stock market

[muck]

FWIW, "portable alpha" is essentially, matching up a source of "alpha" with whatever sort of beta you want.

 

A way this would be used would be if you thought the market was going to go up, buy Nasdaq futures with a portion of your money and use the rest to invest in merger or convertable arbitrage (again, a simplistic example) ... and then when you thought it would go down, sell the Nasdaq future and buy a DJIA future all-the-while keeping the merger or convert arb going in the background.

 

So, you get the volatility of whichever market you want (stocks, bonds, real estate, whatever) and marry it with some sorce of alpha creation, regardless of where the alpha comes from.

 

This allows you to "beat the market" (whatever market it is that you want to beat), but it doesn't necessarily translate to "making money".

[muck]

...is this what you're looking for Weeg?

 

PS - I'm heading for CO w/ the fam for a week ... so, I may not be able to participate in this dialog from here on out...

[yo mama]

But war IS great for the economy...

 

That was more true a century ago that it is today. With each successive war since WW I (if I recall correctly) the economic impact has been less and less benefical.

Edited July 14, 2006 by yo mama

[Randall]

The middle east has been a problem confounding smart people for ages. Of course corrupt morons from Texas could solve it.

 

"Daddy save me again".

[thecerwin]

That was more true a century ago that it is today. With each successive war since WW I (if I recall correctly) the economic impact has been less and less benefical.

 

Is it still beneficial though? (Asking only in terms of the economy)

Edited July 14, 2006 by thecerwin

[Ursa Majoris]

I look at mine every 4-6 weeks. That's probably too often, but I like to have some sense that I'm managing my money. I do move money around between funds quite a bit. Fidelity seems to be offering more and more and some of them are pretty good.

 

Check it daily, it's fun! Bing! There goes another grand after today!

[wiegie]

...is this what you're looking for Weeg?

 

I'm not sure. (remember that I am not really a finance guy)

 

Basically, I was just wondering if there was some money manager who is willing to say to his clients something along the lines of "I guarantee that the funds you invest with me will have a return at least as great as that delivered by X over the next Y years or else I will make up the difference." Where X is something like the Dow, S&P 500, or some such other portfolio or index fund; and Y is some specified length of time.

[Ursa Majoris]

I'm not sure. (remember that I am not really a finance guy)

like the Dow, S&P 500, or some such other portfolio or index fund; and Y is some specified length of time.

 

Wiegie finally 'fesses up that he knows diddly squat about money and is therefore ideally suited to be an economics professor.

[wiegie]

Check it daily, it's fun! Bing! There goes another grand after today!

 

I check mine about once a quarter--it's not much fun when the quarterly report shows that you have less money in your retirement account today than you did 3 months ago even though you have contributed normally to the account over the last three months. (that happened to me on Wednesday)

[wiegie]

Wiegie finally 'fesses up that he knows diddly squat about money and is therefore ideally suited to be an economics professor.

 

pretty much

[yo mama]

Is it still beneficial though? (Asking only in terms of the economy)

 

Depends on what perspective you're looking at it from. Private companies are making money. But those profits are coming at the expense of deficit spending. On a net basis, I'd be surprised if there was much of an overall net economic benefit. Though, I honestly don't know for sure.

[thecerwin]

Depends on what perspective you're looking at it from. Private companies are making money. But those profits are coming at the expense of deficit spending. On a net basis, I'd be surprised if there was much of an overall net economic benefit. Though, I honestly don't know for sure.

 

I'll bet it can be argued both ways with some very good points on each side of the debate.

[Puddy]

Don't try to time the market. Invest regularly and the cost averaging thingy works wonders for you. If you're in the stock market heavily, then you are a long-term investor and shouldn't concern yourself with these types of dips. If you aren't a long-term investor, you shouldn't be in the market heavily.

 

 

 

I don't have a problem with getting out of the market when it has no place to go but down. It's not much different than playing Tomlinson in your lineup when he has a bye week. For most of the season, he'll do wonders for you, but this one week he won't for sure.

 

 

 

STUDIES PROVE MARKET TIMING DOES NOT WORK

A note about "timing". We believe in concepts such as taking profits, buying low and selling high and taking advantage of market conditions. However, the concept of timing - the ability to move in and out of markets and sectors to follow upturns and avoid downturns is nearly impossible. Studies back up this view as you will read below:

 

Study #1

 

One well known study looked at the returns for the Standard & Poor's 500 between 1926 and 1987. The Standard & Poor's 500 is simply an "index" of 500 of the largest companies traded in the United States. Mutual funds are frequently compared to the Standard & Poor's 500 index as a way of evaluating the performance of the mutual fund manager. It is a widely used gauge of the "stock market" as a whole. The authors found that the S&P 500 returned on average just less than 10% (9.44%) each year during the 62 years from 1926 through 1987, inclusive. They then looked at the market return by months and found two interesting things.

