6 ms·

Ask HN: What’s needed to make a living by investing

7 points by quietthrow 8y ago

What all needs to be true if I wanted to make a living by investing/trading stock? In other words what are all the things that need to happen for me to quit my job and make money by working for myself from anywhere and generate the same amount of money as my current salary(say $180k gross) I am trying to understand the needs from different areas/domains perspective. Eg: you next at least X in capital. You next a llc or inc company. You need knowledge of statistics etc.

bouncing 8y ago
First, you need some kind of insight into the market that others don't have and can't obtain. If you're asking this question, you're not a prodigy of economics, math, or statistical analysis. Why would you be able to predict market trends better than anyone else, and especially better than the kinds of experts your competitors have?
- quietthrow 8y ago
  Because I believe I can learn. Because I have grit. Because I am passionate. Because my back is against the wall.
  - nostrademons 8y ago
    Expect to lose a lot of money in the process then. Your competition has all of the above, plus they're already aware of a bunch of ways trades can go south, of what sort of information you need to have a leg up on the competition, of what it takes to get that information, and of how quickly you need to act on it before others get it (which, BTW, is often measured in microseconds these days). If you're really serious about this, I'd recommend starting with play money (or none at all - use a fantasy portfolio), and then actively trading like you're doing your best to make money. Do this for a while - at least 6 months to a year, and ideally through a down market - and benchmark your portfolio results to the overall market performance (say, an S&P 500 index fund). A lot of people look at the absolute dollar value of their returns, say "I made $10K trading stocks, woohoo!", and don't realize that if they'd just put that money in an index fund they would've made $25K for a lot less work. Also remember that there's a large random component to stock prices - just because some of your stocks made money doesn't mean you can double down on what you did with them, because those stocks might just happen to be the ones that went up randomly. You need to track your personal returns with them against how the stock did by itself, i.e. what you would've made if you had just bought and held it, and see whether your entry and exit points really made sense.
    - quietthrow 8y ago
      I hear yea on the microseconds but I am not thinking about hft or algo trading. I am more inspired by warren Buffett’s way and that’s what I would like to do. Play money is a good idea. Any sites you recommend for this?
      - saganus 8y ago
        A mainstream one like https://www.investopedia.com/simulator/ https://www.investopedia.com/simulator/ could be an option. This one https://www.quantopian.com/ https://www.quantopian.com/ is also interesting. It's more algorithmic trading, but has backtesting functionality and other nice features.
      - nostrademons 8y ago
        Pretty much every site is trying to sell you something - that's one of the trading strategies experienced traders are aware of, buy a security and then pay lots of finance bloggers to write a glowing tip-off about this hot new stock, then sell at inflated prices to all the rubes who are buying on stock tips. It's slightly illegal but you're unlikely to get caught, because the victims believe they're being smart and everyone else in the ecosystem profits from the practice. If you really want to do it Buffett's way, go check Benjamin Graham's books (The Intelligent Investor and Securities Analysis) out of the library, read through the last 40 years of Berkshire Hathaway annual reports, and then start reading !0-Ks from the SEC's EDGAR database.
        quietthrow 8y ago
        That was my intention with the original post. How make a living by value investing. What all would one need to do.
      - bouncing 8y ago
        Warren Buffet did not make his fortune as an absentee investor playing the stock market. Not even close. He invested one-on-one, in businesses he thoroughly understood, after a lot of research and understanding of the business. Think less scanning a spreadsheet or stock data and more CNBC's "The Profit" -- walking around a factory floor, looking through accounts receivable, talking to the assembly team, talking to customers. THEN making a decision to invest a lot of money and steer the direction of the business.
  - notahacker 8y ago
    Your back being against the wall is a very bad reason to try to reinvent yourself as an investor. People who make a living by investing either start off with large amounts of capital, a healthy margin on other people's capital because of their assumed knowledge and work ethic, or by lucking out on their friend's business venture they pumped pocket money into growing big fast. I don't think many people got successful investing out of desperation. On the plus side, if you're earning 180k a year, you can acquire the ability to not need to continue to work in your current job - assuming this is your current motivation - far more easily by cutting your living costs and investing simply and passively. The difference between 8% and 12% return on your savings entails a lot of investment skill and luck; the difference between spending $20k per month and $10k per month not so much.
LeoSolaris 8y ago
A large enough amount of money to be reasonably good with a 2% ROI, then stash it all in blue chips that are somewhat stable-ish. That way you're not temped to do much change to which stocks you have. Hire a financial advisor that actually has a fiduciary duty rather than a salesman in a nice suit, and ask the adviser to treat your fortune like retiree money. Basically, the only way to have a better than slim chance to live off of investing is to have a good deal of money to live off of the interest.
- quietthrow 8y ago
  I firmly believe no one will care for your money than you. In that sense I don’t trust financial advisors fully. I would use them the get knowledge on options I have for a specific scenario. To have a large amount of money in the first place I would need to make a living and when I get good at it I would be able to (hopefully) green rate the large amount of money. I want to be able to make a living by avoiding the 9-5 which have too many variables for me to make a large amount of money- promotions; working on right project ; find a diff project cos this one didn’t have the right growth opportunity. I would much rather focus on one thing and compound my knowledge,skills and abilities. Hence the investing/trading route.
deleted 8y ago
[deleted]
codegeek 8y ago
If you have no experience trading stocks yet, the best bet is to make enough money so that you can get a rate of return. S&P over the last 100 years has returned an average of about 10%. So to make 180K gross, I would say you need $1.8 Million cash and then invest in S&P ? If you don't have that, you are in for real fun. I mean most people lose money in stocks or investments. Heck, my 401K investment funds cannot even beat S&P on a constant basis and I have tried to rebalance the heck out of portfolio. I am sure there are folks making 180K gross by investing in stocks but I would bet most of them do that because they have plenty of cash/capital already that generates something along S&P index.
altairiumblue 8y ago
What's needed: - large amounts of capital. if you want to be earning $180k/year that would be in the millions. - being able to handle losing money without your judgement being affected There are many other factors but I'll stop here because in one of your comments you mentioned how you believe that you can succeed because you're passionate and your back is against the wall. Those are the opposite of the two points above.
- quietthrow 8y ago
  Good points. What are the other factors ? I said what I said in another comment cos the comment prior to that completely missed the point and all it said was how it couldn’t be done because you are not a prodigy. While what I said is true I know it’s not the only thing I need. Else I wouldn’t post.
  - airbreather 8y ago
    Often luck plays a significant part, but those that got lucky won't admit it or see it. Two kinds of luck - dumb luck, like you fat fingered a large trade in AAP instead of APP, just at a lucky time. Then there is sizing luck, noticing small/unusual things ignored or out of sight by others and acting to capatilise. The bottom line is for every winning trade, a losing trade occurred and if it was easy, everyone would do it. Sounds like you are heading to fund someone else's new Tesla via process known as wealth transferrance. Why not just cut the process short and place a series of largest allowed bets on 13 Black, probably better odds and near instant discovery.
marketgod 8y ago
Trade options. Save up $300K, and then doing 50% is not really hard to do. If you are trading options, you can do 100% per year, but just aiming for 50% is a good number, making sure you cut losers, and let winners run. $180K is a high salary to aim for though. For example, what I recommend is $30K if you want to double your account, but you would go into 5 plans at once, for $1,000 per plan. So if they all fail, you still have 4-6 more attempts (some plans can go for $2000), to rebuild the account. With a $300K account, going $20K per trade, is reasonable enough to do 50% per year. It's risky, but exciting, and doable.

