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Descartes

Lifer
Oct 10, 1999
13,968
2
0
Originally posted by: PAB
Originally posted by: Tango
I see in this thread the most typical mistake non professionals do when dealing with investments. They focus on returns. Nobody in Wall Street focuses on returns.

Say WHAT

Man, you are way off the mark. If you're not focusing on returns, whether its wall street or main street business you''ll be living on the street shortly.

You missed his point, but that's nothing new.
 

PAB

Banned
Dec 4, 2002
1,719
1
0
Originally posted by: Descartes
Originally posted by: PAB
Originally posted by: Tango
I see in this thread the most typical mistake non professionals do when dealing with investments. They focus on returns. Nobody in Wall Street focuses on returns.

Say WHAT

Man, you are way off the mark. If you're not focusing on returns, whether its wall street or main street business you''ll be living on the street shortly.

You missed his point, but that's nothing new.

How the hell can he say "nobody in wall street focuses on returns" - thats like saying nobody in General Hardware cares about CPU prices.
 

Descartes

Lifer
Oct 10, 1999
13,968
2
0
Originally posted by: PAB
Originally posted by: Descartes
Originally posted by: PAB
Originally posted by: Tango
I see in this thread the most typical mistake non professionals do when dealing with investments. They focus on returns. Nobody in Wall Street focuses on returns.

Say WHAT

Man, you are way off the mark. If you're not focusing on returns, whether its wall street or main street business you''ll be living on the street shortly.

You missed his point, but that's nothing new.

How the hell can he say "nobody in wall street focuses on returns" - thats like saying nobody in General Hardware cares about CPU prices.

It's a difference of perspective, which is why I said you missed his point. You should have read the rest of his post.

Anyway, no on will argue about absolute returns being important. It's just not the only thing to consider.
 

PAB

Banned
Dec 4, 2002
1,719
1
0
Originally posted by: Descartes
Originally posted by: PAB
Originally posted by: Descartes
Originally posted by: PAB
Originally posted by: Tango
I see in this thread the most typical mistake non professionals do when dealing with investments. They focus on returns. Nobody in Wall Street focuses on returns.

Say WHAT

Man, you are way off the mark. If you're not focusing on returns, whether its wall street or main street business you''ll be living on the street shortly.

You missed his point, but that's nothing new.

How the hell can he say "nobody in wall street focuses on returns" - thats like saying nobody in General Hardware cares about CPU prices.

It's a difference of perspective, which is why I said you missed his point. You should have read the rest of his post.

Anyway, no on will argue about absolute returns being important. It's just not the only thing to consider.

Oh, I read the rest of the post but the quoted part was the most outrageous part that I just had to point out to the world.
 

imported_Tango

Golden Member
Mar 8, 2005
1,623
0
0
Originally posted by: PAB
Originally posted by: Descartes
Originally posted by: PAB
Originally posted by: Descartes
Originally posted by: PAB
Originally posted by: Tango
I see in this thread the most typical mistake non professionals do when dealing with investments. They focus on returns. Nobody in Wall Street focuses on returns.

Say WHAT

Man, you are way off the mark. If you're not focusing on returns, whether its wall street or main street business you''ll be living on the street shortly.

You missed his point, but that's nothing new.

How the hell can he say "nobody in wall street focuses on returns" - thats like saying nobody in General Hardware cares about CPU prices.

It's a difference of perspective, which is why I said you missed his point. You should have read the rest of his post.

Anyway, no on will argue about absolute returns being important. It's just not the only thing to consider.

Oh, I read the rest of the post but the quoted part was the most outrageous part that I just had to point out to the world.

Read the post again more carefully. Obviously everybody wants returns. Nobody likes to lose money.

But I repeat: nobody in Wall Street talks about returns. And I do work in asset management in wall street. Returns are easy. Risk adjusted returns is what people in wall street talk about. That's why you have people running portfolio analytics 24/7 and eventually integrating in their fund of funds contrarian instruments knowing they will lose money.

If returns was what they cared about they wouldn't buy something they believe will lose value right? But that is the way we achieve 0 beta. And this is what people here really care about.

 

imported_Tango

Golden Member
Mar 8, 2005
1,623
0
0
Originally posted by: PAB
Originally posted by: Tango
I see in this thread the most typical mistake non professionals do when dealing with investments. They focus on returns. Nobody in Wall Street focuses on returns.

Say WHAT

Man, you are way off the mark. If you're not focusing on returns, whether its wall street or main street business you''ll be living on the street shortly.

I've been doing pretty fine in Wall Street for quite a few years now. But thanks for your interest in my future.

Portfolio managers don't become famous with their returns. They become famous for their 0 beta and low tracking error. It's a fact. But this was exactly the point of my post: amateurs don't know any better and usually only focus on returns, and that's why in the long run they are never able to replicate what portfolio managers at hedge funds can do.
And they also usually pay a lot of money in commissions to a manager that really shouldn't deserve it, based on the risk-adjusted performance. The year end returns do not tell you anything about how you reached that NAV, with what volatility, what correlation to specific indexes or particular macro trends.

Why do you think people pay huge commissions to hedge funds manager that return a constant 7% a year? People could quite easily beat that with a couple of good EM bonds. Again: those hedge funds have zero Beta! That is the real challenge, not the 7%, and that will be what will set superstar managers apart from the others.

Edit: additional note to clarify even better..

I outperformed the head of portfolio management of the firm where I used to work 9 years out of ten. Does this make me a better portfolio manager than he was? After all I had better returns right?

No way! I was extracting better returns from a much riskier portfolio! The returns/risk ratio he was capable of achieving was by far better, and this is what investors care about, together with many other things that, if you are able to deliver, let you take 20% of all the portfolio gains plus 2% entrance fees. None of the investors in that fund would have bought shares of my portfolio, because it was extremely volatile. The way I constructed a portfolio for my own money is extremely different from how I would construct a portfolio for clients, because I can accept high beta for a period because I accept a component of uncertainty, hedge funds instead want zero systemic uncertainty.
 

iversonyin

Diamond Member
Aug 12, 2004
3,303
0
76
Originally posted by: PAB


I had my broker run the numbers re: Beta

Fund A: 1.55
Fund B: 1.43
Fund C: 1.48
Fund D: .89
Fund E: 1.21
Fund F: 1.47
Fund G: 1.57
Fund H: 1.48
Fund I: 1.06
Fund J: .84

Last fund had no data.

Average of 1.2X

I've had this debate before, and here are the numbers.

Morningstar only goes back 10 years on load adjusted performance, so here are the numbers, and these are only domestic funds, not foreign.

3,042 domestic stock funds beat the S&P 500 over the last 10 years, after loads and fees.

The S&P was up an average of 8.42% over 10 years.

4,092 domestic stock funds beat the S&P 500 over the last 5 years, after loads and fees.

The S&P was up an average of 6.19% over 5 years.

4,631 domestic stock funds beat the S&P 500 over the last 3 years, after loads and fees.

The S&P was up an average of 10.44% over 3 years.

It is entirely possible to do better than the benchmarks. I'm doing it now. By the end of the year, we'll compare brainpans. Deal?

Once again, you never really read do you? Yes, its possible to beat S&P on risk adjusted basis- what you are doing is creating "alpha" by doing so. - and only 3-5% of managers can pull that off on the long run.

Why am I frowning upon you against BUY AND HOLD on index fund? I buy and hold on an index fund I get 8% return over the last 10 years- without ANY research or ANY work- I spend my quality time with family and friends. And as your statistic pull out- the longer the timeframe, the harder it become to beat the S&P.

