Stocks & Investing

[zoraster]

I wanted to necro this thread just to point something out to people and point out why you'd invest in low cost index funds rather than pick what you think is going to be super great. The TLDR is you don't know. But longer version is this:

If when this thread started you invested 10,000 in an S&P 500 index fund you'd have about $11,570 right now or $12,134 if you reinvested your dividends. To be clear, that's a huge return over a 2 year period and I wouldn't expect it in the future. But it's still there.

If you had invested $10,000 in Medical Marijuana, the company we talked about on page 1, you'd have $1,250 right now. So obviously this is somewhat flawed: he was saying he was putting in $300ish at a shot it might go to the moon. But he still would have lost $250 doing that. That's a pretty nice meal!

[BROseidon]

There's like no reason not to invest only in ETFs with a Stock/Bond ratio dependent on how soon you need your money.

http://www.vanguard.com

[zoraster]

I'm not sure there's a lot in the ETF vs. Index fund (assuming you're talking about a vanguard or schwab type super low expense ratio fund) discussion and tends to be a distraction.

[BROseidon]

They basically do the same thing - you should just invest in whatever has the cheapest management fees (which is usually Vanguard)

[mykonian]

I wanted to necro this thread just to point something out to people and point out why you'd invest in low cost index funds rather than pick what you think is going to be super great. The TLDR is you don't know. But longer version is this:

If when this thread started you invested 10,000 in an S&P 500 index fund you'd have about $11,570 right now or $12,134 if you reinvested your dividends. To be clear, that's a huge return over a 2 year period and I wouldn't expect it in the future. But it's still there.

If you had invested $10,000 in Medical Marijuana, the company we talked about on page 1, you'd have $1,250 right now. So obviously this is somewhat flawed: he was saying he was putting in $300ish at a shot it might go to the moon. But he still would have lost $250 doing that. That's a pretty nice meal!

I mean, I'm sure people here realize this. I've invested part of my savings when the interest dropped the way it did, but when the worst of the crisis seemed past. Think I was slightly ahead of the curve there compared to other individuals. Either way, I've got pretty much the same guidelines as everybody, to reduce the feeling that you are gambling. Because these are gambles against people who look in your cards, you don't win out. The example you took there, is something the opening poster would invest on based on name and their view on the changes of law. A big fun looks at the numbers, has a couple of lawyers/historians having a far better idea about how politics works, and they make the same decision. You are going to lose out somehow.

So yeah, guidelines I've learned and follow have been kind of common knowledge:

Do spread, if the money pool isn't too big (like mine) that means you'll be spreading around sectors mostly in stead of companies, but indexes are a good option too.
Women are better at (private) investing because they in general don't try to beat the game by trading as much as men. So settle down and invest like a girl. No sense in spending fee if on average you don't get much gain out of it.
Do take your time. You aren't going to figure out who's going to be the big thing 2 years in. You could know that every 10 years you go through an economic cycles. If you have money you don't need in 10 years, your time will come.
Stay away from leveraging tools. They increase the risk. These can be as complicated as turbo's or the likes (where you buy it for part of the money, the bank supplies the rest for a little fee, you take all the risk/all the profit), or as simple as financials. They risk significantly as the indeces do, drop more harshly as the indeces drop.
Stick with your strategy. An extension of taking your time, when you have figured out a way how you think you can do your investing properly, it still won't be clean sailing. Figure out for yourself, what and at what kind of price you want to buy, when you want to sell (be that to take the loss, or cash out), and stick with it. It's easy to get carried away by opinions, having a preset plan to fall back on will make you trade calmer and reduce your risk.
Don't ignore divident. This was the big one for me. Professional traders need to make the money now, they buy and sell every day. The price of the stock (value+potential) is everything, the actual revenue is less important than the possibility of growth. For a retirement fund or something however, that save 3% over the cost to buy some stocks or more really does not sound so bad when your savings account gives sub 1%. High divident means less potential (so the traders didn't drive the prize up), so don't get greedy. But a company that sits there, makes the same money every year, and gives 3% over stock cost to it's shareholders is a fine investment.
Do spread (2): stocks aren't the only option, they are amongst the riskier options, and are difficult to really understand. Bonds require some simple math to figure out the worth, but are much more a known quantatity. Perpetuals are an in between option, but here, moreso than with other products, you need to read the prospectus. Treat them like stocks, you take the same risk, but your value depends heavily on the state of the global interest. Real estate, (this gets as stupid as solar panels on your roof, parents just did as an investment and the return I can calculate off that is significant, but rather save) if it's available, is a way to have part of the investment in a more safe place. Nothing wrong with putting a portion of your investing money in places where you run less risk to lose it all, using only a small part to go for the risky stuff (like stocks in a technological company)

