To the O.P. I've made about 7% a year on the stock market. I used savings from my salary, excess to rent food transportation insurance. I dedicated about 8% a year to savings over 28 years. I never bought on margin, or dabbled in options. I drove old cars, only 2 new ones before retirement. I've owned my house since 1980 and do most of my own maintenance. It's been paid off since 1989.
Secrets to success: watch the media. Buy during panics when everybody else is selling. When everybody is bragging about their stock successes, keep your money in a checking account or cash. Sell then if you have some good profits. Indicator of state of the market, the P/E ratio. This is the invert of the interest rate. Buy at P/E ratios of roughly 10, sell at P/E ratios of 20 or above. Individual companies can have bad P/E due to bad management or startup costs. I stay away from these although I've missed the Amazons & Microsofts who won the business wars. These were balanced by a lot of startups I didn't lose money on.
Problem with mutual funds, they pile into the biggest stocks, which are on the go-go list. These are subject to huge market shifts. Everybody bails out on the same day, including your mutual fund. FANG stocks were a recent mania, punished badly by the covid crash in 2019. The tech boom of the 2000's was infamously followed by the tech bust. The mania in the seventies was conglomerates like GE & ITT. The best mutual fund I've found lately is a dividend paying stock one. Companies that increase their dividends yearly over long periods tend to do so in the future. I've done quite well on one of those. Utility stock funds are good, especially after I sold at 2% dividend rate and bought back after the prices crashed to a 3.5% dividend rate.
I've also lately (15 years) bought some individual stocks, off a brokerage recommended list mainly. Never too much in one sector. Some of the smaller stocks with decent P/E ratios got bought up by bigger companies to consolidate market share. This resulted in bidding wars with profits to me of 5:1 or better. The others fit into my 7% gain average.
I've been retired since age 58.
Secrets to success: watch the media. Buy during panics when everybody else is selling. When everybody is bragging about their stock successes, keep your money in a checking account or cash. Sell then if you have some good profits. Indicator of state of the market, the P/E ratio. This is the invert of the interest rate. Buy at P/E ratios of roughly 10, sell at P/E ratios of 20 or above. Individual companies can have bad P/E due to bad management or startup costs. I stay away from these although I've missed the Amazons & Microsofts who won the business wars. These were balanced by a lot of startups I didn't lose money on.
Problem with mutual funds, they pile into the biggest stocks, which are on the go-go list. These are subject to huge market shifts. Everybody bails out on the same day, including your mutual fund. FANG stocks were a recent mania, punished badly by the covid crash in 2019. The tech boom of the 2000's was infamously followed by the tech bust. The mania in the seventies was conglomerates like GE & ITT. The best mutual fund I've found lately is a dividend paying stock one. Companies that increase their dividends yearly over long periods tend to do so in the future. I've done quite well on one of those. Utility stock funds are good, especially after I sold at 2% dividend rate and bought back after the prices crashed to a 3.5% dividend rate.
I've also lately (15 years) bought some individual stocks, off a brokerage recommended list mainly. Never too much in one sector. Some of the smaller stocks with decent P/E ratios got bought up by bigger companies to consolidate market share. This resulted in bidding wars with profits to me of 5:1 or better. The others fit into my 7% gain average.
I've been retired since age 58.
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Day trading is a much costlier means to enjoy fantasy than a subscription to Disney+
s
One of the best time to buy stocks is when brokerage firms start laying off analysts in specific industries. When steel analysts were becoming scarce it was a great time to buy Nucor.
The issue with selling, particularly short term -- you pay the tax man. In NJ this can amount to just about 50% of the gain. If you're long term you can by "put" options less expensively. The other problem selling -- if you're gonna sell it dump the entire position.
Oh, don't be tempted to write call options on idiosyncratic stocks. Regrettably I did this on a company I had a gain in, and Adobe came in and bought it!
One of the best times to buy junk bonds is when there is no new issuance, it should be no surprise that this occurs at the same time equities are on their derriere.
One of the best time to buy stocks is when brokerage firms start laying off analysts in specific industries. When steel analysts were becoming scarce it was a great time to buy Nucor.