Now, the time frame for buy and hold investor is....20 years+. Talk to me 20 years later when you are consistently beating S&P on a risk adjusted basis. (what Warren Buffet's timeframe? He said he would love to hold the company...FOREVER.)

This is how you calculate beta for your portfolio: Add all % weight of the fund x beta of the fund. If you have equal amount of asset in each of your funds. Then your beta is right. Your portfolio has beta of 1.3. If you have more asset allocated toward the fund with higher beta, then your portfolio should have a higher beta...and vice versa. And your require return for having a portfolio with a beta of 1.3 is :

Require return = Risk Free Rate (10 yr treasury) + beta (S&P return for 10-20 years - risk free rate)

If your actual annualized return for last 10 years beat the require return, then you are, indeed, beating the market.
 

BoldAsLove

Platinum Member
May 10, 2005
2,078
0
0
Originally posted by: Tango
Originally posted by: PAB
Originally posted by: Tango
I see in this thread the most typical mistake non professionals do when dealing with investments. They focus on returns. Nobody in Wall Street focuses on returns.

Say WHAT

Man, you are way off the mark. If you're not focusing on returns, whether its wall street or main street business you''ll be living on the street shortly.

I've been doing pretty fine in Wall Street for quite a few years now. But thanks for your interest in my future.

Portfolio managers don't become famous with their returns. They become famous for their 0 beta and low tracking error. It's a fact. But this was exactly the point of my post: amateurs don't know any better and usually only focus on returns, and that's why in the long run they are never able to replicate what portfolio managers at hedge funds can do.
And they also usually pay a lot of money in commissions to a manager that really shouldn't deserve it, based on the risk-adjusted performance. The year end returns do not tell you anything about how you reached that NAV, with what volatility, what correlation to specific indexes or particular macro trends.

Why do you think people pay huge commissions to hedge funds manager that return a constant 7% a year? People could quite easily beat that with a couple of good EM bonds. Again: those hedge funds have zero Beta! That is the real challenge, not the 7%, and that will be what will set superstar managers apart from the others.

Edit: additional note to clarify even better..

I outperformed the head of portfolio management of the firm where I used to work 9 years out of ten. Does this make me a better portfolio manager than he was? After all I had better returns right?

No way! I was extracting better returns from a much riskier portfolio! The returns/risk ratio he was capable of achieving was by far better, and this is what investors care about, together with many other things that, if you are able to deliver, let you take 20% of all the portfolio gains plus 2% entrance fees. None of the investors in that fund would have bought shares of my portfolio, because it was extremely volatile. The way I constructed a portfolio for my own money is extremely different from how I would construct a portfolio for clients, because I can accept high beta for a period because I accept a component of uncertainty, hedge funds instead want zero systemic uncertainty.

owned
 

imported_Tango

Golden Member
Mar 8, 2005
1,623
0
0
Originally posted by: iversonyin
Originally posted by: PAB


I had my broker run the numbers re: Beta

Fund A: 1.55
Fund B: 1.43
Fund C: 1.48
Fund D: .89
Fund E: 1.21
Fund F: 1.47
Fund G: 1.57
Fund H: 1.48
Fund I: 1.06
Fund J: .84

Last fund had no data.

Average of 1.2X

I've had this debate before, and here are the numbers.

Morningstar only goes back 10 years on load adjusted performance, so here are the numbers, and these are only domestic funds, not foreign.

3,042 domestic stock funds beat the S&P 500 over the last 10 years, after loads and fees.

The S&P was up an average of 8.42% over 10 years.

4,092 domestic stock funds beat the S&P 500 over the last 5 years, after loads and fees.

The S&P was up an average of 6.19% over 5 years.

4,631 domestic stock funds beat the S&P 500 over the last 3 years, after loads and fees.

The S&P was up an average of 10.44% over 3 years.

It is entirely possible to do better than the benchmarks. I'm doing it now. By the end of the year, we'll compare brainpans. Deal?

Once again, you never really read do you? Yes, its possible to beat S&P on risk adjusted basis- what you are doing is creating "alpha" by doing so. - and only 3-5% of managers can pull that off on the long run.

Why am I frowning upon you against BUY AND HOLD on index fund? I buy and hold on an index fund I get 8% return over the last 10 years- without ANY research or ANY work- I spend my quality time with family and friends. And as your statistic pull out- the longer the timeframe, the harder it become to beat the S&P.

Now, the time frame for buy and hold investor is....20 years+. Talk to me 20 years later when you are consistently beating S&P on a risk adjusted basis. (what Warren Buffet's timeframe? He said he would love to hold the company...FOREVER.)

This is how you calculate beta for your portfolio: Add all % weight of the fund x beta of the fund. If you have equal amount of asset in each of your funds. Then your beta is right. Your portfolio has beta of 1.3. If you have more asset allocated toward the fund with higher beta, then your portfolio should have a higher beta...and vice versa. And your require return for having a portfolio with a beta of 1.3 is :

Require return = Risk Free Rate (10 yr treasury) + beta (S&P return for 10-20 years - risk free rate)

If your actual annualized return for last 10 years beat the require return, then you are, indeed, beating the market.

Not even that easy. I hope he has exposure to more than just the S&P 500, so his Betas need actually to get adjusted to the specific markets risk. If all those funds had their beta calculated on the S&P let me tell you there something MASSIVELY wrong about his asset allocation.

Besides, the number of funds he is holding is very very high. From a technical perspective it's very hard to justify it. If he has less than at least a couple of millions invested in those funds it might look like his broker might be trying to generate commissions.

Don't get me wrong, there's nothing bad in holding many funds. But with just three funds you can basically create every portfolio dynamic you can think of.
 
Sep 29, 2004
18,656
67
91
Originally posted by: PAB
Originally posted by: IHateMyJob2004
Originally posted by: iversonyin
Originally posted by: PAB

Again, people are ignoring the risk factor here. I buy GOOG for last 3 years, I beat the market hands down right? Of course on an absolute basis, what about standard deviation of your portfolio, what about extra time spending on it?

For most common folks that has work and family, a set of allocated risk adjust portfolio of passive index funds is the way to go.

Again, I disagree. Passive index funds follow and/or trail the market. I've got a good blend of actively managed funds and I have beaten the S&P for the same timespan by a good margin. I have higher highs and I have higher lows. I took a hit in February but it wasnt falling off a cliff.

I review fund performance quarterly and I make adjustments. Theres no reason why someone with a family or a life cant spend 12 hours a year (three hours a quarter) adjusting their portfolio of managed money.

You pay higher fees for those portfolios. Once again, you forgotten about RISK. You never mention what kind of risk you are taking.

What is the standard deviation of your portfolios?! What is the beta?

YOU NEVER ADDRESS THAT. Keep saying that you "beat" S&P doesn't help. You obviously doesn't account for risk.

"Yea I have a blend of active manage portfolios that beat S&P last 3 years"- risk adjusted? fee adjusted? How about 10-20 years RISK and FEE adjusted?

Even Warren Buffet and Peter Lynch suggest that for most average joes, index funds is the way to go.

I'm not saying you shouldn't try find managers that can actively manage and beat the market. But the odd is 3-5%. So why bother spending time to find that 3-5% of managers when you can settle for market return?

Some fund managers are worth their weight. Remember ... you need a popular well established manager in a fund that is probably going to end up as a closed end fund.

