Investment Advice

[SaintessHeart]

Originally Posted by MeoTwister5

@Don

Dude I think you're GROSSLY underestimating the transformational effects of human greed. I do believe that's what people thought in the past, and look what the global economy's become.

Thank god I'm in Medicine.

I think you underestimate the reach of the big guys in my industry. With AIG run itself aground, and reinsurers have second thoughts of backing them, guess the new financial product on the market.

Repackaged life insurance policies. YOUR premiums for YOUR insurance is going to be repackaged and given as dividends to investors instead of adding to the payout pool of funds, or be invested to generate growth and offset interest and inflation from the rebates and premium holidays. It has yet to appear though, but be prepared not to get paid for the next person you treat.

Enjoy being starved to death by the Hippocratic oath.

[DonQuigleone]

Originally Posted by SaintessHeart

Erm no. The blame game starts no matter who invests the money. Ever wonder why there are disclaimers attached to investment plans?

It is to absolve the investment manager of all liabilities because they KNOW that people would blame them if the investment goes against them.

For the next part, I only need to reply to 2 lines :

It's impossible for their to be a blame game, when everyone has to consent. The person blaming can't say "Well I didn't want to do it" because he had to say yes in the vote. Also, mature people will understand, that even if one person championed the decision, they had no way of knowing that the failure would occur.

This also isn't really an issue when the group isn't trading in risky securities. How often does a given stock go absolutely belly up and lose everything. Not very often, unless your on margin.

Mutual funds are operated by a group of super-experienced managers who went through their trial by fire, trained by their predecessors, supported by actuaries and a huge amount of funding from introducers, financial planners and bank agents. This is called a "invested interest" which the invested company loves because it is a bulk of cash, not small amounts and bits of money small investors directly park their money hoping for it to increase. Besides, the company has to only answer to one agency providing them with a large amount of cash, instead of answering to a group of hopefuls demanding more than the company can provide.

In my experience, in the realms of human behaviour, professionals and amateurs don't behave very differently. I don't mean that as a compliment to amateurs, more as an insult to professionals. If professional group investors can be succesful...

Group investing makes for inferior decisions because too many cooks spoil the broth - they have to agree or disagree simultaneously before a position can be opened. Unless you are investing in a relatively illiquid market, that position would be long gone before you can open the position. Even if the position is still there, many similar people would have prepared to take a stand for (long) and against (short) it; although they are two opposite positions in the same volume to counteract each other, the broker has a great opportunity to earn money even in a small period of 10 seconds before the breakout by widening the spread. And don't forget to factor in the cost of holding the position.

What you say definitely applies to trading, where timing is everything. I don't see how it applies to investing. In investing, it doesn't matter if you're in during that 10 seconds. You're looking at the longer term growth prospects. You have a stock in mind, and a price in mind. If that price appears you buy. If it does not, you wait until it does. If it never appears, you buy something else. These are all things that can be agreed upon without regard for time constraints. The value of a company does not vary that much in real terms. If your company is really fluctuating, it's probably a bad sign anyway...

Besides, we know we can't compete on that timing, it's pointless to try.

I'm not interested in investing in short term positions. I want to actually own part of a company, and be invested in it, and it's success. That's the whole point of investing. You only bail out when it's clear the company is screwing up royally, and it's best to cut your losses.

It is thinking like this that get small-time new investors/traders killed. You alone are responsible for your own money - even the amount you pool into. That is why I took the extreme of not investing in any fund and would rather lose all the money trading and learning the tough way; bear responsibility for what you own instead of asking someone else to put together what they similarly own. You should have absolute and utmost control over your money because that is your personal power.

Yes and no. I'm of the opinion that we'll learn significantly faster if we work together, rather then going it alone.

People in investment clubs EACH HAS THEIR OWN ACCOUNT. They just pick stocks together to learn from each other how to reduce losses. And I am extremely serious and harsh on this issue because I am sick of those son-of-bitches out there selling dreams of "retiring rich" with "minimal time spent online" and "proven investing/trading methods" - all of them are just software that scout for parameters with MACD indicators, Bollinger bands and 52-week highs. And what is more stupid is that even computer engineers buy into it and countries ISSUE PATENTS FOR THE CODE.

Not true for all clubs. Some clubs have a single account, others are just a forum for sharing info.

And I'd certainly agree on not using software, and other things being sold to you. Better just pull up your sleeves and crunch the numbers yourself. Selecting stock is an art, and can't be done by calculation alone (but calculation is pretty important).

[MeoTwister5]

Originally Posted by SaintessHeart

I think you underestimate the reach of the big guys in my industry. With AIG run itself aground, and reinsurers have second thoughts of backing them, guess the new financial product on the market.

Repackaged life insurance policies. YOUR premiums for YOUR insurance is going to be repackaged and given as dividends to investors instead of adding to the payout pool of funds, or be invested to generate growth and offset interest and inflation from the rebates and premium holidays. It has yet to appear though, but be prepared not to get paid for the next person you treat.

Enjoy being starved to death by the Hippocratic oath.

Here in the Philippines very few people, if at all, have insurance. Majority of payments are out of pocket, and insurance companies don't pay a lot for those they cover. All of us doctors here fully understand that getting payed is sometimes just a blessing.

And I didn't enter Medicine thinking I'd get rich.

[DonQuigleone]

Originally Posted by SaintessHeart

All securities ARE risky. It is risk appetite and management that keeps your psychology intact, and thus, your portfolio.

Yes, but some securities are riskier then others. It is entirely possible to express that risk quantifiably. So, a US treasury bond is, generally, almost risk free. It will not fail unless the US almost collapses or chooses to default on it's debt. Now that's currently a real, if remote, possibility.

An investment in a new start up that's highly leveraged is very risky, there's no definite way of knowing whether it will fail or succeed.

A long existing company that has few outstanding liabilities (IE almost all it's liabilities is equity), is not a risky company. In fact, a company that has a assets minus debt value greater then it's market valuation is virtually risk free, as even if the company was dissolved tomorrow, the sale of assets would cover all equity. This is, of course, fairly well.

Not all risk is equal. Saying that "all securities are risky" is like saying crossing the road is always risky, due to the chance of being hit by a car. But some streets are busy, and some streets are empty. But even on the emptiest street you have a chance of being killed at random. The same goes for securities. Some of them are like a busy street, and you better be watching. And some are empty side streets, where nothing is really happening.

Don't bring in cliches like "mature" and "well-informed" when you are talking about a cohesive fund management, impromptu or not. People like that don't manage funds, they only write books and teach in lectures because they think it is foolish as complete grown-ups to throw hard-earned money away.

I more mean mature in a behavioural sense. Mature people will walk away from a failed investment and learn from the experience. Immature people will panic and look for someone to blame. The ill-informed person will be think they're bound to succeed and make loads of money. The well-informed person will know that stocks are a risky business, and that they might fail, and they might succeed. If they fail, they will not be surprised. As long as everyone is aware of the risks going in, I can't see fights and recrimination breaking out.

People go into business together all the time. I don't see much difference between opening a business with someone else and investing in stocks with someone else. In both cases you want to be sure you can trust the other guy, and that the other guy has a decent idea of what he's doing. And both cases hold the prospect for complete failure. Luckily, stock trading doesn't hold the potential to bankrupt you (unless you're taking out debt to do so).

Go work in a bank or government institution for a couple of years and come back and tell me how it works. Or run a paper account for a single market cycle of any kind and tell me how is it like to be slaughtered like the sheep you behave as.

