How do i make my money grow 10% a year

[imported_Lothar]

Originally posted by: TheoPetro

Originally posted by: Lothar

Originally posted by: TheoPetro
You want at least 45 uncorrelated securities to make a well diversified portfolio and 4-5 ETFs should give you that easily.

One does not need such wide moat diversification.

I beg to differ. You get diminishing returns around 30 securities but to get "close enough" to the systematic risk to where adding another security is basically pointless you need ~50 uncorrelated securities.

I disagree.
One shouldn't need more than 20 companies or so.

If you pick more than that then you're just picking for the sake of picking stocks and probably aren't doing your own research.

Top 10 alone account for a little over 70% of my mom's portfolio.
If you can buy more of your best idea, why put money into your 20th-best idea?
The more positions you have, the more average you are.

Diversification is a highly subjective term.
What exactly qualifies as a "well diversified" portfolio? 50 unrelated companies you say.

If I buy 50 stocks do they have to be 2% of the portfolio each for the portfolio to be called diversified?
What if I buy 50 stocks with the top 10 accounting for 70% of my holding, the next 10 accounting for 20%, and the remaining 30 sharing 10%?
What if I buy 50 stocks and one company accounts for 51%, while the remaining 49 companies account for 1% each?

If diversification is more about just picking a bunch of unrelated companies(like the "50" figure you seem to advocate) rather than picking a few companies you truly believe in, I'd prefer to keep doing what what I'm doing(the later) at the expense of it being called undiversified.

 

[PricklyPete]

If everyone knew...everyone would be doing it.

 

[Locut0s]

If there was a guaranteed way of making your money grow at 10% a year then we would all be wealthy. There is a reason banks offer a guarantee of only 3-4% on their best savings accounts.

 

[SinfulWeeper]

Sell drugs. 10% per year would be the lamest. At best it would be a high school economics wettest dream come true.

 

[jpeyton]

Switch your holdings to another currency, like the Euro or Yuan.

 

[JEDI]

Originally posted by: alphatarget1
My HSBC online savings is only 3.05% APY now... 🙁 How do y'all invest your money?

stock market has avg ~12%/yr for the past 30yrs. 10% is easy.

Assuming u have no problem with risk:

50% Total stock fund (US)
25% total stock fund (International)
10% Bonds
5% small cap value
5% Reit (real estate)
5% Whatever the hot sector currently is (ie: Biofuel, gold, oil, solar, healthcare)

the 5% hot sector option lets u have some fun w/the portfolio. and keeps u interested.

or bet it all on Starbucks. Great time to buy.
(5yrs ago people were saying the sky is falling with McDonalds. It went down to $12/share. Today, it's $60/share.)

 

[Mark R]

For the shorter term, you'd probably get 10%/year from the emerging markets - there are plenty of funds, including ETF with very low fees, that invest in popular areas such as BRIC (Brazil, Russia, India, China), more diversified Latin America, Asia/Pacific excluding Japan and Eastern Europe. There are also funds that allow you to invest further off the beaten track - smaller European countries (e.g. Sweden, Austria), South Africa, Chile, etc. If you're going to go for something off the mainstream, then FFS make sure you know what you're getting into.

The risk with emerging markets is that they are highly volatile, and highly sensitive to political events as well as having a degree of correlation to the general health of the US market. That said, the economies there have considerable room for growth (unlike, say, Dow Jones companies). Many of these areas are also rich in natural resources (particularly latin America/BRIC), so if you think that prices of oil, gas, coal, steel, copper and other minerals are going to go up - then you have exposure there.

Of course, emerging markets are high risk, so you need to take appropriate mitigation strategies - e.g. no more than 5-10% of your investment in these regions (unless you want to take a particularly aggressive approach).

Remember the best way to manage risk is to diversify - choose as many uncorrelated investments as you feel happy with (and which don't crush you with fees)
E.g. A simple aggressive portfolio might be as follows
35% Russell 3000 index tracker
15% S&P Euro 350 tracker
10% BRIC fund
10% Corporate bond fund
20% cash

You can try and pick individual stocks, and you can get exceptionally good returns there. However, there is a reason why, if you go to a fund manager they will buy 50 or more different stocks, not just 10. That reason is risk - where there is potential upside, there is risk. Even if you picked stocks at random, however, on average, your returns would on average reflect the return of the stock market. The difference is whether your particular bet paid off. If it does, you make a big profit, if it fails, you lose a big chunk of you portfolio. Even expert fund managers, who do nothing all day except research stocks, don't do much better than picking stocks at random (at least once they've taken their fees), so what chance has the little guy who picks 10 stocks?

