIMES DO I HAVE TO SAY IT!! I ALSO OWN OTHER INVESTMENTS APART FROM STOCKS. Also most stock market investors own other investments apart from stocks. You repeatedly failed to address this point. You need to look at portfolio diversification holistically and not just drill down to the stock exposures.

Post: #82

^ I wrote my previous post without reading through the more recent posts.

@OP: sounds like you have a system that works for you, and while I can't attribute your performance to skill vs. luck, my sincere congratulations on your dedication to self-study and your results.

My posts in this thread are aimed at dissuading people from attempting to replicate your performance and approach without learning up on exactly how to do it.

Finance as a whole is summed up by risk vs. return; I hope everyone considering the markets remembers that the risk comes first, the return may come tomorrow.

Post: #83

Polar yes we agree that nobody should rush out tomorrow to become an active investor.

Only those willing to put in years of hard work and be patient should try and it and they should gradually scale in over a number of years.

For example somebody currently investing 100% passively in index funds and wanting to become an "active"/"enterprising" investor they should spend the first year just reading books, newsletters, magazines, etc and following individual companies.

The second year they could commit a small amount of capital no more than 10% of their stock market investments to individual stocks (other 90% in index funds), then in the third year make it 20%, then in the 4th year make it 30% of the portfolio, 5th year 40%, 6th year 50%, etc. If by the 6th year their results are bad (you need a reasonable number of years to judge) they should consider going back to being 100% passive, but if their results are good they can consider going 100% active.

I admit I did not do it the way I described above but I should have and its what I would recommend others to do when starting out in "active" investing. Investing is a marathon not a sprint.

For what its worth I do not like the term "active" investing because "active" investing can actually be more passive than "passive" investing! What I mean by that is portfolio turnover/activity. Every year for example a massive number of new companies go into the S&P500 and old ones drop out and the index fund or ETF must buy and sell these stocks to continue mimicking the index. I have had multi year periods in my stock portfolio where not a single stock was bought or sold! So who is more "active", someone that buys 10 stocks and just sits on them for ten years or an S&P500 ETF?

Post: #84

For the average person passive investing is superior to active investing. The majority of professionals underperform index funds when fees are included. See Warren Buffet's famous bet with the hedge fund investor. I consider my self to have above average financial savvy, and I do both. Results have been mixed, but for the person who doesn't have a ton of time passive is 100x better. An average investor should never be speculating in the stock market.

Post: #85

I think guys with a decent net worth who are investing passively actually need to sit down and do basic spreadsheet calculations to help them decide if they should be a "passive" or an "active investor".

For example make a spreadsheet showing how much lump sum you currently have to invest (after tax and brokerage if you are going to sell current investments) and how much you will be adding each year over the next ten years.

Then test comparison return assumptions for the whole ten year period e.g. index ETF does 7% I do 8% per annum, Index does 7% per annum and I do do 9% per annum, etc Then you will be able to visually see how many dollars of extra wealth/out-performance you would get under different scenarios.

This will help you decide if for you personally achieving out-performance would be worth the extra time and risk taken.

The next step is to decide if you are able and willing to do the work required to achieve good performance.

The next step after deciding you are willing to do it is the process I wrote about 2 posts above about gradually scaling in to active investing.

Post: #86

This doesnt make sense. If you can beat the market by so much why not put all your wealth in there and leverage up.

You are saying everyone should do their own work, but why? If you are investing 10K a year why not get all your friends and families money and make it 100K a year. You can become a sort of mini-fundmanager and make your friends and family rich. Use the money gained to start/buy businesses and there is no stopping you

If it were so easy everyone would be doing it.

Post: #87

Kavi what you are talking about comes after what I am talking about. My post above is about how to get started in active investing. You should be well established as an active investor and have many years of high returns under your belt before investing your friends and family's money. After all you do not want to lose their money while still trying to figure out if you are good at active investing or not.