Well I plan to learn how it works. And it's easier and more fun to learn if you do so with other people (this is the main thing I learned from college...).

Kid, go read a bloody REAL chart, candlesticks or graph, on different time periods. That argument is so nonsensical to the point that I find it irritating.

Market capitalisation varies. An actual business does not, certainly not day to day. A company does not radically change in a single day. It's simple logic. If you have a company holding 10 factories today, it will hold those same factories tomorrow, and those 10 factories will be worth the same amount. Now, a hurricane could strike, destroying half the factories, or some amazing technological development could suddenly render all those factories utterly obsolete. But those are "acts of god", and occur infrequently. Otherwise, a company can not change very quickly.

Now what the market thinks the company's value is can change quickly. But that zigzaggy graph of the total market capitilization of the company is not an accurate reflection of the real performance of the company. In fact, you can't really assess and change a company's real value more often then the company releases it's budget figures, which is only once every month, or once every quarter.

How do you, yourself know the company is screwing up royally then?

A company doing well or not from a singular perspective is an OPINION. When it becomes generally agreed upon then it becomes a FACT. You are indulging in alot of risk if you require a consensus to sell or buy a fund held collectively.

You are right, when it's just you, it's only your OPINION. If a larger number of people can agree, it's more likely to be FACT. So I can say "I think this company will do well because it's got a new CEO, whose previous company saw growth of 10% a year for 5 years, and he's got a great knowledge of the industry", but my friend will say "Yes, but the company income has no way of covering it's current debt obligations, and the other members of the board have no experience whatsoever in this field, and are all accountants".

This is where the skill comes in. Starting out, all investors will be poor judges. With experience they'll get better at it. If people share their insights, like above, with one another, they'll learn faster. For instance, there I would have learned to look more closely at a company's debt, and it's other board members, 2 obvious, but easy mistakes to make (some people do buy stock purely because of the CEO...).

And short-term or long-term position, you are still investing in a position. It is your exit plan that is of true importance in either trading or investing.

Perhaps so. But surely it's possible to plan ahead an "exit plan". Most sudden price drops can be somewhat anticipated, and planned for. For instance "if at the next quarterly report, profits are X, we sell at Y price". ENRON like sudden scandals followed by collapse are rare, and frankly, nigh impossible to avoid anyway. You just have to try and spot the bad businesses beforehand. A group can do this as they have "many eyes". But, I may be wrong, but I don't see how sudden snap decisions would be frequent if you're engaging in a long term strategy.

Investing and trading is about learning things the hard way. If you guys are not at the learning at the exact same pace as each other, then one of you'll be left in the dust while the others move on. Learning money management is a stage-by-stage process, if you move onto the next stage without mastering the previous, you'd wipe yourself out.

Very possible, but it may not be an indefinite arrangement. Besides that, I've known this guy for a very long time, we have basically the same level of intelligence in almost everything (we both play a lot of strategy games). I've spoken for hours at a time about how to determine the best troop composition starcraft, or why particular companies failed, or the mistakes Germany made in WW2, how to win at Diplomacy (this is a great game to learn game psychology with!)... If this was a guy who I only discussed the latest episode of family guy with, I'd agree with you, but we've always been keen on analysing stuff, and we've always had a good friendly sense of competition and collaboration. I can't really think of a better person to coloborate with.

I don't want it to seem like I'm not appreciating your points. You have convinced me that I should be careful in how I set this up. For instance, I'm going to have a simple contract to limit the possibility for blame and recrimination. And I'm going to put a time limit of a year, so that no one gets stuck in something they don't like out of a sense of "loyalty".

And if you don't catch up, your friends will be running the fund for you. Then shouldn't you start paying them for their work?

At that stage, I'd probably find an excuse to pull out. Or it would spur me on to improve more...

That is why it has to be personal. You learn at your own pace - and that is the fundamental of investing/trading psychology; that is called -risk control-. And by managing the money on your own, it is called -risk acceptance-.

I think it's a question of personality. I don't know how it is for you. But I don't enjoy learning things on my own, if I have no one to talk to, I get bored and stop trying. I have a lot more motivation and enjoyment when I can discuss things with other people. Some people prefer to do things on their own. It's a question of temperament.

And you aren't even accepting your own risk by putting money together with a group whom none of them is a fire baptised money manager, personal or commercial.

I don't see how this necessarily follows. None of us are thinking "because we're working together, we're bound to succeed!" We (my friend and I) are pretty pessimistic about our prospect of success. In fact, because none of the others are "fire baptised money managers" we have a better conception of risk, because we can't say "this guy knows what he's doing, let's just do what he says". We'll both face the same baptism by fire without anything shielding us, we'll just be doing it with someone else (making the whole ordeal more bearable, if not enjoyable).

It is called an illegal fund. Unless your country has no financial laws, or those stuff are kept personal and under wraps, any sharing of accounts have to be made known to the broker, unless it is with a blood relation for inheritance purposes.

It is being kept personal, so no one will really know. Also, the quantities involved are peanuts. If large quantities get involved, we'll just set up a partnership/limited liability company and then we can do as we like legally. So long as one person is not managing the other person's money (IE all partners are co-managing) it is not illegal. If one person was doing all the managing, they'd need a license, and it would be illegal.

I am getting more and more convinced that you are not knowing what you are getting into. You are arguing from a standpoint that traders != investors; which is completely wrong. We are BOTH personal money managers with different tactics and strategies.

Investors, in their way of money management, are a subset of traders who hold stuff for a significantly long term. Traders indirectly invest when we deal in options and futures because of certain financial laws which we can use to our own advantage. The similar thing about us is that we hold things with an intention to have an overall gain in our portfolio through analysis, opportunity leveraging and most importantly, dealing in pure risk.

While you're right, I don't think you're correct to say that it's all about risk. For instance, greater risk is not necessarily bound to greater returns. In an efficient market, it is, but markets are not efficient. Look at the paper linked in the 3rd reply in this thread.

The thing is, if it's all about risk then investing and trading is on the same level as gambling. Now, certain trading patterns are, basically, gambling. But with investing, you can control risk. You can estimate it. In fact, everything in life entails risk. It's just as risky to work at a company as to invest in it!

And if you have an engineering background, like I do, you'll be aware that when dealing in design and construction, you're dealing with material failure and risk. But, by taking measurements, you can measure and control that risk. So, you might assume it's impossible to tell when an aircraft will fail. This is not true. You can't know absolutely, but you can go over the entire aircraft looking for cracks. If you find long cracks, you can estimate the remaining life of the aircraft based on measurements, and work around it. A similiar process can be done with all risky endeavours. It's more difficult in something like investing (because you have to deal with qualitative factors), but a group of people working together can estimate the risk of any investment, and so be able to take a measured choice in investing in it. If an investment exists for which risk can't be measured, don't invest!

Your plan is a speculative risk. Before you drop another argument, go draw up a personal financial plan of your own (not investment plan). If you don't even know where to start, you shouldn't even be investing at all.

This is why I started a thread, looking for "investment advice" . Any good links as to how to draw one up?

[DonQuigleone]

Originally Posted by SaintessHeart

All securities ARE risky, quot erat demonstandrum

So is it pointless to estimate risk?

Still a cliche, still garbage. Please chuck that out of your mind right now; you will NEVER be well-informed, NEVER be able to see into the future, NEVER have enough time to do what you want on the market and NEVER be mature enough to make good decisions every time.

