Reddit's Stock Threads Become a Must-Read on Wall Street(bloomberg.com)
bloomberg.com
Reddit's Stock Threads Become a Must-Read on Wall Street
https://www.bloomberg.com/news/articles/2020-09-15/big-investors-are-dying-to-know-what-the-little-guys-are-doing
318 comments
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.
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.
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.
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
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.
* 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.
No it wasn’t, and everyone should read the Intelligent Investor.
https://www.goodreads.com/book/show/106835.The_Intelligent_I...
https://www.goodreads.com/book/show/106835.The_Intelligent_I...
[deleted]
>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.
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.
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)
People that compare the two outcomes will decide to become new active investors that fuels what the parent to my comment is talking about
Why would they do that? Passive strategies also did well over the last few months.
If you get lucky gains starting out doing riskier things like WSB does, you might be more inclined to keep that style until you take some losses. And if you're swept up in WSB's fun, you'll probably end up taking more losses. WSB is basically an accelerant for investing psychology.
Sure, but what does that have to do with the pandemic or the current state of the economy? It will always be true that active investors are more likely to get "lucky" gains than passive investors. The allure of gambling isn't going to suddenly go away once the overall economy stabilizes.
I think the key disagreement here is that you don't agree that a stock market staying high during a pandemic due to government intervention would attract more active investors, and those active investors can make less mistakes because the stock market was staying irrationally high.
And if you're just a regular wage earner with some cash, seeing the labor market being dropped on its head, maybe this stock market thing might be a good idea to try. I mean, some people definitely bought stocks with the $1200 stimulus check. Getting into the stock market (which ended up doing unreasonably well) was a way to hedge against losing your job (which you had a higher likelihood of losing).
And if you're just a regular wage earner with some cash, seeing the labor market being dropped on its head, maybe this stock market thing might be a good idea to try. I mean, some people definitely bought stocks with the $1200 stimulus check. Getting into the stock market (which ended up doing unreasonably well) was a way to hedge against losing your job (which you had a higher likelihood of losing).
[deleted]
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.
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.
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.
Matt Levine calls this the "bored market hypothesis": people are investing purely for fun, in significant enough numbers to actually move the market.
Eh. If retail investors are investing in the same direction "just for fun" then the real institutional investors will just short their bet.
Unless the market can remain bored longer than institutional investors can remain solvent...
> Unless the market can remain bored longer than institutional investors can remain solvent...
Don't let nit-picky facts like that institutional investors control substantially more capital than retail investors get in the way of a good narrative.
Don't let nit-picky facts like that institutional investors control substantially more capital than retail investors get in the way of a good narrative.
Tell that to all of the institutional investors that have lost money shorting Tesla.
No, there is no good reason for Tesla to be valued the way it is - but there is no shortage of people willing to buy it without putting too much thought into the price, either.
No, there is no good reason for Tesla to be valued the way it is - but there is no shortage of people willing to buy it without putting too much thought into the price, either.
Gambling is a disease
But it's the only disease where you can win a bunch of money from it
Not if you win all the time.
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.
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.
Perhaps, but skill is more rare than luck. More importantly there’s no way to tell the difference.
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).
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).
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.
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.
This is why elon musk is so incredible imo
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.
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.
Save the world? Oh, please. He just wants to be the first. The first to do it at scale.
The fact that you think he's doing it for humanity is laughable.
The fact that you think he's doing it for humanity is laughable.
Also Jack Dorsey.
He works hard, but his contribution to humanity in the form of Twitter is a tire fire. It's even questionable if humanity is better off for having it.
Square is a fine company, but let's face it, it is not changing the world. It's just another payments company with nothing particularly special to make it stand out.
I don't think you can compare him to Elon Musk, except again, the fact that they both work hard. Plenty of people do.
Square is a fine company, but let's face it, it is not changing the world. It's just another payments company with nothing particularly special to make it stand out.
I don't think you can compare him to Elon Musk, except again, the fact that they both work hard. Plenty of people do.
> 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.
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.
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. :-)
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.
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.
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.
i find myself reminding people of this excerpt often.
>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.
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.
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.
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.
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.
That's what Keynes called a beauty contest: https://en.wikipedia.org/wiki/Keynesian_beauty_contest
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?
Yup. Stock Market is a lot like Family Feud.
Buy/sell where you have unique expertise. *If you work in the toilet hardware industry, buy/sell stocks related to that industry.*
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.
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.
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.
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.
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.
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.
These are nice but I suspect these accounts suffer from survivorship bias.
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.
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.
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.
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.
(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.
(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.
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.
#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.
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.
> 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?
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?
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.
Fiscal policy can be applied much more carefully and is often far more efficient.
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.
Yeah, you shouldn't go long in an industry you work in.
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.
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?
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?
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.
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.
I agree that it can be hard psychologically in a high-growth industry like tech.
Oh my goodness, sell at least half!
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.
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.
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.
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.
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.
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.
There are plenty of bad ETFs out there, sure.
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
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
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.
Yes - some periods TLT does have negative correlation to QQQ. I was pretty surprised when I saw this since Bernstein did not see this in his analysis.
As I said it had been 15 years since I have been actively managed my investments. When the stock market dropped I was surprised that our investments hadn't actually dropped so I wanted to find out why. So I put together a google sheet and tried to replicate the Intelligent Asset Allocator with just ETFs. This only goes back to 2005.
First I put in all of the ETFs with weekly data going back to 2005 from GoogleFinance. I then added in the dividend yields - which most online analysis does not do. Then I just used the google sheets correlation function. I set up the sheet so I could slice and dice across different time periods. And then I chose my own asset allocation based on what I saw.
I also looked at the optimal rebalancing period. It looks like it is 2 years for this set of data.
As I said it had been 15 years since I have been actively managed my investments. When the stock market dropped I was surprised that our investments hadn't actually dropped so I wanted to find out why. So I put together a google sheet and tried to replicate the Intelligent Asset Allocator with just ETFs. This only goes back to 2005.
First I put in all of the ETFs with weekly data going back to 2005 from GoogleFinance. I then added in the dividend yields - which most online analysis does not do. Then I just used the google sheets correlation function. I set up the sheet so I could slice and dice across different time periods. And then I chose my own asset allocation based on what I saw.
I also looked at the optimal rebalancing period. It looks like it is 2 years for this set of data.
>
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).
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).
> 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.
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.
If you bought 50/50 AAPL and RIM, wouldn't you still have outperformed index funds? Or was the timing especially awkward?
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.
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.
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 :)
Before you point to S&P 500: I'm from/in Europe, please account for that in your reasoning :)
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.
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.
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/
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/
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.
Yes, the USD is currently the foremost reserve currency. See eg https://marketcap.com.au/wp-content/uploads/2018/11/WRCurren...
International markets outperform the US about half the time: https://www.fidelity.com/viewpoints/investing-ideas/internat...
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?
Until the end of time. Tech is the future.
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).
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).
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")
[0] https://www.ishares.com/uk/individual/en/products/251882/ish... (search for "Exposure Breakdowns", then choose "Geography")
[deleted]
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.
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.
> 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.
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.
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???
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'.
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'.
I bought a weed stock that crashed...
I've been tracking this as a sideproject this year at https://topstonks.com
Right now Gamestop and AMD are the stocks dujour:
https://topstonks.com/stocks/gme
https://topstonks.com/stocks/amd
Interestingly, the guys at wallstreetbets were recommending the VIX a few weeks ago right before the correction. It's been a fun thing to watch.
Right now Gamestop and AMD are the stocks dujour:
https://topstonks.com/stocks/gme
https://topstonks.com/stocks/amd
Interestingly, the guys at wallstreetbets were recommending the VIX a few weeks ago right before the correction. It's been a fun thing to watch.
I’ve found that sub to be 99% idiots, 1% extremely knowledgeable finance experts who browse it to occasionally comment and laugh at the other 99%. It’s my absolute favorite subreddit to read. I consider it like an apolitical temperature gauge on things. There’s not really any politics in there, but it gets the commentary of the news through the lens of money and it’s always interesting.
I was on some Facebook thread and some people were posting screenshots of how they lost 100% during the pandemic... Like $20,000 -> 0 in a matter of weeks. It was extraordinary. They were all using WSB and doing extremely foolish options trades.
Before seeing that I would have claimed basically any sincere strategy in good faith would be a winner right now. Clearly no, there's plenty of people who managed to burn through thousands in these conditions.
Really illustrates the difference between gambling and investing.
It's probably excellent advice to never look at WSB and regard it as 100% noise.
Randomly drawing letters out of a hat and buying those stocks would have produced dramatically better results.
Edit: i just bought a $100 or so of 4 stocks by randomly selecting letters until I got a match. Let's see how this strategy pans out. I bet it won't go to zero
Before seeing that I would have claimed basically any sincere strategy in good faith would be a winner right now. Clearly no, there's plenty of people who managed to burn through thousands in these conditions.
Really illustrates the difference between gambling and investing.
It's probably excellent advice to never look at WSB and regard it as 100% noise.
Randomly drawing letters out of a hat and buying those stocks would have produced dramatically better results.
Edit: i just bought a $100 or so of 4 stocks by randomly selecting letters until I got a match. Let's see how this strategy pans out. I bet it won't go to zero
Options trading is all or nothing. Yes, it's a way to multiply your profits, but it also multiplies your losses.
AAPL stock, from the release of the iPhone until now, has been an amazing investment.
Some amateur analysts would beat the professionals in predicting quarterly reports.
Then greed set in.
https://fortune.com/2013/03/04/the-rise-and-fall-of-andy-zak...
Just imagine if investors in his fund had just bought the stock instead of options (calls).
Similar situation as above.
Don't invest what you can't lose. Slow and steady and living below your means wins the race.
USA tax laws favor investment income over labor income. If no wage income, first $75k of qualified dividend income is federal tax free. Most qualified dividends pay 2-4% so you need $2 million dollars to get $6k post tax dollars a month.
AAPL stock, from the release of the iPhone until now, has been an amazing investment.
Some amateur analysts would beat the professionals in predicting quarterly reports.
Then greed set in.
https://fortune.com/2013/03/04/the-rise-and-fall-of-andy-zak...
Just imagine if investors in his fund had just bought the stock instead of options (calls).
Similar situation as above.
Don't invest what you can't lose. Slow and steady and living below your means wins the race.
USA tax laws favor investment income over labor income. If no wage income, first $75k of qualified dividend income is federal tax free. Most qualified dividends pay 2-4% so you need $2 million dollars to get $6k post tax dollars a month.
didnt realize that link was behind paywall. It won't happen again.
Gist of the story is that an amateur law student was amazingly good at predicting AAPL earnings every quarter. Graduated, and started his own hedge fund.
Publicly advocated buying options because AAPL could only go up bc profits were increasing. That's also what he did with investors' money. Options expired worthless. All $$ lost.
AAPL price did not follow increase in earnings in straight line.
Gist of the story is that an amateur law student was amazingly good at predicting AAPL earnings every quarter. Graduated, and started his own hedge fund.
Publicly advocated buying options because AAPL could only go up bc profits were increasing. That's also what he did with investors' money. Options expired worthless. All $$ lost.
AAPL price did not follow increase in earnings in straight line.
> I would have claimed basically any sincere strategy in good faith would be a winner right now
Options have more degrees of freedom than stocks. Since they're derivatives, those degrees must ultimately collapse to the delta, i.e. to the stock's price movement, as the sole non-zero sum source of profit. As a result, there are more ways for professionals to monetize their edge.
Options have more degrees of freedom than stocks. Since they're derivatives, those degrees must ultimately collapse to the delta, i.e. to the stock's price movement, as the sole non-zero sum source of profit. As a result, there are more ways for professionals to monetize their edge.
The money that professional investors make has to come from somewhere. I guess a part of it is coming from these clueless people.
The stock market is not zero sum. The collectives market cap increases every year. Options are zero sum. There's someone at the other end of every trade and their gains/losses are your losses/gains. That's largely why I think of wsb style options as gambling as opposed to investing.
I was on some Facebook thread and some people were posting screenshots of how they lost 100% during the pandemic... Like $20,000 -> 0 in a matter of weeks. It was extraordinary. They were all using WSB and doing extremely foolish options trades.
