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As a retail investor, you should buy an index fund and then forget about it. By the time you have read this article, the professionals and their computers will

by eru 3mo ago

As a retail investor, you should buy an index fund and then forget about it. By the time you have read this article, the professionals and their computers will have digested that material a thousand times over and have priced it in. To be more precise: buy the lowest cost most diversified index fund you can buy and then hold it. If you want to spend some smarts to get a better return: look at how to minimise taxes and fees.

worik 3mo ago
> As a retail investor, you should buy an index fund and then forget about it. That definitely was true. I am unsure it is still true. Index funds have taken so much of the trade volume the are becoming momentum strategies So long as you are happy following the market wherever it goes, and if the recent past is a guide then up is the direction, then yes. But given the nepotism and corruption in the highest reaches of USAnian society (e.g. Trump's crypto currency scams and the blatant inside dealing and rule ignoring of the Space X float) the future looks much less certain than the past
- collabs 3mo ago
  The future always has risks but the question is that does an option better than index funds exist?
  - eru 3mo ago
    Depending on jurisdiction and taxation, yes. Eg in many places owner-occupied housing is favoured, and might make sense to acquire, even though otherwise it's silly: a single lumpy usually highly levered position; no diversification; multiple times your networth and with very high transaction costs.
- eru 3mo ago
  > I am unsure it is still true. Index funds have taken so much of the trade volume the are becoming momentum strategies I don't understand how that's supposed to work? Btw, keep in mind that index funds are typically really, really keen to lend their shares out to short sellers. > But given the nepotism and corruption in the highest reaches of USAnian society (e.g. Trump's crypto currency scams and the blatant inside dealing and rule ignoring of the Space X float) the future looks much less certain than the past That's a big part of why I am invested in a global index fund, not anything America specific.
dgellow 3mo ago
> By the time you have read this article, the professionals and their computers will have digested that material a thousand times over and have priced it in. I think you overestimate traders. What we call smart money is very often really, really dumb from a macro perspective. Professional traders believe hype and follow trends. There is still at least 2 thesis playing out at the moment for the AI trade, and you don’t need to be a professional trader to take part: one is the AI impact on saas (the market has been very bearish on SaaS companies, and still hasn’t corrected meaningfully), and the ai infrastructure (hardware companies + hyperscalers)
- eru 3mo ago
  The average professional trader might not be that smart, who knows. But: (A) I am not confident I am smarter than the average professional trader here. (B) You don't need to win against the average professional trader: you need to win against the smartest ones. And: I'm not so sure I am smarter than the average professional trader anyway. About your theses: my null hypothesis is that these things are already priced in.
  - dgellow 3mo ago
    You actually don't need to win against the smartest ones, it's not really who is on the other side of the trade. There is an interesting dynamic where the space where retail investors operate isn't really the same space as the "smart money", and because of that there are a lot of small-ish arbitrage opportunities that you can advantage based on your industry expertise (I don't mean insider trading, I mean your understanding regarding how your industry is evolving). Relying on an ETF is perfectly fine, it's way less stressful and gives you the safe-ish exposure to the market most people want. But if you want to do active trading by picking stocks (and you don't mind risking losing your money), you really don't need anything too sophisticated. That being said I would really not recommend people who don't have money and time to lose to actively invest. It's a fun hobby and can be pretty profitable, but not for everyone
    - eru 3mo ago
csomar 3mo ago
I wonder with the spacex thing if this should be revised. “Smart money” have figured out what you are doing and they are at the gates.
- eru 3mo ago
  Sorry, could you please explain? For the record, I deliberately picked an index fund (VWRA) that's not choosy about who to admit, so SpaceX would have been in there pretty quickly no matter what shenanigans they are doing with the S&P500.
  - csomar 3mo ago
    Introduce a vapid company(ies) to the index that will have no future cash-flow and withdraw the liquidity to these "investments". If your index fund has SpaceX in it, Elon musk has basically funneled money out of your retirement account to his insanity rides. If you think SpaceX has even a minuscule chance of succeeding then this conversation doesn't make sense to carry on.
    - eru 3mo ago
      There's like a few thousand companies in the index my ETF is following. I don't have opinions on every last one of them. I just (automatically) follow the market consensus. Keep in mind that index funds are generally really, really keen to lend out their shares to short sellers, too.
rapind 3mo ago
I think there is now so much passive investing that wall street and tech bros are gaming it, and it's no longer based in reality (fundamentals). I mean Elon's deal to get SPCX short listed with NASDAQ was directly targeted at 401(k)s. Not sure how it's all going to play out, but this ginormous increase in passive investing over the past decade or so, mainly in S&P 500, seems like a vulnerability. Small cap might be a better (non-sexy) target long term.
- eru 3mo ago
  > I think there is now so much passive investing that wall street and tech bros are gaming it, Yes, they are supposed to! And they are supposed to compete for the privilege. That's how index funds can add and remove stuff from the index so cheaply. I agree that the S&P500 is not an optimal index. I picked something (VWRA) that's more diversified and less picky about who to admit.
ghtbircshotbe 3mo ago
I like it how morningstar provides a graph of the stock price and morningstar's target price for the past few years, and the target price always closely follows the stock price, even as the stock price fluctuates wildly. All that genius analysis somehow concludes that the company is worth exactly what the market says it is, right up to the point that it doubles/halves in price.
Eddy_Viscosity2 3mo ago
How does 'the market' properly set prices if everyone blindly buying the same things without any discriminators?
- dgellow 3mo ago
  depends entirely on your definition of price. But generally speaking, the idea that the stock market is efficient at allocating resources is just not true. It's an ok-ish thing to say for a 101 course (i.e a first introduction) on the topic, but it very quickly becomes clear how inefficient things can be in practice
  - eru 3mo ago
    Could you please elaborate?
- eru 3mo ago
  What do you mean by everyone? Btw, keep in mind that index funds are really keen to lend out their shares to short sellers.

