Stocks and Trading Thread - Channeling your inner Mono

[DGuller]

I read an article the other day saying that Lending Club was overrun by bots and third world research slaves snapping up the best loans before the average Joe can even review 'em.

That's what I would expect.  If you have a way to make a buck online by analyzing information better than competition, and there is an easy way to access that flow of information programmatically, botting will become inevitable.

[Tamas]

I am thinking about putting a little money (by that I mean really little) into a couple of broad (probably index-based) ETFs.

Will this move immediately trigger the burst of the current global stock-price bubble, or am I safe to do so?

[Admiral Yi]

I am thinking about putting a little money (by that I mean really little) into a couple of broad (probably index-based) ETFs.

Will this move immediately trigger the burst of the current global stock-price bubble, or am I safe to do so?

The way I look at it, after the subprime crash it took two years to regain the previous high.

[Camerus]

It depends on what your investment horizon is.  If you plan on buying and selling in several decades, I say go for it.

Yes, there are a number of indicators suggesting that stocks are reaching historically dangerous levels of overvaluation.  That certainly has me hesitating a bit, which is why I'm rebalancing some of my equities to bonds at the end of this year (not by much, just altering the balance by a couple percentage points) and slightly decreasing my US ETF in favour of international markets – though again, only by a couple percentage points, since I'm not sure international markets wouldn't crater anyway in the event of a US crash.  On the other hand, timing the market is virtually impossible for most mortals, which is why a buy and hold ETF approach is better for most individual investors.

Yi's observation about the Great Recession is correct.  But there have definitely been much longer bear markets in recent history than the Great Recession's.   Just by way of a brief example, using historic S&P 500 returns per https://www.thebalance.com/stock-market-returns-by-year-2388543, if you had $1000 invested during the tech bubble in 2000, your money wouldn't have regained its value until the end of 2006 (where it would be worth ~ $1082) ... only to be wiped away again by the Great Recession.  You wouldn't be in the black again until the end of 2010, where it would be worth $1047.  That's around a decade of zero growth, not to mention a lot of anxiety to go with it.  Of course, if you were still holding it by the end of 2016, it would be worth $2,118 – and would be worth even more as of today's date. Nor would you hopefully be invested solely in an S&P 500 index.

All that is to say market timing is probably impossible, but if you're not going to be selling in several decades anyway, then it's hard for an individual investor to beat the ease and historic success of ETFs (as measured by historic index performance).  Just make sure your portfolio is diversified across a number of global markets and that you're holding enough bonds in there to reflect your risk tolerance / age.

[Tamas]

Thanks.

I wonder how somebody with my meager means could bet against the UK housing market. It seems it is getting into a proper stall, and with now less subsidy on buy-to-let (who the hell thought that was a good idea anyways?) and UK interest rate hike continuously hinted at, a fall is pretty much guaranteed once the Brexit disaster properly unravels.

[Admiral Yi]

Thanks.

I wonder how somebody with my meager means could bet against the UK housing market. It seems it is getting into a proper stall, and with now less subsidy on buy-to-let (who the hell thought that was a good idea anyways?) and UK interest rate hike continuously hinted at, a fall is pretty much guaranteed once the Brexit disaster properly unravels.

I had always suspected, and had it confirmed in an Economist article, that it's difficult if not impossible to short real estate.

That being said, I suggest you think about your investing goals.  I've talked to a couple guys and I've heard the same story a couple times: they want to get a big hit quick.  One guy was talking about gold, the other about bitcoin.  I think you dicked around with options a while back, no?  That's speculation.  You could hit, or could lose it all.  What I recommend instead is that you think about plugging your money into boring old stocks, reinvesting your dividends, and look to make 6-8% a year over the long haul.  It's not sexy, but that's how you make your money grow.

[Tamas]

Good point

[Admiral Yi]

Sketchers just popped 40%.

[Richard Hakluyt]

@Tamas

One useful thing is that most of the FTSE-100 companies are large multinationals, their performance is independent of the UK economy's performance (except insofar as a bad performance by the UK impacts the world economy). Many of them pay dividends in US$ (converted on the day into £). The consequence is that they can be used as a useful hedge against poor performance of the UK, great if your main source of income is UK-based.

[Tamas]

Thanks RH.

Having opened an IG account, I am thinking of starting off with an FTSE100 ETF (maybe the one dealing with dividend stocks) and shorting the UK Property UCTIS ETF. I am just looking into hidden costs of holding a short position over time - I used to do that in CFDs when I was dicking around with those, but never with proper shares. That's a short position I'd be comfortable to sit on for quite a while.

[Tamas]

Never mind, I can't short on normal stocks

[Tamas]

So, I guess I have my plan ready: most of my monthly savings go automatically to two regular saving accounts as they have been doing so (two accounts due to the "help to buy" ISA - given enough time government help will allow us pick up an extra furniture or two!).

From the previously accumulated savings, most will go into some kind of bond (I am yet to research that), the rest (and it ain't much, trust me) went to my freshly created stocks ISA - half into a FTSE100 ETF, the other half went into adventure: Lloyds shares 

[Richard Hakluyt]

Ah yes, I have some Lloyds shares.

At the moment the dividend runs at about 6% and, all being well, their profits will increase and there will be potential capital gains.

Or there might be another financial crisis 

[Tamas]

Yes I read they should benefit from the rate hike, and have a nice dividend, and many analysts feel they'll be growing.

[Ed Anger]