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stock market

basslord1124

Well-known member
#1
So I've been pondering for a little while now about doing the stock market. I know nothing about it, but willing to do some research it before taking the plunge. I was even thinking today that it'd be kinda funny to invest in Dollar Tree since we all love our foamboard.

Anybody here do anything with the stock market or advice on getting started?
 

d8veh

Well-known member
#2
I've had reasonable success with the stock market. You have to look at it as a very long-term investment. I put in something like £12,000 in 2001. Since then, I've taken out £12,000 twice and i still have £17,000 worth of shares in the account. I bet mainly on the shares that pay the highest dividend, but I have about 25% invested in companies that I think have a chance of growing. One important thing I learnt the hard way: do not take any notice of what's recommended in the investment columns. In many cases, the companies are in trouble and the big investors want to sell their shares. They can only do that if they have buyers. It can be a good sign when directors of the company are buying shares in it, but you have to follow carefully to make sure it's not a trick.

The whole thing is a bit of a game. Don't put your life savings in, but if you have spare cash, it's a pretty good long-term bet.
 

PsyBorg

Wake up! Time to fly!
Mentor
#3
I wanted to get into the market back when I was working but got hurt just before the point I had finaces set and had extra funds.

There were softwares just coming out that you could use to track markets at home. I am sure they are even better today.

Just be aware of what is promoted and as d8veh says stay away as to even get to where they woukd pysh a stock like that a lot of wheelin and dealin has already been done and you would just be funding someone elses quick gains.
 

SlingShot

Maneuvering With Purpose
#5
So I've been pondering for a little while now about doing the stock market. I know nothing about it, but willing to do some research it before taking the plunge. I was even thinking today that it'd be kinda funny to invest in Dollar Tree since we all love our foamboard.

Anybody here do anything with the stock market or advice on getting started?
I know a thing or two. I recommend that you become familiar with The Motley Fool. They will make you financially literate if you apply yourself. I suggest that you start with the 13 steps here. Pay close attention to the concept of dollar cost averaging. Particularly now. The current bull market has been running hard for a long time and valuations are stretched IMNSHO.
 

cranialrectosis

Faster than a speeding faceplant!
Mentor
#7
+1 The Motley Fool.

Mind your debt. It's not what you earn, it's what you keep. Debt means interest working against you and is a slow leak in your bank account.

It does you no good to invest $1,000 in a stock returning 8% if you have $1,000 in debt at 18%.

Get out of debt. It's cool to have some debt but be able to pay off unsecured debt every month and free load your credit cards.

When you do, your credit score will rise making it easier to find lower rates on everything else. It's like having a lever on your future and being able to move the fulcrum to a better advantage for you.
 

d8veh

Well-known member
#8
+1 The Motley Fool.

Mind your debt. It's not what you earn, it's what you keep. Debt means interest working against you and is a slow leak in your bank account.

It does you no good to invest $1,000 in a stock returning 8% if you have $1,000 in debt at 18%.

Get out of debt. It's cool to have some debt but be able to pay off unsecured debt every month and free load your credit cards.

When you do, your credit score will rise making it easier to find lower rates on everything else. It's like having a lever on your future and being able to move the fulcrum to a better advantage for you.
Sound advice. The best way to make money is not to have any debt. Never buy anything until you have your own money in the bank or in your pocket, and can afford it. Don't buy PCs, cars, holidays, phones, etc if you can avoid it, and if you must buy one, get one that is only adequate, not the one that you think will impress anybody, nor the one your heart dreams of. All those things are money sinks. As an example, an adequate car costs about 5% of the cost of a new one. If you would buy 4 or 5 old, but good cars instead of new ones in your life time, you'd be around $100,000 better off. You can buy alot of RC planes with that much money. If you follow this advice, you will most likely find inthe future that you have more money than you need, so you can buy whatever you want then, like things that will go up in value including investments.

