Investing in stocks (broker managed?)
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JoseCuervo
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JoseCuervo
To be fair, Darrell didn't say what his asset allocation was. Anybody who had a sane stock/bond allocation and wasn't 100% in equities last year looked like an idiot.
Well, I wouldn't pay an investment manager to manage my cash, I can do that with a checking account...
For some reason, I only evaluate managers on performance of equities, and measure them against indexes. I can adjust the cash level up and down.
And, I think there are many studies that show most managers and investors are poor at timing when to be in and out of the market. If you have a long term horizon, timing won't be the biggest issue.
Look at all the people who moved out of equities in 2008, missed a great rally. Cash and Bonds gained very little of it back.
airdale
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Kind of a mixed hash here. Comments about brokerage houses and comments about investment advisors.
Do a little web searching and you will see a couple of things:
1) There is a mountain of academic research that says on average, investment advisors underperform their benchmarks. The problem is that managed money involves fees, trading costs, bid/asked spreads, etc. all of which subtract money from the account. In general the advisors' stock picking ability is good enough to overcome some of the costs, but not all. Said another way, hiring a professional manager is usually a losing strategy.
2) There is also a mountain of research that says that mutual fund managers' "persistence" of results over a 4-5 year period is zilch except in the case of lousy managers, who remain lousy. What this means is that it does no good to park your money with a manager who has had a good year or two. There is some data that says results might persist for a year. Two factors here: 1) Momentum -- the guy's last year ideas might still be working and (2) influxes of money that cause the manager to buy more of what he likes -- driving the prices up simply because he is a buyer.
The http://www.bogleheads.org/ stuff is good reading, as is Jeremy Siegil's "Stocks for the Long Run." When thinking about your energy play, pay particular attention to Siegil's concept of the "growth trap."
The best advice, lately, though is the wonderful advice in Warren Buffet's recent letter to shareholders that has already been mentioned.
I have done technical analysis including Fourier transform analysis, fundamental analysis, written covered calls, traded options, chased hot managers, and a lot of other stuff over the years. My wife has been Series 7 licensed and a Registered Principal. What I have learned is that the more I play with my food the less food I have. For the past 10+ years I have been in index funds and TIPS and have been a very happy guy.
Re brokerage houses, I don't think it matters much. A true investor, as opposed to a trader, is making so few transactions that a couple of bucks one way or another on the brokerage fees is irrelevant.
Do a little web searching and you will see a couple of things:
1) There is a mountain of academic research that says on average, investment advisors underperform their benchmarks. The problem is that managed money involves fees, trading costs, bid/asked spreads, etc. all of which subtract money from the account. In general the advisors' stock picking ability is good enough to overcome some of the costs, but not all. Said another way, hiring a professional manager is usually a losing strategy.
2) There is also a mountain of research that says that mutual fund managers' "persistence" of results over a 4-5 year period is zilch except in the case of lousy managers, who remain lousy. What this means is that it does no good to park your money with a manager who has had a good year or two. There is some data that says results might persist for a year. Two factors here: 1) Momentum -- the guy's last year ideas might still be working and (2) influxes of money that cause the manager to buy more of what he likes -- driving the prices up simply because he is a buyer.
The http://www.bogleheads.org/ stuff is good reading, as is Jeremy Siegil's "Stocks for the Long Run." When thinking about your energy play, pay particular attention to Siegil's concept of the "growth trap."
The best advice, lately, though is the wonderful advice in Warren Buffet's recent letter to shareholders that has already been mentioned.
I have done technical analysis including Fourier transform analysis, fundamental analysis, written covered calls, traded options, chased hot managers, and a lot of other stuff over the years. My wife has been Series 7 licensed and a Registered Principal. What I have learned is that the more I play with my food the less food I have. For the past 10+ years I have been in index funds and TIPS and have been a very happy guy.
Re brokerage houses, I don't think it matters much. A true investor, as opposed to a trader, is making so few transactions that a couple of bucks one way or another on the brokerage fees is irrelevant.
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FastEddieB
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Fast Eddie B
airdale
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Just ordered it. Thanks for the point-out. Reciprocating: "The Invisible Gorilla" is a good read. The material on how we perceive our own and others' competence is very germane to investing. That and lots of the rest of it is germane to flying.
If you are not at all familiar with the book, start by watching this video:
https://www.youtube.com/watch?feature=player_embedded&v=vJG698U2Mvo Try to count the number of basketball passes by the players wearing white.
PaulS
Touchdown! Greaser!
I have a guy who gets a fixed fee who does mine. I followed him from one firm to another. Been through three significant downturns with him. Remained whole on each, very well positioned. His philosophy is he will be as aggressive or conservative as we want. We are fairly conservative in our wishes. I'm happy with less loss than the indicators in a bad year and less gain in a good year in exchange for some peace of mind. So far we have still made money in bad years and come close to indicators on a few good years and beat them on the rest.
I used to do my own before this guy in the late 90's and thought I was a genius, kept a small portion to play with, we hired him just before the Clinton recession, I did poorly on my own, reinforcing my decision to use him.
I used to do my own before this guy in the late 90's and thought I was a genius, kept a small portion to play with, we hired him just before the Clinton recession, I did poorly on my own, reinforcing my decision to use him.
eaglepilot
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Also a good read-Future Babble (Why Expert Predictions Fail-and why we believe them anyway) by Dan Gardner
Note that some people need to have an "expert" to follow, so that in the case of a problem, they have someone to blame. It's extremely difficult for most people (pilots) to put the blame squarely on themselves.
