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Honestly this is why after dipping my toes into this some time back (along with some very limited time spent in crypto without any kind of derivative shenanigan

Honestly this is why after dipping my toes into this some time back (along with some very limited time spent in crypto without any kind of derivative shenanigans) I came full circle back to index funds and just putting what I can away at the end of the month. Are index funds going to make me crazy-bonkers-rich? No, but neither was anything else in all likelihood. What they’re brilliant at is giving me my time and attention back. They’re low risk/reward, and they’re boring. Just like me, as it turns out. Toast to Jack Bogle.

gxs 4y ago
It's fun to me to stock pick and I rather enjoy it fully aware of the risks. My solution is to set aside a small amount for this purpose and the rest, as you said, put away into index funds.
- highwaylights 4y ago
  And I sincerely wish you well with it, I hope you beat the market and have fun doing it! For me, I’ve learned that modest returns over a long period (that I never have to think about) are good enough :-)
- gmadsen 4y ago
  I justify it as its probably better odds than a casino, and more enjoyment. Nothing wrong with a yolo account, if everything else is squared away
deleted 4y ago
[deleted]
spelunker 4y ago
Options in particular are a trap IMO because they require a LOT of active attention to the market day to day, and in the end aren't really worth it. I also dabbled in options a while back, and ditched them after losing much more than I should. I did learn a lot about the stock market while doing options though, so I guess that is a plus.
- CSSer 4y ago
  Your point about the attention required was my takeaway too. I traded paper in college for awhile out of curiosity, and I made a decent amount of "money" doing it too! I was surprised by this because I thought the stock market was insanely difficult to understand and constantly unpredictable beforehand. It was like that but not as often as I expected. For example, intraday movements could often happen at very predictable times. It can also be very cargo cult. Things like technical analysis seem to work (until they don't) only because enough people believe they will, so the signal to noise ratio can be very hard to suss out. Ultimately the time required and risk tolerance for those moonshot chances just didn't add up.
  - deleted 4y ago
    [deleted]
- rootusrootus 4y ago
  > a LOT of active attention to the market day to day Exactly this. I played options for a while, just with my lunch money, because it was fun. But it quickly consumes your life, you have to stay on top of it all the time. The stress is what made me stop doing it.
- 4oo4 4y ago
  This 100%. It's a trap to follow the advice of investment savvy people that recommend higher risk options without taking into consideration the energy it takes to properly manage risky investments if someone isn't doing it for you. They falsely assume that what works for them (higher risk/return investments and closely following the markets for signals) is what also works for normal people that don't follow markets and financial news very much at all. They mean well and are genuinely trying to help people make the most money possible, but it's a huge blind spot that the time/energy/attention costs of investing aren't also taken into consideration. It's the same reason I wouldn't recommend Linux to someone that isn't motivated enough to learn how to use it. It definitely can maximize what you get from your computer, but only at the expense of requiring more responsibility and time to learn how it works. Though, it's far easier to get solid Linux advice than solid investment advice and a bad financial decision is way harder to recover from than a bad technology choice.
neilv 4y ago
Upvote for Bogleheads. I'm a little sore from the market this year (but less this morning, when my ITOT total US stock market index ETF blipped up 4.8%). And I kinda regret that all my AGG (US bonds index ETF) followed advice to be placed in a tax-advantaged account (where it not only didn't take the edge off equities being down, but I can't even tax loss harvest it). But Bogleheads is still looking like the best school of thought.
spacemadness 4y ago
The reasonable approach to options, if you’re not trying to go crazy speculating, seems to me to be hedging strategies. Or selling options to take a little each sale if you don’t mind the somewhat lesser risk dependent on the type of market at play. All that said, that’s my armchair take as I don’t mess with them outside of Wall Street Raider.
- aeternum 4y ago
  They can also make for a great entry/exit strategy: Want to buy and hold a company but think it's a little too expensive right now? Sell a put, and make risk-free return while you wait. Want to sell that tech stock you've been holding once it doubles? Forget your limit order, that's for the boomers over at vanguard. Sell a call today!
