Comments on: Why it’s hard to invest sensibly http://blogs.reuters.com/felix-salmon/2011/12/28/why-its-hard-to-invest-sensibly/ A slice of lime in the soda Sun, 26 Oct 2014 19:05:02 +0000 hourly 1 http://wordpress.org/?v=4.2.5 By: best essay writer http://blogs.reuters.com/felix-salmon/2011/12/28/why-its-hard-to-invest-sensibly/comment-page-1/#comment-54899 Mon, 13 Oct 2014 11:43:00 +0000 http://blogs.reuters.com/felix-salmon/?p=11657#comment-54899 Red bottom shoes are well known all across the globe. The original creator of these extraordinary style of shoes was Christian Louboutin. These days there are many companies that are making elegant women’s shoes, along with the distinct red sole. These types of shoes are one of the trendiest shoes around, which is apparent from their outstanding demand! Women love to shop for these cheap red bottom shoes, and these shoes usually are in demand during the time of year while they are at a price reduction. However, the common trend is that these shoes aren’t on a discount during the holiday seasons when people love to go shopping for themselves as well as their family.

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By: TFF http://blogs.reuters.com/felix-salmon/2011/12/28/why-its-hard-to-invest-sensibly/comment-page-1/#comment-34562 Thu, 29 Dec 2011 13:38:35 +0000 http://blogs.reuters.com/felix-salmon/?p=11657#comment-34562 @mwwaters, I would argue that the best way to beat the market is to not try. If you approach investing with an eye towards achieving a modest return at a modest risk, then you have a good chance of achieving those goals. (And yes, a modest return beats the market when the market is flat or down.) If you instead try to “beat the market”, and checkpoint yourself weekly, then you are forced to take on excess risk at the worst possible times, resulting in large losses.

Felix wants to beat the market, or at the very least match the market. I don’t care what the market does, as long as I get my 7% long-term ROI. Give me a 3% dividend and 4% earnings growth and I’m happy.

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By: mwwaters http://blogs.reuters.com/felix-salmon/2011/12/28/why-its-hard-to-invest-sensibly/comment-page-1/#comment-34549 Thu, 29 Dec 2011 03:54:29 +0000 http://blogs.reuters.com/felix-salmon/?p=11657#comment-34549 TGGP,

Bonds certainly aren’t systematically overpriced. In a panic, there can be a bond bubble and a stock trough, just like 2009. Even now, stocks may be a good buy because they need to get up to a P/E of 50 before their earnings yields goes down to the levels of 2% Treasuries.

But yes, it is indeed incompatible with the strong forms of the EMH, which is why I don’t really believe the EMH. It definitely is a fool’s game to try to beat the market in the short-term, but if your horizon is on the order of years and not months, it’s not THAT hard to beat the index through changing allocations between stocks and bonds. Of course it is by nature contrarian, which many people have difficulty doing.

Your horizon may also not really be years. Don’t play in the market if you’re not willing to get burned in the short-term, including interest rate risk for bonds sold before maturity.

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By: MacCruiskeen http://blogs.reuters.com/felix-salmon/2011/12/28/why-its-hard-to-invest-sensibly/comment-page-1/#comment-34547 Thu, 29 Dec 2011 03:28:58 +0000 http://blogs.reuters.com/felix-salmon/?p=11657#comment-34547 There’s a saying among poker players (well, I read it in a book on poker)–if you look around the room, and you don’t know who the mark is, it’s you. I believe that this how one should approach the market, and the players in the market. Of course don’t listen to advice from web sites and tv shows–their job is to sell advertising, not to make you rich. Fund managers are in business to generate fees for themselves. If they incidentally make money for you, well, that’s your luck, but don’t bet on it. I’ve kept my money as far away from the stock market as possible since the late 1990s. It was clear that the market was unmoored from reality, and I’ve never seen any reason to believe that it’s gotten any better in the meanwhile.

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By: y2kurtus http://blogs.reuters.com/felix-salmon/2011/12/28/why-its-hard-to-invest-sensibly/comment-page-1/#comment-34546 Thu, 29 Dec 2011 03:07:18 +0000 http://blogs.reuters.com/felix-salmon/?p=11657#comment-34546 You broke my heart Felix. As one of your most loyal readers I’ve read at least a thousand of your posts. Many hundreds of those are fantastic enough that you should put them into a book. A few have missed the mark. And this one is the worst you’ve ever written!

TFF and others have offered more eloquent rebuttals than I could. Individual investors have every reason to belive they can acheive good investment results over the longterm.

Fear not though Mr. Salmon you remain my favorate finanical news source by far! Best wishes for the new year!

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By: revelo http://blogs.reuters.com/felix-salmon/2011/12/28/why-its-hard-to-invest-sensibly/comment-page-1/#comment-34544 Thu, 29 Dec 2011 02:41:28 +0000 http://blogs.reuters.com/felix-salmon/?p=11657#comment-34544 The idea that the professionals on Wall Street have the advantages is absurd. Professional are playing with one arm tied behind their back. First, they are evaluated on a quarterly or at most annual basis. 20% drawdown and they’re fired. But if you can’t tolerate a 20% drawdown now and then, you can’t take on much risk. Someone investing 100% in the stock market (which is wise, if you won’t be touching the money for 40+ years) should expect occasional 50% drawdowns. So the professionals are forced to sell at the first sign of a possible drawdown, which is the worst type of market-timing. Second, professionals can’t just hole up in treasuries for a few years when the stock market is expensive. No one will pay professional management fees for that. Nor can professionals leave the financial markets entirely for rental real-estate, like individuals. There have been many times when real-estate was a bargain compared to stocks and bonds. Right now, if you are living in Sacramento or one of the cities hit hardest by the bubble, you’d be much better off buying single-family houses to rent than buying stocks or bonds. No, you won’t make quick profits. But you should be able to get 8%/year returns after inflation AND these returns are partially tax-advantaged, which is much better than what you will get from stocks and bonds at today’s prices.

The only thing individuals have to fear is other individuals. In particular, individuals like Warren Buffett. People who don’t blink at the possibility of a 50% drawdown in market values, because they buy with plans to hold forever and so they don’t care about market values, just long-term earnings. But there simply aren’t that many smart-money individuals like Buffett. Most rich people don’t want to watch the market like a hawk for opportunities to buy low and sell high. Which leaves the field wide open for individuals who are willing to watch the market constantly to take Wall Street to the cleaners. They just need to maintain a long-term perspective. Over a twenty year period, there will be times when the market is cheap. That is when you buy. And there will be times when it is expensive. That is when you sell, if you want to sell (holding forever is also acceptable).

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