I was looking at a debt help forum. Every guy that needed help had to make a list of all their income and outgoings. More or less every one had a 4x4 gas guzzler, the full Sky TV entertainment package and the latest iPhone - all with monthly repayments.
 
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Bricks

Well-known member
#9
Sound advice from d8 in my 67 years I have never purchased anything I could not pay for except when I bought the home farm, and now I am 100% debt free. I have never purchased a new vehicle or anything I could find used at a good price. I have only ever used a TracFone as I pay exactly for what I get not stuff I will not use.
 
#10
The only thing I can say for sure about the stock market is that, mathematically, it's a losing game for the vast majority of players, and some of the big winners win because they have access to more/better/earlier information and technology than other players. Meaning the game is also, to an extent, rigged against you (unless you are one of them).

Of course, when starting, everybody intends to "win" but the reality is different, your expected return on investment is negative in the long term.

It's a decision making game, for sure, so there is some skill involved, which however - for most players - is not enough to overcome the negative expectancy. You might think that you'll be the exception, but that's also the case for everyone else (otherwise why would they play? ;))

Of course, there's also a decent chance of getting lucky . But you can also get lucky in a casino and, arguably, that is actually more fun and less stressful ;).
 

d8veh

Well-known member
#11
The only thing I can say for sure about the stock market is that, mathematically, it's a losing game for the vast majority of players, and some of the big winners win because they have access to more/better/earlier information and technology than other players. Meaning the game is also, to an extent, rigged against you (unless you are one of them).

Of course, when starting, everybody intends to "win" but the reality is different, your expected return on investment is negative in the long term.

It's a decision making game, for sure, so there is some skill involved, which however - for most players - is not enough to overcome the negative expectancy. You might think that you'll be the exception, but that's also the case for everyone else (otherwise why would they play? ;))

Of course, there's also a decent chance of getting lucky . But you can also get lucky in a casino and, arguably, that is actually more fun and less stressful ;).
That's right to an extent, but generally the companies you invest in are making a profit, some of which gets shared out to the investors, so on average you gain. It's not like betting where money is taken out of the pool of bets that's shared out to the winners so you will lose in the long-term.

The stockmarket goes up and down on a daily basis, but if you trace it over the last century, you'll see that it's basically a straight line upwards, so if you have a diverse portfolio and you stay long-term, you will always win. I think that if you're sensible with your choices, you will always get good returns in the long-term because the value of the shares basically follows inflation, but the investors get additional money from dividends, which means the net result will be more than inflation.

I think these days, its not so smart to invest in managed funds because, again, the managers are taking a cut from the fund, which is getting bigger and bigger. As an example, I bought into a popular fund managed by my bank (RBS) and kept it for about 5 years. At the same time, I put the same amount of money into a shell fund, which I managed myself. At the end of 5 years, my fund managed by a rank amateur (me) had doubled and the one managed by professionals went downby 5%.
 
#12
That's right to an extent, but generally the companies you invest in are making a profit, some of which gets shared out to the investors, so on average you gain. It's not like betting where money is taken out of the pool of bets that's shared out to the winners so you will lose in the long-term.
You are right, i was looking at it from a gaming/betting perspective. The dividend is something I disregarded and yes it would affect your EV positively, but then there are some assumptions behind it. Like that the economy will continue to grow at a sufficient rate for most companies to make profit which is not a given at all - although sufficiently likely in relatively short term, I guess -n based on the historical precedent you mention.

But the money *is* being taken out of the pool al the time, in the form of various fees, taxes, and players cashing out. Obviously there's also an influx in from the new players and dividends so I guess the overall balance has so far been positive. What that des not show though is the distribution of the winnings.

Are you aware of any analysis of this sort? I am willing to bet (pun intended) that, if it was done, we would see some sort of Pareto distribution, with the majority of the players experiencing various amounts of losses, a minority being small winners, and most of the spoils going to a very small percentage of the players.