  - spacemadness 4y ago
    Apparently I really don’t understand options. Why would you sell a put and not buy a put or alternatively sell a call if you think a stock is going to go down? Or is this saying you believe it’s too high and will remain high likely past the expiration date of the option? Likewise with your second example.
    - aeternum 4y ago
      Selling a put can be thought of as similar to a traditional limit buy order. For example say you think Meta is a buy at $90. But Meta is trading at 109.57, so sell a put with a strike of $90 and collect a premium in return for agreeing to purchase a stock at $90. If the stock hits 90 or below the contract will be executed and you will purchase the shares at $90 (same as you were going to do with a limit order). If it doesn't hit 90, you still pocket the premium. It's like getting paid for having a limit order.
      - MikeDelta 4y ago
        Note that this means that, in a more extreme case, if Meta drops to $40, you still have to buy at $90 via the option, realizing a loss of $50 per contract. It's getting paid for taking on risk. A limit order will execute at your level or better, not worse.
lijogdfljk 4y ago
Recommend any reading to learn index funds?
- d23 4y ago
  I read "The Simple Path to Wealth." But honestly, the TL;DR is pick a low-cost broker (like Vanguard) and put your money into something broad, such as VTI for the United States stock market. You could also mix in a world index and bonds, but the expected return on both are lower. All about your own risk tolerance.
  - polishdude20 4y ago
    Just in case I missed anything... When you consider compound interest, it's not assuming you reinvest that money or anything. You just pick an index fund and keep adding to it every month for years and that's enough?
    - svachalek 4y ago
      Yeah do DRIP (dividend reinvestment) as they'll periodically pay out dividends as cash. DRIP will automatically buy more shares. In a taxable account every time you sell you lose some to taxes, hurting your compounding, so stability is especially important in taxable accounts. As you near retirement age you'll want to slide it towards a more conservative mix; you don't want a 50% stock market crash to add a decade to your career.
    - highwaylights 4y ago
      Great question! I’m not an expert so someone correct any of this that is wrong, but there are broadly speaking two types of funds: Accumulation and Distribution Accumulation funds will do the reinvesting internally, so they really are set-it-and-forget-it vehicles. (Distribution units hold the dividend returns as cash, i dont use these, I’m not really sure why anyone would but I assume there’s a tax reason somewhere).
d23 4y ago
That was basically my conclusion after looking into it for a while. There are countless ways of designing an options trading strategy to bet on exactly what outcome you feel is going to happen. But at the end of the day, I couldn't get past that it was all based off of just that: feelings. And that while I could be monkeying around with options trading and timing, I would be missing out gains realized by just being in the market.
no_wizard 4y ago
whats a good way to start with a Bogle strategy, as it were? I never heard of this before and I'd like to learn more. Is this sorta like a Buffett rule thing?
- riffraff 4y ago
  Look at the bogleheads forum and wiki. The idea is just: invest in an index fund, highly diversified, cheap. There are some variations, like using an equity and bond split, but you can just get a world all cap stock ETF and sit back. That's all. It's hard to accept you don't need to know more than this, but it's what most people should be doing.
- wnolens 4y ago
  I think the book is worth a read if you haven't read anything similar (using index funds as a strategy) - "The Bogleheads' Guide to Investing" else, the forums are where a ton of folks hang out and discuss the minutiae of being boring ;) - https://www.bogleheads.org/forum/index.php https://www.bogleheads.org/forum/index.php
- highwaylights 4y ago
  Basically it’s just invest consistently over a long period and for all purposes forget about the money (or at least consider it in your mind to be beyond use). An index fund is as close as investing gets to a savings account. It’s not a savings account, and will go down if the market does - but the logic is that unless you think it’s the end of the world then it will recover. So you just play the long game and end up retired comfortably (and probably early, depending on when you start and how hard you go at it). Put the 8% you can reasonably expect into a compound return calculator and it’ll give an idea of what to expect. It’s not clairvoyance though - things (good and bad) will happen along the way and the numbers will adjust accordingly from the guesstimate.

