Learning about the stock market

[RobS]

I have been in the earning world for 30 plus years and always thought I could manage my portfolio. I've done OK but not great and have never felt expert enough. A couple of years ago we moved everything to a financial adviser (Edward Jones but there are many options). He has done better for us in the couple of years than I could have ever done. I would highly recommend using a financial adviser unless you are confident and skilled in your own abilities.

 

[Wakey]

Both accounts have financial advisers, I just want to get acquainted with a world I have no knowledge in because one day I will possess a portion of both portfolios.

Not that I really think I'll outlive my Grandmother... She's a diesel :laughing:

 

[quicksandfarmer]

My advice is avoid individual stocks. Can be big rewards, but also big risk. Spread out your risk with a no-load mutual fund that tracks the market, lots of them track the S&P.

Good advice. I recently read Thomas Picketty's "Capital in the 21st Century." It's a long book, covers a lot of things, but one of the things he covers is economies of scale in investing. Basically, the more money you have the higher rate of return you get. The more money you have invested the more you can spend on investment research and active management. Below a certain point you're better off just investing in index funds. In an index fund, you're investing in "the market" -- you're basically just settling for the average.

Picketty's research finds that the point where it is worth doing your own portfolio management is around $150 million in assets. Below that, you're best off in index funds. With index funds what really matters is total fees, since every fund based on the same index has the same investment strategy. I have found Vanguard funds to offer the lowest fees.

Be careful hiring a financial advisor. You want someone who you pay by the hour. Someone who works off of commissions on what he sells you, whether it is stocks or insurance, is not working for you. They do not have to put your best interests first.

 

[Timm250]

I just rolled over a 401k & went away from mutual funds to ETFs. Similar to mutual funds but seem to have a lot more choices without investing in individual stocks.

iShares ETFs - Product List | iShares US

 

[smstonypoint]

Good advice. I recently read Thomas Picketty's "Capital in the 21st Century." It's a long book, covers a lot of things, but one of the things he covers is economies of scale in investing. Basically, the more money you have the higher rate of return you get. The more money you have invested the more you can spend on investment research and active management. Below a certain point you're better off just investing in index funds. In an index fund, you're investing in "the market" -- you're basically just settling for the average.

Picketty's research finds that the point where it is worth doing your own portfolio management is around $150 million in assets. Below that, you're best off in index funds. With index funds what really matters is total fees, since every fund based on the same index has the same investment strategy. I have found Vanguard funds to offer the lowest fees.

Be careful hiring a financial advisor. You want someone who you pay by the hour. Someone who works off of commissions on what he sells you, whether it is stocks or insurance, is not working for you. They do not have to put your best interests first.

I haven't read the Piketty book, but I have read a fair number of reviews of the book. Numerous economists (more competent than me) have raised serious questions about his analysis and conclusions.

Prior to my retirement in 2007, I had at least a nodding acquaintance with the academic literature on the efficient markets hypothesis. I haven't kept up with that literature, but here are two recent items that support the hypothesis, both from Mark Perry's blog.

Item 1 Warren Buffett wins $1M bet made a decade ago that the S&P 5 stock index would outperform hedge funds - AEI

Item 2 503 Service Temporarily Unavailable

Steve

 

[Old Red]

I love this thread. I have found for me anyway, putting all the horsepower you have NOW in saving is more important than anything else or anything you are about to learn. You can't get back yesterday but you have control over what you do today and in the future. DO NOT rob from your future self.

How many old farts have you ever asked or ever heard them say they wish they hadn't saved so much money? NEVER...but you will hear about a lot of wasted money. The wife and I MAX out every tax advantaged savings vehicles that are available....2 401ks, Family Plan Health Savings Account, and Backdoor Roth IRAs. We save a LOT of money.....at least for us anyway.

I have my first apartment building and invest in mutual funds and currently have 6 stocks....Disney, AT&T, Old Republic, Dollar General, HSBC, and Chevron. These are all going to be held for 20 years. About to inherit GE, Proctor and Gamble, and Fidelity Technology Mutual Fund.

I just convinced a friend this week who is also 43 that he needed to save more and he took that advice and upped to the max of $18,500 per year in his 401.

