Board index » Word on the Street... » News & Debate




Post new topic Reply to topic  [ 466 posts ]  Go to page Previous  1 ... 19, 20, 21, 22, 23, 24  Next
Author Message
 Post subject: Re: The Stock Market/Personal Finance Thread
PostPosted: Wed Jul 11, 2012 2:42 am 
Offline
User avatar
Unthought Known
 Profile

Joined: Thu Dec 16, 2004 1:54 am
Posts: 7189
Location: CA
Any good penny stock picks?


Top
 
 Post subject: Re: The Stock Market/Personal Finance Thread
PostPosted: Wed Jul 11, 2012 3:51 am 
Offline
User avatar
Administrator
 Profile

Joined: Sat Oct 16, 2004 10:51 pm
Posts: 14534
Location: Mesa,AZ
given2trade wrote:
$úñ_DëV|L wrote:
I'm thinking about getting back into investing. Would it be a bad idea to, say, buy an index fund like MDY and sell a covered call a month out?


The best way to answer this: Yes. Don't do that. Here's why:

Covered calls are a way to lower your risk (volatility) and cap your return but won't make a difference long term EXCEPT cost you a lot of money in commissions. I can explain pretty easily. Do you agree with the statement that you have no edge whether the stock market is going to go up or down in the next month? Do you agree with the statement that you can't time the market? If you agree with both of those, then trading the options market on index funds - even if it's selling covered calls - is a no win game. You will not only lose commissions, but you will lose the spread on the options. It will be a big drag over time in your account. Many months the calls will expire worthless, many months they will have cost you a lot of money. Over years, it will completely wash out, except you will lose a lot on commissions and spreads. I put on covered calls but only when I have a specific view on a company and what I think it will do over the near term.


That actually does make sense. But does that assume there's a 50/50 chance of the option being exercised? It makes sense that if there's generally a positive trend in the market, near-the-money call options would have close to a 50% chance of being exercised, but if it's farther out of the money than the average gain over that period of time... I suppose the lower premium in relation to commission might change the risk/reward. Really, I'm just too lazy to do the math, so thanks for the easy explanation.

_________________
John Adams wrote:
In my many years I have come to a conclusion that one useless man is a shame, two is a law firm, and three or more is a congress.


Top
 
 Post subject: Re: The Stock Market/Personal Finance Thread
PostPosted: Wed Jul 11, 2012 3:52 am 
Offline
User avatar
Administrator
 Profile

Joined: Sat Oct 16, 2004 10:51 pm
Posts: 14534
Location: Mesa,AZ
simple schoolboy wrote:
Any good penny stock picks?


Let me ask that friendly guy who emails me all those great penny stock picks every few days.

_________________
John Adams wrote:
In my many years I have come to a conclusion that one useless man is a shame, two is a law firm, and three or more is a congress.


Top
 
 Post subject: Re: The Stock Market/Personal Finance Thread
PostPosted: Wed Jul 11, 2012 4:54 am 
Offline
User avatar
alot of $$$
 Profile

Joined: Mon Apr 18, 2005 11:01 pm
Posts: 25809
Location: FTW!
Gender: Male
$úñ_DëV|L wrote:
given2trade wrote:
$úñ_DëV|L wrote:
I'm thinking about getting back into investing. Would it be a bad idea to, say, buy an index fund like MDY and sell a covered call a month out?


The best way to answer this: Yes. Don't do that. Here's why:

Covered calls are a way to lower your risk (volatility) and cap your return but won't make a difference long term EXCEPT cost you a lot of money in commissions. I can explain pretty easily. Do you agree with the statement that you have no edge whether the stock market is going to go up or down in the next month? Do you agree with the statement that you can't time the market? If you agree with both of those, then trading the options market on index funds - even if it's selling covered calls - is a no win game. You will not only lose commissions, but you will lose the spread on the options. It will be a big drag over time in your account. Many months the calls will expire worthless, many months they will have cost you a lot of money. Over years, it will completely wash out, except you will lose a lot on commissions and spreads. I put on covered calls but only when I have a specific view on a company and what I think it will do over the near term.


That actually does make sense. But does that assume there's a 50/50 chance of the option being exercised? It makes sense that if there's generally a positive trend in the market, near-the-money call options would have close to a 50% chance of being exercised, but if it's farther out of the money than the average gain over that period of time... I suppose the lower premium in relation to commission might change the risk/reward. Really, I'm just too lazy to do the math, so thanks for the easy explanation.