I go after indivudal stocks. I wish I could brag about gains ... but I can't (yet). But I don't care.

Lessons from 7 years of investing
1) trading can be profitable. You make bigger gain in good times, but bigger losses in bad. And the while commissions/taxes thing is an issue.
2) buy/hold: I've held some very good companies for a long time and they've done nothing. To the point of aggravation. One MRK can kill you (like it did me to a small extent)
3) indexes are a good middle ground. They are the best thing going for hte average investor that does not want to actively follow their portolio.

In my perosnal experience, I am content with buy/hold. I am happy with the ever growing dividends I get (did I post my list of holds in this thread?). The icing on the cake though is the gains I make via options. Stock prices will go up over hte long term. If I make a 3% yield and another 10%+ via options ... I'm doing quite alright ;)

The current market conditions though, I want ot pull my hair out.

EDIT:
http://finance.yahoo.com/q?s=WM,BAC,PFE...,TJX,JNJ,LLTC,CAT,C,FRE,MAS,SLM,GD&d=s

Goi to share price history and look at the dividend historys. The share price has to follow or eventually they would have 100%+ yields. In the mean time, the dividends can be re-invested :)

Even though you are an unsufferable jackass in other threads, I can agree with you in this one.

I'm slowing the trading this month waiting for ATI to report on the 25th. I agree with the higher highs and lower lows, but everyone needs trailing stops.

Buy/Hold was used for MANY years by full service brokers because if they reccomend you to trade a given position a number of times, their comissions (Back in the days when WRAP didnt exist it was not uncommon to spend $100-300 to make a trade) would eat up most, if not all profits and dig into principal. With a $300 comission and 50% going to the indivudual broker's paycheck, you can see how soliciting 2-3 trades a week could be very profitable for he/she in the long run.

This practice is now frowned upon by the SEC and they will investigate accusations of churning by brokers.

Again, I will reiterate. Buy and hold is BUY AND LOSE. It takes intelligence out of the equation and by nature of the namesake believes that you can make money with almost anything and a long enough timespan. Its wrong. Its unholy. It will cost you in the long run.


Everyone should know options. They manage risk so much better than you ever could, and I've got a hedge against my ATI position right now. If it goes up, I make money if it goes down I make less money. Managed risk is the only kind of risk that a lot of people can tolerate.[/quote]

Buy and Lose? That's the stupidest thing I have ever heard. You think Buffet holding Coke for so long makes him some sort of moron?

Trading is great, but no one can time the markets. It's impossible. And that's how traders claim to make money. Traders are nothing more than people that go to the casino and only tell you about it when they win.

Longs don't invest in great stocks, they invest in great companies. They could care less as to what their 2,3,5 year returns are.

EDIT: I should add that some of the welthiest retires I know did buy/hold as value/income investors all their lives. I do what I do becasue it is a PROVEN METHOD. Making 11% annually when inflation is 3-5% will make anyone well to do after 30 years. Depends on how much you invest up front, but it's the bottom line.
 
Sep 29, 2004
18,656
67
91
Originally posted by: Descartes
Originally posted by: PAB
Originally posted by: Descartes
Originally posted by: PAB
Originally posted by: Tango
I see in this thread the most typical mistake non professionals do when dealing with investments. They focus on returns. Nobody in Wall Street focuses on returns.

Say WHAT

Man, you are way off the mark. If you're not focusing on returns, whether its wall street or main street business you''ll be living on the street shortly.

You missed his point, but that's nothing new.

How the hell can he say "nobody in wall street focuses on returns" - thats like saying nobody in General Hardware cares about CPU prices.

It's a difference of perspective, which is why I said you missed his point. You should have read the rest of his post.

Anyway, no on will argue about absolute returns being important. It's just not the only thing to consider.

I read the whole post. It is incorrect to say the least. I think I know what he meant to say, but it is not was said or implied.
 

PAB

Banned
Dec 4, 2002
1,719
1
0
Originally posted by: IHateMyJob2004
Originally posted by: PAB
Originally posted by: IHateMyJob2004
Originally posted by: iversonyin
Originally posted by: PAB

Again, people are ignoring the risk factor here. I buy GOOG for last 3 years, I beat the market hands down right? Of course on an absolute basis, what about standard deviation of your portfolio, what about extra time spending on it?

For most common folks that has work and family, a set of allocated risk adjust portfolio of passive index funds is the way to go.

Again, I disagree. Passive index funds follow and/or trail the market. I've got a good blend of actively managed funds and I have beaten the S&P for the same timespan by a good margin. I have higher highs and I have higher lows. I took a hit in February but it wasnt falling off a cliff.

I review fund performance quarterly and I make adjustments. Theres no reason why someone with a family or a life cant spend 12 hours a year (three hours a quarter) adjusting their portfolio of managed money.

You pay higher fees for those portfolios. Once again, you forgotten about RISK. You never mention what kind of risk you are taking.

What is the standard deviation of your portfolios?! What is the beta?

YOU NEVER ADDRESS THAT. Keep saying that you "beat" S&P doesn't help. You obviously doesn't account for risk.

"Yea I have a blend of active manage portfolios that beat S&P last 3 years"- risk adjusted? fee adjusted? How about 10-20 years RISK and FEE adjusted?

Even Warren Buffet and Peter Lynch suggest that for most average joes, index funds is the way to go.

I'm not saying you shouldn't try find managers that can actively manage and beat the market. But the odd is 3-5%. So why bother spending time to find that 3-5% of managers when you can settle for market return?

Some fund managers are worth their weight. Remember ... you need a popular well established manager in a fund that is probably going to end up as a closed end fund.

I go after indivudal stocks. I wish I could brag about gains ... but I can't (yet). But I don't care.

Lessons from 7 years of investing
1) trading can be profitable. You make bigger gain in good times, but bigger losses in bad. And the while commissions/taxes thing is an issue.
2) buy/hold: I've held some very good companies for a long time and they've done nothing. To the point of aggravation. One MRK can kill you (like it did me to a small extent)
3) indexes are a good middle ground. They are the best thing going for hte average investor that does not want to actively follow their portolio.

In my perosnal experience, I am content with buy/hold. I am happy with the ever growing dividends I get (did I post my list of holds in this thread?). The icing on the cake though is the gains I make via options. Stock prices will go up over hte long term. If I make a 3% yield and another 10%+ via options ... I'm doing quite alright ;)

The current market conditions though, I want ot pull my hair out.

EDIT:
http://finance.yahoo.com/q?s=WM,BAC,PFE...,TJX,JNJ,LLTC,CAT,C,FRE,MAS,SLM,GD&d=s

Goi to share price history and look at the dividend historys. The share price has to follow or eventually they would have 100%+ yields. In the mean time, the dividends can be re-invested :)

Even though you are an unsufferable jackass in other threads, I can agree with you in this one.

I'm slowing the trading this month waiting for ATI to report on the 25th. I agree with the higher highs and lower lows, but everyone needs trailing stops.

Buy/Hold was used for MANY years by full service brokers because if they reccomend you to trade a given position a number of times, their comissions (Back in the days when WRAP didnt exist it was not uncommon to spend $100-300 to make a trade) would eat up most, if not all profits and dig into principal. With a $300 comission and 50% going to the indivudual broker's paycheck, you can see how soliciting 2-3 trades a week could be very profitable for he/she in the long run.

This practice is now frowned upon by the SEC and they will investigate accusations of churning by brokers.

