* “Stuff everyone is talking about”: I mean mostly staying away from IPOs, crap on business magazine covers, TINA narratives etc. Especially stay away from “tips”. And from stuff involving former politicians or government (yea I’m European). Actually I can go on for hours on all the stuff I don't like.
* Dealing with risk: hedging and diversification are expensive in more than 1 way. An investor can manage risk with cruder and cheaper means. E.g. by taking out the original investment after the first ~100% in capital gains. Or quickly cutting companies that start violating your initial criteria. Or limiting yourself to trampled paper that hides a beautiful earning machine. Or most important of all: doing nothing in case you can’t find that kind of trampled paper.
* Wrt risk: I guess periodically holding a huge war chest of cash is the only “diversification” I can approve of.
* Many funds and portfolios are built around arbitrary criteria. By which I mean any criteria that have nothing to do with predictability of earnings and low prices for each individual position (when talking about stocks).
* Volatility is irrelevant. Actually, if you have the tiniest bit of patience and a decent stomach, volatility is awesome. I’m happy if I can pay $1 dollar for a well run company that makes 0.25 dollars in yearly profits. I’m happier if it’s an illiquid company and one beautiful day my fishing order for $0.75 dollars gets filled. Often, companies are more volatile when they’re down, so I even feel confident to say that volatility can do wonders for your performance.
I don’t think proper investing is anything like gambling and I’m pretty sure you’re not playing a zero sum game.
Trading on the other hand is a zero sum game. That’s one reason to not be bullish on any given guy who trades without working for Rentec & co.
Dude, I don't mean to disrespect you, but I don't think you have a background in finance.
* "Especially stay away from “tips”." Ha. My friend - most of the big earnings are made from tips. Financial markets are awash in near-insider trading. It's totally institutionalized. "Tips" are how some of the biggest funds make 100% of their money. Do you honestly think these people are better investors? They pay 'consultants' to talk and try to glean info or they're just passed tips directly.
* There are very well established mathematical mechanisms for proper hedging, diversification and risk management. Most stocks are correlated with other stocks, usually in the same sector. There are mechanisms to evaluate correlations across a portfolio and find inversely correlated stocks to properly hedge. It has nothing to do with those companies, usually sectors.
* "Actually, if you have the tiniest bit of patience and a decent stomach, volatility is awesome" - this is your, personal investment approach. It has nothing to do with what funds may or may not do WRT to volatility. You missed my point: some funds will pay a heavy price for more volatility in the market, given their strategy. So volatility is pretty important and relevant to any strategy.
* "I don’t think proper investing is anything like gambling and I’m pretty sure you’re not playing a zero sum game."
Yes - investing is gambling. There is only about 1% GDP growth in the US economy in a given year. This means there are very little surpluses to be spread out. If funds could only fight for those surpluses, then nobody would be getting amazing returns, and most funds would get 0% return. Ergo - it's mostly a zero-sum game. Meaning - your winnings come from others loses. Meaning: it's poker - and strategies mostly involve understanding how other people invest.
Do you know the saying - when you look around the poker table if you don't see the 'mark' - then the 'mark' is you? You are playing against people who have access to inside information, better research, better trading tools, and tons of staff. Do you think you're going to beat them?
Almost every retail investor is a 'mark'. They are giving their money to the hedge funds. The same can almost also be said for larger funds, often lazily managed.
“I don't think you have a background in finance", don’t worry about it, I’ll take it as a compliment.
* Please do pay for the advice of experts and consultants. I'm sure there's a couple of useful ones amongst the subgroup who don’t speak in riddles and who put their own money where their mouth is.
* Please do engage in hedging and diversification to manage risk. Can’t spend enough on safety! I mean, what else can you do if you’re not sufficiently convinced that some company is super cheap vs earnings?
* Please do spend lots of time and money dwelling on volatility. Hey maybe it will reduce your risk!
* Oooh the “mark at the poker table” thing. Very hedge fundy.
Truth is, I constantly feel like the mark. Like everybody is out to get me. I've considered legally changing my name to Mark but I'm Dutch so it doesn't make much sense.
I feel like a mark with most management teams whose companies I’m looking at. I feel like a mark when people try to overcharge me on the market. I especially feel like a mark when financial services people offer me better research and better trading tools. Since ~2003 I’ve been afraid the entire planet has become a mark for finance.
The good thing is, when I feel like a mark, I don't act. I've never felt like a mark more often than today.
Anyways, if you think we're sitting on the same table, come and get my money. I from my side think you're just 20 years late to your table.
Good luck hedging dude! Being a self admitted gambler, you’ll need it.
Comments
* “Stuff everyone is talking about”: I mean mostly staying away from IPOs, crap on business magazine covers, TINA narratives etc. Especially stay away from “tips”. And from stuff involving former politicians or government (yea I’m European). Actually I can go on for hours on all the stuff I don't like.