I wasn't talking about making good decisions. I was talking about how mature people react better to bad decisions and failure. There's no way to make good decisions other then to foster good judgement with experience (or have good luck). Lot's of immature but succesful people in the world. They can't work well with other people though.

There you go. Investing isn't FUN. It is SERIOUS BUSINESS, and a very selfish one because it is alot of self-reliance. Working together is out of question, exchange of knowledge is a totally different thing from sharing knowledge, but the line thins due to the Golden Rule of the human psyche.

If it wasn't fun, why not just not bother and just park it all in long term bonds? I enjoy this kind of thing. If I didn't I wouldn't bother, because money alone is not much of a motivator.

Serious business things can also be fun, as well.

Go read a bloody chart. Now.

But don't those charts only ever show market capitalization? Unless I'm reading the wrong chart... Could you link me to an example chart you're referring to?

Actual financial statements only are released once a quarter. How do you judge the financial health of a company in between quarterly statements?

This line actually explains the reason behind market volatility. And you are being a complete idiot to actually ignore it.

I'm not really getting what you mean here. Do you basically mean that "FACT" is just consensus reality IE We all agree Company X is profitable so it is.

However, how can all the traders thinking Company X is profitable, affect how profitable it is in the real world? If you just follow it's real world profitability, surely any market deviations will just correct themselves given enough time.

I don't want you to appreciate my points. I just want you to get out there and see how arcane the financial system is becoming.

I certainly want to get out there and get down to business (I might first toy around with a ghost account first)

Come to think of it, when you pool money, that is not your own actual sum, you are leveraging on each others' money. So isn't that margin investing in a sense?

I don't see what you mean. When I pool money with person X, we both toss in 500$ into the fund. At most we can lose 500$ each. If you buy on margin you can lose more then 500$ each, because you've gone into debt.

Heck, the whole paragraph simply says how unsure your level of knowledge is for doing this ( from your posts, you haven't known enough to even start).

Of course I'm unsure! And of course I don't know enough to start! I've never done it before! That's why I'm learning now, and started this thread! Knowledge doesn't appear on it's own, you have to look for it!

That pretty much is what I have to use to ask you kids to GTFO the market. If you describe yourselves as pessimists, that is already a game over. Don't throw that money away, seriously.

One tries and fails, until one eventually tries and succeeds. If you go in with the expectation you'll probably fail, you're in the best position to learn from it. This is the same for all things. I'm not interested in making money from investing in the next 6 months. I'm interested in doing so in the next 5, 10, or 20 years.

Can you please read up about the different kinds of risk and the ways of facing it, from the financial point of view?

If you advise someone to read up on something, you should provide a helpful link. Remember, you're talking to a newb here .



Anyway, I think I need to do some explaining about what I exactly mean by pooling and choosing with another person. I don't mean being a member of the herd, or following a financial guru, or mirroring another person's investments. I don't mean losing control over my finances either. I mean simple short term - medium term relationship where the parties involved invest together, in order to maximise their learning experience. It's like studying alone, vs. having a study buddy. It does not mean we are financially joined at the hip, or that he will manage my finances, and I his. We will devote a subset of our finances towards the fund, where mutual decisions will be made. Otherwise, we're independent.

Now, I think we're getting a "quote explosion", so I'm going to simplify things, here's how I see the pros and cons of such an arrangement:
Pros:1. Information can be researched together and shared. This means that, ideally, multiple amounts of information will be available and processed for the parties involved.
2. All decisions are debated and reasoned out. Foolish, poorly thought out decisions are more likely to be eliminated.
3. The partners involved can share their learning experiences and observations, they can argue over where they made mistakes, and how they can correct them.
4. Less work for any single person, tedious tasks can be divided out.
5. Members can specialize, leading to improved knowledge in single areas.
6. Experiences members can teach inexperienced members.
7. More companies and industries can be researched, leading to a more diverse portfolio.
8. Assets can be pooled, leading to less transaction fees and the ability to more easily buy larger assets, and diffuse the costs among the members.

Cons:
1. Slower deliberation times. Inability to make quick decisions.
2. Bad members can hold back the entire group, make poor decisions that affect everyone.
3. Infighting can occur among members.
4. Groupthink, everyone will think the same, and push the group into poor decisions.
5. Dividedthink, everyone thinks differently, and no decisions can be made.
6. May lead to bad learning outcomes being spread and entrenched among the group.
7. May lead to some members resigning responsibility over their finances and leaving decisions to others (passive behaviour).

If you have more criticisms, please sum them up in a simple list and I'll respond to each in turn, I just want to prevent this thread from getting unruly. Our replies are getting way too long.

The way I see these pros and cons, is that only 2 parts are an absolute material factor, pro 8 and con 1. The rest are simply the result of good or poor organisational behaviour, and are highly dependent on the personalities and proficiencies of the participants. If the "club" is run correctly, most of the pros should be present, if it's run poorly, the group will be dominated by the cons, and doomed to failure.

Now I will (attempt) to address some of (what I perceive to be) your criticisms, note I am condensing a lot of what you say, so I may have missed something, or misunderstood:
1. That you won't develop your own style: I disagree here, you will develop your own style, except that it will likely be shared with the other members of the club. With such a small number of people, I don't see the problem.

2. That investing is too personal, and can't be done with others: I don't really see how this works. Investing is impersonal it's about choosing the mathematically correct decision while intuiting how other participants are behaving in order to maximise gain. There is an elements of style (some will like risk, some will prefer stability, some will like short term, some will prefer long term). As long as all participants have a specific style in mind, I don't see how this is an issue.

3. That you shouldn't trust other people with your money: While I would tend to agree with you on this, I have an exception under the following criteria: 1 where myself and the partners are equally invested financially, 2 where I and the partners have a full role in the decision making, 3 where I have personal trust for the other participants.

Basically, I'm willing to co-manage my assets with someone else, but not hand over my assets to be actually managed by someone else.

Now before we continue, I'd like to limit further discussion of the investment club part to just one or two more posts, as I think the thread may be getting a bit derailed. I think we might just have to agree to disagree. You may be right, and if so, I'll learn my lesson the hard way. Either way, I haven't put much on the line for this thing. I might just use it as a testbed for my own future ideas. But I'll certainly be bearing your thoughts in mind, and be trying to make decisions for myself, and not copy others too much.

-----

Anyway, I don't want to get stuck on one topic.

So I'm now fairly confident that I know where to go and how to set up an account with a broker, and I'll shortly be opening a phantom account and getting familiar with buying, selling and general trading. I've also been reading the basic stuff on investopedia, like how to value stocks, and different approaches to take when choosing stocks.

From what you guys have said, I think it's best to (at least at first) zone in on a single industry. In that respect, I'm thinking of choosing something quite mundane, relatively ignored but with fairly consistent demand. Something like agriculture, fertilizers, Steel, Coal, mining etc. Obviously I'll have to put some thought into which one I'll choose to go into.

When I've chosen that industry, then I'll find a trade publication to subscribe myself to, and use that to stay on top of what's going on in the industry. I might also try and sign onto a relevant newsfeed. Then I'll find a list of those companies listed on the exchange I've access to. I'll quickly browse through them, and shortlist the ones I find most interesting, maybe around 20 or 30 of them. Then, when I've done that, I'll broadly eliminate any company that is an obviously bad financial situation (EG very high levels of debt listed on it's statement). After that I'll look at senior management of each company, and shortlist those that seem to have the best management. I'll place all of these on a watch list, and calculate my own personal "stock value", IE a stock price I'm willing to buy those stocks at (with relevant margin for safety). Then I just wait until one of my watched stocks reaches my desired price, and I buy.

