I know nothing about stocks, but why don't people just do this for ez gains?

[Zeze]

I know nothing about them and I'm smart enough to know that if I know nothing, I should steer clear of them. That being said, let me ask a dumb Q that popped in my mind.

1. There must be a lot of super think-tank individuals or firms that have historically beat the market.

2. Why don't people just follow his/her calls? Maybe he can charge a subscription fee of sort. Win-win for all.

Let me try to answer my own Q, let me know if I'm correct.

The assumption of #1 is false. No one in the WORLD, at individual stock level, have predicted the market consistently & reliably. This is a big statement. Is it true?

 

[MomentsofSanity]

Nothing is guaranteed. No one is perfect. The main thing to remember in this business is if someone is willing to tell/charge you how to make money they have probably a) already made the money that's there to be made or b) the only money to be made is off of your desperation.

I say this as a licensed broker.

 

[BurnItDwn]

Most "beat the market" managed index funds "beat the market" by less than their fee.

 

[tortoise]

ANY stock/bond investment fund is a roller coaster ride . . research chart history! Something like a VWEHX bond fund at least pays monthly dividends.

 

[dullard]

Think of it this way. If some group of people (or even a single person) had a perfect knowledge of the future, then they would beat the market this year, and next year, and next year. Their money would grow, and grow, and grow. Soon, they would be extremely wealthy and own large swaths of the stock market. That group would essentially own big chunks of everything worth owning. They would essentially BE the stock market.

So the real question is, can a super smart think-tank beat itself? Since they are the stock market, and the assumption is that they can beat the stock market, then they must be able to beat their own predictions. Repeatedly.

The answer to that will answer your question.

 

[Svnla]

Warren Buffet, one of the savviest person about investment said put 90% of your investment money on a low cost index fund and 10% on a bond fund and ride the gravy train until you retire.

 

[DaveSimmons]

This is why you should never go to one of those investment seminars. A super-smart think tank could make more money trading the stocks themselves together with a billionaire or two than sharing the information with the rest of us. If "EZ Houze Flippinz" schemes worked, they'd be doing it not selling the scheme.

What you're talking about already exists as "actively managed mutual funds" and "hedge funds." Over time, the S&P 500 index beats most of them, which is some evidence for the ones that do beat it being more lucky than wise.

Unless you can go Back To The Future and pick up a sports almanac, the safest way to get rich slowly is to buy and hold index funds forever.

Easy, no-thought investment: Vanguard.com, Target (year of retirement) fund. All index funds, very low expenses, fully diversified.

 

[dullard]

I know nothing about them and I'm smart enough to know that if I know nothing, I should steer clear of them.

Knowing nothing about stocks doesn't mean you should steer clear of them. It means instead that you should do the smart thing and have lots of stocks in index funds that capture the bulk of the market. That way you get richer without needing to know or do anything.

Just not getting richer isn't the best choice.

 

[NikolaeVarius]

I know nothing about them and I'm smart enough to know that if I know nothing, I should steer clear of them. That being said, let me ask a dumb Q that popped in my mind.

1. There must be a lot of super think-tank individuals or firms that have historically beat the market.

2. Why don't people just follow his/her calls? Maybe he can charge a subscription fee of sort. Win-win for all.

Let me try to answer my own Q, let me know if I'm correct.

The assumption of #1 is false. No one in the WORLD, at individual stock level, have predicted the market consistently & reliably. This is a big statement. Is it true?

Impossible to follow. When a decision is made computers RAPIDLY make the requisite orders and other computers also as rapidly react to the knowledge that hose orders are being placed.

 

[dud]

80% of actively managed funds underperform the market average ... and that is without figuring in their fees. The way to go over the long term is unmanaged index funds with fees of 0.25% or less.

 

[Exterous]

One thing to keep in mind when looking at 'ways to beat the stock market' is that most funds don't have goals\constraints that match with yours. If a stock fund is successful that usually brings in a huge influx of cash. This has to be invested in stocks even if the manager thinks the market is grossly overpriced. Its very success may force behaviors that are in opposition of the strategies that made it successful. Same thing with a crash - while it might be the best idea to hold onto or even buy more stocks at the low price the fund will likely have to sell positions it otherwise wouldn't want to when people want to abandon the market.

CEFs don't have these issues and I have seen some do better than the DJIA over the last 15+ years. There are a few drawbacks here though. Unless you get in at the start you'll pay a premium to get into the fund which tends to be higher than the fund has returned. Some also make promises in regards to return of capital which can be damaging in downwards markets.

As for ez gains the easiest is just to park money in an index fund for a while . While nothing is guaranteed it has, historically, done very well. 100+ year history of 7% returns. Worst 20 year period was 1928-1948 at 2.5%. Second worse was 1958 for 5%. Best 20 year periods not experiencing high inflation were around 14%

 

[monkeydelmagico]

Is it true?

Yes. At least the ones who sell to the public. I haven't explored the private funds; the price of admission is too high.

 

[Red Squirrel]

Actually I was thinking about this the other day since I sorta got into stocks but still have a LOT to learn, was thinking it would be cool if there was a service that basically told you what stocks you should buy/sell. You would pay a subscription fee and it would basically just email you random tips and such. There could be different packages where it gets you more/less details based on how much you pay.

Though I imagine if you can scrape stock data so you can manipulate it locally it would be possible to build a computer program that basically analyzes them and automatically calls shots on what is best to buy/sell. Heck would not be surprised if people already do this and automate the whole thing. Basically could be making a fortune off a simple Raspberry PI running off a basic connection. The hard part is coming up with the proper algorithms to figure out the movement of the stock market. Really advanced ones would probably scrape news sites too.

