12 ms·

The Retreat of the Amateur Investors

43 points by lxm 4y ago

dvt 4y ago
> while betting roughly $35,000 that they would beat the Los Angeles Rams and go on to win the Super Bowl. They lost. These are definitely not investors, and they aren't even traders. They're /r/wallstreetbets gambling addicts. Most of them don't have trading "systems" (no, joining a Discord doesn't count), most follow technical analysis as if it were the Delphic Oracle, most mainly gained in the ridiculously bullish markets of 2020-2021 (I don't know anyone that lost money during that bull run), and most buy and sell options (which are meant to be used as hedging, not investment, instruments). I almost doubled my (non-index) portfolio by making the most obvious plays ever (durr, airlines will probably go back up, casinos will probably go back up, cruise lines will probably go back up). Now, it's much harder to make free money, so yeah, they're "retreating" if you can call it that. But really, sideways/bearish markets are the true test of an investor, not the frenzy of bullish rallies. There's a handful of brilliant people on WSB (like DFV, among others, which are actually good, albeit high risk, traders), but after their coverage in NYT a few years ago, it's just become a cesspool
- elil17 4y ago
  >I almost doubled my (non-index) portfolio by making the most obvious plays ever (durr, airlines will probably go back up, casinos will probably go back up, cruise lines will probably go back up). I would argue that these were not the "most obvious plays ever." Airlines were making most of their money from business travel. It wasn't necessarily foreseeable that business travel would rebound somewhat and that increased leisure travel would make up the rest of the difference. Additionally, you should really compare your performance to how a baseline investment would have performed over the same time period. VT almost doubled from the the start of the pandemic to the market's peak, so it is not really fair to say that you traded your way into doubling your portfolio.
  - DontchaKnowit 4y ago
    There were plenty of opportunities to lose money during that period. Doubling your money is fucjing fantastic no matter how you slice it. Let the guy have his win lmao
    - elil17 4y ago
      There was no opportunity to lose money if you diversified with an index fund or frankly even an actively managed fund. For every one of these guys their is another who lost money compared to the market. People should not push the narrative that you can make money from stock picking when it's just not true in any practical way.
      - DontchaKnowit 4y ago
        you're wrong about that
    - madaxe_again 4y ago
      In the market that we’ve had these past few years, it’s reasonable performance. Me, I just buy and hold on undervalued companies that make sausage machines rather than sausages, have been for a decade, and I’ve seen an overall gain of 38,000%. No leverage, as my strategy occasionally entails watching everything slowly decline 20% during from time to time — but I bought equities in businesses that I believed had legs at the time, and continue to do so for the same reason.
  - duxup 4y ago
    Airlines are also weird in that at times they're more than willing to compete like crazy and eat brutal losses. And then suddenly not ...
  - ghaff 4y ago
    I'm actually surprised by the degree to which business travel has bounced back--especially given that in the tech sector anyway, a lot of companies are scrutinizing travel expenses very carefully.
- rcme 4y ago
  > As his gains swelled, so did his spending on everything from sports betting and bars to luxury cars. The sports betting wasn't part of his investing strategy. This feels like a "No True Scotsman" fallacy to say these people aren't really investors.
- deleted 4y ago
  [deleted]
- maximinus_thrax 4y ago
  I don't understand this comment. Do you have a problem with the terminology? Or with those investors in particular or with how they actually made their money or... ? To me it reads sort of like gatekeeping on who should have access to the market based on the lack of trading 'system' or whatever that means. Reminds me of the hedgies touting about the 'fundamentals' during the GME saga.
  - tptacek 4y ago
    People are right to be cynical and critical of the GME fundamentals. It's a meme, not an investment.
    - maximinus_thrax 4y ago
      it can be both a meme and an investment. If someone buys GME, while they hold the stock, they're by definition an investor.
      - tptacek 4y ago
        That's like saying you're an investor at the table as long as the roulette ball is still moving.
        maximinus_thrax 4y ago
