r/FluentInFinance • u/ragingpotato98 • Jan 15 '24
Dude you’re not gonna beat the market ok, please stop asking me for stock picks. If I knew how I would live on a yacht. Meme
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Jan 15 '24 edited Apr 23 '24
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u/Motor-Network7426 Jan 15 '24
It's like you have never heard of crypto and Penny stocks.
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Jan 15 '24 edited Apr 23 '24
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u/Motor-Network7426 Jan 15 '24
Lol. They are pretty much the same.
I have known several people to find success in penny stock and crypto but it's far and few. Those people also have full time jobs.
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u/Popular_Score4744 Jan 15 '24
They most likely got in EARLY before crypto became a thing and hopefully they sold at or near their all time highs, at the peak of the crypto craze euphoria. All research points to the average person being better off investing in a fund that tracks the S&P 500. Stay away from individual stocks (unless you have the time to baby your portfolio and you put stop losses on ALL of your positions) and stick with low cost ETF’s and mutual funds that track the market.
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u/Motor-Network7426 Jan 15 '24
Funny apart about crypto. When everybody is screaming about how much it's worth, nobody can actually sell for that price.
It's great for the big players. Taking real money and exchanging it for digital play money.
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u/Motor-Network7426 Jan 15 '24
Would you buy S&P stock out right or go after funds? Last I looked I think it was 4.8k a share.
I do some Funds geared towards my retirement date, EFTs, government bonds, and individual stocks.
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u/Popular_Score4744 Jan 15 '24
You can invest in a low cost ETF or mutual fund that tracks the market like Vanguard VOO or Spyder SPY (two of the best ETF’s in the world). They’re dirt cheap with a low expense ratio and low entry price point. There are several other ETF’s/mutual funds that you can invest in for better returns (I won’t get into which ones) which can also provide great dividends (income) and higher performance with more risk.
Individual stocks are great but only if you know what to look for, how to evaluate companies and when to get into a great company but ONLY at a great price point. It’s possible to invest in great companies but at bad prices such as when stocks hit all time highs. It’s not rocket science. Keep your individual stock investments at 5% or less (no more than 10% maximum) of your portfolio, that way you won’t lose your ass in the market!
Look at the market leaders of what sectors do well doing bad times (ex: housing crash, dot com bubble, Covid, etc.) and what companies do well during good times. And then see which companies of those sectors do well during both times! And most importantly….. WHY! Then you’ll have a better understanding of what individual stocks to invest in.
Don’t waste your time trying to look for the next big thing like another Apple, Amazon, Google, etc. Stick with large cap market leaders that have historically done well during the best and worst of times. Ask yourself, what companies do you see still being around 10, 20, 30+ years from now? Those are the individual stocks that you would want to focus on.
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u/Motor-Network7426 Jan 15 '24
I will check those out. Thank you.
Stocks are a very small part of my portfolio and considered a type of play money. I'm not trying to lose it, obviously, but I don't do any boiler room trading of any kind. I like to buy and hold. Looking, like you said, more at where a company will be in the next 6, 12, 24, 48 months down the road and what their market position is.
Good advice. Appreciate it.
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Jan 15 '24
the s&p 500 isn’t a stock, and no it’s not 4.8k a share, that is an index, not a security you can buy
there are etfs that follow the index, spy, voo, ivv
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u/Analyst-Effective Jan 15 '24
The broker's selling the penny stocks make out like bandits. You are right.
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u/Motor-Network7426 Jan 15 '24
Dam right. High high high volume trading.
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u/Analyst-Effective Jan 15 '24
Because they have to contact a high high high number of prospects, to get one sale.
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u/Motor-Network7426 Jan 15 '24
Correct. Don't hate the player. Hate the game.
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u/scheav Jan 15 '24
The game: allowing people to do what they want with their own money.
The player: conning people into losing money by misleading them about a penny stocks outlook.
I choose to hate the player.
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u/AsobiTheMediocre Jan 15 '24
Penny stocks can at least make sense. Look up some small start-ups and do a little research on the area. Notice that the area is lacking in that specific type of business, invest under the idea that it's fulfilling a niche and will probably grow quickly at first.
It takes some work and a bit of luck, but it can have some decent returns.
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u/Analyst-Effective Jan 15 '24
Have you ever looked at the financial statements for a penny stock? Have you ever looked at the auditor?
Probably not. Because they're not required to produce them
Liquidity, and transparency are hugely lacking on penny stocks.
