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Investment Question

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Originally posted by: SampSon
Originally posted by: JS80
hsbcdirect.com = 4.8% liquid instant demand deposit

don't waste your money on an investment adviser. don't listen to most of these punks on ATOT for they are financial nubs.
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What if that advisor is free, like mine?

Suggesting an online savings account with a sub 5% return that is only available until a certain date and then your APR is changed to a variable market rate is a rather nub thing to advise.

With so many incredibly safe mutual funds out there I don't see the point of dumping it into a low yield online savings account for a long term investment.
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exactly. Savings account has a purpose but income generation it is not.

If OP let's us know what he wants to do with it maybe we can help. Descartes has already offered sound advice, but it takes a lot of work.

 
Originally posted by: Descartes
Originally posted by: Jeff7181
it doesn't take a lot of effort to profit from a trend in a thriving sector.
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No it doesn't. But quite frankly, if someone isn't willing to put forth at least as much effort as that takes a few times a year they're better off sticking the money in a savings account or something that will give them a very low but guaranteed increase in value. Just make sure it's large enough that it outpaces inflation. 😀
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You are correct sir, and effort is the problem. A lot of people are very cavalier with their portfolio, and there are a lot of psychological reasons as to why. People are willing to invest a substantial amount of money on a tip (the most common and ridiculous mistake an investor can make--some get lucky, but most don't) and refuse to sell at a loss. This is perfect for a buy-and-hold strategy, and if you give a statistically profitable investment enough time in the sample to provide that return then you'll be profitable, but that's not sound investment strategy.

Nothing is to say that stocks will outperform any other asset classes in the future, but many decades of history suggests they do. People just need to play a more active role in their portfolios to secure profits and identify areas of maximum growth. It's easy to get lucky on a tip if you try enough times, but having a strong equity curve to the upside over a long period of time is exceedingly difficult.
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My uncle didn't "believe in" investing until I put it in dollar amounts for him. I told him 15% per year is an easy goal for mutual fund investing... and if he invested only 1/4 of his net worth that would generate an extra 30k per year for him in his retirement. He's starting to invest now with smaller amounts of money, basically talking to me and copying my decisions, and has gained 18% in the past 9 months or so. So I think he's sold on it since he's starting to do his own research and slowly adding more money to his trading account.
 
Originally posted by: Jeff7181
Originally posted by: Descartes
Originally posted by: Jeff7181
it doesn't take a lot of effort to profit from a trend in a thriving sector.
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No it doesn't. But quite frankly, if someone isn't willing to put forth at least as much effort as that takes a few times a year they're better off sticking the money in a savings account or something that will give them a very low but guaranteed increase in value. Just make sure it's large enough that it outpaces inflation. 😀
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You are correct sir, and effort is the problem. A lot of people are very cavalier with their portfolio, and there are a lot of psychological reasons as to why. People are willing to invest a substantial amount of money on a tip (the most common and ridiculous mistake an investor can make--some get lucky, but most don't) and refuse to sell at a loss. This is perfect for a buy-and-hold strategy, and if you give a statistically profitable investment enough time in the sample to provide that return then you'll be profitable, but that's not sound investment strategy.

Nothing is to say that stocks will outperform any other asset classes in the future, but many decades of history suggests they do. People just need to play a more active role in their portfolios to secure profits and identify areas of maximum growth. It's easy to get lucky on a tip if you try enough times, but having a strong equity curve to the upside over a long period of time is exceedingly difficult.
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My uncle didn't "believe in" investing until I put it in dollar amounts for him. I told him 15% per year is an easy goal for mutual fund investing... and if he invested only 1/4 of his net worth that would generate an extra 30k per year for him in his retirement. He's starting to invest now with smaller amounts of money, basically talking to me and copying my decisions, and has gained 18% in the past 9 months or so. So I think he's sold on it since he's starting to do his own research and slowly adding more money to his trading account.
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Sometimes that's what it takes. I usually just show the difference in returns of a 5-6% investment over a 15% return. Compound this over even a 10-15 year period and the difference is profound. That's enough for most people to take interest. In all the time people invest in hobbies and watching tv, why not invest your time in something that will have a monetary return?

A 15% annualized return would be great if you could do it consistently. I try to stay around 20%, and while some incredible years make it seem like it's easy there are those years where nothing goes right. TREMX is up almost 17% so far this year, and while the question for many would be, "Why didn't I put everything I had in it?!" the answer should be obvious as well: Because you didn't know. What you do know is that the emerging markets, specifically Latin and Europe, are or have been performing incredibly all the while there is this attention on oil. Look for intermediate term trends and find the best funds that play them and 15+% is indeed possible.