[zoraster]

An alternative to the high effort suggestion you've posted that will almost certainly beat it over the long run is to invest in index funds and bond funds, altering the balance as you get nearer to retirement. Although I can't speak to any tax implications somewhere like the Netherlands.

Lots of people's work 401ks automatically invest them in Target funds (targeting a certain year for retirement) that automatically adjusts the balance as that year gets closer. For someone who never wants to look at their stuff and just sock stuff away in their 401k until they retire, that's a pretty awesome thing to do as long as the expense ratio isn't confiscatory (Vanguard's was 0.16%). If you're a more involved investor, doing it yourself tends to have better expense ratios and isn't hard and can be done in just 3 funds (I use 5, but a basic US stock index fund, international index fund, bond fund is perfectly sufficient).

My personal investment portfolio is slightly more complicated, and I've moved some of my bond funds to CA tax-exempt bonds (since that hits both federal and CA taxes whereas TX doesn't have an income tax), but the overall philosophy is the same.

[Zulfy]

ptuh

[ironstove]

If you're new to investing and you don't know what you're doing, I recommend buying an index like SPY and selling covered calls and naked puts both OTM.

[mykonian]

An alternative to the high effort suggestion you've posted that will almost certainly beat it over the long run is to invest in index funds and bond funds, altering the balance as you get nearer to retirement. Although I can't speak to any tax implications somewhere like the Netherlands.

Situation is similar in the Netherlands. I just wanted the responsibility.

[zoraster]

If you're new to investing and you don't know what you're doing, I recommend buying an index like SPY and selling covered calls and naked puts both OTM.

Why?

[Katsuki]

I recommend investing in the Katsuki Poverty Welfare Fund.

[zoraster]

What's my rate of return on that?

[BROseidon]

Great for Katsuki!

[ironstove]

If you're new to investing and you don't know what you're doing, I recommend buying an index like SPY and selling covered calls and naked puts both OTM.

Why?

It's lower on the risk spectrum meaning lower volatility meaning less nights with poor sleep... high liquidity means you won't get sharked by spread gaps, and you learn a lot about investing/financial instruments while doing so.

Alternatively if you don't have the capital requirements to touch SPY, there are smaller funds such as EEM that are also pretty good.

I made the full circle as someone who started investing as a freshman in college with 200 dollars I had saved up, I went through the route of trying to teach myself and picking penny stocks of companies in industries I thought would do well i.e. energy, pharma, medical, biotech, etc... It's been almost 10 years since I first started and I say save yourself the trouble of making the same uneducated/misguided decisions I made when I was young... This is mainly aimed specifically at people that are interested in actively managing some of their investments. I'm just saying what I wish someone had told me when I was first starting out.

If your employer provides a 401k match, you obviously max that first, then max your IRA, then any additional money you still want to invest you can try this strategy out.

[PeregrineV]

I wanted to necro this thread just to point something out to people and point out why you'd invest in low cost index funds rather than pick what you think is going to be super great. The TLDR is you don't know. But longer version is this:

If when this thread started you invested 10,000 in an S&P 500 index fund you'd have about $11,570 right now or $12,134 if you reinvested your dividends. To be clear, that's a huge return over a 2 year period and I wouldn't expect it in the future. But it's still there.

If you had invested $10,000 in Medical Marijuana, the company we talked about on page 1, you'd have $1,250 right now. So obviously this is somewhat flawed: he was saying he was putting in $300ish at a shot it might go to the moon. But he still would have lost $250 doing that. That's a pretty nice meal!

It's even worse than that right now.