The issue with selling, particularly short term -- you pay the tax man. In NJ this can amount to just about 50% of the gain. If you're long term you can by "put" options less expensively. The other problem selling -- if you're gonna sell it dump the entire position.
Oh, don't be tempted to write call options on idiosyncratic stocks. Regrettably I did this on a company I had a gain in, and Adobe came in and bought it!
This is the Investment best advice I ever received - from an old uncle many many years ago. Warren Buffet also preaches this.
The story of how Joe Kennedy made most of his fortune...
The story took place in 1929 : Joseph Patrick "Joe" Kennedy, Sr. JFK's father, claimed that he knew it was time to get out of the stock market when he got investment tips from a shoeshine boy. On that moment Joe Kennedy had the intuition that we were at the end of the bull market and subsequently he decided sell, and to short the market and became .. multi-millionaire !
Ever since, the shoeshine boy has been the metaphor for "time to get out"; for the end of the mania phase in which everyone, even the shoeshine boy, wants in.
My indicator for market "Top" is when those that do not "trust" the market suddenly get interested and openly brag of their gains, and/or when I come home from work to see my wife watching CNBC (she had often asked "how can you sit and watch that program all day?").
My indicator for Market Bottom is VIX over 40, and mass panic selling. This is much easier to identify than a "Top", and the most frightening time to execute a buy.
And sometime you just know its time to buy, like when a barrel of WTI oil at -$37/barrel in April 2020 - (NEGATIVE $37/bbl - they PAY you to take it)...yup, it happened , and I jumped right in, buying Oil producers and refiners...most quadrupled in the 2 years...still have most...
And a word about current Inflation...
Classic definition of Inflation "Too much Money chasing too few goods"
For the past two "COVID" years, the US Government paid you and employer to sit tight, stay home, no evictions, etc, all while nothing / very little was getting manufactured. Most people and employers saved the $$ instead of spending it, which was the intent... Now all back to normal and all flush with cash, on a spending sprees, but NO GOODS to purchase...
Why was this Inflation such a surprise? Same with price of Oil/Gas pump...
I think everybody expected a jump in O&G prices they just couldn't say when it would happen. Just as few expected the oil price to be negative for a bit in March/April 2020. Did people expect a war in Ukraine? I doubt it. I see a lot of the "everybody knew it would happen" as hindsight bias. Not all of it. Just a good chunk of it.
Tom
Tom
Unfortunately for me, TSLA stock price doesn’t follow the normal valuation rules. I reckon $300 is too high. But it keeps defying gravity and reason (my reasoning that is).
I am one to believe Tesla had a 5 year jump on all the other electric car manufacturers, but the others are catching up...and quickly. I donno...TSLA PE of 110 vs General Motors PE of 5? That's pretty steep cost of stock compared to peers. Elon is brilliant, and I would not be surprised if he sees this, and sells Tesla to some other entity before all goes to heck...
If you want a Car company that is an exceptional, exclusive standout, look at Ferrari (RACE).
A DIDJAKNOW:
Ferrari only makes 8000 cars/ year, regardless demand, and demand is always much higher. Juxtaposed to Porsche - well they easily make 10x more.
Think Debeers / Diamonds - Through strategic campaigns, and underhanded business practices, they controlled supply, demand, and pricing with an iron fist.
EDIT - RACE PE is 38
If you want a Car company that is an exceptional, exclusive standout, look at Ferrari (RACE).
A DIDJAKNOW:
Ferrari only makes 8000 cars/ year, regardless demand, and demand is always much higher. Juxtaposed to Porsche - well they easily make 10x more.
Think Debeers / Diamonds - Through strategic campaigns, and underhanded business practices, they controlled supply, demand, and pricing with an iron fist.
EDIT - RACE PE is 38
Well, you have one virtue of becoming a good investor. Patience!
I can't say I am veteran, but I can tell you my rules.. Some are just general and some specific to investing.
General stuff:
1) If I'm feeling comfortable, I'm not growing (including wealth). Risk and Adversity and the associated anxiety is a mental tool I try to always develop..
