3 ms·

When newspapers are running headlines about how some stock is going to double in value, it's time to get as far away as possible. Besides, if you're in technol

by mdkess 14y ago

When newspapers are running headlines about how some stock is going to double in value, it's time to get as far away as possible. Besides, if you're in technology, you shouldn't be investing in tech companies. Since most of us are technologists, if we're ever out of a job for the long term, it'll probably because of a downturn in the technology industry. If our savings are in tech companies, our savings will be down too.

cma 14y ago
If "short anything newspapers are touting to double" were a viable strategy, it would quickly cease to be a viable strategy.
- mdkess 14y ago
  Well, strictly yes, of course you are correct. I'm talking about boring investing though - slow, boring returns from boring companies. So when Forbes runs a headlines saying that AAPL will hit $1000, the stock ceases to be boring, and so in my mind, it's time to step aside for a bit.
far_far_away 14y ago
This is so true and I am glad that I am not the only one who thinks that way. In addition to that one could argue that investing in stocks (whatever the industry may be you are investing in) is a bad thing if you are not an insider. My brother who is a hacker and economist at the same time showed me studies that determined/proofed that the stock market is very irrational (I mean we all knew that but those studies showed this with scientific methods). I will ask him about those studies again - may be interesting to others as well.
- 6thSigma 14y ago
  The day to day of the stock market is irrational, but long term investing isn't. If you're putting money in the stock market and not looking out 5+ years, you are simply gambling.
  - far_far_away 14y ago
    This heavily depends on how the companies you are investing in perform in the mid-term. It is true that the stock market out performs other kind of investments but this is only true if you are not investing in let's say 2-3 companies but rather in an index or something similar. Investing in an index is much much less exciting than investing in 2-3 companies.
    - 6thSigma 14y ago
      > It is true that the stock market out performs other kind of investments but this is only true if you are not investing in let's say 2-3 companies but rather in an index or something similar. It depends on what those 2-3 companies are. An index is certainly safer, but if you are good at determining growth prospects then you should absolutely be picking your own stocks.
- mdkess 14y ago
  I think the strategy of buying a diversified portfolio of large, boring companies doing core things that everyone needs is a pretty safe bet. If you're investing, I think that you should have a gambling account too, because it's fun and keeps you interested. It should be far less than 10% of your portfolio, and you should recognize that it's play money instead of real savings.
gte910h 14y ago
I find this especially true for "Employee Stock Purchase Plans" You should buy the stock for a discount and immediately sell it. This is because if the stock price falls, you have a huge chance of being a layoff.
wes-exp 14y ago
if you're in technology, you shouldn't be investing in tech companies Warren Buffett avoided investing in technology companies during the dot-com tech bubble because he didn't understand them. So according to the most legendary investor of all time, understanding what you invest in is crucial. To exclude investing in tech companies because your income comes from tech companies might be a good strategy to diversify and mitigate against short-term market fluctuations. But it's an incredibly stupid strategy if you're shooting for growth and willing to accept some level of risk. Because your tech expertise gives you the best chance of actually investing intelligently in tech.
- dasil003 14y ago
  Leaving aside the eggs-in-a-single-basket aspect, I think being too close could be a liability. You may read a lot of bearish press about Apple that emphasizes market share over profit share completely missing the point of Apple's culture and the fact that foregoing the standard protectionism is what allows them to pursue the next great product so much better than anyone else. You might be totally right in this thinking and yet still be screwed by the market because it's full of speculators subscribing the conventional wisdom. And it's tech, so totally plausible for them to hold the stock down until consumer tastes move on and it becomes a self-fulfilling prophecy. I see so much dubious analysis of Apple (eg. suggesting Apple could go the Dell route) that I'm getting tempted to go long, but it's a tremendous risk because it's so damn frothy.
- ajross 14y ago
  I think you're missing the point. Yes, if you're willing to "accept risk" then obviously tech can be part of any portfolio. But the grandparent post was making a point about risk analysis that you seem to have missed. Because we are (presumably) already employed in the tech sector, we are already exposed to risk in that sector, even with nothing in our portfolios. A tech downturn is going to impact us disproportionately already, so adding exposure in our investment portfolios is adding extra risk in a way that it is not for a more typical investor. That doesn't mean "don't invest in technology", but it does mean that you need to be more careful about how you reason about it and not just brush the decision off as your willingness to "accept some level of risk."
darkspaten 14y ago
> Besides, if you're in technology, you shouldn't be investing in tech companies. I find that to be an odd maxim. Certainly one should limit exposure to acceptable risk tolerance… say 10-15% of portfolio; however, being in the industry we have significant insight into trends, viability, capital allocation, reputation, market forces, etc. Why wouldn't we leverage that knowledge for investment? When most CIOs were mocking AAPL, the stock was in the low $100s, it was a great time to invest for anyone who spotted the early trend.
mistercow 14y ago
The "technology industry" is too just big and diverse to talk about as a single atomic unit. Hell, even software is too big to treat as a single unit. Don't invest in your specific field (or at least, don't put all of your investments there), but anyone who understands technology is in a better than average position to make smart tech investments.