Again, I will reiterate. Buy and hold is BUY AND LOSE. It takes intelligence out of the equation and by nature of the namesake believes that you can make money with almost anything and a long enough timespan. Its wrong. Its unholy. It will cost you in the long run.


Everyone should know options. They manage risk so much better than you ever could, and I've got a hedge against my ATI position right now. If it goes up, I make money if it goes down I make less money. Managed risk is the only kind of risk that a lot of people can tolerate.

Buy and Lose? That's the stupidest thing I have ever heard. You think Buffet holding Coke for so long makes him some sort of moron?

Trading is great, but no one can time the markets. It's impossible. And that's how traders claim to make money. Traders are nothing more than people that go to the casino and only tell you about it when they win.

Longs don't invest in great stocks, they invest in great companies. They could care less as to what their 2,3,5 year returns are.

EDIT: I should add that some of the welthiest retires I know did buy/hold as value/income investors all their lives. I do what I do becasue it is a PROVEN METHOD. Making 11% annually when inflation is 3-5% will make anyone well to do after 30 years. Depends on how much you invest up front, but it's the bottom line.[/quote]

Actually, I think buffett holding KO this long was moronic. Back a while ago, there were a lot of people drinking the coke kool aid and thought that KO could do no wrong and was a bargain at 80. Look at them now.

Market timing is what my broker used to do with big accounts, he'd just sit around and buy anything mentioned on CNBC and make a few points for them and be out by the end of the day. He was one of the largest comissh generators in the southeastern USA because of it and it is very tough.

Oh and to all the naysayers: heres my chart with my terrible knowledge of investing, options and downright reckless attitude towards money!

http://pics.apartment808.com/users/dukeofurl/TradingAcct.JPG

Better than the S&P and DJIA by a factor of three.
 

iversonyin

Diamond Member
Aug 12, 2004
3,303
0
76
PAB read, but PAB doesn't want to understand. Just like most of PAB thread. I should've never stumble here. I think Tango, ihatemyjob2004 and I made our points here. No need to respond anymore of your trading account chart because its bais- didn't factor in the risk- didn't factor in time frame (how about a 10 to 20 years chart?). If you trade well, I congraulate you...theres only a handful of traders survive through both good and bad time.


 

PAB

Banned
Dec 4, 2002
1,719
1
0
Originally posted by: iversonyin
PAB read, but PAB doesn't want to understand. Just like most of PAB thread. I should've never stumble here. I think Tango, ihatemyjob2004 and I made our points here. No need to respond anymore of your trading account chart because its bais- didn't factor in the risk- didn't factor in time frame (how about a 10 to 20 years chart?). If you trade well, I congraulate you...theres only a handful of traders survive through both good and bad time.

Is there any reason you're not using posessives like "PAB's read" instead of "PAB read" and "never stumbled here" instead of "never stumble here"?

I've only been trading in march. The rest of the gains are from the blend of 12 mutual funds with the average beta of 1.2X.

Higher highs, lower lows = Lower risk in my book.
 

iversonyin

Diamond Member
Aug 12, 2004
3,303
0
76
Originally posted by: PAB
Originally posted by: iversonyin
PAB read, but PAB doesn't want to understand. Just like most of PAB thread. I should've never stumble here. I think Tango, ihatemyjob2004 and I made our points here. No need to respond anymore of your trading account chart because its bais- didn't factor in the risk- didn't factor in time frame (how about a 10 to 20 years chart?). If you trade well, I congraulate you...theres only a handful of traders survive through both good and bad time.

Is there any reason you're not using posessives like "PAB's read" instead of "PAB read" and "never stumbled here" instead of "never stumble here"?

I've only been trading in march. The rest of the gains are from the blend of 12 mutual funds with the average beta of 1.2X.

Higher highs, lower lows = Lower risk in my book.

Understand that I never attack your methodology. You derived extra return from extra risk (which you don't seem to understand no matter how many people explain it to you). And you attack BUY AND HOLD because of its inefficient and ineffectiveness, while you never really prove that it is.

Again, your portfolio of funds has a beta of 1.3 if you allocate equally among all of them. Either way, your source of return came from that extra risk.

You should read more about investing outside those who were written by JC. JC books are entertaining and get you excited about investing but he never shows any research that prove his methodology.
 
Sep 29, 2004
18,656
67
91
Originally posted by: PAB
Originally posted by: IHateMyJob2004
Originally posted by: PAB
Originally posted by: IHateMyJob2004
Originally posted by: iversonyin
Originally posted by: PAB

Again, people are ignoring the risk factor here. I buy GOOG for last 3 years, I beat the market hands down right? Of course on an absolute basis, what about standard deviation of your portfolio, what about extra time spending on it?

For most common folks that has work and family, a set of allocated risk adjust portfolio of passive index funds is the way to go.

Again, I disagree. Passive index funds follow and/or trail the market. I've got a good blend of actively managed funds and I have beaten the S&P for the same timespan by a good margin. I have higher highs and I have higher lows. I took a hit in February but it wasnt falling off a cliff.

I review fund performance quarterly and I make adjustments. Theres no reason why someone with a family or a life cant spend 12 hours a year (three hours a quarter) adjusting their portfolio of managed money.

You pay higher fees for those portfolios. Once again, you forgotten about RISK. You never mention what kind of risk you are taking.

What is the standard deviation of your portfolios?! What is the beta?

YOU NEVER ADDRESS THAT. Keep saying that you "beat" S&P doesn't help. You obviously doesn't account for risk.

"Yea I have a blend of active manage portfolios that beat S&P last 3 years"- risk adjusted? fee adjusted? How about 10-20 years RISK and FEE adjusted?

Even Warren Buffet and Peter Lynch suggest that for most average joes, index funds is the way to go.

I'm not saying you shouldn't try find managers that can actively manage and beat the market. But the odd is 3-5%. So why bother spending time to find that 3-5% of managers when you can settle for market return?

Some fund managers are worth their weight. Remember ... you need a popular well established manager in a fund that is probably going to end up as a closed end fund.

I go after indivudal stocks. I wish I could brag about gains ... but I can't (yet). But I don't care.

Lessons from 7 years of investing
1) trading can be profitable. You make bigger gain in good times, but bigger losses in bad. And the while commissions/taxes thing is an issue.
2) buy/hold: I've held some very good companies for a long time and they've done nothing. To the point of aggravation. One MRK can kill you (like it did me to a small extent)
3) indexes are a good middle ground. They are the best thing going for hte average investor that does not want to actively follow their portolio.

In my perosnal experience, I am content with buy/hold. I am happy with the ever growing dividends I get (did I post my list of holds in this thread?). The icing on the cake though is the gains I make via options. Stock prices will go up over hte long term. If I make a 3% yield and another 10%+ via options ... I'm doing quite alright ;)

The current market conditions though, I want ot pull my hair out.

EDIT:
http://finance.yahoo.com/q?s=WM,BAC,PFE...,TJX,JNJ,LLTC,CAT,C,FRE,MAS,SLM,GD&d=s

Goi to share price history and look at the dividend historys. The share price has to follow or eventually they would have 100%+ yields. In the mean time, the dividends can be re-invested :)

Even though you are an unsufferable jackass in other threads, I can agree with you in this one.

I'm slowing the trading this month waiting for ATI to report on the 25th. I agree with the higher highs and lower lows, but everyone needs trailing stops.

