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I worked briefly[0] at a startup that helps get professional traders faster/easier access to reports, data, etc[1]. It was eye opening. Brokerage firms do huge

by mabbo 8y ago

I worked briefly[0] at a startup that helps get professional traders faster/easier access to reports, data, etc[1]. It was eye opening. Brokerage firms do huge amounts of research to help figure out where the market is going, then only give that information to the big fish who do millions/billions in trades. You and I are not competing in a fair game when we buy and sell stocks. I just keep my retirement savings in a robo-investment account now, balancing ETFs. Hands off the wheel, don't think about it, don't mess with it. [0]Fintech wasn't for me. Just didn't enjoy it. [1]StreetContxt. Cool folks, great company.

H1Supreme 8y ago
> Hands off the wheel, don't think about it, don't mess with it I'm the same way. I put money in, buy more shares of whatever ETF I deem worthy, and outside of the occasional sell to fund another ETF purchase, I don't touch it. It fluctuates, but ultimately goes up. But, man oh man, do I fantasize about trading. When I look at the underlying stocks in an ETF that's doing good for me, and some of them have these massive YTD returns, I get the itch.
- mabbo 8y ago
  I suspect I could do that successfully. What I do instead is give up 0.5% per year and let WealthSimple[0] do it for me. Automatic weekly payments from my bank account get invested in whatever way gets me closer to a balanced portfolio. It's a big cut for doing something I could do manually but I'm super lazy and it's a percentage of not much money anyways. [0] https://wealthsimple.com https://wealthsimple.com or https://wealthsimple.com/invite/FCU4AG https://wealthsimple.com/invite/FCU4AG if you want a referral link which gives you (and me) some extra discounts.
  - tlight 8y ago
    That's a pretty hefty fee when you compare relative to average annual returns. Plus the compounding nature of those costs is not insignificant. Jack Bogle (Vanguard) has a nice chapter demonstrating this in "The Little Book of Common Sense Investing".
    - mabbo 8y ago
      It is. But like I said, I'm really lazy, haha. It works out to a few hundred dollars per year for me, which I'm willing to pay. There's also discounts for referrals which helps lower it.
throwawaymath 8y ago
I've worked in a similar role. I broadly agree: individual investors don't really have the technical skills or the capital needed to acquire and analyze the dizzying amount of data you typically need find an edge. That being said, an individual who specialized in that kind of data acquisition and analysis at a firm can do well on their own by targeting specific equities with only one or two streams of revenue. But it's still difficult and that individual would probably be trading in a manual capacity.
- Retric 8y ago
  The alternative is to simply look at longer time horizons. In the 1990 you could have beaten the market by simply realizing that the PC was going to explode into an everyday item and simply focused on buying and holding the sector vs any one stock. That's not going to see huge daily gains, but on the backs of huge successes like Dell it could easily have turned ~100k into retirement money in a decade.
  - technotony 8y ago
    That worked better when companies IPO'ed earlier. Now most of those gains get taken by private capital. If the equivalent of the PC now is AR/VR/XR or say synthetic biology I can't invest in that without connections and already having that retirement money.
  - lbotos 8y ago
    So, by that logic, where is the market going now? Isn't this just hindsight bias? What's your decade strategy now?
    - Retric 8y ago
      I don't see anything right now growing the way the PC revolution did. But, thinking in terms of what stocks you would want to own 10 years from now is IMO still valuable. Oil companies are still going to be making tons of money in 10 years, but people will start to doubt their future without heavy diversification. Whichever company wins to battle for solar cell manufacturing is going to become the next Exxon, but it's going to be a long brutal slog. Still if your in your 20's buying and holding any company that looks to have an advantage in this space is a long term winning strategy even if most of them will fail.
platz 8y ago
The problem is when everyone is simply tracking an index, there are no more humans in the loop to avert disaster.
- lotsofpulp 8y ago
  We've had quite a few disasters with humans in the loop. And humans are still in the loop, no one is banning them from the exchanges. As long as there is an arbitrage opportunity, why wouldn't someone take advantage of it? The only thing happening is the low value brokers/traders are being taken out of the system and automated, just like people were made redundant in other industries. But for investors who like digging in and doing their homework, opportunity is abound. Everyone else can enjoy their standard index returns to keep up with inflation.
  - platz 8y ago
    I'm just relaying the observations from someone like Mark Blyth on this topic: https://youtu.be/TyxcholoFG8?t=45m30s https://youtu.be/TyxcholoFG8?t=45m30s
- deleted 8y ago
  [deleted]