Right, but there are also traders who have made 10x or more. Many have turned a few thousand into 5 or 6 figures. You have to find the right strategies and traders to follow. There are traders who demonstrate skill, by consistently making profits. This involves optimal position sizing and optimal call option duration and strike prices and other factors such as momentum.
Right, but there are also traders who have made 10x or more. Many have turned a few thousand into 5 or 6 figures. You have to find the right strategies and traders to follow. There are traders who demonstrate skill, by consistently making profits. This involves optimal position sizing and optimal call option duration and strike prices and other factors such as momentum.
> There are traders who demonstrate skill, by consistently making profits
With a large enough group consistently making profits would not necessarily be a demonstration of skill. Even if the returns were completely random several traders would constantly perform well above average.
With a large enough group consistently making profits would not necessarily be a demonstration of skill. Even if the returns were completely random several traders would constantly perform well above average.
This is why this game is so dangerous. Also self reporting introduces bias too (biggest winners likely to report, everyone else not so much).
To be fair, I think WSB bucks this trend a little. People report the huge losses there, and it's part of what makes it so interesting.
In fact, I would argue that the most well-known posts are often from people losing huge amounts of money, eg. "Guh".
In fact, I would argue that the most well-known posts are often from people losing huge amounts of money, eg. "Guh".
How do you differentiate those skillful traders from the lucky ones who somehow managed to beat the house despite being an amateur from WSB?
IMO, the only reliable way is to watch them over a 50-plus-year period and look backward.
> There’s not really any politics in there, but it gets the commentary of the news through the lens of money and it’s always interesting.
You may be interested in this 11 minute video of Ben Felix, of PWL Capital in Canada, entitled "US Elections vs. the Stock Market":
> With the upcoming United States presidential election, lots of investors are worried about how the election outcome will affect their investments. This is not a new worry - elections are stressful times and it seems obvious that the outcome should impact the stock market. Rhetoric from across the political spectrum certainly doesn’t help.
> Fortunately, the relationship between stock markets, elections, and political parties has been studied extensively, allowing us to step back from the rhetoric to consider the historical data and the theories that explain it.
* https://www.youtube.com/watch?v=HYHu9PMY_C4
There some interesting apolitical (peer-reviewed) papers linked in the description. It's all about time-varying risk aversion.
(No connection/relationship, just a fan of his.)
You may be interested in this 11 minute video of Ben Felix, of PWL Capital in Canada, entitled "US Elections vs. the Stock Market":
> With the upcoming United States presidential election, lots of investors are worried about how the election outcome will affect their investments. This is not a new worry - elections are stressful times and it seems obvious that the outcome should impact the stock market. Rhetoric from across the political spectrum certainly doesn’t help.
> Fortunately, the relationship between stock markets, elections, and political parties has been studied extensively, allowing us to step back from the rhetoric to consider the historical data and the theories that explain it.
* https://www.youtube.com/watch?v=HYHu9PMY_C4
There some interesting apolitical (peer-reviewed) papers linked in the description. It's all about time-varying risk aversion.
(No connection/relationship, just a fan of his.)
Also a fan of Ben Felix. He goes straight to the point, cites real research, and doesn't do any distracting comedy skit stuff (ahem, The Plain Bagel).
Sounds like most of Reddit to be fair.
Any picks for expert /u's worth following?
Me. TSLA and AAPL get in those until we get some signals in a few years.
You want one from the idiots or one from the finance experts?
Yup I've been lurking there for years. It was better before this year. Still a few gem comments but you gotta wade through the crap.
Plus people in there at pretty self-aware and it can be very funny.
It's 99% actual 12 year old who somehow managed to set up a robinhood account. Not even joking, if you read some of the comments in the threads you can just tell.
Sounds pretty much like any forum.
Many fora have more politics?
Weeelll... r/spacex has quite a lot of real engineers and overconfident opinionated amateurs get called out on details real quick.
That's why I participate on r/spacex. I am free to post my KSP understanding of spaceflight and be corrected by real rocket scientists. Makes me feel smart _and_ learn, while spreading a minimum of disinformation. And most of the time, I learn things that I would not have even known to ask about.
As long as you don't spread disinformation with overconfidence you really just learn.
The problem with false information are the people who want to sell it as correct information for a variety of reasons.
The problem with false information are the people who want to sell it as correct information for a variety of reasons.
I don't know why this was downvoted, you are correct.
I'm sure that I've posted some wrong things, but not disinformation. Nobody who is ever going to do anything with the information on that sub will ever rely on info posted there. The worst I've seen is some pseudo-news organization actually quoting a Reddit post on r/spacex without attribution. People who actually build rockets don't learn their craft from Reddit.
I'm sure that I've posted some wrong things, but not disinformation. Nobody who is ever going to do anything with the information on that sub will ever rely on info posted there. The worst I've seen is some pseudo-news organization actually quoting a Reddit post on r/spacex without attribution. People who actually build rockets don't learn their craft from Reddit.
r/math and r/physics also have little tolerance for bs too
I am a Reddit newbie but how could it be a subReddit if it’s on a different site?
They're referring to /r/wallstreetbets
They are talking about wallstreetbets subreddit
https://www.reddit.com/r/wallstreetbets/
https://www.reddit.com/r/wallstreetbets/
/r/wallstreetbets or wallstreetbets both refer to the same subreddit at https://www.reddit.com/r/wallstreetbets/
Topstonks (linked above) seems to be a news aggregator and also scrapes comments from some subreddits (They have a "see original") links near each scraped comment.
I also was confused at first.
I also was confused at first.
Reddit is a composite of many subreddits.
Each subreddit is oriented around specific or a broad topic, a theme.
There is a subreddit for anything you can think of, some very niche subreddits are excellent sources of information.
Each subreddit is oriented around specific or a broad topic, a theme.
There is a subreddit for anything you can think of, some very niche subreddits are excellent sources of information.
I understand all of that. My question was about something different: how subreddits could be different websites. It was answered by the sibling commenters.
> The best advice from the worst investors on the internet
I like the catch phrase, lol
I like the catch phrase, lol
The other day a WSB poster put his whole life savings in GameStop and lost half of it: https://www.reddit.com/r/wallstreetbets/comments/j8loz1/do_i...
He bought calls AFTER the surge ... they call that a 'retarded' move. On the other side of the spectrum there was a good GME DD that was predicting a pop one hour before the Microsoft Deal.
That sub is full of extraordinarily risky (stupid) trades. It’s one of the most entertaining places for a toilet read.
This is a nice website I will definitely bookmark this. What criteria do you use to create a top 10 list?
I find it ironic, the point where I stopped going to /r/wallstreetbets is when it got popular.
Last year this time.
It's sad, it used to be a nice crowd of people, but overall, I also stopped going to Reddit. Everything seems less authentic and more forced idea of moderation/content.
--
Everyone says index fund, and they're okay but it's a big thing on Passive Investing, I really enjoy Michael Burry 's quip about passive investing being the next big fall:
https://www.bloomberg.com/news/articles/2019-09-04/michael-b...
And seeing it repeated over and over again on social media/reddit, where people are not experts, fiduciaries or can do simple functions in Excel make me wonder what else would be in the same regard.
Last year this time.
It's sad, it used to be a nice crowd of people, but overall, I also stopped going to Reddit. Everything seems less authentic and more forced idea of moderation/content.
--
Everyone says index fund, and they're okay but it's a big thing on Passive Investing, I really enjoy Michael Burry 's quip about passive investing being the next big fall:
https://www.bloomberg.com/news/articles/2019-09-04/michael-b...
And seeing it repeated over and over again on social media/reddit, where people are not experts, fiduciaries or can do simple functions in Excel make me wonder what else would be in the same regard.
> Everyone says index fund, and they're okay but it's a big thing on Passive Investing, I really enjoy Michael Burry 's quip about passive investing being the next big fall:
Michael Burry is wrong. Going with index funds is no more and no less than investing in the entire market, so unless the entire stock market fails (i.e., every publicly traded company collapses, which would be akin to the economy collapsing), you'll be fine.
And even if there's a major rout, if you put in a little every month via continuous, automatic investing (sometimes mistakenly labelled "dollar cost averaging"), you'll probably do well over the long term. Someone putting a little in at a time (which most of us do monthly for retirement) would have even done pretty well through the 1930s Great Depression (notwithstanding high unemployment, etc) to come out on the other end 25+ years later.
If you believe the economy will completely collapse and not ever recover you're also likely to be someone who has an underground bunker.
Michael Burry is wrong. Going with index funds is no more and no less than investing in the entire market, so unless the entire stock market fails (i.e., every publicly traded company collapses, which would be akin to the economy collapsing), you'll be fine.
And even if there's a major rout, if you put in a little every month via continuous, automatic investing (sometimes mistakenly labelled "dollar cost averaging"), you'll probably do well over the long term. Someone putting a little in at a time (which most of us do monthly for retirement) would have even done pretty well through the 1930s Great Depression (notwithstanding high unemployment, etc) to come out on the other end 25+ years later.
If you believe the economy will completely collapse and not ever recover you're also likely to be someone who has an underground bunker.
> Going with index funds is no more and no less than investing in the entire market
I don't think that's entirely true. When most people talk about investing in index funds they're largely talking about funds like eg. $SPY, not total market funds like $VTI.
There's certainly a case to be made that increasing passive investing in certain indices (like $SPY) causes companies within the index to be overvalued simply because of the nature of passive investing. You often see companies getting a big boost in their share price simply for joining the S&P, even though reason would dictate that there's nothing fundamentally different about the company.
The usual counterargument to this is that we should reach an equilibrium where active managers will then be free to invest in companies that are undervalued simply because they're not a part of an index, but of course that also is making a number of assumptions.
Without reading the article too deeply I'm not sure if that's Burry's specific criticism, but it's one that's not uncommon and certainly isn't completely outlandish.
I don't think that's entirely true. When most people talk about investing in index funds they're largely talking about funds like eg. $SPY, not total market funds like $VTI.
There's certainly a case to be made that increasing passive investing in certain indices (like $SPY) causes companies within the index to be overvalued simply because of the nature of passive investing. You often see companies getting a big boost in their share price simply for joining the S&P, even though reason would dictate that there's nothing fundamentally different about the company.
The usual counterargument to this is that we should reach an equilibrium where active managers will then be free to invest in companies that are undervalued simply because they're not a part of an index, but of course that also is making a number of assumptions.
Without reading the article too deeply I'm not sure if that's Burry's specific criticism, but it's one that's not uncommon and certainly isn't completely outlandish.
> they're largely talking about funds like eg. $SPY, not total market funds like $VTI.
What makes you say that? The S&P 500 is "the market", but there are lots of other valuable indexes in popular use.
For example, VTSMX, the mutual fund version of VTI, forms the backbone of all of Vanguard's FoFs — Target Date Retirement, LifeStrategy, etc.
When I discuss index funds with fellow investors, I'm absolutely referring to VTI, as well as funds like VT, BND, etc.
What makes you say that? The S&P 500 is "the market", but there are lots of other valuable indexes in popular use.
For example, VTSMX, the mutual fund version of VTI, forms the backbone of all of Vanguard's FoFs — Target Date Retirement, LifeStrategy, etc.
When I discuss index funds with fellow investors, I'm absolutely referring to VTI, as well as funds like VT, BND, etc.
> When most people talk about investing in index funds they're largely talking about funds like eg. $SPY, not total market funds like $VTI.
You're not wrong, but for most people, most of the time, this quibble is not worth getting into.
Too many people are not saving anything, either because they (feel they) don't have enough income, are too scared of headlines, or just are not financially literate enough. If these people manage to get something (anything) going, even if it is into a 'non-optimal' S&P 500 fund, that's getting them from 0 to 80. I would be happy with more people doing 'only' that.
If you want to try to try to get them from 80 to 100, be my guest: but IMHO the perfect is the enemy of the good in this case.
> The usual counterargument to this is that we should reach an equilibrium where active managers will then be free to invest in companies that are undervalued simply because they're not a part of an index, but of course that also is making a number of assumptions.
There will always people who think they can do better, and some of those people will be right (at least some of the time):
* https://en.wikipedia.org/wiki/Grossman-Stiglitz_Paradox
You're not wrong, but for most people, most of the time, this quibble is not worth getting into.