This seem broadly right to you guys? Have I missed any steps? Also, if you've got any suggestions as to a good industry to start with, I'm open to any suggestions. I'm thinking something related to agriculture, as my intuition is that it's less volatile then consumer goods. Food demand has pretty constant growth after all. Possibility for high returns is probably fairly low though, but I don't see anything wrong with that if I'm just starting out. I can look at stocks with greater growth potential later.

In addition you know any website that don't just graph market capitilization? For instance, I'd be interested being able to see graphs of revenue, liabilities etc. Right now I'm just diving into balance sheets, and it's a bit tedious.

[DonQuigleone]

Originally Posted by SaintessHeart

Investment is about PERSONAL psychology, NOT how you pick companies, idiot.

It's following numbers, not poker. I fail to see how psychology has anything to do with it. Please illustrate.

It is, because you can't predict the future. The only thing you can do to ensure a flat rate loss if it doesn't make money.

The investopedia article seems to imply you can estimate and control risk.

Don't you have other pressing issues to handle first, like studies, family, finding a job?

No. We are the same age, I doubt I have any more to handle then you do, we're the same age after all...

You need to have your psychology right. If you think that doing something like this is fun, your subconscious would be more lax and you will make more mistakes.

Explain and demonstrate why and how?

Financial statements only tell you whether if it will make money or not. Your point of entry is where your investment starts - you need to know when to enter and leave.

Isn't whether or not the company will make money the point?

This is the reason why I don't want you in the market. You are going to get yourself killed with thinking like that. You don't toy with a practice account - the reason it is there is for you to test strategies and get your psychology back on track if you messed up with real money.

How will I be "killed". Will the stock ticker attack me with a knife?

What about commissions? Drawdowns? You have to pump in money if you want to keep that position if it dips below the price you bought at, so where are you going to find the money?

There's no commision for just holding stocks. Drawdowns don't cause you to lose more money then your initial investment, it just causes you to lose money on your initial investment, but not in excess of it (IE your 200$ stock is now only worth 100$). As for the rest, why not just let it dip below the price you started at? If it's going to fall, you can't stop it, you just have to suck up the loss and move on.

Also, your psychology from your posts already already shows you are out of whack and you want to enter the stock market? You WILL get slaughtered, if it isn't by Big Bank's "investment" arm, it would be senior traders. If it wasn't them, it would be small-time traders; they pick on desperados.

Please explain precisely how.

If you go in with the expectation to fail, you will fail to learn anything because you are learning to fail. There is something called personal psychology you need to know before you enter the market.

This is how I've approached everything in life. I concentrate on learning at first, and then succeeding. When you're concentrating on learning, that necessarily means you're far more likely to fail.

I remember writing somewhere on this forum : go to investopedia and read everything there. Do it - that is how much you need to know, and the process of doing so is one of the things you need to understand.

I've been doing that. They mostly talk about stock picking, evaluating risk, reading financial statements etc. From what you say that's all pointless.

I already wrote about the pace of learning. Remember, all of you are starting from scratch, unless all of you learn at the same pace, someone is going to get left behind. And if everyone is going to stay behind with the guy, they are going to miss out on their momentum.

You know, I've involved myself in group learning exercises in the past, and never had a problem with this. Also, you're talking about it like this is some high pressure race to learn as much as possible. I'd describe it as a marathon. No
need to rush headlong in.

the market is cruel and dangerous place that preys on the minds of the people.

How can flowing numbers do that. You seem to approach this as some kind of vicious battle. I see this as a mathematical and analytical exercise. That's how I view most things. When I look at graphs of stock price, I see a clear mathematical opportunity. As an example, consider Mosaic Company. That company went up in value by 1500% between 2002 and 2008, and then lost 2/3 of it's value during the banking crisis. Now, looking at their financial statements, I could see very strong growth in revenue and asset value between 2006 and 2008 (likely resulting in those price gains), and then it stagnated in 2008-2009, likely resulting in that large price decline (as people's expectations adjusted, coinciding with the 2008 bank crash).

Now, my thesis, is that if I had schooled myself on that company, and it's industry, I could have predicted it's success, and if I had kept an eye on it's success, I may have been able to get out before it crashed in value. Is this all completely wrong? Was it impossible to predict this company's success?

I am not going stand by and watch a group of kids going into debt just because they held a losing position which they couldn't liquidate, or they held a position which turned against them then stagnate, then having to pay to top up for no apparent reason.

How does this work exactly? How would anyone go into debt, just because they were holding stock that declined in value? They're losing money, sure, but they're not going into debt.

Look, if you are not holding a stable full time job, and is able to top up minimum 20% of your capital within half-a-month, don't invest yet. Get your life in order, graduate, get a stable job, THEN you enter the market. You can start preparing to enter the market when you have a job through raising of capital, if you are still not working you can read up as much as you can about everything that interests you.

But my life is in order! I don't even have any outstanding debts! I have money lying around doing nothing, not even earning interest because the banks have all gone to shit.

Your investment plan can only start when you have something stable to fall back on, or at least, a way to pay off the broker in case you got wiped out. To do so without a safety net is foolhardy and retarded.

Detail a case how exactly this would happen, that doesn't include any of the following:
1. Buying on margin.
2. Short Selling.
3. Buying anything other then a stock or bond
4. Doing so with the purpose of selling within a short period (1 day- 1 week).

It's not possible to lose more then you put in if you aren't taking on debt.

[DonQuigleone]

I like the focus on specifics, it makes what you say a lot easier to understand, I've divided into 4 sections, for readability.

Spoiler for Section 1:

Originally Posted by SaintessHeart

Just a few points I compiled for your purview, i.e need-to-know :

I'd agree on those points.

Stocks have pretty flat risk; it is what you can calculate. But you are riskier because you can't calculate the risk of you doing stupid things, or the risk of something bad happening to you.

The real risk in trading/investing comes from YOU, not the stock/share.

That I agree with. But there's no way I can get rid of that risk other then to get down , practice, and see where I can go.

Bro, I spent :

(snip)

I've got:
A 4 year Engineering degree,
A few thousand in familial savings (my mother was diligent)
Decent Job prospects if I move abroad, I can probably earn 30k plus working my degree, and reach 100k in 5-10 years.

I don't have consistent cash flow right now, but I will within the year. So I can see myself being able to invest in that time, and learn the basics in the intervening time.

And I still consider myself a newbie in financial management because I traded a practice Forex account and got wiped out. Why? I didn't get my psychology right, and I went in thinking everything is just statistics. It isn't; the whole thing is about reading sentiment.

I'd say you're right about Forex. Currency trading seems (to me) to be driven almost entirely by emotion.

= speculation; what if someone isn't aware of the risk?

The point of the partnership is that all participants are made to have equal awareness of the risks involved, due to the joint decision making process. If they had the same information as you, how can they complain?

= What if the person couldn't learn from experience?

A good point. If the person doesn't learn from experience, I guess I'd just politely sever the partnership. But better yet, go into it with someone you know will learn from prior experience.

= how is it success to own a company when you are not even earning a consistent increase in it?

You misread I meant to say "I want to actually own part of a company, and be invested in it, and it (the company being invested in's) success. If the company is succesful, then you, as a partial owner, should be succesful as well.

Merely owning part of a company will not make you succesful if that company is stagnant, or worse, fails.

I could go through every single of your post and pick everything out. You have absolutely no idea what you are really getting into yet you still refuse to accept that pooling and running a mini-fund with friends is a dumb thing to do.