First, there were 744 months during those 62 years. Amazingly, all of the market's increase over those 62 years happened in just 50 months. In other words, miss just 50 of the best gaining months out of the 744 months between 1926 and 1987 and your average annual return would have been 0% instead of 9.44%.

 

Second, they found that most of each year's gain occurred in just one out of the 12 months each year. On average, the stock market increased an average of 8.68% during the best month in each of the 62 years from 1926-1987. In stark contrast, the market went up an average of just .76% during the remaining 11 months the year. Again, miss the best month out of the 12 months each year and your gain falls to nearly nothing compared to the nearly 10% average annual return you could have had by just buying and holding stocks.See Chandy and Reichenstein, "Timing Strategies and the Risk of Missing Bull Markets," AAII Journal, Vol. XII, No. 12 (Aug. 1991).

 

 

 

Don't mean to come off as arrogant ... just tweaks me when someone makes a definitive statement (i.e., "you can't beat the market") that is patently false.

 

 

Just for the record, I was not trying to make any kind of definitive statement that you can't beat the market. I was trying to give my opinion that worrying about stock market dips for the long-term investor may not be warranted. Then when MikesVikes pulled out his 'bye week' analogy for timing the market, I remembered reading that study many moons ago and thought it was interesting and applicable to the average investor.

[wiegie]

Just for the record, I was not trying to make any kind of definitive statement that you can't beat the market. I was trying to give my opinion that worrying about stock market dips for the long-term investor may not be warranted. Then when MikesVikes pulled out his 'bye week' analogy for timing the market, I remembered reading that study many moons ago and thought it was interesting and applicable to the average investor.

 

if it makes you feel better, I am pretty sure that muck is on record as saying that most normal people would be better off not trying to beat the stock market

[Puddy]

if it makes you feel better, I am pretty sure that muck is on record as saying that most normal people would be better off not trying to beat the stock market

 

 

Okay, I feel a little better.

[Yukon Cornelius]

if it makes you feel better, I am pretty sure that muck is on record as saying that most normal people would be better off not trying to beat the stock market

 

there is noone normal at this web site

[CaP'N GRuNGe]

So... I have 100% of my 401K in the "Agressive Loss" fund from John Hancock. Good or bad idea?

 

 

I've got mine split 4 ways:

 

Fidelity Select Defense & Aerospace (FSDAX)

 

Fidelity Select Medical Delivery (FSHCX)

 

Fidelity Canada (FICDX)

 

Fidelity Contrafund (FCNTX)

 

Last year I was in energy ( Fidelity Select Energy (FSENX) ) and made some nice money, but chickened out when it started to drop and transferred over to the Contrafund.

 

I had about a 19% return last year. This year i'm running currently slightly in the negative. Any suggestions? I'm tempting to dump everything into GOLD and OIL with the way the world is going right now, but i'm afraid both are already overvalued with fear built in and as soon as I do everything will calm down and both will drop.

 

[thecerwin]

there is noone normal at this web site

 

This is the most logical post I've read in this thread.

[Chavez]

I'm not sure. (remember that I am not really a finance guy)

 

Basically, I was just wondering if there was some money manager who is willing to say to his clients something along the lines of "I guarantee that the funds you invest with me will have a return at least as great as that delivered by X over the next Y years or else I will make up the difference." Where X is something like the Dow, S&P 500, or some such other portfolio or index fund; and Y is some specified length of time.

 

Most investment sales pitches come with the caveat of "past performance does not guarantee future results"; I mean, you can pitch someone on the fact that since the Stock Market was founded way back when it has tended towards an average of double-digit gains, and it's a safe bet that that will continue, but only a fool would guarantee it (IMO - muck's mileage may vary) - not that confidence in your ability is foolish, just that if you take a dump for a year or two, you will lose your shirt either covering the amount you're short on the guarantee or defending yourself from lawsuits over fraud.

[TDFFFreak]

I've seen pricipal guaranteed investments (i.e., you won't lose money even if the market does), but no "market or better" investments (i.e., you'll beat the market in up years and you'll lose less money than the market in down years) that I can think of.

 

I've seen "you can make 8-16% / yr, year in year out pretty much regardless of what is going on" (in fact, that is (mostly) what I do) ... but, if the market is up 25%, you'll still only make 8-16% ... but, if the market is down -5%, you'll still make your 8-16%.

 

I believe I've read about these types of funds, but I've also seen the fine print. I cannot remember what the downside is (beyond the 8-16% earned ever year regardless of the indexes doing better then that), but I rememeber there being a significant downside to these types of funds. If they were such a good deal or right for everyone, there would be plenty (and by plenty I mean 99% of investors out there) investing in these funds as an iron-clad 8%-16% would be good by most investors opinions considering the historic average of the market is somewhere around 10% I believe. (Please correct me on that if you know muck) Not to mention those numbers should outrun inflation. But for some reason these are not a popular investment option and because of that I call "semi-nonsense" on these particular funds.

