Stocks and "the market"

[Mike Henderson]

Of course the 'markets' are the exact opposite as the math says on average you will make money ion the long term. The longer you stay the more likely you are to make money.

The question is if you could have made more money elsewhere.

Yeah, there have been a lot of studies that have shown that unless you have inside information, the best you can do long term is the average of the performance of the market. Of course, some private funds do get inside information. The fund managers cultivate people at various companies they're invested in and get advanced warning of changes in the fortunes of those companies.

Most of those private funds have very large initial investment requirements so it's another example of how the rich do better than the rest of us.

Mike

[Bill Dufour]

Several major brokers now charge no broker fees. I recently bought and sold over $10,000 in stocks for a total cost under 30 cents. What kills most investors is the brokerage fees and the management fees.
My market index fund charges about 0.01% annual fee. If a actively traded fund made 2% more (possible but unlikely) and charged 2.1% management fee I would be doing better. Compound fees every year add up to tens of thousands of dollars in a lifetime.
Bill D.

[Jerome Stanek]

I have had the same stock for 30 years and it has grown 30 times since I got it. plus I get over $3000 dividend check 4 times a year.

[jeff norris 2011]

Yeah, there have been a lot of studies that have shown that unless you have inside information, the best you can do long term is the average of the performance of the market. Of course, some private funds do get inside information. The fund managers cultivate people at various companies they're invested in and get advanced warning of changes in the fortunes of those companies.

Most of those private funds have very large initial investment requirements so it's another example of how the rich do better than the rest of us.

Mike

not denying that, but the average of the market is around 10% (over ten years or longer). the average black jack payout is -5% over the long term.

but yes the average guy is never going to do as well as folks with knowledge and leverage.

[Jim Koepke]

Warren Buffet is possibly the most successful investor in today's market.

His first rule of investing is to only buy stocks of companies in which he understands the business.

Too many investors want to 'make a killing' in the market. Others are afraid to sell a good thing too soon. Of the holding on too long, think of companies like Iomega, Osborne or Enron.

Jerome has a very good path on his stock, one that pays a decent dividend and just hang on. First make sure it is a company that is paying dividends from profits on its business and not through borrowed money.

If a stock is only being held for appreciation, then one does have to sell it when it appreciates. One famous investor whose name escapes me at the moment was asked about selling a stock that went up in value after he sold. His reply was that he is never upset about taking a profit.

jtk

[Edwin Santos]

If the stock goes up and people start to sell it will go down so you have to be one of the first to sell.

Or you just hold it and unless there is something fatally wrong with the company, it will go up again because all stocks cycle, again unless something is fatally wrong. Better yet, you could add to your position by buying more when it is going down, a technique called dollar cost averaging. This is partially what Warren Buffett is talking about when he says to be greedy when others are fearful and fearful when others are greedy. BTW, dollar cost averaging can work the other way too. If you are holding a stock for the long term, and let's say it doubles in value after several years. If you sold half your position, yes you would have to pay your capital gains tax on it, but your basis in the remaining stock you hold is zero, in other words you own it for free.

I have had the same stock for 30 years and it has grown 30 times since I got it. plus I get over $3000 dividend check 4 times a year.

Great story, and perhaps the best part is your stock investment has been growing on a compounded basis and you haven't had to pay any taxes. Compounded growth in a tax deferred environment is to your money what a turbocharger is to a car.

For anyone who has stayed out of the stock market, unless you have found some other alternative investment, I feel for you. This is because you have excluded yourself from a 9 year run of asset appreciation that does not happen very often in a lifetime.
IMO one of the biggest reasons for the wealth gap in the US is not wage disparity. It is because some people are participating in asset appreciation and some people are not. The people who are participating are seeing their wealth increase materially and the people who are not, are being left behind, tracking inflation at best, in other words stagnating, which is unfortunate.

Somewhere in this thread Jack Bogle, the founder of Vanguard was mentioned. His advice was very sound, which is to buy low cost index funds so rather than individual stocks you are buying the market, or a subset category of the market. Either way your risk is spread and over time you will get market returns at the lowest possible cost.

[Kev Williams]

3 times in my life I bought into mutual funds for our retirement, spanning over 20 years. All of them had stellar 20 year performance records. After 20-ish years of paying in monthly, I finally gave up and cashed out the $4200 net gain before the '08 crash took the rest of it.

On our last trip to Vegas many years ago, I succeeded in winning zero out of 27 hands at blackjack, in about 4 different casinos. After losing the first 8 or 9 I kept track - Had a few pushes, but not a single winner.
as a reference- if you bet $5 and let it ride for 27 winning hands, the result is $335,544,320...

I'm cursed at any form of gambling, so I don't do it any more. You guys and gals have fun with it

[Malcolm McLeod]

My first rule: No investment is made based on advice from the internet.

[Malcolm McLeod]

I have had the same stock for 30 years and it has grown 30 times since I got it. plus I get over $3000 dividend check 4 times a year.

Admirable persistence. Slightly better than historical market return (quick look at the guzinta machine says you got 11.4%). The dividend can be deceptive - not so good if you have to invest $12,000,000.00 to get a $3000.0 quarterly dividend..?

My advice: beware of a lack of diversification. ...Enron urged all their folks to ONLY invest in Enron. (So much for my advice; please see my first rule above!)

[Jerome Stanek]

My first investment was a stock option or a cash settlement of $8000

[Edwin Santos]

Admirable persistence. Slightly better than historical market return (quick look at the guzinta machine says you got 11.4%). The dividend can be deceptive - not so good if you have to invest $12,000,000.00 to get a $3000.0 quarterly dividend..?

Malcolm, I agree with the overall return based on a 30x multiple over the 30 year time period, however the dividend ought to be part of the calculation so the total IRR (or yield) of his investment should be higher, possibly much higher than 11.4%. The exact calculation would depend on what he paid for the stock initially.

[Edwin Santos]

3 times in my life I bought into mutual funds for our retirement, spanning over 20 years. All of them had stellar 20 year performance records. After 20-ish years of paying in monthly, I finally gave up and cashed out the $4200 net gain before the '08 crash took the rest of it.

Have you looked up what it would be worth today if you had not cashed out? Might be an interesting comparison for you.
Disclaimer: I admit to being a numbers geek.

[Roger Feeley]

Mike there is a fascinating story about a bunch of MIT types who developed a system for beating blackjack. Using a very early wearable computer and buttons in their shoes, they could predict the octant where the ball would fall and get them all before the ball fell. They did this by activating one button every time a point on the wheel passed a certain spot. They activated another button every time the ball passed a certain spot. The computer digested all this and used vibration to tell them where to get.

check out https://en.wikipedia.org/wiki/Eudaemons

[Bill Dufour]

Dividends are only needed in retirement. The problem with dividends is income tax.
Bill D

[Jim Koepke]

Mike there is a fascinating story about a bunch of MIT types who developed a system for beating blackjack.

The Eudaemons were doing this at the roulette table.

jtk