I think your bad experience unjustly soured you on the idea completely. But you have made me aware of the limitations, but I think those limitations are capable of being compensated.

Spoiler for Section 2!:

This.

I want you to define, in your own words and properly, how does a company make money from YOUR POINT OF VIEW.

Primarily by selling goods or services to it's customers. In doing so, that company has to take on expenses, including (but not limited to): Labour cost, resource cost, machinery cost, inventory cost and maintenance cost. If the company makes more money from selling it's goods/service then it occurs in those costs it is "making money". Invariably that money will go into:
1. Extra pay for labour,
2. Extra pay for management
3. Wasteful spending (of which there are myriad)
4. Capital investment
5. Dividends for owners.

Only the latter 2 directly benefit shareholders. If a company is making a profit, and it is being put into those latter categories, then shareholders will benefit.

No. This is what happens. - it literally means that you owned a white elephant if you can't find anyone to fill.

Getting slaughtered means that practically all of your stocks are like that.

I see what you mean. Basically, holding securities that you cannot sell. I hadn't thought of that, I hadn't considered that it may be difficult to sell off all stock in short order. IE in the process of selling, the price may dive below your desired price before you can move everything, leaving you up a cliff with stocks you don't want.

The inverse case isn't quite as serious, unless you're shorting...

What if you have nothing left from the loss? Aren't you just wasting time AND money?

Of course. That's why you lost. But you can't always win. Trading is a zero sum game, for all winners there must be losers. So unless you're a god, you will occasionally lose and have to suck it up. That's life. If you're obsessed with always winning you're just setting yourself up to be depressed, and that doesn't help you. I don't care if I lose sometimes, so long as I win most of the time. The important thing is to:
a) have planned for the eventuality.
b) run several deals at once, this way you will have gains to compensate the loss.

If you want to learn good mental toughness, I highly advise playing Diplomacy (game rules). It's not really related to Stock markets, but I think it helps foster a tough mentality. If you're interested and want to know more, I can PM you a more in depth explanation.

Investing isn't just about learning. It is about understanding - the environment, the way things are done, and accepting the rules even if they don't sit with you. Understanding doesn't come overnight.

When I say learn, I also mean understand. For instance, you can't learn physics without understanding how bodies mathematically interact with one another. Likewise, you can't learn to invest, without first understanding how companies and the economy as a whole function.

And do you know why you are doing it?

To grow my money, until I have a need for it, be it to acquire a house for myself, retire on, or fund a business idea I may come up with. Money is freedom and power.

Spoiler for Section 3:

You have to really get on fast because the market is forever changing, new laws, new systems. Recently Goldman Sachs found a way around the Volcker Rule; this means they have a new way of screwing us without us knowing about it.

That is how fast things change.

The specifics do change quickly, I'll give you that. But there's a hell of a lot of general stuff that is the same now as it was in 1930. Once I've figured out the general stuff, then I can worry about the specifics.

You don't predict a company's success. you only predict how much you can earn from its growth. If it doesn't grow as much as you aim for it to be, dump it.

As I outlined above, if a company is succesful, then your stock will inevitably follow it's success. You have little way of knowing how fast it will do so. Right now, I have a feeling that the stockmarket is not very responsive to positive indicators, so it's not a great time to see gains in stock value. It's an excellent time to learn the ropes though, in order to be prepared for when the market picks up again.

Equity isn't that bad, if it is commodities, remember that the delivery charges are borne by you, plus that storage places until you can sell that stock in real life; and that is how you can get into serious debt. And you own these things in real life, not on the stock market.

That seems like a pretty dangerous game to indulge in. I have family involved in warehousing and resale, the name of the game is too always have buyers lined up. Especially nowadays with Lean manufacturing being the standard. Inventory is waste.

Are you sure you can fill 10% of your capital if you have to liquidate a position that results in a negative capital?

I'm not sure what you're saying here. If you just were forced to sell securities at a 10% loss, the value of your investment fund has just declined. Why would you need to put money in. For example: you spent 500$ on shares, then a week later, fearful of further decline, you sold them for 450$. Now you have 450$ in your fund, but you don't need to top up 50$ because you still have a positive balance.

If you're referring to a situation where you're using borrowed money. As I've stated previously, it's my opinion that you should avoid all forms of debt when investing. I would only accrue debt if I'm absolutely sure I can spend it on an investment that will lead to further profit that is greater then the debt cost. So I would take on debt to buy new factory equipment, but I wouldn't take on debt for a risky thing like trading.

Investing relies alot on consistency. You can't just take one lump sum and put it into a company and let it grow by itself, you'll never learn anything out of it. The true sense of investing comes from money management : keeping a minimum sum in your capital, holding diversified positions, etc.

Yes, parking money is fairly simple. As I see it, the skill is picking the right place to park it, the right conditions to put it in, the right conditions to take it out. And you need to do it in several places at once to ensure good diversification.

Do you even know how the stock exchange works? How the executions are done and such?

A buyer says they want to buy a number of stocks at a particular price, a seller wants to sell a number of stocks at a particular price. The broker matches the two in exchange for a fee. This is the same as your 3 steps right? I wasn't sure what you meant by step 3.

The problem lies in in the following scenarios :

1. What if there is no bid price to completely fill you order?
2. What if nobody wants to sell?
3. What if the person purposely opens the counter at a later time?
4. What if the volume of sales increased and your spread widens?
5. What if the stock gets acquired or delisted?
6. What if there are after-hour sales?
7. What if you get assigned investing in commodities?

1. You sell all of it down the bid prices. Unless you've placed a limit.
2. You can't buy.
3. Which person, which counter?
4. The seller will be forced to sell at a lower price.
5. I can only assume that you don't end out buying, and your money is returned (while perhaps losing your commission fee).
6. They will change what the prices are the next day when the exchange opens.
7. You get assigned the ownership of the commodity

Spoiler for section 4:

Listen, I almost lost $1000 doing the same thing as you : pooling and buying. Guess what? While the whole thing was shaking none of us could help each other because we promised to sought each other's opinion before liquidating the position, and all of us had the same answer : "I don't know, what do you think?". The father who helped us put the money in the market suggested that we sell it before we agreed.

The mistake you made there was a lack of forward planning. If you had planned in advance what would action would be taken in that circumstance, you would not have had that problem, and the pooling would have been a success. Because you didn't plan, you were all stuck up a creek with no idea what to do.

It was definitely a mistake to require consent before liquidating. Instead, you should have agreed on a set of circumstances before hand in which you would liquidate. Instead you guys didn't anticipate it and panicked.

And the worse thing is that we totally have no idea about liquidity risk - we put up a sale order and nobody wants to buy at our bid price because everyone is too scared to fill our position. And that old man purposely kept quiet all the way because he wanted for us to learn a valuable lesson : when you want to invest or trade, do it yourself. And while everyone is liquidating their position we are asking each other for what to do, and when it stagnated we can't move out of it! And we thought that we could work together as good friends who have known each other for a number of years, and this is what happens. We know each other, but we don't know ourselves.

I'll reiterate, if you had planned ahead what action to take in that circumstance, you would not have needed to argue things out. The point I was trying to make is that your exit strategy is planned out with your partners before you do anything.

The lesson is to always have an exit strategy. Doing it on your own allows you to react faster, but if you had planned ahead, you wouldn't need to think on your feet, you would have already had a stop order there before circumstances overtook you. Or you could have assigned one person to watch and act in a predetermined fashion agreed on by all (similiar to a stop order).

