Help me to love stocks!

[ebisky]

Invest wisely. Even investing in an index fund/mutual fund requires a sense of what's going on in the market.

Invest in industries. Find out what industries are doing well and invest in an index fund corresponding to it. Once that industry is not gaining as much, invest in another. For example, oil and gas has been a very good industry for the past few years. You could invest the majority of your money in oil and gas and diversify the rest. This requires little management, but will yield a substantial gain over investing in an overall index and letting the money go through ups and downs.

Check out the 1 year return on ETF's that track energy: http://finance.yahoo.com/etf/browser..._sn&cs=1&ce=10

Here is real-estate, which was also a huge sector:
http://finance.yahoo.com/etf/browser/mkt?c=etf_sr&f=0

*note that YTD = year to date..which would be Jan 1 of 2006.

Invest your money wisely. Invest in index funds, yet invest in industries. Knowing which industries are doing well is pretty easy and can yield you great returns.

For the people still worried about investing per industry, just know that the majority of your funds should be in a small cap index during a bull market and a large cap index during a bear market. At the very least, take this strategy.

-E

[ebisky]

Quote:

Originally Posted by Cute 'n Fuzzy Bunny Indeed...choosing 3/3/96 and $10,000 in the S&P 500 as a starting point, you'd have $20,000 today after 10 years. 3/3/86 as a starting point, you'd have $57,600 after 20 years. 3/3/76 and you'd have $124, 614 after 30 years. Even going back to 3/3/66 and getting a good chunk of that late 60's/early 70's crappy sideways period, you'd still have $143,523. That long term buy and hold thing appears to really work! But yeah, you pick your start time at the precipice of the longest and steepest bear market in 50 years, its going to look ugly. Especially when you leave out the greatest bull market in US history that immediately preceded it...

True, yet $10,00 in 1986 was about $7,000 compared to 1996. And in 1976, was worth only $3500.

Also, buy and hold isn't the best option. Maybe back in the day when commision rates were insane, but today selling and buying doesn't cost much and is easy to do. No sense in keeping your $$ in a stock/fund going down, you can always buy it back later if you like it THAT bad(yet make sure you know the signs first..don't blindly invest). You'll also be able to buy more shares due to having more $$ from the sell when it was going down.

[cute fuzzy bunny]

Quote:

Originally Posted by ebisky True, yet $10,00 in 1986 was about $7,000 compared to 1996. And in 1976, was worth only $3500.

Why you're absolutely correct. Now try the same trick with a bond fund and report back the period results. I can probably help you by letting on that the inflation adjusted returns for bonds arent as good as the inflation adjusted returns for stocks.

Quote:

Also, buy and hold isn't the best option. Maybe back in the day when commision rates were insane, but today selling and buying doesn't cost much and is easy to do. No sense in keeping your $$ in a stock/fund going down, you can always buy it back later if you like it THAT bad(yet make sure you know the signs first..don't blindly invest). You'll also be able to buy more shares due to having more $$ from the sell when it was going down.

I've been waiting for you all of my life. What mechanism do you use to know when to sell when things are going down and to buy when things are going up? Ten thousand mutual fund managers and millions of indivual investors are waiting with bated breath to learn how to time the market effectively...

[Cool Dood]

Quote:

Originally Posted by Cute 'n Fuzzy Bunny I've been waiting for you all of my life. What mechanism do you use to know when to sell when things are going down and to buy when things are going up? Ten thousand mutual fund managers and millions of indivual investors are waiting with bated breath to learn how to time the market effectively...

It's easy... Just buy low, and sell high.......

[ebisky]

Quote:

Originally Posted by Cute 'n Fuzzy Bunny Why you're absolutely correct. Now try the same trick with a bond fund and report back the period results. I can probably help you by letting on that the inflation adjusted returns for bonds arent as good as the inflation adjusted returns for stocks. I've been waiting for you all of my life. What mechanism do you use to know when to sell when things are going down and to buy when things are going up? Ten thousand mutual fund managers and millions of indivual investors are waiting with bated breath to learn how to time the market effectively...

Using technical analysis and understanding trends. Hopefully it was obvious to most that when the internet bubble burst, they should get out of tech stocks.

I actively manage my money, but the idea I'm presenting is to ride the stock up, through a the usual ups and downs, but if the stock is in a clear downtrend, to not hold onto it because it does not make any sense. I'm not saying to buy and sell every week. Buy when an industry is doing well and sell when it is not. This could be maybe one or two (or less) buy/sells a year. If money was invested in real-estate a few years ago, you could still be holding onto that. I'm not suggesting actively managing the money, just know what has momentum and what is slowing down or reversing.

Watch financial news or go to the library (maybe subscribe) to a financial magazine. That's about all the information you should need for minimal management. I think most people realize that natural resources + real estate have been the big movers over the last few years. It is almost common knowledge. There are reports, however, of the housing bubble about to burst, so if I was invested in real estate I'd be watching things more closely.