Too many people are not saving anything, either because they (feel they) don't have enough income, are too scared of headlines, or just are not financially literate enough. If these people manage to get something (anything) going, even if it is into a 'non-optimal' S&P 500 fund, that's getting them from 0 to 80. I would be happy with more people doing 'only' that.
If you want to try to try to get them from 80 to 100, be my guest: but IMHO the perfect is the enemy of the good in this case.
> The usual counterargument to this is that we should reach an equilibrium where active managers will then be free to invest in companies that are undervalued simply because they're not a part of an index, but of course that also is making a number of assumptions.
There will always people who think they can do better, and some of those people will be right (at least some of the time):
* https://en.wikipedia.org/wiki/Grossman-Stiglitz_Paradox
The concern isn't that it's bad on the individual level, but that it might represent a long-term structural problem when everyone's doing it. If we end up in a scenario where the prices of S&P 500 stocks are determined primarily by the number of indexed investors rather than the performance of the underlying companies... well, that's a Ponzi structure, where the performance of index funds depends critically on people continuing to invest in them.
Although it appears (https://www.economist.com/business/2020/08/06/joining-the-s-...) that we aren't actually heading towards that scenario right now, I think it's a possibility worth some concern.
Although it appears (https://www.economist.com/business/2020/08/06/joining-the-s-...) that we aren't actually heading towards that scenario right now, I think it's a possibility worth some concern.
> If we end up in a scenario where the prices of S&P 500 stocks are determined primarily by the number of indexed investors rather than the performance of the underlying companies...
The prices of individual equities is determined by buyers and sellers coming to an agreement, not buy-and-holders. As long as there are two people who think they can take advantage of each other, there will be price discovery:
* https://en.wikipedia.org/wiki/Grossman-Stiglitz_Paradox
Ben Felix, of PWL Capital in Canada, has good article/video on this:
* https://www.pwlcapital.com/there-is-no-such-thing-as-an-inde...
* https://rationalreminder.ca/blog/2020/1/31/there-is-no-such-...
From the article(s), Blackrock estimated that only about 5% of buy and selling is done by index funds, so the vast majority of market activity, where price discovery happens, is still with the active folks.
See also the recent financial markets discussion with some of the sub-threads on about the (alleged?) usefulness of HFT systems in keeping liquidity high:
* https://news.ycombinator.com/item?id=24746836
The prices of individual equities is determined by buyers and sellers coming to an agreement, not buy-and-holders. As long as there are two people who think they can take advantage of each other, there will be price discovery:
* https://en.wikipedia.org/wiki/Grossman-Stiglitz_Paradox
Ben Felix, of PWL Capital in Canada, has good article/video on this:
* https://www.pwlcapital.com/there-is-no-such-thing-as-an-inde...
* https://rationalreminder.ca/blog/2020/1/31/there-is-no-such-...
From the article(s), Blackrock estimated that only about 5% of buy and selling is done by index funds, so the vast majority of market activity, where price discovery happens, is still with the active folks.
See also the recent financial markets discussion with some of the sub-threads on about the (alleged?) usefulness of HFT systems in keeping liquidity high:
* https://news.ycombinator.com/item?id=24746836
> You're not wrong, but for most people, most of the time, this quibble is not worth getting into.
Sure. I assumed we were talking about whether passive investing could potentially cause negative effects at scale, not whether your average person should invest or not. I don't think the latter is much of a discussion (i.e. yes, they should).
When people criticize passive investing, they're largely criticizing increased institutional passive investment, not retail investors--retail investors don't generally affect the market much one way or the other. And yes, even many institutional funds invest in indices that aren't just total market indices.
If the concern about said passive investing is valid, this of course may end up affecting many average americans down the line, eg. CalSTRS is one of the largest funds in the world.
Sure. I assumed we were talking about whether passive investing could potentially cause negative effects at scale, not whether your average person should invest or not. I don't think the latter is much of a discussion (i.e. yes, they should).
When people criticize passive investing, they're largely criticizing increased institutional passive investment, not retail investors--retail investors don't generally affect the market much one way or the other. And yes, even many institutional funds invest in indices that aren't just total market indices.
If the concern about said passive investing is valid, this of course may end up affecting many average americans down the line, eg. CalSTRS is one of the largest funds in the world.
> I don't think that's entirely true. When most people talk about investing in index funds they're largely talking about funds like eg. $SPY, not total market funds like $VTI.
My personal performance of investing in all three categories (total market index, S&P 500 index, NASDAQ-100 index) matches every chart you can find online over last 5 years; the total index funds are carrying the baggage of all that "not S&P" weight and are worse returns than the 500, with the 100 achieving almost twice the performance as the 500 (near 24% returns over 5y).
The new "target retirement date" funds are falling below all three with the highest expenses and lowest returns, worse than a generic total market fund, $0.02 anecdata from a lifetime passive investor in index funds. (I'm still in the red this year on small cap specific and world growth and similar "diversification" funds, they're by far the biggest money wastes compared to passive index fund investing in my portfolio)
My personal performance of investing in all three categories (total market index, S&P 500 index, NASDAQ-100 index) matches every chart you can find online over last 5 years; the total index funds are carrying the baggage of all that "not S&P" weight and are worse returns than the 500, with the 100 achieving almost twice the performance as the 500 (near 24% returns over 5y).
The new "target retirement date" funds are falling below all three with the highest expenses and lowest returns, worse than a generic total market fund, $0.02 anecdata from a lifetime passive investor in index funds. (I'm still in the red this year on small cap specific and world growth and similar "diversification" funds, they're by far the biggest money wastes compared to passive index fund investing in my portfolio)
> My personal performance of investing in all three categories (total market index, S&P 500 index, NASDAQ-100 index) matches every chart you can find online over last 5 years; the total index funds are carrying the baggage of all that "not S&P" weight and are worse returns than the 500, with the 100 achieving almost twice the performance as the 500 (near 24% returns over 5y).
I think you're perhaps inadvertently proving my point: If S&P funds are performing significantly better than total market funds, either there's something particularly special about S&P companies (very valid reasoning, it's not a random assortment) or S&P companies are overvalued simply because they're part of the S&P and investors value that more than perhaps the fundamentals would support (not a completely asinine thought).
I think you're perhaps inadvertently proving my point: If S&P funds are performing significantly better than total market funds, either there's something particularly special about S&P companies (very valid reasoning, it's not a random assortment) or S&P companies are overvalued simply because they're part of the S&P and investors value that more than perhaps the fundamentals would support (not a completely asinine thought).
> I think you're perhaps inadvertently proving my point
Yes sorry that was the intention - the "market mechanics" which I observe as a passive investor support your theory, as well as my own choices in how I move that money. My goal is overall return on investment as opposed to say socially-conscious or other types of investing choices (although I have dabbled in some of the socially conscious funds, good for the soul but not really the pocketbook); the data shows that using the index funds over total market funds is a better financial choice for a guy like me who just wants to "sort of care from time to time" over the long term.
Yes sorry that was the intention - the "market mechanics" which I observe as a passive investor support your theory, as well as my own choices in how I move that money. My goal is overall return on investment as opposed to say socially-conscious or other types of investing choices (although I have dabbled in some of the socially conscious funds, good for the soul but not really the pocketbook); the data shows that using the index funds over total market funds is a better financial choice for a guy like me who just wants to "sort of care from time to time" over the long term.
Ahh, gotcha. Cheers then!
> matches every chart you can find online over last 5 years; the total index funds are carrying the baggage of all that "not S&P" weight and are worse returns than the 500, with the 100 achieving almost twice the performance as the 500 (near 24% returns over 5y).
Looking at only the last five years is myopic and not wise. You may want to look up the "Lost Decade" of the S&P 500 from 2000 to 2009.
See also this recent <15 minute video from Index Fund Advisors entitled "50 Year Market Review" for a longer perspective:
* https://www.youtube.com/watch?v=M82Veytnsfw
Looking at only the last five years is myopic and not wise. You may want to look up the "Lost Decade" of the S&P 500 from 2000 to 2009.
See also this recent <15 minute video from Index Fund Advisors entitled "50 Year Market Review" for a longer perspective:
* https://www.youtube.com/watch?v=M82Veytnsfw
> Looking at only the last five years is myopic and not wise. You may want to look up the "Lost Decade" of the S&P 500 from 2000 to 2009.
I'm 50+, my money has been moving around these funds since the late 90s. :) I lived as a tech worker through all the 2000-2010 had to offer us, everyone took a beating not just index funds. Besides that point, holding a fund 5 years is normal - it's not like you have to keep a fund longer than 5, make your money and let it go. Roll it over into something else - passive investing does not mean ignoring your investing, you must still tend to your crops from time to time.
I'm 50+, my money has been moving around these funds since the late 90s. :) I lived as a tech worker through all the 2000-2010 had to offer us, everyone took a beating not just index funds. Besides that point, holding a fund 5 years is normal - it's not like you have to keep a fund longer than 5, make your money and let it go. Roll it over into something else - passive investing does not mean ignoring your investing, you must still tend to your crops from time to time.
> I lived as a tech worker through all the 2000-2010 had to offer us, everyone took a beating not just index funds.
Seems to have been not too bad if one had some bonds and rebalanced:
* https://www.forbes.com/sites/investor/2010/12/17/the-lost-de...
> Besides that point, holding a fund 5 years is normal - it's not like you have to keep a fund longer than 5, make your money and let it go.
Why would one jump from one fund to another?
> Roll it over into something else - passive investing does not mean ignoring your investing, you must still tend to your crops from time to time.
Tend in what way? I can think of perhaps rebalancing so if you're doing a multi-fund setup with particularly desired asset allocation (bonds, equities: US, world, EM). But if you're using (say) a target date fund, what's there to do?
In Canada we have "all-in-one" ETFs that have particular asset allocations which do rebalancing internally:
* https://milliondollarjourney.com/all-in-one-etfs-battle-vang...
* https://www.savvynewcanadians.com/all-in-one-etf-portfolios-...
Perhaps as one moves closer to retirement then change the bond component, but what is there to otherwise tend?
Seems to have been not too bad if one had some bonds and rebalanced:
* https://www.forbes.com/sites/investor/2010/12/17/the-lost-de...
> Besides that point, holding a fund 5 years is normal - it's not like you have to keep a fund longer than 5, make your money and let it go.
Why would one jump from one fund to another?
> Roll it over into something else - passive investing does not mean ignoring your investing, you must still tend to your crops from time to time.
Tend in what way? I can think of perhaps rebalancing so if you're doing a multi-fund setup with particularly desired asset allocation (bonds, equities: US, world, EM). But if you're using (say) a target date fund, what's there to do?
In Canada we have "all-in-one" ETFs that have particular asset allocations which do rebalancing internally:
* https://milliondollarjourney.com/all-in-one-etfs-battle-vang...
* https://www.savvynewcanadians.com/all-in-one-etf-portfolios-...
Perhaps as one moves closer to retirement then change the bond component, but what is there to otherwise tend?
> Tend in what way? I can think of perhaps rebalancing so if you're doing a multi-fund setup with particularly desired asset allocation (bonds, equities: US, world, EM). But if you're using (say) a target date fund, what's there to do?
(General response, just quoting this part) - life is messy, things change around you. My 401k for example (throughout different jobs) bounces around, I've had Schwab, WellsFargo, Vanguard (even some no-brand way back when) who each offer their own strategies; some having severely limited options, some having open playing fields - in 2000 WellsFargo may have offered 1 of 3 choices IIRC. In 2020, they have 30 choices (many are target date funds) - but Schwab is open-ended, do what you want; when your money rolls over from one to the other, it's usually a liquidation and cash transfer (although I've used in-kind for a Roth IRA, worked OK but not perfect - lost some cost basis data, had to repair). I do not get to choose where my 401k is hosted in USA, your company chooses the vendor - this may differ up there in Soviet Canuckistan. :)
Some companies shut down their investment division (USAA -> Victory Capital recently), so what was a no-fee no-load option at that company now costs $$ at another company - for example, I think Vanguard funds are free to trade on Vanguard but really expensive on Schwab, so if you held VFINX and rolled it in-kind over to Schwab it would now cost you more than if you unloaded VFINX and replaced it with SWPPX. Some funds are unique to that company and it's hard to find replacements (USAA's USNQX e.g.) so you might choose to eat cross-vendor fees because it's performance is just that good. Really depends on all the "what's free to trade at this vendor" - it's not always an even playing field, each vendor wants to push their in-house flavour of the index.
