I was on some usual stop and go traffic on the 405. And a thought came to me: what of we thought of individual stocks as like lanes in a very wide highway?
Sure, the analogy fall apart in many ways. BUT... In general, everyone is trying to move ahead. So in that regard, it shows the general positive intent of the market.
But then some lanes are blocked, those guys will be stuck for awhile.
Sometimes we all have to veer towards a new lane (different sector?) for awhile.
There are always new people getting on, and people getting off.
Day traders are like the folks who weave rapidly in and out between lanes. Ok, I admit, I used to do that...
As I got older, I realized every lane change is actually a risk. So I got to where I didn't mind following slower traffic, because the risk of changing lanes was too great: maybe crossing the lane reflectors pops my tires, maybe there IS someone in the blind spot, maybe while checking my blind spot a rodent decides to cross the road in front of me, or there is some low debris in the road (like that one time I nearly hit a ladder! or another time someones wheelchair had fallen onto the road!), etc....
And everyone is basically happy as long as all the lanes are moving forward at roughly equal speed. But sometimes you have +5-20% speeders, they're getting ahead too fast, and sometimes the law reels them back in. People are generally happy about that ("yay! they got him!" with glare eyes as you pass that speeder who roared past you), but for the most part people do get away with +5-20%... (yes, based on my very scientific study of this! QED) And those who don't take advantage of that, well they spend more time on the highway...
Sometimes you have the truly excessive speeders, and nobody likes them. Part of it is jealously, but mostly it's just the added risk of causing an accident, which then brings lanes to a crawl.
I'm not sure how to put dividends into the analogy. Maybe drafting behind larger vehicles (saving fuel)?
Sometimes all the lanes get wrecked - I think in my life, I can count about 4 times when traffic was at such a standstill, people got out of their cars to walk around and chit chat and gossip about what might be going on (well, before cell phones; now there is no mystery about things and stuff is pretty boring, such as: oh, a guy jumped, they closed the highway; or a plane doing an emergency landing, that's always a little bit exciting -- I'll equate these to Black Swan events).
It's the forward progress within a lane that represents growth. How long you're at a standstill represents decline.
My wife never liked stocks, she says "that's gambling!" And she had family relatives who wrecked their lives from gambling (but that was with cards mixed with alcohol...), so I tend to think she's just biased. Maybe the highway analogy is a way to view not as gambling -- although picking a lane on the highway is a bit like gambling.
And this is what really made this thought come to me... In stop and go traffic, your lane isn't going so well. You try to switch lanes, and inevitably it seems cursed and ends up slower than what you started with. BUT, in general, everyone is making forward progress. And, there are moments when good opportunities do present themselves -- and you do pick a good lane
To carry this even further, the SIZE of your vehicle might represent a stock price. That doesn't really work -- but the point is, the size doesn't really matter. Sure, people avoid long buses, RVs or tractor trailers -- they're bulkier and slower to maneuver. But whether its 8 passenger cars or 1 big rig, it's the same space occupied and we're all just trying to move forward.
But then I got to thinking, maybe the TYPE of car you have corresponds to your broker. RobinHood would be a cool Turbo WRX: fast, easy to drive, fairly straightforward and practical. Vanguard would be like a 1980s Lincoln Continental: respected, not a lot of bells and whistles. I'll put Fidelity as like some kind of BMW (or maybe a Toyota). And TDAmeritrade is like a newer age Volvo (or a newer Buick, like the Regal) -- pretty cool after they modernized their look. Schwab is some kind of Ford.
Food for thought ! Maybe I'll run it by my daughter, see if it gets her interest in stocks, and not viewing it as gambling (i.e. the sentiment passed on from mom! ). imo, If you make prudent lane choices, you'll likely do just fine. Maybe not optimal, but you'll get there.
Sure, the analogy fall apart in many ways. BUT... In general, everyone is trying to move ahead. So in that regard, it shows the general positive intent of the market.
But then some lanes are blocked, those guys will be stuck for awhile.
Sometimes we all have to veer towards a new lane (different sector?) for awhile.
There are always new people getting on, and people getting off.
Day traders are like the folks who weave rapidly in and out between lanes. Ok, I admit, I used to do that...
As I got older, I realized every lane change is actually a risk. So I got to where I didn't mind following slower traffic, because the risk of changing lanes was too great: maybe crossing the lane reflectors pops my tires, maybe there IS someone in the blind spot, maybe while checking my blind spot a rodent decides to cross the road in front of me, or there is some low debris in the road (like that one time I nearly hit a ladder! or another time someones wheelchair had fallen onto the road!), etc....
And everyone is basically happy as long as all the lanes are moving forward at roughly equal speed. But sometimes you have +5-20% speeders, they're getting ahead too fast, and sometimes the law reels them back in. People are generally happy about that ("yay! they got him!" with glare eyes as you pass that speeder who roared past you), but for the most part people do get away with +5-20%... (yes, based on my very scientific study of this! QED) And those who don't take advantage of that, well they spend more time on the highway...
Sometimes you have the truly excessive speeders, and nobody likes them. Part of it is jealously, but mostly it's just the added risk of causing an accident, which then brings lanes to a crawl.
I'm not sure how to put dividends into the analogy. Maybe drafting behind larger vehicles (saving fuel)?
Sometimes all the lanes get wrecked - I think in my life, I can count about 4 times when traffic was at such a standstill, people got out of their cars to walk around and chit chat and gossip about what might be going on (well, before cell phones; now there is no mystery about things and stuff is pretty boring, such as: oh, a guy jumped, they closed the highway; or a plane doing an emergency landing, that's always a little bit exciting -- I'll equate these to Black Swan events).
It's the forward progress within a lane that represents growth. How long you're at a standstill represents decline.
My wife never liked stocks, she says "that's gambling!" And she had family relatives who wrecked their lives from gambling (but that was with cards mixed with alcohol...), so I tend to think she's just biased. Maybe the highway analogy is a way to view not as gambling -- although picking a lane on the highway is a bit like gambling.
And this is what really made this thought come to me... In stop and go traffic, your lane isn't going so well. You try to switch lanes, and inevitably it seems cursed and ends up slower than what you started with. BUT, in general, everyone is making forward progress. And, there are moments when good opportunities do present themselves -- and you do pick a good lane
To carry this even further, the SIZE of your vehicle might represent a stock price. That doesn't really work -- but the point is, the size doesn't really matter. Sure, people avoid long buses, RVs or tractor trailers -- they're bulkier and slower to maneuver. But whether its 8 passenger cars or 1 big rig, it's the same space occupied and we're all just trying to move forward.
But then I got to thinking, maybe the TYPE of car you have corresponds to your broker. RobinHood would be a cool Turbo WRX: fast, easy to drive, fairly straightforward and practical. Vanguard would be like a 1980s Lincoln Continental: respected, not a lot of bells and whistles. I'll put Fidelity as like some kind of BMW (or maybe a Toyota). And TDAmeritrade is like a newer age Volvo (or a newer Buick, like the Regal) -- pretty cool after they modernized their look. Schwab is some kind of Ford.
Food for thought ! Maybe I'll run it by my daughter, see if it gets her interest in stocks, and not viewing it as gambling (i.e. the sentiment passed on from mom!
). imo, If you make prudent lane choices, you'll likely do just fine. Maybe not optimal, but you'll get there.
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