Tilted Forum Project Discussion Community - View Single Post - How To Get Started In The Stock Market (An Original TFP Guide)

Yakk · 11-04-2006, 02:25 PM

Mate, I've done that, and I'm not a stock broker.

Of course, I've also had investments tank.

Heck, if you bought stock from 1982 to 1999, the average return/year was 16%!

And at a casino, I've managed 20% in a single day! At that rate, I could turn 1$ into 10^28 dollars in a year!

As someone without the time to spend dozens of hours/week either researching one's stock brokers, or researching stocks, you won't be able to beat the people who do spend dozens of hours/week figuring out where to put money. Well, you are able to do it -- but most of your ability to beat them will come from luck.

You aren't large enough potatoes to afford the people who can consistantly make a killing at the stock market.

But you can steal their knowledge. That is what buying index stocks is about -- the sum total of everyone's choice of stocks effectively gets rolled into the index. Following an index is cheap (because it is easy), so you aren't paying for this knowledge.

When you buy a mutual fund, you first have to research if the person selling it to you is pulling the wool over your eyes. Then you have to determine if the person selling it to you can beat the market, on average, by enough to pay for his own salary and commissions.

When I say wool, here is a trick that mutual fund companies use.

Start 50 different mutual funds with small amounts of money. Give 50 different newbie stock pickers freedom to set up a fund.

Wait 1 year. Take the top 20% of the performers over those two years, and increase the investment. Dissolve the bottom 60% of the performers.

Wait 1 year. Take the top 5, and open them up to wider investment.

What could have started with a pool of 50 randomly behaving stock picks now produces 5 "recently opened up" funds that have a 2 year damn-good stock-picking history behind them.

Now add in kickbacks and convince independant stock brokers to sell these products to investors.

Aim for 1%-over-market-returns with a bit of volatility, and claim your 2%/year in comminssions and admin fees.

...

On the other hand, Scott has spend most of his investment earning period during the historically abnormal stock upswing since 1980. So maybe the game is going to change.

11-04-2006, 02:25 PM	#14 (permalink)
Yakk Wehret Den Anfängen! Location: Ontario, Canada	Mate, I've done that, and I'm not a stock broker. Of course, I've also had investments tank. Heck, if you bought stock from 1982 to 1999, the average return/year was 16%! And at a casino, I've managed 20% in a single day! At that rate, I could turn 1$ into 10^28 dollars in a year! As someone without the time to spend dozens of hours/week either researching one's stock brokers, or researching stocks, you won't be able to beat the people who do spend dozens of hours/week figuring out where to put money. Well, you are able to do it -- but most of your ability to beat them will come from luck. You aren't large enough potatoes to afford the people who can consistantly make a killing at the stock market. But you can steal their knowledge. That is what buying index stocks is about -- the sum total of everyone's choice of stocks effectively gets rolled into the index. Following an index is cheap (because it is easy), so you aren't paying for this knowledge. When you buy a mutual fund, you first have to research if the person selling it to you is pulling the wool over your eyes. Then you have to determine if the person selling it to you can beat the market, on average, by enough to pay for his own salary and commissions. When I say wool, here is a trick that mutual fund companies use. Start 50 different mutual funds with small amounts of money. Give 50 different newbie stock pickers freedom to set up a fund. Wait 1 year. Take the top 20% of the performers over those two years, and increase the investment. Dissolve the bottom 60% of the performers. Wait 1 year. Take the top 5, and open them up to wider investment. What could have started with a pool of 50 randomly behaving stock picks now produces 5 "recently opened up" funds that have a 2 year damn-good stock-picking history behind them. Now add in kickbacks and convince independant stock brokers to sell these products to investors. Aim for 1%-over-market-returns with a bit of volatility, and claim your 2%/year in comminssions and admin fees. ... On the other hand, Scott has spend most of his investment earning period during the historically abnormal stock upswing since 1980. So maybe the game is going to change. __________________ Last edited by JHVH : 10-29-4004 BC at 09:00 PM. Reason: Time for a rest.