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Old 04-20-2008, 12:15 PM   #21
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t can be a real roller coaster ride but I enjoy it. Last year I was up almost 100% halfway through the year but finished the year only up about 47%. My 5 year average gain is around 30%. This year I am up 30% year to date. I hope this doesn't sound as though I am bragging. I am just trying to make the point that it is possible to beat the market, despite what many in the financial media would have you believe.

Congratulations on your success .
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Old 04-20-2008, 12:21 PM   #22
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Sure its possible to beat the market...at least for a while.

Concentration sure can make you rich. Or very poor.

The hard part is that not a lot of people will show up to tell everyone how they put it all into five sure things and they all crapped out. Just before they ask if you'd like fries with that.
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Old 04-20-2008, 01:02 PM   #23
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Not to worry, but Trapshooter is just going through a phase right now as well.

Emerging markets funds have a 34+% annuallized return for 5 years. Foreign small cap is up 25+% annuallized for 5 years as well. Energy is up 28% annuallized for the last 5 years, too. So one doesn't need individual stocks to do well.
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Old 04-20-2008, 02:08 PM   #24
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I started investing in January of 1987 and decided to experiment by setting up two different pots of money. One I would manage actively - buying, selling, slicing and dicing individual stocks and the other would be invested in diverisified mutual funds (mostly Vanguard, Mutual Shares etc). I did this for 5 years keeping track of all of my expenses and income very carefully. At the end of 5 years (87-91) my net return in the individual stocks account was zero! the return on my funds was 12%. I sold all my stocks, kept plugging at the funds and was able to go to a part time work basis 7 years latter in 1999 at age 49 and fully retire in 2002 at 52.

Moral of the story? I am not smart enough to invest in individual stocks on my own but in this great country of ours you don't need to - you can still do very well by investing in a diversified group of mutual funds and just keeping at it through the crash of 87, 90, 00-02, and apparently 08 although we'll see about this one...
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Old 04-20-2008, 02:14 PM   #25
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During my early years I fancy myself as a good stock picker. But now I agree with what's others have said. I'm lucky to be at a point in my life that I don't have to take large risks to get me where I want to be. It's so much easier and less stressful to just buy ETFs and work on asset allocation rather than pick individual stocks.
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Old 04-20-2008, 02:24 PM   #26
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Sure its possible to beat the market...at least for a while.

Concentration sure can make you rich. Or very poor.

The hard part is that not a lot of people will show up to tell everyone how they put it all into five sure things and they all crapped out. Just before they ask if you'd like fries with that.
As I said, I wouldn't necessarily recommend my approach to everyone. If you don't think you can beat the market over time, then put your money into etf's or mutual funds and forget about it. No shame. I just don't accept the premise that it is impossible to beat the market. I realize that I have only been doing it for five years. This may not be a long enough track record to prove my point but I don't think it is short enough to be scoffed at either.
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Old 04-20-2008, 02:38 PM   #27
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Not to worry, but Trapshooter is just going through a phase right now as well.

Emerging markets funds have a 34+% annuallized return for 5 years. Foreign small cap is up 25+% annuallized for 5 years as well. Energy is up 28% annuallized for the last 5 years, too. So one doesn't need individual stocks to do well.
Yes, those funds have done quite well. Have you considered getting into some of them?

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Net worth down about 6%, market losses from the late Fall highs are worse than that, but we work, so invested income offsets some of the losses.
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Old 04-20-2008, 02:43 PM   #28
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I am just trying to make the point that it is possible to beat the market, despite what many in the financial media would have you believe.
I don't know of any knowledgable person who would claim it is impossible to beat the market. But many people believe it is very unlikely any particular individual can do it consistently over the multi-decade timeframe required to support a retirement. If an individual CAN do it, he'd be wasting his talent working on his individual portfolio, he/she should be managing a trust, a MF, etc and be retired on his private island in 10 years.