 

That said, the hedge fund in which you have been talking about are possible. Big risk, big reward. They have an awful large price to pay and aren't as well regulated as normal mutual funds. I would stay away from these types of funds 90% of the time, but there is no reason that you may know a few of the managers who do well at this fund sector. They must crush the market to make these worthwhile though and many go out of business too.

Edited July 15, 2006 by TDFFFreak

[MikesVikes]

STUDIES PROVE MARKET TIMING DOES NOT WORK

A note about "timing". We believe in concepts such as taking profits, buying low and selling high and taking advantage of market conditions. However, the concept of timing - the ability to move in and out of markets and sectors to follow upturns and avoid downturns is nearly impossible. Studies back up this view as you will read below:

 

Study #1

 

One well known study looked at the returns for the Standard & Poor's 500 between 1926 and 1987. The Standard & Poor's 500 is simply an "index" of 500 of the largest companies traded in the United States. Mutual funds are frequently compared to the Standard & Poor's 500 index as a way of evaluating the performance of the mutual fund manager. It is a widely used gauge of the "stock market" as a whole. The authors found that the S&P 500 returned on average just less than 10% (9.44%) each year during the 62 years from 1926 through 1987, inclusive. They then looked at the market return by months and found two interesting things.

First, there were 744 months during those 62 years. Amazingly, all of the market's increase over those 62 years happened in just 50 months. In other words, miss just 50 of the best gaining months out of the 744 months between 1926 and 1987 and your average annual return would have been 0% instead of 9.44%.

 

Second, they found that most of each year's gain occurred in just one out of the 12 months each year. On average, the stock market increased an average of 8.68% during the best month in each of the 62 years from 1926-1987. In stark contrast, the market went up an average of just .76% during the remaining 11 months the year. Again, miss the best month out of the 12 months each year and your gain falls to nearly nothing compared to the nearly 10% average annual return you could have had by just buying and holding stocks.See Chandy and Reichenstein, "Timing Strategies and the Risk of Missing Bull Markets," AAII Journal, Vol. XII, No. 12 (Aug. 1991).

 

 

I know that what you're saying isn't bs. I'm not going to tell you that I've doubled my account every year or that I'm any kind of an expert, although I was licensed to sell securites for a few years.

 

My retirement fund doesn't even allow me to buy back into a fund until after a time period (week or two?) after I've taken money out of it. I really don't play the market as much as you might think. I doubt if I have made any transfers anymore than 3 times this year. I also know the sales routine that says if you had invested money in the market the day before it crashed several years ago, you'd still be out on top a few years later.

 

But when I know that the market is going nowhere but down right now, I don't really see a point of not getting out of growth stocks and into something else such as bond funds or something more safe. Everybody has a risk tolerance and not everyone's the same. I also tell everyone when they sign up for our plan that there are no right answers as to which funds to choose. Our overall plan has a large percentage of it's dollars in cash securities right now, but I don't think that I do for myself at all.

 

Every fund manager is obligated to invest their funds as described in their prospectus. Since I don't agree that that is right for me right now, I don't hesitate to move my funds somewhere else.

Edited July 15, 2006 by MikesVikes

[Otis]

I have it set up on my My.Yahoo home page. It updates about 5:30 - 6:00. When it's all in red it's not good - at one stage a few weeks ago I was down nearly $10,000 and I am still way behind where it was at it's zenith even though I'm pumping nearly $1,000 a month into it.

 

I guess at least any new shares will be bought low.

 

 

Perhaps you need a new strategy? My 401k is invested across 4 different mutual funds, all of which are up 5-20% on the year.

[Ursa Majoris]

Perhaps you need a new strategy? My 401k is invested across 4 different mutual funds, all of which are up 5-20% on the year.

 

This year? Or the last 12 months?

[Hugh B Tool]

I pick stocks like I pick FF players. I throw darts

[muck]

A few general things:

 

1) I used the track records of those three managers to point out that the market can be beaten ... but it takes a specific type of person AND a specific type of investment approach to do so.

 

2) In response to TDDFreak ... yes, 8-10% / yr is the right number for long-term market returns (depends on where you start your analysis as to what your % is) ... and yes, quite a few of the hedge funds do go out of business (some because of poor performance, some for other reasons) ... many do not fail though. Also, many mutual funds go out of business (or are merged into other funds managed by the same firm and cease to exist that way). Regardless of investment type (stocks, bonds or other), investment portfolio (individual securities, mutual funds or hedge funds), there are lots of people that are not successful because they have a poorly defined view of "what is the worst thing that can happen" ... and something worse than that happens, and they fail.

 

3) Weeg ... any GUARANTEES are not actual guarantees ... People that promise/guarantee things are (possibly) not telling you the whole truth. That said, there are defined investment strategies that SHOULD allow an investor to beat ANY index (stocks, bonds, real estate, etc), but is not a guarantee that it will happen. Generally, "portable alpha" is what you're looking for, I believe.

 

PS - The 8-16% I shoot for is pretty independant of the market ... I invest in a whole bunch of stuff that is not dependant on the fed raising / lowering rates ... or ... the next quarterly report to come out of IBM ... or ...