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The Long Term Investor

Discussion in 'Investing' started by WXYZ, Oct 2, 2018.

  1. TomB16

    TomB16 Active Member

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    I just cancelled some standing limit orders on a few stocks. It's surprising how frequently low-ball buy orders fill.

    We're still not selling anything but we're holding onto our cash.

    Meanwhile, we have a bunch of real estate we want to divest of and this talk of currency devaluation is like beautiful wind song for people with hard assets.
     
  2. Trahn Thompson

    Trahn Thompson New Member

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    Bannon gets CHINA.
     
    Onepoint272 likes this.
  3. Trahn Thompson

    Trahn Thompson New Member

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  4. weight333

    weight333 New Member

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    Hello,
    I've been following for several months and noticed the recent new members. I decided I'd jump on board. Like others have mentioned, I enjoy following WXYZ's commentary. I'm 36 and work in the first responder field. After graduating college and beginning my first "real job", I enrolled in a 457 account and shortly after opened a TD Ameritrade account. I jumped in head first and made my share of stupid trades. However, since it was just the beginning of the bull market (2009), I was able to buy stocks at great prices: BAC (~$5/share), FB, KO. A few years later, I bought positions in MO, BABA, BIDU, PYPL and AMD. As a slightly above novice investor, I deploy the bulk of my funds to my 457 but I do work quite a bit of overtime weekly and enjoy buying and seeing what I can do on my own. In the past few years, I've focused on buying more dividend earning stocks/ETFs (NOBL, QQQ, MO). I've also opened a M1 Finance account (monthly automated deposits) with positions in AMZN and GOOGL. This approach allows a small fish like myself to purchase fractional shares of expensive stocks. I consider myself a 'buy and hold' long term investor as I have another 30 years in the workforce. I see these other accounts as additional streams to my 457.

    The talk regarding Heritage Auctions/sports cards collectibles created a heightened interest for me. Like many 80/90s kids, I collected baseball cards. Those cards are by and far now worthless due to massive overproduction. However, the mid-late 90s insert cards (chase cards serially numbered /100, /50, /25, etc) have seen a large increase in value as many of these limited cards disappear into private collections. These 90s inserts make up the bulk of my current collection as this is what I collected/bought in high school. Unlike many, I continued to collect in high school and college with my limited resources. This past weekend, I attended the National Sports Collectors Convention in Rosemont, IL. There was much talk about 'Slabgate' and I read that FBI agents served subpoenas at the show. In the past few years, I've delved into the graded vintage cards. I've almost completed a 1971 set (very popular and condition sensitive set due to black borders). I don't own any extremely high end Ruth, Mantle, etc. However, I do own several hundred PSA/SGC graded cards and it's likely at least some have been 'altered'. I consider myself a collector first and if I can sell my collection (when and if I become tired of collecting) and make a few bucks down the road I'll be satisfied. The altering of cards is alarming but I believe this year's show had record attendance and the hobby will overcome this.

    I hope this isn't too long winded and wanted to show my appreciation for this thread. I look forward to future reading and learning from the experienced investors in this group.
     
  5. WXYZ

    WXYZ Active Member

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    weight333

    WELCOME and PLEASE continue to post about your investing and your collecting and anything else that interests you that might be money oriented.......or not......in some way. I HOPE this thread becomes a home for many long term investors. Of course, any sort of investor is welcome to post here. CONGRATULATIONS on being a first responder. My daughter and her husband are also.

    Yes, it is a good thing to put away as much as you can in your 457 account. Those that work for government have seen in recent years that their pensions may not be safe. So it is a good thing to provide for yourself as a back-up plan. I will say that I have seen many younger people, my family members included, that have the vast majority if not virtually all of their savings, in their 401K or IRA, or 457, or other sort of plan. I was given some advice a long long time ago......mid 1990's......by a respected, well to do business friend. At that time I was like most people and had a lot of my investment money going into pension type vehicles. My friend advised me to consider using a taxable brokerage account for a portion of my funds. First he mentioned that taxes for people that socked everything in retirement vehicles would be a killer in retirement. Second, there were no guarantees that government would not change the rules. Third and most important you lose all FLEXIBILITY with your funds. You can not use the funds for business, personal needs, etc, etc, and are locked out of using the funds till age 59 1/2, or longer since most people dont want to touch retirement funds till age 60, 65, 70. I took his advice and am very glad that I did. I dont want the government dictating how and when I use my funds. Having the use of those funds to use for various purposes over my lifetime has been a HUGE benefit. I see many people my age (70) that have the greatest tax liability in retirement. I followed a double plan. First I took care of my retirement and second, I took care of building up a very nice taxable account that once it reached CRITICAL MASS has provided me with funding for anything I might need, regardless of age, government rules, etc, etc.

    Back to your hobby......you may not make returns to equal stocks and funds or the SP500 but cards, comic books, art, coins, etc, etc, all provide enjoyment and if you are smart in what you buy and go for the best quality and items that are not simply a fad, you will be able to make some level of appreciation over the years. I was at a gathering recently of art collectors and the discussion came around to the return on the SP500 versus art. EVERYONE there was in agreement that the SP500 would in general produce a greater return over time, but you can not hang it on you wall and enjoy it. We are all here for a short time and if you are a hard working person and saving and investing for your family's future, there is nothing wrong with allocating a portion of you money to go into some sort of collecting. I have to hang something on my wall and have to have furniture. I may as well buy items that will hold their value and go up some over time and that I enjoy for what they are.
     
    #525 WXYZ, Aug 8, 2019
    Last edited: Aug 8, 2019
    weight333 likes this.
  6. WXYZ

    WXYZ Active Member

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    Some nice articles today.....at least today is when I saw them. HERE is a nice little general article on many of the issues that are facing the world right now:

    Buy the Dip? How About ‘Let's Wait and See’?

    https://www.bloomberg.com/opinion/a...dip-how-about-let-s-wait-and-see?srnd=opinion

    (BOLD is my opinion and what I consider important content)

    "A day after the global stock market had its worst day since February 2018 by tumbling 2.52%, the MSCI All-Country World Index gained 0.50% in a rebound that felt less than satisfying. After all, the last time equities fell more than 2% was in October, and the next day they jumped 0.74%. The natural reaction is to conclude that the worsening U.S.-China trade conflict is to blame, but the reality is that there’s much more to be worried about.

    It’s not just the rapidly weakening global economy — which the International Monetary Fund forecasts will expand this year at its slowest pace since the financial crisis — that has investors on edge. Almost every part of the world seems to be dealing with a budding crisis that could escalate quickly into something much bigger. Some of those include the collapse of a landmark Cold War-era weapons treaty between the U.S. and Russia; Iran’s threat to step up operations against tankers passing through the Strait of Hormuz; North Korea missile launches; protests in Hong Kong; India’s decision to revoke seven decades of autonomy in the disputed Muslim-majority state of Kashmir; and the potential for instability in Venezuela to spread throughout South America. It’s no wonder that a Citigroup index measuring global risk aversion has risen more in the past three days than any time since August. There are also some fundamental reasons to be extra cautious, namely a worsening outlook for U.S. earnings. While profits for the second quarter have come in better than expected by rising 1.47% for the 80% or so of the S&P 500 Index companies that have posted results, analysts are now forecasting a drop in third-quarter earnings and have trimmed full-year estimates to a mere 3.09%, according to Bianco Research. At the start of the year analysts were forecasting earnings growth of around 8% for 2019.