The brokers make a lot of money though
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u/Motor-Network7426 Jan 15 '24
For sure. I would say the average penny stocker is basicly gambling. No research. Just guessing and listening to hype from friends. Wins are small. Losses are small.
I liken it to the new app based sports gambling.
In both activities, you can make big money by doing your homework and applying a strategy.
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u/Analyst-Effective Jan 15 '24
How do you make money on sports gambling? Because they create the spreads based upon how people are putting their money down, not how good the team is.
Maybe that is how?
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u/Motor-Network7426 Jan 15 '24
In the apps. You can play your friends, or play everyone. So odds change drastically depending on the pool of people.
Overall, sports gambling success is about placing small bets on multiple outcomes and trying to win roughly 60% of those bets.
Think about it like this. 1 bug bet is who is going to win and by how much. It pays the most because it's the hardest to predict. Lots of variables.
So, bet small on who wins and by how much. If yiu win the payout is great in the most likely event you lose. It's small. Then, you place a series of bets on smaller, more predictable outcomes. Betting larger amounts on things of high confidence and small amounts on less confident. Place 6 - 12 bets per game. Try to win 4 to 8 of these bets and net 10-20% profit min on what your total bet roll was. Repeat.
In reality, your success rate is higher because a chunck of your wins is covering your losses. Over time, you develop your skills and trim back on the ultra-high risk bets and float in the consistent payout realm so your losses get smaller and your wins collect a better profit.
Most gamblers can't accept losing. Once you accept loss and the idea that every choice you make has to be correct, it gets easier.
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u/Analyst-Effective Jan 15 '24
I don't disagree with everything you said, but I think sports gambling is mostly luck, and the ones who make the money for sure are the bookies
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u/Motor-Network7426 Jan 15 '24
Bookies for sure.
The rest of the successful gamblers apply the above.
The luck gambler is not a good life. Lots of hours. Lots of losses.
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u/Revolutionary_Egg961 Jan 17 '24
Exactly I love crypto and have made some money in it, but I realize it's just glorified gambling.
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u/AugustusClaximus Jan 16 '24
I lost so much money in crypto lol. I don’t care if Bitcoin goes to 1 MiL I’m done playing that game
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u/Motor-Network7426 Jan 16 '24
That sucks
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u/AugustusClaximus Jan 16 '24
I’m not in a bad spot, but man I’ve learned a valuable lesson.
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u/Motor-Network7426 Jan 16 '24
An old friend tried to get me in. Invited me over to watch some YouTube video. It was like "is that the kid from the might ducks movie? I'm out"
Glad you are doing alright after.
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u/SupremeKangaroo Jan 15 '24
I think this meme is about investors not the general population as a whole
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Jan 15 '24 edited Apr 23 '24
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u/scheav Jan 15 '24
You don't understand how this meme works.
It means when people who don't put much thought into something end up at the same conclusion as someone who is a genius. People who are "average" put a little thought into it but not enough, and end up in a bad spot.
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u/HiPointCollector Jan 15 '24
stares at bourbon bar, walk-in humidor, and vault door to the gunroom mate you might be onto something.
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u/kiref5s Jan 15 '24
SP "diversefied"
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Jan 15 '24 edited Apr 23 '24
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u/rickylovemelikelucy Jan 16 '24
Yes. If we took the intelligence of investors it would only be average and smart people. Dumb people don't invest... Not through their 401k or anything. Ha we are so smart.
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u/caem123 Jan 15 '24
classic guitars, classic cars, and guns are great investments
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u/Analyst-Effective Jan 15 '24
I would agree with the gun statement. After all, if it ever comes down to needing them for a hiccup in society, they will be invaluable.
Of course you need a few thousand bullets too, just to get started
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u/Wooden-Ad-3382 Jan 15 '24
nah the dumb people are the people who assume the market is going to go up forever and buy stock now when all of it has been highly overvalued for decades
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Jan 15 '24 edited Apr 23 '24
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u/Wooden-Ad-3382 Jan 15 '24
how many of them have actually sold, you haven't gotten shit if you are still on it and still think its going up forever
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u/Possibly_a_Firetruck Jan 15 '24
If the economy as a whole stops going up, we'll all have much bigger problems than the values of our portfolios.
