JP Grunin: From $10,000 to $100,000 in 6 months.
- Thread starter mGrunin
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Long term you won't beat the market.
Everyone thinks they can, though, and variance means that some people do for a long time. (Professional poker players can tell you all about variance).
A tiny percentage actually can. Just look at mutual funds and how their relatively small management fees destroy any benefit that their ability to pick stocks has. These guys pick stocks for a living. It's all they do.
For the average person, putting X% of your income into index funds/etfs each year is the best way to bankroll yourself.
If you're in the US: https://www.wealthfront.com/
If you're in the UK: How we invest - what we invest in - investment portfolio - investing | Nutmeg
There comes a point with stuff like nutmeg where you have enough capital that you can reduce fees by managing it yourself, but most people will never save that much anyway.
If you want to make money, do it as an entrepreneur. Don't then go and risk all your capital in the stock market. You're just giving yourself extra work/stress/risk (when you have enough of that as an entrepreneur anyway), that statistically speaking will result in your portfolio underperforming over your lifetime anyway.
Yeah, but they hedge a lot. It's called a hedge fund for a reason.
Soros, Druckenmiller... lots of people make great returns.
Lots of ways to get an edge if you know an industry well.
To everyone bashing OP: the dude had all of you in the palm of his hand for months, and if this experiment had worked out (as misguided and poorly executed as it may have been), he would have milked this forum for way, way more than the $90k return he would have made.
How many of you fuckers could blow $10,000 on an experiment? If any of you had any inclination of the outcome of these trades, you could have bet the other way and made bank. But who did?
How many of you fuckers could blow $10,000 on an experiment? If any of you had any inclination of the outcome of these trades, you could have bet the other way and made bank. But who did?
I remember this. It was when you hit your first million, wasn't it? You were drunk (IIRC) but right.
I recommended Yahoo a while back. It doubled after that, and I didn't get a cookie.
You can't predict the market for fucks sake. Nobody can, even massive hedge funds employing mathematicians, astrophysicists, cosmologists and engineers(Winton Capital Management). The founder David Harding admits they can't predict anything. They jump on trends. If something is going up they buy, if it's going down you sell.
You can respond to the market, that's how you make money. You can't predict it. That's how the decades old funds are still making money. Trend following is key.
You can respond to the market, that's how you make money. You can't predict it. That's how the decades old funds are still making money. Trend following is key.
I'm referring to the average Joe, not hedge fund managers. (Hedge funds again are a different kettle of fish).
Your average webmaster/entrepreneur is not going to ever beat the market making stock picks, long term. I used the mutual fund example to show just how hard it is for professional fund managers to beat markets, who dedicate their entire lives to it.
Does scale change things for financial managers?
E.g. is there a difference between managing 10 billion or 1 million besides the additional 0's?
Eventually it's easier to have higher returns on smaller sums, so it might be feasible that the average webmaster beats the market?
that was exactly my sentiment.
No free samples on ecigs? How many different kinds of companies suffer from that? Ever increasing regulation on PD? If you know where to look for an edge and can move fast enough, plenty of opportunities IMO.
If you flip a coin 5 times in a row, you could quite easily get 5 heads. If you flip a coin 500 times in a row, you won't get 500 heads.
Same applies to investing. The more stocks you buy, the more you diversify, the more "stock picks" you make and the more you invest, the more you'll reduce variance and the big wins/big losses. You'll eventually average out at something that's towards the market average return or below it.
You see people get rich with "great stock tips" because of this. They read something in the paper, put £10k into it, and because they only have the one stock, they return several hundred % on it and think they're a genius. They might even be able to do it a second time, or third time.
Eventually, statistics take hold, and the return will reduce to average. How long you can trick yourself into thinking you're better than the market will depend on the number of investment decisions you make.
That is, for the average Joe without inside info, or the scale/knowledge/technology that major funds have.
That scale is all the difference in the world. $10 billion of assets under management is a shit ton of work and not losing, when it's that much, is as important as gaining, so there's lots of defensive positioning and diversification.
Wall Street, believe it or not, is risk averse and therefore slow to innovation - but rushes madly to anything that works with a predictable ROI (on that score it can be a lot like internet marketing). And then, like HFT is going through now, diminishing returns become inevitable due to overcrowding.
But one innovator of managing big money over the past 20 years is the Yale University endowment fund. The late Barton Biggs (good writer - I read and liked his "Hedge Hogs") on Yale's philosphy in 2002: http://www.tiffeducationfoundation.org/SRIdocuments/Barton_Biggs_Yale_Endowment.pdf
Yale’s portfolio is structured using a combination of academic theory and informed (contrary) market judgment.
That was 2002 and Yale's endowment has more than doubled since then, over $20 billion now, while other like funds have floundered. And just think of the work it's taken to weather all the past 12 years has thrown at it.
The game, long before assets are being measured in the billions, is beyond just picking stocks. Good funds (and it doesn't have to be a giant endowment, like Yale or a high flier oft quoted in the media) tend to have smart people with ample resources putting in hard work. There is no Insider-Mart (for the most part, see 'LIBOR scandals' for a live counterargument) where "big guys" can go shop at. It's actually fairly cutthroat - everyone wants to manage other people's money.
Bet the other way? The AAPL trade would've required $50-$60K to short the naked call, not the $2,000 required to buy them.
Possibly, but I think it's worth trying.