        So you're saying that the market is like a casino? Fair enough, then. But no, you're an investor as long as you have money on the table.
        tptacek 4y ago
        No, I'm saying that GME is like a casino. That was an extremely lame attempt at an assumptive close.
        maximinus_thrax 4y ago
- sakopov 4y ago
  He was making sport bets with the money he made from trading. The article doesn't use this to illustrate his trading strategy, but rather explain how he lost the money he made.
- WalterBright 4y ago
  I finally realized what the difference between gambling and investing was. Gambling - mathematically, you're going to lose over time. This is why blackjack, the lottery, and sports betting are gambling. Every system that has payouts based on what people put in, minus a cut for the bookie, is in this category. Investing - the mathematical odds are in your favor. Stocks, real estate, etc., as the payouts are based on the ongoing creation of value.
  - chii 4y ago
    So what do you classify poker as? Gambling? There's no house in poker (cept for the fees for the dealer, which i would assume is fixed).
    - WalterBright 4y ago
      Good question! For most people (myself included) it's a zero-sum game of luck, and a loser if the house takes a cut. For some people who dedicate their lives to it, it's a game of skill, and an investment when played against lesser mortals. If you're betting on the players in the game, then it's clearly gambling.
    - cafard 4y ago
      https://www.gutenberg.org/cache/epub/3189/pg3189-images.html#science https://www.gutenberg.org/cache/epub/3189/pg3189-images.html...
  - reducesuffering 4y ago
    Blackjack as an example doesn’t work for the card counters that have +EV which can be had in a half day of reading / memorizing and $5k bankroll. Technically, their investment EV is far higher than stocks and bonds. Could be on the order of 2% per day, if it wasn’t for those meddling back offs and limits.
    - WalterBright 4y ago
      The casinos know about card counters and throw them out. They also employ countermeasures: 1. limit the amount of bets 2. using multiple decks 3. reshuffling the decks long before the deck runs out making the return so miniscule as to be a waste of time.
- dragontamer 4y ago
  > (durr, airlines will probably go back up, casinos will probably go back up, cruise lines will probably go back up). Don't forget the mother of all obvious plays. "Maybe crude oil's true price is higher than -$40 per barrel" (yes, negative dollars). EDIT: To be fair, oil traders got burned in the short term by calling the bottom at $10, $5, $0, -$5, -$10, or -$20. Showing the complications around "calling the bottom". Yes, it turns out, that the price of oil can collapse to spectacularly low values. Still, the price of oil did in fact recover above these levels, so buying oil at any of these entry points would have netted easy wins over the next couple of years.
- blippage 4y ago
  > not the frenzy of bullish rallies. One maxim I heard: in a bull market, the less you know, the more you make.
WeylandYutani 4y ago
The Netherlands is a country where everyone saves. It's in the blood. But with low interest rates people were forced to invest instead of traditional saving accounts. Not that long ago you had to PAY the banks to hold your money. Crazy times.
- nebula8804 4y ago
  How do they prevent their money eventually going to 0 (on a long enough time horizon)?. Did they use to have very high rates of return in savings accounts? What about during the times you had to pay the bank to hold your money?
- zie 4y ago
  If you are talking in real terms(i.e. after inflation adjustments), you still end up paying banks to hold your money.
hef19898 4y ago
>> Mr. Ghias says he thought the Fed was bluffing I am not actively investing, but I do now central banks are not playing against anyone on any market. When they announce, they follow up with policy, the announcement is to ease the market into it. Betting against that is, well, not so smart.
- bagacrap 4y ago
  The Fed definitely does try to manipulate markets by talking a big game they may or may not follow through with. The Fed has one set of projections and the bond market has another.
thenerdhead 4y ago
When I think of the word amateur investor, I think of a young someone who saves more than they earn, starts to put money in the market to work, and sits on their ass while learning more about it. I do not think of part-time gamblers or day traders.
- chii 4y ago