    The importance of U.S. equities to the global market can’t be understated. Although the MSCI All-Country World Index is up 10.2% this year, that drops to 5% when U.S. stocks are excluded. Markets are always facing some level of geopolitical risks and have weathered them in the past, but what makes the current situation different is the growing evidence that central bank stimulus is having less of an impact not only on economies but on markets as well. “The waters appear to be as opaque now as they were in the fall of 2015 when China hard-landing fears defined global risk markets — if for different types of reasons,” Michael Purves, chief executive officer of Tallbacken Capital Advisors LLC, wrote in a note to clients.

    CREDIT’S RUNNING SMOOTHLY
    Investors shouldn’t get too carried away worrying about the state of markets. For one, there is plenty of evidence that credit markets are running smoothly. Occidental Petroleum Corp. was in the market on Tuesday selling $13 billion of bonds to help finance its purchase of Anadarko Petroleum Corp. Reports suggested that demand was no problem, with the longest portion of the offering, a 30-year security, likely to yield around 2.25 percentage points more than Treasuries, down from initial price talk of 2.7 percentage points. Spreads overall for investment-grade rated corporate debt, while having expanded in recent days to 1.19 percentage points on average, are still far narrower than the 1.57 percentage points reached at the start of January in the wake of December’s carnage in global markets. They are also narrower than the 2.25 percentage points reached in the months after the turmoil in late 2015 that Purves referenced. One traditional measure of funding stress, the Libor-OIS spread, is less than 25 basis points, down from more than more than 40 basis points in December. Also, at 28 basis points on Tuesday, bank funding costs remain comfortably below the 42 basis points they reached in December, showing little concern from counterparties about any inherent risks.

    INDIA RISK IS RISING
    With all that has been going on in the U.S.-China trade war, it would be easy for investors to overlook some important and potentially explosive events in India. Markets there have been on edge after India decided to revoke seven decades of autonomy in the disputed Muslim-majority state of Kashmir. The move to make Kashmir a “union territory” — similar to India’s capital New Delhi — gives the government complete control over the state and consolidates Indian Prime Minister Narendra Modi’s position as a strongman, according to Bloomberg News. The move has a drawn protests in parliament and risks worsening India’s already tense relationship with rival Pakistan in the disputed region. In response, traders have pushed the rupee to its lowest level since early March. “The worries over the political situation in Kashmir and the yuan depreciation are weighing on the currency,” Paresh Nayar, currency and money markets head at FirstRand Ltd. in Mumbai, told Bloomberg News. India’s stock market also dropped to its lowest since early March on Monday before rebounding on Tuesday. As the “I” in the BRIC acronym that also includes Brazil, Russia and China, any weakness in Indian markets has the high potential to weigh on emerging-market assets globally.

    OIL ENTERS A BEAR MARKET
    The upside of a slowing global economy and rising trade tensions is that energy costs are coming down. Brent oil — a global benchmark — slid below $60 a barrel in London and into a bear market. Brent’s 1.20% slide on Tuesday brought its drop to 21% since April. “We shouldn’t underestimate the potential impact of a full-blown trade war between the world’s two biggest economies,” Bart Melek, head of global commodity strategy at TD Securities, told Bloomberg News. “This could very well mean we as a market significantly overestimated demand growth for oil and we could easily be in a surplus situation in 2020.” Sliding oil prices should be a relief not only to consumers at the pump but also to manufacturers that have been struggling with shrinking profit margins just as new orders suffer. A widely followed index produced by JPMorgan showed on Thursday that the global manufacturing sector is contracting. To be sure, it could be lower demand from manufacturers that is contributing to the slide in oil, outweighing the rising threat of supply disruptions in the Middle East and the possibility that Iran could step up its operations against tankers passing through the Strait of Hormuz, according to Bloomberg News.

    HERE COME THE DOWNGRADES
    Much of the discussion in markets on Tuesday remained centered on China and its currency policy after the authorities on Monday allowed it to weaken beyond 7 per dollar for the first time since 2008. The U.S responded by designating China a currency manipulator, but many strategists point out that the yuan would probably be much weaker if the authorities allowed to it freely float instead of managing its decline. A sense of how much weaker China will allow the yuan to become have started to emerge with strategists adjusted their forecasts. One of the first to do so was the team at Barclays. They now expect the yuan to weaken to 7.10 per dollar by the end of this quarter and to 7.25 by the end of the year. They had seen the currency trading at 6.95 per dollar in both periods, slightly weaker than the 6.90 median estimate of strategists surveyed by Bloomberg — a forecast that hasn’t changed since mid-June. “In the near term, we think the (People’s Bank of China) is likely to anchor (yuan) expectations in the 7.05-7.10 range,” the Barclays strategists wrote. “But with China’s economy likely to slow further into next year and the (central bank) indicating its openness to further currency adjustments, we see” the yuan depreciating to 7.25 per dollar into 2020, they added.

    TEA LEAVES
    With focus on China’s yuan as high as it has ever been, it’s likely that the monthly update from the nation on its foreign-exchange reserves will receive more attention than usual from markets. After rising in June to $3.119 trillion, which was the most since April 2018, the nation’s foreign-exchange reserves probably reversed a bit in July as the dollar appreciated and flows into Chinese bonds and stocks held up, according to Bloomberg Economics. The median estimate of economists surveyed by Bloomberg is for a reading of $3.105 trillion. Any number below that may be an indication that China was spending money to support the yuan and keep it from weakening last month as new evidence showed the nation’s economy was slowing."

    MY COMMENT

    I am NOT negative since my investment horizon is long term. I am talking 15 to 25 years, even at my age. So, I am immune to short term events like those in the article above. I do of course, follow those events, thus this article. OUTSIDE the USA, the world is a big mess when it comes to money issues. In my opinion much of the world has been caught up in a deflationary depression for the past 10 years or more. NOTHING that countries have tried to do over the past 10 years has made much difference. AND, I dont see much hope for most countries that have ZERO ability to take the realistic steps to get out of this mess. Those steps being lowering taxes cutting government and regulations, free capitalistic policies, anti-socialistic policies, anti-bureaucratic policies, etc, etc, etc. The BIG question going forward for investors over the long term is going to be the ever creeping SOCIALISM and EU type government policies infecting the USA.
     
  7. WXYZ

    WXYZ Active Member

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    HERE is another article relevant to the CRISES OF THE MONTH (day) environment that we are in at the moment. I do not agree with the BOND advice in this article BUT in general a very nice little LONG TERM INVESTING article:

    Now Isn’t the Time To Manipulate Your Portfolio

    http://www.servowealth.com/blog/now-isnt-the-time-to-manipulate-your-portfolio

    (BOLD is my opinion and what I consider important content)

    "If you’re watching the markets or your investment portfolio too often, you have unfortunately noticed the sharp drop in stocks over the last week. In five trading days, we’ve seen various stock asset classes drop by over 6%. Very little mention is made of the fact that we are in the midst of a well-above-average year through month-end July.

    The cause for this recent decline is heightened trade tensions between the US and China. After the US announced plans to enact $300B in tariffs on Chinese goods starting in September, China “manipulated” its currency, allowing the yuan to fall to its lowest level versus the dollar in a decade.