The biggest thing is understanding all the indicators like MACD etc... I still need to re-read on all of that.

I bought a few stocks just to get started but need to learn way more before I make any serious moves. With the site I use you have to buy 100 at a time so I stick with the stocks that are a few dollars. The big name stocks like Microsoft and Apple are always very safe bets but you need to have a lot of upfront money to buy them.

 

[DaveSimmons]

The biggest thing is understanding all the indicators like MACD etc... I still need to re-read on all of that.

The problem is, you think you are going to do better than full-time fund managers who have access to better data, and who can spend millions of dollars writing their analysis software. Those people mostly fail to beat the S&P 500.

If you treat this as a hobby, and spend some extra money on it instead of golf clubs or sports game tickets, then great. If you lose money you're no worse off than if you'd bought the tickets.

If you do it with your retirement and investment money, you really should think twice and consider index funds instead. Boring but safe, and they require zero effort to buy and hold.

You should set a budget like you would for entertainment expenses, and not dip into your real investment money just to place another bet to cover your losses. You're in stocks Vegas, don't mortgage the house because you "know" your system will win big any hand now.

 

[ControlD]

Though I imagine if you can scrape stock data so you can manipulate it locally it would be possible to build a computer program that basically analyzes them and automatically calls shots on what is best to buy/sell. Heck would not be surprised if people already do this and automate the whole thing. Basically could be making a fortune off a simple Raspberry PI running off a basic connection. The hard part is coming up with the proper algorithms to figure out the movement of the stock market. Really advanced ones would probably scrape news sites too.

That's how the big boys already do things, although they are running a lot more than a RPi to get it done. I would guess the majority of fortunes won and lost in the market are through automated computerized trading. For one person with an online trading account it isn't at all easy however. Huge firms trade huge blocks of stock, so even a slight gain (or loss depending on the type of trade) can result in big profits. If you are using an online service with say $8 a trade, you need to be making decent money with each trade to first cover that cost. $8 to buy and another $8 to sell means you need to make at least $16.01 to start making money. Plus, your trades aren't going through as fast as a huge brokerage firm with their own traders and connection to the market. You will always be behind the big boys. If your algorithm is seeing the same thing theirs is, you probably just lost even though they just won.

 

[Red Squirrel]

The problem is, you think you are going to do better than full-time fund managers who have access to better data, and who can spend millions of dollars writing their analysis software. Those people mostly fail to beat the S&P 500.

If you treat this as a hobby, and spend some extra money on it instead of golf clubs or sports game tickets, then great. If you lose money you're no worse off than if you'd bought the tickets.

If you do it with your retirement and investment money, you really should think twice and consider index funds instead. Boring but safe, and they require zero effort to buy and hold.

You should set a budget like you would for entertainment expenses, and not dip into your real investment money just to place another bet to cover your losses. You're in stocks Vegas, don't mortgage the house because you "know" your system will win big any hand now.

I'd say it's more a hobby/gambling - definitely not retirement. I figure it has better chance of winnings than lotto tickets. I set $100/pay to automatically go to the trading account. Right now most of the money I have in there is all liquid, which is probably safer at my current skill level.

But yeah it's more something for fun, as sometimes I tell myself "oh I want to buy that stock" but now at least I'm setup for it. That was a pain to setup too. So many forms and crap.

 

[Ken g6]

"Past performance is never a guarantee of future returns". Everyone says it. I think it may even be required in an investment's "prospectus".

 

[Udgnim]

1. There must be a lot of super think-tank individuals or firms that have historically beat the market.

These are called hedge funds.

There are individuals that people follow and greatly value what they say or think due to their body of investment success.

Names like Warren Buffett, Jim Chanos, Carl Icahn.

There are also individuals that had great investment success but eventually started missing greatly. Someone like Bill Ackman comes to mind.

 

[John Connor]

There must be a lot of super think-tank individuals or firms that have historically beat the market.

Yes, there are and they have computers crunching numbers.

 

[Rumpltzer]

At my workplace, our investments are limited to company stock and about a dozen "funds" made up of large cap murican, small cap murican, large international, emerging markets, bonds, etc. You choose whih of these funds you want to invest in, and you choose the percentage for each investment. None of them is actively managed, and the fees are very low.

A few years ago, the company began to offer "tiers" where an outside firm would bundle these same funds into groups that match your age group. Basically, they'll choose the percentages for you... and charge a fee to do it! What's weird about this, though, is that they're completely open about their choices and the percentages. It makes me wonder why people might go along with it at all. Why not just mimic their choices and percentages rather than pay them a fee to do it for you?

*shrug*

 

[sandorski]

Buy Low, Sell High. It works everytime! Just like Abstinence.

 

[DaveSimmons]

At my workplace, our investments are limited to company stock and about a dozen "funds" made up of large cap murican, small cap murican, large international, emerging markets, bonds, etc. You choose whih of these funds you want to invest in, and you choose the percentage for each investment. None of them is actively managed, and the fees are very low.

A few years ago, the company began to offer "tiers" where an outside firm would bundle these same funds into groups that match your age group. Basically, they'll choose the percentages for you... and charge a fee to do it! What's weird about this, though, is that they're completely open about their choices and the percentages. It makes me wonder why people might go along with it at all. Why not just mimic their choices and percentages rather than pay them a fee to do it for you?

*shrug*

That's a Target (year) fund. The reasons why they are nice:

- If you're buying funds in an IRA or regular brokerage account, you only need to buy 1 fund instead of 5+, which means only one minimum balance and might mean working your way up to the "big investor" tier sooner (a better share class with lower fees)

- They rebalance the percentages for you, year by year so you never need to sell one fund or buy extra from another. And as you get closer to retirement the % in bonds automatically increases.