 
Originally posted by: Taggart
<davesimmons>

OMG PUT IT IN VFINX!!!!!!!!!!!

</davesimmons>
😉
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Yep, if you want to invest for the long term and don't want all the work of trading that Descartes described, the best choice for most people is stock index based mutual funds.

For that, Vanguard.com and their VFINX (S&P 500 index) fund is one of the safest and best choices, though for diversification you should also have small-cap and worldwide (VEIEX, VEURX, VPACX, etc.)

That's a low-risk, medium-return strategy that has historically returned around 12%. It also requires almost zero effort. Buy funds, hold for decades, profit.

The people getting 20%+ returns are actively trading and accepting much higher risk for their higher return.
 
To remain in safety is to be barren, to take a risk is to live life.

Use that 70k of yours and play high stakes blackjack. You got a 49.5% chance of winning if you play basic strategy! 😀
 
Originally posted by: DaveSimmons
Originally posted by: Taggart
<davesimmons>

OMG PUT IT IN VFINX!!!!!!!!!!!

</davesimmons>
😉
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Yep, if you want to invest for the long term and don't want all the work of trading that Descartes described, the best choice for most people is stock index based mutual funds.

For that, Vanguard.com and their VFINX (S&P 500 index) fund is one of the safest and best choices, though for diversification you should also have small-cap and worldwide (VEIEX, VEURX, VPACX, etc.)

That's a low-risk, medium-return strategy that has historically returned around 12%. It also requires almost zero effort. Buy funds, hold for decades, profit.

The people getting 20%+ returns are actively trading and accepting much higher risk for their higher return.
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You know I like your dedication to VFINX and your willingness to educate others, but I'd like to elaborate on one thing...

The people getting 20%+ returns are actively trading and accepting much higher risk for their higher return.
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That's not necessarily true. I risk no more than 1% of my total equity on a play, and off that 1% I only risk an initial 3%. If the trade works I protect my profits at 5% less the current value. I'm going to actually post a list of the plays I made in one week many weeks back.

Position Symbol Qty Price Tx Total Price Value P&L
Closed SWN 117 $43.13 $10.00 $5,056.21 $42.25 4,943.25 -$112.96 -2.2%
Closed BBSI 188 26.80 10.00 5,048.40 26.26 4,936.88 -111.52 -2.2%
Closed DCAI 452 11.05 10.00 5,004.60 10.80 4,881.60 -123.00 -2.5%
Closed BOOM 144 34.64 10.00 4,998.16 36.86 5,307.84 309.68 6.2%
Closed VPHM 250 20.00 10.00 5,010.00 23.08 5,770.00 760.00 15.2%
Closed CFK 346 14.44 10.00 5,006.24 16.65 5,760.90 754.66 15.1%
Closed DCAI 443 11.30 10.00 5,015.90 11.16 4,943.88 -72.02 -1.4%
Closed NGAS 435 11.50 10.00 5,012.50 11.99 5,215.65 203.15 4.1%
Closed FORD 444 11.27 10.00 5,013.88 10.99 4,879.56 -134.32 -2.7%
Closed CMT 671 7.45 10.00 5,008.95 7.80 5,233.80 224.85 4.5%
Closed FORD 451 11.07 10.00 5,002.57 10.95 4,938.45 -64.12 -1.3%
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If you look at the above it looks like my total risk was $50k, but that wasn't the case; my exposure was much smaller. A 3% gain in one week is a great week, and entirely possible while limiting your total risk to 1% of your equity. You can also see that my losers were a lot less than my gainers, and that's the nature of my particular strategy. I'd be happy to elaborate and provide actual details for those interested.

My posts are too damn long in this thread, so I'll keep it short. You can manage your risk even better than the mutual funds because you are much smaller; it's much easier to get in and out of an issue. The trade (pun intended) is time.

I agree with most of what you say, but I would add one comment to the following statement:

Buy funds, hold for decades, profit.
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Buy funds, hold for as long as the rally in either direction continues, profit. Rallies don't last decades, and letting your portfolio drawdown in front of your eyes over a period of a year or more is a little irresponsible, imo.

Also, I hope some can appreciate that I have posted some actual plays of mine. I normally don't do that, but I hope that someone's eyes and mind might be opened a little in this thread and thus seek further understanding. Concrete evidence of actual action is often helpful.
 