    Of course, any media outlet could have told you what I just summarized above. What the Wall Street Journal or CNBC cannot tell you, however, is what (if anything) you should do about the decline. Why? They don’t know you, your specific goals or your overall financial situation. And those are the only variables that should cause you to manipulate or change your plan, assuming you have one to begin with. If you’re a Servo client and you would like to discuss anything at any time, you know to shoot me an email or give me a call.

    If you’ve taken the time to read the blog, however, you’d probably appreciate some general perspective on keeping a level head in troubling times. If so, continue on…

    One of my favorite things to point out when markets get rocky is how common it is for stocks to lose ground. Most investors in my experience either don’t know the tendency for stocks to decline or how severe the losses can be. The table below looks at the worst monthly declines for a globally diversified, small cap and value "tilted" stock asset class portfolio, (represented by DFA Equity Balanced Strategy) over the last 23 years beginning in August 1996. We’ve seen 7 months (about once every three years) where the diversified portfolio dropped double digits in just 4 weeks! Another 14 months saw losses of between -5% and -10%, including one already in 2019.Clearly, big losses happen, unpredictably, from time to time.

    [​IMG]

    You might assume, in looking at all those monthly losses, that even long-term returns for the DFA Equity Balanced Strategy would be disappointing. Not so. The chart below shows that $1 invested in August 1996 is worth almost $8 today, after a compound return of +9.4% per year. There were a lot of good months to make up for the bad months we see above. In fact, only 36% of all months were negative, the other 64% were positive. This is why I don’t suggest trying to time the market—you will lose far more often than you win.

    [​IMG]

    Stocks tend to get safer the longer that you hold them (they experience fewer negative returns), but that doesn’t mean they are ever “safe.” Often times, new clients become unnerved when their portfolio’s return doesn’t match its long-term average in the first few years. But that’s to be expected! Short-term returns are random and the range of returns over any one-, three-, or five-year period is all over the place. Consider the table below, it shows that the worst periodic returns for the DFA Equity Balanced Strategy were -50.3%, -18.3%/yr, and -5.3%/yr over the aforementioned 1/3/5 year periods. Those are a long way from the average +10.7%, +9.5%, and +9.1% per year returns we’ve seen over all 1/3/5-year periods! Sometimes bad things happen to good portfolios.

    [​IMG]

    Undoubtedly, you want to know if there is a way to minimize those short-term losses. Many investors try to time the market, but that doesn’t work well, as the dismal performance of active managers consistently reminds us. There is an alternative, however. And that is to hold less in stocks and dedicate a portion of your portfolio to relatively safer bonds. The chart above shows a 70/30 mix of the DFA Equity Balanced Strategy and the DFA Fixed Balanced Strategy (bonds). Its worst 1/3/5-year returns were about 30% less painful than the all-stock allocation. But this isn’t a free lunch; lower risk means lower expected returns. We can see this in the form of the average 15-year returns for the Equity Balanced Strategy (+9.2% per year) versus the 70/30 Balanced Strategy (+7.7% per year). 1.5% annually might not seem like a lot, but small differences in returns compound considerably over long periods. $1,000,000 invested at +9.2% per year for 15 years grows to almost $3.7M compared to just over $3.0M at +7.7%. $700,000 difference is almost as much as the beginning portfolios themselves. Another way to look at this is to realize, at +9.2% over 15 years, you only need about $815,000 to reach the same place as $1M that earns +7.7%. This is not to say that everyone should be 100% in stocks, but instead, you should carefully balance risk and expected return when deciding on a portfolio. Volatility stings no matter how little you have in stocks, but you can’t spend lower volatility, only greater wealth.

    In summary, remember the keys to investing success: start with a philosophy, apply it to your particular goals, focus on your plan, set realistic expectations for good and bad times, consider your choices carefully, and then tune out the noise.."

    MY COMMENT

    AS USUAL sounds so simple. YET we know that very few people can follow the simple rules to long term financial security. BUMMER.
     
  8. WXYZ

    WXYZ Active Member

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    LETS keep in mind the lesson of this little article as we go through these short term events:

    Silver lining to U.S. market sell-off: Fundamentals still seem to matter

    https://www.reuters.com/article/us-...ndamentals-still-seem-to-matter-idUSKCN1UX2IC

    (BOLD is my opinion and what I consider important content)

    "NEW YORK U.S. companies posting strong earnings are still winning laurels from investors, even amid the broad stock sell-off over the last week, suggesting that the kind of indiscriminate selling seen the last time an apparent devaluation of China’s yuan spooked global markets is far from imminent.

    High-flying stocks like Chipotle Mexican Grill Inc (CMG.N), Starbucks Corp (SBUX.O) and semiconductor equipment maker KLA Corp (KLAC.O) are all up 8% or more so far in the third quarter, after the companies posted strong earnings and forecasts, extending rallies that have lifted each company's shares by 40% or more since the start of the year. The benchmark S&P 500 .SPX, meanwhile, has shed 2.3% since the start of the quarter as fears of a currency war between the United States and China lead more investors to question the strength of the global economy.

    China allowed its currency to weaken past the key 7-per-dollar level on Monday for the first time in more than a decade, in response to the threat of a new round of punishing U.S. tariffs. The United States, in turn, labeled China a currency manipulator for the first time since 1994. A similar unexpected depreciation in the yuan in 2015 pushed the S&P 500 to the edge of a bear market.

    The recent selloff has left the S&P 500 down nearly 5% from its record high close on July 26, with the technology index down over 6%. The S&P 500 ended Wednesday up 0.08% after spending most of the day in negative territory.

    [​IMG]
    Bank stocks and other financials took an additional hit on Tuesday, hurt by increased expectations that the U.S. Federal Reserve will cut interest rates three more times by year-end.

    [​IMG]
    Still, portfolio managers and strategists say that although the S&P 500 posted its worst day of the year on Monday, the market continues to reward companies that have strong fundamentals.

    “There are fewer clear winning growth companies and in large cap there are fewer really attractive consumer names than a few years ago,” said Barbara Miller, a portfolio manager at Federated Investors. “The companies that are stronger fundamentally are pulling forward a little bit if they are in categories with any macro volatility.”

    Katie Nixon, chief investment officer at Northern Trust Wealth Management, described the market as “stick-to-what’s-working,” saying that “we’re nowhere near a capitulation.

    “If we get any sort of trade truce talk you could see the market rip from here and go up to its previous highs,” Nixon said.

    Overall, companies are weathering the market sell-off roughly in proportion to their corporate results. Among the companies that have posted earnings since the S&P 500 touched its record high on July 26, the share prices of those that beat earnings estimates by 30 percent or more are down only 3 percent on average, while companies that missed expectations are down 7 percent on average, according to Refinitiv data.

    S&P 500 companies whose full-year earnings per share estimates have been raised by analysts this reporting season have also outperformed since the index began its drop from the July 26 record high, reflecting investors’ greater confidence in those companies earnings.

    [​IMG]
    Earnings per share are up 2.7% for the S&P 500 as a whole for companies that have reported second-quarter results, with roughly 73% beating analyst estimates.

    “The underlying reality is that the fundamentals of the U.S. economy remain remarkably okay and earnings continue to outpace people’s worst fears,” said Jim Paulsen, chief investment strategist at independent investment research firm The Leuthold Group.

    By comparison, the deep drops in share prices in August 2015 in the wake of the last unexpected decline in the yuan coincided with a global manufacturing recession that helped crater the price of oil and other commodities, Paulsen said.