Post: #88

AS can you suggest some introductory reading on index funds via Schwab or Vanguard?

Post: #89

I'm really surprised no one has mentioned Morningstar and Focused Free Cash Flow Moat investing.

Post: #90

AS, you started the thread as a point of inquiry but it really seems like you've started it to boost your ego and shame others who disagree.

Poor form.

Post: #91

OP you're so baller at investing we get it.

Post a datasheet with how you pull it all off so even the most unintelligent can replicate your results.

You will get a lot of cred for doing so!

Post: #92

Male Defined I purposely talked very little about myself in the opening post but others kept trying to make the thread personal and asking personal questions or making personal arguments, etc so I replied. If I don't reply to those sorts of questions people will say "look he just ignores all our questions/arguments so he no credibility". If I do answer personal questions/arguments than I get accused of bragging. Go back and read the opening post does it look like a brag about myself? Damned if you do, damned if you don't.

Male Defined can you actually point out examples of where I shamed others who disagreed or insulted people? I merely had logical debate about why I disagreed people.

Churros there are plenty of people who advocate index investing on the forum and would be happy to point you in the right direction if you ask them. It seems a bit ironic that you ask for advice on index investing from me the guy who started a thread basically telling people not to invest in index funds, LOL.

That being said if you are going to invest in index funds today I would be inclined to tilt your portfolio towards a "small cap value ETF/index fund" and also towards emerging market ETFs/index funds. Research from Fama and French the academics as well as countless other academics and fund managers indicate that small caps outperform over the long term and that "value" stocks outperform and when you combine the two even better. As for emerging markets, currently the valuations look attractive relative to U.S. stocks and other developed economy stocks. If you want some books to read on index fund investing John Boggle founder of Vanguard wrote a number of books about the topic. Just google his name on Amazon and you can read his books.

Post: #93

(07-14-2017 04:45 PM)Veloce Wrote:  

(07-14-2017 04:37 PM)John Michael Kane Wrote:  Anyone considering investing in index funds should check out Schwab:

https://www.schwab.com/public/schwab/nn/...funds.html

Their fees are in line with Vanguard if not lower.

Still, I caution anyone to invest (or at least large amounts right now) as the stock market is overpriced as a whole and ready for a correction.

100% agree. I've got a sizeable chunk of change waiting in a money market account, If I see a major correction then I'll dollar cost average back in.

In the meantime I'm putting 100% extra monthly income into my mortgage. My home value jumped considerably the past year and if I think it's poised to skyrocket in the next few based on the local market. I've got a lot more faith in my property than any stock.

And that's really the point. If you know a company as well as your own home and you think it's severely undervalued, by all means buy in. But your analysis should be based on hard tangibles, and not just a "feeling".

While everyone has their own risk tolerances and approaches towards debt (and to each their own) I'm personally not a fan of this approach. I certainly understand the motivation, but holding large amounts of your money on the side waiting for the correction means that money will be losing value through inflation for who knows how long.

Instead, I have a reasonably-sized line of credit through my bank waiting on the sidelines instead. If the market keeps going up, I keep investing my money amount budgeted for investment and let the LOC wait on the sideline. If it corrects, I start dollar-cost averaging the LOC money into my portfolio, then use my investment budget to pay it down over time. Same idea, and you don't have to wait with large sums of money on the side. That being said, I'm single with no dependents and no debts, so my approach isn't necessarily for everyone.

Why wait and lose value through inflation and the opportunity cost of missed returns, when I could have the bank's money do it for me?

(07-14-2017 11:03 PM)Australia Sucks Wrote:  Firstly I started investing in Australian stocks in 2007 right the market peak when the GFC was about to hit. So I know first hand what a bear market is like. Secondly how can you possibly say I got lucky by riding a huge bull market? I invested close to the market peak (I was a newbie at the time and just recently had some cash to invest). Also the Australian stock market has not enjoyed anything like the Bull run of U.S. stocks and the All ordinaries index is still well below its 2007 high. It peaked at around 6800 in 2007 and is currently around 5800. Hardly what I would call a strong tailwind.