 

[RSKY]

When I retired in 2011 at age 57 I had two 401Ks from different employers. I used the small one for income until I reached the magic age of 59 1/2. I then rolled the remaining larger one over into a Fidelity IRA account. Best move I have ever made. I can invest in single issue stocks but never have. Instead everything is in mutual funds. About every three months I look it over and rebalance putting more money into funds that are doing well. Every three or four months I get e-mails and then a call from a young lady who helps me 'manage' my account. At her advice I took out money before the last downturn to do some things we wanted to do. Her advice was that the market was overpriced and due for a correction. If I needed or wanted anything to sell when shares were high. Now I am sitting back and let it all ride. Mr. ***** is making me a lot of money.

Anyway, back to the OP.

I invest only in mutual funds. I spend the time to look at each fund before I invest in it and make sure I am not buying into two funds that buy stocks from the same companies. I want everything spread out in as many companies and sectors as possible. If there is a downturn in one sector maybe the others won't be hurt. I am mainly in growth funds at the present time but if there is not a downturn before 2019 I will slowly start moving into more value and bond funds. If the economy is still doing well under ***** the Democrats will do everything in their power to screw it up before 2020 for political reasons.

I just looked and I have a choice of 3,711 no fee mutual funds. If I don't mind the fees I have a choice of 11,002 funds. Not just Fidelity funds but some from every investment company.

I choose what I want to invest in. I look at it every couple months or so and make changes every three to four months if necessary.

I DO NOT pay somebody else to take a cut of my earnings to 'manage' my funds. Why do that?

The best advice I have ever got on the 401Ks, the stock market, mutual funds, etc. was from a couple old electricians at the factory I worked at for 33 years.

"If it is so bad that people are jumping out of windows and all the TV announcers are talking about is the stock market crash, that is the time to buy. Stocks are cheap then and your money buys more shares. And the stock market always comes back."

RSKY

 

[ericm979]

When I leave an employer I roll that 401k over into one that I manage. You have to roll it over- taking a disbursement triggers taxes. The employer 401ks have additional management fees and usually have higher load/fee investments. I've been maxing out my 401k for the last 20 years and adding the "catch up" since I hit 50. And saving a good amount of post tax money as well. I'm financially ready to retire.

I happened to have a bunch of cash in 2008 and put it in the market right at the bottom. That worked out well- it more than offset the big losing investment that I made in Cisco in the dot com days. I don't usually time the market but that one seemed obvious.

No matter where you stand on politics or economic theory there's likely to be a downturn after all this run up in the market. Remember in the dot com era when they said "it's different now" and the market will only go up? It's not.

 

[Old Red]

When I leave an employer I roll that 401k over into one that I manage. You have to roll it over- taking a disbursement triggers taxes. The employer 401ks have additional management fees and usually have higher load/fee investments. I've been maxing out my 401k for the last 20 years and adding the "catch up" since I hit 50. And saving a good amount of post tax money as well. I'm financially ready to retire.

I happened to have a bunch of cash in 2008 and put it in the market right at the bottom. That worked out well- it more than offset the big losing investment that I made in Cisco in the dot com days. I don't usually time the market but that one seemed obvious.

No matter where you stand on politics or economic theory there's likely to be a downturn after all this run up in the market. Remember in the dot com era when they said "it's different now" and the market will only go up? It's not.

This is great! How old are you know...I'm guessing folks.....we have a IRA/401k Millionaire in this thread! Well done sir! My biggest thing is what to do after I max out all the tax advantaged retirement stuff.....401s, HSA, Roths...all max'd out...have my first apartments triplex....what to do with any cash if someone had some left over???

 

[quicksandfarmer]

I haven't read the Piketty book, but I have read a fair number of reviews of the book. Numerous economists (more competent than me) have raised serious questions about his analysis and conclusions.

Prior to my retirement in 2007, I had at least a nodding acquaintance with the academic literature on the efficient markets hypothesis. I haven't kept up with that literature, but here are two recent items that support the hypothesis, both from Mark Perry's blog.
Steve

For most individual investors efficient markets is a good assumption. The book I would recommend for anyone starting out is "A Random Walk Down Wall Street" by Burton Malkiel (A Random Walk Down Wall Street: The Time-Tested Strategy for Successful Investing (Ninth Edition): Burton G. Malkiel: 864718274: Amazon.com: Books ). He's big on efficient markets and index funds by extension, he served on the board of Vanguard.

Interesting that Buffett, who is touted as the "genius investor", hints that he doesn't believe such a thing is possible.