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 Post subject: Re: The Stock Market/Personal Finance Thread
PostPosted: Wed Jul 11, 2012 8:51 pm 
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A few weeks ago i put 10k in a vanguard 500 fund. I'm a newby at investing, any tips or things i should be watching out for?

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 Post subject: Re: The Stock Market/Personal Finance Thread
PostPosted: Wed Jul 11, 2012 9:20 pm 
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given2trade wrote:
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.


Yeah I had one of those accounts (when it was like 4.5%). I dumped that a couple years ago :(


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 Post subject: Re: The Stock Market/Personal Finance Thread
PostPosted: Wed Jul 11, 2012 9:48 pm 
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pnjguy wrote:
A few weeks ago i put 10k in a vanguard 500 fund. I'm a newby at investing, any tips or things i should be watching out for?


nope. just keep adding over time and don't pull it out if the market crashes.

DON'T TRY AND TIME THE MARKET

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 Post subject: Re: The Stock Market/Personal Finance Thread
PostPosted: Wed Jul 11, 2012 9:49 pm 
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homersheineken wrote:
given2trade wrote:
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.


Yeah I had one of those accounts (when it was like 4.5%). I dumped that a couple years ago :(


me too

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 Post subject: Re: The Stock Market/Personal Finance Thread
PostPosted: Wed Jul 11, 2012 11:07 pm 
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pnjguy wrote:
any tips or things i should be watching out for?


Girls who claim it's just a 'cold sore'.

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 Post subject: Re: The Stock Market/Personal Finance Thread
PostPosted: Thu Jul 12, 2012 1:58 am 
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I remember when I opened a CD back in 2007 at a 4.25% interest rate.

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 Post subject: Re: The Stock Market/Personal Finance Thread
PostPosted: Thu Jul 12, 2012 4:47 pm 
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given2trade wrote:
DON'T TRY AND TIME THE MARKET


This.

Keep putting money in and ignore your monthly statements. Revisit every one or two years and make minor adjustments as needed.

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 Post subject: Re: The Stock Market/Personal Finance Thread
PostPosted: Thu Jul 12, 2012 6:29 pm 
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Cpt. Murphy wrote:
given2trade wrote:
DON'T TRY AND TIME THE MARKET


This.

Keep putting money in and ignore your monthly statements. Revisit every one or two years and make minor adjustments as needed.

I say no this this. Think how much time you put into earning that money. You can at least invest some time into managing those savings and the earnings they will hopefully make. Not all market risks are the same at all times. You should actively be reviewing your portfolio spread at least quarterly and moving the percentage of assets from money to stock to real estate to match the current risks. G2F, is this correct?


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 Post subject: Re: The Stock Market/Personal Finance Thread
PostPosted: Thu Jul 12, 2012 7:47 pm 
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tyler wrote:
Cpt. Murphy wrote:
given2trade wrote:
DON'T TRY AND TIME THE MARKET


This.

Keep putting money in and ignore your monthly statements. Revisit every one or two years and make minor adjustments as needed.

I say no this this. Think how much time you put into earning that money. You can at least invest some time into managing those savings and the earnings they will hopefully make. Not all market risks are the same at all times. You should actively be reviewing your portfolio spread at least quarterly and moving the percentage of assets from money to stock to real estate to match the current risks. G2F, is this correct?


Couldn't disagree more. Nobody should market time. Its been proven time and time again retail investors pull money out of the market at lows and put it in at the highs. Pick an allocation strategy and stick with it. You should change it as you get older to more conservative asset classes.

Only a very savvy investor should try and time the market (I'm not one of them).

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 Post subject: Re: The Stock Market/Personal Finance Thread
PostPosted: Thu Jul 12, 2012 8:27 pm 
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I've noticed Day Traders tend to jump out of a lot of windows.

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 Post subject: Re: The Stock Market/Personal Finance Thread
PostPosted: Thu Jul 12, 2012 8:59 pm 
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I remember in my stock market game my senior year I timed the NASDAQ crash perfect and made 700% on my purchases and shorts in a year. I made 100% gains from January to March on crap like Tarayon Networks, Nortel, VerticalNet, I bought TimeWarner THE DAY before they actually inked the deal with AOL, and bought other REALLY volatile tech stocks that just skyrocketed in the winter of 2000. Then I shorted everything I had purchased just a couple days after the initial plunge of the NASDAQ (except a couple) and doubled my money again on all the shorts. When things reached near bottom I bought it all back (those which hadn't gone bankrupt) and basically doubled it again through the summer and fall of 2001. The sad part is my dad actually BOUGHT a lot of those stocks, in particular VerticalNet, and never sold it. He took a huge hit...

I don't have the balls to do this shit with real money though. My money is split between moderate and low risk mutual funds right now and it's staying there until the day I retire. My companies financial managers have outperformed the market for the last ten years and they seem to have some pretty stout funds for us to invest in.

