Tell me how to spend my money

[Dex]

Watch SPLS to break the 14.80ish range for a breakout. Solar stocks are doing well today as well. Made money off CSIQ and TSL

Just FYI so you know what to look for if you're interested

 

[JR Ewing]

Hi JR,


I must tell you.. initially you suggested a Mutual fund and added that one should hold for 30yrs..is this with systematic purchases (as in dollar cost averaging) . Funds change fund managers. economic environment change. but historically, I always thought stocks outperformed the funds. Moreover, you added about averaging 12% per year....Now I have had some very good years.....but if any broker threw a figure like that at me......without being in a fixed debt instrument and only mutual funds....he would not have my business. IMO for 30yrs...I would be doing some serious diversification and asset reallocation. everyone should be educated and learn rather than just rely on mutual funds or some broker. I know several registered reps that were once top performers with my firm...that have vanished.....at least from the company....and a few with their client's funds. I know others that have traded ahead of their client's to increase their profits. What's my point.....be it trading or investing......educate yourself.

so yea...I thru out trading. that is my opinion. and I don't believe the cost to do business outweighs the possible benefits. if one gets more seasoned...hell set up a Trading entity and write off expenses you mentioned along with losses because now you can write off more than the annual $3000 max.
QUOTE]

I wasn't meaning any disrespect either, just having a conversation. Not trying to hijack the thread or anything. I am speaking from direct experience and other sources my knowledge, known probabilities, my extensive research and practice in risk management, etc.

I wasn't saying only buy one fund and hold that one fund for 30 years. One fund can crash, the manager can lose his mind, quit or get axed (as you said), etc. I think that most people who are not sophisticated / accredited investors who don't have all the money in the world and are able to stomach at least some short term risk and fluctuation in account value can probably do quite well to invest in at least several different well-managed funds that will tend to serve different purposes and form a well-diversified portfolio that will mitigate risk and tend to fare well in good times and hold up well in bad times regardless of what lies ahead.

What I and just about everybody else in the investment field who has worked in institutions, subject to external (and often internal) regulations, and is or has been responsible for unaccredited / unsophisticated people's money recommend is to take a longer term approach. Again, that doesn't mean buy and hold one thing for 30 years. But at institutions, internal and external regulators are quick to pounce on what they consider "churning" with unsophisticated investors' money.

I did clarify in a later post yesterday that I invest on fundamentals. I'll buy, sell, go to cash, short, or whatever based upon fundamentals and changes in fundamentals - whether those changes are within a company, a sector, an industry, the overall economy, etc. I definitely recommend even a novice investor review everything with their advisor a minimum of once a year, or preferably every quarter if possible. And most of the better funds I've liked to use for novice investors and in my own retirement plan do re-allocate when the fundamentals call for it. But they're not turning over the entire portfolio every day or even every month.

But are you saying that if a broker or fund manager threw a 12% average at you, that would be too low for you? Very few mutual funds average that. The only fixed instruments that would offer anywhere near that these days are either scams or perhaps very distressed companies or other entities that would be a relatively huge risk to principal.

Very successful hedge fund managers like David Einhorn average roughly 20%. He's relatively young though, and takes pretty big risks on the short side.

Legends such as Buffet and Icahn are closer to 30%.

And the odd insider trader like Steve Cohen has averaged roughly 40% over the long haul.

John Paulson made 5 billion for himself and 20 billion for his investors with returns well into triple digits in 2007 from shorting subprime mortgages, and has been pretty mediocre both before and after that. In fact he's been pretty beaten up in recent years off of his huge bet on gold. I happen to think gold is a great long term investment, but in the near to mid term it can be extremely volatile.

I'd be curious as to how you did in 2008 and the first quarter of 2009? Typically, the better one's investment strategies do in good times, the worse they will do in bad times (risk / reward).

If you don't mind me asking, what % of your account value do you typically put into any one trade? I have a general rule where I try to use no more than 5% of my $ for any one investment. And if it's a quick trade (higher risk), I'll try to limit myself to 2%.

How much would you say you've averaged from the beginning and for how long? I'm just legitimately curious.

Again, when you're dealing with others' (particularly average, unsophisticated investors') money, regulations, etc - or have been through some ups and downs yourself - risk management, some degree of principal protection, and thinking about the long haul are very important.

This is about the best performing mutual fund in the past 6 years. But he's only been around about that long. He did incredibly well, and has gone to a large cash position recently:

http://quotes.morningstar.com/fund/osfdx/f?t=osfdx

*EDIT: Regarding that one trade that went from 3800 to 40 million, could you expand on that a little more? How much of the portfolio was invested in that?

 

[Mini Forklift Ⓥ]

Much thanks for all of the great info in here guys. Most of it is over my head, but thanks nonetheless! MF

 

[2ez]

I meant the 12% was a little to optimistic.