    “Earnings haven’t rolled over, and neither has the economy,” he said."

    MY COMMENT

    “Earnings haven’t rolled over, and neither has the economy".......LOVE this quote, so true.
     
  9. weight333

    weight333 New Member

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    Thanks WXYZ. This response will take on more of a personal finance strategy as I am closer to the 'starting line' than seasoned investors. I hadn't thought of the taxable brokerage account from that angle but those are clear advantages to not keeping all monies in a 401/457 account. I try to operate in the mindset that the funds are not available until I reach retirement age. I'm fortunate that my work has plentiful overtime which allows me to finance home renovations, family trips, collecting, etc. without touching much of my base pay.

    As a background, I attended a local university and was able to pay off student loans fairly quickly. I found myself treading water the first few years as the economy was still in recovery mode. When I landed a job in my desired profession, the first two years I was working six days a week with extra hours almost daily. I rented a one bedroom apartment for $599/mo (included heat) and bought a used 2002 Toyota for $2500 cash (and still drive to this day). After a year in my profession, I had put away a nice little egg in my checking account. I realized I was receiving next to 0 interest on money I didn't need for monthly expenses. I upped my retirement contribution and began sending quarterly monies to my brokerage account.

    I now keep my emergency fund in my checking account and any extra money after expenses goes toward the two brokerage accounts. I pay a small fee to have my 457 managed and have seen the benefits of compound interest mixed with a strong market. Last July I purchased a home in a hot buyer's market. The house was on the market for three days. After ten months, I refinanced knocking .5% off the interest rate and removing 80% PMI cost. We'll be PMI free in about 18 months. My girlfriend and I split all expenses 50/50 and pay about 15% extra towards the principal.

    I'm just a middle class guy but my hope is that the extra hours and frugal living will allow me the freedom to kick back a bit as I get into my 50s. I will keep researching the best ways to invest my money for maximum return. It took me a few years, but I caught on to the 'novices stick to the index funds' advice you give. However, I enjoy watching and picking stocks. I now do a roughly 70/30 method. 70% funds go into solid, mostly dividend earning companies and the other 30 goes towards up and coming, higher risk/reward stocks.

    This is common sense for most but maybe it'll strike a chord with a young investor to get them on the investing path ASAP.
    "Make hay while the sun's shining"
     
  10. WXYZ

    WXYZ Active Member

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    Weight

    You are a very young guy. Yet you have bought a house in a hot market, learned how to live on a budget, learned how to save and invest your money, paid off student loans, going to be PMI free, etc, etc, etc. You are well on your way to a net worth of over $1MIL. Figure in the present value of your pension and your 457 and you probably have a pretty spectacular net worth for your age. From here on it is easy......just keep doing what you are doing. It is that simple. You have the habits and systems in place in your life, so all you have to do is repeat over and over and over. Of course some day marriage and kids will disrupt things a bit, but you will no doubt be in good shape.

    It is nice to invest and see how you can do with your finances. Once you have done it for ten or more years look back year by year and see how you did each year and over the entire time versus the SP500. This will tell you what you should do going forward. After 45-50 years of investing, I am constantly doing the same thing. Now that I am 70 my BIAS is toward the fund side of my portfolio. BUT....it is hard to give up on the stock side of the portfolio with the spectacular spurts that some times occur with those investments.

    Markets today.......CRAZY. A continuation of the very shallow....news/media opinion driven day to day lurching up and down market conditions. We will see the REAL conditions and direction of the general markets after Labor Day when all the financial people come back from August vacation. This market is showing why is is absolutely IMPOSSIBLE to time the markets. LONG TERM INVESTING smooths out all this chaff and firestorm of media blather that we are now seeing every day. FOUR days ago it was CHINA and currency, Two days ago it was interest rates and the EU, NOW today I hear the media beating the RECESSION drum.....hard. Those people are HACKS. They have NO knowledge. It is all simply OPINION based on nothing, often pushing some agenda. BEWARE making moves in your account in this sort of environment. Just sit back and enjoy the VERY BUMPY ride day to day and the upward momentum of your account over the medium to long term. (depending on how and what you are invested in)
     
    weight333 and Trahn Thompson like this.
  11. Trahn Thompson

    Trahn Thompson New Member

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    weight333, Congrats on starting young you will do well. You are starting just the way I did, I am 47 now and cutting way back on workload and enjoying time with family. I started with a retirement fund thru employer and did some swing trading with two taxed accounts. Thought I was a BIG TIME TRADER but never beat that retirement funded which was in a S&P 500 fund. Changed my swing trading ways and started buying good companies that I held long term. Also with my taxed accounts I wanted to own the market with mutual funds so I bought into some large, mid and small caps funds. "BUY THE BEST OF THE BEST" WXYZ QUOTE and sit back and enjoy the ride! After you buy the best of the best really the only thing it comes down to, do you have the GUTS to hold tight in a tough market. Happy Investing!
     
    weight333 and TomB16 like this.
  12. WXYZ

    WXYZ Active Member

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    On the topic of investing your money in a TAXABLE brokerage account versus 401K, IRA, 457, or other tax deferred account. My philosophy was to put everything in the taxable account for the LONG TERM........ONCE.......I could project out that retirement was set with what I was doing. My PRIMARY REASON........

    I dont like to turn a lifetime of capital gains into a lifetime of taxable income. I prefer to have my money taxed as capital gains that I can control when I take them and time the tax rates rather than having it all be taxed in my later years as INCOME with potentially much higher tax rates and the government telling me how I can handle my money, when I need to take it, etc, etc.

    BIG QUALIFIER: I had the discipline to not touch that taxable account and to contribute to it and let it grow for the LONG TERM. Once in a while I might cash in a little for a new car or some expense when the markets were up, BUT, in general I had the clinical discipline to let it grow. It does not work if you treat it as a big piggy bank and cant keep your hands off.
     
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  13. pj96

    pj96 New Member

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    I agree with the point about putting a portion or the majority of your money into a taxable brokerage account. I have a Roth IRA with two index funds that I max out every year but other than that I put everything into my taxable account. One reason is that I am planning on retiring before 59 1/2 and the other is that my 401k at work has mutual funds with very high fees( around 1.75% and up). Also with my money in the taxable account I can use my money as I see fit without paying an early withdrawal penalty, although I don't plan on spending any of it any time soon as I am invested for the long term.
     
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  14. WXYZ

    WXYZ Active Member

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    Here is a simple little article that is relevant to LONG TERM INVESTING:

    10 bits of investment wisdom that can help your 401(k) flourish

    https://www.usatoday.com/story/mone...-words-wisdom-can-help-your-401-k/1893221001/

    (BOLD is my opinion and what I consider important content)

    "Every day I tweet a memorable investment quote from a market guru. Here are my all-time favorite concise words of wisdom to help you guide your retirement funds.

    1. “Bull markets are born on pessimism, grow on skepticism, mature on optimism and die on euphoria.” – Sir John Templeton

    Frequent readers may recall this pearl from my previous columns. It’s the best single depiction of evolving bull markets and sentiment. Templeton was a legendary, pioneering global investor – a great, gentle human and a font of wisdom. He wasn’t alone. Stock market history offers abundant visionaries who could see the way ahead for you with words worth heeding. Like:

    2. “Investment decisions should focus first and foremost on markets or asset classes. Over time, that’s going to explain roughly 90% of investment returns.” – Gary Brinson

    Brinson, a long-retired top-tier money management guru, pioneered the theory that asset allocation – how you divide your assets between stocks, bonds and other securities –and subsets thereof, matters more than which single stocks you own. Get those big decisions mostly right, diversify and forget needling in haystacks.