In regards to me holding 3 stocks you clearly glossed over that post where I mentioned that stocks only make up a portion of my investment portfolio. I also own real estate and commodities.

I get the distinct sense that your real-estate holdings are Australian-domiciled, and that your commodity holdings are in ones that Australia makes lots of. Given that the vast majority of retail investors have their real-estate exposure in their primary residence, I'll go ahead and wager that's the case with you. Possibly with a home-equity line of credit against it for investment funds, as well.

Setting aside the fact that Australia is in the midst of a massive real-estate bubble, only surpassed by the one in my own country, you've probably fallen victim to another of the classic mistakes that retail investors make - overexposure to their home country. Usually, this is due to government tax incentives that encourage investment at home but distort portfolios and make them undiversified by national jurisdiction.

In the grand scheme of things, we can both agree that Australia represents a relatively small percentage of the global economy, at best. Its entire economy is predicated on the idea that China will keep hoovering up its minerals, and that Australians will take the cash that results and keep buying and selling each other overpriced real-estate. Break any of those assumptions and you're toast. I should know, given that Canada's economy is the exact same model (substituting the United States for China.)

That's the nice thing about index investing - it offers a easy-to-use tool by which you can diversify across asset classes, sector classes, and jurisdictions.

I'll go ahead and discuss my own investment holdings in a broad view: 30% in US equities, 30% in international equities (mostly Europe, Australia, and developed Asia), 20% in Canadian equities, and 20% in fixed income. That is a portfolio diversified across hundreds of thousand of holdings, across every sector imaginable, and across nearly every country with an economy worthy of being called as such, appropriately scaled to the size of their equity market capitalization and size of local economy. All with no more than four separate ETFs.

In short, if Australia does live up to your username and does in fact begin to suck, you're going to end up far worse than you might have anticipated.

Post: #94

Hi Speed your post has little to do with the topic of the thread but I will address it anyway.

My 3 stock holdings are listed on the ASX but all three stocks actually have some exposure to foreign earnings.

My real estate exposures are indeed in Australia. Its difficult to borrow money or to manage a property when it is overseas (I have entertained the idea from time to time and will likely pull the trigger on a foreign property one day). On top of the fact that you are adding currency risk.

I think its debatable if there is a property bubble Australia wide. Sydney and Melbourne property prices are in a bubble, however I think the bubble will continue for years to come. As for the rest of the country, almost all other cities are not experiencing property bubbles and my property holdings are in cities other Sydney and Melbourne.

As for my commodity exposure its fully in precious metals, which in some cases can act as a hedge to an economic downturn.

Yes you can invest in an index fund or ETF for overseas exposure but you can also buy shares directly easily enough. The are brokerages in Australia that will let you buy shares in something like 40 different countries (from memory). This is aside from the fact that you can buy shares in multi-national companies which give you plenty of foreign exposure.

Post: #95

(07-14-2017 10:54 AM)Australia Sucks Wrote:  With the right attitude, patience, discipline and study/knowledge most reasonably intelligent people can outperform the market. It is a realistic goal.
Most retail/individual investors are uninformed idiots, so beating them should be easy.

This is correct in my experience. In August 2012 Facebook (FB) shares dropped to $18. I brought in at $19.39 using 30% of my net worth.

I am still holding these shares which are currently worth $159.97, a gain of 725% over 5 years.

Any one with a knowledge of network effects could have seen that Facebook had a compelling future as the worlds leading social network.

Over the next 3 months I will be scaling out of Facebook, and waiting for the next "no-brainer" opportunity to go in hard with.

I believe young Westerners are living in a fantastic time of innovation and opportunities. So learn a little about the new advances in tech, there are game changers - for example :

Artificial Intelligence - Nivida (NVDA) make the GPU's which power many AI systems.

