quote:

Originally posted by DMF:

quote:

Originally posted by slosig:
From personal experience I can tell you that if you are right you will make a whole lot more money putting all your eggs in one basket and watching it closely.

There are many former ENRON employees who would disagree with that philosophy.

They probably would disagree with that, but they would be blaming their plight on the wrong cause.

One of the bedrock principles of investing is to “investigate before you invest.”

What should you investigate? A chart that shows the stock price heading to the moon?

Maybe a study of the financial statements, several years annual reports?

You don’t understand financial statements. Then, you should not be investing in individual companies.

Warren Buffett and Charles Munger, two who likely do understand financial statements, have a few rules, one of which is, “Never invest in a business you cannot understand." This one rule alone will save you from untold grief, misery and fear.

“But, but, lots of investment pros were buying Enron.” Yeah.

When you look for appreciation ahead of buying shares of a business that you understand and will likely do well into the indefinite future, you are speculating, not investing. Some will disagree with that. Fine.

I look for shares of companies in simple businesses that I understand, and buy shares when I can get them at less than I figure they are worth. These don’t always work out, but they do more often than not. I stay away from high P/Es, high price to book ratios, complicated financials. This has worked very well for me, with a couple of exceptions where cheap stocks inexplicably got a lot cheaper.

As I slip further and further into old age and decrepitude, I am starting to look into funds, so my widow won’t have to be burdened with such matters, which she has no trainng or experience in.

We have a diversified account based on the level of risk we are comfortable with; since I’m retired, that could be described as “moderate.”

In another thread I described who we are using for wealth management and was informed by a couple of experts here that we were foolish. To each his own.

The economy is so healthy that it seems hard to mismanage an account. I suppose we won’t really know how wise we are until there’s a downturn. Suffice to say, we have been more than happy with the performance of our account.

I was sent an impressive folio from Fisher a month or so ago. Right now, I don’t see a reason to explore a change.

quote:

Originally posted by Rey HRH:
Market timers time the market proactively while diversify and re-balance time the market retroactively and neither is inherently superior to the other.

I'm no necessarily arguing for the superiority of one strategy over another, but there is one big difference: you can look back at what the market has done in the past with perfect accuracy. Looking forward, all you're really doing is guessing.

quote:

Originally posted by Rey HRH:
The flaw that is the negative that I see for diversify and re-balance is this: Imagine that at a given point your portfolio is diversified and re-balance. Some time after, the stock market goes down say 25% enough to trigger a re-balance. You would sell off some bonds in your portfolio and buy more stocks that are now priced lower. Your mix is again balanced but, obviously, your pie is smaller. Everything is fine and dandy but only if the market starts going up. If it drops down another 25%, then all you've done is sold a portion of your bonds that were safe into stocks that lost some more. And your pie is smaller still. You again re-balance by selling more bonds and buying more stocks but only on the hope (outlook) that it's time for the market to start going up again. Then on a rising market, you keep selling the stocks that are growing to buy more bonds that are returning a lot less. I don't see this strategy as inherently better than Market Timing.

You can construct a scenario that will result in poor performance for any investment strategy.

quote:

Originally posted by Rey HRH:


Nothing wrong with value investing; I own shares of Bershire Hathaway.

Your post brings up yet another way of slicing and dicing strategies: Value vs Growth investing. And both of those could be compared to indexing.

But to take a step back, I think between Value and Growth investing, neither is superior to the other without the backdrop of what is happening in the stock market currently. I think there is a case to be made that one should not be wedded to one or the other in times when the investing environment is better suited for one of them.

I suppose one can even allocate a portfolio between growth and value stocks and adjust the percentages as deemed appropriate for a given period.

That article you link confuses me. It says Fisher liked growth stocks but he bought them at a low price which sounds like value investing to me.

Philip Fisher was an advocate of scuttlebutt, going around talking to customers, competitors, former employees, etc. to help assess company management and prospects. His book sets out a 15 point checklist to use in selecting investments. He didn’t want to own a bunch of companies, just a few really good ones. Like Buffett, his favorite holding period was forever. He bought Motorola in 1955 and owned it as long as he lived.