Originally posted by: Aztech
Any big investors on here? I know most of yall are broke college students but there seems to be some good savings/investing topics on here sometimes too.

So, if you had $75K to invest somewhere safe, where would you put it? I'm actually asking this for someone else, and they need it to be safe, as in very low risk, if any.
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You didn't answer one important question...How liquid does this money need to be?

If this money is an emergency fund or will be a downpayment on a house in a few months, you really should keep it in a high yield savings account like ING or HSBC.

If it's going to be invested for retirement, though, it should probably be invested into no load mutual funds and index funds. If this guy is young, he should consider starting an Roth IRA with part of it, too.
 
My posts are too damn long in this thread, so I'll keep it short. You can manage your risk even better than the mutual funds because you are much smaller; it's much easier to get in and out of an issue. The trade (pun intended) is time.
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I don't disagree, though from what you've disclosed your methods are very different and much more logical from most other active traders here.

I look at good investing options as a spectrum with increasing amount of work and (often) risk for increasing return. What I usually recommend to people is at the "easy and safe" end of the spectrum, as opposed to a lot of people here (not you) that recommend "hard and dangerous" suggestions with a higher return.

What I recommend isn't the "best" strategy, just one that almost anyone can do safely while earning a decent return.

We discussed this in other threads, but most people who fall into aggressive investing don't do the hard work you do to minimize the risk, so their odds of keeping a good return are much lower than yours.

(We should put up a point-counterpoint page somewhere and just link to it in these threads 🙂 )
 
"Why didn't I put everything I had in it?!" the answer should be obvious as well: Because you didn't know.
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That's one thing that prevents people from investing. The fact that nobody knows what's going to happen, but that's not entirely true. Technical indicators can tell you what has happened in the past and what is happening currently. Typically you can tell what's happening, and what will probably happen. The question though is how much and when? How much will the stock increase and value, and how long will it take, and when will it go back down?

So far I've been investing mainly in funds because they're lower risk than stocks and they can provide some very good returns as Descartes pointed out with TREMX. Now I'm more comfortable using technical analysis, and more confident in my ability to read the charts, and I'm now investing in stocks, with decent success so far. I bought CHINA back at the beginning of January for 3.33 a share and got stopped out at the end of January at 3.95 a share for an 18% profit in about 3 weeks. I bought ADPT a week and a half ago at 5.75 per share and I still own it at 6.43 per share which is about a 12% gain in a week and a half. But I also bought HPOL at 5.55 per share at the end of January and got stopped out at 5.15 per share for about an 8% loss. Had I set my trailing stops better and given it time to come back after that short correction, I would have still owned that one and had an 8% profit right now. So that's what I'm working on now... finding a good method of setting trailing stops. I'm using 10% right now by recommendation of my grandfather.
 
Originally posted by: Jeff7181
"Why didn't I put everything I had in it?!" the answer should be obvious as well: Because you didn't know.
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That's one thing that prevents people from investing. The fact that nobody knows what's going to happen, but that's not entirely true. Technical indicators can tell you what has happened in the past and what is happening currently. Typically you can tell what's happening, and what will probably happen.
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That's the key point. Technical analysis can only tell you what is more likely, and even then sometimes it's no more likely than getting heads or tails from a coin. Provided that you have a slight statistical edge, a proper risk and money management strategy, and proper psychological discipline (or an automated system to remove your discretionary thoughts from the process) you can be profitable. My strategy has proven profitable even if I'm wrong more times than I'm right. If 4 out of 10 plays work and your gainers are at least 3 times your losers all it takes is proper risk and money management to be profitable.

The question though is how much and when? How much will the stock increase and value, and how long will it take, and when will it go back down?
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None of which you could ever know with any reasonable certainty. Granted, you can gauge the strength of a move after it has started, but you'll never know when it will go back down. It's easy to look at a chart and say, "See, that incredible shooting star that followed a rally to resistance in the intermediate trend channel told me that there was a reversal leading to a correction and a return to support", but that's after it's happened. Technical indicators are great for what they suggest... indications. Use actual price action to confirm the indications.

Granted, there are people that make money with predictions, but I don't personally know of any that do so consistently, and it's consistency that makes you profitable.