With this I'll ask a different question:

Take an out of the money option, even 10% out of the money, 1 month out. It's very cheap. We're talking about an index like the S&P 500, SPY. I'll answer your question two ways.

1) Let's say it's 10 cents and you sell it every month. 99/100 times it will expire worthless. 1/100 times it will expire at $10.

If that didn't convince you, then this will:

2) Who is taking the other side of that option? Professional market makers. They are pricing it at 10 cents for a reason. There is a bid and an ask. The bid is probably 8 or 9 cents and the ask is 10 or 11 cents. They stand ready to sell it to you at 10 or 11 cents and will buy it at 8 or 9 cents. They are not doing this to be nice; they (the market) has decided this is the fair price for this contract. You have no edge to say they are wrong, that the option is mispriced. Don't get involved.

_________________
CrowdSurge and Ten Club will conduct further investigation into this matter.


Top
 
 Post subject: Re: The Stock Market/Personal Finance Thread
PostPosted: Wed Jul 11, 2012 5:32 am 
Offline
User avatar
$5 Donation Gets Custom Title
 Profile

Joined: Sun Oct 17, 2004 8:33 am
Posts: 17101
given2trade, is this thread why you are called given2trade?


Top
 
 Post subject: Re: The Stock Market/Personal Finance Thread
PostPosted: Wed Jul 11, 2012 5:42 am 
Offline
User avatar
alot of $$$
 Profile

Joined: Mon Apr 18, 2005 11:01 pm
Posts: 25809
Location: FTW!
Gender: Male
yup

nothing to do with bootlegs

_________________
CrowdSurge and Ten Club will conduct further investigation into this matter.


Top
 
 Post subject: Re: The Stock Market/Personal Finance Thread
PostPosted: Wed Jul 11, 2012 12:58 pm 
Offline
User avatar
See you in another life, brother
 Profile

Joined: Mon Apr 18, 2005 7:01 pm
Posts: 13165
Gender: Male
given2trade wrote:
However, the majority of your money should be in equities when you're young. It's ok if it takes you a year to fully invest it as you don't want to market time.

What does this mean?

_________________
"Socialism never took root in America because the poor see themselves not as an exploited proletariat but as temporarily embarrassed millionaires."
-- John Steinbeck


Top
 
 Post subject: Re: The Stock Market/Personal Finance Thread
PostPosted: Wed Jul 11, 2012 1:20 pm 
Offline
User avatar
Yeah Yeah Yeah
 Profile

Joined: Sat Oct 16, 2004 10:57 pm
Posts: 3332
Location: Chicago-ish
given2trade wrote:
homersheineken wrote:
given2trade wrote:
Great question. While I can't help you with the exact percentages, you should always keep some money in cash/short term bonds (when yields are higher, now it's the same thing as cash). You should not have 100% of your money in equities. Maybe 80/20? It really depends on how much you have to invest vs. what your short term cash needs are. I'd say a good rule of thumb would be to assume the market could go down 50% tomorrow, at any time. If you are not comfortable with how much your assets would be if that happened, invest less.

However, the majority of your money should be in equities when you're young. It's ok if it takes you a year to fully invest it as you don't want to market time.

The stock market is the single best vehicle to preserve your wealth and to maybe even grow it (in real terms). Any other instrument (cash, government bonds, precious metals) is not going to do the job in the long run.

homersheinken: I asked you that question, not to be a dick, but to prove a point. I make my living off of the stock market. I have almost 20 years experience now. It's my full time job. 99% of people should not buy individual stocks or attempt to become rich from the stock market. The 1% that do are doing it full time and have a leg up on the 99%. If you have a cavity, you would never try to fix it yourself - you'd go to a dentist. Same goes for investing, even though the commercials make it seem so easy.

The reason why no financial advisor will ever advocate index funds is because they MAKE NO MONEY selling the product. Fees are very low, commissions online are extremely low, etc.

Depending on the amount of assets you have, you really only need to be in 1 ETF, either SPY or MDY. As your assets grow and you get much older you would probably want to diversify into a bond ETF that is lower risk/lower return by its nature. That is where your "20%" could go. There is no need to do that now, just leave it in cash. Interest rates are just too low to matter.


I wasn't trying to be a dick either, it was a serious question. I'm a web developer and this thread has been helpful :thumbsup:


My response was going to be: I know nothing about web developing and if I wanted to build a website I'd hire someone because others are do it full time and can do a much better job than me.


