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Old 05-19-2017, 03:56 PM   #381
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Understanding the management team is critical, and ties into the very real difference between investing and speculating.

Investing is the process of buying a part ownership in a business, and understanding the business risks of doing so (to that end, it makes sense to know that the managers of the business have the owners interests first).

Speculating is little more than hoping for a short term gain, based on a superficial understanding of risks.

You are right, most people aren't interested in the effort required to invest. In that case, a market ETF, or a reputable investment advisory firm is probably the best best.

Certainly not constrained only to millennials. Investing vs. speculating (gambling) is a phenomenon across generations.
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Old 05-19-2017, 04:21 PM   #382
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The biggest thing with using an advisor isn't purely investing either. It's all the other areas that they can help with (tax planning, estate planning, retirement planning, etc.) Of course investments and investment strategy is a piece of it, but there are all kinds of other areas that people just flat out miss or ignore until it's too late.

I also think that a major part of an advisors role isn't purely picking the right stock, but making sure that people don't do something stupid and make big mistakes. That's not as glamorous as it might seem, but people have a hard time understanding risk to begin with, nevermind recognizing how it impacts them personally. Sometimes the biggest impact isn't just an enormous gain, it's recognizing what not to do at a given time.
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Old 05-19-2017, 04:34 PM   #383
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I see "investing" much differently. Plowing through financial statements is one way to "invest" but not the only...and certainly not the least risky. I think it's the ultimate certainty that people speak with when they talk about the right way to invest that gets me. There are other ways to trade and invest that have zero to do with "diversification", financial statements and management teams. All the financial information you're talking about is already available to the public long before you get it so what you're really talking about is having better information sooner than millions of other investors. That's a tough road to take.
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Old 05-19-2017, 04:39 PM   #384
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and what is it you're referring to? Technical trading?
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Old 05-19-2017, 04:46 PM   #385
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The biggest thing with using an advisor isn't purely investing either. It's all the other areas that they can help with (tax planning, estate planning, retirement planning, etc.) Of course investments and investment strategy is a piece of it, but there are all kinds of other areas that people just flat out miss or ignore until it's too late.

I also think that a major part of an advisors role isn't purely picking the right stock, but making sure that people don't do something stupid and make big mistakes. That's not as glamorous as it might seem, but people have a hard time understanding risk to begin with, nevermind recognizing how it impacts them personally. Sometimes the biggest impact isn't just an enormous gain, it's recognizing what not to do at a given time.
Absolutely agree with everything in this post, especially the bold.

I would go a step further and say an advisor's role shouldn't be stock picking at all. The value from an advisor comes from a) having a well constructed portfolio, b) actually providing advice, such as tax planning, retirement planning, etc, and c) helping investors avoid mistakes and emotional decisions.

There are multiple studies that show that investors that engage an advisor outperform investors that don't use an advisor. - quite substantially. A very strong case can be made that the primary reason for that is item 'c' above.
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Old 05-19-2017, 04:51 PM   #386
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and what is it you're referring to? Technical trading?
Kind of. Quantitative trading. Mostly chart patterns and trend lines from the technical world along with some programs showing abnormality. Then just collecting data and creating strategies. If I could program properly it would be algorithmic trading.
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Old 05-19-2017, 04:57 PM   #387
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Kind of. Quantitative trading. Mostly chart patterns and trend lines from the technical world along with some programs showing abnormality. Then just collecting data and creating strategies. If I could program properly it would be algorithmic trading.
If you aren't using a algorithm with instantaneous data and automated trades aren't you far behind the groups that do this professionally. (Unless you of course run one of these groups). But for the individual investor aren't you just to far behind the information coming in?
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Old 05-19-2017, 05:12 PM   #388
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If you aren't using a algorithm with instantaneous data and automated trades aren't you far behind the groups that do this professionally. (Unless you of course run one of these groups). But for the individual investor aren't you just to far behind the information coming in?
Not really. It's all in real time via Trade Station which is plenty fast for me. Automated trades are possible for US citizens on TS but not really necessary for me. Algorithmic trading sounds like those flash boys types of high frequency traders but it's not like that. It's really just trading that is governed by a set of rules programmed into a computer and when the market meets those conditions it gives you a trade signal. It doesn't rely on speed of trades. Usually a two minute chart is what I work off of but I'm working on a 30 second chart strategy for the first few minutes of the day. The conditions I look for take several minutes to develop. Some strategies I only enter after the first 52 minutes of the trading day. Some strategies are even for over night holds or swing trades. It's generally the same conditions but different time frames on the charts.
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Old 05-19-2017, 05:53 PM   #389
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As a millennial, I've figured out all those other things; home, saving, buying groceries, meal plan and prep, disciplined personal budget etc (I only allow myself avocado on my Chipotle burrito once a year).