Different category but related: company stock - for whatever reason, that's almost always been E-Trade (now Morgan Stanley!) in tech; both Google and Red Hat offered friends-of-company shares exclusively though E-Trade, my company does it, etc. - so now I have yet another vendor to deal with and it tends to grow arms and legs unless you keep pulling money out and pushing it over to your preferred vendors. Target funds are actively managed assets, they have higher fees and constant re-balancing being done by humans to meet "the target" - they're still kind of new (many created mid-2010s I think) so we only have so much data, but generally they're 4-star and lag (returns) behind any common 5-star index fund. (compare 2 from the same vendor, for example SWPPX vs SWYGX but almost all vendors have them now, this is not investing advice).
(General response, just quoting this part) - life is messy, things change around you. My 401k for example (throughout different jobs) bounces around, I've had Schwab, WellsFargo, Vanguard (even some no-brand way back when) who each offer their own strategies; some having severely limited options, some having open playing fields - in 2000 WellsFargo may have offered 1 of 3 choices IIRC. In 2020, they have 30 choices (many are target date funds) - but Schwab is open-ended, do what you want; when your money rolls over from one to the other, it's usually a liquidation and cash transfer (although I've used in-kind for a Roth IRA, worked OK but not perfect - lost some cost basis data, had to repair). I do not get to choose where my 401k is hosted in USA, your company chooses the vendor - this may differ up there in Soviet Canuckistan. :)
Some companies shut down their investment division (USAA -> Victory Capital recently), so what was a no-fee no-load option at that company now costs $$ at another company - for example, I think Vanguard funds are free to trade on Vanguard but really expensive on Schwab, so if you held VFINX and rolled it in-kind over to Schwab it would now cost you more than if you unloaded VFINX and replaced it with SWPPX. Some funds are unique to that company and it's hard to find replacements (USAA's USNQX e.g.) so you might choose to eat cross-vendor fees because it's performance is just that good. Really depends on all the "what's free to trade at this vendor" - it's not always an even playing field, each vendor wants to push their in-house flavour of the index.
Different category but related: company stock - for whatever reason, that's almost always been E-Trade (now Morgan Stanley!) in tech; both Google and Red Hat offered friends-of-company shares exclusively though E-Trade, my company does it, etc. - so now I have yet another vendor to deal with and it tends to grow arms and legs unless you keep pulling money out and pushing it over to your preferred vendors. Target funds are actively managed assets, they have higher fees and constant re-balancing being done by humans to meet "the target" - they're still kind of new (many created mid-2010s I think) so we only have so much data, but generally they're 4-star and lag (returns) behind any common 5-star index fund. (compare 2 from the same vendor, for example SWPPX vs SWYGX but almost all vendors have them now, this is not investing advice).
Okay, I understand now.
In Canada our 401k-equivalent is the Registered Retirement Saving Plan (RRSP). Most companies have something similar to what you describe in that they hook up with a financial services company and do contribution matching. That company has certain offerings, either mutual fund (often fees/MERs > 1%) or if you're lucky perhaps ETFs nowadays.
I frequent /r/PersonalFinanceCanada and semi-often we get people asking which of the offered mutual funds should someone buy. The general consensus is that for most people to choose the funds that have the lowest fees and closely match a equity or bond index: pick a bond percentage weighting that generally let's you sleep at night.
When you leave a job you can often leave the money with the financial company, but it's often easier to do a liquidate-and-transfer to a 'central' RRSP account if you hope around a lot.
In Canada our 401k-equivalent is the Registered Retirement Saving Plan (RRSP). Most companies have something similar to what you describe in that they hook up with a financial services company and do contribution matching. That company has certain offerings, either mutual fund (often fees/MERs > 1%) or if you're lucky perhaps ETFs nowadays.
I frequent /r/PersonalFinanceCanada and semi-often we get people asking which of the offered mutual funds should someone buy. The general consensus is that for most people to choose the funds that have the lowest fees and closely match a equity or bond index: pick a bond percentage weighting that generally let's you sleep at night.
When you leave a job you can often leave the money with the financial company, but it's often easier to do a liquidate-and-transfer to a 'central' RRSP account if you hope around a lot.
I think the USA is sort of the same, my experience is layperson so I don't know if this is typical or normal: the company itself pays a fee to the vendor to maintain your 401k account under whatever the 401k legalities are (taxes being deferred etc.). A lot of time the funds available to choose from are the "institutional" kind that us mere mortals can't buy, only large vendors. So our money is pool-leveraged at scale using techniques and funds we individuals cannot access.
When you leave that employer, you can leave your 401k at that vendor but after awhile the old company starts to bug you about moving it as it's costing them money to maintain an account for an ex-employee. I missed that subtle point you noted - most companies (? all?) only match contributions to their vendor 401k, so there's our internal-company incentive to get you onto their plan to get those sweet, sweet matching dollars.
When you leave that employer, you can leave your 401k at that vendor but after awhile the old company starts to bug you about moving it as it's costing them money to maintain an account for an ex-employee. I missed that subtle point you noted - most companies (? all?) only match contributions to their vendor 401k, so there's our internal-company incentive to get you onto their plan to get those sweet, sweet matching dollars.
You may want to look up the "Lost Decade" of the S&P 500 from 2000 to 2009.
Why is that 9 year period special? You're just picking two bottoms of the market. 9/2002 to 2/2009 is -7% even with dividends.
But if I push it out only 1 year (9/2002 to 2/2010) the return is +25%.
Why is that 9 year period special? You're just picking two bottoms of the market. 9/2002 to 2/2009 is -7% even with dividends.
But if I push it out only 1 year (9/2002 to 2/2010) the return is +25%.
> But if I push it out only 1 year (9/2002 to 2/2010) the return is +25%.
Which is kind of my point: many people are looking at the last ten years and seeing that equities/S&P 500 can do no wrong. But things were painful in the previous decade. But then pretty good again in the 1990s.
See Index Fund Advisors' recent ~15 minute video "50 Year Market Review":
* https://www.youtube.com/watch?v=M82Veytnsfw
A lot of people are dumping money into $SPY and and $QQQ, and that's certainly worked recently, but may not work all the time, especially if you have another few decades to go until retirement (which is many/most people's primary long-term financial goal is).
Which is kind of my point: many people are looking at the last ten years and seeing that equities/S&P 500 can do no wrong. But things were painful in the previous decade. But then pretty good again in the 1990s.
See Index Fund Advisors' recent ~15 minute video "50 Year Market Review":
* https://www.youtube.com/watch?v=M82Veytnsfw
A lot of people are dumping money into $SPY and and $QQQ, and that's certainly worked recently, but may not work all the time, especially if you have another few decades to go until retirement (which is many/most people's primary long-term financial goal is).
> Which is kind of my point: many people are looking at the last ten years and seeing that equities/S&P 500 can do no wrong. But things were painful in the previous decade.
I will posit that 40 years is probably a bulk of the average person's investing years (25-65), and I may be being generous in "average" based on how often I read people do not invest (if true).
40 year (1980-2020) chart for VFINX (Vanguard S&P 500) - a share was $20 in 1980 (~$63 adjusted for inflation 2020); trades at $320 today. Using a random historical rate of return calculator[1], $10k one time invested in an S&P 500 index in 1980 is just shy of $238k at the end of 2019 at 8.5% return.
[1] https://financial-calculators.com/historical-investment-calc...
I will posit that 40 years is probably a bulk of the average person's investing years (25-65), and I may be being generous in "average" based on how often I read people do not invest (if true).
40 year (1980-2020) chart for VFINX (Vanguard S&P 500) - a share was $20 in 1980 (~$63 adjusted for inflation 2020); trades at $320 today. Using a random historical rate of return calculator[1], $10k one time invested in an S&P 500 index in 1980 is just shy of $238k at the end of 2019 at 8.5% return.
[1] https://financial-calculators.com/historical-investment-calc...
> I will posit that 40 years is probably a bulk of the average person's investing years (25-65)
Except that at 65 (the 'traditional' retirement age) one generally doesn't just liquidate all one's equity holdings.
Best practices is generally to increase bond holdings as one ages, but going all-bonds/fixed income is rarely done as I understand things. Unless you've built up enough cash to simply buy an annuity so that it's now the insurance company's problem, or one has a pension, some form of equity returns are needed.
At 65, most people's average life expectancy can be another twenty years in most developed countries (with a 50% chance of making it into one's 90s), so from start (ending school) to finish (death), that could be 60 years. And that doesn't include a partner that may live beyond you if they're of a younger age, and so would also use whatever resources are left for their own needs.
Except that at 65 (the 'traditional' retirement age) one generally doesn't just liquidate all one's equity holdings.
Best practices is generally to increase bond holdings as one ages, but going all-bonds/fixed income is rarely done as I understand things. Unless you've built up enough cash to simply buy an annuity so that it's now the insurance company's problem, or one has a pension, some form of equity returns are needed.
At 65, most people's average life expectancy can be another twenty years in most developed countries (with a 50% chance of making it into one's 90s), so from start (ending school) to finish (death), that could be 60 years. And that doesn't include a partner that may live beyond you if they're of a younger age, and so would also use whatever resources are left for their own needs.
Target date retirement funds aren't new? And they include bonds, so of course you're not going to beat the market with them.
Most target date funds (Vanguard, Fidelity's Zero funds, Schwab's Target Date Index) use passive index funds and are exceedingly cheap and have excellent performance. Schwab's have a net ER of just 0.08%, the lowest in the industry, beating Vanguard by 7 basis points.
There are some ridiculously complicated and overpriced TDFs (T. Rowe Price comes to mind) out there, of course. Knowing what you buy is important.
The reason the NASDAQ 100 is beating the S&P is because of FAANG stocks, and the trend has mostly been the last decade or so. Meanwhile, the total market index is pretty much on par with the S&P since 1992 [1].
[1] https://www.portfoliovisualizer.com/backtest-portfolio?s=y&t...
Most target date funds (Vanguard, Fidelity's Zero funds, Schwab's Target Date Index) use passive index funds and are exceedingly cheap and have excellent performance. Schwab's have a net ER of just 0.08%, the lowest in the industry, beating Vanguard by 7 basis points.
There are some ridiculously complicated and overpriced TDFs (T. Rowe Price comes to mind) out there, of course. Knowing what you buy is important.
The reason the NASDAQ 100 is beating the S&P is because of FAANG stocks, and the trend has mostly been the last decade or so. Meanwhile, the total market index is pretty much on par with the S&P since 1992 [1].
[1] https://www.portfoliovisualizer.com/backtest-portfolio?s=y&t...
> Target date retirement funds aren't new?
Yeah I don't pretend to be a pro to know what constitutes "new", other than for example "many 2020 target date funds were created 2005-2008 at the major vendors" - is that "new"? Is 15 years "tenured"? shrug Compared to an index fund going back to 1980, I tend to think that's "new" in the long term skyline of mutual funds.
Yeah I don't pretend to be a pro to know what constitutes "new", other than for example "many 2020 target date funds were created 2005-2008 at the major vendors" - is that "new"? Is 15 years "tenured"? shrug Compared to an index fund going back to 1980, I tend to think that's "new" in the long term skyline of mutual funds.
Target date funds have existed since the 1990s. The age of current TDFs is skewed by the fact that they are created with a specific time horizon; Vanguard's 2065 fund was only created in 2017, for example, for obvious reasons.
TDFs are just funds-of-funds, so you only need to know the characteristics of the underlying funds to understand their makeup and performance. Vanguard's TDFs, for example, are composed of some of the most highly respected index mutual funds in the business.
There are other arguments for not holding target date funds, but generally speaking I think they're the best investment that your average retail investor can make.
TDFs are just funds-of-funds, so you only need to know the characteristics of the underlying funds to understand their makeup and performance. Vanguard's TDFs, for example, are composed of some of the most highly respected index mutual funds in the business.
There are other arguments for not holding target date funds, but generally speaking I think they're the best investment that your average retail investor can make.
> There are other arguments for not holding target date funds, but generally speaking I think they're the best investment that your average retail investor can make.