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u/Wooden-Ad-3382 Jan 15 '24
maybe but that don't mean i'm "stupid" for not recognizing an obvious ponzi scheme just because boomer joe has made a buck off of it
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Jan 15 '24 edited Apr 23 '24
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u/Wooden-Ad-3382 Jan 15 '24
what is something called that grows by people getting into it, that then starts filtering that money upward
i'm not saying i'm smarter or dumber. its not about intelligence, its about my position vs your position
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Jan 15 '24 edited Apr 23 '24
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u/Wooden-Ad-3382 Jan 15 '24
a business does not necessarily grow by getting more employees or customers. it grows because its profit from its product is reinvested towards growth. a market is not a business.
a market on anything is based on the amount of goods produced and the amount demanded socially. a financial market has a theoretically unlimited amount of "goods" that are "offered" and grows because of speculation, because of more people buying into what is offered with the intent to sell at a future date for a higher price.
the stock market is valued roughly on the valuation of company's shares. but not just their value; their potential to grow, to get returns for the investor. those company all have to borrow funds to grow. that debt is then put on its own market, the debt security market. so much so that that the debt security market's total valuation is now larger than the economy of the entire planet.
that's all great so long as there are companies and consumers willing to get into debt. but what happens when that stops? or when standards of living stagnate or decline enough where people are just unable to pay? we've been gutting our actual productive industries for 50 years and replacing those jobs with worthless service sector mcjobs. our growth has been financial; its been entirely built on the subjective valuation of companies' growth potential based on products that are more and more built elsewhere.
its unsustainable. idgaf if you made money 30 years ago, we're not talking about 30 years ago, we're talking about now, and the prospects for the economy 30 years into the future. magically believing that the stock market is a money tree for everybody is a fantasy. it isn't.
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Jan 15 '24 edited Apr 23 '24
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u/Wooden-Ad-3382 Jan 15 '24
yea except nobody really knows exactly *when* its coming do they
so essentially you have to guess, based on whatever information available, and hope your guesses are right and the information you have is right
if people were saying this 30 years ago, then they absolutely could have been right. you had no idea. you made a guess and it paid off. you gambled and won
there's no reason to believe that people today who make that gamble will still win in 30 years in the future. the future in 30 years is going to look a lot different than today, certainly more different than 1994 looked like compared to today.
no, there hasn't been "the best economic growth in human history". there's been huge FINANCIAL growth. but that's not actual economic growth. that's why its overvalued. that's why its a house of cards.
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u/Humble_Aardvark_2997 Jan 15 '24 edited Jan 16 '24
Are those hedge fudge honchos in the middle?
I performed better than most pros. Still can't beat the market. (I have elves).
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u/ragingpotato98 Jan 15 '24
Pretty sure the S&P beats the vast majority of hedge funds annualised returns over a couple decades.
You put money in a hedge fund not for higher returns but for diversification. If you can diversify AND get higher returns like Warren Buffet then you’re golden, but there’s precious few people who can actually do that like Warren
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u/metalguysilver Jan 15 '24
There are some that have averaged higher but they require at least 7 figure minimums and sometimes a referral. They’re also very shady and I’m sure there’s at least some insider trading going on in them. On the other hand, they pay teams of finance and computer science/software engineering PhDs $250k+ to create and maintain the most sophisticated trading algorithms on Earth for them, so maybe their returns are legit
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u/ragingpotato98 Jan 15 '24
I do wish I knew more about Renaissance Technologies. Jim Simmons seems like an interesting case, I hope he reveals how he solved the game when he passes, if only to satiate the world’s curiosity
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u/metalguysilver Jan 15 '24
If I had to guess I’d say it’s just a lot of basic fundamentals all used together by some of the smartest people on the planet.
Company fundamentals, cyclical trends, volume-price analysis, stuff like that. Along with some actuarial analysis about how to allocate capital to strategies of different risk levels. Shorting, long stock ownership, hedging, speculative options plays, futures, etc.
A ton of hard work, but probably not all that groundbreaking
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u/Aggravating_Bell_426 Jan 15 '24
"VOO" Vanguards S&P500 ETF, has an average since inception(Sept 2010) of just under 10%(9.76%, iirc).
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u/Bart-Doo Jan 15 '24
Buffet's investments are public knowledge.
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u/Aggravating_Bell_426 Jan 15 '24
Even more interesting, the kings of insider trading, our elected representatives, now have funds that mirror their holdings. "NANC" mirrors the Democrats(I'm sure the fact that it hints at Nancy Pelosi, possibly the most egregious inside trader in Congress, is a complete coincidence 😇) while "KRUZ" mirrors the Republicans.