Post: #96

Roosh is right. In general the efficient market hypothesis is correct. Most funds don't beat the market, the ones that do seem to be randomly selected each year (no real pattern), and even if you get lucky and pick a fund that beats the market you'll still end up making less then a low fee ETF because you'll get killed with fees.

As an undergrad when I was obsessed with Finance and Economics I was able to significantly able to beat the market mostly using momentum plays; and general Macroeconomic analysis. BUT I had to be paying attention and grinding non-stop almost every day, AND I had formal training, AND almost no other Finance students were able to match my performance. Not to mention even if you're good at investing and follow the markets obsessively it still isn't worth it for amateurs from a strictly financial standpoint. If you have say $25,000 to invest and get an extra 6% return; that's still only an extra $1,500 dollars a year. I easily could have made more then that if I had taken all of those hours and worked at a minimum wage job with them instead.

The only people who can make the numbers work are men that work for hedge funds, or large financial institutions. Because they have so much capital to invest they can achieve economies of scale, and make an astronomical amount of money in the absolute sense. But not necessarily that much when you look at their Net Income as a percentage Return on Capital.

Post: #97

If I was to get back in the market, I'd just copy the moves of a guy that has a strong, multi-decade record of success. Usually these guys are moving in quantity, so their trades are public knowledge.

You would think that would be more likely to succeed than our stock picks, as most of these guys actually do have proven, specialized knowledge in investing as a whole, or at least in a certain industry, whereas most of us don't.

That strategy would certainly save a lot of time. For some folks, this is too rough on the ego though, to admit that there's someone out there that's better than them.

Now, if someone does have insider knowledge of a certain industry, then more power to them, but I'd bet most guys that think they have this knowledge actually don't.

Just a thought.

Post: #98

mpr I believe I covered most of your points in this 4 page thread but I'll go over them once again.

-Most fund don't beat the market because they are too big and lack flexibility (too many restrictions in their mandates) not to mention they are generally too focused on the short-term. Also they are more focused on maximizing assets under management than maximizing performance. They are two completely different and sometimes incompatible objectives.

-Most finance courses are absolute non-sense and teach garbage which does not hold true or work in the real world. Also most people including finance students lack patience and a long-term focus. Also most finance courses are taught by academics rather than top class practitioners. If you look at some of the courses at Columbia business school, some of these courses were taught by people like the legendary Joel Greenblatt and they produced a lot of successful students. Look at all the people of Warren Buffett's generation who studied under Ben Graham and David Dodd. Those classes produced a crop of legendary investors such as Warren Buffett and Walter Schloss. If you include people who say they were heavily influenced by Ben Graham you have names such as William J. Ruane. Irving Kahn. Jean-Marie Eveillard. Seth Klarman. Bill Ackman. Most finance students have crappy professors. The ones who had seasoned and successful investors (quite rare) as their teachers tended to do well. Read the speech by Warren Buffett:
https://www8.gsb.columbia.edu/articles/c...rinvestors

Here is what what was written in one of the reviews of the book Security analysis (the book was written by Benjamin Graham and Davidd Dodd):

"It may take months and years for Graham to teach you the lessons you need to learn, but he will teach you, just as he taught Buffett. Remember Buffett wasn't his only successful student. There were many other MASTERS that were created in that classroom at Columbia so many decades ago. An example are the folks that ran and run Sequoia Capital, a value hunting firm that's been around for decades, outperforming all their competitors.

There is really no other book that can give you the FORMAL GROUNDING that you need to become a true player in the stock market. Even now, forty years after I started reading Graham and Dodd, I am still learning something on every page I read over and over again.

Many other reviewers have taken the time to explain what it on those pages; I will not rehash them here. I need to motivate you to ACT, to click the button that says, I want to own this book, so please allow me to share one or two stories with you.

