[wegs2]

I've found two successful strategies:

1) Index funds.

2) Buy/sell where you have unique expertise. If you work in the toilet hardware industry, buy/sell stocks related to that industry.

I do #1, since consulting generates higher returns than any micromanagement of my portfolio. Perhaps that will change in a few years, as I have more savings.

I'm not sure why anything public ought to generate alpha for me over people who do this full-time. The only place where I have a unique advantage are my areas of professional expertise. I can evaluate the quality and market impact of a development in my industries more accurately than people who do finance full-time, so there's some alpha there. It's not huge, since most companies do things outside of my area of expertise too. But it's better than zero.

It's worth noting that diversity is important. One can actively trade a small chunk of one's portfolio in one's own industry. I wouldn't allocate more than perhaps 25% of my holdings into areas where I am an expert.

And of course, standard disclaimers on insider trading apply. A safe approach is to trade in companies in one's own industry, but not in ones where one is employed or has any contracts / NDAs / relationships / internal information.

[Kosirich]

Very sound advice.

I would add this quote from Fooled by Randomness:

Unfortunately, the inherent randomness of stock markets means that, just like millions of monkeys hammering on typewriters for long enough can eventually produce Shakespeare, so can unskilled investors produce great track records. In fact, it is very likely that some will.

Consider for example a cohort of 10,000 investors who, for the sake of argument, are relatively incompetent: each year they only have a 45% chance of being profitable. In other words, you would basically be better off investing based on the flip of a coin.

Nevertheless, despite their lack of skills, after 5 years based on probabilities alone we can expect almost 200 of them to have been profitable every year. They would boast flawless track records and enjoy praise for their exceptional skills.

Of course, in the long run, the randomness that sustains these “acute successful randomness fools” will turn against them. Wall Street has seen many traders, who after years of success have one devastating quarter where they lose everything in one huge blow-up.

Often their short-lived success was due to the fact that they simply happened to be at the right place at the right time, i.e. pure luck.

We often mistake luck and randomness for skill and determinism.

[acdha]

It’s interesting how that idea has been around for so long - it wasn’t new when A Random Walk Down Wall Street came out in the 1970s - but there’s a never ending supply of people who think they can beat the odds and investors who want to believe.

[CydeWeys]

The crazy thing is, /r/wallstreetbets is fully cognizant of this fact. They just do it anyway for the lulz. They egg each other into increasingly degenerate highly risky options trading, and huge losses are lionized just as much as huge gains.

[lordgrenville]

Matt Levine calls this the "bored market hypothesis": people are investing purely for fun, in significant enough numbers to actually move the market.

[whimsicalism]

Eh. If retail investors are investing in the same direction "just for fun" then the real institutional investors will just short their bet.

[lordgrenville]

Unless the market can remain bored longer than institutional investors can remain solvent...

[cvhashim]

Gambling is a disease

[blueside]

But it's the only disease where you can win a bunch of money from it

[tacocataco]

Not if you win all the time.

[jefftk]

It's not new, but it also took a while to become the mainstream advice: https://www.jefftk.com/p/survey-of-historical-stock-advice

[throw0101a]

It was also difficult to implement in a practical way for most people. While mutual funds (SICAV in EU, OEIC in UK) have technically been around since stocks have been around, implementing an index-tracking fund needed (a) indexes to be invented, and (b) computers to be able to do data processing:

* https://en.wikipedia.org/wiki/Mutual_fund

Perhaps the Dow Jones was small enough of an index to keep track of manually, but things like the S&P 500 would have been harder (never mind the Russell 3000 or total market):

* https://en.wikipedia.org/wiki/S%26P_500_Index#History

Then there had to be interest from investors. So it's not entirely surprising that it took until the 1970s with Vanguard to really create something.

[dade_]

No it wasn’t, and everyone should read the Intelligent Investor.

https://www.goodreads.com/book/show/106835.The_Intelligent_I...

[vsareto]

>but there’s a never ending supply of people who think they can beat the odds and investors who want to believe.