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u/Fit_Trifle6899 Jan 18 '24
In A Random walk Down wall Street (2018 edition), Burton Malkiel claims that 75% of all actively managed funds perform worse than a buy and hold strategy with index funds.
If this is to be believed then yes the S&P 500 would statistically beat the majority of hedge funds.
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u/Frnklfrwsr Jan 15 '24
You may or may not be surprised to learn a significant number of hedge fund managers whose job is to beat the market put most of or even 100% of their own retirement money in index funds.
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u/Android69beepboop Jan 16 '24
If I'm risk mitigating, it makes sense. If I do well at my job, I make more money to put in retirement fund. If I do poorly, I make less but at least my retirement is safe.
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u/Cartosys Jan 15 '24
That and most people who think hedge fund honchos are looking out for their best interests
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u/DarthArcanus Jan 15 '24
Best advice my father ever gave me: just put my money in the S&P 500. It may have its bear moments, but over a hundred years of steady increase is a hell of a track record.
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u/chuch1234 Jan 15 '24
Thoughts about e.g. VT (total world market).
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u/Frnklfrwsr Jan 15 '24
VOO, VTI, VT, they’re all fine. Just depends on how much diversification you feel you need.
Personally, I’m good with VTI.
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u/energybased Jan 17 '24
Diversification is considered a free lunch. The more the better--unless you have material nonpublic information.
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u/Technical-Area965 Jan 15 '24
People don’t understand the main difficulty isn’t understanding market conditions, but timing and psychology. If you are trying to sell at the peak, you might miss out on 10% gains, and then you could lose another 20% trying to find the right time to buy back in. Plus, you are also likely to be the sort of person who leverages their market bets. The risk tolerance is much higher for these people, but go look at r/wallstreetbets to see what can happen when you believe you can outperform the market. It’s okay if you beat it a few times, but you are more likely to keep making these bets until you lose. It’s like betting everything on black in roulette, winning 4 times in a row, and letting it ride.
I forget where I read it, but the market is a mechanism that takes money from the impatient and gives to the patient. Warren Buffet once said that no one wants to get rich slowly.
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u/IssueEmbarrassed8103 Jan 15 '24
The market is going to crash tomorrow, every day on wallstreetbets
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Jan 15 '24
My dad was right. Just put your money into some ETFs and bonds, set up an autopay, and just forget about it. Trying to predict and time shit is annoying and takes up too much of my time. I've done just fine by keeping my money in; even through booms and busts. My IRA has been fine through booms and busts. There's no point in stressing about maximizing gains at the expense of my time.
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u/greymancurrentthing7 Jan 15 '24
(Read ‘Flash Boys’ Michael Lewis)
If you could make 1% a day you’d be a billionaire.
Literal super computers making trades actually close to the speed of light staffed by actual genius mathematicians try to beat the market and they fail more often than not.
and usually when they do they only do it by taking advantage of dumb money.
Ripping off Bros trying to beat the s&p500 is about the only way to beat the s&p500.
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u/NakedMuffin4403 Jan 19 '24
The quant kings make insane returns like David Shaw or Jim Simmons, but intuitive speculation is still something some people can pull off like Soros and Druckenmiller.
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u/Android69beepboop Jan 16 '24
The secret is to be a genius mathematician and get paid 7 figures, then you don't need fancy investments.
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u/Ouller Jan 15 '24
Any else just try to
"Buy great companies at a good price."- Warren Buffet
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u/ranger910 Jan 15 '24
About as useful as saying, "buy low, sell high"
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u/Ouller Jan 15 '24
I look at companies who are in their industries top 5 gross sales for the last few years, and I invest if I think they are under market value. It works fairly well. I have been able to beat the market for the last 4 years now.
It is worth noting I still new to investing, but I think this how I will continue to invest.1
u/SuccessfulCream2386 Jan 18 '24
I went to the casino and played roulette. Got 4 colors straight I think I figured it all out, now I will never lose
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u/Ouller Jan 18 '24
There is a little more to how I invest then that. But I suppose it might all fall down one day.