    3. “Ninety percent of what passes for brilliance or incompetence in investing is the ebb and flow of investment style – growth, value, small, foreign.” – Jeremy Grantham

    Grantham has built a long, successful career in institutional asset management based on getting the big picture right. As I detailed on my July 21 column, most active managers’ outperformance comes down to capitalizing on index quirks. When their preferred style wins, they win.
    4. “The market is always making mountains out of molehills and exaggerating ordinary vicissitudes into major setbacks.” – Ben Graham

    Take it from the legendary, “father of security analysis”: Don’t get hung up on wiggly wobbles. That most people around you will be too short-term focused makes it no less wrong.

    5. “Read Ben Graham and Phil Fisher, read annual reports, but don’t do equations with Greek letters in them.” –Warren Buffett

    Indeed. Don’t overcomplicate things. Simplicity wins, almost always.

    6. “Your ultimate success or failure depends on your ability to ignore the worries of the world long enough to allow your investments to succeed. It isn’t the head but the stomach that determines the fate of the stock-picker.” –Peter Lynch

    Lynch’s legendary stock-picking, and Buffet’s, too, had consistently amazing symmetry with Brinson’s and Grantham’s quotes.

    7. “When markets are down, I’m a much happier person. When we hear about recessions, disasters, revolutions, we know there will be an opportunity.” – Mark Mobius

    Mobius, arguably the original Emerging Markets pioneer, working under John Templeton for 30 years, epitomized buying, “when there’s blood in the streets – even if it’s your own.” (That's from Baron Nathan Rothschild’s famous 18th-century quote.)

    8. “I know you believe you understand what you think I said, but I’m not sure you realize that what you heard is not what I meant.” – Alan Greenspan

    Investors hung on this former Federal Reserve head’s every word. This quote evidences why you shouldn’t. Central bank fixation is a myopic error violating what virtually all our investment greats believed. Think big picture. Think long term. Recall this whenever folks get excited about the utterances of current Fed head, Jay Powell.

    9. “Any man who is a bear on the future of this country will go broke.” – J.P. Morgan

    As long as free enterprise and relatively free markets exist, bull markets will always follow bear markets. Emergent opportunities will always arise. Bet against that and you lose.

    Today’s final gem from the legend I opened with:

    10. “The four most dangerous words in the world of investing are, This time it’s different.” – Sir John Templeton"

    MY COMMENT:

    I like things that are SIMPLE when it comes to investing. In my opinion the SIMPLE style of investing will WIN out over any other format.
     
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  15. WXYZ

    WXYZ Active Member

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    We live in an era of MEDIA IRRESPONSIBILITY and dishonesty. ALL that maters is ratings, clicks, and survival. HERE is a typical headline TODAY. Of course, this sort of JUNK NEWS and blatant fear mongering drives the markets over the very short term:

    "Dow tanks as scary recession indicator with perfect track record flashing red"

    "Recession indicator with perfect track record flashing red"

    https://www.foxbusiness.com/economy/yield-curve-inversion-signals-recession

    MY COMMENT:

    The media environment when it comes to investing is NOW the worst I have seen in my lifetime of investing. BLATANT SENSATIONALISM is the norm. Much of this JUNK is driven by short term traders and their media helpers that are willing to publish any sort of CRAP for views and short term trading profits. As a LONG TERM INVESTOR I obviously totally IGNORE this sort of garbage.

    We have seen a lot of "stuff" over the years about various "new era" situations in the investing world. ACTUALLY, I believe that we may be in a new era right now that will be the norm into the future. We are in the era of FLASH investing news.....especially the negative. Internet investing "news" lurches around from day to day, hour to hour. Young people have little to no education when it comes to investing and treat it like everything else that is driven by the internet.........a game. Superstition and idiocy are the name of the game. Everyone with any sort of view is suddenly an expert with a soap box. DANGEROUS.....yes. When you have people being driven in their behavior by this sort of "stuff" you have the potential for total disconnect from reality. When that becomes the norm than reality does not matter anymore. There is currently potential for the new normal to be the schizophrenic, psychotic market. Disconnected from reality, delusional, and dangerous......especially in the short to medium term. BEWARE. DO NOT act on this garbage if you are truly a long term investor. My definition of long term being at the very MINIMUM 5 years and preferably at the minimum 10 years.
     
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  16. WXYZ

    WXYZ Active Member

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    HERE is one of the best articles I have seen in a long time. Needless to say, I agree with all of these rules in general.

    (BOLD is my opinion and what I consider important content)

    The Laws of Investing
    https://www.collaborativefund.com/blog/the-laws-of-investing/

    "Think of how big the world is. And how good animals are at hiding. Now think about a biologist whose job it is to determine whether a species has gone extinct.

    Not an easy thing to do.

    A group of Australian biologists once discovered something remarkable. More than a third of all mammals deemed extinct in the last 500 years have later been rediscovered, alive:

    We identified 187 mammal species that have been missing (claimed or suspected to be extinct) since 1500. This number includes all such mammals for which we were able to find key variables for analysis. In the complete dataset, 67 species that were once missing have been rediscovered.

    A lot of what we know in science is bound to change. That’s what makes science great, what makes it work, and what distinguishes it from religion. Science is filled with rules, evidence-based theories, and probabilistic observations. Laws – immutable truths lacking exceptions – are rare. Most fields only have a handful.

    But the handful of laws that exist have a special function: they’re the great grandmothers, the old wise men, of the day-to-day theories and rules used to discover a new truth. There’s a hierarchy of science: laws at the bottom, specific rules above that, then theories, observations, hunches, and so on. The higher you go on the pyramid the more exciting things become. That’s where discovery and opportunity live. But everything at the top of the pyramid must respect the laws at the bottom.

    The idea of flexible rules deriving from unshakeable laws applies to every field. John Reed writes in his book Succeeding:

    When you first start to study a field, it seems like you have to memorize a zillion things. You don’t. What you need is to identify the core principles that govern the field. The million things you thought you had to memorize are simply various combinations of the core principles.


    Same thing in investing.


    What’s an investing law? There’s no definition, so I’ve taken some liberties here. I try to limit them to forces that influence all types of investments, in all sectors, in all countries, throughout all of history, with few exceptions, and some explanation for why it will continue indefinitely.

    A theme here is that investing is not just the study of finance. It’s the study of how people behave with money. So most of these “laws” describe a universal feature of how people respond to risk, reward, and scarcity.

    They are simple. But they are, I think, part of a foundation that governs most of what happens in investing, and will keep happening as long as investing exists.

    Law #1: Optimism and pessimism will always overshoot because the boundaries of both can only be known in hindsight, once they’re passed.

    The correct price for any asset is what someone else is willing to pay for it, because all asset prices rely on subjective assumptions about the future. And like a blind man who doesn’t know where a wall is until his cane touches it, markets cannot know when optimism or pessimism has gone too far until they bump into the limits and enough investors protest in the other direction.