gxs 4y ago

It's fun to me to stock pick and I rather enjoy it fully aware of the risks. My solution is to set aside a small amount for this purpose and the rest, as you said, put away into index funds.

highwaylights 4y ago
And I sincerely wish you well with it, I hope you beat the market and have fun doing it! For me, I’ve learned that modest returns over a long period (that I never have to think about) are good enough :-)
gmadsen 4y ago
I justify it as its probably better odds than a casino, and more enjoyment. Nothing wrong with a yolo account, if everything else is squared away

deleted 4y ago

[deleted]

spelunker 4y ago

Options in particular are a trap IMO because they require a LOT of active attention to the market day to day, and in the end aren't really worth it. I also dabbled in options a while back, and ditched them after losing much more than I should. I did learn a lot about the stock market while doing options though, so I guess that is a plus.

CSSer 4y ago
Your point about the attention required was my takeaway too. I traded paper in college for awhile out of curiosity, and I made a decent amount of "money" doing it too! I was surprised by this because I thought the stock market was insanely difficult to understand and constantly unpredictable beforehand. It was like that but not as often as I expected. For example, intraday movements could often happen at very predictable times. It can also be very cargo cult. Things like technical analysis seem to work (until they don't) only because enough people believe they will, so the signal to noise ratio can be very hard to suss out. Ultimately the time required and risk tolerance for those moonshot chances just didn't add up.
- deleted 4y ago
  [deleted]
rootusrootus 4y ago
> a LOT of active attention to the market day to day Exactly this. I played options for a while, just with my lunch money, because it was fun. But it quickly consumes your life, you have to stay on top of it all the time. The stress is what made me stop doing it.
4oo4 4y ago
This 100%. It's a trap to follow the advice of investment savvy people that recommend higher risk options without taking into consideration the energy it takes to properly manage risky investments if someone isn't doing it for you. They falsely assume that what works for them (higher risk/return investments and closely following the markets for signals) is what also works for normal people that don't follow markets and financial news very much at all. They mean well and are genuinely trying to help people make the most money possible, but it's a huge blind spot that the time/energy/attention costs of investing aren't also taken into consideration. It's the same reason I wouldn't recommend Linux to someone that isn't motivated enough to learn how to use it. It definitely can maximize what you get from your computer, but only at the expense of requiring more responsibility and time to learn how it works. Though, it's far easier to get solid Linux advice than solid investment advice and a bad financial decision is way harder to recover from than a bad technology choice.

neilv 4y ago

Upvote for Bogleheads. I'm a little sore from the market this year (but less this morning, when my ITOT total US stock market index ETF blipped up 4.8%). And I kinda regret that all my AGG (US bonds index ETF) followed advice to be placed in a tax-advantaged account (where it not only didn't take the edge off equities being down, but I can't even tax loss harvest it). But Bogleheads is still looking like the best school of thought.

spacemadness 4y ago

The reasonable approach to options, if you’re not trying to go crazy speculating, seems to me to be hedging strategies. Or selling options to take a little each sale if you don’t mind the somewhat lesser risk dependent on the type of market at play. All that said, that’s my armchair take as I don’t mess with them outside of Wall Street Raider.