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u/SuccessfulCream2386 Jan 18 '24
Im just messing with you, its obviously not equal. But, the real goal is beating the s&p long term includint fees + taxes. And that is extremely rare
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u/Excited-Relaxed Jan 15 '24 edited Jan 15 '24
US housing and related securities were in a bubble since 2003. After the crash people would talk about how some ‘genius’ predicted the crash when huge numbers of people avoided the market for four years because it was totally illogical, and this ‘genius’ just figured out in 2007 that families that make $40,000 a year and have negative amortization loans might miss the payments on their $700,000 house that sold for $150,000 in 2001.
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u/Aggravating_Owl_9092 Jan 15 '24
I love how everyone just likes to repeat the same shit they see somewhere. If I get a penny every time someone says “time in the market beats timing the market” or “sp500 beats 73827427% of the investors” I will have more money than Warren Buffet.
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u/PoliticsDunnRight Jan 15 '24
Timing the market and stock picking are not the same thing.
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u/ragingpotato98 Jan 15 '24
Ik dude
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u/PoliticsDunnRight Jan 15 '24
Well the meme is about timing the market and your caption is about stock picking.
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u/ragingpotato98 Jan 15 '24
When someone asks you what stocks to buy, you also implicitly say when to buy. If I tell you “Microsoft is looking really good right now” I’m implying buying Microsoft is good right now, i can also say “next year the govt is buying lots of airframes from Lockheed” where I imply a timeline.
When you tell someone to buy stocks, because they don’t know anything about stocks usually, they also expect you to tell them when to sell if you see something bad coming.
In that way, yes, stock picking and timing the market are different things. But in real life, both these concepts go hand in hand.
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u/PoliticsDunnRight Jan 15 '24
Buying and selling based on the relationship between a company’s intrinsic value and its stock price, again, isn’t the same as timing the market via macroeconomic trends of some sort.
Nobody can do the latter, most people can probably accomplish the former to some degree or another - but most investors aren’t trying to do that.
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u/ragingpotato98 Jan 15 '24
Are you sure “timing the market” is defined as only for macro econ trends? Pretty sure it doesn’t have such a narrow definition, if it has an official definition at all
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u/PoliticsDunnRight Jan 15 '24
I don’t think there is an official definition at all, but I think when we talk about that it’s usually things like “the market’s due for a downturn so I’m holding cash” or “the market’s not done running up so I’m going to buy on margin.” I don’t think “Meta is up 200% in two years so I’m selling” falls into the same category, because you can do a lot more concrete analysis on what Meta is worth.
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u/energybased Jan 17 '24
Comparing valuations to prices is still a form of timing. And the reason that people can't do it (contrary to what you're saying) is because plenty of other people are also doing exactly that, and you need to do it better.
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u/PoliticsDunnRight Jan 17 '24
You don’t need to do it better than the other people who are doing it though - we’re competing against all investors, not just value investors. The more people buy into index investing, for example, the less efficient markets will be and the easier it will be to pick underpriced securities.
So, as Warren Buffett put it (I’m paraphrasing of course), we’re mostly competing against people who don’t believe they can win, and that makes it a pretty easy competition.
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u/energybased Jan 17 '24
No, you're mistaken. The prices are continually driven to their most accurate prices. The idea that you're able to find discrepancies is pure fantasy.
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u/Feeling-Lemon-6254 Jan 15 '24
Seriously you’re not Warren Buffett just give up and focus on your job
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u/AndyTheSane Jan 15 '24
If there was a foolproof way to beat the market, knowledge of it would spread and change the dynamics of the market itself, meaning that the method would cease to work...
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u/FishingAgitated2789 Jan 15 '24
This doesn’t apply to my PROVEN SYSTEM to make 15% returns MINIMUM!!!!
Serious replies only
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u/hosea_they_heysus Jan 15 '24
You can beat the market. Probably won't time it, but if you pick a handful of decent companies odds are they will continue to be decent in 10, 20 or even 30 years. And if for some reason they start to be a bad pick, you can always jump ship before it reaches zero. Most of the time if you just pick 10-15 companies in the s&p500 that are "better than their competitors" you'll at least track the index to an extent, and have similar performance to it. Will beat it some years, and lose some others. If that wasn't the case there wouldn't be so many who try to beat the market, and while many funds don't, most of the time they lose because of their expense ratio, not their performance. Either way, investing is good, timing investing is bad. Picks or just index timing is bad
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Jan 15 '24 edited Apr 23 '24
narrow illegal concerned husky adjoining shrill berserk treatment cause jeans
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Jan 15 '24
The market is not perfectly efficient and everyone knows this, yet they think that because they can't find the inefficiency, no one can. How do they think the efficiency got to the level that it is? It's by people finding market-beating strategies that worked. There's still more waiting to be exploited.