(I am an amateur, maybe I'm making this too simple) If I look up August 1st 2006 to 2020 for two Vanguard funds which are competing during this time frame, VFINX (S&P500) and VTWNX (TDF 2020), a person ~50yo (assuming 65 retirement target 2020) who had a choice in 2006 (the month after the TDF was created, impossible to invest before then) where to put their money:
(I am an amateur, maybe I'm making this too simple) If I look up August 1st 2006 to 2020 for two Vanguard funds which are competing during this time frame, VFINX (S&P500) and VTWNX (TDF 2020), a person ~50yo (assuming 65 retirement target 2020) who had a choice in 2006 (the month after the TDF was created, impossible to invest before then) where to put their money:
VFINX $120 - $325 (2.70x)
VTWNX $ 20 - $ 35 (1.75x)
You can't compare the S&P 500 with a fund that, at age 50, would hold 25% in bonds. Of course the TDF will lose.
The function of gradually transitioning to bonds is to hedge against inflation, lock in profits, and buffer against market volatility. Those are useless for someone just starting out in their 20s — which is why TDFs start out with very little bonds — but important to someone whose time horizon is just 15 years. Someone at age 50 should be extremely careful about holding just the S&P.
Also, keep in mind that the equity portion of Vanguard's TDFs are 60/40 US/international, because that's what Vanguard thinks gives you best diversification [1]. Depending on the time period you measure, international does either better or worse than the US [2].
You may be interested in reading about Vanguard's target date fund philosophy. [3]
[1] https://www.vanguard.com/pdf/ISGGEB.pdf
[2] https://www.fidelity.com/viewpoints/investing-ideas/internat...
[3] https://personal.vanguard.com/pdf/ISGTDF.pdf
The function of gradually transitioning to bonds is to hedge against inflation, lock in profits, and buffer against market volatility. Those are useless for someone just starting out in their 20s — which is why TDFs start out with very little bonds — but important to someone whose time horizon is just 15 years. Someone at age 50 should be extremely careful about holding just the S&P.
Also, keep in mind that the equity portion of Vanguard's TDFs are 60/40 US/international, because that's what Vanguard thinks gives you best diversification [1]. Depending on the time period you measure, international does either better or worse than the US [2].
You may be interested in reading about Vanguard's target date fund philosophy. [3]
[1] https://www.vanguard.com/pdf/ISGGEB.pdf
[2] https://www.fidelity.com/viewpoints/investing-ideas/internat...
[3] https://personal.vanguard.com/pdf/ISGTDF.pdf
Edit: Hedge against deflation, not inflation.
I wasn't stating my question clearly, apologies - I'm on board with the reasons and the theories (and do not argue), but here's where my brain is having a problem - why not invest in the index fund until you're 65 and then roll it over into a TDF at 65? You get more bang for the buck even paying the capital gains tax after 15 years and taking the money you earned and have more TDF buying power. You (me) do not need the benefits of the TDF until I actually retire (well I won't, am I common?).
Parameters for my math: already-income-taxed dollars; $1200 one-time investment in 2006 (no re-investments of dividends, etc.) and capital gains of 15% (middle tier). Just to make the math round nicely and account for gains tax for a rollover and forum comment. :)
This is where I'm not following why it was better for this person to buy and hold VTWNX for 15y instead of increasing gains with VFINX first, then rolling it over into that more "bond-like" scenario later. Feels like I'm leaving money on the table as 40 years of market data shows the index @8.25% just keeps going up over time (even when you lose like in 2009 with a low of $68, the loss is still higher than 1995 value of $55 without inflation adjustments).
Parameters for my math: already-income-taxed dollars; $1200 one-time investment in 2006 (no re-investments of dividends, etc.) and capital gains of 15% (middle tier). Just to make the math round nicely and account for gains tax for a rollover and forum comment. :)
2006 - buy
VFINX @ 120 == 10 shares
VTWNX @ 20 == 60 shares
2020 - sell
VFINX @ 325 == (325*10)*.85 == 2762.50
VTWNX @ 35 == ( 35*60)*.85 == 1785.00
This is where I'm not following why it was better for this person to buy and hold VTWNX for 15y instead of increasing gains with VFINX first, then rolling it over into that more "bond-like" scenario later. Feels like I'm leaving money on the table as 40 years of market data shows the index @8.25% just keeps going up over time (even when you lose like in 2009 with a low of $68, the loss is still higher than 1995 value of $55 without inflation adjustments).
If you think the S&P will hold up until the day you retire, sure.
In that case, I wouldn't use a TDF (because you have no target date); I'd move to a balanced fund such as Vanguard LifeStrategy.
But a pure equity portfolio is considered very aggressive and risky for someone close to retirement. What if another 2008 happens?
Bonds reduce volatility. Look at the mid-March 2020 drop. At the lowest, the S&P was -32% YTD. BND's lowest point was -4% and was positive 2 weeks later. S&P didn't pass zero until August, more than 5 months later.
Bonds also allow you to lock in your gains. Being less volatile, the bond portion is much safer than stocks. Your main enemy there is inflation, which is why many TDFs supplement with US TIPS.
I understand if you want to be aggressive. That's fine, and you don't have to use a TDF. I know J. L. Collins (who's retired) caps his bond allocation to 20%.
But I don't think strategy is for everyone.
In that case, I wouldn't use a TDF (because you have no target date); I'd move to a balanced fund such as Vanguard LifeStrategy.
But a pure equity portfolio is considered very aggressive and risky for someone close to retirement. What if another 2008 happens?
Bonds reduce volatility. Look at the mid-March 2020 drop. At the lowest, the S&P was -32% YTD. BND's lowest point was -4% and was positive 2 weeks later. S&P didn't pass zero until August, more than 5 months later.
Bonds also allow you to lock in your gains. Being less volatile, the bond portion is much safer than stocks. Your main enemy there is inflation, which is why many TDFs supplement with US TIPS.
I understand if you want to be aggressive. That's fine, and you don't have to use a TDF. I know J. L. Collins (who's retired) caps his bond allocation to 20%.
But I don't think strategy is for everyone.
> If I look up August 1st 2006 to 2020 for two Vanguard funds which are competing during this time frame, VFINX (S&P500)
Equities can have periods of not-great performance, which can be offset by holding some bonds (20-30%) to rebalance:
* https://www.forbes.com/sites/investor/2010/12/17/the-lost-de...
Pure returns/yield aren't the only reason to hold a particular financial asset (though it is a good one of course):
https://awealthofcommonsense.com/2020/08/why-would-anyone-ow...
Equities can have periods of not-great performance, which can be offset by holding some bonds (20-30%) to rebalance:
* https://www.forbes.com/sites/investor/2010/12/17/the-lost-de...
Pure returns/yield aren't the only reason to hold a particular financial asset (though it is a good one of course):
https://awealthofcommonsense.com/2020/08/why-would-anyone-ow...
The story of “Bob”, the world’s worst market timer:
https://awealthofcommonsense.com/2014/02/worlds-worst-market...
https://awealthofcommonsense.com/2014/02/worlds-worst-market...
Yup: follow Ben Carlson (the author of that weblog). As well as his colleague Michael Batnick (https://theirrelevantinvestor.com) and Nick Maggiulli (https://ofdollarsanddata.com).
All the publicly facing folks at Ritholtz Wealth Management seem to be top tier.
All the publicly facing folks at Ritholtz Wealth Management seem to be top tier.
Burry argues that the nuts and bolts of actually implementing a large passive index fund break if enough people sell at once. The price will diverge from the actual underlying assets, causing more selling, causing more divergence, etc. If perfectly implemented (as in you actually get a slice of all companies in the index) then it would work as advertised. This isn’t the case in real life though.
> Burry argues that the nuts and bolts of actually implementing a large passive index fund break if enough people sell at once.
What seems to be happening is more inflows into index funds as time goes on from the articles I've seen. Most people, so far, seem to be keeping their heads and even loading up during downturns (buying low).
The other thing with index funds is that they're often automated (e.g., monthly saving for retirement), so a lot of folks aren't actually looking at their portfolios (generally a good thing), and so are going on with their daily lives regardless of financial headlines.
What seems to be happening is more inflows into index funds as time goes on from the articles I've seen. Most people, so far, seem to be keeping their heads and even loading up during downturns (buying low).
The other thing with index funds is that they're often automated (e.g., monthly saving for retirement), so a lot of folks aren't actually looking at their portfolios (generally a good thing), and so are going on with their daily lives regardless of financial headlines.
Failed companies are dropped from stock market indices, so I wonder if investing in indices is in effect a method of biasing the selection in favor of "winners" over the general performance of the economy....?
It is, but mostly due to their selection process, basically removing poorly performing companies and adding sane one that are about to grow.
Wallstreetbets has always been this way. It’s not an investing sub. It’s a gambling sub. If you want to get more serious about your gambling, there’s r/options. If you want to actually invest, there are subs for buying and selling stocks.
I do think it’s hilarious how much credit WSB gets in the press. A very few have made millions. The rest have collectively lost countless millions. If sophisticated firms are now analyzing the actions of WSB members, they just became even more the fish in a barrel.
I do think it’s hilarious how much credit WSB gets in the press. A very few have made millions. The rest have collectively lost countless millions. If sophisticated firms are now analyzing the actions of WSB members, they just became even more the fish in a barrel.
All correct. Referring to WSB as (having ever been) "nice people" also seems an odd way to view the sub. The entire fun of WSB has always been the
4chan humor coupled with the gravity of real money.
I doubt that pro traders are buying simple calls and puts like WSB. But selling them those options when groupthink takes over might be profitable, indeed.
I doubt that pro traders are buying simple calls and puts like WSB. But selling them those options when groupthink takes over might be profitable, indeed.
> I doubt that pro traders are buying simple calls and puts like WSB. But selling them those options when groupthink takes over might be profitable, indeed.
Most pro traders aren't really selling options either unless they're a market makers, in which case they're hedging with stock so as to remain delta neutral.
Pro traders use options to reduce risk via hedging. It's meant to be an insurance policy to protect holdings in the underlying. Buy $10M of ABC stock and insure it with $100,000 of ABC put contracts. Of course, it was quickly turned into a high risk/high leverage speculative vehicle by gamblers.
Most pro traders aren't really selling options either unless they're a market makers, in which case they're hedging with stock so as to remain delta neutral.
Pro traders use options to reduce risk via hedging. It's meant to be an insurance policy to protect holdings in the underlying. Buy $10M of ABC stock and insure it with $100,000 of ABC put contracts. Of course, it was quickly turned into a high risk/high leverage speculative vehicle by gamblers.
I assume that pros reading WSB are reading it to better cater to and/or take advantage of that crowd rather than to “invest” alongside.
It’s akin to trying to get seated at the poker table with a terrible player. It’s not because you want to emulate their play, but rather you want to be in the game with them.
It’s akin to trying to get seated at the poker table with a terrible player. It’s not because you want to emulate their play, but rather you want to be in the game with them.
Exactly my point with the fish-in-a-barrel comment. It's kind of sad really, as many of them have gambling addictions and serious financial problems.
[deleted]
I would be interested to know which are the subreddits for actual investing.
There are a few you can check out, r/investing, options, stocks, etc.
In the r/investing sub you can find links to others as well.
In the r/investing sub you can find links to others as well.
r/securityanalysis
Michael Burry made his name by doing a deep dive on mortgage backed securities. He knew what he was talking about because he crunched the numbers before he attracted attention.
How that experience translates into macroeconomic forecasting, such as when he said farmland was the next big play, or now passive investing is bad, I don't know. Has he crunched the numbers, or is he using some theoretical framework to try to predict macroeconomic events? In any case his words attract a lot of attention now, even when he may be speaking outside his areas of expertise.
How that experience translates into macroeconomic forecasting, such as when he said farmland was the next big play, or now passive investing is bad, I don't know. Has he crunched the numbers, or is he using some theoretical framework to try to predict macroeconomic events? In any case his words attract a lot of attention now, even when he may be speaking outside his areas of expertise.
> Last year this time
WSB really hit the primetime in February/March this year.
https://i.imgur.com/oRxJe4F.png
WSB really hit the primetime in February/March this year.
https://i.imgur.com/oRxJe4F.png
As an individual you have one advantage over professional traders: complete control of your capital.
This is a huge advantage, and one that should deliver you alpha independent of having an edge, having a super computer, having a huge network, etc...