Based on how the stock market didn't die during the pandemic vs. how many people lost their jobs, I'd say they are right to believe that.

[shawnz]

You are talking about a different issue (correlation between the stock market and the economy). The person you are replying to is talking about active versus passive investment (i.e. betting on individual stocks to beat the market rather than investing in total market index funds)

[vsareto]

People that compare the two outcomes will decide to become new active investors that fuels what the parent to my comment is talking about

[shawnz]

Why would they do that? Passive strategies also did well over the last few months.

[acdha]

Did active investors do significantly better, or did they just benefit over the short term from massive government efforts like everyone else? The real test of the market will be if Biden wins and all of the Republican “deficit hawks” wake from the coma they’ve been in for the last 4 years.

I would say it’s far too early to draw conclusions about the pandemic stock market, and certainly to say that an observation which has generally been supported by data for the last century or so is no longer valid.

[tomlue]

It is also possible to mistake results based on skill for luck and randomness.

It feels better to believe that the success of others is due to luck and that your failures are due to randomness. Sometimes, other people are more intelligent / skilled / harder working.

It is certainly possible to beat index funds, many do so, some of them are mostly lucky, some of them are mostly skillful.

[Kosirich]

I think I agree with the point you are trying to make, but I would do a hard distinction between entrepreneurship and allocating funds on the stock market. Strong arguments for what I think you are trying to say by Sometimes, other people are more intelligent / skilled / harder working are made by Peter Thiel in his "Zero to One". The argument he makes is that there are more people who have succeed more than once. (success defined here as a multi billion business)

It is certainly possible to beat index funds, many do so, some of them are mostly lucky, some of them are mostly skillful. - That is the trick ain't it? The hole point is that there is no way to distinguish between the two (a priori) and no way to deduct if it will lead to future success (posteriori).

[eloff]

That's an interesting tidbit from Zero to One that I've forgotten. It's very rare to find someone who has founded more than one billion dollar plus company.

There are some good reasons for this:

- If you created such a company, you may still be running it. Jeff Bezos, Mark Zuckerburg, Larry Ellison. By the time you retire from that you're super wealthy and old, there's little reason to start over.

- Founding a company is HARD. Few people who went through that once are interested in doing it again. Paul Graham wrote about how he feels that way, although he did do it again with YC.

But I think the point is fair that success at that level requires not just skill but a lot of luck of being in the right place at the right time with the right idea and the right combination of skill and connections to pull it off. It's extremely unlikely.

You can certainly say Bill Gates and Mark Zuckerburg are skilled and they work hard. But it's clear they were also very lucky.

[drchickensalad]

This is why elon musk is so incredible imo

[eloff]

Yeah, the world could use more people like him. He's mostly not motivated by the money. After making $1B from the PayPal exit he could have just retired and bought a yacht or an island. He wants to de-carbonize transport and colonize Mars. Both to give humanity a better chance at surviving into the future.

That's three billion dollar companies so far and counting. Is there anybody else who's done that? Not to my knowledge.

He quite likely has some kind of savior complex, he's quite literally trying to save the world.

A fascinating and incredible human being.

[feteru]

Also Jack Dorsey.

[shawnz]

> It is certainly possible to beat index funds, many do so

Regardless of whether it is a matter of luck or skill, in practice almost nobody has beaten index funds over long periods like 10+ years.

[Liskni_si]

While it's probably stupid to think about it this way, anyone who's done nothing for the last 10 or 20 years and then bought TSLA one year ago can today be described as having beaten index funds over the last 10 or 20 years. :-)

[0xEFF]

Perhaps, but skill is more rare than luck. More importantly there’s no way to tell the difference.

[throwaway9d0291]

This phenomenon is also exploited in unregulated areas like forex trading robots.

A scammer will set up a bunch of systems trading some relatively small amount of real money and let them do their thing. After some time, some number of their robots will have actually made a decent amount of money, at which point the scammer will start offering the trading robot for sale on various marketplaces. Hundreds of people buy the robot and quickly find that it doesn't really make money.

