7 ms·

Except that in this case, the guy bought the whole market by indexing, so he wasn't very wary and picky, although the index itself took care of getting rid of b

by gighi 12y ago

Except that in this case, the guy bought the whole market by indexing, so he wasn't very wary and picky, although the index itself took care of getting rid of bad performers (because they went out of business).

notastartup 12y ago
that's what makes this even more beautiful. you don't need to drive down to the balance sheets of each company you want to invest, he bought a representation of a basket of companies. What's the likelihood of another market crash like the one in the 80s? What's the likelihood of 2008 housing market crash? I reckon that the latter is more predictable and omnious, while a sudden market crash without any signs like the one in the 1980s is less likely. The theory that market is already efficient over a long stretch of time must be true. It reverts to its mean which is a continued bull as long as the economy can fit it. However, this must be a tough concept to sell. "Hey I just lost 60% of your money because I bought in right at the peak recently, but please don't pull out your money yet, it will recover for sure in 5 years." Again, this example shows the difference between Bob and the average investor. Bob would've said okay, while the average investor would've taken his/her money out and getting ready to sue you for fraud, "but you promised 20% return on my money". "YES, you will get 20% compound interest on your money if you wait another 10 years, believe me the stock market always goes up". But unlike Bob, you can definitely time your market entry. 1. Wait for market crash. 2. Buy. 3. Check in a couple of years. And people who buy after a major market meltdown, when everybody shudders at the word 'stock', the wise ones buy in. When everybody is talking about it, you run. Contrarian investing. You can also apply this bullish bias in markets outside of stocks. Forget daytrading noise, just buy & hold. 1. Buy Crude Oil mini futures. 2. Hold on to it. 3. Check back every few months instead of every few minutes provided you still can meet the margin calls. What a great article. This really have resparked my interest in investing and trading.
- collyw 12y ago
  All very easy, but how do you tell when a market has crashed? If the price is down 20% on a week before, who says its not due to go down another 30% next week?
  - notastartup 12y ago
    If it has gone down 20% already, which is huge btw, you buy. If it goes down another 30% you double down. 50% market crash that would be however very unlikely and rare occurence. Looking beyond the Americas, https://finance.yahoo.com/echarts?s=%5EN225+Interactive#symbol=%5En225;range=my;compare=;indicator=volume;charttype=area;crosshair=on;ohlcvalues=0;logscale=off;source=; https://finance.yahoo.com/echarts?s=%5EN225+Interactive#symb... In some cases, like Japan, they never really really recovered after 1990. Imagine if you were Bobsan, "It's been 20 years...." I shudder to imagine. On a side note, looks like the nikkei really shows Japan's stagnation starting from mid 1990s....really isn't promising. https://ca.finance.yahoo.com/echarts?s=%5EKS11#symbol=%5EKS11;range=my https://ca.finance.yahoo.com/echarts?s=%5EKS11#symbol=%5EKS1... You can see KOSPI has been on a strong bull run but still following the nikkei similarly. I would stay away from anything else besides United States at the moment to play like Bob.
  - lutusp 12y ago
    The answer should be obvious. The market isn't predictable at all, for the reason that there are any number of players, each following a private strategy. Without cheating, without using insider information, you're better off investing in an index fund and tracking the slow but reliable increase in market valuation, instead of trying to track the unpredictable peaks and valleys along the way. More here: http://arachnoid.com/equities_myths http://arachnoid.com/equities_myths People who use the index fund strategy are statistically ahead of all other strategies -- I mean statistically. You can obviously find exceptions, black swans, but as a matter of probability and averages, you're better off in an index fund than any other market investment strategy. Guess who swears by this idea, and who is going to make all his relatives adopt it after he's gone? Warren Buffet.
    - notastartup 12y ago
      But Warren Buffet invests in individual companies using valuation technique to discover under valued companies which the market is ignoring. One peculiar thing about Warren Buffet is that he has strayed away from technology companies, he's always invested in very stable ideas like brand and other economic moats unlike the tech sector which is susceptible to unexpected disruptions, like two boys working in a garage to build a better search engine. He even stayed clear of Microsoft and seems like it fit his plan of holding onto a good stock forever. For those that do not know how to come up with a intrinsic valuation of a company, for example, reading through K's and Q's and figuring out if there's discrepancies in what it actually says and what the market thinks, it's best to invest an index, a large basket of companies and you bet your ass that for a country like United States, it's going to go up in valuation, seeing how well aligned the NSA's global surveillance is poised to benefit American corporations, I'd definitely back American companies, although the intrusion into individual freedom and privacy is jarring, I'll play the dirty capitalist, if it means I can make money work for me.