Just guessing ;) not really my area of interest but all this kinda made me curious.
 

cranialrectosis

Faster than a speeding faceplant!
Mentor
#13
Often when players cash out that simply opens up opportunity. Profit is not the result of the expanding economy. The expanding economy is the result of profit.

Taxes and fees are the only zero sum game. So long as those are kept in check, the average long term player profits, particularly if you use your investments as a tax shelter (401k for example).

A large part of my stock market strategy is my tax plan. Never do one without the other.

The longer I keep my money, the more it makes for me. The longer I keep my money, the less I will pay in taxes because when I retire, I won't have a 6 figure income. The more I keep, the more I earn. Again, it's not what you make, it's what you keep.

There are no 'winnings'. Don't play that game. It's zero sum and requires a loser. Think collaboration and you have 'earnings'. I am not 'winning' money and taking it out of a pool. I am using my money to earn more money and helping others around me to do the same by building a bigger pool.
 

SlingShot

Maneuvering With Purpose
#14
But the money *is* being taken out of the pool al the time, in the form of various fees, taxes, and players cashing out. Obviously there's also an influx in from the new players and dividends so I guess the overall balance has so far been positive. What that des not show though is the distribution of the winnings.
The stock market is the greatest wealth building mechanism ever devised. And anybody can participate. Anyone. There is a program where an investor can buy as little as a single share at a time for an index fund without paying a commission.

Rule No. 1 There are no "winnings" for investors. Investors participate in earnings and capital appreciation. It is absolutely not a zero sum game. One needs to think in terms of owning small pieces or companies. Not little pieces of paper with ticker symbols. Winnings are for speculators or gamblers. The place for those people is Las Vegas

Rule No. 2 It's time IN the market that is important. Not timing the market. As @cranialrectosis stated, look at the long term chart. Up and up and up. Not in a straight line, but over time......up. $1 worth of gold bought in 1887 or so when adjusted for inflation is worth how much? Maybe a dollar still. I recall reading once that it was at about $0.97. Cherry picking a little to make a point but still valid.

Rule No. 3 Stocks are the only thing that people (as a group) hate to buy on sale. They wait until the market has run and then get in at the top. They then get burned and bail because they have no discipline. The stock market had an absolute fire sale in March 2009. I knew very few people at that time that had the optimism for the future that I was trying to preach. When it comes to the stock market, it pays big to be a contrarian. Zig when others are zagging. And vice versa.

Rule No. 4 When in doubt, review rules 1-3.
 
#15
There are no 'winnings'. Don't play that game. It's zero sum and requires a loser. Think collaboration and you have 'earnings'. I am not 'winning' money and taking it out of a pool. I am using my money to earn more money and helping others around me to do the same by building a bigger pool.
When you buy stock on the exchange, you buy them form *someone* who decided to sell them at the same moment. One of you made a good decision, the other - a bad one. If a transaction is profitable for you it automatically is unprofitable for him/her (or them). One of you becomes a winner, the other a loser - at least in terms of this particular transaction.

The stock market is the greatest wealth building mechanism ever devised. And anybody can participate. Anyone. There is a program where an investor can buy as little as a single share at a time for an index fund without paying a commission.
Damn. That's a great marketing line if ever I heard one ;).

Look, I am not saying i know a better mechanism . But even the "best" solution is almost never a perfect one. It makes sense to be able to criticize it if just to look for improvements.

Ok, investment as in buying stock directly issued by company. This I understand, though obviously there's still risk and speculation involved. If for no other reason then because of the hyper-competitive nature of the markets, especially when particularly juicy opportunities appear...

And regular stock market transactions and investments in financial instruments etc are to my eyes nothing but - speculation and game. Can be played short term, long term, or mid term, doesn't matter.

BTW, doesn't the real real "wealth building" happen at the level of the company, by way of production/research/infrastructure development etc? Obviously it's good to have a mechanism that enables and finances it, but that's all that I can see here.

