In my experience, it means you are able to buy low and sell high.

Which, in turn, means to buy when a security is undervalued, and sell when it is overvalued?

Incorrect. It typically means to outperform some metric that represents the market as a whole, for example the S&P 500. You can buy low and sell high and still underperform the market.

In finance, you'll hear "beating the market" referred to as "generating alpha"

But the S&P 500 consists of large cap, which have historically underperformed compared to small cap, correct? So the S&P 500 isn't really "the market as a whole," but rather a potential benchmark for large cap specifically, right?
Haven't studied this before, but risk-adjusted performance sounds like an essential measurement.

I have another question: how come mutual funds don't take an incentive fee (i.e. percentage of profits) like hedge funds do? Or do some do?

"Beating the market" is an extremely broad term and really means nothing without context. I said the S&P 500 because that is one of the most common metrics... And "the market as a whole" is another blanket statement with little meaning. Do you mean the equity markets? Are you talking about oil and gold too? What about the art market or the stamp market?

Small caps may outperform large caps but are more risky. People only care about risk-adjusted returns. This is what finance theory (Modern Portfolio Theory) is based on.

I may be wrong but I am guessing mutual funds don't take an incentive fee for legal reasons.

OK I think I understand. So if someone were investing in some small cap fund and achieved a better return than the S&P 500, and, because of that, claimed they were beating the market, well that wouldn't entirely be accurate because they're comparing apples to oranges.

Or, for a more extreme example, say it was municipal bonds instead of small cap. In that case they'd be comparing apples to lettuce.

Correct?

Yup, you got it. You should always consider your risk when analyzing returns.

Is it possible for a US citizen in the US to open a savings account at a US bank that is held in one or more foreign currencies.

For example, let's say that I've got 20K US dollars and I want to convert those to euros (or some other currency) and then have those euros earn interest in a savings account (I understand that this rate will be low, I'm just looking for the market rate for this type of account). Also important would be no monthly fees and the ability to convert back to dollars if I needed the money for something.

The idea here is to save a part of my emergency cash in a currency other than US dollars, so if the dollar completely tanks, my emergency fund has some diversification to withstand this. So the most important things I'd be looking for are liquidity, no fees, and very modest interest.

If there is another, easier way to accomplish this particular goal, I'd be interested in hearing about that as well.

I'm a total noob, but I don't see the point because you are always going to be spending in USD.

Unless if the USD tanks you are planning on packing up shop and moving to Europia?

edit: Wait, ok I see your point.

Beating the market means beating the SP500. If you can use small caps to do that, show your results. The SP500 is about 75% of the value of the entire market anyways.

Why aren't Yahoo's ownership of Alibaba reflected in Yahoo's balance sheets? Yahoo owns 43 percent of Alibaba which is worth about $26 Bil. Yet, Yahoo itself is worth only $20 Bil. Would someone please explain that to me? Thanks

beating the market means equal or better returns on a risk-adjusted basis, right?

Need some advice, guys.

I've cashed out my entire online bankroll. I've spent a bunch of it but I basically have about ~1500 left. I'm a 20 year old college student living at home with my parents so I don't really have any bills to pay for. What should I do with the money? I don't want to just leave it in my account and slowly spend it away. Is the money too insignificant to do anything with?

Hey guys, thanks for answering Q's in this thread, a wealth of knowledge here.

I'm interested in buying an investment property to rent out but I'm a complete noob. I'm 21 and am saving my poker winnings towards buying a small property to get me on the ladder. (should have enough to buy a small one bed flat in the UK by the end of the year)

Looking for some good books tailored for noobs that will cover pretty much everything. What to look for in terms of location, rent yield, steps to take before buying etc etc...

also something about housing markets and when is best to buy would also help.

thanks

it is in the balance sheet. the 43% stake is worth $2.326 Billion, not 26

You can't do a whole lot with $1500. Put it in a separate account if you don't want to slowly spend it away. It's a good idea to have some emergency funds, anyway. At 20, though, I'd recommend spending it on traveling.

So I decided to start reading through the reading list here, I've started with Market Wizards interview book. Just finished the first interview...are these people serious? I'm going to finish it for better perspective, but the first guy truly sounded like a sports writer, just flailing to build a narrative where there wasn't one.

Thanks for the explanation. I forgot to factor in the exchange rate Dol/HKD when look at the Alibaba stock.

if i want to buy gold, or small cap stocks, what is the best broker to do that? if you only have like 80k$. Also im european and i would prefer a euro broker, how does that work with taxes tho? Technically im under the radar with exactly how much i have made with poker. Isnt there a site, or guide somewhere on this? Because it is all pretty damn confusing.

I would start by reading this thread- Ask me about real estate investing

Honestly I thought Market Wizards was not that good of a book. Start with Fooled by Randomness by Nassim Nicholas Taleb, that's a real sweet book.

How do I access Nintendo's financials? MSN had almost nothing and usually yahoo is only good for finding businesses by industry.

http://www.nintendo.co.jp/ir/en/index.html

Whats up everyone,

Im basically a noobie to the investing world, and basically coming to the forum to say hi and see what I can learn. I know nothing about trading, but am interested in possibly learning.

I know this post seems very generalized, and its all been asked before, but hey - I'm a newbie, and I'd like to hear what advice and feedback can be offered. Any response is appreciated. I read the faq - excuse me if I missed something.

Easy questions:

-What book(s) do I read that gets me the most direct route to at least being competent in trading? Maybe not profiting, but having a clue.
-Once you learn trading, you get a practice account, practice, then trade and profit!! I'm sure its not this easy - someone please tell me the real deal about what one has to do to be successful.

Basically, looking for the answers regarding what one needs to learn to make it in trading.

Again - I'm sure this has been asked before, but I'm a noobie, and I just want to try and learn, so excuse me if the post comes across as too general, but I'm just starting out. Any threads or posts about specific opinions regarding these questions - feel free to link them.

Thanks!!

Is there any way I could calculate the standard deviation of an hypothetical portfolio over the last few years?