So then what will be your response? ;)


Top
 
 Post subject: Re: The Stock Market/Personal Finance Thread
PostPosted: Wed Jul 11, 2012 1:24 pm 
Offline
User avatar
Yeah Yeah Yeah
 Profile

Joined: Sat Oct 16, 2004 10:57 pm
Posts: 3332
Location: Chicago-ish
given2trade wrote:
yup

nothing to do with bootlegs


This relates to my earlier question.


Top
 
 Post subject: Re: The Stock Market/Personal Finance Thread
PostPosted: Wed Jul 11, 2012 1:42 pm 
Offline
User avatar
alot of $$$
 Profile

Joined: Mon Apr 18, 2005 11:01 pm
Posts: 25809
Location: FTW!
Gender: Male
4/5 wrote:
given2trade wrote:
However, the majority of your money should be in equities when you're young. It's ok if it takes you a year to fully invest it as you don't want to market time.

What does this mean?


For people who are starting out, you shouldn't put all your money in the stock market day 1. Maybe divide the total amount by 4 and put it in every 3 months until you're fully invested. The reason to do this is to "smooth" it out so that you don't market time and potentially put it all in right before a big correction.

_________________
CrowdSurge and Ten Club will conduct further investigation into this matter.


Top
 
 Post subject: Re: The Stock Market/Personal Finance Thread
PostPosted: Wed Jul 11, 2012 2:44 pm 
Offline
User avatar
See you in another life, brother
 Profile

Joined: Mon Apr 18, 2005 7:01 pm
Posts: 13165
Gender: Male
given2trade wrote:
4/5 wrote:
given2trade wrote:
However, the majority of your money should be in equities when you're young. It's ok if it takes you a year to fully invest it as you don't want to market time.

What does this mean?


For people who are starting out, you shouldn't put all your money in the stock market day 1. Maybe divide the total amount by 4 and put it in every 3 months until you're fully invested. The reason to do this is to "smooth" it out so that you don't market time and potentially put it all in right before a big correction.

Oh okay, gotcha. In that book it mentioned that with Vanguard, for example, if you put in $10k or more you will qualify for lower expense ratios than you would otherwise. In that case is it worth it to start by putting the first $10k in at once even if the initial goal may be to only put $20-25k in total during year one? Or is the benefit from the lower rate small enough that it isn't worth the additional risk of a major correction affecting half of your planned investment?

_________________
"Socialism never took root in America because the poor see themselves not as an exploited proletariat but as temporarily embarrassed millionaires."
-- John Steinbeck


Top
 
 Post subject: Re: The Stock Market/Personal Finance Thread
PostPosted: Wed Jul 11, 2012 3:03 pm 
Offline
User avatar
Stone's Bitch
 Profile

Joined: Fri Jan 28, 2005 1:04 am
Posts: 2057
Location: The end of the spiral...
4/5 wrote:
given2trade wrote:
4/5 wrote:
given2trade wrote:
However, the majority of your money should be in equities when you're young. It's ok if it takes you a year to fully invest it as you don't want to market time.

What does this mean?


For people who are starting out, you shouldn't put all your money in the stock market day 1. Maybe divide the total amount by 4 and put it in every 3 months until you're fully invested. The reason to do this is to "smooth" it out so that you don't market time and potentially put it all in right before a big correction.

Oh okay, gotcha. In that book it mentioned that with Vanguard, for example, if you put in $10k or more you will qualify for lower expense ratios than you would otherwise. In that case is it worth it to start by putting the first $10k in at once even if the initial goal may be to only put $20-25k in total during year one? Or is the benefit from the lower rate small enough that it isn't worth the additional risk of a major correction affecting half of your planned investment?


Ask about a “letter of intent”. Basically, it is a document you can fill out that will allow you to state the amount of money you intend to invest over a 13 month period, and will allow you to take advantage of the corresponding expense ratio (for that full amount). If you don’t hit that breakpoint, your account will just be adjusted to account for whatever expense ratio you would have paid at the lower investment amount. Most breakpoints are $25,000, $50,000, $100,000, etc…I don’t know of many that start at $10,000—is this Vanguard account through an employer?