What most folks outside Wall St don't realize is that the job of a trader isn't just to maximize alpha. Most of the job boils down to getting senior management comfortable with risk so they don't walk over one day and give you the infamous "tap on the shoulder." Management's job is to get their bosses (investors in the fund.. often pensions, endowments, UHNW family offices, etc..) comfortable with the risk.
Until one day... when end investors pull their money from the fund, and management walks over to the traders with one word: "sell." Often times both management and the traders know this is the wrong trade, but they have no choice.
It's important to understand if sell-offs are caused by fundamentals or liquidity... the first part of march was the former, the second part of march was the latter.
Complete control of your capital means you don't need to be any smarter than the pros, you just need to know when the sell-off is liquidity related and not fundamentals related.
Good luck out there :)
This is a huge advantage, and one that should deliver you alpha independent of having an edge, having a super computer, having a huge network, etc...
What most folks outside Wall St don't realize is that the job of a trader isn't just to maximize alpha. Most of the job boils down to getting senior management comfortable with risk so they don't walk over one day and give you the infamous "tap on the shoulder." Management's job is to get their bosses (investors in the fund.. often pensions, endowments, UHNW family offices, etc..) comfortable with the risk.
Until one day... when end investors pull their money from the fund, and management walks over to the traders with one word: "sell." Often times both management and the traders know this is the wrong trade, but they have no choice.
It's important to understand if sell-offs are caused by fundamentals or liquidity... the first part of march was the former, the second part of march was the latter.
Complete control of your capital means you don't need to be any smarter than the pros, you just need to know when the sell-off is liquidity related and not fundamentals related.
Good luck out there :)
But they are playing games with OTHER people's money (aside from the payoff for them)
You are playing with YOUR money.
You are playing with YOUR money.
Yes. And?
The alpha dynamics of a liquidity related sell-off are heavily tilted towards folks with locked up capital. Why do you think every manager and their mother has raised a distressed fund?[1]
You can have access to that return profile simply by having some capital ready to deploy as an individual, for the reasons I described above. This can add massive alpha.
[1] https://www.bloomberg.com/news/articles/2020-06-17/record-nu...
The alpha dynamics of a liquidity related sell-off are heavily tilted towards folks with locked up capital. Why do you think every manager and their mother has raised a distressed fund?[1]
You can have access to that return profile simply by having some capital ready to deploy as an individual, for the reasons I described above. This can add massive alpha.
[1] https://www.bloomberg.com/news/articles/2020-06-17/record-nu...
The problem is that working class individuals are often in much more vulnerable positions than the capital class. What if I invested a portion of my emergency fund in late march, then got fired in June? Not a great place to be in.
Yes agreed, this dynamic exacerbates inequality. No arguments from me there.
Bloomberg writes this piece probably once a quarter now.
It makes me wonder if it's really because institutional investors find WSB relevant, or because Bloomberg is flirting with Reddit investors, and trying to attract them to their reporting
At least some part of it has to be the amount of attention these news pieces get on wsb itself. The subreddit has about 1.5 million subscribers. Any news piece by Bloomberg or Wallstreetjournal talking about r/wallstreetbests instantly gets posted over there and usually garners huge amounts of upvotes. Pretty much free traffic/ad impressions.
Example: https://reddit.com/r/wallstreetbets/comments/dj5xru/u_did_it...
Example: https://reddit.com/r/wallstreetbets/comments/dj5xru/u_did_it...
Yeah; it's a similar phenomenon to when parts of the financial press were taking bitcoin perhaps more seriously than it warranted a few years ago. Good way to expose the enthusiasts to your ads.
Ad money off news stories is a rounding error in the rounding error of Bloomberg's revenue.
but probably not to "Contributing Editor[s]" and the like
I’d subscribe to Bloomberg if it wasn’t $35.00/month.
For that price I can jump in on quite a few others instead.
For that price I can jump in on quite a few others instead.
It's because BBG is a journalism outlet trying to get views. These article doesn't contain relevant information for sophisticated investors (which the large majority of BBG readers are not)
Or if they're playing 4D chess and want more investors to make stupid mistakes by taking advice from WSB. One person's loss is another person's gain.
Well of course. No matter whether a large group of people act in a certain way on the stock market for good or bad reasons, it behooves actual professionals to be informed. So if a single source of information moves the market in one way, whether based on actual insights or just good old fashioned self serving "I bought at X, let's influence others so the value goes up" tactics, people in the business should know.
It's like being amazed that tech people all seemingly go to a message board run by a single venture capital firm to congregate, even if the number of users who have an actual business agreement with said firm is essentially a rounding error of the total.
It's like being amazed that tech people all seemingly go to a message board run by a single venture capital firm to congregate, even if the number of users who have an actual business agreement with said firm is essentially a rounding error of the total.
2-3 years ago it was the Wealthfronts and Betterments of the world ruling the roost. the conventional wisdom is that most traders lose money and would be better off putting it into ETFs and mutual funds and it seemed to be winning. Bloomberg wrote fret pieces about whether there'd be anybody left to trade. now it's reversing, degeneracy is on the rise, and individual traders are 20% of equity trading volumes.
That's whats nonobvious. saying "well of course" dismisses this broader trend which is the institutional validation of something that's been extremely nonobvious.
That's whats nonobvious. saying "well of course" dismisses this broader trend which is the institutional validation of something that's been extremely nonobvious.
> the conventional wisdom is that most traders lose money and would be better off putting it into ETFs and mutual funds and it seemed to be winning. Bloomberg wrote fret pieces about whether there'd be anybody left to trade.
Don't worry, even if (say) 90% of invested money is in passive index funds, you only need a few active folks to keep things running:
* https://en.wikipedia.org/wiki/Grossman-Stiglitz_Paradox
If some AI/ML system notices a discrepancy that can be exploited it will do so.
Don't worry, even if (say) 90% of invested money is in passive index funds, you only need a few active folks to keep things running:
* https://en.wikipedia.org/wiki/Grossman-Stiglitz_Paradox
If some AI/ML system notices a discrepancy that can be exploited it will do so.
Thx Robinhood. Plus Robinhood partners get to front all of those trades anyways, right?
> Robinhood partners get to front all of those trades
If you give me, your broker, an order to buy 100 shares of Apple, and I buy Apple stock before executing your order, that's front running.
If you give me, your market maker, an order to buy 100 shares of Apple and I sell them to you out of my inventory, I'm making a market, not front running. If you give me, your execution partner, an order to buy 100 shares of Apple and I sell them to you at the national best offer (NBBO) while simultaneously or immediately thereafter buying them somewhere else for a lower price, I'm giving you execution for a price, not front running.
If you give me, your broker, an order to buy 100 shares of Apple, and I buy Apple stock before executing your order, that's front running.
If you give me, your market maker, an order to buy 100 shares of Apple and I sell them to you out of my inventory, I'm making a market, not front running. If you give me, your execution partner, an order to buy 100 shares of Apple and I sell them to you at the national best offer (NBBO) while simultaneously or immediately thereafter buying them somewhere else for a lower price, I'm giving you execution for a price, not front running.
The point is they’re not buying from an exchange. It’s all being middled for margin and harvested for data to cover the execution cost.
> they’re not buying from an exchange
Most trades haven’t been executed on exchanges since at least the 90s. Sophisticated investors are fine with this. They often seek out off-exchange execution for a variety of benefits.
The problem with Robinhood isn’t how it executes trades. It’s the kind of trading it encourages. It’s not in the shadows, it’s front and center in the UI.
Most trades haven’t been executed on exchanges since at least the 90s. Sophisticated investors are fine with this. They often seek out off-exchange execution for a variety of benefits.
The problem with Robinhood isn’t how it executes trades. It’s the kind of trading it encourages. It’s not in the shadows, it’s front and center in the UI.
How does forums or subreddit like WSB work for stock advice? At-least on TV, the advisors would disclose whether they hold positions or did they advice their clients for the same stocks since they have a reputation to protect; In public forums won't everyone just advice based on their vested interest?
Are these forums large enough for the 'law of large numbers' to do its thing and that's what these analysts are looking for?
Are these forums large enough for the 'law of large numbers' to do its thing and that's what these analysts are looking for?
It’s more or less equivalent to getting hot tips from 4chan. 95% dross, 4% illegal and 1% priceless insight. The fun part is figuring out which is which.
> 1% priceless insight
Are there real examples of this? Not "the stock was discussed on r/WSB and then went up," but a cogent line of validated analysis one would pay for on Wall Street?
Are there real examples of this? Not "the stock was discussed on r/WSB and then went up," but a cogent line of validated analysis one would pay for on Wall Street?
No. Confirmation bias means that people who make good/lucky bets might look like sages, however even a blind squirrel finds a nut occasionally.
The DD (daily discussion) threads usually have more reasonable insights than the individual submissions.
From an outsider it looks as just luck that 1 out of 100 advices is useful although I guess the relevant part is the value of that 1%. In any case I don't know if I would trust a source of information
like that in any other field.
Another question from a total ignorant is, if true, how is it possible that 1% exists and then... loop and wait until next post of investments pops up in HN.
Another question from a total ignorant is, if true, how is it possible that 1% exists and then... loop and wait until next post of investments pops up in HN.
There are 'DD' authors that manage to produce good insight and get 5-6 good predictions in a row but they are quite drown in other poor DD. See the ticker GME, someone with a pristine record predicted a GME pop following a console deal before the second COVID wave. Somehow he timed it perfectly (GME / Microsoft partnership annouced less than an hour after that post). That was a good DD and people apparantly made good money. Then it was followed by a tremendous amount of other poor posts (yolos, shitpost and 'gut feeling' DD) AFTER the surge. Without any information it is rather difficult to distinguish between the 'good' and 'bad' ones. There are some people tracking performances of different authors but I did not get to see an exhaustive study that would conclude one way or another.
Edit: ok nevermind the GME DD exemple. I tried to find it to link it here, but it is now deleted. People are claiming the author was a Microsoft Insider. Disclosing that info was highly illegal. I don't know what would be the legal ramifications of trading on illegal info when you don't know that said info is illegal. But I knwo that being investigated by a 3 letters agency is something you want to avoid.
Edit: ok nevermind the GME DD exemple. I tried to find it to link it here, but it is now deleted. People are claiming the author was a Microsoft Insider. Disclosing that info was highly illegal. I don't know what would be the legal ramifications of trading on illegal info when you don't know that said info is illegal. But I knwo that being investigated by a 3 letters agency is something you want to avoid.
https://www.reddit.com/r/wallstreetbets/comments/hr5f9i/chea...
This guy is a perfect example. He did a lot of posts early pandemic up until a month ago.
This guy is a perfect example. He did a lot of posts early pandemic up until a month ago.
Best response: "Sir, this is the unemployment line."
Think of it as a real-time pump and dump. Professionals view it for sentiment validation - and there are several tools that already attempt and provide that on Bloomberg terminals using combinations of Webull, Stocktwits, and WSB to name a few.
Part of this is stock moves - but some are purely the underlying options, a lot more of what WSB trades. Given that (many) options have little to no movement (where little is < 100 contracts a day) cataloging and tracking this sentiment activity can be incredibly valuable, assuming you have all the data.
Part of this is stock moves - but some are purely the underlying options, a lot more of what WSB trades. Given that (many) options have little to no movement (where little is < 100 contracts a day) cataloging and tracking this sentiment activity can be incredibly valuable, assuming you have all the data.
WSB is frequently temporarily disabled due to financial crimes. One of the mods was arrested in 2015.
The vested interest is the point. Why would you trust someone hyping a stock if they don't stand to benefit from any price rise?
This is the natural contradiction in stock buying advice.
If the guy making the recommendation doesn't hold the stock, that makes his advice suspect as why isn't he following his own advice?
But if the guy making the recommendation does hold the stock, that makes his advice suspect as he'd profit just as much from promoting bad stocks as good ones. Isn't he just recruiting greater fools?
If the guy making the recommendation doesn't hold the stock, that makes his advice suspect as why isn't he following his own advice?
But if the guy making the recommendation does hold the stock, that makes his advice suspect as he'd profit just as much from promoting bad stocks as good ones. Isn't he just recruiting greater fools?