aeternum 4y ago
They can also make for a great entry/exit strategy: Want to buy and hold a company but think it's a little too expensive right now? Sell a put, and make risk-free return while you wait. Want to sell that tech stock you've been holding once it doubles? Forget your limit order, that's for the boomers over at vanguard. Sell a call today!
- spacemadness 4y ago
  Apparently I really don’t understand options. Why would you sell a put and not buy a put or alternatively sell a call if you think a stock is going to go down? Or is this saying you believe it’s too high and will remain high likely past the expiration date of the option? Likewise with your second example.
  - aeternum 4y ago
    Selling a put can be thought of as similar to a traditional limit buy order. For example say you think Meta is a buy at $90. But Meta is trading at 109.57, so sell a put with a strike of $90 and collect a premium in return for agreeing to purchase a stock at $90. If the stock hits 90 or below the contract will be executed and you will purchase the shares at $90 (same as you were going to do with a limit order). If it doesn't hit 90, you still pocket the premium. It's like getting paid for having a limit order.
    - MikeDelta 4y ago
      Note that this means that, in a more extreme case, if Meta drops to $40, you still have to buy at $90 via the option, realizing a loss of $50 per contract. It's getting paid for taking on risk. A limit order will execute at your level or better, not worse.

lijogdfljk 4y ago

Recommend any reading to learn index funds?

d23 4y ago
I read "The Simple Path to Wealth." But honestly, the TL;DR is pick a low-cost broker (like Vanguard) and put your money into something broad, such as VTI for the United States stock market. You could also mix in a world index and bonds, but the expected return on both are lower. All about your own risk tolerance.
- polishdude20 4y ago
  Just in case I missed anything... When you consider compound interest, it's not assuming you reinvest that money or anything. You just pick an index fund and keep adding to it every month for years and that's enough?
  - svachalek 4y ago
    Yeah do DRIP (dividend reinvestment) as they'll periodically pay out dividends as cash. DRIP will automatically buy more shares. In a taxable account every time you sell you lose some to taxes, hurting your compounding, so stability is especially important in taxable accounts. As you near retirement age you'll want to slide it towards a more conservative mix; you don't want a 50% stock market crash to add a decade to your career.
  - highwaylights 4y ago
    Great question! I’m not an expert so someone correct any of this that is wrong, but there are broadly speaking two types of funds: Accumulation and Distribution Accumulation funds will do the reinvesting internally, so they really are set-it-and-forget-it vehicles. (Distribution units hold the dividend returns as cash, i dont use these, I’m not really sure why anyone would but I assume there’s a tax reason somewhere).

d23 4y ago

That was basically my conclusion after looking into it for a while. There are countless ways of designing an options trading strategy to bet on exactly what outcome you feel is going to happen. But at the end of the day, I couldn't get past that it was all based off of just that: feelings. And that while I could be monkeying around with options trading and timing, I would be missing out gains realized by just being in the market.

no_wizard 4y ago

whats a good way to start with a Bogle strategy, as it were? I never heard of this before and I'd like to learn more. Is this sorta like a Buffett rule thing?

riffraff 4y ago
Look at the bogleheads forum and wiki. The idea is just: invest in an index fund, highly diversified, cheap. There are some variations, like using an equity and bond split, but you can just get a world all cap stock ETF and sit back. That's all. It's hard to accept you don't need to know more than this, but it's what most people should be doing.
wnolens 4y ago
I think the book is worth a read if you haven't read anything similar (using index funds as a strategy) - "The Bogleheads' Guide to Investing" else, the forums are where a ton of folks hang out and discuss the minutiae of being boring ;) - https://www.bogleheads.org/forum/index.php https://www.bogleheads.org/forum/index.php
highwaylights 4y ago
Basically it’s just invest consistently over a long period and for all purposes forget about the money (or at least consider it in your mind to be beyond use). An index fund is as close as investing gets to a savings account. It’s not a savings account, and will go down if the market does - but the logic is that unless you think it’s the end of the world then it will recover. So you just play the long game and end up retired comfortably (and probably early, depending on when you start and how hard you go at it). Put the 8% you can reasonably expect into a compound return calculator and it’ll give an idea of what to expect. It’s not clairvoyance though - things (good and bad) will happen along the way and the numbers will adjust accordingly from the guesstimate.