by eru 3mo ago

worik 3mo ago

> As a retail investor, you should buy an index fund and then forget about it. That definitely was true. I am unsure it is still true. Index funds have taken so much of the trade volume the are becoming momentum strategies So long as you are happy following the market wherever it goes, and if the recent past is a guide then up is the direction, then yes. But given the nepotism and corruption in the highest reaches of USAnian society (e.g. Trump's crypto currency scams and the blatant inside dealing and rule ignoring of the Space X float) the future looks much less certain than the past

collabs 3mo ago
The future always has risks but the question is that does an option better than index funds exist?
- eru 3mo ago
  Depending on jurisdiction and taxation, yes. Eg in many places owner-occupied housing is favoured, and might make sense to acquire, even though otherwise it's silly: a single lumpy usually highly levered position; no diversification; multiple times your networth and with very high transaction costs.
eru 3mo ago
> I am unsure it is still true. Index funds have taken so much of the trade volume the are becoming momentum strategies I don't understand how that's supposed to work? Btw, keep in mind that index funds are typically really, really keen to lend their shares out to short sellers. > But given the nepotism and corruption in the highest reaches of USAnian society (e.g. Trump's crypto currency scams and the blatant inside dealing and rule ignoring of the Space X float) the future looks much less certain than the past That's a big part of why I am invested in a global index fund, not anything America specific.

dgellow 3mo ago

> By the time you have read this article, the professionals and their computers will have digested that material a thousand times over and have priced it in. I think you overestimate traders. What we call smart money is very often really, really dumb from a macro perspective. Professional traders believe hype and follow trends. There is still at least 2 thesis playing out at the moment for the AI trade, and you don’t need to be a professional trader to take part: one is the AI impact on saas (the market has been very bearish on SaaS companies, and still hasn’t corrected meaningfully), and the ai infrastructure (hardware companies + hyperscalers)

eru 3mo ago
The average professional trader might not be that smart, who knows. But: (A) I am not confident I am smarter than the average professional trader here. (B) You don't need to win against the average professional trader: you need to win against the smartest ones. And: I'm not so sure I am smarter than the average professional trader anyway. About your theses: my null hypothesis is that these things are already priced in.
- dgellow 3mo ago
  You actually don't need to win against the smartest ones, it's not really who is on the other side of the trade. There is an interesting dynamic where the space where retail investors operate isn't really the same space as the "smart money", and because of that there are a lot of small-ish arbitrage opportunities that you can advantage based on your industry expertise (I don't mean insider trading, I mean your understanding regarding how your industry is evolving). Relying on an ETF is perfectly fine, it's way less stressful and gives you the safe-ish exposure to the market most people want. But if you want to do active trading by picking stocks (and you don't mind risking losing your money), you really don't need anything too sophisticated. That being said I would really not recommend people who don't have money and time to lose to actively invest. It's a fun hobby and can be pretty profitable, but not for everyone
  - eru 3mo ago

csomar 3mo ago

I wonder with the spacex thing if this should be revised. “Smart money” have figured out what you are doing and they are at the gates.

eru 3mo ago
Sorry, could you please explain? For the record, I deliberately picked an index fund (VWRA) that's not choosy about who to admit, so SpaceX would have been in there pretty quickly no matter what shenanigans they are doing with the S&P500.
- csomar 3mo ago
  Introduce a vapid company(ies) to the index that will have no future cash-flow and withdraw the liquidity to these "investments". If your index fund has SpaceX in it, Elon musk has basically funneled money out of your retirement account to his insanity rides. If you think SpaceX has even a minuscule chance of succeeding then this conversation doesn't make sense to carry on.
  - eru 3mo ago
    There's like a few thousand companies in the index my ETF is following. I don't have opinions on every last one of them. I just (automatically) follow the market consensus. Keep in mind that index funds are generally really, really keen to lend out their shares to short sellers, too.

rapind 3mo ago

I think there is now so much passive investing that wall street and tech bros are gaming it, and it's no longer based in reality (fundamentals). I mean Elon's deal to get SPCX short listed with NASDAQ was directly targeted at 401(k)s. Not sure how it's all going to play out, but this ginormous increase in passive investing over the past decade or so, mainly in S&P 500, seems like a vulnerability. Small cap might be a better (non-sexy) target long term.

eru 3mo ago
> I think there is now so much passive investing that wall street and tech bros are gaming it, Yes, they are supposed to! And they are supposed to compete for the privilege. That's how index funds can add and remove stuff from the index so cheaply. I agree that the S&P500 is not an optimal index. I picked something (VWRA) that's more diversified and less picky about who to admit.

ghtbircshotbe 3mo ago

I like it how morningstar provides a graph of the stock price and morningstar's target price for the past few years, and the target price always closely follows the stock price, even as the stock price fluctuates wildly. All that genius analysis somehow concludes that the company is worth exactly what the market says it is, right up to the point that it doubles/halves in price.

Eddy_Viscosity2 3mo ago

How does 'the market' properly set prices if everyone blindly buying the same things without any discriminators?

dgellow 3mo ago
depends entirely on your definition of price. But generally speaking, the idea that the stock market is efficient at allocating resources is just not true. It's an ok-ish thing to say for a 101 course (i.e a first introduction) on the topic, but it very quickly becomes clear how inefficient things can be in practice
- eru 3mo ago
  Could you please elaborate?
eru 3mo ago
What do you mean by everyone? Btw, keep in mind that index funds are really keen to lend out their shares to short sellers.