This guy @Rawseed is dropping golden nugget knowledge bombs encrusted in diamond.
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Free registration at the forum removes this block.waiting to buy them on sale when the recession hits over the next 2 years.
Again I am just learning so do love the feedback, but it seems from the research I have done the market misprices companies very often, giving opportunities to purchase or even short them before the market levels out and prices them correctly - these don't come along very often but they do come along.
I’ve been investing for about 15 years now, i’ve tried all sorts of methods. There are lots of people succeeding using different strategies, and you have to take into account your own risk tolerance, and time to devote to it.
The thing that has personally worked the best for me is the following.
Phil describes choosing great companies that you are passionate about, have strong growth rates, a "moat" (brand/patent/proprietary info), and great leadership. This can all be identified.
I HAVE traded, on & off for decades, including doing it professionally. And I agree with you. The old "standard wisdom" of "everything baked into the price" was the Efficient Market Hypothesis. In this philosophy, all the knowledge about the stocks is public, so everybody makes the same decisions, so it's not possible to beat the market.
Which is obviously utter claptrap, balderdash, and booshwah. Look at Warren Buffet's record and tell me you can't beat the market. It's hard to believe people bought that BS for decades, and they even awarded a Nobel for it.
People are emotional. The markets are driven by fear and greed. (Though this is becoming less so as machines take over trading -- but people still run the machines.) People overreact when they're afraid, and they get too greedy when things look good. This causes overreactions. That's how businesses can go "on sale," when everybody panics and dumps their stocks at any price. That's when you want to buy.
Well trust me it's EVEN HARDER to beat the market. It's the biggest casino on the planet, with mountains of money there for the taking. If you can just figure it out. And every bank, every financial institution, every schmoe on the street is trying to beat it. Fund companies have armies of PhDs, rooms full of computer equipment, and unlimited budgets trying to squeeze money out of the market. And when there are that many people going after a prize, the prize tends to get snapped up and disappear.
I don't know if I agree. The whole point of going fastlane is seperating yourself from the rat-race and being able to determine your own luck. If I left the rat-race and can afford to purchase a company I love at a discount because the market mispriced it, or even short ones I dislike or think are overpriced, that doesn't seem greedy to me.
The market is an EMOTIONAL roller-coaster
I HAVE traded, on & off for decades, including doing it professionally. And I agree with you. The old "standard wisdom" of "everything baked into the price" was the Efficient Market Hypothesis. In this philosophy, all the knowledge about the stocks is public, so everybody makes the same decisions, so it's not possible to beat the market.Again I'm kind of talking out of my a** as I haven't even traded before but based on what I've seen not everything is baked into the price at all times.
You got that right. If you can honestly make 2400% -- or hell, 100% -- you're spanking the stock market.100% agree with you though that the 2400% returns I get in my business is a better bet currently.
If this can be identified, it's already baked into the current stock price.
The people who live and breath the stock market can't seem to beat the S&P 500 consistently. Unless they are activist investors.
All true. However his outsized investing results started long before he was big enough to influence the market. That's how he BECAME big enough. He started producing exceptional returns when he was a pretty ordinary schmoe.Warren Buffet is an activist investor. He gets discounts on stock purchases. He uses his influence to broker deals. He uses his influence to increase the value of the companies that he owns.
Depends on how efficient the market is. In a fully efficient market, yes, it's pretty much a random walk. But in an inefficient market, you can find and exploit those inefficiencies. I used to do it myself.People are irrational. You can't use rational data to predict stock price or company valuation.
Unless you are a computer or some form of AI, you cannot and will not find any rational discrepancies in stock price or public company valuations.
Trend-following is one of the oldest trading concepts, and it's totally rational. People see the market moving up and they don't want to miss the party, so they pile on -- which perpetuates the trend. Or they see the market heading down, they panic and don't want to get stuck with a losing position, so they sell and perpetuate the trend. Trend-following approaches worked very well (see e.g. the Turtles, who became some of the largest fund managers in the industry with that approach) until enough people figured it out. When too much money started chasing the same targets, it squashed the successful strategy.So, any discrepancies to be found are irrational and therefore cannot be predicted.
My prediction: Gonna happen in a relatively short period of time after Trump gets (probably) re-elected next year.
No offense; but this whole thread smells of Greed.
Based on what happened after his election in 2016 and the 3 years after that, Trump was good for the stock market and the economy. Doesn't matter if you are for or against him the data speaks for itself.
When you say succeeding what do you mean?
To me, succeeding means that your returns are better than the S&P 500.
Actually, not just better.
Your returns need to be better while factoring the time you spent managing your portfolio.
Actually, that's not even enough.
Your returns need to be better while factoring in the time you spent managing your portfolio and factoring in the time you could have spent investing in your Productocracy (opportunity cost).
Investing in an index fund is completely passive. No time spent.
Your time is extremely valuable. So, your returns need to be significantly higher than the S&P 500 to legitimize managing a portfolio.
Disregard what I'm saying, if you invest for fun or entertainment. There's nothing wrong with that.
It's just not Fastlane.
However his outsized investing results started long before he was big enough to influence the market. That's how he BECAME big enough.
He started producing exceptional returns when he was a pretty ordinary schmoe.
And BTW his size and influence are no guarantee either. Buffet didn't believe in the new-fangled dot-com stuff, so he completely ducked the carnage in 2000-2002 and gained a lot on the S&P. Then about 2002 he lost that advantage, and Berkshire turned into an S&P index fund. I haven't updated the study recently, but with one exception in late 2007, BRK's moves mirrored the SPY almost perfectly for over 10 years. Even with his size and influence.
