Stocks and Trading Thread - Channeling your inner Mono

[Caliga]

Hot stock tips always wind up like that.  I suspect that all of those tips get started by pump and dumpers, and then rely on word of mouth to disseminate.

[alfred russel]

Never buy a stock just because the company puts out a product you (and/or others) like.  It's as much, or more, about how well the company manages its finances than what they happen to be producing.

That said, I rarely buy a stock if I can't understand what the company is doing in order to make money, and especially if their product is something intangible.

I didn't consider buying it because I personally like their product.  I considered buying it because I saw a lucrative monopoly.  If plenty of people buy those machines, then plenty of people will need to keep buying the supplies for them that cost a fortune.  If you're selling something that's not just a commodity, you're poised to make very good money.

Exxon has done okay selling a commodity.

[alfred russel]

By January, I will have enough money which (barely)  worth investing. I was thinking some fund, but I am also thinking: why should the bank get most of the profits from stocks? On the other hand, I am not very good in this. Me:

Index funds give you diversification without soaking up all your gains in management fees.

I currently own

JPM (JP Morgan)
SPY (S&P 500 index fund)
WMT (Wally World)

I only own index funds (and company stock). Sometimes I'll trade individual stocks, but only if I have a very good understanding of the business (basically if I worked there, or know someone in a senior position, and have gone through their filings).

[Admiral Yi]

Exxon has done pretty well finding, extracting, transporting, and refining a commodity.

[alfred russel]

Exxon has done pretty well finding, extracting, transporting, and refining a commodity.

Unfortunately, to sell a commodity you have to be in its possession and deliver it to the point of sale. 

[Caliga]

I've owned Exxon stock on like three separate occasions.  Each occasion ended with a substantial capital gain

[Monoriu]

What about bonds?  Do you guys have bonds in your portfolios?

[MadImmortalMan]

Not in my hobby stock account, but I've tried the odd options here and there. I have bonds in the 401ks and IRAs along with the mutual funds of course.

[Monoriu]

Another problem is the strength of the US$, or lack thereof.  The HK$ is pegged to the US$.  So if the US$ drops, the HK$ follows.  I am tempted to buy Euro bonds, but I'm not sure if that's a good idea given what's going on in Greece and other places.  I am also worried about possible inflation in the coming years.  OTOH doing nothing is also a dangerous option.  Doing nothing means holding HK$/US$ in cash.  I get no income and I give up interest from bonds.  The whole thing is so frustrating

[Caliga]

Same as MiM... don't mess with bonds.

[Monoriu]

Same as MiM... don't mess with bonds.

But fixed income assets should be essential components of a balanced portfolio.  Bonds strike a balance with equities (whose value fluctuates greatly) and cash (whose income is too small and there is almost no appreciation in value).  Not having any bonds is itself a risky proposition.  When we are young we can afford to put everything in equities.  But as we approach retirement age, we need to become more conservative. 

[Monoriu]

I also own oil company stocks.  My fear is that these companies can become the next Kodaks.  So much effort is being put into alternative energy sources that I worry the day will come sooner than I think.

[Monoriu]

What do you people think about safe withdrawal rates? 

For those who don't know, it is a simple rule of thumb way to calculate the amount of assets needed for retirement.  It represents the amount of money you can withdraw from the portfolio every year without exhausting the portfolio.  Say, you need $50k a year after retirement.  Assume that you adopt a 4% SWR, then the initial asset requirement is $50k divided by 0.04 = $1.25 million.  How much money you need after retirement is really a matter of personal preference.  So the SWR becomes crucial.  The typical SWR regarded as safe is 4%.  Anything below 4% is conservative and stands a higher chance of success.  An SWR of 5% or above is risky - the portfolio may be depleted before you die. 

There is a huge amount of literature written on this.  Some say it is idiotic, because the strategy could be too conservative and leave a large unspent balance.  Some say they've tested the strategy with real data from the past century or so, and it can withstand a recession the scale of the Great Depression.  Some say the best idea is to buy an annuity.  Some say annuities are traps. 

What say you?

[Jacob]

My goal is to make enough that I can retire on cash reserves and real estate.  Those bits I feel comfortable enough that I know what's going on.  Equities and buying and selling shit?  Nope.

If I am to have a continued revenue stream after I stop working it'll have to be residuals, royalties or other IP derived income.

[Monoriu]

I am going to rely on a combination of cash, bonds, bond funds, index funds, and individual stocks.  Most will be on a buy and hold basis.  For bonds, I'll diversify into different currency denominations.  For stocks, I'll favour defensive plays with relatively stable dividend payouts (e.g. utilities). 

In case they fail, I also have 5 secret doomsday weapons.

First is the wife's portfolio.  Much smaller than mine but it is there.

Second is the HK government's generous old age benefit scheme which amounts to a whopping US$120 per month after I reach 70.  I know they try to abolish the scheme so it may not be there when I am 70.

Third is our life long defined benefit monthly PENSION and a big payout that each of us will get when we hit 60  MUHAHAHAHAhahahaha

Fourth is the flat that we currently live in.  The current plan assumes that I'll die with full equity in the flat, untouched.  I can perhaps tap into that when starvation is imminent. 

Finally, as citizens of Great Britain/European Union and Canada, we can fly to either place to collect whatever social benefit they have if all else fails.