Rule No. 3 Stocks are the only thing that people (as a group) hate to buy on sale. They wait until the market has run and then get in at the top. They then get burned and bail because they have no discipline. The stock market had an absolute fire sale in March 2009. I knew very few people at that time that had the optimism for the future that I was trying to preach. When it comes to the stock market, it pays big to be a contrarian. Zig when others are zagging. And vice versa.
That perfectly illustrates my point. Your winning strategy relies on exploiting the incompetence of other players so that the profits - cut out of the money they invested then abandoned - end up in your hands. Those are the majority of stock market players. The losers.

Not saying you are doing anything wrong btw. Just making sure we see things for what they are ;).
 

d8veh

Well-known member
#16
When you buy stock on the exchange, you buy them form *someone* who decided to sell them at the same moment. One of you made a good decision, the other - a bad one. If a transaction is profitable for you it automatically is unprofitable for him/her (or them). One of you becomes a winner, the other a loser - at least in terms of this particular transaction.
That's not right at all. I sold some of my shares to get money for a project. I made a big profit when I sold them. The new guy was happy to buy then. No doubt he made a profit on them too. We both won from the deal, we were both happy and it was the right decision for both of us.
 
#17
That's not right at all. I sold some of my shares to get money for a project. I made a big profit when I sold them. The new guy was happy to buy then. No doubt he made a profit on them too. We both won from the deal, we were both happy and it was the right decision for both of us.
Sorry to nitpick ;) but that's not quite precise. Let's assume he actually did make profit; that's exactly the further profit *you* could have made had you kept the shares, so it's the money you lost.

You just happened to value the ability to run your project as high or higher than the (somewhat risky) expectation of making further profits form the shares, and you were already ahead, so it *felt* good to you. But as far as the actual transaction, you lost and he won ;).

But I will bail out of this thread at this point, obviously I am not on this forum to try to discourage people from investing in stocks or w/e. Just my point of view, I like keeping things real, and actually have given these things some thought in the past. Best of luck ;)
 

SlingShot

Maneuvering With Purpose
#18
That's not right at all. I sold some of my shares to get money for a project. I made a big profit when I sold them. The new guy was happy to buy then. No doubt he made a profit on them too. We both won from the deal, we were both happy and it was the right decision for both of us.
That's exactly right. A win win. You got cash which YOU wanted, and the other guy got shares which HE wanted. You got off the train where you wanted to and another started his journey at the same stop.

My example was illustrative of market psychology. Not something that is necessary in order to win the game.

A person buying today, using discipline and dollar cost averaging for the long term should expect to do well over time. The least skilled investor can expect to earn 8-10% a year on average. Compounding. (And that is key.)
 

SlingShot

Maneuvering With Purpose
#19
I think these days, its not so smart to invest in managed funds because, again, the managers are taking a cut from the fund, which is getting bigger and bigger. As an example, I bought into a popular fund managed by my bank (RBS) and kept it for about 5 years. At the same time, I put the same amount of money into a shell fund, which I managed myself. At the end of 5 years, my fund managed by a rank amateur (me) had doubled and the one managed by professionals went downby 5%.
Unfortunately, this is almost always the case. The managers have a hard time earning the 1-2% that they charge and end up losing to low fee index funds. If I recall correctly, it is something like 80% of fund managers which fail to beat the index (S&P 500 which is the standard benchmark). Forget about hedge funds! Those guys have been thrashed lately.

In the bond market, however, I think it is quite possible to benefit from a manager. Bill Gross, for example, had a really long record of success
 

d8veh

Well-known member
#20
Sorry to nitpick ;) but that's not quite precise. Let's assume he actually did make profit; that's exactly the further profit *you* could have made had you kept the shares, so it's the money you lost.
I didn't lose anything. I used the money for another investment that grew at a faster rate than the shares. Like he said, I got off the train at the station I wanted. No point in travelling past the station you want to get off.