Depends on how efficient the market is. In a fully efficient market, yes, it's pretty much a random walk. But in an inefficient market, you can find and exploit those inefficiencies. I used to do it myself.
As an example: in the late 1990's and early 2000's I produced some excellent-to-ridiculous returns, consistently, for over 2 years. With large amounts of real money. I used a computer to generate my trades but it wasn't some fancy AI, just simple moving averages & simple rules. I could have computed it with a 4-function calculator if I wanted to. I continued to be quite successful until the attacks of 9/11 shocked the market and totally blew up the market psychology. Then everybody stopped acting rationally like they had been, and I couldn't find those ineffiencies any more. I came back to the markets a few years later and found that more people were throwing technology at the markets, squeezing out the low-hanging fruit, and it became more efficient. It became much more difficult, and eventually impossible, for me to make a profit at it.
Trend-following is one of the oldest trading concepts, and it's totally rational. People see the market moving up and they don't want to miss the party, so they pile on -- which perpetuates the trend. Or they see the market heading down, they panic and don't want to get stuck with a losing position, so they sell and perpetuate the trend.
In an efficient market, I agree with your "cannot be predicted" comment. And these days most markets are efficient. (But not all. I understand some of the cryptos can be traded very well because the markets are small, full of amateurs, and prone to over-reaction.) If you can find an inefficient market, you can still make money in it.
So if your point of view that there is no way to get rich investing?
Investing SHOULD only be something you do when you sell your business or have a large enough amount to live passively on a low-maintenance 4.5% bond?
The reason I ask is it seems the amount of time spent on learning investing is... quite a bit more than I expected and not sure if it's worth it at this point or not.
I'm not super financially savvy, but I'll play devils advocate.
You say investors do not gamble, but playing the market is by definition buying into a company or companies. Unless you have INSIDERS information or a very clear understanding of that industry, it's gambling.
1. There's no telling when the price will be back up. It might be one month, it might be one year, it might be five years.
2. There are external factors that can play a large role in a company's health. I am in the paper industry. When China decided that they weren't going to take recycled fiber anymore, it raised costs for the entire industry. You could have stock in the best paper company but it would have done much worse than a company in another industry.
I'm not saying don't invest in a company that you've heavily researched, but I think it all depends on what your financial situation is.
If you have a couple of months from savings, money going to retirement, and you just have extra money to put into a Great Company that you've done extensive research on, then I would say go for it.
If you are living paycheck to paycheck, trying to time the market for a big payoff. I would say that's gambling.
Things like index funds are hugely popularized because they work for the average person to get an average return in the long term without a lot of work.
It's easy to look back and say, "I said these stocks were going to do well, and they did". It's a lot harder to do that over and over for years and years without being wrong.
Before you jump in though, I would play with a stock simulator and see how you do, an example is: Investopedia Stock Simulator
You sign up, they give you virtual money and you can see how your bets really turn out. I think you'll find out that it's not as easy as the book makes it sound.
Looking forward to hearing other people's opinions though.
I am stuck here with my laptop in a waiting room and I'm wondering how I may be able to provide some value, I thought I'd share a quick summary of a great book I just finished - being that I am a complete rookie in finance - and maybe even get feedback on the method from those who have a ton more experience than I do.
With the coming recession - there will be some great opportunities to buy stocks cheap so I have committed myself to learning as much about finance as possible. Here's the lowdown of Phil Town's Method.
What is RULE 1?
Very simply - never lose money in the stock market, and it's actually a simpler concept than most would think. Rule one investors just do not gamble.
How could you not lose money in the stock market, and in fact nearly guarantee 15% returns?
A majority of mutual fund managers/traders lose money by diversifying into a ton of different investments hoping to mitigate losses and have enough wins to still be on the positive side. There is no need to diversify if you are choosing the right companies. The market is an EMOTIONAL roller-coaster, and often misprices these great companies. You can identify and buy huge opportunities at 50% of their price, wait for the market to adjust their price, and sell/hold.
What Makes A Great Company?
Phil describes choosing great companies that you are passionate about, have strong growth rates, a "moat" (brand/patent/proprietary info), and great leadership. This can all be identified.
How Do I Know When A Great Business Is On Sale?
I will not get too deep into this, other than explaining the overall ideology. Using 10 year historical growth rates of sales, equity, earning per share, and ROIC (all very simple numbers to obtain), you can determine the future growth rates of the company. Using these growth rates you can determine the most likely future stock price and reverse calculate what price TODAY you'd need to buy at to have a 50% margin of safety (buy at half off) AND grow your investment 15% per year.
The Summary
GREAT companies with great track records for growth go on sale for 50% off when the market panics or misprices them. You can purchase them on sale and grow 15%-25% a year with very little risk as long as you are holding out for the right businesses.
I am currently selecting my rule 1 companies and waiting to buy them on sale when the recession hits over the next 2 years.
You won't get rich quick by investing. You might get rich slow. So it's a good thing to do in the background, while you're doing something else for your main shot at greatness. That way if you never manage to cash out your company in an IPO and retire rich at 35, you might at least be able to retire comfortably at 60.
I agree with Demarco’s strategy that focus on yield instead of just following on the broad index.That’s not my view. Based on Unscripted , that seems to be Demarco’s view.
I just don’t think you should have money in individual stocks. Unless they’re stock options.
The return you’ll get from the time you spend isn’t worth it. Just buy index funds with Vanguard, Fidelity, or Schwab.
I think that every entrepreneur should max out a Roth IRA or Backdoor Roth IRA annually using index funds.
Many entrepreneurs should also consider putting some money in a solo Roth 401k or SEP IRA. How much to put in it is hard to tell. It’s based on age, risk tolerance, family status, the stage of their business, and other factors.
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