4 ms·

+1 for using industry knowledge. Most of my money is invested in ETFs, however, I've been able to beat the market by significant amounts when I invested in tech

+1 for using industry knowledge. Most of my money is invested in ETFs, however, I've been able to beat the market by significant amounts when I invested in tech stocks because I understood what drives the price. There are plenty of small cap tech stocks that have doubled / tripled the last few years. Understand the market, understand the product and technology well, and you can do significantly better than any wall street analyst. Don't rush into it, but do your research. Look at the numbers and the growth potential.

Chris2048 10y ago
But how do you understand the market? Is looking at the company numbers enough, or do you have to look at companies in detail? Is domain knowledge enough, or do you need to look at corporate culture, people and business plans? How fast do you need to be, in term of reacting to events?
- kerryfalk 10y ago
  To answer your first question: be a part of it, either as a consumer or a producer. My professional life now revolves around mining. I'm confident to know who to invest in and who not to. My personal life centers around various hobbies - I'm confident I could choose a few companies in those spaces to invest in. Unfortunately, most of those are well performing private companies.
  - planteen 10y ago
    Just curious - are you worried about getting too coupled to the industry you work in? I try not to invest in tech since I work in tech. So a big downturn in tech would not only be bad for my job but also investments. Or would you possibly bet against mining?
    - kerryfalk 10y ago
      I wouldn't put my whole portfolio in it but I'm not really worried about being too tied to the industry I work in. That might also be because it's mining. Mining is a large portion of the world's GDP (estimated to be in the range of 45-60% either directly or as a supplier to others). If mining as an industry suffers, we're all probably in a bit of trouble.
    - charlesdm 10y ago
      Tech is disrupting many existing industries, meaning ultimately more money will flow from those sectors into tech. I'm extremely bullish on tech for the next 5-10 years.
- cloudjacker 10y ago
  Supply and demand... if you know a stock is heavily shorted and Martin Shkreli owns 70% of all the stock and tells his broker to turn off the borrowability, then there's A) a lot less stock to short B) current shorts have to deliver C) less shares to buy when they cover what happen?
jgalt212 10y ago
> Understand the market, understand the product and technology well, and you can do significantly better than any wall street analyst. Don't rush into it, but do your research. Look at the numbers and the growth potential. This is very dangerous advice because it just ain't true. Under efficient markets, you can do equally well as "any wall street analyst"
- charlesdm 10y ago
  1. Markets aren't efficient. They're full of emotion and greed. They can be irrational. Just look at Brexit - even stocks that had zero exposure to the UK (directly or indirectly) sold off significantly. 2. Why would you assume you can't do better than an analyst, in your area of expertise? Someone who understands tech well will be able to make better tech investments, than, let's say, investments in mining. That seems pretty obvious to me. That doesn't means you'll always get it right, but it does increase chances significantly.
  - arjie 10y ago
    1. Did they actually have zero exposure to the UK? There are knock-on effects. If many airlines had exposure to the UK and this oil company only sold to american airline companies, they still effectively have exposure to the UK. If this spring manufacturer had the majority of their deals with that oil company, then they're going to suffer with them. I'm not saying you're wrong. I used the same hypothesis to buy on Brexit panic, but I don't know if it was correct. 2. Honestly, the analysts got it wrong in their own area of expertise often enough that I don't think it makes sense to pretend they're oracles in comparison to anyone else.
  - philh 10y ago
    You don't just have to beat the analysts. You have to beat all the other people in tech who think they can beat the analysts.
  - jgalt212 10y ago
    Markets are efficient because you cannot effectively predict how long emotion, greed, and irrationality will drive the bus before rationality once again prevails.

Chris2048 10y ago

But how do you understand the market? Is looking at the company numbers enough, or do you have to look at companies in detail? Is domain knowledge enough, or do you need to look at corporate culture, people and business plans? How fast do you need to be, in term of reacting to events?

kerryfalk 10y ago
To answer your first question: be a part of it, either as a consumer or a producer. My professional life now revolves around mining. I'm confident to know who to invest in and who not to. My personal life centers around various hobbies - I'm confident I could choose a few companies in those spaces to invest in. Unfortunately, most of those are well performing private companies.
- planteen 10y ago
  Just curious - are you worried about getting too coupled to the industry you work in? I try not to invest in tech since I work in tech. So a big downturn in tech would not only be bad for my job but also investments. Or would you possibly bet against mining?
  - kerryfalk 10y ago
    I wouldn't put my whole portfolio in it but I'm not really worried about being too tied to the industry I work in. That might also be because it's mining. Mining is a large portion of the world's GDP (estimated to be in the range of 45-60% either directly or as a supplier to others). If mining as an industry suffers, we're all probably in a bit of trouble.
  - charlesdm 10y ago
    Tech is disrupting many existing industries, meaning ultimately more money will flow from those sectors into tech. I'm extremely bullish on tech for the next 5-10 years.
cloudjacker 10y ago
Supply and demand... if you know a stock is heavily shorted and Martin Shkreli owns 70% of all the stock and tells his broker to turn off the borrowability, then there's A) a lot less stock to short B) current shorts have to deliver C) less shares to buy when they cover what happen?

jgalt212 10y ago

> Understand the market, understand the product and technology well, and you can do significantly better than any wall street analyst. Don't rush into it, but do your research. Look at the numbers and the growth potential. This is very dangerous advice because it just ain't true. Under efficient markets, you can do equally well as "any wall street analyst"

charlesdm 10y ago
1. Markets aren't efficient. They're full of emotion and greed. They can be irrational. Just look at Brexit - even stocks that had zero exposure to the UK (directly or indirectly) sold off significantly. 2. Why would you assume you can't do better than an analyst, in your area of expertise? Someone who understands tech well will be able to make better tech investments, than, let's say, investments in mining. That seems pretty obvious to me. That doesn't means you'll always get it right, but it does increase chances significantly.
- arjie 10y ago
  1. Did they actually have zero exposure to the UK? There are knock-on effects. If many airlines had exposure to the UK and this oil company only sold to american airline companies, they still effectively have exposure to the UK. If this spring manufacturer had the majority of their deals with that oil company, then they're going to suffer with them. I'm not saying you're wrong. I used the same hypothesis to buy on Brexit panic, but I don't know if it was correct. 2. Honestly, the analysts got it wrong in their own area of expertise often enough that I don't think it makes sense to pretend they're oracles in comparison to anyone else.
- philh 10y ago
  You don't just have to beat the analysts. You have to beat all the other people in tech who think they can beat the analysts.
- jgalt212 10y ago
  Markets are efficient because you cannot effectively predict how long emotion, greed, and irrationality will drive the bus before rationality once again prevails.