[adwi]

I had an Econ professor who explained this in similar way with a joke about the sure fire way to get rich in the market: Start a paid newsletter with stock tips, send half your subscribers one tip, the other half the opposite. Remove the people you sent the bad tips to, repeat.

[misiti3780]

i find myself reminding people of this excerpt often.

[Frost1x]

>2) Buy/sell where you have unique expertise. If you work in the toilet hardware industry, buy/sell stocks related to that industry.

A lot of success in investment seems to me to gravitate around what the general populace thinks is valuable or should be valuable. I often find that can sometimes drastically differ than assessments I form based entirely on niche expertise I have in a domain. It's a lot more about asessing perception, ability to manage consumer/investment perceptions, and momentum of perception than it is about assessing functional advantage.

When I make an assessment in an area with niche expertise, I often realize I need to then think a lot more about how other people will perceive and assess the same information. Usually my assessment of others' perception better predicts success than my personal assessment, anecdotally speaking.

The good news is, from my niche expertise domains, I usually have a fairly good sample of interactions with those outside the domain to sample their misperceptions and find what it is people think vs what is actually going on. What I fail at is then predicting the irrational decisions that follow after because that distribution seems to be almost random.

Because of this, I stick with indexes which are a sort indirect popularity listing.

[Geee]

That's exactly the situation that you should take advantage of. You can win big if you disagree with everyone else, and you're right.

If you notice that there's a big emotional or even tribalist resistance to a new technology or a business model, then that's probably a good investment, if you know that fundamentally it's going to work. The best investments are those where the general population is wrong, and their mistaken judgement is caused by psychological reasons or emotions rather than facts. The facts will win in the long run.

[Nbox9]

My biggest investment returns have been from doing exactly what you are saying. However I only notice opportunities like this every few years. Obviously there are more opportunities than what I am perceiving in my industry.

[ric2b]

That's what Keynes called a beauty contest: https://en.wikipedia.org/wiki/Keynesian_beauty_contest

[srtjstjsj]

Are you talking about pop culture fad stocks like Apple and Tesla and whatever Jim Cramer is pump and dumping, or niche stocks that most people don't known about?

[ajuc]

Yup. Stock Market is a lot like Family Feud.

[akg_67]

  Buy/sell where you have unique expertise. *If you work in the toilet hardware industry, buy/sell stocks related to that industry.*

I have yet to meet/ hear about anyone who has been able to do this successfully. I personally have tried this with my own segment of industry domain, not that successfully. The issue was tunnel vision that comes with knowing too much about your own segment or falling into “insider trading” zone.

Most of the success came from adjacent segments. You have enough knowledge and experience to make an educated guess on the adjacent segments but you are not involved enough to be knee deep into it and can’t see the forest from the trees.

[simmons]

I don't claim to be any kind of investment guru, but here's my two cents.

I've had solid returns from investments in industry segments I've worked in. The strategy outlined above by wegs2 reflects my thoughts almost exactly, including not investing more than 25% into these "personal experience" investments, since it inevitably means putting many eggs in few baskets. Most of your investments should be in lower-risk, highly diversified things like index funds.

I'd add a couple of additional things:

1. I'm pretty confident about predicting the success of an industry, but not individual companies. There's just too many factors in play to predict individual winners and losers. So within the "personal experience" investments, I hedge across several competitors who I think have good prospects. (Happily, all such companies have done well, so I guess I've avoided winner-takes-all outcomes.)

2. Even in industry segments I'm very familiar with, I avoid companies that are prominent household names. I think there's just too much investor psychology wrapped up in this, and overvaluations are more likely. So I avoid investing in companies like Google and Apple. (Granted, if I had invested in Apple it would have done well! But it being a household name gives me cold feet.) One way to avoid this is to consider upstream suppliers the general public may not be familiar with, but nonetheless produce great value and have good prospects.