The idea behind value is to own shares of a business that earns a profit year after year, soundly financed, low debt, etc. when you can buy the shares at an attractive price. You pay nothing for growth, which might or might not happen. Growth is off in the uncertain future. You want to pay for productive assets used to earn a profit, nothing for a rosy scenario. Fisher went the extra mile, using scuttlebutt to give him ideas where a fast growing market might be about to emerge. Back in 1947, TV was a growth market but very competitive. The shortage was in picture tubes which led to Corning Glass Works which went from ~20 to ~250 in a decade.

The book I referred to before is one of the classics which should be in every investor library.

If you like to read go here https://www.bogleheads.org/index.php. Lots of interesting info with the links on the left side of the page.

Buy lower.

Sell higher.

That's pretty much all you need to know.



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quote:

Originally posted by Rey HRH:
Personal Capital claims no one has a crystal ball and market timers have a dismal performance history. Their strategy is to diversify among the company size and sectors and re balance.

There are very inexpensive (inexpensive meaning very low fee) ways to do this with algorithms - the so-called robot advisors. Schwab Intelligent Portfolios is one alternative to consider, if this seems attractive. Personally, I would not pay a human to do this on my behalf.

quote:

I get that no one has a crystal ball. I buy that market timers have a dismal record. However, as he was explaining the diversify and re-balance strategy, I thought I simplified (in my mind) the comparison between the two. Market timers time the market proactively while diversify and re-balance time the market retroactively and neither is inherently superior to the other.

The re-balancers try to 'buy low' and 'sell high' based on price movement. When something has gone up, it must be time to sell some of it - it's 'high'! When something goes down, it's now time to buy more, as it's now 'low'. It should be pretty obvious that approach makes a lot of assumptions. As one example, what if a company/industry is about to become obsolete or face new regulatory problems? Hey, the stock went down....so now it's 'cheap' and the rebalance algorithm says to buy more...but is it really time to load up, or might there be some other factors other than just price change to consider?

Market Timing tries to do the same thing based on someone's sense of whether the market is high or low. Dunning-Krueger will tell you everyone feels they are the expert at that. Historical return numbers will tell you that most are not good at that.

There are professional 'crash is right around the corner' forecasters, and there are analogous 'market about to break XYZ barrier on the upside' forecasters. A broken clock is right twice a day, and if they stay consistent, and hope nobody keeps track, sooner or later they look like Nostradamus.

In fact, though, some of the most humorous non-fiction you will ever read is market forecasts from the financial press, aged appropriately.

quote:

Originally posted by JALLEN:

As I slip further and further into old age and decrepitude, I am starting to look into funds, so my widow won’t have to be burdened with such matters, which she has no trainng or experience in.

You haven't been given permission to pass away. So, as you'll be living forever, your spouse won't have to worry about such things.

quote:

Originally posted by Rey HRH:
For the stock portion, they start with the MSCI World Index as a benchmark which, as the term implies, is across the world and countries. Then they "make a call" as to which countries and which sectors will outperform or underperform the other countries or sectors. For example using random numbers, if US is 50% of the index and Spain is 5% and if they believe US will underperform and Spain will outperform, they will adjust their actual portfolio so that US is 47% and Spain is 8%. Same with sectors.

What they sell most is their ability to call the individual sector or country. That remains to be seen by me.

Yes. You are either paying the individual transaction fees as they adjust your personal portfolio, or you are paying a higher expense ratio as they adjust the actively-managed custom fund or portfolio that they have invested your money in.

quote:

Originally posted by chellim1:
Short answer: both strategies can be effective.
Google: tactical asset allocation

Thank you for the guidance. I appreciate it.

That will give me the basics. So it's not something that Personal Capital came up with. And you gave me the thought that one can also diversify between those two strategies and adjust weighing over time as learning or experience dictates.