 

[JR Ewing]

Is this the company you mentioned earlier, 2?

http://bigcharts.marketwatch.com/quickchart/quickchart.asp?symb=ctkh&insttype=&freq=2&show=&time=20


Another thing I like to do in moderation for myself is to use a bit of options. Bought puts and calls work best on the high-beta investments such as many tech, energy, and biotech stocks that tend to move a great deal in either direction on news such as earnings, FDA decisions, clinical trials, etc. I've found overall that buying puts when bearish is generally safer than actually being short. Selling or "writing" options is generally riskier though, although writing a bit of COVERED calls can also be a good way to generate income for the advanced investor with plenty of assets who is looking to add a bit of alpha.

On the subject of high frequency trading, I don't know if anyone has ever heard of these two hedge funds, but they make very liberal use of computerized trading. Both have done very, very well (in that 30-40% range over a long time period), and I've noticed in my reading and research about them that they have very similar methodologies and tend to buy and sell many of the same securities in similar time frames.

http://en.wikipedia.org/wiki/Renaissance_Technologies


http://en.wikipedia.org/wiki/D._E._Shaw_%26_Co.


Both Jim Simon and David Shaw have extensive computer backgrounds, and hired techies to build computer systems that comb the markets constantly at lightning speed detecting buy and sell signals and automatically execute trades for them. I'm pretty sure they both still also invest and trade on fundamentals with part of their $, but the automated trading plays an important role in their successes.

These are 2 very good books on these subjects also:

http://www.amazon.com/More-Money-Than-God-Relations/dp/0143119419

http://www.amazon.com/Quants-Whizzes-Conquered-Street-Destroyed/dp/0307453383/ref=sr_1_1?s=books&ie=UTF8&qid=1377193257&sr=1-1&keywords=the+quants

 

[2ez]

yes that is the company. there was some kind of news that a strategic alliance was coming with Motorola I think the company was. but note I said unrealized gains. the stock is a pink sheet. market makers are not as obligated to execute a trade as with the bigger markets...NASDAQ, NYSE. so he was not able to sell at the $2+ level. he never told us.....but based on the time that he was able to sell his shares....we guestimated he realized btwn $700k - $1mil.


I would not feel comfortable suggesting options to someone that is just getting started. not saying that you are but options are way down the road when first leaning how to trade. I am a aware of the hedge funds you mention. the last hedge fund I worked for, had $6bil AUM, and there were less than 20 of us. we also had a more conservative 2/20 fee structure.

for those reading that are not clear on the fee structure, for a more simpler way of explaining.....AUM is assets under management. 2/20 is 2% admin cost to run the office....and we received 20% of the profits we generated for the clients. unfortunately the services were primarily offered to the higher net worth individuals. Min $20mil..... arguably much easier to deal with than some institutions.



we have taken over this thread. if there is more to talk about lets use PM as to not bore our friends on this board.

 

[Realize]

You're not boring me. I'm paying attention.

I'm the kind of person that likes to learn from other peoples mistakes so I dont make them.

Tell us what not to do.

 

[Stumpy]

Why buy into a franchise when you could set something like this up for yourself and not have to pay part of your profits to someone else? Do your homework and cut them out.

 

[2ez]

Why buy into a franchise when you could set something like this up for yourself and not have to pay part of your profits to someone else? Do your homework and cut them out.

I've considered franchises. I have friends that own McDonald's, Rita's Water Ice, Golden Corral....all are doing well and living comfortably. Now there are arguments for and against buying into a franchise....but I believe one should be open to any and everything.


Now...I am partnering with others and looking into setting up a Laundromat in urban areas. that shiat would never fly middle class and up areas. or at least not as profitable. Not against buying into a franchise and using its business model.

I prefer to partner with another......I don't know everything and IMO there are always strength in numbers. share the risk and reward...I am not greedy. Just my preference.

 

[Gstacker]

Some franchise are horrible but some are hard not to make money at...
The advertising power of a franchise could never be matche by a independent...
Advertising is often one of the biggest expenses...
MF I think you should stake me in the World Series of poker for 50% of my action lol
10k can make you a few million!

 

[2ez]

Also, I know some friends that got together/partner.......to start exporting goods to other countries. Freaking Rice and Yams.

Then there are others going on a site...I think its called Koparts or Karparts...where they are buying salvaged cars and sending to Panama and other countries where the rules for deeming a car usable or salvaged or not...are not as stringent. my neighbor send higher end cars to Guyana. He has two Lexus' in his garage now waiting for paperwork to complete. Rules are more stringent there but the value of the cars increase 50 - 100%.

many, many ways to make money...once you have money to work with.

 

[JR Ewing]

You're not boring me. I'm paying attention.

I'm the kind of person that likes to learn from other peoples mistakes so I dont make them.

Tell us what not to do.

I guess my whole point on one thing NOT to do for 99+% of the investing population is day trading, or otherwise trying to beat the market EVERY day or generally taking on EXCESSIVE risk.