* Dealing with risk: hedging and diversification are expensive in more than 1 way. An investor can manage risk with cruder and cheaper means. E.g. by taking out the original investment after the first ~100% in capital gains. Or quickly cutting companies that start violating your initial criteria. Or limiting yourself to trampled paper that hides a beautiful earning machine. Or most important of all: doing nothing in case you can’t find that kind of trampled paper.
* Wrt risk: I guess periodically holding a huge war chest of cash is the only “diversification” I can approve of.
* Many funds and portfolios are built around arbitrary criteria. By which I mean any criteria that have nothing to do with predictability of earnings and low prices for each individual position (when talking about stocks).
* Volatility is irrelevant. Actually, if you have the tiniest bit of patience and a decent stomach, volatility is awesome. I’m happy if I can pay $1 dollar for a well run company that makes 0.25 dollars in yearly profits. I’m happier if it’s an illiquid company and one beautiful day my fishing order for $0.75 dollars gets filled. Often, companies are more volatile when they’re down, so I even feel confident to say that volatility can do wonders for your performance.
I don’t think proper investing is anything like gambling and I’m pretty sure you’re not playing a zero sum game.
Trading on the other hand is a zero sum game. That’s one reason to not be bullish on any given guy who trades without working for Rentec & co.
Dude, I don't mean to disrespect you, but I don't think you have a background in finance.
* "Especially stay away from “tips”." Ha. My friend - most of the big earnings are made from tips. Financial markets are awash in near-insider trading. It's totally institutionalized. "Tips" are how some of the biggest funds make 100% of their money. Do you honestly think these people are better investors? They pay 'consultants' to talk and try to glean info or they're just passed tips directly.
* There are very well established mathematical mechanisms for proper hedging, diversification and risk management. Most stocks are correlated with other stocks, usually in the same sector. There are mechanisms to evaluate correlations across a portfolio and find inversely correlated stocks to properly hedge. It has nothing to do with those companies, usually sectors.
* "Actually, if you have the tiniest bit of patience and a decent stomach, volatility is awesome" - this is your, personal investment approach. It has nothing to do with what funds may or may not do WRT to volatility. You missed my point: some funds will pay a heavy price for more volatility in the market, given their strategy. So volatility is pretty important and relevant to any strategy.
* "I don’t think proper investing is anything like gambling and I’m pretty sure you’re not playing a zero sum game."
Yes - investing is gambling. There is only about 1% GDP growth in the US economy in a given year. This means there are very little surpluses to be spread out. If funds could only fight for those surpluses, then nobody would be getting amazing returns, and most funds would get 0% return. Ergo - it's mostly a zero-sum game. Meaning - your winnings come from others loses. Meaning: it's poker - and strategies mostly involve understanding how other people invest.
Do you know the saying - when you look around the poker table if you don't see the 'mark' - then the 'mark' is you? You are playing against people who have access to inside information, better research, better trading tools, and tons of staff. Do you think you're going to beat them?
Almost every retail investor is a 'mark'. They are giving their money to the hedge funds. The same can almost also be said for larger funds, often lazily managed.
“I don't think you have a background in finance", don’t worry about it, I’ll take it as a compliment.
* Please do pay for the advice of experts and consultants. I'm sure there's a couple of useful ones amongst the subgroup who don’t speak in riddles and who put their own money where their mouth is.
* Please do engage in hedging and diversification to manage risk. Can’t spend enough on safety! I mean, what else can you do if you’re not sufficiently convinced that some company is super cheap vs earnings?
* Please do spend lots of time and money dwelling on volatility. Hey maybe it will reduce your risk!
* Oooh the “mark at the poker table” thing. Very hedge fundy.
Truth is, I constantly feel like the mark. Like everybody is out to get me. I've considered legally changing my name to Mark but I'm Dutch so it doesn't make much sense.
I feel like a mark with most management teams whose companies I’m looking at. I feel like a mark when people try to overcharge me on the market. I especially feel like a mark when financial services people offer me better research and better trading tools. Since ~2003 I’ve been afraid the entire planet has become a mark for finance.
The good thing is, when I feel like a mark, I don't act. I've never felt like a mark more often than today.
Anyways, if you think we're sitting on the same table, come and get my money. I from my side think you're just 20 years late to your table.
Good luck hedging dude! Being a self admitted gambler, you’ll need it.
You last response made no sense.
Your points regarding what hedge funds should do or not are simply wrong.
I don't invest, I leave that to professionals.
Also - you might want to take a course in investing finance. You'll find it very interesting.
Ok so when giving people advice and talking about courses and backgrounds, at least you have experience with investing or trading in the past?
Or just the courses?