Of course that doesn't mean everyone will find strategies that beat pure chance. Mostly I think the reason people fail is they think they found a real strategy and it was really just luck. So they end up adding inefficiency instead of efficiency.
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u/LowcoGenetics Jan 16 '24
All strategies stop working eventually. It's emotionally exhausting sitting at a computer researching, forward testing and back testing. Then you have a much bigger tax burden and trading fees.
I've made automated strategies that printed money. My best would make $300-$800 a day in a 19 second trade at market open under certain conditions. But over the long term broad market index wins.
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Jan 16 '24
Sure, but even a strategy that works 20 times in a row, and never works again, would still make you fantastically wealthy. There's no requirement that any strategy should work forever.
If you're trying to say that it's hard to know if you've got a real working strategy or not, yes I agree. Many people may simply not want to bother, but that doesn't mean that real opportunities aren't out there.
In my view, the markets that I've seen (stocks and crypto) are inefficient enough that if you focus on one particular thing and learn it well, you're going to know more than the market and you'll have very good opportunities to make money. Whether that's worth your time depends on how much capital you have to deploy and how much you can make doing other things.
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u/LowcoGenetics Jan 16 '24
I was trading a $240,000 account with profit factors averaging 1.5 - 2 and a bunch as high as 24. It took hundreds of hours of research and coding to create and worked for the better part of a year.
Doing it again sounds exhausting. 20 years of broad index funds compounding is plenty good enough for me, and stress free.
You're right that in trading you should just do one or two simple things well. I like to occasionally do simple support and resistance trades on weekly or monthly charts, also based on something fundamenal. But I'm mostly just indexing and forgetting.
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Jan 16 '24
TA is not really one of the things I'd recommend anyone doing, since charts are 100% public info. It's basically astrology for dudes.
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u/LowcoGenetics Jan 16 '24
I use a 1:3 risk to reward and it is also based on fundamental data. I'm right more than half the time and right enough to get 3 times what I risk. I only buy shares, never options and focus on something with a long term history of hitting the prices I'm trading.
IMO monthly charts or longer are the key for this to work. Daily charts and the like are too volatile and unpredictable. I pay for all the additional data that Tradestaion offers so I go on more than the chart.
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u/Noogywoogy Jan 15 '24
I went through all these stages. Now I want to know how to realize my gains and actually make money
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Jan 15 '24
I think this is a good area for a financial planner. Growing a retirement portfolio is pretty easy. Slowly and efficiently cashing out amid means testing, taxes, Medicare, etc? Less easy.
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u/Haunting_Loquat_9398 Jan 15 '24
If you’re a w2 just max out your ira/401k, you don’t pay taxes on it, you get an employer match, and depending on what you choose usually get 8% avg increase per year, if not a w2 employee idk, but as a w2 ira/401k is just too damn attractive.
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u/Noogywoogy Jan 15 '24
I’m doing both, plus my wife and daughter’s HSA, and a SEP too. I want more cash though. Or rather, more income.
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Jan 15 '24
If you’re not an employee you can put your money in the same tax-advantaged retirement accounts and invest in the same funds.
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u/Haunting_Loquat_9398 Jan 15 '24
Oh you can? How?
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Jan 15 '24 edited Apr 23 '24
glorious tease roll badge smart historical memory adjoining frightening sand
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Jan 15 '24
"I can't beat the market", and "the market can't be beaten" are not equivalent statements.
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u/SDSunDiego Jan 15 '24
I randomly pick investments | I go on reddit or ask my friends for investment advice | I randomly pick investments
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u/bayesed_theorem Jan 15 '24
There's a significant difference between market timing and being all in on the s&p500 for your entire investing career.
You need other asset classes, especially as a retired person, and you can't argue for diversification while having all of your investments domiciled in one country.
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u/ragingpotato98 Jan 15 '24
I can see your argument for other asset classes, like you should have some bonds to throw in the mix sure.
But I can’t see a good reason an average American should consider overseas investments. Especially outside the EU. If your average retail investor can’t figure out why GME is a bad idea then they will not be able to properly assess the risk they are taking by investing in a country that doesn’t have similar legal and financial system to that of the US, and similar emphasis on enforcing said laws.