2) Work towards goals, workout what you want to achieve in capital and annual returns to achieve the life-style/pension your going for. Plenty of compound calculators about. Use SMART objectives (Specific/measurable/attainable/relevant and time-based). YNAB is a good tool for budgeting, Personal Control is a good tool for tracking investment towards goals (plenty of analytics like a net worth tracker, retirement planner). I use both of those and a couple of others to develop and track my plans.
3) Take into account what everyone says and then do what you believe. A quote from Aristotle - “It is the mark of an educated mind to be able to entertain a thought without accepting it.” Plenty of people are risk adverse (ignore them) but that goes back to point 1
4) Read a book every 2 weeks - Start with Rich Dad Poor Dad and go from there
Investment stuff:
1) Don't ignore business opportunities. Only the 0.1% of the 0.1% make quick wealth, it's statistically unlikely to be me or you and those that do then often have to work hard to capitalise on those ops. Passive income is a misnomer. Taking capital and building a small biz with a small TAM, or finding way to develop a business in a larger TAM where cash-flow, exits or floats are an option are just as viable as property, stocks, commodities or whatever the latest craze is. Everything requires graft - money isn't free but the side benefit - you will develop tools to read P&L's, review corporate strategies, balance sheets, cash-flow, capabilities of the board etc. If your crazy enough to invest in individual stocks, you will be educated in how to truly judge who you are investing in
2) Never run out of cash. Cash-flow is king
3) Never run out of cash....
4) Peter Lynch once said, if someone could predict inflation three times in a row - they would be a billionaire. If the head of the FED, Head of the Bank of England etc can't. I'm not going to and you are unlikely too. No one knows what's going to happen on a regional level let alone global.
5) You and I work full-time jobs, your even going to be studying part-time. If highly paid full-time analysts can't predict the market, your not going to. Do not buy individual stocks. Even if you trade with that business, people lie when it comes to money. Do not buy individual stocks - you cannot beat the market just gamble.
6) Do not invest money you need in the next 10 years. This journey is not a quick rich scheme, they don't exist, if you find one let me know!
7) There have been 40 or so Market Crashes since the Great Depression. Normally one every 4 years or so. The market has always gone back up. You would have 5x your month on the S&P 500 if you invested in early 2000's on an ETF. But again, this is an odd time.
8) Gov's can't afford property prices to turn negative, property is normally a good "bet" but this is an unusual time. I'm sure every country is introducing schemes to make home buying easier. I can't remember who said it, but civilisation is only ever 3 days away from anarchy - when there is no food.. Look at Sri Lanka. Property isn't as safe as it was, but when I invest in property I always focus on the micro economy - location/gov policy is king. This takes time to research, look for property analytic tools - I use these guys in the UK - https://propertydata.co.uk
9) Diversify - buy some crypto if you want... just make sure it's not 90% of your wealth..
10) Always be educating in the different types of vehicles you can be investing in - different stock markets - types of funds etc - bonds - commodities
11) Independent Financial Advisors are worth their weight in gold - key word is independent
12) During high inflation - your cash is eroding daily. Do something with it. 10k will have the same buying power as 9k next year in the uk
13) Your wealth includes your debt, this loan could make your personal wealth negative. Be careful - that's not a good place to be..
Final thing I would say. Markets are all over the place. No one knows where to invest right now - no one ever has with 100% certainty. It would take a couple of days just to even summarise the geo-political and macro-economic situation. If I was you, I would be educating myself rapidly and following world-class investors retoric before you start your EE course, if you plan to take this seriously and take advantage of the capital you can gain at low interest rates from Gov. I think borrowing money and making money is fine, if you stay within the rules. Most importantly - never run out of cash and take a 10 year + approach. Just don't think it will be easy.
Good luck!
Edit one other thing: Wealth has nothing to do with cash. You just need to own more assets than the average person in your region...
I can't say I am veteran, but I can tell you my rules.. Some are just general and some specific to investing.
General stuff:
1) If I'm feeling comfortable, I'm not growing (including wealth). Risk and Adversity and the associated anxiety is a mental tool I try to always develop..