Buy/Hold was used for MANY years by full service brokers because if they reccomend you to trade a given position a number of times, their comissions (Back in the days when WRAP didnt exist it was not uncommon to spend $100-300 to make a trade) would eat up most, if not all profits and dig into principal. With a $300 comission and 50% going to the indivudual broker's paycheck, you can see how soliciting 2-3 trades a week could be very profitable for he/she in the long run.

This practice is now frowned upon by the SEC and they will investigate accusations of churning by brokers.

Again, I will reiterate. Buy and hold is BUY AND LOSE. It takes intelligence out of the equation and by nature of the namesake believes that you can make money with almost anything and a long enough timespan. Its wrong. Its unholy. It will cost you in the long run.


Everyone should know options. They manage risk so much better than you ever could, and I've got a hedge against my ATI position right now. If it goes up, I make money if it goes down I make less money. Managed risk is the only kind of risk that a lot of people can tolerate.

Buy and Lose? That's the stupidest thing I have ever heard. You think Buffet holding Coke for so long makes him some sort of moron?

Trading is great, but no one can time the markets. It's impossible. And that's how traders claim to make money. Traders are nothing more than people that go to the casino and only tell you about it when they win.

Longs don't invest in great stocks, they invest in great companies. They could care less as to what their 2,3,5 year returns are.

EDIT: I should add that some of the welthiest retires I know did buy/hold as value/income investors all their lives. I do what I do becasue it is a PROVEN METHOD. Making 11% annually when inflation is 3-5% will make anyone well to do after 30 years. Depends on how much you invest up front, but it's the bottom line.

Actually, I think buffett holding KO this long was moronic. Back a while ago, there were a lot of people drinking the coke kool aid and thought that KO could do no wrong and was a bargain at 80. Look at them now.

Market timing is what my broker used to do with big accounts, he'd just sit around and buy anything mentioned on CNBC and make a few points for them and be out by the end of the day. He was one of the largest comissh generators in the southeastern USA because of it and it is very tough.

Oh and to all the naysayers: heres my chart with my terrible knowledge of investing, options and downright reckless attitude towards money!

http://pics.apartment808.com/users/dukeofurl/TradingAcct.JPG

Better than the S&P and DJIA by a factor of three.[/quote]

Your comments on Buffet pretty much solidify the fact that you nothing about the man, nor why he has held it.

As for your link ... you're implying that everyone can make 60% annually? You are implying that you will? Good luck with that. If you keep the pace you think your going to keep, you'll be a billionaire. One problem, there is no such thing as a famous trader for a reason.

Oh, to add..... have you factored in taxes and commissions? Are you factoring in the maximum you are allowed in losses each year (regarding taxes)? What is going to happen when you amass $500K in gains and $200K in losses one year down the road when $197K of those losses are not deductable? It's a losing game ...

EDIT:
As for myself, I have a plan to make 20% annaully after taxes via investments. Over the long term, I am confident I will. All through value/income investing and by applying concepts rooted in valuation and applyign them to options The only thing holding me back thus far is the occasional stock that takes a crap llike MRK and CAG. Awesome companies that hit bad times. I'm not here to prove it. I'm not young and naive anymore.

EDIT 2:
I should add ... I hope you do make big gains. More power to you. It's just in the long term, you won't beat buy/hold. As I think I mentioned, the only "wealthy" investors I know that are retired today are thsoe that became so by being buy/hold investors that are value/income oriented. They love the preferreds. They make 10%+ yields each year. That's jsut yield, not capital gains. All in a risk adjusted manner.
 

KingGheedora

Diamond Member
Jun 24, 2006
3,248
1
81
Originally posted by: sm8000
Originally posted by: Lothar
Originally posted by: sm8000
I dumped all my SUNW in favor of SUN(oco) ;) And ATI was the first thing I bought.

Why don't you join our game here?
http://forums.anandtech.com/messageview.aspx?catid=38&threadid=2011914

And you too PAB...

I'm already playing a game at CNBC.com, but I'll take a look at this and if I can make the time...

Originally posted by: PAB
Originally posted by: sm8000
I dumped all my SUNW in favor of SUN(oco) ;) And ATI was the first thing I bought.

I'm just joshing you, I noticed you were still holding SUNW a few posts up.

So, mind telling ATOT how much fake money I made you and on what positions?

I honestly haven't been paying close enough attention, but here's an updated snapshot of my portfolio, and this is by far the best shape it's ever been in:

http://pics.bbzzdd.com/users/sm8000/portfolio.jpg

One MEEEELION DOLLARS!! Where did you get all that money?
 

PAB

Banned
Dec 4, 2002
1,719
1
0
Originally posted by: IHateMyJob2004
Originally posted by: PAB
Originally posted by: IHateMyJob2004
Originally posted by: PAB
Originally posted by: IHateMyJob2004
Originally posted by: iversonyin
Originally posted by: PAB

Again, people are ignoring the risk factor here. I buy GOOG for last 3 years, I beat the market hands down right? Of course on an absolute basis, what about standard deviation of your portfolio, what about extra time spending on it?

For most common folks that has work and family, a set of allocated risk adjust portfolio of passive index funds is the way to go.

Again, I disagree. Passive index funds follow and/or trail the market. I've got a good blend of actively managed funds and I have beaten the S&P for the same timespan by a good margin. I have higher highs and I have higher lows. I took a hit in February but it wasnt falling off a cliff.

I review fund performance quarterly and I make adjustments. Theres no reason why someone with a family or a life cant spend 12 hours a year (three hours a quarter) adjusting their portfolio of managed money.

You pay higher fees for those portfolios. Once again, you forgotten about RISK. You never mention what kind of risk you are taking.

What is the standard deviation of your portfolios?! What is the beta?

YOU NEVER ADDRESS THAT. Keep saying that you "beat" S&P doesn't help. You obviously doesn't account for risk.

"Yea I have a blend of active manage portfolios that beat S&P last 3 years"- risk adjusted? fee adjusted? How about 10-20 years RISK and FEE adjusted?

Even Warren Buffet and Peter Lynch suggest that for most average joes, index funds is the way to go.

I'm not saying you shouldn't try find managers that can actively manage and beat the market. But the odd is 3-5%. So why bother spending time to find that 3-5% of managers when you can settle for market return?

Some fund managers are worth their weight. Remember ... you need a popular well established manager in a fund that is probably going to end up as a closed end fund.

I go after indivudal stocks. I wish I could brag about gains ... but I can't (yet). But I don't care.

Lessons from 7 years of investing
1) trading can be profitable. You make bigger gain in good times, but bigger losses in bad. And the while commissions/taxes thing is an issue.
2) buy/hold: I've held some very good companies for a long time and they've done nothing. To the point of aggravation. One MRK can kill you (like it did me to a small extent)
3) indexes are a good middle ground. They are the best thing going for hte average investor that does not want to actively follow their portolio.

In my perosnal experience, I am content with buy/hold. I am happy with the ever growing dividends I get (did I post my list of holds in this thread?). The icing on the cake though is the gains I make via options. Stock prices will go up over hte long term. If I make a 3% yield and another 10%+ via options ... I'm doing quite alright ;)

The current market conditions though, I want ot pull my hair out.

EDIT:
http://finance.yahoo.com/q?s=WM,BAC,PFE...,TJX,JNJ,LLTC,CAT,C,FRE,MAS,SLM,GD&d=s

Goi to share price history and look at the dividend historys. The share price has to follow or eventually they would have 100%+ yields. In the mean time, the dividends can be re-invested :)

Even though you are an unsufferable jackass in other threads, I can agree with you in this one.