You may feel that your risk profile is OK with that, in which case, good luck to you. I've done the same, but I already have a broader portfolio containing the bulk of my investments. If you don't fancy your chances as a betting man, then a diversified tracker fund will allow you simply to ride the market.

Don't forget that international investing can help with diversification - it provides an alternative stockmarket which is driven by slightly different forces, and where the money is invested in a different currency. If you fear US$ devaulation, then this may be an effective hedge. Over the last 12 months, the Russell 3000 has shown an 8% fall, as have European markets, but because of dollar devaluation against the Euro, in $ terms, the Euro market is even (excluding dividend income).

 

[Carbo]

Take a look at Private Mortgage Investing. Returns 11% in a very low risk environment with no fees. I've been doing it for around 18 months now, on both sides, and am quite pleased with it.

 

[HeroOfPellinor]

Put 10% of your money on black.

 

[LuckyTaxi]

Originally posted by: Ticky
Get lucky in the stock market?


(Anyone else buy NVDA below 19.00?)

Nope but i bought $5000 of SKNY when it was $0.15.

 

[2canSAM]

Originally posted by: LuckyTaxi

Originally posted by: Ticky
Get lucky in the stock market?


(Anyone else buy NVDA below 19.00?)

Nope but i bought $5000 of SKNY when it was $0.15.

Stupid ? time. You bought $5000.00 @ $0.15/(5000/0.15 = 33333) share right now it is at $0.38/share. So if you sold right now you would be looking at ~ $12666.00 (0.38x3333=12666)

 

[edro]

Originally posted by: 2canSAM

Originally posted by: LuckyTaxi

Originally posted by: Ticky
Get lucky in the stock market?


(Anyone else buy NVDA below 19.00?)

Nope but i bought $5000 of SKNY when it was $0.15.

Stupid ? time. You bought $5000.00 @ $0.15/(5000/0.15 = 33333) share right now it is at $0.38/share. So if you sold right now you would be looking at ~ $12666.00 (0.38x3333=12666)

Minus 25% Tax and X% Selling Fees.
Still, a very very nice gain.

 

[LuckyTaxi]

Originally posted by: 2canSAM

Originally posted by: LuckyTaxi

Originally posted by: Ticky
Get lucky in the stock market?


(Anyone else buy NVDA below 19.00?)

Nope but i bought $5000 of SKNY when it was $0.15.

Stupid ? time. You bought $5000.00 @ $0.15/(5000/0.15 = 33333) share right now it is at $0.38/share. So if you sold right now you would be looking at ~ $12666.00 (0.38x3333=12666)

Stupid? I'm not selling now. I'm holding on, hopefully it hits $1.

 

[imported_Lothar]

Originally posted by: LuckyTaxi

Originally posted by: Ticky
Get lucky in the stock market?


(Anyone else buy NVDA below 19.00?)

Nope but i bought $5000 of SKNY when it was $0.15.

You have $5,000 shares of SKNY, but you didn't have enough money to open a Roth IRA for 2007? 😕
You said you only had $1k to contribute initially + $150/month.

If you didn't end up contributing the maximum $4000 for 2007, that was a stupid move you did.

 

[LuckyTaxi]

Originally posted by: Lothar

Originally posted by: LuckyTaxi

Originally posted by: Ticky
Get lucky in the stock market?


(Anyone else buy NVDA below 19.00?)

Nope but i bought $5000 of SKNY when it was $0.15.

You have $5,000 shares of SKNY, but you didn't have enough money to open a Roth IRA for 2007? 😕
You said you only had $1k to contribute initially + $150/month.

If you didn't end up contributing the maximum $4000 for 2007, that was a stupid move you did.

Well I did, but $5k for a penny stock that I KNEW was going to go up was a no-brainer for me.

 

[Skyclad1uhm1]

The world food market is doing pretty well. So is the Afghan Opium market for that matter.

 

[MetalMat]

:beer:

Originally posted by: TheoPetro

Originally posted by: Special K


I didn't know investing (not trading) was supposed to be fun 😕

the research, and finding a solid company/fund to invest in is a hell of a lot of fun, for me at least. I can kill whole weekends pouring through financial statements and market data. I have to actually stop myself from getting on ameritrade when I have homework/exams. I guess if you dont enjoy it pay someone to do it for you but there are a lot of people who like it.

