What are your chances of succeeding with these types of investments?

[Scott Bradley]

I am 22, and am new to investing and I need wisdom, on what paths are wisest to take.

I am currently involved in investing passively at Vanguard with the S&P 500 index fund. I am wondering if I am making a mistake by doing this?


What are your chances of succeeding with these types of investments:

-Passive investing (stock and bond index funds)
-vs Active Investing
-Becoming a Fund Manager
-Futures
-Options
-Forex Trading
-Stock Trading
-Penny Stocks
-Investing in National and Foreign Currencies
-Investing In Commodities (Especially Gold, Platinum and Silver)
-Investing in Bonds (Treasuries, Municipal Bonds, Corporate Bonds)


Or should I just skip investing in most of these, go with passive investing, and then start doing an online business?

 

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[thaboybam]

Look at it like this. "Active Investing" isn't "investing", it's gambling. And if you don't have adequate time to research, run away from that idea fast! You could pay someone for picks,but you still have to monitor it while the markets open.


I trade options and it's extremely stressful. I've made 5k in a day and also have lost same.

 

[MJ DeMarco]

What are your chances of succeeding with these types of investments?

1.38%

 

[DrkSide]

Invest in yourself, your ideas, and a business that you create.

 

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[100k]

No way to tell. Depends on so many things.

 

[Stridone]

Been there, done that, wouldn't recommend it. You can make some long-term profits if you're really really good but it's very frustrating because you're not really in control when you invest in something other than yourself. I now wish I had invested that time and money into something truly fastlane.

Investing in the stock/commodity/whatever market should probably just be a way to preserve your wealth, not accumulate it in the first place.

 

[G_Alexander]

Scott...

Please read The Millionaire Fastlane and then get back to us. You will find that the question you are asking here is pretty useless until your liquid net worth is >~$7mm. That is when true market passivity can occur through munis, some high-yield instruments and of course selected ETFs. At this point you will also be able to sleep comfortably at night through any and all market volatility.

You have some reading to do. Now GO. Go order the book (passive income for MJ...see how that works?), READ it and apply what you learn.

 

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[Scott Bradley]

I don't even know who to believe anymore. It's too overwhelming and I feel trapped. Too many choices.


I've signed up for both the Boglehead Forums and this Fastlane Forum, and the people at the Boglehead Forums told me to invest in index funds at Vanguard and that many of the people there were rich, and that business has not become a major success for them. One guy said he made more money investing than he did with his entire online business, and his online business only made 30,000 total. They told me that many work at home opportunities are scams and that 90% fail in internet marketing, and you should concentrate on investing.

Then I come here and you say the exact opposite. Forget investing until you are already rich, then invest to preserve your wealth. But what happens if this idea fails?

Back to square one, and plenty of time wasted - living with mom and dad.

What am I supposed to do when people can't agree with each other? There's no consensus!

 

[mememan]

Pick up and read about deep, Graham-style value investing. Barring that, index funds are fine, but you have to hold onto for the long-term and there are reasons why, going forward, indexing won't work. You need money to make money, but simple Graham-based strategies can routinely beat the market when performance is reviewed over a 3-5 year time period.

 

[Scott Bradley]

But the thing I always wondered about index funds, is that, what do you do when there is a stock market crash?

Should you sell and pick bonds, or instead hold on?

 

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[MJ DeMarco]

and the people at the Boglehead Forums told me to invest in index funds at Vanguard and that many of the people there were rich

LOL, "rich" is relative. You've probably gotta bunch of 55 year old guys barely cracking 1M in net worth, getting up at 6AM, fighting traffic, and throwing their life away at some job they hate -- if that's what you want for yourself, go back to the Vanguard forum and don't forget to bring with you a lot of hope-and-pray. Oh yea, and don't forget to give their plan at least 5 decades, or 3/4's of your life.

I'm going to ask that you stop posting here until at least you've read the book on which this forum is based upon.

If you aren't going to do that, you will continue to ask the wrong questions and/or questions that have already been addressed. This really isn't an investment forum and if you are seeking to learn old-school "investing" (Er, gambling) there are much better places, yes, the VG forum is one of them.

The people here aren't interested in growing their net worth by trusting a bunch of crooks on Wall Street, but trusting themselves and their business, their ingenuity, and their hard work.

 

[Stridone]

I don't even know who to believe anymore. It's too overwhelming and I feel trapped. Too many choices.