I'm slowing the trading this month waiting for ATI to report on the 25th. I agree with the higher highs and lower lows, but everyone needs trailing stops.

Buy/Hold was used for MANY years by full service brokers because if they reccomend you to trade a given position a number of times, their comissions (Back in the days when WRAP didnt exist it was not uncommon to spend $100-300 to make a trade) would eat up most, if not all profits and dig into principal. With a $300 comission and 50% going to the indivudual broker's paycheck, you can see how soliciting 2-3 trades a week could be very profitable for he/she in the long run.

This practice is now frowned upon by the SEC and they will investigate accusations of churning by brokers.

Again, I will reiterate. Buy and hold is BUY AND LOSE. It takes intelligence out of the equation and by nature of the namesake believes that you can make money with almost anything and a long enough timespan. Its wrong. Its unholy. It will cost you in the long run.


Everyone should know options. They manage risk so much better than you ever could, and I've got a hedge against my ATI position right now. If it goes up, I make money if it goes down I make less money. Managed risk is the only kind of risk that a lot of people can tolerate.

Buy and Lose? That's the stupidest thing I have ever heard. You think Buffet holding Coke for so long makes him some sort of moron?

Trading is great, but no one can time the markets. It's impossible. And that's how traders claim to make money. Traders are nothing more than people that go to the casino and only tell you about it when they win.

Longs don't invest in great stocks, they invest in great companies. They could care less as to what their 2,3,5 year returns are.

EDIT: I should add that some of the welthiest retires I know did buy/hold as value/income investors all their lives. I do what I do becasue it is a PROVEN METHOD. Making 11% annually when inflation is 3-5% will make anyone well to do after 30 years. Depends on how much you invest up front, but it's the bottom line.

Actually, I think buffett holding KO this long was moronic. Back a while ago, there were a lot of people drinking the coke kool aid and thought that KO could do no wrong and was a bargain at 80. Look at them now.

Market timing is what my broker used to do with big accounts, he'd just sit around and buy anything mentioned on CNBC and make a few points for them and be out by the end of the day. He was one of the largest comissh generators in the southeastern USA because of it and it is very tough.

Oh and to all the naysayers: heres my chart with my terrible knowledge of investing, options and downright reckless attitude towards money!

http://pics.apartment808.com/users/dukeofurl/TradingAcct.JPG

Better than the S&P and DJIA by a factor of three.

Your comments on Buffet pretty much solidify the fact that you nothing about the man, nor why he has held it.

As for your link ... you're implying that everyone can make 60% annually? You are implying that you will? Good luck with that. If you keep the pace you think your going to keep, you'll be a billionaire. One problem, there is no such thing as a famous trader for a reason.

Oh, to add..... have you factored in taxes and commissions? Are you factoring in the maximum you are allowed in losses each year (regarding taxes)? What is going to happen when you amass $500K in gains and $200K in losses one year down the road when $197K of those losses are not deductable? It's a losing game ...

EDIT:
As for myself, I have a plan to make 20% annaully after taxes via investments. Over the long term, I am confident I will. All through value/income investing and by applying concepts rooted in valuation and applyign them to options The only thing holding me back thus far is the occasional stock that takes a crap llike MRK and CAG. Awesome companies that hit bad times. I'm not here to prove it. I'm not young and naive anymore.

EDIT 2:
I should add ... I hope you do make big gains. More power to you. It's just in the long term, you won't beat buy/hold. As I think I mentioned, the only "wealthy" investors I know that are retired today are thsoe that became so by being buy/hold investors that are value/income oriented. They love the preferreds. They make 10%+ yields each year. That's jsut yield, not capital gains. All in a risk adjusted manner.[/quote]

No, I'm saying that outuperforming the greater market like the DJIA and S&P should be the standard rather than the exeption. I dont plan on making 60%, but if I do hey awesome! I plan on outperforming the indicies by 4-5%, which I'm doing handily with managed money. The extra juice I make on the side by running buy writes and speculative plays is subidizing the commerical real estate investment fund.

Taxes: 15% on the profit
Comissh: I'm in wrap so I pay roughly $5000 a year, but I get my money's worth.

BTW, ATI is holding 110.

I just might have to get bumper stickers.
 

PAB

Banned
Dec 4, 2002
1,719
1
0
Originally posted by: PAB
Originally posted by: crownjules
Originally posted by: MmmSkyscraper
In other news, no-one gives a sh1t.

In other news, you're a complete an utter a$$. Way to sh1t up an otherwise decent thread discussing something people do in fact take interest in talking about.

To get back on topic, PAB where do you find the stocks you invest in or watch? Ones like Boeing are self-explanatory, they're larger companies that everyone knows about. Do you invest money into any small cap stocks and if so, how do you learn about them? Cramer? A publication like IBD?

I, myself, am trying to break into currency trading and eventually futures. The advantage of currency trading is that it's so cheap - a mini-lot requires a $50 payment that you get back plus/minus any gains/losses, which are ~$1 a point. So you can make some mistakes and not get hit hard in the wallet while learning. (my stop-losses are set to 30 points, so I lose $30 at most when wrong).

I read - A LOT. Seriously. I've also got my eyes and ears wide open. Just as an example, did you know CAT is having problems with getting ACERT to meet new EPA regulations regarding on highway diesel engine emissions? Did you know PCAR has/will post an INCREDIBLE order surge for trucks because everyone wants a truck that was made before said EPA regs went in effect on Jan 1? The EGR can reduce NOX and other VOC's from exhaust but they just cant manage particulate emissions. Cue: diesel particulate filters. GLW and MMM make them, and last time I checked we've got a lot of class 8 trucks on the road. Every one will need one and every one will need replacement at regular intervals. Oh, and light duty diesels will need them too. I'm glad I'm long GLW. Too bad LCD TV's arent doing that well anymore, but I do like GLW's LCD business because what's going to need lots of LCD glass in the future? Oh right...... glass cockpits for the new stuff Boeing is rolling out.

Amazing what you pick up in a thread on a trucking forum. :p

I dont like small caps because simply put - I'm not going to run around what can amount to pumping and dumping. I own several mutual funds that do specialize in small cap stocks, and thats what they're good at doing. I'll leave them be and let them do what they do best. I read a lot of equity research from my broker, who is full service. I generate a lot of commish for him and I do get my money's worth. I talk to my broker more than I talk to my dad. Cramer is a great source of entertainment as well as a great idea generator. Some of his picks have just reinforced my equity research and my position on things like ATI, BA, and NOV - all of which I own. ATI was a solicited buy from my broker's research department. BA was one of my picks just being an avation nerd listening to the feed from JFK approach :p and NOV was an equity research reccomendation. I used to read IBD but I dont have the desire to sit in one place and read a newspaper for an hour outside of the D train going from Flatbush to W4.

I'm not into currencies and I dont plan on being, but I will say this. As a rule of thumb being in the business of buying and selling things....

I make 5 trades: three go well, one goes sideways, one goes down. You have to use stops to manage downside. Manage downside, the upside handles itself. If you make a lot of trades, you will incur losses - the big trade that you should be making once in a while is the one that's going to carry you.

My .02.

JC just pumped the hell out of CMI since he was WRONG on OHE sales. Apparently, according to JC CMI delivers!

I'm still cautious on the smokestacks like CMI and CAT. The technicals on CAT look good right now, and one of my engineers at PCAR says theres some wicked huge air freight bills from Peoria to Denton every day. KW Mexico is running like crazy since they dont have EPA regs to follow. Hmmm - time to revisit PCAR?