So far I've been investing mainly in funds because they're lower risk than stocks and they can provide some very good returns as Descartes pointed out with TREMX. Now I'm more comfortable using technical analysis, and more confident in my ability to read the charts, and I'm now investing in stocks, with decent success so far. I bought CHINA back at the beginning of January for 3.33 a share and got stopped out at the end of January at 3.95 a share for an 18% profit in about 3 weeks. I bought ADPT a week and a half ago at 5.75 per share and I still own it at 6.43 per share which is about a 12% gain in a week and a half. But I also bought HPOL at 5.55 per share at the end of January and got stopped out at 5.15 per share for about an 8% loss. Had I set my trailing stops better and given it time to come back after that short correction, I would have still owned that one and had an 8% profit right now.
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Don't do that 🙂. It's easy to say, "See, had I held on I could have been profitable", but it's not so easy to say, "See, had I held on I would have lost more!" The reality is that you didn't know it would have recovered, and it's precisely this lack of certainty that leads people to hold the bag on companies like Enron! Protect your profits! Getting out was the right thing, and I am suggesting that you should have gotten out a lot sooner. An 8% loss will absolutely kill your portfolio. Think of it this way: An 8% loss means you need 8% just to break even. I know that's obvious, but thinking of it that way puts a new light on the matter. You now need a 16% gain to see 8%.

So that's what I'm working on now... finding a good method of setting trailing stops. I'm using 10% right now by recommendation of my grandfather.
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If you are investing in a long-term buy-and-hold strategy then 10% might be ok, but if you're trading then 10% will put you out of business very, very quick. I've had weeks many of my plays went against me, and so has any trader. If my stops were at 10% I'd be wiped out in a month. If you're holding for the long term (3+ years) then 10% is ok, but anything shorter and you should consider a trailing of no more than 5% if you are profitable.

All just my opinion of course.
 
Originally posted by: Aztech
Any big investors on here? I know most of yall are broke college students but there seems to be some good savings/investing topics on here sometimes too.

So, if you had $75K to invest somewhere safe, where would you put it? I'm actually asking this for someone else, and they need it to be safe, as in very low risk, if any.
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You mentioned very low risk but didn't mention timeframe. Without that you can't do anything other than put the money in online savings like HSBC.

I would rule out mutal funds and even index funds. Contrary to popular belief here, index funds are not safe.

If this person has 5 year time frame, I would put 60k into government I-Bond currently paying 6.73%. 30k direct from US Treasury online and 30k in paper form. That leaves 15k for online savings like HSBC, ING Direct, etc. I-Bond will protect from inflation which is what you want and it doesn't get any safer than the US government. 15k in savings account currently pay slightly lower interest at around 4.75% but is liquid so you can have easy access if needed without any penalty.

If you want better return you're going to have to take on risk.
 
If you are investing in a long-term buy-and-hold strategy then 10% might be ok, but if you're trading then 10% will put you out of business very, very quick. I've had weeks many of my plays went against me, and so has any trader. If my stops were at 10% I'd be wiped out in a month. If you're holding for the long term (3+ years) then 10% is ok, but anything shorter and you should consider a trailing of no more than 5% if you are profitable.
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I've tried lower ones, so has my grandfather... and I'm not sure if it's luck or what, but it doesn't seem like 5% gives a stock enough time to correct after a large spike. I guess one could look at that and say "good, I'll catch it on each upswing" but if you do that too much you just fall victim to whip-sawing and end up with trading fee's eating up a lot of your profits (for smaller investors like myself). Seems like with a 5% trailing stop we kept getting stopped out with 6-7% dips, with a 10-15% jump afterwards.

My uncle has been testing out a strategy with a 1:2 risk reward ratio where he sets both stops and limits. He says it works best with a very volitile stock because you can count on it to move a certain amount each day. Basically if a stock is trading at $10, he sets a limit at 12 and a stop at 9 (if he's going long, not short). If he's right only half the time he makes 10%. With some intelligent analysis it's not that difficult to be right 50% of the time... but even only being right half the time, 10% per trade is not a bad deal. 🙂
 
Originally posted by: dirtboy
Putting it under their matress would provide a safe, low risk location.
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Actually with the risk of being robbed and the risk of a house fire, that's not a very good place to put it. 😀
 
Oh by the way... just a tip for some general mutual fund trading. I prefer no-load funds, but sometimes you can't avoid it with the funds that tend to do better... if I have to pay a fee, I'd rather pay a front end fee rather than back end since a front end fee will be a percentage of the original investment, and the back end fee will be a percentage of the value when you sell, which hopefully would be higher than your original investment.
 
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