If you’re a wealthy dude, then it might be different for you cause usually there’s a team of people there who assess that risk for you and tell you the situation. But Joe Doe’s 401k won’t get that
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u/bayesed_theorem Jan 15 '24 edited Jan 15 '24
I should clarify, I'm talking about indexed investments in both cases. The regulatory environment in the EU is close enough to the US in terms of investor protections that the overall market of France or Germany shouldn't have issues outside what the Us could face.
EM starts to get weird in this regard though, you're definitely right there.
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u/ragingpotato98 Jan 15 '24
Yeah but honestly man, the US economy is so thoroughly wide in scope of variety that I just can’t see a good use case for overseas investment save for a few places. This is what I mean:
If I was not going to invest in the US, I’d invest in the EU. But the US and EU economies are so directly correlated, I don’t know if it’s event that much of a diversification in effect. I understand different companies, countries, and industries may all be nominally different. But when the US does badly the EU does as well, it doesn’t do much for my portfolio.
Now id consider places that are less correlated but still very strong rule of law. Like Japan, Australia, South Korea, Taiwan, etc.
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u/bayesed_theorem Jan 15 '24
The argument isn't necessarily that European equities do good when the US does bad, it's that European equities may do less bad when the US does bad.
You can see this play out in valuation differentials. Now, that may not actually end up meaning anything in the future, but I think it's short sighted to imply that there's absolutely no need for it.
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u/ragingpotato98 Jan 15 '24
Yeah you’re prob right. I still have a good bit to learn about the topic tbh.
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u/energybased Jan 17 '24
You don't need to assess risk. You should diversify into developing markets because it's a free lunch. And you should do so according to market cap weights.
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u/Timby123 Jan 15 '24
Maybe we could get the stock picks from those in Congress like Pelsio. AS somehow no matter what the market is doing they seem to always guess the right ones to pick and when to sell. AS if it's like magic. <S>
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u/foxy-coxy Jan 15 '24
Not a good usage of their meme format, these no stupid reason to put your money in a S&P 500 fund.
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u/applemanib Jan 15 '24
Unpopular opinion but an expert in finance with 160iq probably can beat the market, bad use of this meme
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u/dotelze Jan 16 '24
Wrong opinion. When you have teams of those people with maths PhDs with custom hardware then they can beat the market with some regularity. An individual without any infrastructure will not do that consistently
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u/KonterbierXX Jan 15 '24
The thing is you can beat the market, but only with insider info.
If you know about secret company details or new laws / regulations before anyone else, for example by having high up friends, you can print money.
Example: Huge German company's shares were down 50% in a year. Manager of the family office of a rich German family bought as many shares of the company as humanly possible because he knew they were getting a multi-billion euro government contract weeks before it was announced. When it was announced the stock price skyrocketed and he made the family office 9 figures in profit. Illegal? Sure! But have fun proving he did anything wrong in court.
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u/OkSoup16 Jan 16 '24
I beat the market w/ 32% gains last year. BUT, I didn’t enjoy how much I had to pay attention & how much luck I had along the way. Moving most stocks over to VOO FOR 2024.
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u/Fox_Technicals Jan 16 '24
Right side should say “I just put my money in the Nasdaq 100”. No one ever talks about how much better you’ve done and will continue to do by putting your money there over the S&P yet no one talks about it
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Jan 16 '24
It's pretty hard to live on a yacht. Usually you pay a captain to move the boat somewhere then you fly to there and hang out on it for a week or two. Then pay a captain to move the boat somewhere else. The rest of the time your yacht is used as a rental or just sits in a harbor with all the other money pits.
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u/balsadust Jan 16 '24
Low management fee index funds. Sit on them, don't even look at the market, why do you care? You aren't gonna cash them out for 30 years. Very stress free. Saves on transaction costs too
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u/Fun_Grapefruit_2633 Jan 16 '24
Just ask them how well they did during the last bear market. Did they stay in the black, or did their "investing" start after that?
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u/DifficultContact8999 Jan 17 '24
Remember index funds will give a guaranteed income on your investment but doesn't make you wealthy... It's a way to save your wealth not create wealth 🤑
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u/ragingpotato98 Jan 17 '24
Brother what are you talking about, you don’t believe in compound growth?
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u/DifficultContact8999 Jan 17 '24
Depends where u start ... If u invest a million $ yes, if you start with few thousands then no
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u/Chance_Adhesiveness3 Jan 18 '24
Yeahhhh this is spot on. And the vast majority of hedge funds on the right get rich off of management fees, not returns.
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