    The peaks and bottoms of market cycles always look irrational in hindsight, like they went too far. But in real time markets are just trying to find the limits of what people can endure. And they have to do that because any gap between an asset’s potential and what investors are willing to endure creates opportunities that will be exploited.

    Yale economist Robert Shiller won the Nobel Prize for a paper he wrote in 1981 about a similar idea. The bottom line is that markets aren’t really rational; they’re just pretty reasonable.

    Law #2: Calm plants the seeds of crazy.

    If markets never crashed they wouldn’t be risky.

    If they weren’t risky they would get expensive.

    When they’re expensive they crash.

    The same is true for recessions. When the economy is stable people become optimistic. When they get optimistic they go into debt. When they go into debt the economy becomes unstable.

    Economist Hyman Minsky figured out that stability is destabilizing half a century ago and it’s one of the most useful observations in investing because it explains why volatility is both inevitable and caused by people acting reasonably. If you view every debt-fueled recession, market crash, and asset bubble as an example of your fellow people acting crazy you might get cynical, which makes it hard to be a long-term optimist even when you should be. If you view them as inevitable you realize they’re just part of the ride and an occasional reminder that the fasten-your-seatbelt sign should never be turned off.

    Law #3: Career realities create a mismatch between cash flows and time horizon, antagonizing the power of compounding.

    Well-meaning financial advisors will speak to 23-year-olds and say, “You’re so lucky, you have 45 years before retirement. Compounding can grow your money 20-fold during that time.” The confused and realistic 23-year-old will reply, “That’s neat, I make $16 an hour and have $58,000 in student loans.” By the time that student’s career has taken off and they have substantial cash flow to invest they’re usually in their 40s or 50s, when the power of compounding has diminished by perhaps 90%, tempting them to take more risk to meet their goals.

    Investing is the equivalent of the NFL only being allowed to recruit players in their 50s – well past their prime, with performance far short of what their younger selves could achieve. Some people’s earnings power will peak when they’re young. But when the world is that good to you when you’re young you’re bound to assume your paychecks will continue indefinitely and fail to take advantage of your blessed time horizon.

    The gap between what’s possible on a spreadsheet and practical in the real world will always be vast.

    Law #4: People with different time horizons and different goals want different things out of the same asset, creating reasonable differences in opinion that can be misinterpreted as disagreements.

    Pension funds own Google stock. So do index funds. And active managers. And day traders. And high-frequency traders.

    Each has a different time horizon and goal, so of course they’re going to react differently to news and have different opinions on what information matters and what’s going to happen next.

    That can create problems, because if you own an asset the last thing you want is other smart people telling you, or signaling to you, that you’re crazy for owning it. A lot of intelligence can be drowned by a little social persuasion. If you are exposed to the opinions of people who own the same asset as you but have different goals and time horizons as you, you can be misled and tempted into bad decisions even if what the other person is saying is right for them.

    When different goals exist, reasonable people can and will disagree. Focusing your attention on information that aligns with your own goals is critical, but harder than it sounds.

    Law #5: Luck and risk are the opposite sides of the same coin but we treat them very differently.

    Everything important in finance is about probability. And since most probabilities are less than 100, there’s a chance that you can make a good (or bad) decision and still end up with a bad (or good) outcome.


    The former is called risk. The latter is called luck.


    They are blood relatives. But we treat them as different species.

    Risk is generally seen as something that happens to you, while luck is treated as something you did to yourself. Returns are always adjusted for risk, never for luck.

    People jump through hoops to avoid risk. Should you want to avoid luck? Of course not. But if you don’t recognize luck when it happens to you you can fool yourself into thinking past performance was indicative of skill in a way that leads you to regrettable decisions.

    Experiencing risk makes you realize that some stuff is out of your control, which is valuable feedback. Luck provides the opposite: A false and dangerous feeling that you are in control, because you did something and then got the outcome you wanted. Bill Gates: “Success is a lousy teacher. It seduces smart people into thinking they can’t lose.”

    Law #6: The biggest risk is always whatever no one is talking about, because if no one’s talking about it they’re not prepared for it.

    Everything in finance is data within the context of expectations. One doesn’t matter without the other.

    Expectations of a big risk can sanitize how painful that event is when it hits because people are pretty good at preparing, if only because most of the damage caused by big financial events is an overreaction to surprises and unknowns (see Law #1). I can practically gouge my eyes out putting in my contact lenses with no pain, but if I get poked in the eye by surprise, on accident, I’ll wince and yelp because I don’t know what the damage was done or how much is left to come. In the same vein, the difference between Donald Trump tweeting something crazy vs. Jerome Powell doing the same is a mile wide.

    A universal irony of risk is that no matter how hard you try to quantify it it will always leave out the stuff you can’t imagine or aren’t thinking of. Which is the stuff that matters most.

    Carl Richards says it best: “Risk is what’s left over when you think you’ve thought of everything else.”

    Law #7: Narratives become self-fulfilling and can override visible capabilities that are easier to measure.

    On January 1st 2009 the U.S. economy had roughly the same number of people, the same number of factories, machines, office buildings, computers, data centers, trucks, trains, patents, schools, creativity, and ideas as it did on January 1st 2007. But it was $16 trillion poorer and employed 10 million fewer people in 2009 than in 2007.

    What changed was the narrative. Optimism to pessimism – snap your fingers, that’s all it takes.

    Once the narrative that home prices will keep rising broke, mortgage defaults rose, then banks lost money, then they reduced lending to other businesses, which led to layoffs, which led to less spending, which led to more layoffs, and on and on. Other than clinging to a new narrative we had an identical capacity for wealth and growth in 2009 as we did in 2007. But the economy took its worst hit in 80 years.

    Finance and economics rely on forward-looking subjective assumptions, and the whole edifice can surge or break when those assumptions change. The productive capacity doesn’t have to change; the story people believe is all it takes.

    At one point in time a narrative that housing prices are going to collapse sounds silly. But as soon as enough people believe it it becomes self-fulfilling. The same is true in the opposite direction and explains some of America’s economic outperformance against nations with equally capable citizens. Never underestimate a group of people with strong beliefs in either direction.

    Law #8: Technology will be ridiculed proportionally to how groundbreaking it is because it’s hard to distinguish familiarity from utility.

    Think of the most groundbreaking technologies of the last 100 years. Now go back and see what people said about them in the beginning. You will find universal criticism and skepticism. The more important the technology is today, the more skepticism it faced when it arrived. Few exceptions.

    Most skepticism of new technology is warranted, either because early prototypes are awful or the whole idea was silly to begin with. But a new technology that turns out to be amazing – cars, airplanes, antibiotics, vaccines, computers – will be criticized for different reasons: few can imagine how it will fit into their own lives, and worry its side effects will harm their way of life. Three reasons this happens:

    • To accept that something will replace the way you do things today requires admitting that the way you do things today isn’t efficient and will go extinct. That’s hard to accept because people want to be efficient and become sentimental over how things have always been done. One of the top criticisms of the early car was the indignity it placed on the poor horse.

    • New technologies often spark cultural shifts, which for older generations are hard to distinguish from moral decline. The telephone killed the art of letter writing; email killed phone conversations; Slack killed face-to-face meetings, and so on.

    • Understanding the value of new technology requires imagination, but unless you have skin in the game that doesn’t seem worth the effort because technology is supposed to make things easier and simpler, not wrack your brain.
    A common theme in history is the worry that we used to innovate, but haven’t done anything meaningful in 10+ years. In hindsight the common cause of this worry is that takes 10+ years for us to recognize the importance of new innovations.