This could be turning around, but JC does raise a good call. CMI does power generation as does CAT, except their exposure to OHE sales isnt as large as CAT and they also have the light duty market cornered with Dodge. I've seen this in the car business, the Dodges do better money because of the CMI association. NAV manufactures all engines for F and their 3/4 ton and ups and their last design was terribly flawed that anyone who knows trucks will tell you to run away from the 6.0 PSD.

CMI is on the short list with some more homework.
 

imported_Tango

Golden Member
Mar 8, 2005
1,623
0
0
Originally posted by: PAB
Originally posted by: IHateMyJob2004
Originally posted by: PAB
Originally posted by: IHateMyJob2004
Originally posted by: PAB
Originally posted by: IHateMyJob2004
Originally posted by: iversonyin
Originally posted by: PAB

Again, people are ignoring the risk factor here. I buy GOOG for last 3 years, I beat the market hands down right? Of course on an absolute basis, what about standard deviation of your portfolio, what about extra time spending on it?

For most common folks that has work and family, a set of allocated risk adjust portfolio of passive index funds is the way to go.

Again, I disagree. Passive index funds follow and/or trail the market. I've got a good blend of actively managed funds and I have beaten the S&P for the same timespan by a good margin. I have higher highs and I have higher lows. I took a hit in February but it wasnt falling off a cliff.

I review fund performance quarterly and I make adjustments. Theres no reason why someone with a family or a life cant spend 12 hours a year (three hours a quarter) adjusting their portfolio of managed money.

You pay higher fees for those portfolios. Once again, you forgotten about RISK. You never mention what kind of risk you are taking.

What is the standard deviation of your portfolios?! What is the beta?

YOU NEVER ADDRESS THAT. Keep saying that you "beat" S&P doesn't help. You obviously doesn't account for risk.

"Yea I have a blend of active manage portfolios that beat S&P last 3 years"- risk adjusted? fee adjusted? How about 10-20 years RISK and FEE adjusted?

Even Warren Buffet and Peter Lynch suggest that for most average joes, index funds is the way to go.

I'm not saying you shouldn't try find managers that can actively manage and beat the market. But the odd is 3-5%. So why bother spending time to find that 3-5% of managers when you can settle for market return?

Some fund managers are worth their weight. Remember ... you need a popular well established manager in a fund that is probably going to end up as a closed end fund.

I go after indivudal stocks. I wish I could brag about gains ... but I can't (yet). But I don't care.

Lessons from 7 years of investing
1) trading can be profitable. You make bigger gain in good times, but bigger losses in bad. And the while commissions/taxes thing is an issue.
2) buy/hold: I've held some very good companies for a long time and they've done nothing. To the point of aggravation. One MRK can kill you (like it did me to a small extent)
3) indexes are a good middle ground. They are the best thing going for hte average investor that does not want to actively follow their portolio.

In my perosnal experience, I am content with buy/hold. I am happy with the ever growing dividends I get (did I post my list of holds in this thread?). The icing on the cake though is the gains I make via options. Stock prices will go up over hte long term. If I make a 3% yield and another 10%+ via options ... I'm doing quite alright ;)

The current market conditions though, I want ot pull my hair out.

EDIT:
http://finance.yahoo.com/q?s=WM,BAC,PFE...,TJX,JNJ,LLTC,CAT,C,FRE,MAS,SLM,GD&d=s

Goi to share price history and look at the dividend historys. The share price has to follow or eventually they would have 100%+ yields. In the mean time, the dividends can be re-invested :)

Even though you are an unsufferable jackass in other threads, I can agree with you in this one.

I'm slowing the trading this month waiting for ATI to report on the 25th. I agree with the higher highs and lower lows, but everyone needs trailing stops.

Buy/Hold was used for MANY years by full service brokers because if they reccomend you to trade a given position a number of times, their comissions (Back in the days when WRAP didnt exist it was not uncommon to spend $100-300 to make a trade) would eat up most, if not all profits and dig into principal. With a $300 comission and 50% going to the indivudual broker's paycheck, you can see how soliciting 2-3 trades a week could be very profitable for he/she in the long run.

This practice is now frowned upon by the SEC and they will investigate accusations of churning by brokers.

Again, I will reiterate. Buy and hold is BUY AND LOSE. It takes intelligence out of the equation and by nature of the namesake believes that you can make money with almost anything and a long enough timespan. Its wrong. Its unholy. It will cost you in the long run.


Everyone should know options. They manage risk so much better than you ever could, and I've got a hedge against my ATI position right now. If it goes up, I make money if it goes down I make less money. Managed risk is the only kind of risk that a lot of people can tolerate.

Buy and Lose? That's the stupidest thing I have ever heard. You think Buffet holding Coke for so long makes him some sort of moron?

Trading is great, but no one can time the markets. It's impossible. And that's how traders claim to make money. Traders are nothing more than people that go to the casino and only tell you about it when they win.

Longs don't invest in great stocks, they invest in great companies. They could care less as to what their 2,3,5 year returns are.

EDIT: I should add that some of the welthiest retires I know did buy/hold as value/income investors all their lives. I do what I do becasue it is a PROVEN METHOD. Making 11% annually when inflation is 3-5% will make anyone well to do after 30 years. Depends on how much you invest up front, but it's the bottom line.

Actually, I think buffett holding KO this long was moronic. Back a while ago, there were a lot of people drinking the coke kool aid and thought that KO could do no wrong and was a bargain at 80. Look at them now.

Market timing is what my broker used to do with big accounts, he'd just sit around and buy anything mentioned on CNBC and make a few points for them and be out by the end of the day. He was one of the largest comissh generators in the southeastern USA because of it and it is very tough.

Oh and to all the naysayers: heres my chart with my terrible knowledge of investing, options and downright reckless attitude towards money!

http://pics.apartment808.com/users/dukeofurl/TradingAcct.JPG

Better than the S&P and DJIA by a factor of three.

Your comments on Buffet pretty much solidify the fact that you nothing about the man, nor why he has held it.

As for your link ... you're implying that everyone can make 60% annually? You are implying that you will? Good luck with that. If you keep the pace you think your going to keep, you'll be a billionaire. One problem, there is no such thing as a famous trader for a reason.

Oh, to add..... have you factored in taxes and commissions? Are you factoring in the maximum you are allowed in losses each year (regarding taxes)? What is going to happen when you amass $500K in gains and $200K in losses one year down the road when $197K of those losses are not deductable? It's a losing game ...

EDIT:
As for myself, I have a plan to make 20% annaully after taxes via investments. Over the long term, I am confident I will. All through value/income investing and by applying concepts rooted in valuation and applyign them to options The only thing holding me back thus far is the occasional stock that takes a crap llike MRK and CAG. Awesome companies that hit bad times. I'm not here to prove it. I'm not young and naive anymore.

EDIT 2:
I should add ... I hope you do make big gains. More power to you. It's just in the long term, you won't beat buy/hold. As I think I mentioned, the only "wealthy" investors I know that are retired today are thsoe that became so by being buy/hold investors that are value/income oriented. They love the preferreds. They make 10%+ yields each year. That's jsut yield, not capital gains. All in a risk adjusted manner.

No, I'm saying that outuperforming the greater market like the DJIA and S&P should be the standard rather than the exeption. I dont plan on making 60%, but if I do hey awesome! I plan on outperforming the indicies by 4-5%, which I'm doing handily with managed money. The extra juice I make on the side by running buy writes and speculative plays is subidizing the commerical real estate investment fund.