[brewer12345]

Quote:

Originally Posted by ebisky Using technical analysis and understanding trends.

Cut that out. The Boss is in a meeting in the next room and he'll hear me if I laugh out loud.

[bosco]

Quote:

Originally Posted by ebisky Using technical analysis and understanding trends. Hopefully it was obvious to most that when the internet bubble burst, they should get out of tech stocks. I actively manage my money, but the idea I'm presenting is to ride the stock up, through a the usual ups and downs, but if the stock is in a clear downtrend, to not hold onto it because it does not make any sense. I'm not saying to buy and sell every week. Buy when an industry is doing well and sell when it is not. This could be maybe one or two (or less) buy/sells a year. If money was invested in real-estate a few years ago, you could still be holding onto that. I'm not suggesting actively managing the money, just know what has momentum and what is slowing down or reversing.

and you've been doing this for how long? and your track record is?

Unless you have a fairly rigid mechanical system that removes your emotions from the process, I suspect you will find out it is not nearly as easy as you say/think.

If you do have such a system (or pay to get signals from someone who does), it is likely that you may experience some success for a while, but unlikely that you will significantly beat the market averages over the long haul.

There are, however, some pretty good systems out there that can equal or even slightly beat market averages. Their big plus, in my mind, however, is that they reduce volatility and increase your risk-adjusted return. Very few can consistently beat the market averages, as Mark Hulbert as adequately demonstrated.

All approaches, whether timing or buy and hold, entail an emotional cost. Emotional reactions are a very individual thing. I think people should take the approach that is

1) consistent (i.e. that they can stick to)

and

2) fairly rigid or mechanical (doesn't require you to constantly agonize over what to do on a daily basis--this is the recipe for failure)

ANY approach that you can stick with will beat one that you abandon due to panic or distress.

Don't ask me how I know this....

[ebisky]

Quote:

Originally Posted by bosco and you've been doing this for how long? and your track record is? Unless you have a fairly rigid mechanical system that removes your emotions from the process, I suspect you will find out it is not nearly as easy as you say/think. If you do have such a system (or pay to get signals from someone who does), it is likely that you may experience some success for a while, but unlikely that you will significantly beat the market averages over the long haul. There are, however, some pretty good systems out there that can equal or even slightly beat market averages. Their big plus, in my mind, however, is that they reduce volatility and increase your risk-adjusted return. Very few can consistently beat the market averages, as Mark Hulbert as adequately demonstrated. All approaches, whether timing or buy and hold, entail an emotional cost. Emotional reactions are a very individual thing. I think people should take the approach that is 1) consistent (i.e. that they can stick to) and 2) fairly rigid or mechanical (doesn't require you to constantly agonize over what to do on a daily basis--this is the recipe for failure) ANY approach that you can stick with will beat one that you abandon due to panic or distress. Don't ask me how I know this....

For swing or day trading these principles hold true, yet investing in industries is an easy way to invest with minimal risk and beat the market that does not require much, if any active management of the funds. This is all I'm trying to get at. I'm talking about ETFs or any other fund that tracks industries. Diversify, of course, but I'd suggest moving the majority of your investments into industries that are doing well instead of investing in a fund that tracks the S&P 500 or another major market. I'm suggesting doing a few trades a year at max(maybe none), not trading every day/week/month. Move your funds into areas that are growing.

[Ed_The_Gypsy]

And bosco quoth:

Quote:

ANY approach that you can stick with will beat one that you abandon due to panic or distress. Don't ask me how I know this....

I think you and I could put together a 12-step program on this. "Friends of Dory36"?

El Gitano

[bosco]

Quote:

Originally Posted by ebisky For swing or day trading these principles hold true, yet investing in industries is an easy way to invest with minimal risk and beat the market that does not require much, if any active management of the funds. This is all I'm trying to get at. I'm talking about ETFs or any other fund that tracks industries. Diversify, of course, but I'd suggest moving the majority of your investments into industries that are doing well instead of investing in a fund that tracks the S&P 500 or another major market. I'm suggesting doing a few trades a year at max(maybe none), not trading every day/week/month. Move your funds into areas that are growing.

this is called "chasing the hot sectors"

lotsa luck...

[ebisky]

Quote:

Originally Posted by bosco this is called "chasing the hot sectors" lotsa luck...

Check out the 1 year returns of the Vanguard energy and real estate ETFs.

No chasing here. Investing. These are also not hot markets. They have been stable markets in a long term uptrend(at least they have been in the past, as I said real estate is a it iffy at this point).

[cute fuzzy bunny]

Quote:

Originally Posted by brewer12345 Cut that out. The Boss is in a meeting in the next room and he'll hear me if I laugh out loud.

Too late. The wife (aka "the boss") just asked "Now what the hell is so funny?".