I don't mean the above as a rebuke, if you hadn't told me that story, I probably would have made the same mistake. But I draw a different lesson then you do. It's like when I play a strategy game like Diplomacy. I have to plan for every contingency, both good and bad, and have a plan for every case. If you don't do that planning, you can't minimise your losses, and if you don't minimise your losses, a possible win is turned into an outright elimination.

I was extremely lucky because the market is moving in a certain direction (2008). For the past couple of years, the market is moving sideways; if you plan to invest, be prepared to lose lots, earn little or nothing at all for the next few years. My guess is that TRL is doing dividend investing, and that requires a large capital which you can't touch with that non-recurring single lump sum you have.

From the stock price graphs I've looked at so far(which is not many, I admit), I have to agree. Growth is stagnant, and there aren't clear trends, especially when you compare to 1990-2008, where there was decent sustainable growth. My guess is things will begin to pick up again in the future, and if you're well placed(IE have a good amount of capital ready to invest) and knowledgeable, you can make good returns. Until then, all you can do is prepare.

P.S And Xellos actually made a good point about mutual funds; I finally found the article on why it is better for you. The thing is, after the way the Fed handled the fallout of the 2008 crisis, I lost alot of confidence in mutual funds.

I might have been willing to put money into a mutual fund before 2008, I don't really trust them anymore.

Besides, Investopedia says Index funds outperform 75% of mutual funds anyway. I don't trust Financial Gurus. At all.

[DonQuigleone]

Originally Posted by SaintessHeart

1. Mister, when your order cannot get filled completely, it gets CANCELLED after a certain period of time. And I stated bid price, know what is bid price and what the question means?
2. If nobody wants to sell, you can't buy. Similarly in No.1, your position is NOT FILLED. The sellers probably won't want to sell too because they are waiting for someone else to go first.
3. You are really a frog in the well on this one. When the person opens the counter at a later time, the price can move but you can't liquidate or set up a position. This can be disastrous if you are holding a losing position and got gapped - this is how you lose money beyond your stop loss.
4. Spread indicates volatility. If the spread widens due to increased transaction, the price will probably change faster than you can act. And for investors, it is not a good price because it moved too much at that moment of time.
5. If the stock you own gets acquired or delisted, you either own new shares from the new company, or get small cash payout at a flat rate per share you own. If the company decides to acquire the company, throw away the name and take it's brand/product line, you get nothing. If it gets delisted.......I don't think I have to explain further, you know what it means.
6. Do you know what gapping is and what it can do to you?

7. Do you know WHAT ARE the implications of owning the commodity IN REAL? And what is option/futures assignment?

1. Well firstly, you don't set an actual asking price, you set a limit. The broker chooses the relevant price for you. So if the current price doesn't fill the order, the broker proceeds downwards to lower bids, until you hit the limit, or run out of stocks to sell. You can have a partially filled order. Those are only prevented by setting it as "all or none".
2. That's what I said. However that situation is rare due to market makers
3. Yes, but I see no definition of counter (and I've searched investopedia...), and you haven't explained who "the person" is. Is it another seller? Another buyer?
4. Yes, but I thought you were asking what you'd do if you were a seller in that situation, there you're forced to take a loss.
5. Indeed.
6. It's "invisible" market movements that take place between market opening and market closing, often caused by the aforementioned after hour sales. "Gapping" is a market movement that you have no way to pre-empt, and I can imagine is annoying.
7. Inventory Costs. Don't buy stuff if you can't quickly shift it! First rule of warehousing and Lean. Options are optional, futures are obligatory. IE an Option gives you the right to claim an asset, the future means you must take it. Generally, it's a lot more efficient to speculate on a commodity using a future, because you don't have to hold it in inventory...

This is really serious. The problems I have pointed out to you, and you blatantly just sweep them as a Q&A? Why don't you think about the answers and ask yourself about it?

If you ask questions, expect answers. If you wanted to be more straightforward, you could explain "this is a problem because x, y, z etc.", I thought the point of the questions was so I figure out the problems myself, which I did to my best ability.

Section 4 :
The problem with us is nothing more than human error as we went down the road and realised; we had people who followed us and did worse. They tried to "learn from our mistakes" and did another set of mistakes - some even bought on margin to attempt to recoup their losses; when we ask them why they broke the rules they set their answer is "don't know". For those who did well, there are a couple of usury cases where the person whose name was used as an account changed the PIN and declared the money all his. Under the law, the others couldn't get it back because it is an illegal fund.

That sounds fairly disastrous all right. But I thought it was only $1000 on the line. I could understand people behaving that way over larger sums but...

Then again, I've seen the ugly side of inter-person politics. I've seen people threaten one another with absurd stuff over positions in student societies. That's my main fear with group endeavours. But I've never had such issues with very small groups.

What you THINK you can do that we can't is hindsight, which is always 20/20. When it gets down to brass tacks, it never gets done. No sooner will you find a leech in your group and start witch-hunting, or start marginalising the person who always give the suggestions that work only once in a while, and then having second thoughts whether to trust him at all : that is how money can change people.

I've seen similiar shit happening in University societies. But this stuff happens in work places too. None of it is unique to investing groups. As soon as people are working together, things can go really wrong. The bigger the group, the more likely it is to go wrong.

Take my sister, she set up a very succesful story telling event. All was going well, my mom served as the treasurer to the group. Fast forward a year later, and some small sub-group decides to push both my mom and sister out of the group they created through a "democratic" process. People can be really shitty.

Don't do it. Stop being such a bigot, delivering nonsense and semantics in your arguments and LISTEN to someone who has gone through this agonising experience - you will end up losing more important things than money if it falls through; if you don't know what else you will lose, you shouldn't be in the market at all. The risk on your social life and emotional prospects is not worth it at all.

While your own story is quite a compelling story, otherwise you're just giving me a lot of doom and gloom. Maybe it's bigoted of me, but I think, provided the right controls are in place, the process can work. The failures you elaborate are very very real, but they are not inevitable. But on the other hand, I also find a lot of positive articles about investment clubs online. The benefits Investopedia elaborates on outweighs the risks to my mind, and I've already seen the worst of group of politicking already (trust me on that, I knew one auditor who was a psychopath who would get rid of anyone who disagreed with him about the most minor of things, that ended out including me...).

Maybe you were just unlucky?

[TinyRedLeaf]

Yikes. I won't add fuel to fire.

@Don: If you're set on giving this investment club a try, go ahead. It's just one step short of setting up a business in any case.

Originally Posted by DonQuigleone

I certainly want to get out there and get down to business (I might first toy around with a ghost account first)

That's what I'd recommend.

Originally Posted by DonQuigleone

I don't see what you mean. When I pool money with person X, we both toss in 500$ into the fund. At most we can lose 500$ each. If you buy on margin you can lose more then 500$ each, because you've gone into debt.

Tip: Don't buy on margin. It's not worth the risk, unless you're serious about making trading your day job.

Originally Posted by DonQuigleone

From what you guys have said, I think it's best to (at least at first) zone in on a single industry. In that respect, I'm thinking of choosing something quite mundane, relatively ignored but with fairly consistent demand. Something like agriculture, fertilizers, Steel, Coal, mining etc. Obviously I'll have to put some thought into which one I'll choose to go into.

There's a reason that Warren Buffett liked "old economy" companies in manufacturing and insurance: he could extrapolate their values well into the future, and then calculate backwards to derive a present value at which he'd buy into the stock. Such companies have growth patterns that are more discernible relative to, say, pharmaceutical and medical-engineering companies.

