Stocks - The Best Buys 2

[Slava]

Originally Posted by Bill Bumface

I really see zero reason why a person in that situation wouldn't be investing in ETFs only.

You need a pretty sizeable portfolio before individual stocks starts to make sense.

Sure they are fun, and lots of us do it, but the stats on how many people can consistently beat whole market returns for more than ~10 years say none of us should be investing in individual stocks.

Well I definitely agree with you regarding the size of the portfolio and issues surrounding diversification and that angle. The "beating the market" discussion is a pet peeve of mine. I have a longer piece on this and if it gets through my compliance department I'll post it here for people who are interested.

[Bill Bumface]

Originally Posted by Slava

The "beating the market" discussion is a pet peeve of mine. I have a longer piece on this and if it gets through my compliance department I'll post it here for people who are interested.

Haha, I definitely look forward to it!

Let me add some context to my statement.

A professional managing a portfolio can do all sorts of great things regarding tax savings etc. that the average person dumping stuff into ETFs will likely not take advantage of. They will also have a far stronger skillset of matching risk to a person's life.

But if we are strictly talking about the self directed investor that is doing it on the side, I stand by my point. Less than 10% of professional fund managers have outpaced the indexes when looking at most studies that have gone longer than 10 years. I truly believe to think that any average Joe, no matter how interested in the stuff, is naive to think that by picking individual stocks they are going to outpace those pros, and therefore outpace the indexes.

[OMG!WTF!]

It may be beyond most people to beat the market. But there are people who do beat the market all the time. It can be done and done consistently. Most people write it off as crazy talk but if you put in the time and effort and gain the knowledge it pays off.

[Bill Bumface]

Originally Posted by OMG!WTF!

It may be beyond most people to beat the market. But there are people who do beat the market all the time. It can be done and done consistently. Most people write it off as crazy talk but if you put in the time and effort and gain the knowledge it pays off.

Define "consistently". For example, over a 20 year horizon, what percent of self directed investors are beating total market returns?

[Krovikan]

Originally Posted by OMG!WTF!

It may be beyond most people to beat the market. But there are people who do beat the market all the time. It can be done and done consistently. Most people write it off as crazy talk but if you put in the time and effort and gain the knowledge it pays off.

Are there good resources to learn more, my portfolio at this point is too small, I figure ETF and one stock trades are my best bet. But I would like to understand more about what I'm doing.

I use Investopedia.com if I don't understand a term, but doing more research, I find most self-help sites or videos (YouTube and Udemdy) are just trying to pump and dump stocks or are hawking bad education courses.

Right now, my TSFA at around $5k and I have an even split between complete gambles (ETHC, for example) and ETFs or undervalued stocks (Low Price to Book and positive EPS). For the second half, I feel like I can do better on the stocks, as my ETF positions are up 28% over the last 6-months (I am new to ETFs) where the stocks are sitting under 10% return generally.

[DoubleF]

Originally Posted by Bill Bumface

I really see zero reason why a person in that situation wouldn't be investing in ETFs only.

You need a pretty sizeable portfolio before individual stocks starts to make sense.

Sure they are fun, and lots of us do it, but the stats on how many people can consistently beat whole market returns for more than ~10 years say none of us should be investing in individual stocks.

Well, that's essentially what I was saying. But somehow there was a misunderstanding and a few posters were thinking I was trying to say that everyone should consider pouring all their investments into bank stocks rather than hold mutual funds and ETFs, which isn't what I meant. Going all in on a single stock and not diversifying isn't the smartest of moves.

I was saying to take a small position in a bank stock alongside the mutual funds and ETFs to learn about stocks.After learning on a bank stock whether you want to acquire more stocks or if the mutual fund/ETF route is the most effective route for your situation and comfort.

[OMG!WTF!]

Originally Posted by Bill Bumface

Define "consistently". For example, over a 20 year horizon, what percent of self directed investors are beating total market returns?

I have no idea but if you believe 0% of self directed investors beat the market over 20 years, that's totally fine. But I'm telling you people can and do beat the market year after year and it's not a fluke, luck or voodoo. It's a method, it's research, it's repeatable. It's not what most people believe it is. I just get frustrated when people suggest picking stocks is a fool's game.