Later edit: Sorry, I didn't mean to pile on, Trapshooter. I missed the posts from the others who were already shooting at you. "Pull!"
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Old 04-20-2008, 02:50 PM   #29
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Yes, those funds have done quite well. Have you considered getting into some of them?
I've been in them for years. It's all part of a standard asset allocation.
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Old 04-20-2008, 03:12 PM   #30
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I bought individual stocks in the 90's...just had to go with the flow. Since then, funds are more to my liking. I've gotten lazy, what can I say? Only $50k in these stocks, a small fraction of net worth. As UM would say, "hormones".
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Old 04-20-2008, 03:29 PM   #31
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Later edit: Sorry, I didn't mean to pile on, Trapshooter. I missed the posts from the others who were already shooting at you. "Pull!"
LOL! No problem. I know I am way outside the mainstream on this issue, especially on this board.
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Old 04-20-2008, 03:45 PM   #32
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This is a good question, and one that has been on my mind much in the past year or so. My current allocation is a little more than 13% cash, a little less than 1% in a single ETF, and the rest in individual issues (86%).

I started in single stocks because the people who I first hired for advice were biased that way. My few journeys into the world of mutual funds were disappointing (bought at the really wrong time) and soured me on them for a long time. That I am something of a control freak adds to my bias against someone else making decisions about how my money is invested.

Admittedly, I am to investing what Forrest Gump was to shrimping. My style? Well, it ain’t for everybody, and more than a few people have questioned my decisions with “Boy, are you stupid or something?” But I have always had a really long time horizon on my investments and, depending on your view, I either made some really good buy decisions or I was too stupid to sell when I should have.

Before the internet made it so easy to look at your portfolio value every day, I wouldn’t even look at monthly statements for months at a time. When I did, I would see a stock that had gone up significantly and wonder if I should sell. The next year I might open a statement and see the same stock was down by 50% and kick myself for not selling the previous year. But ultimately I would not sell because I was at least smart enough to realize it was a good company that wasn’t going out of business in the next decade or two, and with my time horizon it was all just pretend money until I actually sold.

It was only in the mid-to-late 1990’s, as the tech boom was making a lot of co-workers talk about how rich they were, that I started thinking about stocks differently. I missed the whole thing, not because I was smart, but because I was used to making decisions about a stock based on the underlying company’s prospects for staying in business and making a good profit. CNBC was on every television in every office and I started watching and trying to figure out what they hell those people were talking about – (momentum - what’s that?). I also remember drinking an overpriced beer at Enron Field in the spring of 2000 when everyone cheered Ken Lay as he told them how he was going to transform Enron into the premier internet service provider. It struck me at that moment that I must be the dumbest guy in the stadium, because I didn’t get it.

The bubble burst just about the time I decided that I would stick my toe in the tech waters (lucky for me, losing a toe is not fatal), and in the following years even my plain vanilla portfolio took a beating. I was thinking of retiring in 2000, but the pension wasn’t so great back then and with a devalued portfolio on my hands retirement would just mean going to work somewhere else.

The pension got much better and the portfolio has had a couple of very good years. My returns are, after 26 years, almost two points above the S&P, but the ups and downs have generally mirrored that index. Now I’m at the point where I have to decide how much time and energy I want to spend being an active investor, and what kind of return I get for time that I would rather spend doing something I really enjoy.

For the most part, I have left the plain-vanilla taxable investment alone, and concentrated my time and energy on a rollover-IRA at FIDO funded by the lump-sum portion of my pension (DROP). It was an experiment to see if I could do it, if I could get a good return, and how much time and energy it took.

It’s been a little over a year and in the IRA I’m up 4.2% compared to the S&P at –4.3, the NASDAQ -.77 and the DOW which is up 1.8%. (FIDO’s S&P 500 Index Mutual Fund (FSMKX) is down 5.14% for the past 12 months, and its other index funds are the same, so I guess I did even better compared to the products I could have bought.). Even the much beloved Wellesley is down 4.65% over the same time period.

So I made some money, and I did better than the overall market and at least some mutual funds, but compared to the amount of time I spent doing it I should have just gone and gotten a damn j*b. In fact, I have basically taken on a full-time j*b doing this. My golf clubs came out of the garage yesterday, the first time they have seen light in a year. The last time I went to the gym was before Thanksgiving. The list of stuff I have missed out on is way too lengthy.

Plus, given that it was an experiment and I wanted to see my results much sooner than a decade from now, I significantly shortened my time horizon. Result? Volatility sucks. There have been a few mornings when I almost called FIDO to tell them they had screwed up, because there was no way that XYZ stock could have lost 28% in one day. When you pay attention to this stuff every day you can get a little freaked out by the ride on the volatility train.

