Stocks and Trading Thread - Channeling your inner Mono

[Habbaku]

Such is the way for millennials and younger.

So no. Not thinking about stocks with an eye to this. Though it does remind me I need to get on top of moving my Swiss pension into an account without charges.

Do you not see the disconnect here? This is a terrible way to think about investing.

[DGuller]

I think a good definition to separate gambling from (possibly risky) investment is whether the expected return is positive or negative, after all expenses and such.  There is an inflection point there: if your expected returns are positive, then you want to minimize the volatility as much as possible to maximize your chance of making a profit.  If your expected returns are negative, then you want to push the volatility up without bound to maximize your chance of making a profit.

[Josquius]

Such is the way for millennials and younger.

So no. Not thinking about stocks with an eye to this. Though it does remind me I need to get on top of moving my Swiss pension into an account without charges.

Do you not see the disconnect here? This is a terrible way to think about investing.

No. I don't get your meaning.
Not being overly concerned with building a pension doesn't mean I want to actively lose pension money if its avoidable.

[Admiral Yi]

In the long run investing is not gambling.  It's a sure thing.  There is a chance the market crashes and you lose 40% the day after you decide to buy.  But I guarantee that in 15 years that investment will have grown more than if you had put it in a bank.

There is also the risk of an individual company cratering.  That's why you diversify.

[DGuller]

In the long run investing is not gambling.  It's a sure thing.  There is a chance the market crashes and you lose 40% the day after you decide to buy.  But I guarantee that in 15 years that investment will have grown more than if you had put it in a bank.

There is also the risk of an individual company cratering.  That's why you diversify.

Be careful with financial guarantees.  I think history shows that 15 years isn't a long enough period to guarantee a positive return.

[crazy canuck]

One of the signs it is time to sell - someone claims equities are a sure thing.

[Admiral Yi]

Be careful with financial guarantees.  I think history shows that 15 years isn't a long enough period to guarantee a positive return.

Since the creation of the Dutch East Indies Company I can think of two cases that break that rule.

[DGuller]

Be careful with financial guarantees.  I think history shows that 15 years isn't a long enough period to guarantee a positive return.

Since the creation of the Dutch East Indies Company I can think of two cases that break that rule.

What are those?

[Admiral Yi]

What are those?

Great Depression and Japan 80s.

South Sea bubble and Louisiana bubble don't count because they were single companies, not entire markets.

[DGuller]

What are those?

Great Depression and Japan 80s.

South Sea bubble and Louisiana bubble don't count because they were single companies, not entire markets.

The Dotcom Bubble may or may not make the cut, by a small margin either way.  The S&P 500 went from 1510 to 1865 in the 15.5 year period from the middle of 2000.  That's 1.4% annualized return, which back then was probably doable in the saving account.  The Obama recovery in the last couple of years of that 15.5 year period made a huge difference.

[Admiral Yi]

The Dotcom Bubble may or may not make the cut, by a small margin either way.  The S&P 500 went from 1510 to 1865 in the 15.5 year period from the middle of 2000.  That's 1.4% annualized return, which back then was probably doable in the saving account.  The Obama recovery in the last couple of years of that 15.5 year period made a huge difference.

That doesn't include dividends. 

[Admiral Yi]

Also, consider the artificiality of that situation.  Who, besides the odd lottery winner, sits on a big chunk of change and invests it all at one go?  The plain vanilla investor puts some away each year.  So the money he invested a year before the bubble peak makes somewhat better than that 1.4, the money two years before better still, and so on.

[Threviel]

I tried to argue this earlier. Say that someone invests 100€ in index funds each month from the age of 20 to the age of 60. That's 40 years and I believe that even a Japanese saver that started in 1981 will have made a profit on that strategy.

[Josquius]

I tried to argue this earlier. Say that someone invests 100€ in index funds each month from the age of 20 to the age of 60. That's 40 years and I believe that even a Japanese saver that started in 1981 will have made a profit on that strategy.

But a Japanese saver who started in the late 80s?
That's where a lot of signs in western economies are pointing towards us being.

I've a friend who is ahead of me in this market business. I remember him being aghast when I mentioned how much deposit I put down on my house. I should have invested it in stocks and paid the minimum deposit instead he said.
But... Just as diversifying in the market is smart so too is diversifying what you do with your money. I think its more likely than not that things will remain OK for some time to come and we arent looking at another big crash for a while... But theres still way too big a chance of that happening to gamble against it with everything.

[Threviel]

Someone that started later will presumably be better off since that someone will lose less in the 90's crash. The first few years will be bad investments, but hot damn the 2002 ones are good. Of course, someone that started in 1952 will presumably be crossed. The tactic is of course a bit more complex, including that one should start to move away from the stock market more and more as one gets closer to time where the money is to be used. Doing it that way will make the 1952'er sing and weep with joy at all the glorious profit. And this by just looking at index, there are dividends to consider also which might even make the 1989 savings be profitable in the long run.

Leveraging the mortgage is not a bad tactic, but it presumes that one can always afford to keep up with the payments. We leverage our mortgage, but our mortgage is about 1/6th of the value of our huse so the risk is minimal. Leverage increases risk and I would not recommend it if the mortgage is too big in relation to the value of the security or if the payments is any kind of a problem.