_________________
Now, what would Oscar Winner© Michael Caine do?


Top
 
 Post subject: Re: The Stock Market/Personal Finance Thread
PostPosted: Wed Jul 11, 2012 3:11 pm 
Offline
User avatar
See you in another life, brother
 Profile

Joined: Mon Apr 18, 2005 7:01 pm
Posts: 13165
Gender: Male
https://personal.vanguard.com/us/content/Funds/FundsAdmiralSharesOverviewJSP.jsp

It's called Vanguard Admiral Shares. For "most" index funds you qualify with just $10k in, for mutual funds it's $50k. For "certain sector index funds" it's $100k.

I haven't looked into it so closely to know exactly what "most" is referring to.

_________________
"Socialism never took root in America because the poor see themselves not as an exploited proletariat but as temporarily embarrassed millionaires."
-- John Steinbeck


Top
 
 Post subject: Re: The Stock Market/Personal Finance Thread
PostPosted: Wed Jul 11, 2012 3:35 pm 
Offline
User avatar
Stone's Bitch
 Profile

Joined: Fri Jan 28, 2005 1:04 am
Posts: 2057
Location: The end of the spiral...
4/5 wrote:
https://personal.vanguard.com/us/content/Funds/FundsAdmiralSharesOverviewJSP.jsp

It's called Vanguard Admiral Shares. For "most" index funds you qualify with just $10k in, for mutual funds it's $50k. For "certain sector index funds" it's $100k.

I haven't looked into it so closely to know exactly what "most" is referring to.


Interesting. I didn't dig too deep, but my guess is that you have to have $10,000 up front to qualify for those shares. As to it being a good idea to invest $10,000 all at once to be able to get the discount...well, that's pretty much impossible to say. Keep in mind that the market could adjust upwards too, which you could partially miss out on if you spread your investment out. It's a gamble, but most people opt to level off the downside risk.

_________________
Now, what would Oscar Winner© Michael Caine do?


Top
 
 Post subject: Re: The Stock Market/Personal Finance Thread
PostPosted: Wed Jul 11, 2012 4:16 pm 
Offline
User avatar
Supersonic
 Profile

Joined: Tue Oct 19, 2004 12:10 am
Posts: 10993
Gender: Male
good information in this thread. this, along with some other motivation, is nudging me toward stepping further into the market beyond my ample but unexciting freedom fund.

_________________
i8pork wrote:
being on the internet is fun as hell. :comp:


Top
 
 Post subject: Re: The Stock Market/Personal Finance Thread
PostPosted: Wed Jul 11, 2012 4:59 pm 
Offline
User avatar
alot of $$$
 Profile

Joined: Mon Apr 18, 2005 11:01 pm
Posts: 25809
Location: FTW!
Gender: Male
4/5 wrote:
given2trade wrote:
4/5 wrote:
given2trade wrote:
However, the majority of your money should be in equities when you're young. It's ok if it takes you a year to fully invest it as you don't want to market time.

What does this mean?


For people who are starting out, you shouldn't put all your money in the stock market day 1. Maybe divide the total amount by 4 and put it in every 3 months until you're fully invested. The reason to do this is to "smooth" it out so that you don't market time and potentially put it all in right before a big correction.

Oh okay, gotcha. In that book it mentioned that with Vanguard, for example, if you put in $10k or more you will qualify for lower expense ratios than you would otherwise. In that case is it worth it to start by putting the first $10k in at once even if the initial goal may be to only put $20-25k in total during year one? Or is the benefit from the lower rate small enough that it isn't worth the additional risk of a major correction affecting half of your planned investment?


Not worth the benefit. Spread it out over a year. I don't know what the Vanguard fees are directly but you don't need them. You can find the cheapest online broker (make sure no hidden fees like inactive use fees) and probably pay $7-$10 a trade, fixed. You can buy an ETF which trades just like a stock. If you want me to do research for you on what the best broker is I can or I can just google it.

http://www.brokerage-review.com/stock-b ... firms.aspx

Optionshouse looks good. $4 a trade and no fees.

_________________
CrowdSurge and Ten Club will conduct further investigation into this matter.


Top
 
 Post subject: Re: The Stock Market/Personal Finance Thread
PostPosted: Wed Jul 11, 2012 5:02 pm 
Offline
User avatar
alot of $$$
 Profile

Joined: Mon Apr 18, 2005 11:01 pm
Posts: 25809
Location: FTW!
Gender: Male
Alex wrote:
good information in this thread. this, along with some other motivation, is nudging me toward stepping further into the market beyond my ample but unexciting freedom fund.