I think your balanced approach is a reasonable conclusion. Timing the market simpy doesn't work. No one can predict the future. Source: finance degree, and following the market for 29 years.

An indicator with a perfect track record just sent a 'powerful' sell signal.

The relentless gush of cash into the stock market is sending a powerful "sell" signal, according to a Bank of America Merrill Lynch gauge that has been a reliable indicator in the past.

Investors poured $33.2 billion into stock-based funds through the week ended Wednesday, BofAML said in a report. That's a record both for total flows and as well as for active funds, which alone pulled in $12.2 billion.

By comparison, equity funds across all classes took in a net $278 billion for all of 2017, according to Morningstar, meaning that last week alone equated to 12 percent of flows for the entire previous year.

The week continued a trend that has seen money rush into stocks as major averages climb to new records. The Dow Jones industrial average is up 7 percent year to date.

While the inflows have helped push the market higher, they also can be seen as a contrary indicator when they flash signs of excess. BofAML uses a proprietary "Bull & Bear" indicator that gauges when inflows or outflows point to investors moving too far to either side.

The current reading on the indicator of 7.9 is the most bullish since a reading above 8 in March 2013 — a sell signal. Michael Hartnett, BofAML's chief investment strategist, said the Bull & Bear indicator has shown 11 previous sell signals since the firm started tracking it in 2002 and has been correct each time.

In the near term, around February and March, that suggests a technical pullback for the S&P 500 to 2,686, which would represent a drop of close to 6 percent, Hartnett said.

The enthusiasm has not been unique to the U.S., whose equity markets brought in $7 billion of fresh cash.

Emerging markets attracted $8.1 billion in new flows, Europe brought in $4.6 billion and Japan saw $3.4 billion. That comes as 98 percent of global markets are trading above their 50- and 200-day moving averages, both classic signs of overbought markets.

FWIW, the Dow is the most overbought since ... 1904 (not a typo)

Stock-based funds overall have brought in just shy of $77 billion in 2018, with the lion's share of $59.2 billion going to passively focused exchange-traded funds.

However, investors continue to hedge, giving about $32 billion to bonds, while last week's $1.5 billion flow into gold funds was the highest in 50 weeks.

Link

quote:

Originally posted by JALLEN:
An indicator with a perfect track record just sent a 'powerful' sell signal.

Soooooooo...... you trying to say some number lets someone 'time' the market?!?!?! Who knew?

All kidding aside, I know you didn't write that article, and I know you don't believe in timing, either.

With all due respect to CNBC and the author, Jeff Cox - who did write that article - nothing on the planet has a perfect track record. Noone, no thing.

I can recall when the predictor with the 'perfect record' was along the lines of 'if the original NFC team won the Super Bowl, the Dow will be up the next year.' That was perfect...until it wasn't.

File it away and read it in a few years, for a laugh.

Interesting thread

I started investing a long time ago - well, about 25 years ago.

I even had a small investment group of about 10 friends at one point. Our goal was to double our money and then quit. We did - took 4 years.

Personally, I started doing a lot of research using ValueLine as a tool and looking to screen out stocks that met specific criteria. I was looking for companies that had a track record of steady growth in earnings and a steady growth in profits. Dividends were nice and if those were increasing or constant that was a plus.

Out of all the stocks that I originally purchased with a rollover in 1997 the only one still in my portfolio is Exxon Mobil.

When I was working in the semiconductor industry, I was on the FABS committee for the industry so I got to see behind the scenes on a few companies like Intel, Moto, Lucent as well as my own parent company Unitrode/TI. Because of what I did (clean room construction, building construction and equipment fit up) I had an idea of what we were planning on doing 24 - 36 months into the future.

This was the only time in my investing career that not only did I know what 'they' did but I also knew 'what they knew'. That almost never happens. Once I left the semi industry I got out of investing in the tech sector.

