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This reads like a request for a startup to teach people how to pick stocks. I am not sure this would be particularly useful, and I fear it could be dangerous. T

This reads like a request for a startup to teach people how to pick stocks. I am not sure this would be particularly useful, and I fear it could be dangerous. There is plenty of evidence that the average investor, instead of obsessing over the return on investment, would be better off putting their money in index funds and focusing on things that are in their control, like their savings rate, (tax-efficient) asset allocation, or minimizing investment fees. There is no shortage of accessible material on the subject. Also: "The old model of financial advisors, mutual fund managers and brokers is dying fast." Is there any evidence to support this? I.e., are mutual fund managers making less money? And if formally trained investment professionals, as an aggregate, are not good at managing money, is it reasonable to think that individuals will do better with a code academy for stocks?

nirvana 15y ago
Do you have any evidence to supper your assertion that it is dangerous to train people in investing? I know its popular for people to throw up their hands and give up and claim that index funds are the way to go. I also know that many people who have done so, would prefer to think that they are doing the smart thing, and so they claim that this is the smart thing, despite the fact that it is really easy for anyone who thinks about it for a few minutes to beat those returns. Take an index- say the Dow Jones[1]. The companies in the index don't change very often at all. It would be very easy to buy a few shares of each company and simply hold them. You have the commission fees in the first year, but with discount brokers, that's pretty small, and then there would be no more fees. Meanwhile the people who gave up and just handed their money over to be "managed" in an index mutual fund are paying %1-%2 a year in fees. Spending an hour making a spreadsheet and you can keep your replica of the Dow Jones balanced by adjusting where you put new money in. Why pay %2 of your investment, every year, to managers for something that would take you an hour to do once? Over 10 years that's %20 of your investment, not even counting the effects of compounding. Over 40 years that's %80 of your investment, not counting the effects of compounding which will be much more significant. [1] IF you don't have the funds to buy the whole index, you can buy just the heaviest weighted ones. Further, when companies do leave or get added to the index, you can trade this when its announced, rather than have to wait like the index fund does, which means you get a better return because the index has to buy them after they've appreciated due to being announced as being added to the index.
- imp 15y ago
  Most good index funds have fees much less than 1%. Vanguard offers them for about a 0.15% fee.
  - nirvana 15y ago
    That sounds small, but compound it [monthly/quarterly] over a decade.... and I think that this is the fee that they charge on top of your money, but that there are also fees embedded in the funds that cause the returns to slightly underperform the actual index by the amount of the fee (though its been awhile and the laws may have have changed.) Even if that is the total fee, at the end of the day, you're getting a market return minus that fee. This is not success. It is not difficult to beat the market, nor to do it over the long term. It just takes a little bit of knowledge and a little bit of discipline.
    - yannickt 15y ago
      "It is not difficult to beat the market, nor to do it over the long term." Yet most active fund managers, who I assume are not stupid, do not beat the market over the long term.
      - nirvana 15y ago
        Their incentive is to earn fees for their company first, and then beat the market, second. And yet you advise people to pay them inordinate sums to underperform the market. I love how I'm getting voted down for pointing out simple and obvious facts. I take down votes without counter arguments as proof that the people I'm debating are expressing a religious, rather than rational, perspective. That's fine, believe what you like. Just don't try to persuade me with such assertions.
        yannickt 15y ago
        I never advised anything of the sort. You're putting words in my mouth.

nirvana 15y ago

Do you have any evidence to supper your assertion that it is dangerous to train people in investing? I know its popular for people to throw up their hands and give up and claim that index funds are the way to go. I also know that many people who have done so, would prefer to think that they are doing the smart thing, and so they claim that this is the smart thing, despite the fact that it is really easy for anyone who thinks about it for a few minutes to beat those returns. Take an index- say the Dow Jones[1]. The companies in the index don't change very often at all. It would be very easy to buy a few shares of each company and simply hold them. You have the commission fees in the first year, but with discount brokers, that's pretty small, and then there would be no more fees. Meanwhile the people who gave up and just handed their money over to be "managed" in an index mutual fund are paying %1-%2 a year in fees. Spending an hour making a spreadsheet and you can keep your replica of the Dow Jones balanced by adjusting where you put new money in. Why pay %2 of your investment, every year, to managers for something that would take you an hour to do once? Over 10 years that's %20 of your investment, not even counting the effects of compounding. Over 40 years that's %80 of your investment, not counting the effects of compounding which will be much more significant. [1] IF you don't have the funds to buy the whole index, you can buy just the heaviest weighted ones. Further, when companies do leave or get added to the index, you can trade this when its announced, rather than have to wait like the index fund does, which means you get a better return because the index has to buy them after they've appreciated due to being announced as being added to the index.

imp 15y ago
Most good index funds have fees much less than 1%. Vanguard offers them for about a 0.15% fee.
- nirvana 15y ago
  That sounds small, but compound it [monthly/quarterly] over a decade.... and I think that this is the fee that they charge on top of your money, but that there are also fees embedded in the funds that cause the returns to slightly underperform the actual index by the amount of the fee (though its been awhile and the laws may have have changed.) Even if that is the total fee, at the end of the day, you're getting a market return minus that fee. This is not success. It is not difficult to beat the market, nor to do it over the long term. It just takes a little bit of knowledge and a little bit of discipline.
  - yannickt 15y ago
    "It is not difficult to beat the market, nor to do it over the long term." Yet most active fund managers, who I assume are not stupid, do not beat the market over the long term.
    - nirvana 15y ago
      Their incentive is to earn fees for their company first, and then beat the market, second. And yet you advise people to pay them inordinate sums to underperform the market. I love how I'm getting voted down for pointing out simple and obvious facts. I take down votes without counter arguments as proof that the people I'm debating are expressing a religious, rather than rational, perspective. That's fine, believe what you like. Just don't try to persuade me with such assertions.
      - yannickt 15y ago
        I never advised anything of the sort. You're putting words in my mouth.