[dd36]

I limit it to products I consume but am an early adopter on. It has worked great on TSLA and ENPH. I got into BCLI because of Making a Murderer 2 attorney on Twitter talking about an ALS treatment her law partner’s wife was taking. Big fan of index plus 2-5 stocks.

[jfoutz]

I wish I could remember the name of the book, but I remember a few stories. The author was a young broker, and had a truck driver client. The truck driver was pretty adamant about investing in this factory that kept growing every time their route took them out there. It was a tampon factory, and there was institutional bias about dumping millions into women's products. Truck driver ended up retiring early.

Another was Pep Boys, the name is stupid, hard to pitch to an institutional investor, but made tons of money when someone got over their embarrassment.

Aside from biases, He called out La Quinta, you experience doesn't have to be super deep. The guy recognized it was clean, inexpensive, not the Ritz but a solid deal for what you got.

The last strategy that I thought was sorta odd (but makes sense) is companies that own big chunks of other companies. Their example was AT&T being cheap, but owning big chunks of cell phone companies. We sorta saw the same thing play out with Yahoo and Ali-baba.

Peter Lynch! One up on Wall Street! Probably super dated now, but was a pretty interesting perspective on trying to see things other people didn't see.

[air7]

These are nice but I suspect these accounts suffer from survivorship bias.

[jfoutz]

Been a few years since I read the book, absolutely - these are the highlights. If I recall correctly there are failures as well. The book walks through how to read annual reports so hopefully the reader isn't picking totally fake companies.

I guess, the gist is, if all trades are just coin flips, it won't matter anyway. But if you're really committed to investing in a single stock (and you probably shouldn't), have yourself a reason to think you have an edge. maybe the whole sector is growing, pep boys, auto zone, o'rielly and you can't really go wrong.

If you're going to the casino anyway, play a game where you at least understand the rules.

[parenthesis]

A problem with (2) is what if all the companies in your industry are rubbish investments relative to the index. You may be able to identity the best business in your sector, but it may still be a worse investment than the worst company in a different sector.

A second problem with (2) is that working in a particular industry makes you already massively `overweight' that sector. If something goes wrong with that industry, you could be out of a job. The last thing you need is for your investments to go wrong at the same time.

[wegs2]

(1) In an efficient market, all the companies are one segment are no more and no less likely to be either rubbish or overvalued than any other segment. The risk is random.

(2) You manage that with diversification. I'd never allocate more than 25% of my portfolio to my own active management. My expected returns are slightly higher than index.

(2a) Buying stocks for my employer or their competitors would be difficult for insider trading. I'm much more likely to buy adjacent segments: suppliers, customers, etc. If I'm picking a supplier, I'm uniquely qualified to have alpha on their stock. On the other hand, my own job isn't very exposed to market changes in those segments.

[CameronNemo]

If you are willing to trade options, you can buy puts for shaky firms in your sector. Whole sector goes down, you lose your job but win big on the options.

[jl2718]

#2 doesn’t work. At least for heavily-traded sectors. Why?

First: “The markets will remain irrational longer than you will remain solvent.” Fed policy pumped in too much dumb money. If you don’t think like them, you lose.

Second: “Markets create their own reality.” Dumb money eventually creates smart results. Today access to capital is far more important than any other factor in success.

Third: “Opportunity is blood in the water.” Good investments are entrenched stable markets. Disruptive technologies kill margins for everybody.

[whimsicalism]

> Fed policy pumped in too much dumb money

Given fed policy, the outlook of the market seems rational. Why would the Fed not engage in expansionary monetary policy during a recession? Just so that the market better reflects how you "feel" it should look?

[CameronNemo]

Because monetary policy rarely works long term, and is a fatally blunt instrument.

Fiscal policy can be applied much more carefully and is often far more efficient.