I knew there had to be a joke when I saw you posted :)

Cpt. Murphy makes all good points. There is also a risk that after you fully invest in 12 months, the market tanks. But for people who have no exposure to the market and are just starting out, I don't think putting it all in day 1 is a good idea. You need to get used to the volatility which will be extreme. You will be tempted to take money out when its down and out more in when its up. Just follow your plan, putting in new money every 3-6 months (can't do it too often or you will pay a lot of commissions, unless you go directly through Vanguard).

_________________
CrowdSurge and Ten Club will conduct further investigation into this matter.


Top
 
 Post subject: Re: The Stock Market/Personal Finance Thread
PostPosted: Wed Jul 11, 2012 5:09 pm 
Offline
User avatar
alot of $$$
 Profile

Joined: Mon Apr 18, 2005 11:01 pm
Posts: 25809
Location: FTW!
Gender: Male
Nevermind, Vanguard is cheap and no fees on their products. You can use them. Will get better service than some shitty discount broker.

https://personal.vanguard.com/us/whatwe ... s/flagship

_________________
CrowdSurge and Ten Club will conduct further investigation into this matter.


Top
 
 Post subject: Re: The Stock Market/Personal Finance Thread
PostPosted: Wed Jul 11, 2012 8:06 pm 
Offline
User avatar
Yeah Yeah Yeah
 Profile

Joined: Sat Oct 16, 2004 10:57 pm
Posts: 3332
Location: Chicago-ish
given2trade wrote:
Alex wrote:
good information in this thread. this, along with some other motivation, is nudging me toward stepping further into the market beyond my ample but unexciting freedom fund.


I knew there had to be a joke when I saw you posted :)

Cpt. Murphy makes all good points. There is also a risk that after you fully invest in 12 months, the market tanks. But for people who have no exposure to the market and are just starting out, I don't think putting it all in day 1 is a good idea. You need to get used to the volatility which will be extreme. You will be tempted to take money out when its down and out more in when its up. Just follow your plan, putting in new money every 3-6 months (can't do it too often or you will pay a lot of commissions, unless you go directly through Vanguard).


Can you say what is a good ratio (I realize this will be variable based on personal preferences/situations) between money in equities/bonds and something more fluid (and what would be the best options for those - are rates too low to make CD's and such not worth it?)?


Top
 
 Post subject: Re: The Stock Market/Personal Finance Thread
PostPosted: Wed Jul 11, 2012 8:11 pm 
Offline
User avatar
alot of $$$
 Profile

Joined: Mon Apr 18, 2005 11:01 pm
Posts: 25809
Location: FTW!
Gender: Male
homersheineken wrote:
given2trade wrote:
Alex wrote:
good information in this thread. this, along with some other motivation, is nudging me toward stepping further into the market beyond my ample but unexciting freedom fund.


I knew there had to be a joke when I saw you posted :)

Cpt. Murphy makes all good points. There is also a risk that after you fully invest in 12 months, the market tanks. But for people who have no exposure to the market and are just starting out, I don't think putting it all in day 1 is a good idea. You need to get used to the volatility which will be extreme. You will be tempted to take money out when its down and out more in when its up. Just follow your plan, putting in new money every 3-6 months (can't do it too often or you will pay a lot of commissions, unless you go directly through Vanguard).


Can you say what is a good ratio (I realize this will be variable based on personal preferences/situations) between money in equities/bonds and something more fluid (and what would be the best options for those - are rates too low to make CD's and such not worth it?)?


There are too many variables for a one size fits all kind of thing. Generally speaking, anyone under 50 should have vast majority of their assets in equities.

Rates are too low for CDs. ING Direct will pay you a whopping .5% for a multi year CD. Better off just keeping your cash as cash.

_________________
CrowdSurge and Ten Club will conduct further investigation into this matter.


Top
 
Display posts from previous:  Sort by  
Post new topic Reply to topic  [ 466 posts ]  Go to page Previous  1 ... 19, 20, 21, 22, 23, 24  Next

Board index » Word on the Street... » News & Debate


Who is online

Users browsing this forum: No registered users and 4 guests


You cannot post new topics in this forum
You cannot reply to topics in this forum
You cannot edit your posts in this forum
You cannot delete your posts in this forum
You cannot post attachments in this forum

Search for:
Jump to:  
cron
It is currently Thu Aug 24, 2017 5:02 am