Originally Posted by Krovikan

Are there good resources to learn more, my portfolio at this point is too small, I figure ETF and one stock trades are my best bet. But I would like to understand more about what I'm doing.

I use Investopedia.com if I don't understand a term, but doing more research, I find most self-help sites or videos (YouTube and Udemdy) are just trying to pump and dump stocks or are hawking bad education courses.

Yeah there are lots of charlatans out there. But any and all info is not a bad thing at the beginning. Just learn not so much what people do, but how they do it. There's a process that traders go through and it is usually similar no matter what methods they use.



I'll pm you what I think is the best education available. But whatever you choose, don't pay for anything until you decide for yourself what's going to work for you. The vast majority of legitimate education is available for free. What you end up paying for is the actual tools people use, the programs, indicators or platforms.

[DoubleF]

Originally Posted by Krovikan

Are there good resources to learn more, my portfolio at this point is too small, I figure ETF and one stock trades are my best bet. But I would like to understand more about what I'm doing.

I use Investopedia.com if I don't understand a term, but doing more research, I find most self-help sites or videos (YouTube and Udemdy) are just trying to pump and dump stocks or are hawking bad education courses.

Right now, my TSFA at around $5k and I have an even split between complete gambles (ETHC, for example) and ETFs or undervalued stocks (Low Price to Book and positive EPS). For the second half, I feel like I can do better on the stocks, as my ETF positions are up 28% over the last 6-months (I am new to ETFs) where the stocks are sitting under 10% return generally.

I'm going to go on a limb here and say that you know more than probably 2/3 of all people that actively/passively trade without a financial adviser or stock broker and the problem is a bit more along the lines of information overload. My TFSA portfolio is a bit bigger than yours, but even I don't use the ratios to determine stocks to purchase... and I have a business background and am very familiar with these ratios and how to calculate them.

I personally rely much heavily on income statements, balance sheets, price history and basic industry/political info/gut feelings on long term viability of profitability when I purchase stocks. I feel like many people already use the ratios approach to the point where I rarely see major spreads to exploit... But there's no real perfect answer. It's kinda like the story of the blind men and the elephant, each using a different method to try and illuminate an object they cannot fully see. It always seems like anyone with any method gets blindsided on occasion by some other data point or analysis somewhere sooner or later.

There's a ton of stock billionaires that have different approaches. I like Warren Buffet's approach though which (hopefully not over simplified) is a long term projection and hold evaluation approach. He also likes stocks in companies that are more tangible scaling of growth rather than other stocks that are a little more speculative. I also don't have a huge interest in this type of stuff in the same way many other do so I check my portfolio something like every 2-4 weeks for a few days and then completely forget what's going on.

$5,000 might seem small, but 5 stocks at $1K each is actually enough to set yourself up with a reasonably basic diversified portfolio. I personally usually transact in increments of around $1,000-1,500. I think I started circling back and adding increments to existing stocks once I exceeded $15K.

[puckedoff]

Not sure what your trade costs are but if you are paying $10/trade then when you buy in $1500 increments, you are paying 0.67% (not counting when you go to sell) so you could be better off buying an already diversified cheap mutual fund (for example TDB902 for US index is 0.35%). Of course if you hold for long periods you don't have to re-pay that $10 each year like you would in a fund.

For a small portfolio, you may want to just use the cheap indexes and then once you have larger values to trade buy individual stocks or whatever and keep your cost down that way. Just my 0.02 bps

[Enoch Root]

Originally Posted by OMG!WTF!

I have no idea but if you believe 0% of self directed investors beat the market over 20 years, that's totally fine. But I'm telling you people can and do beat the market year after year and it's not a fluke, luck or voodoo. It's a method, it's research, it's repeatable. It's not what most people believe it is. I just get frustrated when people suggest picking stocks is a fool's game.


Yeah there are lots of charlatans out there. But any and all info is not a bad thing at the beginning. Just learn not so much what people do, but how they do it. There's a process that traders go through and it is usually similar no matter what methods they use.



I'll pm you what I think is the best education available. But whatever you choose, don't pay for anything until you decide for yourself what's going to work for you. The vast majority of legitimate education is available for free. What you end up paying for is the actual tools people use, the programs, indicators or platforms.

Let's see these methods. And let's see some evidence.