That said, unless you're a maths wiz like Buffett, you may find this approach very dry (be prepared to crunch several years' worth of data to be able to derive a reliable model of a company's future performance).

With regard to commodities like agriculture, bear in mind that most companies in this sector pay low dividends, yet are vulnerable to volatile price movements. Such stocks aren't necessarily assets you want to hold for the long term (unless you happen to find companies experimenting with the next Green Revolution; good luck on that).

If you're trading on a London-based platform, try to find out about your equivalent of Real Estate Investment Trusts (Reits). Given the massive fallout in property values over the past three to four years, this may be a good time to go bargain hunting in Europe. Don't just look at residential-property funds. Examine commercial and industrial properties too. Over the medium to long term, these instruments may deliver attractive capital gains, while providing relatively good yield in the short term.

[SaintessHeart]

Originally Posted by TinyRedLeaf

That said, unless you're a maths wiz like Buffett, you may find this approach very dry (be prepared to crunch several years' worth of data to be able to derive a reliable model of a company's future performance).

Buffett is an extreme long-term value investor. He bought stuff to hold beyond his lifetime; Berkhath made more money from dividends and managing ownership of shares (he usually doesn't dump everything in one go) than buy-sell tactics. Of course, with the Lubrizol scandal it really questions if Berkhath is one of "them".

If you're trading on a London-based platform, try to find out about your equivalent of Real Estate Investment Trusts (Reits). Given the massive fallout in property values over the past three to four years, this may be a good time to go bargain hunting in Europe. Don't just look at residential-property funds. Examine commercial and industrial properties too. Over the medium to long term, these instruments may deliver attractive capital gains, while providing relatively good yield in the short term.

I find it surprising that you would mention this. The ride up has already started last year; remember those newspaper ads the local papers put up about owning property in London? When ads start to appear, it means that it is probably somewhere middle on the ride up - this is where the general crowd will come in. Also, the Chinese beat us to it, they even bought the shell of an aircraft carrier.

Even if it is owning property; never, EVER join the crowd. The next retracement is might be soon though - watch for the Euro implosion; third time is the charm. I don't think the Greeks are going to have effective austerity measures anyway.

@ Don - I am going to delete all my previous posts because I just realised that I broke a personal rule : never attempt influence another person's trading/investing position as one would always lose out, either as a leech, a leech owner or losing a friend. None of the options are worth it.

[DonQuigleone]

Originally Posted by TinyRedLeaf

@Don: If you're set on giving this investment club a try, go ahead. It's just one step short of setting up a business in any case.

Indeed. I think it pretty much shares all the positives and negatives with starting a business. I think the risk is lower though. Still, I've been convinced to put a lot of safeguards in place, and not approach the whole area too casually.

Tip: Don't buy on margin. It's not worth the risk, unless you're serious about making trading your day job.

Oh god yes. I did that on Railroad Tycoon 3, didn't work out well... (and that's just a game...). It's easy to find stories of bankrupted traders, and they all consist of buying huge quantities of securities on the margin.

There's a reason that Warren Buffett liked "old economy" companies in manufacturing and insurance: he could extrapolate their values well into the future, and then calculate backwards to derive a present value at which he'd buy into the stock. Such companies have growth patterns that are more discernible relative to, say, pharmaceutical and medical-engineering companies.

That said, unless you're a maths wiz like Buffett, you may find this approach very dry (be prepared to crunch several years' worth of data to be able to derive a reliable model of a company's future performance).

It may not have been apparent from my posts, but the Buffet approach is very attractive to me. I am good at math, so it's something I think I can do. But it's still necessary to know some trading skills, mostly in order to time your entry and exit.

I also studied Engineering, and will (most likely) be working in companies related to engineering into the future, so I'll be in a good position to know parts of the industry very well. Manufacturing and Engineering companies make up almost all the big movers on the market, so I should eventually have a good knowledge of what the good and bad companies are.

With regard to commodities like agriculture, bear in mind that most companies in this sector pay low dividends, yet are vulnerable to volatile price movements. Such stocks aren't necessarily assets you want to hold for the long term (unless you happen to find companies experimenting with the next Green Revolution; good luck on that).

Yeah, this is the trouble with agriculture, while the demand is very steady, supply can be hit with sudden events (for instance all those wheat rust outbreaks). Also, it's such an established industry, with high competition, all making basically the same thing, that I can't see opportunities for big profits. That said, I was looking at Mosaic's financial statements, and they've shown some pretty good equity growth. It's valued at 15 billion in equity today, and it's grown by ~3 billion a year for the last 5 years, excepting 2009 when it had stagnant growth. Only problem is that the market cap is 30 billion! Still, it might have good enough growth potential to justify that.

How about steel(and other metal mining/manufacturing)? That said, large portions of steel demand (like the car industry) are quite consumer driven. Tricky Tricky.

Originally Posted by SaintessHeart

Buffett is an extreme long-term value investor. He bought stuff to hold beyond his lifetime; Berkhath made more money from dividends and managing ownership of shares (he usually doesn't dump everything in one go) than buy-sell tactics. Of course, with the Lubrizol scandal it really questions if Berkhath is one of "them".

The Buffett method is the most attractive to me. That said, even Buffet's portfolio has taken large losses in the last 3 or 4 years.

I find it surprising that you would mention this. The ride up has already started last year; remember those newspaper ads the local papers put up about owning property in London? When ads start to appear, it means that it is probably somewhere middle on the ride up - this is where the general crowd will come in. Also, the Chinese beat us to it, they even bought the shell of an aircraft carrier.

Yeah, I've been hearing on the news a few months back about foreigners buying property in London, and basically leaving it empty. Seems like Bubble territory to me.

@ Don - I am going to delete all my previous posts because I just realised that I broke a personal rule : never attempt influence another person's trading/investing position as one would always lose out, either as a leech, a leech owner or losing a friend. None of the options are worth it.

As you like. I do have to say that I learned a lot of terminology and basics. But I think my stubbornness to completely ascribe to your view might somewhat prove the point that investing is "deeply personal".

[TinyRedLeaf]

Originally Posted by DonQuigleone

How about steel(and other metal mining/manufacturing)? That said, large portions of steel demand (like the car industry) are quite consumer driven.

Don't know anything about steel, sorry.

Originally Posted by SaintessHeart

I find it surprising that you would mention this. The ride up has already started last year; remember those newspaper ads the local papers put up about owning property in London? When ads start to appear, it means that it is probably somewhere middle on the ride up - this is where the general crowd will come in.

Originally Posted by DonQuigleone

Yeah, I've been hearing on the news a few months back about foreigners buying property in London, and basically leaving it empty. Seems like Bubble territory to me.

I was talking about Reits, not actual property... In any case, if I'll take both your word for it. Truth be told, I've only just managed to unwind from a few positions and haven't quite decided what to do with the cash yet. Most likely I'll just be putting a part of it in an ST Index stock, then wait and see for a few more weeks.

By the way, it's also important to "invest" in your own health when you're still young and fit, and the premiums are low. Buy insurance, if you haven't already. Not just life, but also for hospitalisation, accidents and major illnesses.

Originally Posted by ChainLegacy

I'm interested in commodity trading and forex... but I'm not investing anything right now (well, a little bit but not much). I want to save a bit more and start my own business first, which is finally within grasp... 50 hour workweeks ftw.

Cool. Good luck. Let me guess, something to do with nutrition?