by gighi 12y ago

notastartup 12y ago

that's what makes this even more beautiful. you don't need to drive down to the balance sheets of each company you want to invest, he bought a representation of a basket of companies. What's the likelihood of another market crash like the one in the 80s? What's the likelihood of 2008 housing market crash? I reckon that the latter is more predictable and omnious, while a sudden market crash without any signs like the one in the 1980s is less likely. The theory that market is already efficient over a long stretch of time must be true. It reverts to its mean which is a continued bull as long as the economy can fit it. However, this must be a tough concept to sell. "Hey I just lost 60% of your money because I bought in right at the peak recently, but please don't pull out your money yet, it will recover for sure in 5 years." Again, this example shows the difference between Bob and the average investor. Bob would've said okay, while the average investor would've taken his/her money out and getting ready to sue you for fraud, "but you promised 20% return on my money". "YES, you will get 20% compound interest on your money if you wait another 10 years, believe me the stock market always goes up". But unlike Bob, you can definitely time your market entry. 1. Wait for market crash. 2. Buy. 3. Check in a couple of years. And people who buy after a major market meltdown, when everybody shudders at the word 'stock', the wise ones buy in. When everybody is talking about it, you run. Contrarian investing. You can also apply this bullish bias in markets outside of stocks. Forget daytrading noise, just buy & hold. 1. Buy Crude Oil mini futures. 2. Hold on to it. 3. Check back every few months instead of every few minutes provided you still can meet the margin calls. What a great article. This really have resparked my interest in investing and trading.

collyw 12y ago
All very easy, but how do you tell when a market has crashed? If the price is down 20% on a week before, who says its not due to go down another 30% next week?
- notastartup 12y ago
  If it has gone down 20% already, which is huge btw, you buy. If it goes down another 30% you double down. 50% market crash that would be however very unlikely and rare occurence. Looking beyond the Americas, https://finance.yahoo.com/echarts?s=%5EN225+Interactive#symbol=%5En225;range=my;compare=;indicator=volume;charttype=area;crosshair=on;ohlcvalues=0;logscale=off;source=; https://finance.yahoo.com/echarts?s=%5EN225+Interactive#symb... In some cases, like Japan, they never really really recovered after 1990. Imagine if you were Bobsan, "It's been 20 years...." I shudder to imagine. On a side note, looks like the nikkei really shows Japan's stagnation starting from mid 1990s....really isn't promising. https://ca.finance.yahoo.com/echarts?s=%5EKS11#symbol=%5EKS11;range=my https://ca.finance.yahoo.com/echarts?s=%5EKS11#symbol=%5EKS1... You can see KOSPI has been on a strong bull run but still following the nikkei similarly. I would stay away from anything else besides United States at the moment to play like Bob.
- lutusp 12y ago
  The answer should be obvious. The market isn't predictable at all, for the reason that there are any number of players, each following a private strategy. Without cheating, without using insider information, you're better off investing in an index fund and tracking the slow but reliable increase in market valuation, instead of trying to track the unpredictable peaks and valleys along the way. More here: http://arachnoid.com/equities_myths http://arachnoid.com/equities_myths People who use the index fund strategy are statistically ahead of all other strategies -- I mean statistically. You can obviously find exceptions, black swans, but as a matter of probability and averages, you're better off in an index fund than any other market investment strategy. Guess who swears by this idea, and who is going to make all his relatives adopt it after he's gone? Warren Buffet.
  - notastartup 12y ago
    But Warren Buffet invests in individual companies using valuation technique to discover under valued companies which the market is ignoring. One peculiar thing about Warren Buffet is that he has strayed away from technology companies, he's always invested in very stable ideas like brand and other economic moats unlike the tech sector which is susceptible to unexpected disruptions, like two boys working in a garage to build a better search engine. He even stayed clear of Microsoft and seems like it fit his plan of holding onto a good stock forever. For those that do not know how to come up with a intrinsic valuation of a company, for example, reading through K's and Q's and figuring out if there's discrepancies in what it actually says and what the market thinks, it's best to invest an index, a large basket of companies and you bet your ass that for a country like United States, it's going to go up in valuation, seeing how well aligned the NSA's global surveillance is poised to benefit American corporations, I'd definitely back American companies, although the intrusion into individual freedom and privacy is jarring, I'll play the dirty capitalist, if it means I can make money work for me.