[slaymaker1907]

Doing (2) has some extra risk that people don't talk about very often. If you, like most people, have to work a day job, it is actually less risky to invest outside of the area you work in (using a diversified portfolio). If you work in the tech industry and there is a tech downturn, it is not ideal if your investments are also doing poorly at the same time. By nature of working in that industry, your finances are already heavily dependent on that industry and it might be a good idea to take that into account while investing. You don't want to be both investing in a bunch of AI companies and working at an AI company if we end up in a second AI winter.

[whimsicalism]

Yeah, you shouldn't go long in an industry you work in.

[01100011]

This is a tough one to follow through on. I've got a ton of vested RSUs that I'm sitting on because I see my company as a growth stock. I really should sell it and buy a low ER S&P500 index. We're an S&P500 stock, so I'd still retain exposure to my companies performance, but the risk would reasonable I think. Unfortunately I'm irrationally fixated on the potential gains. It's doubly stupid because I have more RSUs vesting soon, so even if I sell, I'm still invested in my company.

[sobani]

One thing you can consider is: What if your company is Enron 2.0 and goes bust next month. Do you have enough savings to last until you find your next job and are your other investments on track for what you need for retirement?

If you answered yes to both questions, then you can consider not selling your RSUs. If you answered no to either or both those questions, I would strongly consider selling enough of your vested RSUs to turn those into yesses.

If you need to sell a significant chunk of your RSUs to reach those targets I would suggest you to take a good look at your current budget to figure out why your savings and investments are not on target.

Also, do you have any experience with dealing with a large drop in value and do you _know_ based on that experience that you'll be able to sit tight when such a drop inevitably will happen? Because if you don't have such experience (or worse: you know you're unable to sit tight), chances are you will be part of the stampede in times of panic. In that case consider selling 'more'.

Lastly, what would you suggest your best friend do in your situation?

[bartvk]

I started working at Oracle in 2001. There were two kinds of senior people there. The ones who sold their stock, and the ones who didn't. The first group would sometimes have a sold-off house or similar, the second group would sometimes have bitter people in it.

[whimsicalism]

I sell vested RSUs & ESPP stock immediately. That's even worse than investing in the same sector.

I agree that it can be hard psychologically in a high-growth industry like tech.

[CameronNemo]

Oh my goodness, sell at least half!

[maire]

I actually investigated this strategy (only buy index funds) because it was highly recommended in a book my daughter read. I thought it was bogus and it turns out that it is.

I haven't been an active investor for 15 years so it took a little time to fire up my investing analysis tools. This is what I found out.

Index funds are highly incestuous. There is a high correlation across the top index funds because they largely have the same stocks. The exceptions seem to be reits, oil, foreign, and financial index funds.

The rest of the index funds all seem to be heavily weighted in big tech stock.

So - if that is true, why not buy the heavily weighted stocks directly and do your own financial analysis on them? For instance, I look at past 5 year sales growth. Then I look at yoy sales growth. Then I look at P/S over the last 5 years (to see if it is out of whack). Then I look at PEG over the last 5 years (to see if it is out of whack). Then I look at gross margins. Then I look at dividend yield. All of this data is available for free.

[atombender]

It's a little tone deaf to claim that index funds are "bogus". Your average American worker is not going to be better off doing what you do, as opposed to throwing it all in VT/VTWAX or a Vanguard target date fund.

Index funds accomplish three things, as I see it:

* By investing in a broad basket of stocks, you can eliminate unsystematic risk. This was shown by Harry Markowitz in his landmark paper that established modern portfolio theory.

* By using an index that weights by market cap, you get, at any point in time, what the market thinks the value of the stocks are.

* By letting a management company track the index for you, you take all the work and emotion out of it.

"Building your own index" like you suggest is feasible, but a lot of work. Turnover can also be a real problem in a taxable account. My suggestion to anyone who wants to do this sort of thing is to use M1 Finance, which automates the trading for you. You just set the percentages and go. I think it could be an enlightening way to manage a small amount of "fun money", but I wouldn't do this for everything.

Lastly, there are absolutely mutual funds and ETFs that screen by financial criteria the way you're doing. Look at the Russell RAFI indexes, for example.

