Over confidence, delusion and variance are all a part of it. It's not impossible that a day-trader might find some niche that is under-exploited, but markets are volatile and everything can change at a moment's notice. I was a mid-stakes poker pro back when Party was king, and now work on the trading floor of a bank, and would argue that even today poker is far easier to beat than the stock market. However, the great thing about the stock market is that you can make money just by tracking the index, so it's not necessary to beat anybody. The S&P returned 26% this year. You can be sure that relatively few retail traders matched that.

Investing and trading are completely different games. Fundamental analysis means scrutinizing financial statements and understanding businesses inside and out. Trading has nothing to do with that. Someone could be good at both but there isn't much overlap. It's like comparing an investment banker to someone who works in sales and trading (completely different jobs).

High frequency traders post bid and ask prices with some spread in between. This means they supply liquidity for any trader or investor who wants to buy or sell immediately by placing a market order. Some exchanges (such as the TSX) incentivize liquidity providers by paying them a rebate for supplying this liquidity, which helps to attract these low latency liquidity providers. Conversely, market orders often pay a "liquidity taker" fee in addition to the spread that the liquidity providers earn. These rules are rapidly evolving and differ from one exchange to the next, but HFT activity makes up the majority of messages that are sent to most stock exchanges on a daily basis.

good posts janabis

Janabis, thanks again for all the advice, much appreciated. So as far as value investing goes.. are there retail value investors that do it from home as a full-time job type thing? And what does that usually entail? I envision something like having a portfolio of 10-30 stocks type thing and constantly studying and keeping up w the market to make the odd adjustment, but ultimately not a lot of buying and selling. Is that like a thing that people actually do, and can be successful at?

I guess I'm just trying to figure out what's feasible for me as someone who wants to transition into finance without having to work for anyone, and have enough stuff to do (ie. not just owning a portfolio that I check once a week and sometimes adjust) to constitute it as my next "career". Is that possible?

GL dude. If your still on active on skype, add me, let's catch up .

No, that isn't very realistic. You're describing the job of a portfolio manager, which is usually someone with an advanced education and many years of experience. Much of the upside in a job like that involves being a good salesperson and having a lot of wealthy connections so you have lots of money to manage. If you're trying to do this for yourself, you should just be buying an ETF and spending your time more productively on something else. Most people in finance who work for themselves started their careers working for (and learning from) someone else.

Alright thanks again. So just to confirm, all the heaps of resources available (books, websites, teaching aids, etc..) for someone to learn about investing are essentially useless and even potentially only harmful if they don't have a finance background (nor plan on entering the industry and/or getting a formal finance education) because they're pretty much always better off just buying ETFs? (Not being facetious btw, just trying to get a clearer picture.. it's a confusing scene for a newb.)

There's basically no possible way for someone w/o a formal finance education or background to carve out a self-employed career that's better than using ETFs and if it's happened, it was almost certainly variance. Is that pretty much the reality of things?

Basically yes.

i'll strengthen the claim and assert that no one -- with or without formal finance background or fancy education -- beats indexing in the long run.

Okay so say person A has an ETF performing at X%. Am I correct to think that making a random adjustment to the fund will on average produce the same result? (Ie. Random Walk Down Wall Street type thing..) So effectively, you're saying that any adjustments someone can make to "improve" an ETF will not yield a true premium large enough to make up for the costs/fees of the adjustments?

Let's just make this all clear. Everyone talks about the doom of "no real person can ever beat the averages..." That's not saying that going out on your own will produce losses and you're going to lose all of your money.

It just means that if the markets return 15%, you have to return 16%+ to "beat the average." If you day trade, value invest, etc. and get 10%, you're still profiting and making money. You're just not making as much as if you just held the markets, etf, index, whatever it is.

Also, if the market goes down 15%, but your portfolio only goes down 10%, you're beating the average in that regard.