But how do I learn how to invest wisely?

I'm the son of immigrates and my dad literally thinks investing means wasting (bad at English). I didn't exactly have a leg up in that department vs my peers whose dads were bankers and old stock Canadians.

Can someone teach me?
A good place to start, for a Canadian perspective, is the Financial Wisdom Forum. See here: http://www.financialwisdomforum.org

All volunteer, no pressure, and generally aligned with the tenets of Bogle (the founder of Vanguard, which essentially created the index fund). The corresponding US website is Bogleheads.org. The Wealthy Barber would likely approve of both websites and the information contained therein.
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Old 05-19-2017, 05:55 PM   #390
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I don't know, I think essays about stock picking and a bunch of stuff on 30 second graphs is a pretty solid foundation.
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Old 05-19-2017, 07:28 PM   #391
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Not really. It's all in real time via Trade Station which is plenty fast for me. Automated trades are possible for US citizens on TS but not really necessary for me. Algorithmic trading sounds like those flash boys types of high frequency traders but it's not like that. It's really just trading that is governed by a set of rules programmed into a computer and when the market meets those conditions it gives you a trade signal. It doesn't rely on speed of trades. Usually a two minute chart is what I work off of but I'm working on a 30 second chart strategy for the first few minutes of the day. The conditions I look for take several minutes to develop. Some strategies I only enter after the first 52 minutes of the trading day. Some strategies are even for over night holds or swing trades. It's generally the same conditions but different time frames on the charts.


So, short term speculation then.
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Old 05-19-2017, 07:58 PM   #392
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So, short term speculation then.
No not at all. It's actually the opposite of speculation. For example, if you "understand the management team" of 1000 different companies, can you tell me how many of those companies will yield successful trades? And what will your average return be? What about your average loss? And what will your risk compared to that return be? Have you tested your reason for buying stocks over a sufficient number of trades to get answers to those questions? Can you formulate those reasons into rules to create a strategy to repeat your results? If not, according to the definition, you are speculating.
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Old 05-19-2017, 10:24 PM   #393
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Not really. It's all in real time via Trade Station which is plenty fast for me. Automated trades are possible for US citizens on TS but not really necessary for me. Algorithmic trading sounds like those flash boys types of high frequency traders but it's not like that. It's really just trading that is governed by a set of rules programmed into a computer and when the market meets those conditions it gives you a trade signal. It doesn't rely on speed of trades. Usually a two minute chart is what I work off of but I'm working on a 30 second chart strategy for the first few minutes of the day. The conditions I look for take several minutes to develop. Some strategies I only enter after the first 52 minutes of the trading day. Some strategies are even for over night holds or swing trades. It's generally the same conditions but different time frames on the charts.
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No not at all. It's actually the opposite of speculation. For example, if you "understand the management team" of 1000 different companies, can you tell me how many of those companies will yield successful trades? And what will your average return be? What about your average loss? And what will your risk compared to that return be? Have you tested your reason for buying stocks over a sufficient number of trades to get answers to those questions? Can you formulate those reasons into rules to create a strategy to repeat your results? If not, according to the definition, you are speculating.
Haha, so on one hand you're talking about trading on 30 seconds of info or "maybe even overnight" and then you try to say this isn't speculative? I'm in stitches!

I don't know what kind of information you use to define an investment, but "maybe even overnight" isn't an investment period. I don't know what you're up to, but it's hard to consider that investing.
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Old 05-20-2017, 06:26 AM   #394
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Haha, so on one hand you're talking about trading on 30 seconds of info or "maybe even overnight" and then you try to say this isn't speculative? I'm in stitches!