[maire]

My favorite book on investing is The Intelligent Asset Allocator by William Bernstein. This is what made me aware of issues in correlations.

I still believe in diversification. If an ETF is sufficiently diverse I will buy the ETF. Some ETFs are not - XLE is nearly 50% Chevron and Exxon!

You should also read Taleb if you want to understand the fallacy of unsystematic risk. He is difficult to read because of his overinflated ego but he has some persuasive ideas.

[atombender]

There are plenty of bad ETFs out there, sure.

[maire]

Here is my correlation between QQQ and major sector ETFs going back to 2005 when Bond ETFs were introduced.

QQQ 1 XLK 0.9952440282 VCR 0.9813656495 SPY 0.9774334512 VHT 0.9749607257 DIA 0.9738966572 XLI 0.944646275 MDY 0.9418372572 XLP 0.9340495871 XLU 0.9322048846 VBK 0.9749569179 TLT 0.8238447288 IEF 0.7459539935 LQD 0.7698459752 VNQ 0.7211819234 SHY 0.5117276512 GLD 0.4880148474 XLF 0.4715141612 EFA 0.2721585482 XLE 0.04648142997

[atombender]

What is your formula? This doesn't match what I'm used to. For example, TLT has an inverse correlation with the US stock market (-0.32 according to PortfolioVisualizer.com), so I would expect it to be inversely correlated with QQQ.

[loco5niner]

> So - if that is true, why not buy the heavily weighted stocks directly and do your own financial analysis on them? For instance, I look at past 5 year sales growth. Then I look at yoy sales growth. Then I look at P/S over the last 5 years (to see if it is out of whack). Then I look at PEG over the last 5 years (to see if it is out of whack). Then I look at gross margins. Then I look at dividend yield. All of this data is available for free.

I'm not really sure how to do all those things, and I'd rather spend that learning how to make database things work.

Also, it sounds like all you're doing is looking at (very recent)past performance (not a predictor of future performance), and putting all your eggs in one basket (big tech).

[throw0101a]

> 2) Buy/sell where you have unique expertise. If you work in the toilet hardware industry, buy/sell stocks related to that industry.

When I started investing, being an EE and working in IT, I tried this: I bough AAPL and RIMM. One did better than the other.

I'm now basically all-index all the time.

[tinco]

If you bought 50/50 AAPL and RIM, wouldn't you still have outperformed index funds? Or was the timing especially awkward?

[throw0101a]

Well, I had other things as well (e.g., telcos, which did pretty well). It's just that when I started RIMM was on top of the world: this before the iPhone was released. Over the course of some time (I don't remember the exact dates/years anymore), AAPL went up and RIMM went down.

Which goes to show that being on top is no guarantee of anything. Just ask ExxonMobil (XOM): in 2013, a scant seven years ago, it was the largest company in the world (surpassing Apple).

* https://www.forbes.com/sites/dividendchannel/2013/01/25/exxo...

This past week it's not even largest US energy company:

* https://www.cnn.com/2020/10/05/investing/exxon-stock-solar-w...

I sold everything around when Apple did their split in that time frame, and moved to a more passive strategy.

[tasuki]

What do people mean when they say "index funds"? There are so many... which ones are you taking into account?

Before you point to S&P 500: I'm from/in Europe, please account for that in your reasoning :)

[unreal37]

There's no law that says you have to invest in Europe, right?

The US stock market outperforms any European or Canadian stock market in the past 10 years, and there's no reason that won't continue. This is because the US is where tech stocks are listed.

So, invest in the US even if you live outside the US. YMMV.

[sxyuan]

Investing outside your region leads to currency risk. Currency hedged funds tend to incur slightly higher costs. I don't know if there are additional tax implications as well.

