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Author Topic: Freedom 25  (Read 5121 times)

Andrew425

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Re: Freedom 25
« Reply #15 on: September 22, 2012, 02:26:15 pm »

Well the reason I started this thread was because I had a GIC worth some thousands finish.

When I went to the bank, they offered me the opportunity to get back into a new one that would pay me 1.8% per annum. When I asked what inflation was the bank advisor said 2%

She said it was a safe bet if I did that. So I walked away with my money and have been trying to find something to do with it.

A 8.34% return sounds fairly good to me as I have no real expenses as of yet so I (hopefully) don't need the cash any time soon.

Not that I would actually invest in it, but does Boeing look like a good deal to you if you wanted a 3-4 month holding?



Lord Bucket:

That is what I got out of that book as well and it has helped me look at purchases basically a waste because I could have used the money for something that would have made me more money.


Bouchart:

Thanks for the book advice I will look into them


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mainiac

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Re: Freedom 25
« Reply #16 on: September 22, 2012, 04:27:28 pm »

Not that I would actually invest in it, but does Boeing look like a good deal to you if you wanted a 3-4 month holding?

No, if you are holding a single stock less then a year you are actively trading.  You are trying to outsmart people who do this professionally.  Remember the old saying "if you do not know who the sucker is at the table, it's you."  On top of that you will be losing money on commissions and that's going to take a significant chunk if you are buying for only 4 months and trading with such a small stake.

You are trying to play a game here where the deck is stacked against you, not only because you don't have as much expertise picking investments but also because you do not have the organizational convenience of the big traders.  By trading more actively you compound those disadvantages.

People like you get burned every day with stocks, you are in completely over your head and should go with the safe, smart moves.  But if you do not feel like taking that advice then please at the very least only buy stocks that you plan on holding for 10 years or more.  Every time you buy or sell a stock you are taking another roll of the dice and the odds are against you on every gamble you take.  Short term prices are driven by factors that you just don't have the ability to track, you are playing blind against someone with their eyes open.

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On a more abstract note I want to point out that most of the profit to be made on the stock market is not with companies you've heard of.  Most of the gains come not from large established companies but from small companies that grow into large ones.  But you as an individual lack information about smaller companies.  Maybe you might have special knowledge about a small company in which case you can actually stand a chance to beat the market (but put yourself at risk).  But unless you have that sort of special knowledge you are missing out on the most profitable class of assets by trying to manage your own capital.  This is why you want to find a fund with low management fees and low trading frequency and put your money in it.  They are buying a class of asset that you essential are unable to buy.
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"Don't tell me what you value. Show me your budget and I will tell you what you value"
« Last Edit: February 10, 1988, 03:27:23 pm by UR MOM »
mainiac is always a little sarcastic, at least.

Bouchart

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Re: Freedom 25
« Reply #17 on: September 22, 2012, 07:36:56 pm »

If you have any debt, you should pay that down first.  Surprised nobody has brought that up.
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Andrew425

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Re: Freedom 25
« Reply #18 on: September 23, 2012, 03:36:16 pm »

Luckily I have no debt so that isn't an issue.

But as an abstract, if you owed $2000 at a super low interest rate of 1% would it be wiser to invest the money and use the profits to pay off the debt?

Mainiac: You seem to have much against trading stocks. Is this because of previous experience? How would you suggest making money with money?
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LordBucket

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Re: Freedom 25
« Reply #19 on: September 23, 2012, 03:47:02 pm »

as an abstract, if you owed $2000 at a super low interest rate of 1% would it
be wiser to invest the money and use the profits to pay off the debt?

As an abstract, if you could borrow money at any rate less than the rate of return you would receive from an investment you could be making with that money, it would be profitable to do so. This is how banks make money, for example. They pay you less interest for your deposit than they themselves make by loaning your money out to others.



Microcline

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Re: Freedom 25
« Reply #20 on: September 23, 2012, 04:35:46 pm »

LordBucket is right on the money here.  You really should run a few paper trade simulations before you start playing for keeps.

Mainiac: You seem to have much against trading stocks. Is this because of previous experience? How would you suggest making money with money?
He doesn't seem to be against the idea of making money with money, he just seems aware of the risks that trying to do so entails.

Also, do you have a fund of easily accessible money in case of an emergency such as disease, injury, or loss of employment for yourself or a family member or an economic downturn?  If not, you might want to consider that before putting your extra money in riskier ventures.
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mainiac

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Re: Freedom 25
« Reply #21 on: September 23, 2012, 06:06:27 pm »

You can make money with money using a broad stock index fund or a stock portfolio consisting of stocks you chose.  Buy it, hold it, it goes up in value, you make money.  What I'm advising you against is actively buying and selling stocks.  If you keep buying stocks and selling them again 4 months later you taking on a lot of risks and arbitrage costs.Z

My personal experience with stock ownership is limited to my 401k which I have invested in an index fund with Vanguard.  When I first got my 401k I looked into how different retirement investments performed and saw that statistically speaking trying to manage my own investments was a very bad idea.  Maybe you are smarter then the average first time investor but to be blunt I don't see any evidence of that yet.  I don't want to see you get ripped off so some hedge fund manager somewhere can come out a thousand bucks richer so I want you to pick the no-brainier investment here.

A 401k invested in a stock market index will statistically speaking be both the safest and the highest returning investment that you can make on the stock market.  Millions of people just like you think they are better then the market and are proven wrong.  The lucky ones do make a profit and think they came out ahead, not even realizing that they could have made a bigger profit without the risk if they'd just gone for an index fund.
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"Don't tell me what you value. Show me your budget and I will tell you what you value"
« Last Edit: February 10, 1988, 03:27:23 pm by UR MOM »
mainiac is always a little sarcastic, at least.