If you're interested in day trading or doing whatever, give it a shot. Just understand your expectations. I've tried almost everything, and I've made almost every mistake in the book. I enjoy researching companies and trying to find one that is undervalued rather than just holding mutual funds (which I do have a portfolio of mutual funds). But to say I'll never beat the average doesn't mean I can't try to manage my own money and have some fun while doing it.

Even Warren Buffett said that it would be hard to beat the averages in a bull market, but he expected to beat the averages in a bear market. In the end, he beat the averages in all ways, but he knew what his expectations were.

i think the short answer is "yes", but your mental model seems a little weird so i'm not entirely sure what you're proposing.

an etf is effectively equivalent to a mutual fund, which is just a bucket that owns other things, such as stocks and bonds.

an index fund (either an index etf or an index mutual fund) tracks some specific index -- a list of things with some common property. for example, the S&P 500 index is a list of the "top" 500 american companies with publicly-traded stock.[1]. S&P 500 Index Funds seek to own stock in all of these companies (probably in proportion to each company's market weight).

i believe in broad diversification so i own a Total US Stock Market index that holds stock in ~6000(!) american companies.

clearly at this scale, you're not going to beat the index by individually owning and managing 5999 of the 6000 available stocks -- the effect of any individual stock is negligible, and transaction fees will eat you alive.

so you can go the other way, and try to just pick a few "winners". but now you've lost your diversification advantage and risk has gone through the roof.

hence, low-cost index funds ftw.

[1] ...or something. The details aren't important for this discussion, but there is way more detail than you care to read at http://en.wikipedia.org/wiki/S&P_500.

i understand the point you're making but equities can and have gone to zero. if your portfolio is invested in only a few stocks, your whole portfolio can go to zero. investing tends to involve significant chunks of one's net worth, so make sure you understand the risks before you play.

(i'm not posting this to pick a fight or be debbie downer, but since my audience is beginners[1] i felt i had to say something )

this is what i wanted to talk about

if you're thinking of this as a fun hobby and you have disposable cash to throw at it, then by all means go for it. as someone who has spent countless hours playing poker and RPGs, i understand the thrill of fiddling with numbers in spreadsheets. even srs bsns posters at Bogleheads sometimes buy random stocks with a dedicated "fun money" portion of their portfolio (usually 5-10%).

i'd say it's kind of like being a breakeven poker player: you win some, you lose some, you're bleeding a little to the rake in the long run, but it's cheap entertainment and you might get lucky and get a piece of a BBJ one day.

i would say get your financial house in order first (no bad debt, emergency fund, maxing tax-advantaged space), then see what else there is to do.


[1] who else would need to read my ramblings?

Hey guys, not sure if this is the place the post, but thought it was a better place to start than just firing up a thread.

Complete noob to the stock market, although as I search to broaden my $$$ horizon to more than just poker I assumed it was a decent place to start.

Pretty much looking for the best books/websites/courses to get started.

Any help appreciated,

Cheers

purrretrog,

read the previous 10 posts.

Great stuff tyler.. thanks for the insightful explanations everyone, very helpful.

BFI - Can you help me price a condo rental? I'm not sure if this is realistic, but can I give you guys a description and a few stats about this place and have someone give me an estimate for monthly rent? It's not my place, so I'm not setting any prices-- just looking for what you guys think it should cost.

-2BR/2BA assessed at $250k last year (1300 square feet)
-location: downtown Madison, WI (zip 53703), a university town that has high pressure on the rental market, although students are usually looking for cheap low-end rentals
-amenities: central A/C, natural gas fireplace insert, a walk-in closet, bay windows (very bright), front-load washer/dryer, new dishwasher, one garage parking spot, partial lake view, nice kitchen, three ceiling fans, nice lighting
-expenses (per month): $492 taxes, condo fees unknown at this point but assume $500 if this varies more than I think

Just curious if anyone can give me a quick ballpark range of rental pricing for this.