I was away from this forum for a while because I was spending all my time researching and learning, and I came back recently because I needed a good does of the sane common-sense that most people here give out. Thanks for that, by the way.

My conclusion is that I can, and will, continue to invest in individual stocks as long as it works for me. But playing with Mr. Market every day is not going to work for me, and I’m going back to looking out ten-to-twenty years. If that takes more than 5-10 hours a week to do properly, then I need to rethink and adjust. And as my investment time horizon starts to get shorter, or if I stop being good at it (or having Bubba Gump’s luck), it will definitely be time to move toward ETF’s, maybe some mutual funds, and you’ll hear me saying “…psst, Wellesly.”
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Old 04-20-2008, 03:58 PM   #33
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I would basically echo the others who said that they stopped "playing the market" with individual stock picks because they were no longer in a position to NEED to "beat the market." At some point, the risk of underperforming becomes more compelling than the desire to maximize potential wealth.

I invest with the goal of maximizing my chances of hitting a certain objective (such as "have $1M in all retirement accounts within 10 years"). At some point, taking too much risk -- even as it might maximize the *average* case wealth after 10 years -- also reduces the chances of reaching the goal. And at this point I'd be content with typical market returns for the next 20 years or even 1% below it. That's enough for us to more than reach our goals, so I don't see the need to take the extra risk with stock picking or market timing.
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Old 04-20-2008, 04:08 PM   #34
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No shooting from here. I've beaten the market by sizable margins for 14 years straight.

But I think the difference is that I know i've been lucky, rather than smart. Because I've already seen up close that smart doesnt work very well.
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Old 04-20-2008, 05:07 PM   #35
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I did it for years and then it dawned upon me that I was more lucky then smart. So my answer is a). ... before I got too unlucky.
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Old 04-20-2008, 07:51 PM   #36
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No shooting from here. I've beaten the market by sizable margins for 14 years straight.

But I think the difference is that I know i've been lucky, rather than smart. Because I've already seen up close that smart doesnt work very well.
I never professed to be smart. I prefer to chalk it up to luck, hard work and divine intervention with an emphasis on the latter. I was just responding to the original poster's question concerning investing in individual stocks. I thought I had something germane to add from my successful experience. But heck, you may be right. I may end up working the drive-thru window at McDonald's. There will probably be a lot of "professional" money managers there with me. Like the guys at Bear Stearns who leveraged up 32:1 on subprime loans. They, and their ilk, may be some of the same guys who will be managing your favorite mutual fund next year. We'll save a spot for you. LOL
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Old 04-20-2008, 07:52 PM   #37
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I've already been a fry cook, quarter pounder grill cook, and a night manager at Mcdonalds. Heck, I did a few lunches on the regular burger grill and could do a dozen-six on the turn. That'll make some old mcdonalds workers groan. Hint: you have to use both sides of the spatula since there isnt actually enough time to flip all 24 burgers if you turn the spatula unnecessarily.

But that was when I was 16.

So...I'm good, but thanks!
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Old 04-20-2008, 09:20 PM   #38
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I traded individual stocks for awhile in the 90s. Won a few, lost a few. I finally came to the conclusion that I knew just enough to be dangerous. I'm much happier since I diversified in Vanguard funds and stopped paying so much attention. I just shift the AA slightly as I age and let the funds do their thing.
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Old 04-20-2008, 09:40 PM   #39
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Hint: you have to use both sides of the spatula since there isnt actually enough time to flip all 24 burgers if you turn the spatula unnecessarily.
I believe it. You are crazy fast on the computer too. A one minute response time? Thats got to be some kind of record. LoL
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Old 04-20-2008, 09:46 PM   #40
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Luck of the draw. Hell, I watched an entire Al Hore movie since the last time I posted.

To tell the truth, the board often chides me that I need to wait 30 seconds between responses.

That dozen-six on the turn thing really is crazy. You have 30 seconds to flip 24 pieces of frozen mutameat. I saw it done in under ten seconds once.

That guy was something. He's in charge of a big piece of floridas public works engineering department now.

Make your own joke!
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