7 points by quietthrow 8y ago

bouncing 8y ago

First, you need some kind of insight into the market that others don't have and can't obtain. If you're asking this question, you're not a prodigy of economics, math, or statistical analysis. Why would you be able to predict market trends better than anyone else, and especially better than the kinds of experts your competitors have?

quietthrow 8y ago
Because I believe I can learn. Because I have grit. Because I am passionate. Because my back is against the wall.
- nostrademons 8y ago
  Expect to lose a lot of money in the process then. Your competition has all of the above, plus they're already aware of a bunch of ways trades can go south, of what sort of information you need to have a leg up on the competition, of what it takes to get that information, and of how quickly you need to act on it before others get it (which, BTW, is often measured in microseconds these days). If you're really serious about this, I'd recommend starting with play money (or none at all - use a fantasy portfolio), and then actively trading like you're doing your best to make money. Do this for a while - at least 6 months to a year, and ideally through a down market - and benchmark your portfolio results to the overall market performance (say, an S&P 500 index fund). A lot of people look at the absolute dollar value of their returns, say "I made $10K trading stocks, woohoo!", and don't realize that if they'd just put that money in an index fund they would've made $25K for a lot less work. Also remember that there's a large random component to stock prices - just because some of your stocks made money doesn't mean you can double down on what you did with them, because those stocks might just happen to be the ones that went up randomly. You need to track your personal returns with them against how the stock did by itself, i.e. what you would've made if you had just bought and held it, and see whether your entry and exit points really made sense.
  - quietthrow 8y ago
    I hear yea on the microseconds but I am not thinking about hft or algo trading. I am more inspired by warren Buffett’s way and that’s what I would like to do. Play money is a good idea. Any sites you recommend for this?
    - saganus 8y ago
      A mainstream one like https://www.investopedia.com/simulator/ https://www.investopedia.com/simulator/ could be an option. This one https://www.quantopian.com/ https://www.quantopian.com/ is also interesting. It's more algorithmic trading, but has backtesting functionality and other nice features.
    - nostrademons 8y ago
      Pretty much every site is trying to sell you something - that's one of the trading strategies experienced traders are aware of, buy a security and then pay lots of finance bloggers to write a glowing tip-off about this hot new stock, then sell at inflated prices to all the rubes who are buying on stock tips. It's slightly illegal but you're unlikely to get caught, because the victims believe they're being smart and everyone else in the ecosystem profits from the practice. If you really want to do it Buffett's way, go check Benjamin Graham's books (The Intelligent Investor and Securities Analysis) out of the library, read through the last 40 years of Berkshire Hathaway annual reports, and then start reading !0-Ks from the SEC's EDGAR database.
      - quietthrow 8y ago
        That was my intention with the original post. How make a living by value investing. What all would one need to do.
    - bouncing 8y ago
      Warren Buffet did not make his fortune as an absentee investor playing the stock market. Not even close. He invested one-on-one, in businesses he thoroughly understood, after a lot of research and understanding of the business. Think less scanning a spreadsheet or stock data and more CNBC's "The Profit" -- walking around a factory floor, looking through accounts receivable, talking to the assembly team, talking to customers. THEN making a decision to invest a lot of money and steer the direction of the business.
- notahacker 8y ago
  Your back being against the wall is a very bad reason to try to reinvent yourself as an investor. People who make a living by investing either start off with large amounts of capital, a healthy margin on other people's capital because of their assumed knowledge and work ethic, or by lucking out on their friend's business venture they pumped pocket money into growing big fast. I don't think many people got successful investing out of desperation. On the plus side, if you're earning 180k a year, you can acquire the ability to not need to continue to work in your current job - assuming this is your current motivation - far more easily by cutting your living costs and investing simply and passively. The difference between 8% and 12% return on your savings entails a lot of investment skill and luck; the difference between spending $20k per month and $10k per month not so much.