  An amateur is someone who is doing it (whatever "it" is) without being paid by someone a fee to do it. An amateur investor is someone who is investing their own money. A professional investor is an investor who is being paid by somebody else (a fee of some kind) to do the investing on their behalf. Amateur/professional doesn't refer to the method they invest using. They could be using gold-fish to tell them what to buy, or they could be using sophisticated computer and math models to buy/sell.
  - deleted 4y ago
    [deleted]
  - thenerdhead 4y ago
    I don’t think we share the same definitions. Thanks for the comment though.
ggm 4y ago
Its paywalled so I can comment initially only to the teaser. He's a "trader" not an investor. amateur traders are quite different to investors. If the article actually says there is a function here for individuals to direct preferences, and somehow "inform the market" well ok, wisdom of crowds. If the article really means "a giant suck hole of chumps we can rip off because we know more than them, and they have sentiment, and enough stake to lose to make it worthwhile" thats kind of .. wall street bets but in a newspaper.
- shagie 4y ago
  Gift link (no paywall) - https://www.wsj.com/articles/the-retreat-of-the-amateur-investors-11675486817?st=lqxnb85vrkldll2&reflink=desktopwebshare_permalink https://www.wsj.com/articles/the-retreat-of-the-amateur-inve...
  - ggm 4y ago
    Thanks. As I expected, there's a conflation of day traders, and players against investors. Lots of people acquire things and hold. They pay some intermediary to perform the trades, but they aren't doing active trading, because their investment strategy is buy and hold. So, observations to the size of the amount of non-funds amateur investors? on the money. But assuming their movements is a function of people who read some $25 "how to make money trading from home" seems to me to be faulty journalism. I very much doubt active traders (people with more than one transaction per week let us say) is the scale of the market of concern here. I think its far more likely as people look at income from holding, the relative worth compared to initial investment, and availability of income stream products and investments they're moving out of shares and into other things. Pensioners do that. They're not all get-rich-quick fantasists. The illustration and their quips to returning to $14/h jobs in Vegas are not really a national trend as much as seniors pulling out of direct shares into EFT, or property, or income stream products from banks.
- llampx 4y ago
  Unless you can and do read financial documents and have a say at the investor relations meetings, you're more likely a trader relying on being able to sell your shares for a greater price than you bought them for, than an investor. Let's be real. 100 shares of a billion or trillion dollar market cap company does not an investor make.
abudabi123 4y ago
Investors retreat to Giga Texas for Mar 1 event. The future is bright.
- cactusplant7374 4y ago
  Is it a software company? Or an energy company? Or a car company?
- dylan604 4y ago
  No, the stars at night are, and big
LatteLazy 4y ago
https://archive.ph/g3zwJ https://archive.ph/g3zwJ
LatteLazy 4y ago
One of the proper, necessary functions of any investment market is to take money away from people who do the wrong things with it. That is how the system is MEANT to work. "I am an amateur who guessed randomly and threw money at things I didn't understand" is a confession, not a defence.
- seydor 4y ago
  If you are saying that the CEO of every company that defrauded/did something criminal to other people should be forced to pay back the stock to the people who invested in it, then yes, let's see it
- marginalia_nu 4y ago
  > One of the proper, necessary functions of any investment market is to take money away from people who do the wrong things with it. Why is that?
  - paulmd 4y ago
    because someone has to be on the other side of every transaction and socially because the goal of the system is to get participants to behave in "optimal" fashion, for a certain very specific definition of "optimal".
  - reeboo 4y ago
    Because ideas that don't add value should not be pursued, else you are wasting resources. Imagine how dysfunctional the world would be if you could never loose money investing in something.
    - marginalia_nu 4y ago
      In what sense would such a world be dysfunctional?
      - reeboo 4y ago
        Imagine you invested $100 into my company. Let's say my company specialized in doing absolutely nothing, as in, the company had a bank account and produced/sold nothing. In our little toy world where you always make money on investments, two weeks in I returned $150 to you (you've made $50). This brings up questions like "where did that extra $50 come from", but maybe you get the point of the original comment now.