That reminds me of a question I was once asked: You're in the hospital and are about to have surgery. You see the surgeon, just before the surgery is about to start, reading up on the operation he's about to perform in a textbook. Do you trust that surgeon more, or less now?
Interesting question. Slightly related, the book The Checklist Manifesto argues for checklists in operation rooms, to prevent rare but disastrous cases like "scalpel left inside patient", or "wrong blood type administered".
So maybe a different version of the question could be: "Do you have more or less confidence in the operating team (surgeon, nurses) using a checklist?" After reading the book I would have more confidence.
So maybe a different version of the question could be: "Do you have more or less confidence in the operating team (surgeon, nurses) using a checklist?" After reading the book I would have more confidence.
I would rather surgical teams had industry-standard automated tracking technology with (for example) bar codes and radio frequency tags, than a checklist.
> industry-standard automated tracking technology with (for example) bar codes and radio frequency tags, than a checklist
The book referenced, The Checklist Manifesto, is worth a read. Checklists outperform automated tracking technologies because checklists don't silently fail.
The book referenced, The Checklist Manifesto, is worth a read. Checklists outperform automated tracking technologies because checklists don't silently fail.
Is there an independent reference for this?
In my experience, checklists almost always silently fail.
[Edited to add: 2015 column in Nature suggests studies giving positive results to checklists don't replicate: https://www.nature.com/news/hospital-checklists-are-meant-to... ]
In my experience, checklists almost always silently fail.
[Edited to add: 2015 column in Nature suggests studies giving positive results to checklists don't replicate: https://www.nature.com/news/hospital-checklists-are-meant-to... ]
> column in Nature suggests studies giving positive results to checklists don't replicate
"In a review of nearly 7,000 surgical procedures performed at 5 NHS hospitals, they found that the checklist was used in 97% of cases, but was completed only 62% of the time8. When the researchers watched a smaller number of procedures in person, they found that practitioners often failed to give the checks their full attention, and read only two-thirds of the items out loud9. In slightly more than 40% of cases, at least one team member was absent during the checks; 10% of the time, the lead surgeon was missing."
"In a review of nearly 7,000 surgical procedures performed at 5 NHS hospitals, they found that the checklist was used in 97% of cases, but was completed only 62% of the time8. When the researchers watched a smaller number of procedures in person, they found that practitioners often failed to give the checks their full attention, and read only two-thirds of the items out loud9. In slightly more than 40% of cases, at least one team member was absent during the checks; 10% of the time, the lead surgeon was missing."
[deleted]
Yes, exactly... 64% of the time, in well-sampled professional surgical settings, the checklist was not even completed?
Try saying/doing that in the airplane industry. Pilots are trained to use the checklist in all operations.
I would like both please. Tracking technology helps with the specific example of tools left inside patients, but does nothing for things like accidentally amputating the wrong leg.
Both is fine, but given the choice I'd prefer to watch a member of the surgical team write with a sharpie on my legs.
Sure, but until then, a checklist could be a $100 dollar solution for a hospital in Zambia until there is more money for a more advanced system.
I remember chatting with some of the top US specialists in a specific field and they all freely admitted that after seeing a patient with a less common condition that they need to go back a give themselves a refresher. Unless it's something you see every day, it's almost impossible to keep all that information in your head.
[deleted]
Less. I want a surgeon to have done my procedure a good number of times already recently (if I get to choose.)
I disagree. Pre-X checklists exist because the reliability gained by going through step-by-step isn't easily replicated by other means. And, even if the surgeon has done your procedure every day this week, what are the odds they did it for someone with exactly your 'specs'? Surely there are considerations to be made based on age, gender, allergies, fitness level, and much more that it would be worthwhile to address prior to cutting into the patient.
Checklist, sure.
Textbook, no.
Textbook, no.
That level of specialization doesn’t really exist in the US outside of the Oklahoma Surgery Center. Surgeons do a kind of surgery, not a particular surgery. That’s part of why some Indian surgical places are so good; much, much more specialization than is the norm in North America or Europe.
Huh? This is completely wrong.
For instance, I have Thoracic Outlet Syndrome. It's something really fucking shitty that overhead sports players and computer nerds are prone to (along with those with connective tissue disorders)
It's surprisingly super fucking hard to get right and general surgeons have fucked a lot of people up attempting to do it. Most famously, a Houston Astros pitcher was left paralyzed by the surgery, and his surgeon later ran into him homeless under a bridge. I think I have that linked in my more recent of comments.
Anyways, there are about 5 major hospitals in the U.S. with completely specialized Thoracic Outlet Surgery divisions within their vascular surgery wing of the hospital. These surgeons only do this one specific surgery - removing first/cervical ribs, sometimes along with two other involved muscles. My surgeon is Dr. Dean Donahue of Boston Mass General's Thoracic Outlet Surgery Program - arguably the most famous and successful practicioner of said surgery in the U.S./world.
Now, obviously, my condition isn't some special case. There's quite a few 'rarer' super specific medical conditions requiring a single specific surgery that larger U.S. hospitals (think Mayo Clinic, Cedars Sinai, Mass General, Cleveland Clinic, etc) do have devoted wings for with surgeons that only do that singular procedure in their otherwise generalized division. Not just the "Oklahoma Surgery Center"
Sorry if I misinterpreted what you were saying or if this otherwise seems like I'm ranting and rambling haha. Not trying to rant - just wanted to inform/give some insight.
For instance, I have Thoracic Outlet Syndrome. It's something really fucking shitty that overhead sports players and computer nerds are prone to (along with those with connective tissue disorders)
It's surprisingly super fucking hard to get right and general surgeons have fucked a lot of people up attempting to do it. Most famously, a Houston Astros pitcher was left paralyzed by the surgery, and his surgeon later ran into him homeless under a bridge. I think I have that linked in my more recent of comments.
Anyways, there are about 5 major hospitals in the U.S. with completely specialized Thoracic Outlet Surgery divisions within their vascular surgery wing of the hospital. These surgeons only do this one specific surgery - removing first/cervical ribs, sometimes along with two other involved muscles. My surgeon is Dr. Dean Donahue of Boston Mass General's Thoracic Outlet Surgery Program - arguably the most famous and successful practicioner of said surgery in the U.S./world.
Now, obviously, my condition isn't some special case. There's quite a few 'rarer' super specific medical conditions requiring a single specific surgery that larger U.S. hospitals (think Mayo Clinic, Cedars Sinai, Mass General, Cleveland Clinic, etc) do have devoted wings for with surgeons that only do that singular procedure in their otherwise generalized division. Not just the "Oklahoma Surgery Center"
Sorry if I misinterpreted what you were saying or if this otherwise seems like I'm ranting and rambling haha. Not trying to rant - just wanted to inform/give some insight.
In the US, it really depends on the surgery and the center. I know from chatting to some doctors that eye surgery for example, isn't exclusively cataract surgery, but it's like 60% of their surgeries and typically done by a handful of doctors. Back of the eye surgery is done at the same center, but by another set of doctors.
So while it's true it's not common to find the type of single surgery centers like they have in India, there are lots of surgeons who do the same surgery weekly or several times per week.
But yeah, if you're seeing an ENT at a smaller center, they might be doing 100 procedures a year and no more than 10 of any given type.
So while it's true it's not common to find the type of single surgery centers like they have in India, there are lots of surgeons who do the same surgery weekly or several times per week.
But yeah, if you're seeing an ENT at a smaller center, they might be doing 100 procedures a year and no more than 10 of any given type.
And yet pilots often read checklists, even after thousands of flight hours. In fact, they are often required to. It is a way to make sure they don't skip steps that are important in case of emergency. Emergencies don't happen often, and it is easy to forget them when things become routine.
So it is understandable you want an experienced surgeon to do your procedure, but if a surgeon is reading a textbook, it doesn't mean he is less experienced than one who doesn't. He may be less confident, but if you consider the Dunning–Kruger effect, it is not necessarily a bad thing.
So it is understandable you want an experienced surgeon to do your procedure, but if a surgeon is reading a textbook, it doesn't mean he is less experienced than one who doesn't. He may be less confident, but if you consider the Dunning–Kruger effect, it is not necessarily a bad thing.
A checklist is quite a bit different from a textbook
Interesting question, but the answer has to be less. I don’t have to lookup certain Sql queries, or code syntax because I know it by heart. Pretty sure I can whip out a prototype without leaving the IDE. If he’s looking something up, even if just for a quick refresher, that means it stems from some sort of doubt / insecurity.
This is not a prototype, this is a surgeon performing production-level work. It's the same as if you had to whip out a basic service (as trivial as it core domain logic could be) but with all the details it need: deployment pipeline, monitoring, logging, a future-proof architecture (or do you want to be living with subpar heart surgery because the prototype was faster to deliver?).
The analogy breaks down very quickly, I just wanted to demonstrate how absurd your statement is.
The analogy breaks down very quickly, I just wanted to demonstrate how absurd your statement is.
It is entirely possible that looking at how to perform the procedure prevents fringe failures of surgery. Imagine your surgeon does his job extremely well but it turns out he performed the wrong surgery on the wrong patient because he trusted his memory too much.
[deleted]
That makes perfect sense if the person hyping the stock is relatively unknown and has minimal reach. Things get murky if an individual has enough of a following to move markets. If someone with enough clout, say Ackman or Dalio start pitching a particular stock, it's difficult to know whether they actually believe it will rise or if they hope to profit off others listening to them.
> Why would you trust someone hyping a stock if they don't stand to benefit from any price rise?
Because they wouldn't be _hyping_ a stock?
If someone owns stock, they benefit from a price rise, so any evaluation is a reflection of that.
If someone doesn't own stock, they don't benefit from a price rise, but from rendering a correct evaluation.
Because they wouldn't be _hyping_ a stock?
If someone owns stock, they benefit from a price rise, so any evaluation is a reflection of that.
If someone doesn't own stock, they don't benefit from a price rise, but from rendering a correct evaluation.
Someone who doesn't own a stock benefits from the publicity. Peter Schiff has made a lot more money from books and his gold brokerage than investing in gold.
Advice from vested interests might not be always beneficial to the investor or the market e.g. From some one trying to short the stock.
> At-least on TV, the advisors would disclose whether they hold positions or did they advice their clients for the same stocks since they have a reputation to protect; In public forums won't everyone just advice based on their vested interest?
I'm pretty convinced that a number of people are profiting by buying a position, then making a post about why that's the correct position to be in, then after they the post position, they sell it to the people reading their post.
If you hold the position at the time of your post, that's considered evidence that you believe in the position and your advise.
/wsb/ is good for sheer entertainment and/or straight up gambling and is completely fine for 99% of people. It's also very bad for the occasional "I just lost my rent money what do I do" or that kid who killed himself after using robinhood.
I'm pretty convinced that a number of people are profiting by buying a position, then making a post about why that's the correct position to be in, then after they the post position, they sell it to the people reading their post.
If you hold the position at the time of your post, that's considered evidence that you believe in the position and your advise.
/wsb/ is good for sheer entertainment and/or straight up gambling and is completely fine for 99% of people. It's also very bad for the occasional "I just lost my rent money what do I do" or that kid who killed himself after using robinhood.
[deleted]
Inverse WSB, by the time people on WSB are talking about the trade, its too late and better to take the opposite side. Happened with SLV, and TSLA battery day. Most times good plays or ideas that are posted before the fact get ridiculed and don't get traction until after they played out.
> chief market strategist at Prudential Financial Inc., who admits she checks sites like Twitter.com often to gauge retail trends.
If their approach is just to read it, I think they’re too late.
If their approach is just to read it, I think they’re too late.
Twitter is darn near instantaneous for trading. People will post things like "just sold 30 sh $TSLA" moments after they do so.
I think OP suggest writing on Twitter or r/Wallstreetbets yourself
I think OP suggest fully automatic tracking.
I've been working on a dashboard to track the sentiment and most mentioned tickers in the WSB daily discussion threads at https://www.quiverquant.com/wallstreetbets/
You can follow along and see how the WallStreetBets "portfolio" performs compared to the market every day.
You can follow along and see how the WallStreetBets "portfolio" performs compared to the market every day.
As a non-investor, and from no analysis other than eyeballing this, it looks to me like the main takeaways here are a) that market movements are a reasonable predictor of WSB sentiment, and b) that WSB sentiment gradually increases over time whilst the market is flat, and resets on a crash. Is there more signal in here that I'm not seeing?
