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Old 04-23-2008, 03:03 PM   #61
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In your defense, the bunny ate some sushi today.
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Be fearful when others are greedy, and greedy when others are fearful. Just another form of "buy low, sell high" for those who have trouble with things. This rule is not universal. Do not buy a 1973 Pinto because everyone else is afraid of it.
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Old 04-23-2008, 03:10 PM   #62
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In your defense, the bunny ate some sushi today.

When my glasses get smeared, things in strange fonts just look like fuzzy Japanese to me.
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Old 04-23-2008, 03:46 PM   #63
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I only invest in individual stocks. I couldn't get excited about paying a pro to invest my money when most of them can't beat the dart board method. In their defense, fund managers have to diversify to a degree that makes it hard to beat the market.
I agree. I gradually switched from mutual funds to individual stocks after figuring out that the great majority of managers are highly-paid closet indexers.

ETFs are a legitimate alternative, but personally I avoid them because they contain lousy companies in low margin industries: e.g., auto manufacturers, restaurant chains, airlines, retailers, etc.
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Old 04-23-2008, 08:38 PM   #64
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I agree. I gradually switched from mutual funds to individual stocks after figuring out that the great majority of managers are highly-paid closet indexers.

ETFs are a legitimate alternative, but personally I avoid them because they contain lousy companies in low margin industries: e.g., auto manufacturers, restaurant chains, airlines, retailers, etc.
Oh no! Another certifiable nut job who thinks that he can actually invest his own money. LOL! Welcome to the club. Whatever you do, don't make the same mistake I did by sharing your results or you will be branded a liar.
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Old 04-23-2008, 08:59 PM   #65
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Those who can, do. Those who can't, teach ridicule those who can.
Maybe:
"Those who believe they can, try"
"Those who fail either shut up about it or lie"
"Those who succeed and brag about it are the subject of strong suspicion and get defensive"
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Old 04-23-2008, 09:03 PM   #66
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Hey I'm not ridiculing you. Its just that you're gonna step on a rake at some point. You *can* be successful at building your own home grown mutual fund with a bunch of well picked diverse individual stock and bond holdings.

But dang, its work!
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Be fearful when others are greedy, and greedy when others are fearful. Just another form of "buy low, sell high" for those who have trouble with things. This rule is not universal. Do not buy a 1973 Pinto because everyone else is afraid of it.
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Old 04-23-2008, 09:45 PM   #67
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I edited out the portion of my prior post which implied that some people can't invest in individual stocks successfully. That goes against my philosophy. The main reason I originally chimed in on this thread was to espouse my belief that the average Joe can beat the market. It is a lot of work and I wouldn't recommend it to anyone unless they enjoy it but it can be done. I think it is worth it. I may change my opinion on this at some point if my methods cease working. That is a very real possibility. Perhaps a probability. Some say it's a certainty. If it comes to that I may go over to the dark side, but not quite yet.
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Old 04-25-2008, 12:50 PM   #68
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So, Brewer, if you don't like the Gardners, what do you think of Suzi Orman?

Actually, I mention her because something I heard her say on the radio last year is driving my investment strategy right now:

"If you own a stock and you won't buy more of it when the price drops, then you should be selling that stock".

Earnings calls the last few days have me throwing money at the losers. Hope this works out.
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Old 04-25-2008, 01:04 PM   #69
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Suze is frequently factually incorrect or gives questionable advice, whch is generally exactly what the boobs who call her show deserve.

I have been adding to stakes in the unloved lately. Thinking about what I would be willing to part with to pursue compelling opportunities.
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Old 04-25-2008, 03:45 PM   #70
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"If you own a stock and you won't buy more of it when the price drops, then you should be selling that stock".
Its not quite that simple. I think the million year old investing saw this is derived from is a warren buffett or peter lynch quote that said if a stock dropped in price and none of the fundamentals that caused you to want to own it have changed, then you should be buying more.

Its entirely possible to have some fundamentals change, a price drop to occur, and an investor not feeling the changes are enough to divest, but enough to not call for further investment.