43 points by lxm 4y ago

dvt 4y ago

> while betting roughly $35,000 that they would beat the Los Angeles Rams and go on to win the Super Bowl. They lost. These are definitely not investors, and they aren't even traders. They're /r/wallstreetbets gambling addicts. Most of them don't have trading "systems" (no, joining a Discord doesn't count), most follow technical analysis as if it were the Delphic Oracle, most mainly gained in the ridiculously bullish markets of 2020-2021 (I don't know anyone that lost money during that bull run), and most buy and sell options (which are meant to be used as hedging, not investment, instruments). I almost doubled my (non-index) portfolio by making the most obvious plays ever (durr, airlines will probably go back up, casinos will probably go back up, cruise lines will probably go back up). Now, it's much harder to make free money, so yeah, they're "retreating" if you can call it that. But really, sideways/bearish markets are the true test of an investor, not the frenzy of bullish rallies. There's a handful of brilliant people on WSB (like DFV, among others, which are actually good, albeit high risk, traders), but after their coverage in NYT a few years ago, it's just become a cesspool

elil17 4y ago
>I almost doubled my (non-index) portfolio by making the most obvious plays ever (durr, airlines will probably go back up, casinos will probably go back up, cruise lines will probably go back up). I would argue that these were not the "most obvious plays ever." Airlines were making most of their money from business travel. It wasn't necessarily foreseeable that business travel would rebound somewhat and that increased leisure travel would make up the rest of the difference. Additionally, you should really compare your performance to how a baseline investment would have performed over the same time period. VT almost doubled from the the start of the pandemic to the market's peak, so it is not really fair to say that you traded your way into doubling your portfolio.
- DontchaKnowit 4y ago
  There were plenty of opportunities to lose money during that period. Doubling your money is fucjing fantastic no matter how you slice it. Let the guy have his win lmao
  - elil17 4y ago
    There was no opportunity to lose money if you diversified with an index fund or frankly even an actively managed fund. For every one of these guys their is another who lost money compared to the market. People should not push the narrative that you can make money from stock picking when it's just not true in any practical way.
    - DontchaKnowit 4y ago
      you're wrong about that
  - madaxe_again 4y ago
    In the market that we’ve had these past few years, it’s reasonable performance. Me, I just buy and hold on undervalued companies that make sausage machines rather than sausages, have been for a decade, and I’ve seen an overall gain of 38,000%. No leverage, as my strategy occasionally entails watching everything slowly decline 20% during from time to time — but I bought equities in businesses that I believed had legs at the time, and continue to do so for the same reason.
- duxup 4y ago
  Airlines are also weird in that at times they're more than willing to compete like crazy and eat brutal losses. And then suddenly not ...
- ghaff 4y ago
  I'm actually surprised by the degree to which business travel has bounced back--especially given that in the tech sector anyway, a lot of companies are scrutinizing travel expenses very carefully.
rcme 4y ago
> As his gains swelled, so did his spending on everything from sports betting and bars to luxury cars. The sports betting wasn't part of his investing strategy. This feels like a "No True Scotsman" fallacy to say these people aren't really investors.
deleted 4y ago
[deleted]
maximinus_thrax 4y ago