I don't know what kind of information you use to define an investment, but "maybe even overnight" isn't an investment period. I don't know what you're up to, but it's hard to consider that investing.
I get that. And CP investors are very good by all accounts. But it's a mutual laugh. On one hand, "I have no idea what you do". And on the other, "but it's sure isn't investing".

I also find it funny that chances are not a single "investor" here can answer a single question that quantifies their investment. I get the feeling "investors" buy a stock because "they think it will go up". And I do not think they know when they have failed other than to hold onto it forever and let the market and diversification smooth it out.

Ironically, that is not investing. Ironically that is hope, prayer, gambling by its definition. I know it works for some people but it works because the markets work.

What I do is easy. Chart patterns repeat themselves. They always have. It's been proven. It's just human psychology. If Jesus sold fish I could tell you exactly when Judas shorted his fish stock and began the inevitable fish market crashed 2000 years ago.

Most market beating trends start with statistically significant abnormal action from very low volatility....nothing going on for months and then some change in fundamentals that causes people to pile in. I haven't looked at the top 500 gainers this year but I know 70-80% of them will fit that bill. It starts with a big day, pulls back due to profit taking. Then either fails and returns to a trend line or continues higher for bigger gains. Sometimes you catch the big day. Sometimes you catch the pull back for longer holds. But it's just psychology and it happens over and over. It's quantifiable, testable and repeatable. It happens on 30 second charts. It happens on ten year monthly charts.

At any rate, defining an investment by the duration of time you have your money involved is silly. Being in cash every night is wildly less risky than holding over night. Stocks rarely tank during the trading day. News happens generally after hours and you wake up with a 30% haircut. So time is just a bizarre metric for investment vs speculation. Time is required to reap the benefits of diversification. But that also makes the gainers less valuable. It just removes alpha and to beat the market requires alpha.

Going back to the poster with the question, how do I invest, I don't think it matters what method you use. What does matter is creating a strategy you can rely on. Buying based on a management team might be a fantastic strategy. But how do I search out the companies with the best teams? What is the criteria? How do I know they are better than the others? And most importantly, when have I been proven wrong? Once those have been answered with a statistically significant number of subjects in your study, at that point you have stopped speculating. The average Joe with average information needs this data or you just become more chum for people with better information.

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Old 05-20-2017, 07:14 AM   #395
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That's incredible. I hope you are managing money for Aimco or CPP? It would be incredibly selfish to use this brilliant strategy purely for personal gain when you could be working this system for everyone's gain.
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Old 05-20-2017, 09:27 AM   #396
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That's incredible. I hope you are managing money for Aimco or CPP? It would be incredibly selfish to use this brilliant strategy purely for personal gain when you could be working this system for everyone's gain.
Most major funds and banks use technical and quantitative trading now. And they perform better as well...."meaningfully better"...

https://papers.ssrn.com/sol3/papers....act_id=2202060

They teach it in CFA courses. Banks do it. Pensions do it. Funds do it. Cramer even does a section every week with technical analysts. I know it's sarcasm, but why would you work for someone else if you didn't have to?
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Old 05-20-2017, 09:35 AM   #397
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So... technical trading.

Overconfidence is a good thing - because it results in people pursuing active management, in whatever form that may take. And the more people there are pursuing their active strategies, the more significant the efficiency of the markets becomes.

Are markets perfectly efficient? No, of course not. But are they effectively efficient, thus creating the environment whereby passive investing becomes the best strategy for the vast majority of investors? Absolutely.

And every time I see someone proclaim/explain that their strategy is superior, I smile.

Edit: oh now I see you're calling it technical trading as well.
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Old 05-20-2017, 09:36 AM   #398
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I forgot to mention earlier, an oft forgotten aspect of a healthy financial set up is life insurance. However, it's a hard sell to younger individuals who often think they are invincible and don't need it.

Because of the convoluted argument of what an investment is, I will say, for me, it's to leave something behind for the future generations. Whole life insurance can help me achieve that.

EDIT: It is a good idea to know the difference between whole and term life insurance.
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Old 05-20-2017, 09:58 AM   #399
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If you are trading based on 'price', and not 'value', then it is by nature a spec trade.
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Old 05-20-2017, 10:55 AM   #400
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Can we stop wasting our time with all this trading business and get back to the real meaning of this conversation, it's supposed to be about how ####ty and useless those youngsters are
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