Andrew425

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Re: Freedom 25
« Reply #22 on: September 27, 2012, 07:14:45 pm »

What sort of calculations did you do that lead you to that?

I'm somewhat new at this but, if a investment company makes 5% on my money and then takes 2-3% of that I barely will make inflation.

What about seeing what they are investing in themselves and buying the larger companies that they are hedging their bets in?

How can you invest in a stock market index and isn't that riskier then investing in a single company?
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LordBucket

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Re: Freedom 25
« Reply #23 on: September 27, 2012, 09:13:55 pm »

How can you invest in a stock market index and isn't that riskier then investing in a single company?

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

First, an index isn't a single company. It's a broad spectrum of companies across an entire market or industry. For example, any one cell phone company might do well or poorly, but what are the odds of every cell phone company in the world all doing poorly? If you were to buy into a "cell phone company index" that bought stocks of all cell phone companies...it wouldn't matter if any one particular company went bankrupt or were bought out because presumably some other company would pick up what was lost.

Second, in theory it removes people from the decision making process. An index isn't a collection of stocks that some particular person or group of people think is going to do well for whatever arbitrary reason. It's an attempt to mimic the action of whatever market or industry they're mimicking. If you buy into something like the Wilshire 5000, which attempts to mimick the action of "publicly traded companies in the US" and has 4100 different stocks in it, so long as "the US market" is doing well it doesn't matter what any particular company or industry does. You're not depending on a single guy in a suit measuring price/earning ratios and managing your fund based on his personal beliefs. Instead you're betting that "the market, overall" will do well.


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if a investment company makes 5% on my money and then takes
2-3% of that I barely will make inflation.

Commission structures vary, but it's possible to pay a lot less than 2-3%. If you're using mainiac's strategy and planning to do a long term hold, you can probably get away paying 5% on intial buy-in and less than one percent per year. For example, here's a mutual fund with a .2% expense ratio. Here's an EFT with .1%. .5% to 1% is more common, but it's possible to pay much less. Note however, that this is percentage of total fund, not percentage of profit. Even if a fund loses money, you'll still pay that percent.

Anyway, it's a valid strategy. It's not what I would personally recommend, but if you're extremely adverse to risk, unwilling to take the time to learn more about finance, and your goal is to start investing at age 18 and have enough money to retire comfortably at age 60, it might be an effective way to accomplish that.

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What about seeing what they are investing in themselves and buying the larger companies that they are hedging their bets in?

It's generally impractical for most investers to do that becuase they don't have enough money. I mentioned the Wilshire 5000, but let's use the S&P 500 as an example. It only has 500 stocks in it. Here's the list.

So what are you going to do, buy one share of each of those 500 stocks? At $10/trade that would be $5000 in broker's fees. Plus, not all stocks are priced the same. For example, google is trading at $756/share, wheres AGL Resource is selling for $40/share.  So...do you buy one share of each, in which case you're paying a $10 fee to buy AGL that's only worth $40 which therefore has to go up by 25% just to break even? Or do you buy an similar percentages of each stock? 500 different stocks, so have half a percent of your total investment in each. For example, 1 share of google is about $760, so buy $760 worth of each stock. 1 share of google @ $760, and 19 shares of AGL @ $40, etc. If you take this route, then even assuming google is the most highly values stock in the index (which I doubt) buying $760 worth of 500 different stocks would be $378,000, plus the $5000 in broker's fees.

Or you could buy 1 share of the index for $1447.
« Last Edit: September 27, 2012, 09:43:35 pm by LordBucket »
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Andrew425

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Re: Freedom 25
« Reply #24 on: October 08, 2012, 07:43:02 pm »

Quote
So what are you going to do, buy one share of each of those 500 stocks? At $10/trade that would be $5000 in broker's fees. Plus, not all stocks are priced the same. For example, google is trading at $756/share, wheres AGL Resource is selling for $40/share.  So...do you buy one share of each, in which case you're paying a $10 fee to buy AGL that's only worth $40 which therefore has to go up by 25% just to break even? Or do you buy an similar percentages of each stock? 500 different stocks, so have half a percent of your total investment in each. For example, 1 share of google is about $760, so buy $760 worth of each stock. 1 share of google @ $760, and 19 shares of AGL @ $40, etc. If you take this route, then even assuming google is the most highly values stock in the index (which I doubt) buying $760 worth of 500 different stocks would be $378,000, plus the $5000 in broker's fees.

I was planning on just buying stocks in the 30$-40$ range (as long as they meet my criteria)

So I set up an on-line brokerage account, with Scotia itrade. I have yet to put any money into as i'm quite hesitant about putting down real money.

The fee per trade is $30 so i'm wondering if you guys had any other recommendations for other online brokerage accounts. (Or if it's a good deal)

If that's the best I can do in terms of fees and stuff i'm thinking I won't be able to do day trading in the least and will have to go for longer holds.

I'm going to the book store in the next few days and I was wondering if anyone else had a good financial book to read.
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LordBucket

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Re: Freedom 25
« Reply #25 on: October 09, 2012, 03:14:23 am »

The fee per trade is $30 so i'm wondering if you guys had any other recommendations for other online brokerage accounts. (Or if it's a good deal)

That seems very high. You can easily get $10/trade from just about anyone else.

Here's a comparison of various electronic brokerage firms

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any other recommendations

I've only used Ameritrade. I was happy with them, but I rather suspect that probably most brokerage firms and trading platforms these days offer pretty much the same services and features.

Here's a youtube demo video for the Think or Swim platform if you want an idea of what it will look like once you start doing this.

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