[OMG!WTF!]

Originally Posted by Enoch Root

Let's see these methods. And let's see some evidence.

Sure. I've been meaning to list some trades in real time but it's hard to cause it's busy first thing. I'll try to get some up tomorrow am. VSTM was a perfect algorithm based trade that fit all the rules today. SUNW was a loser though so it was pretty much a wash. I would have made a bit more if I had followed my exit rules on both trades.

[Slava]

Originally Posted by OMG!WTF!

Sure. I've been meaning to list some trades in real time but it's hard to cause it's busy first thing. I'll try to get some up tomorrow am. VSTM was a perfect algorithm based trade that fit all the rules today. SUNW was a loser though so it was pretty much a wash. I would have made a bit more if I had followed my exit rules on both trades.

Winning trades and beating the market aren't the same thing. I think what he's asking for is evidence that there are a lot of investors beating the market over the longer term, not just in a day (unless you can string together say 200 of those)

[stone hands]

please name some of these investors who have beat the market for 20 years so i can be rich

[OMG!WTF!]

Originally Posted by Slava

Winning trades and beating the market aren't the same thing. I think what he's asking for is evidence that there are a lot of investors beating the market over the longer term, not just in a day (unless you can string together say 200 of those)

I get that. It's performance over a statistically significant number of trades that makes the case. Also, it depends what you mean by "a lot of traders". Yes, lots and lots of traders beat the market all the time. But that number is not significant compared to the number of traders who have tried and failed. I get that too. But short of posting trades for 200 days I guess it is kind of pointless. I should just mind my own beezwax. I don't think Enoch was sincere anyway.

[Fuzz]

Originally Posted by stone hands

please name some of these investors who have beat the market for 20 years so i can be rich

Warren Buffet. And, uhm...ok ,that's all I've got.

[Enoch Root]

Originally Posted by OMG!WTF!

Sure. I've been meaning to list some trades in real time but it's hard to cause it's busy first thing. I'll try to get some up tomorrow am. VSTM was a perfect algorithm based trade that fit all the rules today. SUNW was a loser though so it was pretty much a wash. I would have made a bit more if I had followed my exit rules on both trades.

I'm not interested in hearing about your winners. I would assume you have some.

Originally Posted by OMG!WTF!

I get that. It's performance over a statistically significant number of trades that makes the case. Also, it depends what you mean by "a lot of traders". Yes, lots and lots of traders beat the market all the time. But that number is not significant compared to the number of traders who have tried and failed. I get that too. But short of posting trades for 200 days I guess it is kind of pointless. I should just mind my own beezwax. I don't think Enoch was sincere anyway.

You said you had repeatable methods for beating the market. I would (sincerely) like to see them.

By the way, taking on substantially more risk, whether it be margin, options, or whatever, and then generating higher returns than the market, is not beating the market. You have to account for risk-adjusted returns.

[Enoch Root]

Originally Posted by Fuzz

Warren Buffet. And, uhm...ok ,that's all I've got.

Even Warren Buffet is an exaggerated response.

Yes, he has a long track record of beating the S&P 500, but so does a value ETF (i.e. value stocks, over time, outperform the overall market), and he is a value investor.

When you compare him to a value index, the gap is significantly reduced.

He still outperforms a little, but then you also have to account for his big advantage - he doesn't just invest in companies, he manages them. His team goes in and helps turn around many of the companies they buy. Most of us more humble investors don't get to do that.

[moncton golden flames]

Originally Posted by stone hands

please name some of these investors who have beat the market for 20 years so i can be rich

warren buffet, charlie munger, guy spier, monesh pobrai, benjamin graham, peter lynch, george soros, jack bogle, carl icahn just to name a few.

long and short of it, there are a lot of great investors who achieve large gains over long periods of time.

[moncton golden flames]

Originally Posted by Enoch Root

You said you had repeatable methods for beating the market. I would (sincerely) like to see them..

read 'the intelligent investor' by benjamin graham.

it's not rocket science, it just doesn't follow 'efficient market theory' which most financial investment people follow.

good businesses do go on sale from time to time because the market is emotional and sometimes irrational and does not always price stocks appropriately.

[moncton golden flames]

i will leave this here.

charlie munger's 4 pillars of investment success.