2) Work towards goals, workout what you want to achieve in capital and annual returns to achieve the life-style/pension your going for. Plenty of compound calculators about. Use SMART objectives (Specific/measurable/attainable/relevant and time-based). YNAB is a good tool for budgeting, Personal Control is a good tool for tracking investment towards goals (plenty of analytics like a net worth tracker, retirement planner). I use both of those and a couple of others to develop and track my plans.
3) Take into account what everyone says and then do what you believe. A quote from Aristotle - “It is the mark of an educated mind to be able to entertain a thought without accepting it.” Plenty of people are risk adverse (ignore them) but that goes back to point 1
4) Read a book every 2 weeks - Start with Rich Dad Poor Dad and go from there
Investment stuff:
1) Don't ignore business opportunities. Only the 0.1% of the 0.1% make quick wealth, it's statistically unlikely to be me or you and those that do then often have to work hard to capitalise on those ops. Passive income is a misnomer. Taking capital and building a small biz with a small TAM, or finding way to develop a business in a larger TAM where cash-flow, exits or floats are an option are just as viable as property, stocks, commodities or whatever the latest craze is. Everything requires graft - money isn't free but the side benefit - you will develop tools to read P&L's, review corporate strategies, balance sheets, cash-flow, capabilities of the board etc. If your crazy enough to invest in individual stocks, you will be educated in how to truly judge who you are investing in
2) Never run out of cash. Cash-flow is king
3) Never run out of cash....
4) Peter Lynch once said, if someone could predict inflation three times in a row - they would be a billionaire. If the head of the FED, Head of the Bank of England etc can't. I'm not going to and you are unlikely too. No one knows what's going to happen on a regional level let alone global.
5) You and I work full-time jobs, your even going to be studying part-time. If highly paid full-time analysts can't predict the market, your not going to. Do not buy individual stocks. Even if you trade with that business, people lie when it comes to money. Do not buy individual stocks - you cannot beat the market just gamble.
6) Do not invest money you need in the next 10 years. This journey is not a quick rich scheme, they don't exist, if you find one let me know!
7) There have been 40 or so Market Crashes since the Great Depression. Normally one every 4 years or so. The market has always gone back up. You would have 5x your month on the S&P 500 if you invested in early 2000's on an ETF. But again, this is an odd time.
8) Gov's can't afford property prices to turn negative, property is normally a good "bet" but this is an unusual time. I'm sure every country is introducing schemes to make home buying easier. I can't remember who said it, but civilisation is only ever 3 days away from anarchy - when there is no food.. Look at Sri Lanka. Property isn't as safe as it was, but when I invest in property I always focus on the micro economy - location/gov policy is king. This takes time to research, look for property analytic tools - I use these guys in the UK - https://propertydata.co.uk
9) Diversify - buy some crypto if you want... just make sure it's not 90% of your wealth..
10) Always be educating in the different types of vehicles you can be investing in - different stock markets - types of funds etc - bonds - commodities
11) Independent Financial Advisors are worth their weight in gold - key word is independent
12) During high inflation - your cash is eroding daily. Do something with it. 10k will have the same buying power as 9k next year in the uk
13) Your wealth includes your debt, this loan could make your personal wealth negative. Be careful - that's not a good place to be..
Final thing I would say. Markets are all over the place. No one knows where to invest right now - no one ever has with 100% certainty. It would take a couple of days just to even summarise the geo-political and macro-economic situation. If I was you, I would be educating myself rapidly and following world-class investors retoric before you start your EE course, if you plan to take this seriously and take advantage of the capital you can gain at low interest rates from Gov. I think borrowing money and making money is fine, if you stay within the rules. Most importantly - never run out of cash and take a 10 year + approach. Just don't think it will be easy.
Good luck!
Edit one other thing: Wealth has nothing to do with cash. You just need to own more assets than the average person in your region...
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See the Amazon case. Amazon was as pricey for a long time, no earnings. Amazon won, lots of earnings now. Netscape lost. Will Tesla win? I didn't buy any of either TSLA or Amazon. Too gogo. Too much emotion. TSLA net worth more than Ford the news said. I bought 1000 sh F @ $8.50 paying 8% dividends, rode out the dividend cancellation for a couple of years during covid where it went down to 6. When it got to $14.30 without dividends, I sold. I see about 500 times as many Ford trucks as I do Tesla cars.