I've signed up for both the Boglehead Forums and this Fastlane Forum, and the people at the Boglehead Forums told me to invest in index funds at Vanguard and that many of the people there were rich, and that business has not become a major success for them. One guy said he made more money investing than he did with his entire online business, and his online business only made 30,000 total. They told me that many work at home opportunities are scams and that 90% fail in internet marketing, and you should concentrate on investing.

Then I come here and you say the exact opposite. Forget investing until you are already rich, then invest to preserve your wealth. But what happens if this idea fails?

Back to square one, and plenty of time wasted - living with mom and dad.

What am I supposed to do when people can't agree with each other? There's no consensus!

People get rich in all fields. Just pick whatever you prefer and pour your free time and money into that, you might fail but that is a form of progress in itself. Keep moving forward.

 

[mememan]

But the thing I always wondered about index funds, is that, what do you do when there is a stock market crash?

Should you sell and pick bonds, or instead hold on?

If you do index stocks, you have to just hold on during a crash. Sell, and you may miss out on the upside that brings you back to where you were before the crash.

Honestly, bonds are riskier than stocks. You don't have a high enough variance of returns on bonds to make up for the fact that some will go to zero. Also, bonds are especially an area where quantitative and mathematical analysis has made the potential for excess returns for the average person very unlikely (unless they are an expert in distressed debt).

There are a couple problems with index funds anyway; your point being one of them. Another is the fact that most index funds a cap-weighted. What this means is that you always buy more in the companies that are already overvalued. Take the S&P 500 for example. You put $100 in that, and $5 is going to Apple. If Apple represents 5% of an investment in the S&P 500, it's obvious the other companies can't get the same amount.

One thing you never see, but which can do a lot to reduce volatility of a strategy, is to have a rebalancing period of 2 vs 1 year. This allows different "baskets" of money to be operating on their own timetable. Say it's 2008/2009 again; it would be scary as hell to rebalance your ENTIRE portfolio at this point, and most people wouldn't. Deviating from your strategy like this may have wiped out any possible outperformance. However, if you have 1-2 baskets that don't have to be rebalanced for another year, and you make maybe 1-3 basket purchases that year and only have to sell out and replenish 1-2 baskets, that's a strategy someone may be more willing to keep up with.

 

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[mememan]

LOL, "rich" is relative. You've probably gotta bunch of 55 year old guys barely cracking 1M in net worth, getting up at 6AM, fighting traffic, and throwing their life away at some job they hate -- if that's what you want for yourself, go back to the Vanguard forum and don't forget to bring with you a lot of hope-and-pray. Oh yea, and don't forget to give their plan at least 5 decades, or 3/4's of your life.

I'm going to ask that you stop posting here until at least you've read the book on which this forum is based upon.

If you aren't going to do that, you will continue to ask the wrong questions and/or questions that have already been addressed. This really isn't an investment forum and if you are seeking to learn old-school "investing" (Er, gambling) there are much better places, yes, the VG forum is one of them.

Also, mention on Bogleheads a couple of the problems with indexing and you will be attacked in mass. It's almost a cult

 

[frieden70]

Then I come here and you say the exact opposite. Forget investing until you are already rich, then invest to preserve your wealth. But what happens if this idea fails?

What am I supposed to do when people can't agree with each other? There's no consensus!

Well the confusion for you (I'm assuming) is that you have not read the Millionaire Fastlane and therefore don't understand our way of thinking.

In the most simplistic form, the rich don't get rich off of investing in the stock market, usually. The rich get rich by having a fastlane vehicle that get's them wealth and they use the stock market and other investment vehicles to STAY RICH.

In school they talk about how investing the market could yield you, on average, 10% annually (and that's being generous), right?

Well, how the hell do you expect to get rich on 10% returns unless you are investing millions?

Let's say you have have 50K to invest in the stock market, and you are actually getting 10% returns (congrats!), you've made 5K in that year. Is that going to make you rich?

Even if you compound that annually, that sure as hell aint gonna make you rich. At least not during the time of your life that you'd like to be...

Adding inflation, you probably won't be rich anyway (and this is all assuming you have 50K to invest right now).

Then you say this.

One guy said he made more money investing than he did with his entire online business, and his online business only made 30,000 total. They told me that many work at home opportunities are scams and that 90% fail in internet marketing, and you should concentrate on investing.

