[3pt14159]

Disclosure: I'm probably exposed to every stock in this comment.

Eh. If you're smart and in technology you can beat index funds pretty easily. I'm not even counting Bitcoin. I time the market too.

Your advice works for the median person, but if you're in the intellectual 1% or 0.1% beating the market is pretty easy.

1. You should have a really good reason for buying a high P/E or negative EPS stock. It should be grounded in unit economics and entrenchment, not marketing. Tesla is a good example, I knew it was just a matter of unit economics. The technology was solid. Made over 10x sans options. Apple is another good example: They had a low P/E and I thought they were well situated to make money from services if they could just figure out how to design better software. They did it.

2. When the cover of Time magazine is this:

http://img.timeinc.net/time/images/covers/pacific/2005/20050...

And The Economist is this:

https://i.ebayimg.com/images/g/qcYAAOxyGwNTFJSE/s-l300.jpg

Put two and two together and put everything in cash. Sure I missed out on two years of growth, but after the recession hit I bought back at half. Bought back in when things had stabalized and recently sold 85% of the portfolio because fundamentals look wacky. It might take a month it might take two years, but another recession is coming.

3. Research the damn thing. If you don't understand it well enough don't buy it. You're not losing money by failing to buy the next hot thing. I read the entire Bitcoin paper before buying to make sure it could handle different stresses. My only regret was not leaning harder into it when I bought it at $4 CAD / BTC. I was too sheepish about "internet monopoly money" even though I knew it could hit $10k or $50k a coin if it took off.

4. Don't necessarily max out your 401k / RRSP. Tax rates are going way, way, way up once the baby boomers hit the social safety net. If you aren't at the top marginal rate you're using up tax deferment that will be better once you are. Plus having money outside of these vehicles makes investing in your friends startup easier. The only exception is if you're buying a house and you can loan yourself money from it (since it's like buying the house tax free).

5. Bubbles can go on for way longer than you think. Just be fucking patient. Do I wish I mortgaged a house in Toronto in 2009? Sure. But the stock market has gone up too and housing at these levels is unsustainable. At the very least housing price growth will subside.

[mikestew]

I'm sure you're being downvoted for going against orthodoxy by suggesting that one can "beat the market". I agree with you in that it can be done, and should not be attempted by most people (I personally would not put intelligence constraints on it; I think it's a factor of one's tolerance for looking at financial data, and an ability to keep emotion out of trading decisions). I don't try to time the market, however. My prime directive is to preserve capital, which I implement mostly through stops. I'm happy to leave money on the table, but I don't want to lose money.

But let's look at the fund in question: how did they stay funded? The same way a lot of bad funds stay funded: people put money in and never look at it again. And those people are not the ones updating stop limits, looking at charts, and basically making a hobby of their finances. Those people should be buying index funds. And there is absolutely nothing wrong with that. With the time I've spend reading books, tracking markets, etc., I could have learned a language, started a business, build my own house, whatever. Because after looking at returns over the last twenty years, yeah, I have demonstrated I can consistently beat the market (or more likely, can leverage opportunities of sheer luck), but not by enough to make the opportunity cost worth it if I didn't actually like doing it as a hobby.

And folks should completely ignore your point #4, especially the part about buying a house "tax-free". Eh, not quite.

[3pt14159]

I agree that it isn't really tax free since you got to pay it back eventually, but because mortgages generally require some minimum amount down (at least here in Canada) it's a real consideration for many people, though it does come at a cost later if you're going up tax brackets.

I also agree that it isn't just intelligence, but I do think you can't do much if you aren't at least in the top 5%, even with a whole hell of a lot of training. Much of investing is a zero sum game, and it's extremely competitive.

I also agree that most people should do broad basket, diversified ETFs and I also think your stop-loss strategy is above average, but I think you could probably do better if you were willing to take more risks on individual companies / technologies.

As for returns, I agree that it doesn't look good on paper for the first 20 years, but the difference compounds and building experience matters. I'm now at the point where I'm both better at it and I have more at my disposal to grow. Last time I checked, not counting crytpo-currencies, I'm averaging around 18% per year pre-inflation across a mix of bonds, stocks, and funds. Now, much of that has been a combination of timing / luck on currencies. So let's call it 15% to be safe. Doubling every 5 years, I'm 32 and I started this at around 15. I put maybe 200 hours into it a year and the family portfolio not counting housing or shares in hard-to-sell startups is almost $1m. Another 40 years of this is going to really make all this effort worth it, provided we don't have something catastrophic like a world war / economic collapse.

On getting downvoted:

I don't let it bother me. I try to remember that sometimes I see things I know are factually wrong get upvoted and that sometimes I'm getting upvoted despite being wrong. The votes aren't the truth, even if they do correlate.

Maybe we need more webs-of-trust on social networks that should influence how votes are counted. Because if you just judge thing by the words on their own, somethings can sound wrong or crazy at first blush even if they are right. For example, Facebook's Instagram acquisition was seen as dumb, but it was genius. Although maybe this idea is wrong. Maybe we already overweigh the opinions of the connected and powerful.

[toomanybeersies]

> My only regret was not leaning harder into it when I bought it at $4 CAD / BTC.

In another universe, you're commenting on HN, saying "investing in bitcoin was a complete waste of money, after it was abandoned en masse in 2015".

Hindsight is 20/20, that goes both for missing opportunities, and for losing money.

For every example of someone like you that says "it's easy, just time the market, and you'll make a bunch of money", there's several people that tried, and failed.

In the end day trading and timing the market are gambling. It's no different to betting on the result of a sports match, you have information and odds, but in the end, there is the random element. For every person that strikes it rich betting on horses, there's a lot of people who lose a lot of money.

[3pt14159]

The difference is when you write out your reasons and you find out 3 years later that you were right.

It can be gambling, but that's like saying dating is gambling because there is an element of chance involved with whether or not you get physical with someone.

No. It's not. There are people that are good at romance. There are people good at understanding and predicting technology. This whole mantra of "it's just gambling!" is by a bunch of people that didn't have an approach rooted in discipline and science.

[dopamean]

> ...beating the market is pretty easy

I pretty much stop reading when I get to this point in someone's comment. This statement is as ridiculous as it is irresponsible.

[KozmoNau7]

It's a prime example of survivorship bias and 20/20 hindsight.

[akvadrako]

This is a very irresponsible comment. It's the kind of thing you hear from someone selling a get rich quick scheme; it sounds plausible, but it has less to do with the reasons given then having a greater pool of suckers to build on. Even a gambler who wins the lottery can make a story about how he knew which numbers to pick and that it was based on "unit economics and entrenchment".

I could try to describe the fallacy in general terms but I don't have to because your reasoning is obviously bullshit. Tesla has not made any money yet - they are still burning through billions a year financed by junk bonds. The value of Bitcoin is also almost wholly speculation; how could it be otherwise when it's limited to 7 slow, public, expensive, wasteful transactions per second. Both those assets could crash to zero next year.

So, yeah, you managed to get in at the top of some major bubbles, which could be called "intellectual" except you can't even identify the real reasons for your success. And in general this is not a healthy approach to finance because these assets don't make money - they just transfer it from later investors to earlier investors.