I don't understand this comment. Do you have a problem with the terminology? Or with those investors in particular or with how they actually made their money or... ? To me it reads sort of like gatekeeping on who should have access to the market based on the lack of trading 'system' or whatever that means. Reminds me of the hedgies touting about the 'fundamentals' during the GME saga.
- tptacek 4y ago
  People are right to be cynical and critical of the GME fundamentals. It's a meme, not an investment.
  - maximinus_thrax 4y ago
    it can be both a meme and an investment. If someone buys GME, while they hold the stock, they're by definition an investor.
    - tptacek 4y ago
      That's like saying you're an investor at the table as long as the roulette ball is still moving.
      - maximinus_thrax 4y ago
        So you're saying that the market is like a casino? Fair enough, then. But no, you're an investor as long as you have money on the table.
        tptacek 4y ago
        No, I'm saying that GME is like a casino. That was an extremely lame attempt at an assumptive close.
        maximinus_thrax 4y ago
sakopov 4y ago
He was making sport bets with the money he made from trading. The article doesn't use this to illustrate his trading strategy, but rather explain how he lost the money he made.
WalterBright 4y ago
I finally realized what the difference between gambling and investing was. Gambling - mathematically, you're going to lose over time. This is why blackjack, the lottery, and sports betting are gambling. Every system that has payouts based on what people put in, minus a cut for the bookie, is in this category. Investing - the mathematical odds are in your favor. Stocks, real estate, etc., as the payouts are based on the ongoing creation of value.
- chii 4y ago
  So what do you classify poker as? Gambling? There's no house in poker (cept for the fees for the dealer, which i would assume is fixed).
  - WalterBright 4y ago
    Good question! For most people (myself included) it's a zero-sum game of luck, and a loser if the house takes a cut. For some people who dedicate their lives to it, it's a game of skill, and an investment when played against lesser mortals. If you're betting on the players in the game, then it's clearly gambling.
  - cafard 4y ago
    https://www.gutenberg.org/cache/epub/3189/pg3189-images.html#science https://www.gutenberg.org/cache/epub/3189/pg3189-images.html...
- reducesuffering 4y ago
  Blackjack as an example doesn’t work for the card counters that have +EV which can be had in a half day of reading / memorizing and $5k bankroll. Technically, their investment EV is far higher than stocks and bonds. Could be on the order of 2% per day, if it wasn’t for those meddling back offs and limits.
  - WalterBright 4y ago
    The casinos know about card counters and throw them out. They also employ countermeasures: 1. limit the amount of bets 2. using multiple decks 3. reshuffling the decks long before the deck runs out making the return so miniscule as to be a waste of time.
dragontamer 4y ago
> (durr, airlines will probably go back up, casinos will probably go back up, cruise lines will probably go back up). Don't forget the mother of all obvious plays. "Maybe crude oil's true price is higher than -$40 per barrel" (yes, negative dollars). EDIT: To be fair, oil traders got burned in the short term by calling the bottom at $10, $5, $0, -$5, -$10, or -$20. Showing the complications around "calling the bottom". Yes, it turns out, that the price of oil can collapse to spectacularly low values. Still, the price of oil did in fact recover above these levels, so buying oil at any of these entry points would have netted easy wins over the next couple of years.
blippage 4y ago
> not the frenzy of bullish rallies. One maxim I heard: in a bull market, the less you know, the more you make.