Have any one of us told you to do a work from home opportunity?

No, we've told you to build a fastlane business.

Be creative, solve real problems, create real value for people and create a real business. Not those MLM or make money from home scheme bullshit programs.

In the nicest way possible, go read The Millionaire Fastlane if you want any advise from us.

If you don't read the book, you won't understand our way of thinking and we simply can't help you.

Good luck in whatever you end up doing.

 

[DrkSide]

They told me that many work at home opportunities are scams and that 90% fail in internet marketing, and you should concentrate on investing.

Everything on the internet must be true, since they told you.

You have the mindset that you want to work from home so lets find a company that allows me to do that and do it. People around here see that and want to build a company that lets others work from home legitimately. You tell me which one you will make more money off of.

Edit: In fact, after you have read the book (and only after) come back to this thread and take a look at the sentence I quoted. You found a problem that if fixed could make you millions of dollars.

 

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[smartmoney]

If you're going to invest in publically traded securities, then I think index funds (which are passive) are the least bad option.

Picking individual securities demands a enormous amount of time dedicated to researching the markets. Most people don't bother to adjust their returns for how much time they spent researching. If they did, they might find that it isn't worth it.
Besides, even enormous time spent researching probably gives you a only a very small advantage.

If you hire a company (Vanguard, Fidelity, etc) to handle your money with a mutual fund, you really have to read the fine print. A lot of funds rack up huge fees and give the managers incentives that aren't necessarily in line with growing your investments. For example, some funds charge "transaction fees" when making changes in the fund's holdings. If these fees are large enough, then managers might just make a bunch of trades that aren't in your interests to drive up their fees.

I once looked at an investment fund prospectus someone else was considering. It was practically a book of fine print. Just made me get the impression that this was an industry that didn't have the customer's interests in mind.

Also, it's hard for me to see how investment professionals really differ all that much. Seems to me that they all recommend some standard split between stocks and bonds that is diversified. But you know that yourself anyway.

 

[socaldude]

Also remember that past performance is not an indicator of future performance. Just because the S&P 500 did X% a year for 30 years doesn't mean its gonna do it again in the next 30 years. What if the market looks like Japan's market? YEARS of poor returns?

Having $400,000 in index fund equities when you are 65 years old is not gonna give you financial freedom. And thats assuming that you make it there alive. You know the odds of dying in a car accident are 1 in 70 through out your lifetime? What about health issues? What about your F%&ken TIME!?

If you want to get rich off of options or currency trading you are better off playing Poker or Blackjack at the casino.

There are so many ridiculous assumptions in the path of the slowlane its laughable.

Don't you want to have the steering wheel of life in your own hands instead of giving it to someone or something else?

Read the book.

 

[Scott Bradley]

Let's say its 2008 stock market crash

What if during a depression/recession you had stock prices fall, and so you bought LOTS of them because they are so cheap, so that when the market recovers and stock prices rise, you would get more dividends for each share you bought at a low price during the depression?

This is buying low, as opposed to buying high when then US economy is in a bull market.

 

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[DrkSide]

What if during a depression/recession you had stock prices fall, and so you bought LOTS of them because they are so cheap, so that when the market recovers and stock prices rise, you would get more dividends for each share you bought at a low price during the depression?

There have been quite a few great responses in this thread and you have just ignored every one of them.

 

[DeletedUser394]

Let's say its 2008 stock market crash

What if during a depression/recession you had stock prices fall, and so you bought LOTS of them because they are so cheap, so that when the market recovers and stock prices rise, you would get more dividends for each share you bought at a low price during the depression?

This is buying low, as opposed to buying high when then US economy is in a bull market.

Do you know how to read?

I was cutting you slack up to this point, but now you're just choking yourself with it...

As has been pointed out, this is the wrong forum for this type of stuff.

This is primarily a business forum.. ie you create the business.

 

[mememan]

Let's say its 2008 stock market crash

What if during a depression/recession you had stock prices fall, and so you bought LOTS of them because they are so cheap, so that when the market recovers and stock prices rise, you would get more dividends for each share you bought at a low price during the depression?

This is buying low, as opposed to buying high when then US economy is in a bull market.

You could use EV/EBIDTA to rank stocks based on the market capitalization you are willing to invest in. Then, rank according Piotroski's F score. Invest in the stocks with the highest combined rank of these two. You could also use Altman Z to check for bankruptcy potential and Beneish M for fraud/manipulation and if it hits those targets, throw the stock out.

