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>Plus, say through in-depth research and know-how, you do manage to beat the market. At best, you've created a part-time job for yourself. Unless you're managin
by icefox 13y ago
>Plus, say through in-depth research and know-how, you do manage to beat the market. At best, you've created a part-time job for yourself. Unless you're managing other people's money, or have a 7-figure+ portfolio, I expect the time taken to do the due diligence necessary to consistently beat the market - if indeed such a thing is possible - would end up paying a lower hourly rate than you could earn doing other, more reliable, less zero-sum things.
Of course most people wont suddenly have a 7+ figure portfolio, but will first have a 5+ and then 6+ figure portfolio. Yes I researched something for days when I was only investing $30K and that could be called a low hourly rate job, but I was learning an immense amount and now can do the same research in only a few hours all while dealing with a significantly larger amount so my "hourly rate" keeps going up.
And for what it is worth I am really enjoying the process.
- tempestn 13y agoFair enough - if you enjoy doing it, then it's a hobby and it doesn't matter how much you make. But I certainly wouldn't want to put an entire 7+ (or even 6) figure portfolio in a single stock, or even a handful of them. Say that your analysis is dead-on, but some completely unforeseen event strikes the couple of companies you've invested in. There goes a good chunk of your life savings. I certainly don't think there's a problem with devoting a small percentage of your portfolio (say 5%) to stock picks, or even a larger percentage split over multiple stocks, if you enjoy doing it. I occasionally do it with 5% too. But with retirement savings, I like to have as many guarantees as possible. By investing globally in index funds, I have as much confidence as possible that unless the world implodes, my savings will grow over the coming decades. If I pick individual stocks, even a decent number of them - holding say 10-15 at a time - and even if I actually AM really good at it, it is entirely feasible that I could lose money in the long term through bad luck alone. So even if I can increase my expected value through stock picking, I also significantly increase my risk. I find personal finance fascinating too, but I prefer to spend my hobby time studying multifactor investing (regression analysis, etc.) and researching the optimal funds to achieve a moderate small and value tilt, while maintaining low costs and broad diversification.
- icefox 13y agoRather than a short comment a few different books I could recommend that you might like on this hobby/topic are: -Your life or your money (personal finance more than investing) -The Warren Buffett Way -The Five Rules for Successful Stock Investing: Morningstar's Guide to Building Wealth and Winning in the Market...
- tempestn 13y agoThanks, I'll take a look. I did read the Intelligent Investor years ago and enjoyed it, but honestly between searchtempest, family, and relaxation time, I'm also pretty happy to have a portfolio that can run on autopilot. :) My top book recommendation BTW would be the 4 Pillars of Investing by Bill Bernstein.
- icefox 13y agoAh if you read Intelligent Investor you are ahead of most and The Warren Buffett Way would then just be a light fun rehash read (usually the book I recommend before Intelligent Investor). The Five Rules for Successful Stock Investing at least for me was a good book that explained reading financial reports. I'll check out 4 Pillars of Investing, thanks