LeoSolaris 8y ago

A large enough amount of money to be reasonably good with a 2% ROI, then stash it all in blue chips that are somewhat stable-ish. That way you're not temped to do much change to which stocks you have. Hire a financial advisor that actually has a fiduciary duty rather than a salesman in a nice suit, and ask the adviser to treat your fortune like retiree money. Basically, the only way to have a better than slim chance to live off of investing is to have a good deal of money to live off of the interest.

quietthrow 8y ago
I firmly believe no one will care for your money than you. In that sense I don’t trust financial advisors fully. I would use them the get knowledge on options I have for a specific scenario. To have a large amount of money in the first place I would need to make a living and when I get good at it I would be able to (hopefully) green rate the large amount of money. I want to be able to make a living by avoiding the 9-5 which have too many variables for me to make a large amount of money- promotions; working on right project ; find a diff project cos this one didn’t have the right growth opportunity. I would much rather focus on one thing and compound my knowledge,skills and abilities. Hence the investing/trading route.

deleted 8y ago

[deleted]

codegeek 8y ago

If you have no experience trading stocks yet, the best bet is to make enough money so that you can get a rate of return. S&P over the last 100 years has returned an average of about 10%. So to make 180K gross, I would say you need $1.8 Million cash and then invest in S&P ? If you don't have that, you are in for real fun. I mean most people lose money in stocks or investments. Heck, my 401K investment funds cannot even beat S&P on a constant basis and I have tried to rebalance the heck out of portfolio. I am sure there are folks making 180K gross by investing in stocks but I would bet most of them do that because they have plenty of cash/capital already that generates something along S&P index.

altairiumblue 8y ago

What's needed: - large amounts of capital. if you want to be earning $180k/year that would be in the millions. - being able to handle losing money without your judgement being affected There are many other factors but I'll stop here because in one of your comments you mentioned how you believe that you can succeed because you're passionate and your back is against the wall. Those are the opposite of the two points above.

quietthrow 8y ago
Good points. What are the other factors ? I said what I said in another comment cos the comment prior to that completely missed the point and all it said was how it couldn’t be done because you are not a prodigy. While what I said is true I know it’s not the only thing I need. Else I wouldn’t post.
- airbreather 8y ago
  Often luck plays a significant part, but those that got lucky won't admit it or see it. Two kinds of luck - dumb luck, like you fat fingered a large trade in AAP instead of APP, just at a lucky time. Then there is sizing luck, noticing small/unusual things ignored or out of sight by others and acting to capatilise. The bottom line is for every winning trade, a losing trade occurred and if it was easy, everyone would do it. Sounds like you are heading to fund someone else's new Tesla via process known as wealth transferrance. Why not just cut the process short and place a series of largest allowed bets on 13 Black, probably better odds and near instant discovery.

marketgod 8y ago

Trade options. Save up $300K, and then doing 50% is not really hard to do. If you are trading options, you can do 100% per year, but just aiming for 50% is a good number, making sure you cut losers, and let winners run. $180K is a high salary to aim for though. For example, what I recommend is $30K if you want to double your account, but you would go into 5 plans at once, for $1,000 per plan. So if they all fail, you still have 4-6 more attempts (some plans can go for $2000), to rebuild the account. With a $300K account, going $20K per trade, is reasonable enough to do 50% per year. It's risky, but exciting, and doable.