If you really want to go crazy in a similar situation, you could buy LEAPS on companies within the S&P 500 that meet that criteria. LEAPS are long-term options contracts that give a right to buy at a set price. Say each one costs $2 but gives you the right to buy a stock at $20. Unlike say margin or shorting, only your investment is at risk.

You would buy a basket of these leaps, since most will expire worthless. However, you only need one to work out to get ahead. For example, you could have bought $10k in LEAPS on Wells Fargo and came out with $1.3M a few weeks later as the stock recovered. Let's say we take that same $10k and distribute amongst the cheapest, safest 5%-10% of the S&P 500. If only one of those is our Wells Fargo, we take $400 and turn it into $52k, so less our $10k investment, $42k in the black.

 

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[frieden70]

Let's say its 2008 stock market crash

What if during a depression/recession you had stock prices fall, and so you bought LOTS of them because they are so cheap, so that when the market recovers and stock prices rise, you would get more dividends for each share you bought at a low price during the depression?

This is buying low, as opposed to buying high when then US economy is in a bull market.

Let's say you go to a forum and ask for advice and completely disregard all the information and advice that is given to you...

Yeah, that just happened.

Sorry man, I don't mean to be a dick but at this point, I don't get what you're trying to get out of being here and posting. You asked for our advice, we gave it to you and now you're trying to prove your point.

Clearly, you're in the wrong forum if the vehicles you're talking about are the vehicles you are choosing to get rich.

We simply do not believe that those vehicles get you on the fastlane to wealth.

Again, read the book and then come back.

Until you read it, we simply can't help you and all that's going to happen is you getting frustrated (and us too for that matter).

Good luck in whatever you choose.

 

[MJ DeMarco]

Let's say its 2008 stock market crash
What if during a depression/recession you had stock prices fall, and so you bought LOTS of them because they are so cheap, so that when the market recovers and stock prices rise, you would get more dividends for each share you bought at a low price during the depression?
This is buying low, as opposed to buying high when then US economy is in a bull market.

OMFG.

 

[gabu4u1]

LOL, "rich" is relative. You've probably gotta bunch of 55 year old guys barely cracking 1M in net worth, getting up at 6AM, fighting traffic, and throwing their life away at some job they hate -- if that's what you want for yourself, go back to the Vanguard forum and don't forget to bring with you a lot of hope-and-pray. Oh yea, and don't forget to give their plan at least 5 decades, or 3/4's of your life.

I'm going to ask that you stop posting here until at least you've read the book on which this forum is based upon.

If you aren't going to do that, you will continue to ask the wrong questions and/or questions that have already been addressed. This really isn't an investment forum and if you are seeking to learn old-school "investing" (Er, gambling) there are much better places, yes, the VG forum is one of them.

The people here aren't interested in growing their net worth by trusting a bunch of crooks on Wall Street, but trusting themselves and their business, their ingenuity, and their hard work.

Thank you for repeating it here again. It is evident that he has not read TMF .

 

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[Scott Bradley]

So far after all your peoples answers, here is what I think you are all telling me-

- DONT start investing until you have 100% success of your business up FIRST.
- Wait till your 30 to start investing in the stock market. Just FORGET about investing, it won't make you much money right now anyway.
-investing is for poor people
- business is the ONLY reasonable way to get rich. All other options are slim chances
-DONT invest



So the question is, what am I going to do NOW?!!

Investing in stock market first then starting a business vs building a business first than investing second

 

[AllenCrawley]

I'm going to ask that you stop posting here until at least you've read the book on which this forum is based upon.

The owner of the forum asked you to stop posting until you've read the book yet you keep posting and creating new threads.

 

[Scott Bradley]

Actually I HAVE read the book, I just don't 100% agree with you, and sceptical whether this would be the best lifestyle choice for me

 

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[frieden70]

If you've read the book, and don't agree with it, then why are you asking people that basically use the teachings of the book as gospel for advice that's contradictory to what is written?

That just doesn't make sense man.

In the nicest way possible, I think you need to do some soul searching before you even think about trying to make money. Figure out what you really want to do and go from there...

 

[mars]

I was once told to not be a "askhole" by someone I looked up too. Didn't understand it at first, but it's a simple rule that's helped a bunch.