    Law #9: Big results are driven by tail events, so winning while losing much of the time is normal.

    Anything that is huge, profitable, famous, or influential is the result of a tail event – an outlier, one-in-thousands or millions event. And most of our attention goes to things that are huge, profitable, famous, or influential. When most of what we pay attention to is the result of a tail it’s easy to underestimate how rare and powerful tails are.

    But tails drive almost everything. A minority of participants will capture outsized returns because opportunity attracts competition, and the winners of that competition tend to lock in because customers, employees, and investors want to associate with winners.

    A diversified portfolio will derive most of its long-term returns from a minority of companies. Those companies derive most of their value from a minority of products, and those products were the brainchild of a minority of employees, who were educated at a minority of schools, on and on.

    The takeaway from tails is that you should be comfortable when a lot of what you do and see doesn’t work. If you become paralyzed when a few things don’t work you’ll never stick around long enough to enjoy the few things that do.

    Law #10: Effective strategies change as the metrics investors care about evolve.

    Good investing strategies are like the flu vaccine. Effective ones exist, but only for a limited period of time because the underlying disease evolves and becomes resistant to what used to work.

    The flu vaccine changes every year based on what types of flu strains are likely to prevail. Investment strategies should do the same.

    Benjamin Graham published several editions of his book The Intelligent Investor, with each new edition swapping out old formulas for new ones that worked. This wasn’t an error or covering up bad mistakes. A good strategy will catch attention, and attention can sanitize opportunity in an instant.

    Jim Grant’s quote that “successful investing is about getting everyone to agree with you … later,” has so much wisdom in it. A metric can influence you, but it won’t make a difference unless masses of other investors decide it should influence them as well. The hard part is that the things investors pay attention to and agree on change over time.

    In one era it was price to book value that mattered most. Then dividends reigned supreme. Then earnings per share. The P/E ratio was popular for a while. Over the last decade it’s brand and maybe revenue growth, with anything happening below that line having little significance.

    The hard balance is determining what’s timeless and is owed patience and what’s expired and should be discarded. If there were an easy answer to that question we’d all be at the beach.

    Law #11: The most persuasive evidence is what you want to be true and/or have experienced personally.

    A good investor turns over many rocks in a quest to find something special. But special is subjective. What you think is amazing may bore me, and vice versa. The special things we discover usually aren’t like nuggets of gold, with a specific quantifiable market value. Special is in the eye of the beholder, and because of Law #10, the trick is getting others to eventually behold it. Take value stocks. They are loved by many and, by definition, hated by others. Your story vs. mine.

    “Special” is defined by a story, and the undefeated Pulitzer Prize-winning storyteller inside your own head is always yourself. The story that sounds the best is typically:

    • What you want to be true. The incentives for being right in investing are so big that it’s hard to think clearly about your analysis without getting distracted by the potential rewards. Predict the right weather and you get to wear the right clothes. Predict the right investments and you get to retire on the beach. High stakes cause fuzzy thinking because they push you to desperately want something to be true even if it’s not.

    • What you’ve personally experienced. Familiarity is a doppelganger of accuracy in your brain. The two can be hard to tell apart. Stuff you’ve experienced personally is way more realistic than what you merely read about, and two equally smart investors with the same data can come to opposite conclusions, swayed only by the differences in their unique life experiences.
    Evidence you don’t want to be true and haven’t experienced can be persuasive, of course. But the amount of reinforcement you get when you do, and have, is easy to underestimate.

    Law #12: A gap between the timing of investment opportunities and faith in an investment manager will influence professional investment decisions.

    A common lament of investment managers is that investors in their funds are too short term, redeeming after a few quarters of poor returns and neutralizing the manager’s attempt at long-term thinking.

    It’s easy in this situation to blame the investors as short-sighted and emotional. Sometimes you should. But often there’s a good reason investors don’t align with a manager’s time horizon.

    Investment managers try to find opportunities for outperformance. Investors who put money in those funds try to determine whether the manager has the rare and requisite skill to do so. Those are different things.

    An investment manager sees a performance lull as an inevitable pause. But a fund investor may see it as evidence to question whether the manager has any skill. And you can’t blame them, given the dismal track record of managers in every asset class. The difference between “temporarily out of favor” and “past success was luck/marketing” is often only known in hindsight after many years. Fund investors remaining patient for long can look unreasonable – even reckless – when the odds are so high that a manager’s previous outperformance was either luck or is no longer valid (Law #10). I don’t think you can blame the manager or the fund investor. Most of the time they both have good intentions but are trying to do different things with limited data. (It’s why communication is so key).

    But that reality can push investment managers towards a shorter time horizon than they prefer because their first order of business is keeping investors happy so they can stay in business. There is a saying in fund management, “I’d rather lose half my clients than half my clients’ money.” It is both noble and easier to Tweet than to do.

    Law #13: Diagnosis errors creating a tendency toward action in a field where the first rule of compounding is to never interrupt it unnecessarily.

    It’s easy to tell if your car is broken. If you turn the key and it doesn’t start, something is wrong. Maybe you don’t know what’s wrong, but something different needs to be done if you want to drive. No ambiguity.

    But how do you diagnose whether your portfolio is broken?

    If it doesn’t perform well for a year, is that broken?

    Maybe. Or maybe it’s run-of-the-mill volatility.

    Two years? Still hard to tell. Maybe it’s just out of favor.

    Three? Five? Ten? Still don’t know. “Perfect storm,” and all that.

    When volatility and out-of-favor periods are guaranteed, it’s hard to diagnose whether your investing strategy is broken or merely requires patience. Most other things in life aren’t like that. Most things are like cars – there’s no ambiguity that something is wrong.

    The difficulty in diagnosing portfolio problems creates an incentive toward action because doing nothing when something might be wrong feels irresponsible. And action tends to repel potential performance, because the more knobs you fiddle with the more chances you have to screw up and the more you rely on short-term moves that are influenced by changes in investor moods more than changes in data.

    Law #14: Speculation is rational because low-probability events can be massively rewarding when leverage and huge sums of money are involved.

    If you’re a long-term investor you might look at the cacophony of daily trading as a parade of innumerate cowboys. You views feel confirmed when you see the results of traders.

    Why would someone bet on a company beating quarterly earnings?

    Or whether orange juice futures are going to fall next week?

    Or on the timing of the next recession?

    Are these people crazy?

    Sometimes, yes. But if you end there you miss an important point: The right way to think about returns is through expected value – reward x probability. And the rewards for being right in investing can be so huge that it makes rational sense to speculate on low-probability events.

    Betting on low-probability events is not innumerate. Here’s what is: expecting everyone to ignore an event that has a 1% chance of happening but offers a life-changing reward if it happens.

    When huge amounts of money and leverage are available, the rational barriers to speculation are not the odds of success of certain events, but transaction costs and liquidity. Reduce those barriers and it will always make sense for someone to speculate on long-shot, crazy-looking ideas.

    Law #15: Behavior > analytics, because one can’t be taught and the other can.

    Learning about new investments for most investors a single generation ago meant going to the library and hoping there was a public filing available that was less than a year outdated. The amount things have changed, and the speed they changed, is unbelievable.

