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I spent three years at one of the world's largest hedge funds. I was a banker for a year before that. Most important lesson I learned: Don't play individual sto
by akharris 14y ago
I spent three years at one of the world's largest hedge funds. I was a banker for a year before that. Most important lesson I learned: Don't play individual stocks and think you have anything more than a gambler's chance of success.
There's a public perception that stocks as an asset are simple to understand - good company=stock goes up! - that is hugely far from the truth. Equity is a complex instrument. The factors influencing the movement of equities are complex.
For the retail investor, the best move is a balanced mixed of assets designed to capture long term market beta - effectively the tendency of asset classes to gain value over time. That's not so easy either, but if you gamble, it's better to gamble on a cornerstone of capitalism as a whole rather than an individual company.
- tosseraccount 14y agoDid your hedge fund outperform an S&P 500 index fund during the long run? Investing in stocks does not have to be complex.
- iamgilesbowkett 14y agoThere's a great infographic that pits human lifespans against this old idea - that investing in the stock market is always a good idea because it goes up in the long run. There were many, many times in the last 100 years where "the long run" was longer than a normal human lifespan.
- akharris 14y agoIt's really important not to think of this as just "invest in the stock market." It's "invest in assets with positive expected return." That means you need to diversify across asset classes, and that doesn't mean domestic and foreign stocks. Also, re: stock market - most people's perception is based on the last 30. That happens to be the longest sustained bull market in history.
- Drbble 14y agoIncluding two crashes.
- mcphilip 14y agoThe more I learn about markets the more comfortable I am with my decision to primarily invest in index tracking ETFs (e.g. SPY). If I want to 'gamble', i'll do something more elaborate like short volatility, but 90% of my capital is deployed following the market's movement, not trying to beat it.
- TomGullen 14y agoThe biggest mistake I see is "The price is plummeting! It's a frickin' bargian!" Have actively tried to stop people investing on that or a similar premise without any luck.
- ams6110 14y agoGlad I didn't think that when I bought AAPL at $14 in 2001.