[brewer12345]

Quote:

Originally Posted by ebisky Check out the 1 year returns of the Vanguard energy and real estate ETFs.

Great, now where can I get next year's return numbers for them?

[73ss454]

Quote:

Originally Posted by brewer12345 Great, now where can I get next year's return numbers for them?

Next year's WSJ

[REWahoo]

ebisky,

After reading your recent posts putting forth your investment strategy and offering posters investment advice, I'm just a little curious about your background and experience level in the equity markets.

You mentioned in your initial post back in January that you were in your final semester in college. That could mean you are anywhere from 20 to 100 or so, but the odds are you are on the low end of that range. So how long have you been investing and how did you develop your strategy? How did it hold up in the roller coaster we were on this past decade? Or were you too short to be allowed to ride?

[cute fuzzy bunny]

Magic 8 ball is uncommitted. Got "it is decidedly so", "ask again later", "reply hazy, try again later".

[ebisky]

Quote:

Originally Posted by REWahoo! ebisky, After reading your recent posts putting forth your investment strategy and offering posters investment advice, I'm just a little curious about your background and experience level in the equity markets. You mentioned in your initial post back in January that you were in your final semester in college. That could mean you are anywhere from 20 to 100 or so, but the odds are you are on the low end of that range. So how long have you been investing and how did you develop your strategy? How did it hold up in the roller coaster we were on this past decade? Or were you too short to be allowed to ride?

I've been investing for a little over a year, but don't let my inexperience fool you into thinking I don't know the markets. I've read many books and continue to educate myself about the market. I also trade almost every day and surround myself with professionals.

The strategy I am suggesting here is not one I use. I am a swing trader, so I don't hold investments for longer than a few days (if that), however, I know enough about how the market works to know that investing in industries as a safe investment is a good idea. I've looked at the charts and studied how the ETFs move.

My main point is that if you are investing in index funds, to invest in industries and not the overall market. When I have a full time position, I will start actually "investing" my money and it will go into index funds. Any profits I make off my active investments I will move over into index funds. Knowing which industries are doing well is not very difficult and would not take a lot of time or research to figure out.

I'm just trying to help out. Take my advice or leave it. I suggest at least to look into it. Investing in industries makes sense. It's safer than investing in individual stocks due to diversifying within the entire industry, yet you get the benefits of the momentum from specific industries.

-E

[REWahoo]

Quote:

Originally Posted by ebisky I've been investing for a little over a year, but don't let my inexperience fool you into thinking I don't know the markets. I've read many books and continue to educate myself about the market. I also trade almost every day and surround myself with professionals.

I sincerely wish you and the professionals surrounding you the very best.
Just out of curiosity, which way are they facing?

[bosco]

Quote:

Originally Posted by ebisky I've looked at the charts and studied how the ETFs move.

we've all studied and looked at the charts. Unfortunately, none of us can see the part of the chart just to the right of the right edge, and that's the part of it that seems to have the most effect on whether we've made a good investment or not.

I suspect that there are more than a few of us here that believed, at some point in the past, that we had it all figured out. Some of us even had the bad luck to succeed for a few years before we got our comeuppance. Maybe you are different. No offense, but I won't be betting my money on it. Especially since you just stated that you don't use this "safe" approach yourself.

[ebisky]

Quote:

Originally Posted by bosco we've all studied and looked at the charts. Unfortunately, none of us can see the part of the chart just to the right of the right edge, and that's the part of it that seems to have the most effect on whether we've made a good investment or not. I suspect that there are more than a few of us here that believed, at some point in the past, that we had it all figured out. Some of us even had the bad luck to succeed for a few years before we got our comeuppance. Maybe you are different. No offense, but I won't be betting my money on it. Especially since you just stated that you don't use this "safe" approach yourself.

I understand where you are coming from and realize I might sound a little hypocritical. I am a momentum investor, so I trade symbols, not companies. I use almost all technical analysis. TA is dependable because almost everyone else uses it, especially the big investment firms. For example, if a stock is in an uptrend and crosses below the 20 moving average line, it is a sign that the stock will break into a small downtrend. As long as the falling price doesn't break the uptrend, the stock should rise once again to newer highs. Just at the very basic level of TA using moving averages is almost all a new investor would need for stocks. Use 20, 50, 100, 200 moving average lines on a graph and it will tell you a lot. Here is a simple illustration I drew up of the Vanguard real estate ETF (symbol: VNQ) I use a lot more indicators when analyzing a stock, but this just goes to show how simple tools such as moving averages can be used to predict trends. For example, a great time to buy the VNQ would have been at the beginning of May '05 when the 20 day MA crossed above BOTH the 50 and 100 moving averages...an extremly strong sign of an uptrend. Also notice the very long term trend was never borken. The stock came down to a low of 53.60 in oct '05, which was much higher than the low of 48.46 at the end of March '05. Higher highs, higher lows.