When I was a teenager going to college in New York, my accounting professor got me an afternoon job with John W. Bristol, the foremost money manager of the 1950's and 60's. He ran the Princeton University portfolio among many others of equal prestige. Always sitting behind him was a well-worn copy of Graham and Dodd.

Two years later with Arthur Andersen, I had the honor of auditing the richest man in the world - Daniel K. Ludwig. He was worth $5 billion in the early 1970's. No education, 5th grade maybe, and forget college. Behind him was Graham and Dodd, the only book there, and it was underlined and annotated. This man was secretive and shy; he had only two friends in life - Howard Hughes, and Clark Gable."

Also the point is that even if you are only investing $25,000 the extra gains won't make much difference to you but the extra knowledge learned will. Maybe if you are investing $25,000 today in 10 years time after saving and investing every year you might be investing $600,000. At that point the skills and knowledge you gained will help you generate a strong return from that $600,000. Getting 6% out-performance on $600,000 is equivalent to an extra $36,000 of return. Is that not worth your while? Maybe twenty years after first investing that $25,000, through a combination of saving and investing every year maybe you will have $1.5 million at your disposal. At that point 5% out-performance is an additional $75,000 per annum in return.

Contrary to your assertion, people like Buffett and Joel Grenblatt have consistently pointed out that size is the enemy of performance and is in fact a huge anchor weighing down performance. There is a reason why Berkshire Hathaway is generating far lower returns than 30 or 40 years ago. In fact Buffett stated many years ago if he only had $1 million dollars to invest he could get a 50% per annum return. If you are investing $10 billion dollars that excludes a lot of micro-cap companies and smaller real estate opportunities. Not too mention the difficulty in getting into and out of positions.

Spaniard88 there is some merit in your strategy but typically by the time an investor becomes really famous they are investing so much capital that their returns while still decent will be nothing like their earlier years. So by you copying them you get the disadvantage of size (not investing in micro-caps or other smaller opportunities) without the advantages. What I mean by you not getting the advantages is for example you won't get access to the private bond, private preferred stock and private share placement deals, private derivatives contracts, buying unlisted/private companies, etc that Berkshire Hathaway or guys like Carl Icahn sometimes get. So I do not necessarily advise shadowing people like that.

Post: #99

Sometime next week if I have time I will try and do a comprehensive "How to get started in "value" investing" thread because I have gotten multiple requests to create a thread on how to invest. I do not consider myself to be knowledgeable enough to do an advanced thread on the topic for seasoned practitioners but I certainly can create a thread which answers some common questions for those new to the concept of "value" investing.

Post: #100

It's a give and take. The time it takes to learn how to be good enough to generate alpha, not just on the actual knowledge side but also the emotional control side, is quite long. You can do all the analysis you want and everything can go exactly as you thought it would, but if the stock drops 40% just because of general macro factors how would you take it? Bailing for a loss may or may not be the correct move, and that is where most people, even experienced people, go wrong.

Indexing is better for maybe 80%+ of the people out there because time may be better spent doing something else. Even if you invest, lets say $25,000 to generate 5% alpha over the year (which is pretty darn good), that's only an extra $1250 for what could over 100 hours of study, review, and tracking over the year. Even $200k is only $10k extra in your pocket over the year, which may/may not be worth the 100 hours of study you put in over the year.

It took me ten years to translate sports/other handicapping into generating similar returns in the stock market, and I am in the top 2% of handicappers out there. It really is not easy at all.

If you said you started in 2007, then that allowed you to recover from 2008 onwards to ride one of the biggest and longest bulls we have ever seen, where any idiot picking high beta nonsense like Tesla could say they are destroying everyone out there. The proof of mettle is really when things turn south, even if you did everything right.

And as for value investing, although I agree with your sentiment on it, value investors following the Graham formula or similar tactics have trailed the index during this run. Which goes to my original point of even if you do everything right, you can still lose to indexing just because.