If I had any testicles I'd put purchase orders for moderate growth stocks if the DOW dips below 12250, and sell orders in at DOW 13000. It seems like every time a bad set of data and European economic worries hit we slide down into the 12000-12250 territory, and then when they bail themselves up we surge back up towards 13000 for a bit. But I know that in my position in life there is absolutely no reason to take that kind of risk. Best to let it ride the ups and downs over the next 30 years.

One thing I will say, I wish to hell I had a few grand on hand to back a short on Facebook after the IPO. That would have been a nice quick payday.

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 Post subject: Re: The Stock Market/Personal Finance Thread
PostPosted: Thu Jul 12, 2012 9:19 pm 
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LittleWing wrote:

I don't have [] balls

If I had any testicles


:(

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 Post subject: Re: The Stock Market/Personal Finance Thread
PostPosted: Thu Jul 12, 2012 9:45 pm 
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given2trade wrote:
LittleWing wrote:

I don't have [] balls

If I had any testicles


:(


I don't want to knock up any chicks.

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 Post subject: Re: The Stock Market/Personal Finance Thread
PostPosted: Thu Jul 12, 2012 11:44 pm 
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given2trade wrote:
tyler wrote:
Cpt. Murphy wrote:
given2trade wrote:
DON'T TRY AND TIME THE MARKET


This.

Keep putting money in and ignore your monthly statements. Revisit every one or two years and make minor adjustments as needed.

I say no this this. Think how much time you put into earning that money. You can at least invest some time into managing those savings and the earnings they will hopefully make. Not all market risks are the same at all times. You should actively be reviewing your portfolio spread at least quarterly and moving the percentage of assets from money to stock to real estate to match the current risks. G2F, is this correct?


Couldn't disagree more. Nobody should market time. Its been proven time and time again retail investors pull money out of the market at lows and put it in at the highs. Pick an allocation strategy and stick with it. You should change it as you get older to more conservative asset classes.

Only a very savvy investor should try and time the market (I'm not one of them).
So you're suggesting to keep your asset mix the same regardless of the market? Seems like taking on needless downside risk. If I owned Euros, I would have gotten out of them a long time ago and not just stuck with them.


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 Post subject: Re: The Stock Market/Personal Finance Thread
PostPosted: Fri Jul 13, 2012 5:53 am 
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tyler wrote:
given2trade wrote:
tyler wrote:
Cpt. Murphy wrote:
given2trade wrote:
DON'T TRY AND TIME THE MARKET


This.

Keep putting money in and ignore your monthly statements. Revisit every one or two years and make minor adjustments as needed.

I say no this this. Think how much time you put into earning that money. You can at least invest some time into managing those savings and the earnings they will hopefully make. Not all market risks are the same at all times. You should actively be reviewing your portfolio spread at least quarterly and moving the percentage of assets from money to stock to real estate to match the current risks. G2F, is this correct?


Couldn't disagree more. Nobody should market time. Its been proven time and time again retail investors pull money out of the market at lows and put it in at the highs. Pick an allocation strategy and stick with it. You should change it as you get older to more conservative asset classes.

Only a very savvy investor should try and time the market (I'm not one of them).
So you're suggesting to keep your asset mix the same regardless of the market? Seems like taking on needless downside risk. If I owned Euros, I would have gotten out of them a long time ago and not just stuck with them.


If you are smart enough to know when to buy or sell Euros or any currency consistently, you should be a billionaire. Most of us aren't.

Image

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 Post subject: Re: The Stock Market/Personal Finance Thread
PostPosted: Fri Jul 13, 2012 10:46 am 
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given2trade wrote:

If you are smart enough to know when to buy or sell Euros or any currency consistently, you should be a billionaire. Most of us aren't.



I don't think he was implying buying or selling at the high/lows. With practice you can time a little bit, but that type of behavior rarely creates a better return than a basic index fund.

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 Post subject: Re: The Stock Market/Personal Finance Thread
PostPosted: Fri Jul 13, 2012 1:22 pm 
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Quote:
With practice you can time a little bit


no you can't

Quote:
but that type of behavior rarely creates a better return than a basic index fund


yes it would

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 Post subject: Re: The Stock Market/Personal Finance Thread
PostPosted: Fri Jul 13, 2012 5:53 pm 
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Am i able to put my $10k investment up as collateral if i plan to purchase a home?

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 Post subject: Re: The Stock Market/Personal Finance Thread
PostPosted: Fri Jul 13, 2012 7:47 pm 
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pnjguy wrote:
Am i able to put my $10k investment up as collateral if i plan to purchase a home?


Don't think so.

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 Post subject: Re: The Stock Market/Personal Finance Thread
PostPosted: Wed Aug 01, 2012 5:37 am 
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MUST READ (I'm right!)

http://dealbook.nytimes.com/2012/07/31/in-picking-facebook-shares-repeating-the-mistakes-of-the-past/


In Picking Facebook Shares, Repeating the Mistakes of the Past

By STEVEN M. DAVIDOFF
Since the implosion of the dot-com bubble in 2000, retail investors have been rightfully wary of the stock market. Facebook was going to change it all, bringing the ordinary investor back.