    Most people can probably learn more about the health of Goldman Sachs than they can about their own health, given how much data is now free and centralized. “Anyone can know anything” is an exaggeration but directionally accurate.

    The behavioral side of investing – fear, greed, impatience, overconfidence – is different.

    It’s surged in popularity, but it’s not like data that can be disseminated and learned. Data is influential, but cortisol and dopamine are authoritative. And so much of what drives investing behavior is deeply ingrained personality and personal experience, not something that can necessarily be taught.

    The behavioral side of investing will always be more important than the analytical side because good behavior and no data can still do well, but tons of data mixed with poor behavior is a lit fuse.

    I’ve always believed that 10% of the population does not need help investing. They were born understanding it intuitively. Another 10% can’t be helped. They’re compulsive gamblers and always will be.

    Law #16: An attachment to investment entertainment because money is a universal product with powerful tail-driven anecdotal stories and emotions that are easily triggered.

    A hurricane barreling down on Florida poses no direct risk to 92% of Americans. But a recession barreling down on the economy could impact every single person, many of them profoundly.

    Other than health, money may be the only topic that is relevant to your life whether you like it or not. So many people pay attention to, and talk about, big stories, which spreads to even more people as opinions are given and stories are told.

    And back to Law #9, tail-driven results: there will always be stories of extreme successes and failures, presented in a way that makes us overestimate their prevalence and underestimate their complexity. So the stories are often extreme, causing us to dream about great outcomes or worry about terrible outcomes more than is warranted.

    And money is emotional because we’re dealing with our ability to retire, send our kids to school, and just our general wellbeing in life. So potential threats and opportunities can be blown out of proportion.

    It all adds up to investing being a field where marketing, entertainment, flashing lights, pretty charts, and epic stories grab attention in the way, say, the weather, doesn’t.

    Law #17: The humble math of savings, fees, and taxes.

    “Save a little bit of money each month and at the end of the year you’ll be surprised at how little you still have.” I forget who said that but it’s true. And it’s painfully easy to overlook because savings is simple and takes work, while investing is exciting and can give the impression of effortlessness. Savings can be more valuable than investment returns because they’re more in your control.

    Another timeless truth: Fees and taxes will reduce returns by 100% of their amount. Everyone knows this but if you compare how much effort goes into searching for small investment gains while low-hanging fruit of fees and taxes sit ignored at eye level, and you’ll be reminded that knowing something and acting on it are two different things."

    Russian novelist Fyodor Dostoyevsky once wrote about natural laws:

    Nature does not ask your permission, she has nothing to do with your wishes, and whether you like her laws or dislike them, you are bound to accept her as she is, and consequently all her conclusions.

    So it goes with every field’s laws, including investing."

    MY COMMENT

    You see MUCH if not all of the above happening in a day like today, in a month like this month and in the "MODERN" investing era.
     
    #536 WXYZ, Aug 14, 2019 at 11:11 AM
    Last edited: Aug 14, 2019 at 2:42 PM
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  17. dhawk

    dhawk New Member

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    Hi, im looking to buy and hold stocks for a very long time. Can anyone recommend which website i should be using to do this? And also i have an idea in what stocks i should be investing in like (JNJ) and (WM) but can anyone give me maybe 10 stocks to invest in for LONG term? Also thinking about starting small and adding to portfolio every other week or monthly. Is this a good plan? Cheers
     
  18. Trahn Thompson

    Trahn Thompson New Member

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    Welcome dhawk, I use TD Ameritrade for buying stocks, but that's just the one I picked. I don't give advise on picking certain stocks, I'm more of GIVE A MAN A FISH HE EATS FOR THE DAY, TEACH A MAN TO FISH AND HE'LL EAT FOR A LIFETIME type of person. Do your research before buying any stock, do not rely on what someone else thinks. When you buy stock in a company, you should buy with future growth as a primary factor. A good start would be read this thread from page one. Happy Investing!
     
  19. WXYZ

    WXYZ Active Member

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    welcome dhawk

    If starting small than it might be a good idea to just put your market funds in a SP500 Index Fund till you have built up a nice amount and have educated yourself on investing and risk tolerance. I do like the two stocks that you mention, but like others on here.........I do not give investment advice over the internet.

    HOWEVER.........I do from time to time in this thread post my ACTUAL portfolio and I have done so below for you. Since I know nothing about you or your situation, this is NOT intended as investment advice to you personally. By your question about which website to use........do you mean which Brokerage firm? Is so, I personally use Schwab. Any of the major brokerages are good. Schwab, Vanguard, Fidelity, etc, etc. When you get a chance let us know what you purchased and why. Your input is welcome on this thread any time.......agree or disagree.

    MODEL PORTFOLIO:

    "Here is my "PORTFOLIO MODEL" for all accounts managed which is the basis for MUCH of my discussion in this thread. I am re-posting this since I often talk in this thread about my portfolio model. My custom in the past on this sort of thread was to re-post my portfolio model every once in a while since I will tend to talk about it once in a while. I "manage" six portfolios for various family including a trust. ALL are set up in this fashion. If I was starting this portfolio today, lets say with $200,000. I would put half the money into the stock side of the portfolio, with an equal amount going into each stock. The other half of the money would go into the fund side of the portfolio, with an equal amount going into each fund. As is my long time custom, I would than let the portfolio run as it wished with NO re-balancing, in other words, I would let the winners run. Over the LONG TERM of investing in this style (at least in my actual portfolios), the stock side seems to reach and settle in at about 55% of the total portfolio and the fund side at about 45% of the total portfolio over time. That is a GOOD THING since it tells me that my stock picks are generally beating the funds over the longer term. AND....since the funds in the account generally meet or beat the SP500, that is a VERY good thing.

    As mentioned in a post in this thread, I include the funds in the portfolio as a counter-balance to my investing BIAS and stock picking BIAS and to add a VALUE style component (Dodge & Cox Stock Fund), a top active management fund that often beats the SP500 (Fidelity Contra Fund) and a SP500 Index Fund to get broad exposure to the best 500 companies in AMERICAN business and economy. The funds also give me broad diversification as a counter-balance to my very concentrated 12 stock portfolio.

    STOCKS:

    Alphabet Inc
    Amazon
    Apple
    Boeing
    Chevron
    Costco
    Home Depot
    Honeywell
    Johnson & Johnson
    Nike
    3M
    MSFT

    MUTUAL FUNDS:

    SP500 Index Fund
    Fidelity Contra Fund
    Dodge & Cox Stock Fund

    CAUTION: This is a moderate aggressive to aggressive portfolio on the stock side with the small concentration of stocks and the mix of stocks that I hold and with the concentration of big name tech stocks. Especially for my age group. (65+). So for anyone considering this sort of portfolio, be careful and consider your risk tolerance and where you are in your life and financial needs. I am able to do this sort of portfolio since my stock market account is NOT needed for my retirement income AND I have a fairly HIGH RISK TOLERANCE. In addition I am a fully invested, all the time, LONG TERM investor. (LONG TERM meaning many years, 5, 10, 20, years or more)"
     
  20. dhawk

    dhawk New Member

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    thanks for the replies guys, can i just ask if this is a good idea..? So ill be buying into certain stocks that i have read are best for holding long term, initially say 5 stocks and putting ~£500 in each, is it a good idea to keep topping up these same 5 stocks? say adding £100 to each every other week? Thanks
     

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