Taxes: 15% on the profit
Comissh: I'm in wrap so I pay roughly $5000 a year, but I get my money's worth.

BTW, ATI is holding 110.

I just might have to get bumper stickers.[/quote]

How old are you? From the quite nervous reaction you have to comments and advices other people give to you I guess you are pretty young. That's a good thing, and it reminds me of when I was starting having interest in the financial markets as a teen and later in college.
Or, you might not be that young and just have a very limited threshold to comments and critiques from other people.

In the end, it's your money, so it's your business. But remember that the day you fall in love too much with your ideas and start thinking you will always get it right, will be a very bad day for your investments. Always question if emotions are leading your trades more than culture, models and knowledge.

Now my 2cents, if you want them. If not, feel free to ignore me.

You have a lot of mutual funds. I don't know what you are holding, but from a professional perspective it is very hard to justify it. You can have a portfolio with Beta=1 when regressed on the S&P 500 holding just three stocks and a Beta=1 on the MSCI World with 5 funds.

Of course there is nothing wrong about holding a lot of funds, but be sure your broker isn't over diversifying you to capture commissions. They always do.

Get exposure to foreign markets, especially emerging markets. Apart from the tremendous returns they had in the last few years they have negative correlation to US markets. In the last 10 years you could have increased returns with decreased risk. It's basically a win-win. Look for uncorrelated assets and inversely correlated assets. If everything you have is going up at the same time, it's not good news. It looks like it is. But it really is not. It only means everything you have is exposed to the same systemic risks.

Try to understand what everybody has been trying to explain to you in this thread, before getting angry and calling names. Returns are not the key element for successful investing. Returns/Risk ratios are. If you have a Beta of 1.3 of course you are outperforming the index. That's what the beta is actually indicating. In fact, you should have outperformed 1.3 times, or you are actually losing in risk adjusted basis. If you accept more risk you must be rewarded accordingly.

Stop focusing on returns. You'll do yourself a favor. Stop thinking like a trader and start thinking like a portfolio manager.

You know, every year two assholes wake up: one of them goes long on a market with a beta of 10, the other goes short on the same market with a beta of 10.
Every year one of the two assholes will make a lot of money, the other will end living in the street. The lucky asshole usually then go out and starts his own hedge fund claiming 200% returns in the last year... and usually in 3-5 years he goes bankrupt. You can easily understand why there is nothing like a famous trader right? And why instead absolute returns managers can ask 20% commission on profits and 2% fees and people line up at his door...

I've seen people popping up like mushrooms every bull market, claiming amazing returns. They never last. Most of the gurus of the late-90s mow make a living selling newsletters on the internet. Just like it happened with supposed-to-be real estate gurus and it will happen to commodities gurus.

I had tremendous returns on my personal portfolio in the last few years. I had 85% exposure to Emerging Markets so you can imagine. Does this make me a great portfolio manager? No! My beta was huge, and the markets I picked were the most successful in the world, so obviously I did great. But I achieved it by accepting huge risk and very high beta, not by creating Alfa. And creating Alfa is what makes you a great manager. I just happened to be right in my assumptions on macro trends, and believed in it enough to accept very high risks. This is not portfolio management. This is being right on a bet. The reason why I did it is because it's overall only a fractional part of my wealth management model. In absolute terms, my wealth is market neutral.

Again, I never ever heard anybody in wall street pointing out that somebody is a great portfolio manager based on his returns. Never. Never heard a Fund of Funds picking its managers based on the returns their funds had. Never.

What they ask is: how much is his Alfa? Of much is their tracking error? What's his sharpe ratio? How does their model react to a 30% shock in energy prices? How much are their portfolio sensitive to credit spreads? And most important of all: how would his fund change the statistics of my asset allocation.

That's why 0-beta managers command such huge commissions. They generate Alfa with no correlation to the markets. That is a real risk adjusted gain, basically saying you are extracting value with no market risk. So much harder than generating a windfall the particular year when you were right.

You don't have to trust me. Get a book or two on portfolio management and study them. You'll do yourself a huge favor. Never stop learning and never trust anybody whose main point is returns before analyzing where those returns came from and what his model would have achieved in a different situation. It's full of bullshit out there.

Best of luck
 
Sep 29, 2004
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Originally posted by: PAB
No, I'm saying that outuperforming the greater market like the DJIA and S&P should be the standard rather than the exeption. I dont plan on making 60%, but if I do hey awesome! I plan on outperforming the indicies by 4-5%, which I'm doing handily with managed money. The extra juice I make on the side by running buy writes and speculative plays is subidizing the commerical real estate investment fund.

Taxes: 15% on the profit
Comissh: I'm in wrap so I pay roughly $5000 a year, but I get my money's worth.

BTW, ATI is holding 110.

I just might have to get bumper stickers.

Cleaned up the HUGE TREE that formed :)

OK, I think anyone can beat hte indices by 4-5%. You probably will. Your chart just implied delusions of grandeur. Apparently, you are grounded on Earth ;)

Heck, I'm shooting for 8% (after taxes) .... but time will tell, although I am very confident. I do it via 3 things:
1) options
2) dividends
3) capital appreication

I have targets for all 3 metrics. 1 and 2 have been clicking for 2+ years now. It's that dang capital appreciation that's holding me back. One year MRK hurts me. The next, CAG. This year is smooth sailing so far though. I wonder if WM will be the spoiler (I doubt it, but it's my only risk).

I don't like ATI .... I view it as specualtive more than what I'm after. Good work regardless.

It's amazing what an extra 4% will do over the long term (30 years). Heck, even 1% extra via trading, options or whatever will have huge implications 30 years out.

When I was referring to taxes, I was referring to capital gains taxes and how much can be claimed in losses. If you have $100K in losses one day and $500K in gains, all $500K in gains are taxed and virtually none of those losses are deducatable.
 
Sep 29, 2004
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Originally posted by: TangoYou don't have to trust me. Get a book or two on portfolio management and study them. You'll do yourself a huge favor. Never stop learning and never trust anybody whose main point is returns before analyzing where those returns came from and what his model would have achieved in a different situation. It's full of bullshit out there.

Best of luck

Hrmm ... portfolio managmeent books. I never even thought of reading those. Any recomendations?
 

imported_Tango

Golden Member
Mar 8, 2005
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Originally posted by: IHateMyJob2004
Originally posted by: TangoYou don't have to trust me. Get a book or two on portfolio management and study them. You'll do yourself a huge favor. Never stop learning and never trust anybody whose main point is returns before analyzing where those returns came from and what his model would have achieved in a different situation. It's full of bullshit out there.

Best of luck

Hrmm ... portfolio managmeent books. I never even thought of reading those. Any recomendations?

It really depends on how much academic you want it. Try anything published by the CFA institute. This one is fairly good:

http://www.amazon.com/o/ASIN/0470080140...t=101&pf_rd_p=278240701&pf_rd_i=507846

Or, this is a classical, but a little bit on the expensive side and very technical:

http://www.amazon.com/Investments-Zvi-B...?ie=UTF8&s=books&qid=1175804225&sr=1-1

I also like this one a lot as a bed-table reading, if you are interested in Emerging Markets (and I think everybody should):

http://www.amazon.com/Third-World-Class...?ie=UTF8&s=books&qid=1175804325&sr=1-1