Wish I had they motivation to do that. I just stick mine in a 401k and do the vanguard Roth IRA target retirement funds. After that I go play guitar, play gta 4 and get stoned :beer:

 

[TheoPetro]

Originally posted by: Lothar

Originally posted by: TheoPetro

Originally posted by: Lothar

Originally posted by: TheoPetro
You want at least 45 uncorrelated securities to make a well diversified portfolio and 4-5 ETFs should give you that easily.

One does not need such wide moat diversification.

I beg to differ. You get diminishing returns around 30 securities but to get "close enough" to the systematic risk to where adding another security is basically pointless you need ~50 uncorrelated securities.

I disagree.
One shouldn't need more than 20 companies or so.

If you pick more than that then you're just picking for the sake of picking stocks and probably aren't doing your own research.

Top 10 alone account for a little over 70% of my mom's portfolio.
If you can buy more of your best idea, why put money into your 20th-best idea?
The more positions you have, the more average you are.

Diversification is a highly subjective term.
What exactly qualifies as a "well diversified" portfolio? 50 unrelated companies you say.

If I buy 50 stocks do they have to be 2% of the portfolio each for the portfolio to be called diversified?
What if I buy 50 stocks with the top 10 accounting for 70% of my holding, the next 10 accounting for 20%, and the remaining 30 sharing 10%?
What if I buy 50 stocks and one company accounts for 51%, while the remaining 49 companies account for 1% each?

If diversification is more about just picking a bunch of unrelated companies(like the "50" figure you seem to advocate) rather than picking a few companies you truly believe in, I'd prefer to keep doing what what I'm doing(the later) at the expense of it being called undiversified.

http://pics.bbzzdd.com/users/donkadonk/Div.jpg

The number is closer to 40 securities but that graph should give ya the idea. The point of this isnt to call you diversified its to point out that you can effectively eliminate a lot of unnecessary risk that you take on by holding fewer securities. You can keep on doing what youre doing, and you may make out quite well, but you are bearing much more risk than you are being compensated for.

 

[Nerva]

Originally posted by: TheoPetro

Originally posted by: Lothar

Originally posted by: TheoPetro

Originally posted by: Lothar

Originally posted by: TheoPetro
You want at least 45 uncorrelated securities to make a well diversified portfolio and 4-5 ETFs should give you that easily.

One does not need such wide moat diversification.

I beg to differ. You get diminishing returns around 30 securities but to get "close enough" to the systematic risk to where adding another security is basically pointless you need ~50 uncorrelated securities.

I disagree.
One shouldn't need more than 20 companies or so.

If you pick more than that then you're just picking for the sake of picking stocks and probably aren't doing your own research.

Top 10 alone account for a little over 70% of my mom's portfolio.
If you can buy more of your best idea, why put money into your 20th-best idea?
The more positions you have, the more average you are.

Diversification is a highly subjective term.
What exactly qualifies as a "well diversified" portfolio? 50 unrelated companies you say.

If I buy 50 stocks do they have to be 2% of the portfolio each for the portfolio to be called diversified?
What if I buy 50 stocks with the top 10 accounting for 70% of my holding, the next 10 accounting for 20%, and the remaining 30 sharing 10%?
What if I buy 50 stocks and one company accounts for 51%, while the remaining 49 companies account for 1% each?

If diversification is more about just picking a bunch of unrelated companies(like the "50" figure you seem to advocate) rather than picking a few companies you truly believe in, I'd prefer to keep doing what what I'm doing(the later) at the expense of it being called undiversified.

http://pics.bbzzdd.com/users/donkadonk/Div.jpg

The number is closer to 40 securities but that graph should give ya the idea. The point of this isnt to call you diversified its to point out that you can effectively eliminate a lot of unnecessary risk that you take on by holding fewer securities. You can keep on doing what youre doing, and you may make out quite well, but you are bearing much more risk than you are being compensated for.

that's actually a pretty nice graph. for some reason i think it is a bit flawed though. the markets are interconnected enough that a huge negative event can throw diversification out the window.

