Basics of stock trading 101: Stock traders and Mono to me!

Started by Drakken, March 03, 2010, 04:20:04 PM

Previous topic - Next topic

alfred russel

Quote from: Drakken on March 05, 2010, 01:12:51 PM
So, in short, if you do not have income that classes you at least in the "middle" middle class, don't bother.

But the thing is, I don't want to let my savings stu in some checking account with abysmally low interest rates, like your common Joe. I want it to grow. But I need to work with my income as it is now.

My personal income (30K gross) would class me in very low middle class, but I have next to no passive (I just have my student loan, but as I said, the repayment is accounted in my expenses already). I'm living low, but comfortable lifestyle.

So already 1) is out (10K?! That would be saving for years at my current income and I'm 30 already), and I'll never be able to max out at 4).


The problem is that if you don'thave $10k (or a decent size as a cushion), what happens if you lose your job or you get sick (or even total your car)? The money may not be there if it has been put in the stock market--you could end up with nothing at all and a big pile of bills.

Just because you put the money in a money market doesn't mean you won't have passive income--not too long ago money markets were returning over 5% a year--a lot more than most stocks in recent years.

And why would you be upset you can't make it to #5? Who wants their investment income to be taxable?
They who can give up essential liberty to obtain a little temporary safety, deserve neither liberty nor safety.

There's a fine line between salvation and drinking poison in the jungle.

I'm embarrassed. I've been making the mistake of associating with you. It won't happen again. :)
-garbon, February 23, 2014

Malthus

Quote from: alfred russel on March 05, 2010, 01:19:14 PM
Quote from: Drakken on March 05, 2010, 01:05:44 PM


Don't ETFs have maximum annual fees? One such ETF had a maximum annual fee of 0.650%.

Basically all my personal investments that are in stocks are in two mutual funds with Vanguard: one is an index fund tracking all US stock, the other is an index fund tracking all international stock excluding the US.

Here is a close analog to the US stock index fund:

https://personal.vanguard.com/us/funds/snapshot?FundId=0085&FundIntExt=INT

The annual expenses are 0.18%. Quite a bit lower than your ETF--even if it has low fees too. Also, when you buy into the vanguard fund it is completely free. For the ETF going through a broker, you are going to have to pay a fee (maybe a low one of $7 or so, but why even pay that?).

That's pretty well what I do - my cash is in an ING fund (Streetwise Balanced), no-load.
The object of life is not to be on the side of the majority, but to escape finding oneself in the ranks of the insane—Marcus Aurelius

DGuller

If you feel like gambling, learn to play poker seriously instead.  You'll scratch your gambling itch much more effectively that way, and get a lot more return if you put your mind to it. 

You may also learn that in stochastic processes, quality of results is not strongly connected to quality of decisions in in the short term, something that might save you huge amounts of money once you actually have it.  Gambling with $3000 in the stock market seems like a recipe to grind it down to nothing quickly but surely.

Drakken

Quote from: DGuller on March 05, 2010, 01:33:31 PM
If you feel like gambling, learn to play poker seriously instead.  You'll scratch your gambling itch much more effectively that way, and get a lot more return if you put your mind to it. 

You may also learn that in stochastic processes, quality of results is not strongly connected to quality of decisions in in the short term, something that might save you huge amounts of money once you actually have it.  Gambling with $3000 in the stock market seems like a recipe to grind it down to nothing quickly but surely.

You know I am already playing poker and studying it seriously, although I reaped my winnings from NL10, took a break, and restarted at 2NL to rebuild my bankroll from scratch. But that's a hobby, not something to build up my wealth - at least not yet.

And like I said, it's not as if I wanted to gamble all my capital into risky ventures like some microfish schooling around. I'm perfectly willing to build the bulk of my capital on steady, low-risk growth over a few years. Just that I do not want to wait until I'm 55 to have at last a sizeable capital to experiment.

Currently, for me the moment is ideal because, while I have a low income, I have lower passives as well: no house, no child, no car, no debt aside my student loan at a reasonably young age. I'm the type of miser Mono would like.

alfred russel

Drakken, if you want to make more money, the best way isn't to focus on how much passive income you can squeeze out of $3k. You can write in complete sentences, which means you are more articulate than many in your age group that are making a lot more money. You could pursue a more lucrative career.
They who can give up essential liberty to obtain a little temporary safety, deserve neither liberty nor safety.

There's a fine line between salvation and drinking poison in the jungle.

