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I just want to make some kind of formulas where I can plug in financial data and moving averages, etc. and have it tell me which ones to pick. I have the motivation to do a thing like that. Has anyone done anything like this?
I don't even need to know anything about the company, just put the numbers from it's financial statements and p/e and whatever and let my formula do the work. I know there are people who do this type of thing for dog track races, so I'm sure someone has for the stock market.
I am attempting this right now, even though I know probability of success is low. It's like climbing the Mt Everest But I did pass CFA 3/3 and have a passable acquaintance with valuation tricks and tips so I am not starting from scratch.
In the meanwhile, you can use various screeners to weed out loser companies. They won't tell you what the intrinsic value of a company should be but at least narrow your universe of viable candidates for further research.
Maybe I will just put everything into an S&P index fund. But I would like to be at least a little more creative and invest in index funds.
Is it true that 50% of a stock's performance is the performance of a sector?
I just want to make some kind of formulas where I can plug in financial data and moving averages, etc. and have it tell me which ones to pick. I have the motivation to do a thing like that. Has anyone done anything like this?
I don't even need to know anything about the company, just put the numbers from it's financial statements and p/e and whatever and let my formula do the work. I know there are people who do this type of thing for dog track races, so I'm sure someone has for the stock market.
Then, maybe once my formula told me what to pick, or gave me some suggestions, I could look at it manually and tell whether I want to go with it or not.
And also, you could always make a portfolio so a certain amount is in bonds or precious metals, which do well during recessions, so that way you could make sure to cut back on losses during recessions.
ummm, ValueLine and Standard & Poor's MarketScope have a thousand times more formulas and expertise (not to mention history and a track record) so save yourself a headache, get onto one or the other of these, and buy stocks they recommend.
The "efficient market hypothesis" fails just often enough to entice a fresh cohort of contrarians to try their hand at fresh cleverness. Some succeed. Poor college-graduates (or dropouts) don't become billionaires through mere buy-and-hold. But of those who aim high, most falter. Most would arrive higher by aiming more modestly.
In more concrete terms, consider this analogy: 100 people find $1000 each. They all attempt to trade the market, using whatever tools are available to them. Fast forward 30 years. Of those original 100, 50 are bankrupt. 30 have OK returns, but noticeably lag the market. 15 essentially match the market. 3 beat it handsomely. One beats is very handsomely. And one becomes spectacularly wealthy.
Now consider another 100 people, also with $1000 of starting capital, who follow some variant of the boring buy-and-hold approach (sprinkled with minor variations such as "dollar cost averaging"). Fees and taxes vary, but after 30 years we find that all 100 of them very slightly lag the market.
Assume 8% annual return and 3% inflation. So that's 5%/year gains in the market, on average. In our second group, after 30 years, that $1000 has become $4322 in inflation-adjusted terms. That's not exactly spectacular wealth. If the goal were amassing spectacular wealth, the recommended strategy would fail. Nobody in the second group attained that goal. One person in the first group did. But how did the others in the first group fare? In terms of statistical expectation, in which group would you like to be?
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Originally Posted by farmerjohn1324
There is no way that can be true because a professional investor will always make money better than the average person.
Investing is one of the few fields were entirely competent and well-meaning professionals don't necessarily beat amateurs. Professionals earn their living from fees and commissions, and not from excelling as stock-pickers. Those professionals who do well, generally do so from consistency and tenacity, from avoiding stupid emotional decisions, and not from esoteric technical insights.
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Originally Posted by mysticaltyger
A funny thing happens when your after tax savings rate hits 50%. You don't need your savings to compound at a high rate.
This holds while one's accumulated capital remains a small multiple of one's annual earnings. Once your portfolio becomes say 20X as large as your annual income, fastidious discipline in savings can't compete with even a modest annual rate of return.
What almost no one tells you is that investing in stocks isn't for everyone. Most people buy high and sell low. Money in the bank will pay nothing, but better that than being a panicked investor and selling at a loss.
Okay so I should just pick stocks that ValueLine and the others recommend. But then how do I know when to sell them?
Don't waste your money on services. Picking stocks is old school. But index funds. Nothing wrong with owning as few as one to represent your entire stock asset class. With SPY or VOO you own 500 of America's very best companies, you are diversified, and you get about 40% exposure to foreign sales. Buy and hold. With stocks you are inevitably doing more trading (more fees) and taking on more risk (less diversification).
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ValueLine and Standard & Poor's MarketScope have a thousand times more formulas and expertise (not to mention history and a track record) so save yourself a headache, get onto one or the other of these, and buy stocks they recommend.
They simply take on more risk. I got some advertisement in the mail from ValueLine and they were boasting about how they've beaten the S&P since 1982 or something like that. First of all, I'm only concerned with how they've done since the Internet exploded. Nowadays nobody has any advantage. All you can do to beat the market is to take on more risk. There is NO SKILL involved in doing that. Just pick growth stocks or favor small caps. During bull markets you will do better. That we already know.
Don't waste your money on services. Picking stocks is old school. But index funds. Nothing wrong with owning as few as one to represent your entire stock asset class. With SPY or VOO you own 500 of America's very best companies, you are diversified, and you get about 40% exposure to foreign sales. Buy and hold. With stocks you are inevitably doing more trading (more fees) and taking on more risk (less diversification).
They simply take on more risk. I got some advertisement in the mail from ValueLine and they were boasting about how they've beaten the S&P since 1982 or something like that. First of all, I'm only concerned with how they've done since the Internet exploded. Nowadays nobody has any advantage. All you can do to beat the market is to take on more risk. There is NO SKILL involved in doing that. Just pick growth stocks or favor small caps. During bull markets you will do better. That we already know.
With 20 stocks you have about 92% of the diversification benefits of a 500 stock portfolio. The index fund, being cap-weighted, is by definition overweight every bubble and underweight the bargain sectors. The S&P 500 was 35% in large-cap tech at the NASDAQ peak in 2000, and at the peak in 2007 before the financial crisis, the largest sector by far was financials. Any five bargain value style stocks at the beginning of 2000 had far less risk than the index fund.
But I love the prevalence and popularity of indexing, and those who espouse efficient market theory, and people who discourage individual stock ownership. Y'all are helping me heaps and heaps of lovely money.
With 20 stocks you have about 92% of the diversification benefits of a 500 stock portfolio. The index fund, being cap-weighted, is by definition overweight every bubble and underweight the bargain sectors. The S&P 500 was 35% in large-cap tech at the NASDAQ peak in 2000, and at the peak in 2007 before the financial crisis, the largest sector by far was financials. Any five bargain value style stocks at the beginning of 2000 had far less risk than the index fund.
But I love the prevalence and popularity of indexing, and those who espouse efficient market theory, and people who discourage individual stock ownership. Y'all are helping me heaps and heaps of lovely money.
If you have 20 healthcare stocks or 20 agribus stocks or 20 oil stocks, no.
I would be happy matching the market performance, but would like to be able to predict when it will recess so I can take my money out of it at those times. Can I use the economic indicators to do this?
So, in other words, you want the unattainable. Give it up already
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But I did pass CFA 3/3 and have a passable acquaintance with valuation tricks and tips so I am not starting from scratch.