Comments like the above to a nationwide viewing audience of relatively immature investors may result in a whole lot of people selling stocks when they go down because they're scared to buy more when its on sale. The latter being a typical problem with most investors. Then compounded by locking in the loss.

Thanks Suze.
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Be fearful when others are greedy, and greedy when others are fearful. Just another form of "buy low, sell high" for those who have trouble with things. This rule is not universal. Do not buy a 1973 Pinto because everyone else is afraid of it.
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Old 04-25-2008, 04:10 PM   #71
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"If you own a stock and you won't buy more of it when the price drops, then you should be selling that stock".
This doesn't make sense to me. As cute fuzzy bunny points out, it may well prompt nervous people to dump their stocks at a loss.

Rules of thumb always need to be approached with discretion, but I'd be comfortable with the following variation on the above: "If you own a stock but are reluctant to buy more of it even if you have the cash available and diversification is not an issue, then you should ask yourself whether you really want to continue holding that stock".

I'm sure some of you can improve on the precise wording, but you get my point.
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Old 04-25-2008, 05:40 PM   #72
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This doesn't make sense to me. As cute fuzzy bunny points out, it may well prompt nervous people to dump their stocks at a loss.
Loss aversion is a behavorial finance trap. It is very important to sell your losers. Your portfolio should not have any losers that are more than year old. One can always find something to replace the losers with. So nervous people should dump their stocks at a loss if they have held them a little while.
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Old 04-25-2008, 06:09 PM   #73
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Well see, thats something I wouldnt do. If I was comfortable with the company fundamentals, the direction, management and so forth it would be sort of irrelevant that it was down. In fact, if it was a good company just receiving weak attention from buyers, it'd have a better than average upside potential.

So I wouldnt sell a stock just because it had been down for a set period. I'd sell it because of new information that made it not be something I wanted to continue to hold.

This is why I dont hold any more individual stocks. Even when you've got all the info, you havent got all the info.
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Be fearful when others are greedy, and greedy when others are fearful. Just another form of "buy low, sell high" for those who have trouble with things. This rule is not universal. Do not buy a 1973 Pinto because everyone else is afraid of it.
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Old 04-26-2008, 07:08 PM   #74
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Loss aversion is a behavorial finance trap. It is very important to sell your losers. Your portfolio should not have any losers that are more than year old. One can always find something to replace the losers with. So nervous people should dump their stocks at a loss if they have held them a little while.

I pretty much agree especially in a taxable account. I found the 30 day cooling off period needed to comply with wash sale rules is an important perspective. Sometimes after I sell a loser I still want to buy it after 30 days most often I find that there is a better opportunity.

I am not as rigorous for selling my loser in my IRAs. Still if a stock under preforms the market by ~25% over many months, you should either sell or buy more, unless there is new information.
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Old 04-26-2008, 07:54 PM   #75
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I've seen several posters refer to "back when I was buying individual stocks". I started buying them 18 months ago using TMFs Stock Advisor and Global Gains services as my guides. I'm currently "playing" with 1/8 of our portfolio in this manner.

It's exciting and probably mildly addictive, but I am buying for the long-term. I put the most money in the losers and the only stock I've sold was Jet Blue.

My self-devised strategy is to spread the risk by holding small positions in lots of companies (anywhere from $2k-$10k in about 25 or more different stocks). I would appreciate any feedback on this strategy.

I'm still working and planning to FIRE before 50 (hopefully two more years of work).

My question is: Did you once by individual stocks and then stop because,

A) You realized it wasn't a sound strategy for the average investor, or

B) You moved from the investing to the withdrawal phase?
Back to the OP.

In my case I have moved the opposite direction. I've never been a pure mutual fund person. Since ERing I have switched from managed mutual funds to index funds/ETF (except for a few special case closed end funds.). However, my AA has moved from 50% funds 25% stocks 25% bonds/bond funds to 50% individual stocks 30% index funds 20% bonds/bond funds.