I'm embarrassed. I've been making the mistake of associating with you. It won't happen again. :)
-garbon, February 23, 2014

Drakken

Quote from: alfred russel on March 05, 2010, 01:27:11 PM
The problem is that if you don'thave $10k (or a decent size as a cushion), what happens if you lose your job or you get sick (or even total your car)? The money may not be there if it has been put in the stock market--you could end up with nothing at all and a big pile of bills.

Just because you put the money in a money market doesn't mean you won't have passive income--not too long ago money markets were returning over 5% a year--a lot more than most stocks in recent years.

And why would you be upset you can't make it to #5? Who wants their investment income to be taxable?

I have already around 1500$ in my account right now, just in case something happens. And I live in Canada, where healthcare is cheap and I'm far qualified for employment insurance if something happens.

The problem is, that time and money is wasted by letting my unused money in a checking account doing nothing. Hence why I search for investment both flexible and easy to liquidate if  prices are high or if a problem happens.

And thanks to you, I am learning about the possibility of putting it into money market right now, at a much higher yield that most stocks and checking accounts doing nothing. I didn't do it before because I didn't know they existed.

My first priority is building up. To me, reach #4 would be the ultimate short-to-middle-term goal. I'll be proud when I'm able to max out the 5K limit per year of a TFSA of my choosing, for example.

Malthus

Quote from: Drakken on March 05, 2010, 01:12:51 PM
Quote from: alfred russel on March 05, 2010, 12:40:23 PM
My advice:

1) make sure you have $10k put aside (or six months living expenses) in a money market account.

2) pay off all credit cards or other debt that has a high interest rate (this excludes a mortgage and possibly a student loan, depending on the terms)

3) put aside money in safe investments such as CDs for living expenses that are coming up (a down payment for a house, tuition for a master's degree, etc.)

4) max out all tax advantaged retirement accounts with investments in broad based mutual funds with low fees (this should contain a mix of stock and bond funds, depending on your age--probably mostly stock for you)

5) With any left over money, continue investing as in #4

So, in short, if you do not have income that classes you at least in the "middle" middle class, don't bother.

But the thing is, I don't want to let my savings stu in some checking account with abysmally low interest rates, like your common Joe. I want it to grow. But I need to work with my income as it is now.

My personal income (30K gross) would class me in very low middle class, but I have next to no passive (I just have my student loan, but as I said, the repayment is accounted in my expenses already). I'm living low, but comfortable lifestyle.

So already 1) is out (10K?! That would be saving for years at my current income and I'm 30 already), and I'll never be able to max out at 4).

This game is all about managing risks. I keep a "cushion" of cash in GICs; every month, one comes due. True interest rates are horrible right now, but if I'm ever in trouble it is nice to know there is money around. It took me a long time to build it up, because I was doing other things at the time.

Sadly, dealing with one's own finances is often not much fun; it's more of a heard-headed look at stuff like fees and comparative rates. For example, paying off debt is a boring but often lucrative financial move - I make extra payments on my mortgage for this reason: it has a guaranteed return.

Think of all these things as part of a balanced portfolio. Having cash in it serves a good purpose, even if rates suck. For growth, it is far better if you don't have much money to go with a fund that has low fees (and check carefully for various sorts of hidden fees) - it's the fees as much as anything that will kill ya; trading in stocks for small amounts is pointless if you have to pay a transaction fee each time.

Best of all, concentrate on increasing revenue.

The object of life is not to be on the side of the majority, but to escape finding oneself in the ranks of the insane—Marcus Aurelius

DGuller

If you're good at poker, a measely amount like $3000 will be put to much better use there, as your bankroll.  Poker income doesn't scale up well, so you get your best returns while investing small amounts.  Your $3000 invested in the market will take its sweet time to compound to anything worthwhile. 

Of course, the key is that you have to be good.  However, if you are good, it's not unreasonable to turn your $3,000 into $10,000 for the year, which is a much better return for the effort.

DGuller

Quote from: alfred russel on March 05, 2010, 01:48:35 PM
Drakken, if you want to make more money, the best way isn't to focus on how much passive income you can squeeze out of $3k. You can write in complete sentences, which means you are more articulate than many in your age group that are making a lot more money. You could pursue a more lucrative career.
An even better idea.  An extra ten thousand or two per year pretty soon adds up to real money, a bit more than a reasonable return on $3,000.

Drakken

Quote from: DGuller on March 05, 2010, 02:00:11 PM
If you're good at poker, a measely amount like $3000 will be put to much better use there, as your bankroll.  Poker income doesn't scale up well, so you get your best returns while investing small amounts.  Your $3000 invested in the market will take its sweet time to compound to anything worthwhile. 

3K$ in poker, right now, at my income level? No, it's scared money.