Check Craigslist, look at what comparable condos are going for in that neighborhood

I want to start budgeting better. I have a 5 month old daughter and would like to start allocating some funds toward her future(college), i also want to start allocating funds toward expense accounts, savings, and maybe even something like a vacation fund.

Basically i just want to start by setting better financial goals and seeing progress with my money. Currently I have a lot of cash in my checking account that sits there waiting to be spent, which when this is the case happens. If i start throwing some of that towards objectives and forgetting about it, it would be a great thing and naturally pry make me tighten up my "wants" spending.

step one would pry be just being honest and developing a plan and goals, most which can be taken care of on my own. Currently reading Bogleheads guide to investing and there is some stuff linked to what im saying, developing a plan. it is my first book.

Anyone have any other recommendations or material to help me get started in creating a good budget? things that break down numbers and maybe general savings goals, anything about creating a quality budget/savings goals

Check out comparable market rent prices in your area. That is what you will get. No renter cares a whit how much your property costs you per month.

i agree that having a plan is an essential first step, and that once you have one it's way way waaaaaay easier to just send money to the right buckets.

i see bogleheads talk about mr money mustache and dave ramsey, though most only like dave for his level one topics -- getting out of debt, saving aggressively, etc. -- not necessarily for his higher level investment strategies.

I'm new to this forum, so I'm not sure if this the right place to ask. Basically I was wondering if anyone experienced in trading currency has any opinions on the future of the Aussie dollar. I've got $50,000 AUD in my Aussie bank account from when I was playing poker over there, but I have no plans to go back any time soon (i'm American). Should I be getting my money out now? The forecasts aren't looking too good. Thanks for any advice!

cardsharkk04,

the general consensus in this forum is that the current market price for a good (eg, Australian Dollars) is a reasonable approximation of its true value. If you can beat the market for any statistically significant basis, then you:

a) probably already know it
b) probably wouldn't be asking this question on 2p2

Thus, I'd suggest that you simply move your money into whichever currency you're likely to have the rest of your money in, and invest it with the rest of your money. You may want to stagger it over a few months if you want to reduce variance, but for $50k, the transaction costs are significiant.

FWIW, I used this company to transfer my money from Australia to the UK (Isle of Man): https://ifx.ozforex.com.au/

They were able to get rates that were competitive with what my employer (a company making huge international financial transfers by comparison to me as an individual) was able to get from their commercial suppliers (and they both provided the international wire and currency conversation rate which was ~2% better than what Barclays Bank were charging me).

It’s speculative waiting for a move in the first place but I definitely wouldn’t be looking at a long term uptick to the >$1 you could get for the last couple of years and would just take the money out.

The reason I say that is the AUD was fixed against the USD until 1983 and it’s coming off historic highs since 2010.



Australia also has a big question mark around it due to a bunch of factors like the collapsing manufacturing sector, reliance on commodity exports and the countries record low interest rates.

I consider Platinum Asset Management pretty astute long term value investors and the CIO and CEO from that company break down the macro reasons they are short the AUD over the long term pretty well in this video if you are interested
http://www.youtube.com/watch?v=ei8rQUL1zmA

Yea I doesn't look like its going to be getting back even with USD anytime soon so I suppose I'll stagger it back into my US bank account. Thanks for the website Josem!

I have maybe 5 or 6 grand my parents have for me. It was "invested" in a cd or 2 unfortunately. Long story short I am going to ask for the money and have 2 choices and need opinion. Do I use all of it to pay a chunk of my govt student loan which has an avg percent of like 5.5 or invest in a stock or 2/contribute to my roth Ira which is up to almost 7k after 11 months. 1k in 401k since August(up 1 dollar lol)
Keep in mind I am ahead on all loans including the govt which is half of my debt. I don't care about my private loans because the payments are low and interest is maybe 3 percent.
I live at home and make Atleast 2k a month depending on hours.
Thoughts?

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