Per post 148 I've done okay with some individual stocks. Mutual funds pile into the flavor of the hour since they are weighted by market valuation, see post 141. Mania on the way up, mania on the way down. I find a stock in a market where they are needed, not exactly idiots, not too likely to bankrupt the place overnight. Some failures. GE lost 2/3 its value in a day when one broker in NYC stole $1.5 million. Fortunately I was diversified, lost about 1% net worth on that. Was out of GE totally when Jack Welch tried to capture the oil supply business (baker-hughs) when oil was at $100 a barrel. Too obviously stupid. He lost his shirt, I didn't. Read the news & keep up. Some sectors are good on the downs - consumer necessities, utilities. Some sectors are good on the up. Consumer discretionary. Get a schwab account & read their advice - very cheap education. I'm a bit overweight on defense stocks now - who is making all that hardware we are shipping to Ukraine? Boeing gets hammered when a plane crashes. Might be buying opportunity those days, but $350 a share stock puts too much of a dent in my total for 100 shares to risk.
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It's not so much about how many Fords, GMs or Teslas you see on the road. It's about how many are being sold now, at what profit margin, ability to scale, projected market demand and ability to innovate.
Then there is the auto industry's debt plague of which Tesla is devoid, not a bad place to be ATM. It's hard to know how all this is going to pan out, certainly a major shake up is happening. Add the influx of quality, cheap Chinese EV's and I'd say behind the big talk, folk like GM and Ford are looking seriously at survival plans. When it comes to EV's, ATM Tesla is in front, BYD looks to have the best chance of catching / overtaking them, VW, we'll see..
Interesting vid on latest construction techniques:
TCD
I have been following Netflix since early 2000...saw them totally destroy Blockbuster....these guys were really doing something cool! I was a subscriber getting DVDs, and canceled / rejoined a few times when they raised subscriptions...but I liked their product, and always rejoined.
But for whatever reason, I never saw streaming to be the next "thing". My biggest investing mistake to date! From under a buck in 2002 to over $700 during COVID. Has since been beaten down to under $190 (where I finally bought it).
The company met all the requirements I have:
But for whatever reason, I never saw streaming to be the next "thing". My biggest investing mistake to date! From under a buck in 2002 to over $700 during COVID. Has since been beaten down to under $190 (where I finally bought it).
The company met all the requirements I have:
- Industry leader
- Makes money (tons of money)
- Has good Vision of future
- General Public believes it to be a good company (no scandals, etc)
- Extreme oversold position ($700/shr to under $200/shr due to more canceled subscriptions than expected, due to the password sharing crackdown? Really? Who wasn't password sharing?)
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^^^^^^^^^^^ +1000
12) I like the equity of companies that are strong BBB debt issuers in an inflationary environment.
13) Articles popping up in the Wall St Journal and NYTimes regarding the employees of private "go-go" companies borrowing using their stock as collateral. That works when high values are continuing to rise, not when rates are rising -- saw this in the dot-com bubble and tried to help several folks by arranging derivative trades privately.
Yup, I remember those horror stories during Dot Com bust regarding High Flying Company issuing Options to employees....
If I recall correctly, they were exercising the issued options into shares, then seeing the price plummet,.. but left with a huge taxable event come tax time...the double whammy.......
Ha, found it....This almost made me cry back then...
https://www.chicagotribune.com/sns-tech-taxes-story.html
Thanks to @indianajo and @sebbyp for the advice, much appreciated.
We still struggle with reduced availability of certain key electronics (Which is used in EVERYTHING now except perhaps brooms and footballs), raw materials like steel and aluminium has increased a lot, the pandemic is cause for most of this still. Combine this with increased costs of fuel/gas/electricity which will over time also make a very big impact.
Finally the statistics people starting to catch up with the situation: Families are sacrificing their food budgets to cover other increased expenses.