(Also, thanks for posting this. I love these kinds of dashboards.)
(Also, thanks for posting this. I love these kinds of dashboards.)
[deleted]
From the graph it is unclear to me which one is following the other. I wouldn't be surprised that that the WSB sentiment just reflect the eprformance of the market the previous day.
This article was a fascinating window into stock trading.
Thousands of retail traders making decisions based on public information and emotion, who are then monitored by professionals simply to measure momentum and sentiment.
Not a single mention of value creation, or even something simple like a P/E ratio.
Thousands of retail traders making decisions based on public information and emotion, who are then monitored by professionals simply to measure momentum and sentiment.
Not a single mention of value creation, or even something simple like a P/E ratio.
There are 3 ways to make ROI:
1. Dividends. 2. Liquidation. 3. Speculation.
“Fundamentals” focuses on the first two. Unfortunately an expanding money supply creates capital inflows that will never be matched by returns. So everybody has to focus on speculative returns, which seem to be more about marketing.
I wonder if someday there’ll be a Benjamin Graham equivalent for speculative hype investing. Maybe a Bogle for the vast array of tech synthetic derivatives.
1. Dividends. 2. Liquidation. 3. Speculation.
“Fundamentals” focuses on the first two. Unfortunately an expanding money supply creates capital inflows that will never be matched by returns. So everybody has to focus on speculative returns, which seem to be more about marketing.
I wonder if someday there’ll be a Benjamin Graham equivalent for speculative hype investing. Maybe a Bogle for the vast array of tech synthetic derivatives.
Reddit Retail investors are participating in Keynesian beauty contest https://en.wikipedia.org/wiki/Keynesian_beauty_contest
They buy what is popular and professionals can make money using that information.
They buy what is popular and professionals can make money using that information.
I like this trader who posts his trades: https://gregorymannarino.substack.com I do not act on it. If I was to buy more stock it would be something 'boring' like s&p500 tracker.
Professionals exist for a reason. Whether software or investing, you are better off with a pro. All these anecdotes make my eyes roll.
Once you've seen a few people torpedo their retirements, this macho pass-time loses it's lustre. For the love of god, hire a competent professional for your financial planning.
If it is entertainment, that's fine. Still, hire a pro for the money you aren't gambling with.
It can be difficult to find a good one in an industry with so much woo. Shop around for one that isn't trying to sell you something.
Once you've seen a few people torpedo their retirements, this macho pass-time loses it's lustre. For the love of god, hire a competent professional for your financial planning.
If it is entertainment, that's fine. Still, hire a pro for the money you aren't gambling with.
It can be difficult to find a good one in an industry with so much woo. Shop around for one that isn't trying to sell you something.
This is wrong. My mom hired a professional and made under 4 percent a year during the biggest bull market in history. He got 1% and the mutual funds got 1% so fees were over half her gains. Professional financial advisors are mostly crooks. They sell fake expertise and often put your money in places they would never put it themselves.
Better advise is to read some books on personal finance and invest in low cost index funds.
Better advise is to read some books on personal finance and invest in low cost index funds.
Find a fee-only advisor and have them setup a plan. Then vet their plan with another one. Also do your own research.
People need to realize they have a second job no matter if they like it or not which is to allocate your assets and manage your risk.
People need to realize they have a second job no matter if they like it or not which is to allocate your assets and manage your risk.
Data on which stocks are getting the most mentions in WSB is useful to sophisticated investors/traders, because it tells them which stocks have the most retail attention which they'd be interested in counter-trading. Otherwise I don't think WSB is given any attention by sophisticated actors unless it's for humor/enjoyment.
[deleted]
If anyone is unfamiliar with WSB this is a good (albeit tongue-in-cheek) summary https://www.youtube.com/watch?v=jg85H26wyLk
Trading on information like this must be useless after this Bloomberg article.
The memes are great on that subreddit, when the March crash happened and people were posting gifs of 'Order 66' being executed from Star Wars... priceless
Wait... isn't WSB mostly trolls, memes and inside jokes?
Even if they are, they affect the market, because so many people read it.
utilizing crowd knowledge at its best :)
“We have plenty of people that have tried to leverage Wall Street Bets in some form or another for opportunity, for profit,” said Jaime Rogozinski, the thread’s founder. “Some shady, some legal, some blatantly illegal.”
This is going to end in tears. It's as if Reddit is a magnet for the world's miscreants. The white supremacists, the incels, the pedophiles, and now the options bros.
This is going to end in tears. It's as if Reddit is a magnet for the world's miscreants. The white supremacists, the incels, the pedophiles, and now the options bros.
Reddit is kindergarten compared to 4chan.
It is and it isn't. These kinds of people are just much more dilute on Reddit, and is much bigger than 4chan.
On a bit of an off-topic, the progression of 4chan from where it was in ~2013 to where it is today is fascinating.
On a bit of an off-topic, the progression of 4chan from where it was in ~2013 to where it is today is fascinating.
I'm fascinated by this topic. Do you have any writeups you'd recommend for further reading?
I don't really, I experienced it first-hand. This article seems okay though : https://lithub.com/from-anon-to-alt-right-the-dangerous-tric...
[deleted]
Thanks to oldhatemach for the writeup. I appreciate it.
oldhatemachs write-up is inaccurate. 4chan isn't what it is because it's a magical place of anonymity where your opinions are considered in a vacuum. 4chan is what it is because, as time goes on, the website attracted the people that were getting banned from pseudonymous websites. As these kinds of people accumulated and accumulated, the website became progressively more toxic in every way, which drove out people who didn't enjoy that, which gave the most toxic members hegemony.
It's also not true that 4chan has stopped doxxes and raids. Just yesterday /pol/ was full of people that were scouring everything they could to doxx the security guard involved in the shooting. 4chan was also counterraiding the leftist bunkerchan to have revenge on them making a meme about the facial features of the kind of people that enjoy /pol/.
And it's also wrong that 4chan is a paragon of free speech. It used to be, but as the userbase started harboring more and more fascists, and as more and more of them became janitors, they started censoring leftist posters unless they refrained from, well, anything that makes a Chan a Chan.
4chan in general is also highly resistant to evidence that goes against their narrative, and won't shy away from accusing the authors of any study they disagree with of being part of a Jewish conspiracy.
Most of all, the biggest meme in that post was calling /pol/ "slightly grown up from their libertarian idealism, [...] now with a hint of conservatism". /pol/ is openly fascist. As in, Julius Evola, Swastika, Black Sun, genocide, kind of fascist.
People who spend their time talking about the day of the rope being censored isn't what drove them to violent tendencies, what drove them to violent tendencies is a mix of being socially recluse, racist, white males, egged on by literal Nazis who saw the opportunity to radicalized them, all of that in a community so repulsive to anyone else that few enjoy being there.
It's not even that creative either. The main mascot of /pol/ was stolen from some random webcomic, the wojak came from Krautchan, and so on. It's just slight memes from someone else's art and a few puns. It's not a main creative force of the internet, far from it.
Those are the dynamics behind 4chan becoming what it is. Purely anonymous websites in a pseudonymous majority will inevitably become a disaster. That poster is someone who was carried down the rabbit hole and can't realize just how extreme and wrong their opinions are, who can't realize what their values became, trying to convince themselves their worldview and website isn't as insane as it is.
It's also not true that 4chan has stopped doxxes and raids. Just yesterday /pol/ was full of people that were scouring everything they could to doxx the security guard involved in the shooting. 4chan was also counterraiding the leftist bunkerchan to have revenge on them making a meme about the facial features of the kind of people that enjoy /pol/.
And it's also wrong that 4chan is a paragon of free speech. It used to be, but as the userbase started harboring more and more fascists, and as more and more of them became janitors, they started censoring leftist posters unless they refrained from, well, anything that makes a Chan a Chan.
4chan in general is also highly resistant to evidence that goes against their narrative, and won't shy away from accusing the authors of any study they disagree with of being part of a Jewish conspiracy.
Most of all, the biggest meme in that post was calling /pol/ "slightly grown up from their libertarian idealism, [...] now with a hint of conservatism". /pol/ is openly fascist. As in, Julius Evola, Swastika, Black Sun, genocide, kind of fascist.
People who spend their time talking about the day of the rope being censored isn't what drove them to violent tendencies, what drove them to violent tendencies is a mix of being socially recluse, racist, white males, egged on by literal Nazis who saw the opportunity to radicalized them, all of that in a community so repulsive to anyone else that few enjoy being there.
It's not even that creative either. The main mascot of /pol/ was stolen from some random webcomic, the wojak came from Krautchan, and so on. It's just slight memes from someone else's art and a few puns. It's not a main creative force of the internet, far from it.
Those are the dynamics behind 4chan becoming what it is. Purely anonymous websites in a pseudonymous majority will inevitably become a disaster. That poster is someone who was carried down the rabbit hole and can't realize just how extreme and wrong their opinions are, who can't realize what their values became, trying to convince themselves their worldview and website isn't as insane as it is.
oldhatemach(1)
Reddit tends to be a lot less nuts than 4chan, but when Reddit gets locked into a thing a lot of people follow the trend.
"Gamergate"[1] broke a lot of brains all across the internet in 2014 and for several years later.
[1] https://en.wikipedia.org/wiki/Gamergate_controversy
[1] https://en.wikipedia.org/wiki/Gamergate_controversy
Gamegate is pretty much what you get when you have corrupt game review sites. When people do backroom deals to buy good reviews with money there is always plausible deniability so the powder keg was already there, it was just waiting for the fuse to trigger.
The fuse was triggered by a random computer novel getting a 10/10 review because the reviewer had a relationship with the developer of the novel. "Gamers" don't go to game review sites to see the reviewer's girlfriend's computer novels. Corruption became extremely obvious now and was given a visible face called Zoe Quinn and therefore everyone started directing their hate against media to that visible face. Of course the media then tried to spin it as an anti women thing even though it was an anti media thing. Obviously media reporting won't be reporting negatively about itself. Nobody is going to release articles about how many bribes they have taken to promote certain games.
The fuse was triggered by a random computer novel getting a 10/10 review because the reviewer had a relationship with the developer of the novel. "Gamers" don't go to game review sites to see the reviewer's girlfriend's computer novels. Corruption became extremely obvious now and was given a visible face called Zoe Quinn and therefore everyone started directing their hate against media to that visible face. Of course the media then tried to spin it as an anti women thing even though it was an anti media thing. Obviously media reporting won't be reporting negatively about itself. Nobody is going to release articles about how many bribes they have taken to promote certain games.
[deleted]
Game reviews being bought by publishers is a long known fact, even from 90s. Maybe not direct money exchanging hands, but pages for early access and such. And everyone knows to laugh at IGN's and others' reviews. Knowing that they are just paid for hypemachines... Or at least don't dare to be truely critical for fear of not getting access next time. Still they do deliver marketing briefs in nice package so they kinda have a place.
What really triggered the gamergate was that writers directly attacked their audiences, with suspiciously similar articles from multiple-source at nearly same time. And that they care more about themselves and their buddies than their audience. And many don't even self-identify as hobbyist... Which really should be death knell for any hobbyist media.
What really triggered the gamergate was that writers directly attacked their audiences, with suspiciously similar articles from multiple-source at nearly same time. And that they care more about themselves and their buddies than their audience. And many don't even self-identify as hobbyist... Which really should be death knell for any hobbyist media.
I think the underlying cause is that the business model changed. In the past, up to 2010, the gaming media were mostly physical paper magazines and were bought by gamers with hard cash. If they didn’t cater to gamers they would simply lose their audience.
But nowadays gaming media is much broader, from some random blog or YouTube let’s play channel to bigger news sites. And online news attention is everything and controversies are just generating more clicks.
But nowadays gaming media is much broader, from some random blog or YouTube let’s play channel to bigger news sites. And online news attention is everything and controversies are just generating more clicks.
[deleted]
If you think this looks bad you should see the discords full of pump and dump crypto scams
Reddit is the 18th most popular site on the internet (globally). So, it's not that it's magnet for the terrible, it's a magnet for everyone (and there are some terrible people among everyone).
It a stage for really horrible people to influence a lot of people.
Sounds like anything political on Reddit.
Or a lot of great people can have a positive influence on someone terrible.
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.