by mdkess 14y ago

cma 14y ago

If "short anything newspapers are touting to double" were a viable strategy, it would quickly cease to be a viable strategy.

mdkess 14y ago
Well, strictly yes, of course you are correct. I'm talking about boring investing though - slow, boring returns from boring companies. So when Forbes runs a headlines saying that AAPL will hit $1000, the stock ceases to be boring, and so in my mind, it's time to step aside for a bit.

far_far_away 14y ago

This is so true and I am glad that I am not the only one who thinks that way. In addition to that one could argue that investing in stocks (whatever the industry may be you are investing in) is a bad thing if you are not an insider. My brother who is a hacker and economist at the same time showed me studies that determined/proofed that the stock market is very irrational (I mean we all knew that but those studies showed this with scientific methods). I will ask him about those studies again - may be interesting to others as well.

6thSigma 14y ago
The day to day of the stock market is irrational, but long term investing isn't. If you're putting money in the stock market and not looking out 5+ years, you are simply gambling.
- far_far_away 14y ago
  This heavily depends on how the companies you are investing in perform in the mid-term. It is true that the stock market out performs other kind of investments but this is only true if you are not investing in let's say 2-3 companies but rather in an index or something similar. Investing in an index is much much less exciting than investing in 2-3 companies.
  - 6thSigma 14y ago
    > It is true that the stock market out performs other kind of investments but this is only true if you are not investing in let's say 2-3 companies but rather in an index or something similar. It depends on what those 2-3 companies are. An index is certainly safer, but if you are good at determining growth prospects then you should absolutely be picking your own stocks.
mdkess 14y ago
I think the strategy of buying a diversified portfolio of large, boring companies doing core things that everyone needs is a pretty safe bet. If you're investing, I think that you should have a gambling account too, because it's fun and keeps you interested. It should be far less than 10% of your portfolio, and you should recognize that it's play money instead of real savings.

gte910h 14y ago

I find this especially true for "Employee Stock Purchase Plans" You should buy the stock for a discount and immediately sell it. This is because if the stock price falls, you have a huge chance of being a layoff.

wes-exp 14y ago

if you're in technology, you shouldn't be investing in tech companies Warren Buffett avoided investing in technology companies during the dot-com tech bubble because he didn't understand them. So according to the most legendary investor of all time, understanding what you invest in is crucial. To exclude investing in tech companies because your income comes from tech companies might be a good strategy to diversify and mitigate against short-term market fluctuations. But it's an incredibly stupid strategy if you're shooting for growth and willing to accept some level of risk. Because your tech expertise gives you the best chance of actually investing intelligently in tech.

dasil003 14y ago
Leaving aside the eggs-in-a-single-basket aspect, I think being too close could be a liability. You may read a lot of bearish press about Apple that emphasizes market share over profit share completely missing the point of Apple's culture and the fact that foregoing the standard protectionism is what allows them to pursue the next great product so much better than anyone else. You might be totally right in this thinking and yet still be screwed by the market because it's full of speculators subscribing the conventional wisdom. And it's tech, so totally plausible for them to hold the stock down until consumer tastes move on and it becomes a self-fulfilling prophecy. I see so much dubious analysis of Apple (eg. suggesting Apple could go the Dell route) that I'm getting tempted to go long, but it's a tremendous risk because it's so damn frothy.
ajross 14y ago
I think you're missing the point. Yes, if you're willing to "accept risk" then obviously tech can be part of any portfolio. But the grandparent post was making a point about risk analysis that you seem to have missed. Because we are (presumably) already employed in the tech sector, we are already exposed to risk in that sector, even with nothing in our portfolios. A tech downturn is going to impact us disproportionately already, so adding exposure in our investment portfolios is adding extra risk in a way that it is not for a more typical investor. That doesn't mean "don't invest in technology", but it does mean that you need to be more careful about how you reason about it and not just brush the decision off as your willingness to "accept some level of risk."

darkspaten 14y ago

> Besides, if you're in technology, you shouldn't be investing in tech companies. I find that to be an odd maxim. Certainly one should limit exposure to acceptable risk tolerance… say 10-15% of portfolio; however, being in the industry we have significant insight into trends, viability, capital allocation, reputation, market forces, etc. Why wouldn't we leverage that knowledge for investment? When most CIOs were mocking AAPL, the stock was in the low $100s, it was a great time to invest for anyone who spotted the early trend.

mistercow 14y ago

The "technology industry" is too just big and diverse to talk about as a single atomic unit. Hell, even software is too big to treat as a single unit. Don't invest in your specific field (or at least, don't put all of your investments there), but anyone who understands technology is in a better than average position to make smart tech investments.