750$, ultimately, I can live with it if I lose it. And I have a rakeback deal. At 25NL it's 30 buy-ins. Hell, even 500$ would be fine if 25NL is my lowest limit I allow myself to grind at.

Drakken

Quote from: alfred russel on March 05, 2010, 01:48:35 PM
Drakken, if you want to make more money, the best way isn't to focus on how much passive income you can squeeze out of $3k. You can write in complete sentences, which means you are more articulate than many in your age group that are making a lot more money. You could pursue a more lucrative career.

If it can be of any interest, I am tired of working in a job I love, yes, but which I feel I have no chance of advancement. Yes, it's been only almost three years, but I feel it is long enough.

So much, in fact, that I am thinking to go meet my boss and actually ask him, point blank, whether or not there is advancement possible at my position, even if it means moving to Toronto or Vancouver. Because I won't be pulling data tables from surveys all my life, that's for sure. And how can I have chances of advancement if I don't express my interest in actually moving up?

But the fact that I've stopped my Master's Degree to work full time feels like a hindrance to me, even though the positive corollary is that, as college graduate, I am qualified for any administrative job which doesn't require prior specialized knowledge.

The Minsky Moment

Quote from: alfred russel on March 05, 2010, 01:19:14 PM
Quote from: Drakken on March 05, 2010, 01:05:44 PM


Don't ETFs have maximum annual fees? One such ETF had a maximum annual fee of 0.650%.

Basically all my personal investments that are in stocks are in two mutual funds with Vanguard: one is an index fund tracking all US stock, the other is an index fund tracking all international stock excluding the US.

Here is a close analog to the US stock index fund:

https://personal.vanguard.com/us/funds/snapshot?FundId=0085&FundIntExt=INT

The annual expenses are 0.18%. Quite a bit lower than your ETF--even if it has low fees too. Also, when you buy into the vanguard fund it is completely free. For the ETF going through a broker, you are going to have to pay a fee (maybe a low one of $7 or so, but why even pay that?).

The expense ratio on IVV (an S&P 500 tracker ETF) is 0.09% or half the expenses of Vanguard.  If you buy it through Fidelity there is no brokerage fee.
The purpose of studying economics is not to acquire a set of ready-made answers to economic questions, but to learn how to avoid being deceived by economists.
--Joan Robinson

alfred russel

Quote from: The Minsky Moment on March 05, 2010, 03:46:47 PM


The expense ratio on IVV (an S&P 500 tracker ETF) is 0.09% or half the expenses of Vanguard.  If you buy it through Fidelity there is no brokerage fee.

The Vanguard fund is a broader fund than the S&P500, and if you have more money the expense ratio falls to .09%.

That isn't very relevant to this discussion, your ETF may be better for Drakken, I just wanted to defend Vanguard.  ;)
They who can give up essential liberty to obtain a little temporary safety, deserve neither liberty nor safety.

There's a fine line between salvation and drinking poison in the jungle.

I'm embarrassed. I've been making the mistake of associating with you. It won't happen again. :)
-garbon, February 23, 2014

Drakken

Quote from: The Minsky Moment on March 05, 2010, 03:46:47 PM
Quote from: alfred russel on March 05, 2010, 01:19:14 PM
Quote from: Drakken on March 05, 2010, 01:05:44 PM


Don't ETFs have maximum annual fees? One such ETF had a maximum annual fee of 0.650%.

Basically all my personal investments that are in stocks are in two mutual funds with Vanguard: one is an index fund tracking all US stock, the other is an index fund tracking all international stock excluding the US.

Here is a close analog to the US stock index fund:

https://personal.vanguard.com/us/funds/snapshot?FundId=0085&FundIntExt=INT

The annual expenses are 0.18%. Quite a bit lower than your ETF--even if it has low fees too. Also, when you buy into the vanguard fund it is completely free. For the ETF going through a broker, you are going to have to pay a fee (maybe a low one of $7 or so, but why even pay that?).

The expense ratio on IVV (an S&P 500 tracker ETF) is 0.09% or half the expenses of Vanguard.  If you buy it through Fidelity there is no brokerage fee.

Is it available through Canadian markets? Don't see IVV after a quick market search.

Admiral Yi

Quote from: Drakken on March 05, 2010, 04:47:40 PM
Is it available through Canadian markets? Don't see IVV after a quick market search.
My broker allows me to buy and sell in certain overseas markets (Toronto, London, Hong Kong, Tokyo, Paris, and Frankfurt) for an additional fee.  I'm guessing you have similar options.

Whether you want to assume the currency risk is another question.