 

[TheoPetro]

Originally posted by: 3cho

Originally posted by: TheoPetro


http://pics.bbzzdd.com/users/donkadonk/Div.jpg

The number is closer to 40 securities but that graph should give ya the idea. The point of this isnt to call you diversified its to point out that you can effectively eliminate a lot of unnecessary risk that you take on by holding fewer securities. You can keep on doing what youre doing, and you may make out quite well, but you are bearing much more risk than you are being compensated for.

that's actually a pretty nice graph. for some reason i think it is a bit flawed though. the markets are interconnected enough that a huge negative event can throw diversification out the window.

The graph is only showing systematic (light blue) and nonsystematic (dark blue) risk. Its true that a large negative event can shake the market and you can lose money. Thats accounted for in the graph because it is showing the standard deviation (risk) inherent in holding X securities. For example if you only have 2 securities and the markets tank you can lose (on average) 30% but if you have 40+ you would normally only lose a little more than 20%. You need a security market line and an efficient fronter graph to look at return.

 

[2canSAM]

Originally posted by: LuckyTaxi

Originally posted by: 2canSAM

Originally posted by: LuckyTaxi

Originally posted by: Ticky
Get lucky in the stock market?


(Anyone else buy NVDA below 19.00?)

Nope but i bought $5000 of SKNY when it was $0.15.

Stupid ? time. You bought $5000.00 @ $0.15/(5000/0.15 = 33333) share right now it is at $0.38/share. So if you sold right now you would be looking at ~ $12666.00 (0.38x3333=12666)

Stupid? I'm not selling now. I'm holding on, hopefully it hits $1.

Wasn't calling it stupid, was saying "stupid question time" as I was about to ask a stupid question

 

[Nerva]

Originally posted by: TheoPetro

Originally posted by: 3cho

Originally posted by: TheoPetro


http://pics.bbzzdd.com/users/donkadonk/Div.jpg

The number is closer to 40 securities but that graph should give ya the idea. The point of this isnt to call you diversified its to point out that you can effectively eliminate a lot of unnecessary risk that you take on by holding fewer securities. You can keep on doing what youre doing, and you may make out quite well, but you are bearing much more risk than you are being compensated for.

that's actually a pretty nice graph. for some reason i think it is a bit flawed though. the markets are interconnected enough that a huge negative event can throw diversification out the window.

The graph is only showing systematic (light blue) and nonsystematic (dark blue) risk. Its true that a large negative event can shake the market and you can lose money. Thats accounted for in the graph because it is showing the standard deviation (risk) inherent in holding X securities. For example if you only have 2 securities and the markets tank you can lose (on average) 30% but if you have 40+ you would normally only lose a little more than 20%. You need a security market line and an efficient fronter graph to look at return.

thats true... but if you are a fund... levered up to like 15 to 1, and the russians default on their debt, no amount of diversification will help.

 

[LuckyTaxi]

Originally posted by: 2canSAM

Originally posted by: LuckyTaxi

Originally posted by: 2canSAM

Originally posted by: LuckyTaxi

Originally posted by: Ticky
Get lucky in the stock market?


(Anyone else buy NVDA below 19.00?)

Nope but i bought $5000 of SKNY when it was $0.15.

Stupid ? time. You bought $5000.00 @ $0.15/(5000/0.15 = 33333) share right now it is at $0.38/share. So if you sold right now you would be looking at ~ $12666.00 (0.38x3333=12666)

Stupid? I'm not selling now. I'm holding on, hopefully it hits $1.

Wasn't calling it stupid, was saying "stupid question time" as I was about to ask a stupid question

ahhh . ok ... hahaha ... yes lots of money to be made.

 

[Chiropteran]

Invest in SUV's while they are cheap, and sell them for a big profit next year when the gas prices drop.

If the gas prices don't drop, oops!

 

[thomsbrain]

Originally posted by: LuckyTaxi

Originally posted by: Lothar

Originally posted by: LuckyTaxi

Originally posted by: Ticky
Get lucky in the stock market?


(Anyone else buy NVDA below 19.00?)

Nope but i bought $5000 of SKNY when it was $0.15.

You have $5,000 shares of SKNY, but you didn't have enough money to open a Roth IRA for 2007? 😕
You said you only had $1k to contribute initially + $150/month.

If you didn't end up contributing the maximum $4000 for 2007, that was a stupid move you did.

Well I did, but $5k for a penny stock that I KNEW was going to go up was a no-brainer for me.

Yeah, but you could have bought that penny stock with your Roth IRA account instead of your regular brokerage account, and you wouldn't be looking at losing a big chunk of your profits to taxes when you sell. You basically trimmed 25% off of any profits you will make.