However back in 2010, our very own JALLEN gave me a nice tip on Realty Income when it was around $19 a share

Long story short, I think I am a firm believer in the buy and hold model of investing. Day to day investing is not my job but I try to stay on top of what I own - keep it manageable to about 10 holdings of some stocks and ETF's. Currently no bonds. Also I have never got into futures or shorts. Too much work for me and its not my paycheck.

quote:

Originally posted by joel9507:

quote:

Originally posted by JALLEN:
An indicator with a perfect track record just sent a 'powerful' sell signal.

Soooooooo...... you trying to say some number lets someone 'time' the market?!?!?! Who knew?

All kidding aside, I know you didn't write that article, and I know you don't believe in timing, either.

With all due respect to CNBC and the author, Jeff Cox - who did write that article - nothing on the planet has a perfect track record. Noone, no thing.

I can recall when the predictor with the 'perfect record' was along the lines of 'if the original NFC team won the Super Bowl, the Dow will be up the next year.' That was perfect...until it wasn't.

File it away and read it in a few years, for a laugh.

It’s called coincidence.

Some old speculator made a fortune years ago selling seasonal trades, spreads, all sorts of goofy deals which had very high historic probabilities. Sell May wheat, buy October pork bellies on December 23, reverse before May went under the gun. Orange juice/soybeans, love cattle/soybean oil.

One lady in Arkansas turned $1,000 into $100,000 in a dozen or so straight trades, in cattle futures. Coincidence?

When it comes to investing, I only know two universal rules:

1) It's never a good idea to pay interest on anything that depreciates.

2) Things go "down" a lot faster than than they go up.

I've been preaching Dogs of the Dow for over 20 years and still am. I use a modified system but similar criteria. Love the unloved and be prepared for ups and downs. I'm good at it and have been an active investor since I was 13 years old, back in 1964 and it's been good to me.

My first purchase was 8 shares of Eli Lilly when it was traded otc. A Merrill Broker recommended 2 stocks, Lilly and Syntex. I chose Lilly but Syntex was good, a pioneer in women's birth control. 8 shares is over 1000sh now due to splits and div re-investment. I've got time and I like investing so I pick individual securities and have never owned any funds. Currently I hold about 25 different securities and seldom sell unless something changes. I've been in Papa John's since ipo and while others were dumping after PJ's big mouth attack I added some more. Same way with GE, I hate em but after they cut div in 1/2 and share price bottomed the 1/2 price div looks good. I bought some @ 16. I see Ford paying over 5% and am comfortable owning F. Vectren Energy VVC has raised their div something like 55 years in a row and it's attractive now. So is Duke. I bought more Kroger @ 20 when Amazon was getting all the Whole Foods news Kroger is over 30 now. There are a million reasons not to buy every stock - fuck it, jump in. A bull market climbs a wall of worry so if you've got the stomach for it belly on up to the bar.

quote:

Originally posted by JALLEN:
It’s called coincidence.

Some old speculator made a fortune years ago selling seasonal trades, spreads, all sorts of goofy deals which had very high historic probabilities. Sell May wheat, buy October pork bellies on December 23, reverse before May went under the gun. Orange juice/soybeans, love cattle/soybean oil.

One lady in Arkansas turned $1,000 into $100,000 in a dozen or so straight trades, in cattle futures. Coincidence?

The saying growing up in Michigan was "Even a blind pig finds an acorn once in a while."

You probably already have read it, but if not, Taleb's book "Fooled By Randomness" is a great read on this and related topics.

quote:

Originally posted by joel9507:

quote:

Originally posted by JALLEN:
It’s called coincidence.

Some old speculator made a fortune years ago selling seasonal trades, spreads, all sorts of goofy deals which had very high historic probabilities. Sell May wheat, buy October pork bellies on December 23, reverse before May went under the gun. Orange juice/soybeans, love cattle/soybean oil.

One lady in Arkansas turned $1,000 into $100,000 in a dozen or so straight trades, in cattle futures. Coincidence?

The saying growing up in Michigan was "Even a blind pig finds an acorn once in a while."

You probably already have read it, but if not, Taleb's book "Fooled By Randomness" is a great read on this and related topics.

I have, several times actually, trying to figure out all the ramifications, implications, meaning.