by mabbo 8y ago

H1Supreme 8y ago

> Hands off the wheel, don't think about it, don't mess with it I'm the same way. I put money in, buy more shares of whatever ETF I deem worthy, and outside of the occasional sell to fund another ETF purchase, I don't touch it. It fluctuates, but ultimately goes up. But, man oh man, do I fantasize about trading. When I look at the underlying stocks in an ETF that's doing good for me, and some of them have these massive YTD returns, I get the itch.

mabbo 8y ago
I suspect I could do that successfully. What I do instead is give up 0.5% per year and let WealthSimple[0] do it for me. Automatic weekly payments from my bank account get invested in whatever way gets me closer to a balanced portfolio. It's a big cut for doing something I could do manually but I'm super lazy and it's a percentage of not much money anyways. [0] https://wealthsimple.com https://wealthsimple.com or https://wealthsimple.com/invite/FCU4AG https://wealthsimple.com/invite/FCU4AG if you want a referral link which gives you (and me) some extra discounts.
- tlight 8y ago
  That's a pretty hefty fee when you compare relative to average annual returns. Plus the compounding nature of those costs is not insignificant. Jack Bogle (Vanguard) has a nice chapter demonstrating this in "The Little Book of Common Sense Investing".
  - mabbo 8y ago
    It is. But like I said, I'm really lazy, haha. It works out to a few hundred dollars per year for me, which I'm willing to pay. There's also discounts for referrals which helps lower it.

throwawaymath 8y ago

I've worked in a similar role. I broadly agree: individual investors don't really have the technical skills or the capital needed to acquire and analyze the dizzying amount of data you typically need find an edge. That being said, an individual who specialized in that kind of data acquisition and analysis at a firm can do well on their own by targeting specific equities with only one or two streams of revenue. But it's still difficult and that individual would probably be trading in a manual capacity.

Retric 8y ago
The alternative is to simply look at longer time horizons. In the 1990 you could have beaten the market by simply realizing that the PC was going to explode into an everyday item and simply focused on buying and holding the sector vs any one stock. That's not going to see huge daily gains, but on the backs of huge successes like Dell it could easily have turned ~100k into retirement money in a decade.
- technotony 8y ago
  That worked better when companies IPO'ed earlier. Now most of those gains get taken by private capital. If the equivalent of the PC now is AR/VR/XR or say synthetic biology I can't invest in that without connections and already having that retirement money.
- lbotos 8y ago
  So, by that logic, where is the market going now? Isn't this just hindsight bias? What's your decade strategy now?
  - Retric 8y ago
    I don't see anything right now growing the way the PC revolution did. But, thinking in terms of what stocks you would want to own 10 years from now is IMO still valuable. Oil companies are still going to be making tons of money in 10 years, but people will start to doubt their future without heavy diversification. Whichever company wins to battle for solar cell manufacturing is going to become the next Exxon, but it's going to be a long brutal slog. Still if your in your 20's buying and holding any company that looks to have an advantage in this space is a long term winning strategy even if most of them will fail.

platz 8y ago

The problem is when everyone is simply tracking an index, there are no more humans in the loop to avert disaster.

lotsofpulp 8y ago
We've had quite a few disasters with humans in the loop. And humans are still in the loop, no one is banning them from the exchanges. As long as there is an arbitrage opportunity, why wouldn't someone take advantage of it? The only thing happening is the low value brokers/traders are being taken out of the system and automated, just like people were made redundant in other industries. But for investors who like digging in and doing their homework, opportunity is abound. Everyone else can enjoy their standard index returns to keep up with inflation.
- platz 8y ago
  I'm just relaying the observations from someone like Mark Blyth on this topic: https://youtu.be/TyxcholoFG8?t=45m30s https://youtu.be/TyxcholoFG8?t=45m30s
deleted 8y ago
[deleted]