Also, the cost increase is running away from inflation, they claim a certain inflation rate but cost of food has increased significantly more than that this year. From june to july alone the cost increase for food is almost exactly 10%, it will not go back down.
So people are spending less money on food, at the same time as food prices are going up.
Water, electricity and fuel prices are going through the roof, a lot of hard working people have no money to spend.
Electricity will most likely be very expensive this winter, even now there are new records being set several times per week.
Statistics are lagging behind because: they have to record the data before it can be analyzed, statistics is just hindsight.
Meanwhile: My freezer is full of meats and we have an agreement with a nearby farm where we have grown some vegetables. Have made a years supply of various jams, redcurrant jelly, "squash". Stock is full but still building up a supply of potatoes, beans, maize. Have a good supply of firewood.
We will not freeze or go hungry, even expect to reduce our expenses contrary to most, but that is because we've taken action.
I know people that will struggle.
If you strike out the "flush with cash" bit it will be more correct, I've heard quite a few economists claiming the same thing you're saying. But people did not stop spending money during the pandemics, they where unable to go out to eat and did not spend money on that, but they did spend a lot more money on other things and prices for electronics went crazy because you-know-what. A few lucky souls may be flush with cash, but the Pandemic was also a reason for cost increase in many areas, the average Joe is certainly not in a better position.
We still struggle with reduced availability of certain key electronics (Which is used in EVERYTHING now except perhaps brooms and footballs), raw materials like steel and aluminium has increased a lot, the pandemic is cause for most of this still. Combine this with increased costs of fuel/gas/electricity which will over time also make a very big impact.
Finally the statistics people starting to catch up with the situation: Families are sacrificing their food budgets to cover other increased expenses.
Also, the cost increase is running away from inflation, they claim a certain inflation rate but cost of food has increased significantly more than that this year. From june to july alone the cost increase for food is almost exactly 10%, it will not go back down.
So people are spending less money on food, at the same time as food prices are going up.
Water, electricity and fuel prices are going through the roof, a lot of hard working people have no money to spend.
Electricity will most likely be very expensive this winter, even now there are new records being set several times per week.
Statistics are lagging behind because: they have to record the data before it can be analyzed, statistics is just hindsight.
Meanwhile: My freezer is full of meats and we have an agreement with a nearby farm where we have grown some vegetables. Have made a years supply of various jams, redcurrant jelly, "squash". Stock is full but still building up a supply of potatoes, beans, maize. Have a good supply of firewood.
We will not freeze or go hungry, even expect to reduce our expenses contrary to most, but that is because we've taken action.
I know people that will struggle.
I read in the paper that people in the UK are giving away or abandoning pets because they cannot afford to maintain pets any more, and the coming winter is expected to be expensive in energy costs.
Be very careful, all of you.
Be very careful, all of you.
With potatoes you can make vodka, so you're in luck.
Red currant jelly a difficult find stateside. Most, if not all, imported from France. My sister and I would harvest the currants from bushes in my gram's back yard and she would "put it up" by the gallon, sealing the jars with paraffin!
It is indeed absolutely ridiculous. Electric power is about 10x the cost compared to 1 year ago.
There are some that have sold their cars to both reduce costs as well as improve their buffers.
@jackinnj Homemade is always best! 😎
Contemplating buying another freezer to further increase our storage, have space for it. Unfortunately I sacrificed my "potato cellar" to reduce the need for heating cables in the bathroom floor, so if I want to store more vegetables it will have to be frozen, thankfully adding another freezer would not use that much more power.
I got plenty of homemade beer and wine.
Distilling alcohol is illegal here, but there's a giant gray area in regards to fraction-freezing.
Been contemplating buying some vents with integrated heat-recovery, it would be a cost but I expect the savings in required heating might be equal to that of replacing all of my windows (neighbourhood of 3-4000kWh/year). Given todays electricity prices I'd recover the cost rather quickly...
For an Indian your knowledge of English is abysmal or you completely misread what is in a post. So, to put you right - what I said was that CNBC is a good source to learn about the markets as this programme covers the whole world - In Europe, Asia is covered at night, so in effect you have 24 hour coverage. It never spouts off as an oracle though you do in all your posts.
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