But, all my other ones are doing ok. *grumble grumble on some them*

[zoraster]

If you're new to investing and you don't know what you're doing, I recommend buying an index like SPY and selling covered calls and naked puts both OTM.

Why?

It's lower on the risk spectrum meaning lower volatility meaning less nights with poor sleep... high liquidity means you won't get sharked by spread gaps, and you learn a lot about investing/financial instruments while doing so.

Alternatively if you don't have the capital requirements to touch SPY, there are smaller funds such as EEM that are also pretty good.

I made the full circle as someone who started investing as a freshman in college with 200 dollars I had saved up, I went through the route of trying to teach myself and picking penny stocks of companies in industries I thought would do well i.e. energy, pharma, medical, biotech, etc... It's been almost 10 years since I first started and I say save yourself the trouble of making the same uneducated/misguided decisions I made when I was young... This is mainly aimed specifically at people that are interested in actively managing some of their investments. I'm just saying what I wish someone had told me when I was first starting out.

If your employer provides a 401k match, you obviously max that first, then max your IRA, then any additional money you still want to invest you can try this strategy out.

Oh, I wasn't confused about the SPY suggestion, which is a low cost index ETF (though not the lowest).

My question is about the other suggestion for new investors. I'd never suggest a new investor start by selling covered calls. Anyway, I don't think active trading should be almost anyone's goal unless you're in it for the game. Which is fine too, but it's more gambling than anything else.

[Cephrir]

I've been investing a bit for a couple years now (though not the last 8 months or so because I'm dumb) and I would not want to touch any sort of option with a ten foot pole thank you.

[zoraster]

I mean if you have a 401k, you're investing.

[ironstove]

I've been investing a bit for a couple years now (though not the last 8 months or so because I'm dumb) and I would not want to touch any sort of option with a ten foot pole thank you.

Why are you opposed to options? They're honestly a great tool once you understand how to use them. You can fix bad trades, hedge against volatility, and generate passive income on low volatility stocks you're holding.

I personally love options, I trade stock sometimes but most of the time I'm selling options and trading futures, this is outside of my 401k though, I have the time to manage both accounts actively and I take a much more conservative approach on my 401k investing in funds/indexes whereas my personal account is much more aggressive and carries a lot more risk with it.

With that said, it's my choice to take on risk with options, if you want to run a low-risk, low-return strategy then that can easily be done, it's just not on my agenda.

[mykonian]

You could use options to cover off your risk on stock with a little math and effort. It comes at an efficiency cost but occasionally can be the right decision. Probably not for use by us though.

[PeregrineV]

OK, I found a stock that has performed well, and am looking to find another that will preform similary over the next 7 years.

I hope to do this by comparing the statistics of the stock and look for current ones following a similar statiscal pattern.

CHTR
Charter Communications Inc N

12/2/2009- $33.00
12/8/2016- $278.98

Total return: 712.14%
Average Annual Total Return: 35.31%

No dividends paid, one or zero splits.

Any advice on what statistics I should research?

[zoraster]

I'm not sure what you're asking for. How to identify a company that has an average of a roughly 35% annual growth rate over 7 years?

If you find the answer, please share. Until then, I'll just scratch and win.

[PeregrineV]

I'm not sure what you're asking for. How to identify a company that has an average of a roughly 35% annual growth rate over 7 years?

If you find the answer, please share. Until then, I'll just scratch and win.

I know there are about a 1000 stats for a company. If I can find another one with similar growth, then we can correlate to see what stats are similar.
Of course, more companies that perform like this the better, but this is the first I've found.

Until I find another, or a few more, what are the most common stock indicators used? Like P/E Ratio (although that one does not work for this stock), etc.

[Ranmaru]

What should I do if i want to get my feet wet. where should i start, what should i read so i'm well informed on investing and stuff.

[PeregrineV]

What should I do if i want to get my feet wet. where should i start, what should i read so i'm well informed on investing and stuff.

A good Google search can help, depending on how much you know/don't know.

http://www.investopedia.com/advisor-net ... t-savings/

Talks about mutual funds and regular investment vs retirement investment.

is that what you mean? Or more basic, or more advanced?