Since, I retired I have found more time to study the market and stocks. I have also gained more confidence in my skills and primarily temperament as an investor.

Much like Ha Ha I buy stocks for their future income stream in most cases this means dividends. I have gotten away from thinking of stocks as whose price goes up and down somewhat randomly, and trying to figure out when to buy them (hopefully low) and sell them hopefully (higher). Instead I focus on income, so I get more excited when 4 of my stocks raised their dividend this week than the one who went up 15% last week. Even if dividend increase is only a penny a share in the case of a bank ASBC. I'll admit to being lazy and depending on analyst like the folks at M* far too much. Still having a pretty dependable stream of dividend income is quite comforting when both the market falls and MM and CD interest rates plunge.

If I didn't find investing in individual stocks intellectually interesting, I would be perfectly content to pick 4 of 5 ETFs and get on with life, but right now stock selection is a hobby which I think I provides a superior risk adjusted return.
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Old 04-26-2008, 09:14 PM   #76
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The main reason I originally chimed in on this thread was to espouse my belief that the average Joe can beat the market. It is a lot of work and I wouldn't recommend it to anyone unless they enjoy it but it can be done. I think it is worth it. I may change my opinion on this at some point if my methods cease working. That is a very real possibility. Perhaps a probability. Some say it's a certainty. If it comes to that I may go over to the dark side, but not quite yet.
Unlike the stock market poker, is a zero sum game. In fact it is negative expected value (EV) game. That is because the house takes a commission (a rake) from each pot in Vegas it is typically $3 or $4. Now for medium stakes No Limit Texas holdem (i.e. the TV game) a typical large pot is $300-$400 so there is 1% charge. In my home games the rake is much larger often as much as 5%, roughly speaking this means that it costs you $60-100 to play poker for night. This means that average player is losing money over the long term. Still there are plenty of poker players who make money.

Last weekend I watched a late 20s Army Sargent (E6) fund the lifestyle of the best poker player in Hawaii. The turn card was a fourth club (10 9 7 and 3 clubs) the young Sargent pushed his remaining $600 into a $400 praying that his pocket Aces were good. The 60 year old card shark thought for a moment before calling; no one on the table was at all surprised when he showed his Ace of Clubs. As the card shark stacked his $1600 worth of chips. I told the woman sitting next to me, "you don't really need to be a good poker player to make money you just need to avoid doing really stupid things!"

Last night it was my turn. A reckless player raised before the flop, I reraised him. The flop was Ace Jack and 4. I checked, he bet $200, I thought for a minute before raising my remaining $650. He instantly called.
I had three 4s and he a pair of Aces with a queen kicker. As I was stacking my $1500 in chips, I noticed a solid poker player say to her husband, "he always wins", he said to her "thats because he doesn't make mistakes.". I thought to myself, naw that isn't true I make plenty of mistakes playing poker and investing, I just don't make stupid impulsive mistakes.

The forums are filled with news articles and anecdotes of of people doing incredibly stupid things with their money. The stock market is no exception. I don't have to be the best poker player in the world to make money just better than 70-80%. I think the same is true for individuals with stock selection. The comparison between poker and stock market isn't entirely accurate, because a small fraction of the stock market pros, control a huge amount of the assets via fund. On the other hand the pros have some huge disadvantages. I am quite sure that plenty of the index fund managers at Vanguard, felt that investing money in NASDAQ stocks was stupid in 1999 and early 2000, but they had no choice.

Similarily we just witnessed bond and hedge fund managers force to liquid perfectly good bonds at fire sale prices because they had margin calls/redemptions. The individual investor can look at these situations and say I know a bargain when I see one I am going to buy my more of these beaten down issues. One doesn't need to time the market perfectly to do quite well within 20% of the top or bottom for individual stocks is plenty good enough and even for the market as whole.

Obviously, rebalancing serves a very similar function, and require much less work. So I would never say that sticking with index funds, and asset allocation is bad. I feel certain that doing so avoids make a dumb mistake, which is key to making money in long run for both stocks and poker. Still my believe in an efficient market continues to decrease.
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