Not only is historical performance no guarantee of future performance, 10 years is a pretty short time span to look back - it doesn't even take you back to the '08 recession. The US did well in the 1990s and 2010s, but both ex-US developed markets and emerging markets did better in the 2000s: https://www.ishares.com/us/strategies/international-etfs

It's good to diversify internationally, and that probably does mean holding some US equities ETF even if you're in Europe. As for what else to buy, this may be a good starting point: https://www.lynalden.com/best-etfs/

[marketgod]

You can hedge your currency risk but the U.S. dollar is the world currency. For example in Canada in 96 when you were making USD it was killing you until about 2003 but if you didn't dip into it that money doubled on its own as the USD is much stronger today.

[tasuki]

Yes, the USD is currently the foremost reserve currency. See eg https://marketcap.com.au/wp-content/uploads/2018/11/WRCurren...

[atombender]

International markets outperform the US about half the time: https://www.fidelity.com/viewpoints/investing-ideas/internat...

[tasuki]

Yes, for the past 10 years this was a wonderful piece of advice. What leads you to believe it's just as wonderful for the upcoming 10 years? How long are tech stocks going to outperform the market?

[colinmhayes]

Until the end of time. Tech is the future.

[sobani]

https://www.justetf.com/en/find-etf.html?assetClass=class-eq...

Here is a link to ETFs available in Europe that have a worldwide focus. If you have no clue or preference, go for the top one. It's large, cheap and doesn't try to do anything fancy.

Keep in mind that even world wide indexes have a large portion in the US, since the US market is so large. On the flip side, there are many companies in the US that are internationally diversified themselves. Coca Cola sells its sugar all over the world, not just in the US.

Just ETF is focused on showing only ETFs that are available in Europe (not all ETFs abide by EU regulation).

[tasuki]

Two thirds of iShares Core MSCI World is in US stocks [0]. That seems to me like a rather large proportion. But good point that many of those companies are international!

[0] https://www.ishares.com/uk/individual/en/products/251882/ish... (search for "Exposure Breakdowns", then choose "Geography")

[sjtindell]

As evidenced by the housing crisis or the Bernie Madoff scandal among others, even the professional so called “smart money” can be driven by many of the same simple forces as your average trading gambler off the street. There’s not much evidence anyone has significant “alpha” due to expertise outside of a few sects such as the the followers of Buffet or HFT cliques.

[naveen99]

I prefer to put energy in building software also. But occasionally invest based on news at the top of front page of hn. For example if reddit was public, I’d buy some on Monday based on this thread. Thankfully I already bought some reddit in the private markets a while ago.

[an_opabinia]

> Buy/sell where you have unique expertise... A safe approach is to trade in companies in one's own industry

For every 1 person who works in the tech industry, there are 1,000 people who don't, but still made fortunes investing long in it, through none other than direct stock picking. That is to say, you have no unique advantage, there are 1000x more people lacking your expertise who perform just as well, I could see no stronger evidence for the irrelevance of such expertise, at least in public markets.

Just from market mechanics, someone has to be buying all that stock at the all-time-highs, repeatedly, it's not the people with tech expertise, it's not possibly only index buyers, they would simply run out of money.

Of course, from an egocentric perspective, you would credit yourself with being some genius stockpicker if, coincidentally, you worked in technology and bought tech stocks.

Consider a different situation where you were an energy industry expert, you would have lost money in long positions most of the last 6 years, and in four of those years, you would probably lose money as frequently as you would win it across all trades.

[ivanche]

I think it's safe to assume there are 1 000 000 employees in tech industry worldwide. So, by your calculation, there are 1 000 000 000 people in the world who made fortunes by direct picking tech stocks???

[hacker_9]

I've had very good success with ETFs that are more focused on specific industries - clean energy, tech, EVs etc. I recently designed my own fund with a focus on E-Commerce, and to assign the weights I used the Quality/Value Rank from Stockopedia (essentially they combine a set of financial ratios for you, to determine how profitable a company is as well as how much the stock price has already 'priced in' future earnings).

The results almost feel like magic, but I am wary the market is being propelled heavily upward at the moment, and even a trump tweet has and can derail it. But as the saying goes, 'make hay while the sun is shining'.

[darthrupert]

I bought a weed stock that crashed...