[ChainLegacy]

Originally Posted by TinyRedLeaf

Tip: Don't buy on margin. It's not worth the risk, unless you're serious about making trading your day job.

In the Futurama episode when every character was made to be stupid by the brain aliens, Zoidberg exclaims "Zoiby wanna buy on margin!"

I'm interested in commodity trading and forex... but I'm not investing anything right now (well, a little bit but not much). I want to save a bit more and start my own business first, which is finally within grasp... 50 hour workweeks ftw.

[SaintessHeart]

Originally Posted by DonQuigleone

How about steel(and other metal mining/manufacturing)? That said, large portions of steel demand (like the car industry) are quite consumer driven. Tricky Tricky.

Metals? That is trader territory. Stick to owning USSC or we'll cut you open and bleed you dry.

Originally Posted by DonQuigleone

Yeah, I've been hearing on the news a few months back about foreigners buying property in London, and basically leaving it empty. Seems like Bubble territory to me.

The thing about owning property in London, from what I am told about people living there, is that it still follows the archaic land ownership laws dating as far back to the 1700s. Basically, if you have money, you buy it, and you own it. Just be prepared to get into some trouble when you plan to liquidate it and you are not an Englishman.

As you like. I do have to say that I learned a lot of terminology and basics. But I think my stubbornness to completely ascribe to your view might somewhat prove the point that investing is "deeply personal".

*looks at guilt baggage from indirectly leading "friendship mirror funds"*

*drags it along*

Originally Posted by TinyRedLeaf

I was talking about Reits, not actual property... In any case, if I'll take both your word for it. Truth be told, I've only just managed to unwind from a few positions and haven't quite decided what to do with the cash yet. Most likely I'll just be putting a part of it in an ST Index stock, then wait and see for a few more weeks.

I am not particularly confident about the local markets actually, but with the cooling measures, REITS are pretty nice things to own right now. STI is still hovering from about 2 years ago, you'd have to buy plenty of shares to actually make anything.

Not sure about London REITs. Need to go dig, but usually if people buy alot of property from a certain developer, getting REITs is GENERALLY a good idea as it gives you a pretty constant payout. Just check the demographic of the people buying the new developments; if they are old people, be prepared to ditch it within the decade.

By the way, it's also important to "invest" in your own health when you're still young and fit, and the premiums are low. Buy insurance, if you haven't already. Not just life, but also for hospitalisation, accidents and major illnesses.

If this thread is named "financial management", that is what I would have suggested. Get a Whole Life Policy with Additional Benefit Riders for Critical Illness and Accident, and drop a lump sum in for an Endowment Plan maturing at 30. When you hit 30, use the matured Endowment plan to get an Annuity.

Originally Posted by TinyRedLeaf

Tip: Don't buy on margin. It's not worth the risk, unless you're serious about making trading your day job.

Originally Posted by ChainLegacy

In the Futurama episode when every character was made to be stupid by the brain aliens, Zoidberg exclaims "Zoiby wanna buy on margin!"

Margin trading is risky and you have to follow a few rules RELIGIOUSLY :

1. Don't take up a position during the first 30 minutes and the last 1 hour of the opening hours.
2. Set a stop loss before you click "Place Order"
3. Be at your computer EVERY MORNING during opening. If it gaps towards your profit target, good. If it gaps away from your stop loss in the very first second, dump everything - no second thoughts, do it.
4. Don't take unusually large positions. My rule is 1%, some people do 3-5%.
5. Don't do it on options and futures. Especially when writing options; assignment on commodities is NOT A JOKE, if you get assigned even on 1 contract of gasoline, be prepared to have 2000+ cars to fill.
6. Get rid of everything before the weekend or a public holiday.
7. The most important rule : don't find a reason to buy something you can't afford.

Even with those rules, you still can screw up royally if you don't do doublechecks to see if you are adhering to them.

Originally Posted by ChainLegacy

I'm interested in commodity trading and forex... but I'm not investing anything right now (well, a little bit but not much). I want to save a bit more and start my own business first, which is finally within grasp... 50 hour workweeks ftw.

Don't trade unless you are so deeply antisocial, or enjoy learning things the SpecOps way. The first three years of learning how to trade is a suicide run, unless you are so determined to learn about it, don't trade. And along the way, you have to do a few hard resets if you screw up. Thank goodness for paper trading.

Rest of you, just invest. Don't do what I do, I have seen imitators getting killed because they are not willing to put their life on it.

[ChainLegacy]

Originally Posted by TinyRedLeaf

Cool. Good luck. Let me guess, something to do with nutrition?

Eventually I'd like to run a line of supplements... right now I just want to start investing in affiliate marketing and streamline it into an actual e-vendor. I know some of the logistics, but we'll see how it goes.

Originally Posted by SaintessHeart

Don't trade unless you are so deeply antisocial, or enjoy learning things the SpecOps way. The first three years of learning how to trade is a suicide run, unless you are so determined to learn about it, don't trade. And along the way, you have to do a few hard resets if you screw up. Thank goodness for paper trading.

Rest of you, just invest. Don't do what I do, I have seen imitators getting killed because they are not willing to put their life on it.

My best friend just got a job as a day trader on Wall Street, and he's not antisocial at all. I hope you're wrong or he'll run into problems,

[SaintessHeart]

Originally Posted by ChainLegacy

Eventually I'd like to run a line of supplements... right now I just want to start investing in affiliate marketing and streamline it into an actual e-vendor. I know some of the logistics, but we'll see how it goes.

What kind of supplements are you looking into, and which target market?

My best friend just got a job as a day trader on Wall Street, and he's not antisocial at all. I hope you're wrong or he'll run into problems,

Is he a floor trader or backroom trader?

[Dhomochevsky]

The best time to start trading is during a dotcom boom-bubble.
That's what I did. Worked out quite well.

Just remember to never try the same thing in normal times.

[DonQuigleone]

Originally Posted by SaintessHeart

Metals? That is trader territory. Stick to owning USSC or we'll cut you open and bleed you dry.

The actual commodity, or company securities? I would have thought basic industries are one of the less volatile sections of the market.

The thing about owning property in London, from what I am told about people living there, is that it still follows the archaic land ownership laws dating as far back to the 1700s. Basically, if you have money, you buy it, and you own it. Just be prepared to get into some trouble when you plan to liquidate it and you are not an Englishman.

I think the BBC thought foreigners were buying london property because they thought it was "stable". I think it's just Gold in another form. I guess the Olympics might also present good opportunities.

If this thread is named "financial management", that is what I would have suggested. Get a Whole Life Policy with Additional Benefit Riders for Critical Illness and Accident, and drop a lump sum in for an Endowment Plan maturing at 30. When you hit 30, use the matured Endowment plan to get an Annuity.

While I've got health insurance (and will continue to pay into it), and obviously there's much merit in accident insurance etc., I don't really see the point of paying for life insurance, especially when I'm guaranteed to never get any benefit from it (due to being dead). As for the endowment variation, surely the lump sum you receive at the end is less of a return then if you had put in some long term bond.

At most I'd pay for some life insurance while I have young kids, otherwise...


Best return I ever saw was when my dear government created SSIAs. You could contribute a max of €254 a month, starting in 2002. In 2007 you'd recieve all your money back +interest AND 25% of the principal. Now 25% on 5 years isn't amazing (you can get more investing), but you have to bear in mind that was on all the principal, so on average you were getting 25% for only 2 and a half years. And it was risk free on top of that, you also got interest too(I don't know what that was).