I'm not convinced that I can either, which is why I'm doing this with a very small amount right now. Less than 1% of what I have in index funds. If it continues to work then I'll continue to scale the amount out. If not, then I'll probably stop doing it and put it back in the index fund.
Individual stocks that move around a lot more have a much higher risk/reward amount compared to index funds. An index isn't likely to move more than 30% in a year. Individual stocks can move a LOT more than that. If you are not clueless and have some strategy that makes sense, I don't think it's as hard as people make it out to be to beat the market. But I think being like 75% in index funds and 25% in individual stocks or 90/10 or w/e you are comfortable with makes more sense. Having a large percent in these stocks that move a lot is crazy.
Take a look at this variance simulator for a winning poker player:
It's the same with investing. You make your picks, the average of them would be an EV (expected value) and what actually happens will be any one of those lines.
The problem with doing what you're saying is that you have to make so many trades over such a long period of time to prove you're better than the market, rather than lucky.
Most investors ride on a lucky wave, get over confident, make poor choices and lose a ton of money when the markets crash, etc.
Individual stocks can move up 30% just as easily as they can drop 30%. Institutional investors have all the same information you have, and desks full of people that know a lot more about these companies than you do. If a stock is sure to go up 30%, that'll be factored into the price.
It's non-sensical to assume in most cases you know something that all these huge market moving institutions don't. By the nature of this, any "insight" you have is dependent on luck. The problem is you'll get lucky and get winners, and think you know something, or made "good buys". You could invest in 5 stocks that each go up 100% this year, all on the back of luck alone.
Amazon lost 90% of its value in the year 2000.
Even stocks like Apple lost ~half their value in 2008.
Most investors are just gambling. They get a rush from spending all that time picking the perfect stop, and seeing it fly up 30% over the year. The only difference is that in the casino the odds are stacked against you, in the markets, they generally trend up year-on-year.
though short lived this was a great 3 trades to follow and anticipate.
thinking after, 1 and 2 maybe he'll make it back.
it was interesting because I hadn't thought it possible and I gave 10k to a friend ones to try this with indexes
needles to say he blew most of it.
no disrespect for grunin from me. i have done more stupid things and I'm sure most of us here have, it's why I love wickedfire, it's this crowd. you'll get excited, and you got balls. you try and for some of us this will lead to more.
anyway wanted to weigh in because I believe in stocks. and it seems like they getting bashed here for the wrong reasons.
If you treat them like a bank account, and not like a casino 10 to 15% year over year is possible.
Just the safe ones, someone else mentioned it in this thread, those where you buy 1$ for 80c and I'd like to add are in a stable industry (ressources for example)
thinking after, 1 and 2 maybe he'll make it back.
it was interesting because I hadn't thought it possible and I gave 10k to a friend ones to try this with indexes
needles to say he blew most of it.
no disrespect for grunin from me. i have done more stupid things and I'm sure most of us here have, it's why I love wickedfire, it's this crowd. you'll get excited, and you got balls. you try and for some of us this will lead to more.
anyway wanted to weigh in because I believe in stocks. and it seems like they getting bashed here for the wrong reasons.
If you treat them like a bank account, and not like a casino 10 to 15% year over year is possible.
Just the safe ones, someone else mentioned it in this thread, those where you buy 1$ for 80c and I'd like to add are in a stable industry (ressources for example)
If you're talking about investing in a Dow or S&P 500 index then this is true. But not if you're talking about individual stocks. Most companies throughout history that ever got an IPO also ended up dying.. because most companies die eventually. But those indexes will live on no matter what and most likely go up too.
Take a look at this variance simulator for a winning poker player:
It's the same with investing. You make your picks, the average of them would be an EV (expected value) and what actually happens will be any one of those lines.
The problem with doing what you're saying is that you have to make so many trades over such a long period of time to prove you're better than the market, rather than lucky.
Most investors ride on a lucky wave, get over confident, make poor choices and lose a ton of money when the markets crash, etc.
Individual stocks can move up 30% just as easily as they can drop 30%. Institutional investors have all the same information you have, and desks full of people that know a lot more about these companies than you do. If a stock is sure to go up 30%, that'll be factored into the price.
It's non-sensical to assume in most cases you know something that all these huge market moving institutions don't. By the nature of this, any "insight" you have is dependent on luck. The problem is you'll get lucky and get winners, and think you know something, or made "good buys". You could invest in 5 stocks that each go up 100% this year, all on the back of luck alone.
Amazon lost 90% of its value in the year 2000.
Even stocks like Apple lost ~half their value in 2008.
Most investors are just gambling. They get a rush from spending all that time picking the perfect stop, and seeing it fly up 30% over the year. The only difference is that in the casino the odds are stacked against you, in the markets, they generally trend up year-on-year.
I think what matters most are your actual returns. And if you are beating the market, you should continue doing whatever you are doing for as long as it lasts.
Whether you can prove you are actually good or not and what statistics say is likely to happen shouldn't stop people from trying. All that matters is your return vs the market. It's also probably a good idea to manage it in a way where a few bad trades won't take away all your gains or return you close to the market average.
That's the equivalent of telling people they should go and play roulette, and if they win a few times, great, it doesn't matter that they statistically speaking should have lost.
It doesn't make sense. Long term, the average of 100,000 investors like you will make more money by investing in index funds. Any short term big wins, etc, are going to come down to luck.
If people accept that they're just gambling and taking a risk, then great. The problem is when people are convinced that because they have a few winners they're a great investor.