Strong Eagle wrote:JR8 wrote:What investments do you have?
[Historically I've been a landlord, but now am shifting much more into a 'boring/steady' stock portfolio that I can invest in and then perhaps forget, for ever...]
Spot on. I know so many people who want to "beat" the market and it is so hard to do. The best active fund managers, with heaps of capital and resources behind them are hard pressed to do better. So long as one has sufficient cash resources to not have to sell in a down cycle to maintain a lifestyle, it's the best way to go.
It is a parallel to the ethos we 'sold' when i worked in the Private Client Divn for a few years. The brokers, if they had free rein, would sell anything that made them the fattest commission, I was er.... a member of the 'internal security' department that monitored what got sold to whom to ensure clients were not mis-sold products. We'd all been in the game a long time and across many divisions, my ex-boss (in the game 40 years) was like General Hawkeye, no trick or game got passed him hehe. The brokers knew we were watching, and we knew every trick in the book, so 'violations' were *extremely* rare, less than annual, and even then only perhaps suspicions and doubts and the broker would get hauled in for an interrogation. It helped keep them all in line I suppose
[anyway i digress... :]
Point is there are investor life-cycle stages, and risk profiles that run in parallel. Your 20s is when you start accumulating funds that can be invested. Usually very small initially, but starting early can have a huge longer term effect. But when younger, since your lifetime investor horizon is perhaps 40 years, you can tolerate much more short-term volatility. With volatility and risk, often comes returns *if* considered over the longer term. Anyway, in brief, the profile is to reduce risk towards retirement. I.e. you don't want to be a year from retirement and see your pot of funds in something high risk/high volatility suddenly half in value - since you have little or no time to see it come back, you want your required retirement income, steady and stable, and predictable. 'No more drama or risk required'. Get your foolish and super-high-risk ideas out of your system very young (currency pairs, spread-bets, options, warrants blah blah... and learn a big lesson when you f it up and lose your capital. Then don't do it again, accept that the tortoise always beats the brash hare hehe...).
I think beating the market is very hard. Firstly how do you define it. How do you deal with that most investors who don't won't admit it? Almost every investing article is by someone who claims to, or worse claims it is somehow easy if you 'follow my method'. It's not, and few genuinely manage to. Of course it tends to be even harder if you pay fees to someone who claims they can, that just reduces your potential returns right off the bat. Unless your fees really do pay for insight you don't have I suppose.
Strong Eagle wrote:
I've concluded that a "meet" the market strategy is best, and ETF's are the best way to participate in the market for a variety of reasons. I'm invested in US stuff and not much international. S&P 500 (SPY) which has about 75 percent of the value of the total market, Vanguard total market (VTI), some 3350 stocks comprising 95 percent of the market, and a couple of REIT's. If I'm looking for some additional growth at some additional risk then I look in technology and healthcare/pharma ETF's.
Yep, my personal experience agrees: Meeting the market/index return is great.
Moving around, as we expats tend to do tends to make it harder to open and run long-term brokerage accounts. Never mind ones that offer the products that we might want. For the same reason I chose to keep it simple, plain vanilla stocks for me so far (in this, my retirement pot).
There are arguments that buying an entire index, you're buying the wheat with the chaff; and it's preferable to identify the wheat and shun the chaff. That is what i try and do, but this is almost an open-ended job of following news/trends etc, and it's not my idea of passive investment. I.e. I don't want to do it longer than it takes me to run my margin account to zero, maybe a year, max 2, more.
Strong Eagle wrote:No BRIC's for me. No commodities, oil, or precious metals... the demand of just one or two countries can turn these upside down. No bonds, especially bond funds. And no exotics like structured notes... I've realized that if the companies that offer these could pick up capital more cheaply then they wouldn't offer these products... it is they, not I, who make the money.
I held Billiton (BLT) the mega-cap miner and watched it tank (re china). That was a while back when I set out to build a diversified (15+) sector portfolio and hence needed a miner. That blind 'one stock from every sector' approach worked well for a while, trouble is after a while you learn a lot more and start asking 'why should I invest in the piece of s*** just because it offers me 5% more sector diversity!?'.... I went from 20 stocks to 24, to 20, to 18... 15, 10, 5, and now just two. Yes, I'm a fool. And yes this time the market will have a huge relief-rally as soon as the Fed announces it's first rise.... meanwhile it's killing me (mentally), but hopefully the trigger will click next week agh!
Strong Eagle wrote:
I keep a few dollars of mad money to stuff into things I hear about... money I can afford to lose.
Yep, very wise. And this is precisely what I should do. Keep my main account as boring as watching paint dry, and partition off a very small amount as 'play money', that I can afford to lose *but* learn important lessons from. 'Writing options? Hell yes why not?! lol'.
Strong Eagle wrote:
Edited to add: "Diversification" is something that might have made sense a decade or two ago but I'm not sure it is applicable anymore. What's the point of investing into ETF's or stocks in various areas like telcom, pharma, transportation, airlines, utilities when in a global environment everyone is touched by global events. Some folks say, "Well, some industries are counter-cyclical and you can move your money around to avoid the loss." Yes, well, maybe so... but check back to the beginning about trying to beat the market.
I judge that I am 'diversified' when I am in an ETF whose companies are into every sort of thing. I judge I am diversified when I am invested in companies large and small. I judge I am diversified when I am in real estate as well as securities.
Perceived wisdom can be dangerous eh? Just look at me, down to 2 stocks, fool (or TF Genious lol!) that I am
A lot of this is a battle against human nature and impulse. I am prey to it now, I know it, and I must desist. Jeez this sounds likes Catholic confession... ok, who's got the wine, I hope it's a good one...
The word 'diworseification' is an interesting one. Unnecessarily spreading your bets (that's what they are) and so diluting your overall return. Like me following a 'blind' 20-sector portfolio strategy.
It's interesting how far you could boil down a minimal portfolio spread. A bank (cyclical) might be opposite on the spectrum to a consumer staple: HSBC vs Unilever? And so on, Perhaps 5 similar pairs for 10 stocks, in any investors home or local market could e a starting point. [No, there's more needed to that, but just a passing thought].
Tell me, when you invest do you have an end goal?Is there a noted point, a goal, at which you'll say 'Right I've achieved what I set out to; chips off the table now'... This kind of vision/acceptance eludes me (I'm too paranoid
), so I'm interested if others ever find it, and if so, how they accept it.