Instead, Facebook was a massacre for retail investors, highlighting yet again why stock picking is a loser's game. The hype around Facebook was enormous as retail investors salivated at the chance to buy what they hoped would be the next Apple. Yet, after initially trading above $40 a share, the stock is now down nearly 43 percent from the initial offering price.

The Facebook example is one more confirmation of studies that have shown that, on average, individual investors lose out consistently when they buy and trade individual stocks. They're better off investing in passive index funds.

Professors Brad M. Barber and Terrance Odean recently released a paper surveying the evidence. Studies of individual investor trading found that "many investors earn poor returns even before costs." These investors trade badly and tend to lose more money than they would using a simple buy-and-hold strategy in passive funds that match indexes like the Standard & Poor's 500-stock index.

How big is the loss? The same authors in another study of 65,000 investors found that the 20 percent who traded most actively earned 7 percentage points a year less than the buy-and-hold investors, the 20 percent who traded least actively. For the individual investor, that can add up to hundreds of thousands of dollars over a lifetime.

This is not surprising. Even mutual fund managers have trouble beating the market. Last year, according to S.& P. Indices, 84 percent of actively managed funds did not beat the Standard & Poor's index representing that fund's sector. Going back over five years, 61 percent of funds underperformed. Even so, most mutual funds beat individual investors who try to do it themselves.

If the professionals have such problems, individual investors don't have a chance. They are not as knowledgeable and not as disciplined. Study after study has found that individual investors have a disposition effect - that is, they tend to sell winners too soon and hold on to the losers by refusing to recognize their failure.

Individual investors are also heavily influenced by their mind-set and their environment.

For one, they are strongly influenced by media reports and buy stocks that are promoted. And, yes, there are studies of Jim Cramer's show, "Mad Money," and this effect. One recent study found that the higher the viewership of the show, the bigger the market reaction to stock recommendations. The authors also found that Mr. Cramer's buy recommendations had more influence than sell recommendations, reflecting people's desire to bet on winners. But didn't we know that already from the tech bubble? More than a decade ago, stocks of companies with little or no profits were wildly hyped. It all ended badly, with retail investors losing the most.

In full disclosure, I'm still a little bitter about that. In 1999, I bought Ask Jeeves stock at about $120 a share, eventually selling at below a dollar before shares went up 28-fold and the company was sold to IAC/InterActiveCorp. I'm unfortunately a great example of how retail investors can time things perfectly wrong as they become part of the herd. The Facebook affair was but a sad repeat.

These inherent flaws put us off on the wrong foot when we pick and trade stocks. We don't diversify enough, don't do enough research and tend to sell on emotion rather than logic.

If this weren't hindrance enough for even the most educated individual investor, the Facebook debacle shows that the market is rapidly changing in ways to make it even harder for individual investors to profit.

In the case of Facebook, the profits from investing were largely taken from individual investors before the I.P.O., by trades in the private market where most individual investors could not trade. Goldman Sachs, for example, led a private investment round at a $50 billion valuation only a year ago, selling a third of the stock in the offering at about double the price. By the time Facebook came to market, there was little left for average investors.

The losses in Facebook show that Wall Street doesn't seem to care much about the individual investor. Companies are increasingly going public with structures that disenfranchise stockholders, or they are looking to cash out and go private just before things get good. Investment banks furiously peddled Chinese issuers to a public that didn't seem to care much about the companies' problems.

Instead, the markets have become the domain of hedge funds, where high-frequency trading peels off short-term profits. In the longer term, the severe underperformance of mutual fund managers last year was attributed by Horizon Advisors to the volatility in the markets and the increasing correlation of stocks. As stocks move together, or become correlated, picking winners that offer returns higher than the market average becomes more difficult.

Beyond all of these barriers, individual investors are also faced with a stock market that has remained stagnant for the last decade.

So what can be done?

One thing to consider is whether to further educate individual investors on the problems of investing on their own. The studies show that in general, investors are better off in passively managed index funds. But even here, investors tend to defeat themselves. At least one study has found that investors who engage in passive exchange-traded funds eat away the gains in performance by using this as an excuse to trade more. The problem again occurs when investors try to trade on their own.

In light of this, more disclosure and education would be nice. Perhaps Mr. Cramer's show could begin each segment with a note spelling out how much investors lose when they trade on their own. The warning could be given to all investors when they sign up for brokerage accounts. And because not everyone will heed this disclosure, the government might take steps to limit the ability of people to trade in their retirement accounts, where the bulk of Americans hold their invested wealth.

But the bottom line is that more needs to be done to educate and help individual investors. It should become common knowledge that investing in an individual stock and trading may be fun, but it may also be dangerous to their wealth. Perhaps the warnings could start with a confessed Facebook I.P.O. investor.

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