WeylandYutani 4y ago

The Netherlands is a country where everyone saves. It's in the blood. But with low interest rates people were forced to invest instead of traditional saving accounts. Not that long ago you had to PAY the banks to hold your money. Crazy times.

nebula8804 4y ago
How do they prevent their money eventually going to 0 (on a long enough time horizon)?. Did they use to have very high rates of return in savings accounts? What about during the times you had to pay the bank to hold your money?
zie 4y ago
If you are talking in real terms(i.e. after inflation adjustments), you still end up paying banks to hold your money.

hef19898 4y ago

>> Mr. Ghias says he thought the Fed was bluffing I am not actively investing, but I do now central banks are not playing against anyone on any market. When they announce, they follow up with policy, the announcement is to ease the market into it. Betting against that is, well, not so smart.

bagacrap 4y ago
The Fed definitely does try to manipulate markets by talking a big game they may or may not follow through with. The Fed has one set of projections and the bond market has another.

thenerdhead 4y ago

When I think of the word amateur investor, I think of a young someone who saves more than they earn, starts to put money in the market to work, and sits on their ass while learning more about it. I do not think of part-time gamblers or day traders.

chii 4y ago
An amateur is someone who is doing it (whatever "it" is) without being paid by someone a fee to do it. An amateur investor is someone who is investing their own money. A professional investor is an investor who is being paid by somebody else (a fee of some kind) to do the investing on their behalf. Amateur/professional doesn't refer to the method they invest using. They could be using gold-fish to tell them what to buy, or they could be using sophisticated computer and math models to buy/sell.
- deleted 4y ago
  [deleted]
- thenerdhead 4y ago
  I don’t think we share the same definitions. Thanks for the comment though.

ggm 4y ago

Its paywalled so I can comment initially only to the teaser. He's a "trader" not an investor. amateur traders are quite different to investors. If the article actually says there is a function here for individuals to direct preferences, and somehow "inform the market" well ok, wisdom of crowds. If the article really means "a giant suck hole of chumps we can rip off because we know more than them, and they have sentiment, and enough stake to lose to make it worthwhile" thats kind of .. wall street bets but in a newspaper.

shagie 4y ago
Gift link (no paywall) - https://www.wsj.com/articles/the-retreat-of-the-amateur-investors-11675486817?st=lqxnb85vrkldll2&reflink=desktopwebshare_permalink https://www.wsj.com/articles/the-retreat-of-the-amateur-inve...
- ggm 4y ago
  Thanks. As I expected, there's a conflation of day traders, and players against investors. Lots of people acquire things and hold. They pay some intermediary to perform the trades, but they aren't doing active trading, because their investment strategy is buy and hold. So, observations to the size of the amount of non-funds amateur investors? on the money. But assuming their movements is a function of people who read some $25 "how to make money trading from home" seems to me to be faulty journalism. I very much doubt active traders (people with more than one transaction per week let us say) is the scale of the market of concern here. I think its far more likely as people look at income from holding, the relative worth compared to initial investment, and availability of income stream products and investments they're moving out of shares and into other things. Pensioners do that. They're not all get-rich-quick fantasists. The illustration and their quips to returning to $14/h jobs in Vegas are not really a national trend as much as seniors pulling out of direct shares into EFT, or property, or income stream products from banks.
llampx 4y ago
Unless you can and do read financial documents and have a say at the investor relations meetings, you're more likely a trader relying on being able to sell your shares for a greater price than you bought them for, than an investor. Let's be real. 100 shares of a billion or trillion dollar market cap company does not an investor make.

abudabi123 4y ago

Investors retreat to Giga Texas for Mar 1 event. The future is bright.

cactusplant7374 4y ago
Is it a software company? Or an energy company? Or a car company?
dylan604 4y ago
No, the stars at night are, and big

LatteLazy 4y ago

https://archive.ph/g3zwJ https://archive.ph/g3zwJ

LatteLazy 4y ago

One of the proper, necessary functions of any investment market is to take money away from people who do the wrong things with it. That is how the system is MEANT to work. "I am an amateur who guessed randomly and threw money at things I didn't understand" is a confession, not a defence.

seydor 4y ago
If you are saying that the CEO of every company that defrauded/did something criminal to other people should be forced to pay back the stock to the people who invested in it, then yes, let's see it
marginalia_nu 4y ago
> One of the proper, necessary functions of any investment market is to take money away from people who do the wrong things with it. Why is that?
- paulmd 4y ago
  because someone has to be on the other side of every transaction and socially because the goal of the system is to get participants to behave in "optimal" fashion, for a certain very specific definition of "optimal".
- reeboo 4y ago
  Because ideas that don't add value should not be pursued, else you are wasting resources. Imagine how dysfunctional the world would be if you could never loose money investing in something.
  - marginalia_nu 4y ago
    In what sense would such a world be dysfunctional?
    - reeboo 4y ago
      Imagine you invested $100 into my company. Let's say my company specialized in doing absolutely nothing, as in, the company had a bank account and produced/sold nothing. In our little toy world where you always make money on investments, two weeks in I returned $150 to you (you've made $50). This brings up questions like "where did that extra $50 come from", but maybe you get the point of the original comment now.