Blackjack vs. Stocks

[blackriver]

Why do you want the shitty stocks in a particular sector?

i may not understand the sector, if everyone else thinks its shitty its often a good deal

...the overpriced stocks

because i dont know how much their r&d and brands are worth. if everyone thinks its over priced, it probably isnt

...the under-market capitalized stocks

come on

....the non dividend stocks

when a company gives dividends they are saying "here we have too much money. maybe you can do better with it than us." then why did i invets int he first place? a company that doesnt pay dividends is one that has so many opportunities and is spending their time producing value instead of seeking loans when they already have the money.

...why not just put 10 bucks in all 5000 stocks on the big exchanges then

some people do, it depends on what you believe about the world and how others are evaluating these stocks

...why pay an ongoing fee

you do not have a complex well informed view. this confidence is similar to anyone who read a book on a topic and is suddenly an expert

 

[Midwestern]

Investing Vs Trading

the advice that most people are giving you on this site is regarding investment. I support investment as a way to tuck away a nest egg, but it really doesn't compare to blackjack the way trading does. If all you are interested in is investment, find a good advisor, tell him your investment goals, and have him help you decide what risk profile you want and have him help you create an investment portfolio.

Now if you want to dive deeper into the situation, we need to make a distinction between Investment and Trading. Investment is like planting a garden and watching it grow. Trading is ACTIVELY getting in and out of 'investments' on a short term basis. I see more of a parallel between BJ and trading (rather than bj and investing), however there is still one HUGE difference between BJ and the two:
one thing you need to realize is that profits are not "virtually guaranteed" in investing/trading the way they are in blackjack. In BJ you can have a profit expectation per hour, which really makes it more like a job. In investment, there is no guarantee of returns. In addition, cost of access is high so you can expect expenses of 2000-4000 per month if you are fully committed and really gung-ho about it.


Trading takes years to learn and a lifetime to master. There are seasoned pros who have a difficult time making profits in a year, and this is NOT due to unfavorable variance (i.e. in the same way a high + shoe sometimes doesn't work out). Most of the time, traders are just plain wrong. But similarly to blackjack, if you can find ways to lose less when you're wrong and make more when you're right, you can make money in the long run. And the money can be VERY good for the right people at the right firm.

my advice on trading/investing: You will not be profitable in the long run unless you work FULL TIME in the trading/investing arena. Your best bet is to get a job in the space and work hard towards becoming a proprietary trader/ portfolio manager.

If you have a quantitative degree like Math, Econ, Statistics, Finance, or Some sort of Engineering degree, you should be able to get interviews for trading jobs.

I'm sure you know that Don Schlesinger was a full time wall street derivatives trader so reading some background on him would be helpful. I was trying to find a link to an interview he did on Parker Pages about careers on wall street, but.. i couldnt find it. Good luck on your search though. If you decide that you really want to pursue a career in it, i can offer lots of advice on how to get started and i can recommend books on more specific topics.

 

[zengrifter]

haha i'm not lazy, but I am a very busy man! It's not for lack of willingness!

Okay, with a full time job 20-hrs/mo is still quite doable. zg

 

[Lowrider]

"you do not have a complex well informed view. this confidence is similar to anyone who read a book on a topic and is suddenly an expert"

I think 25 years of Ben Graham value investing with almost a 10% annualized return would find severe disagreement with this statement....why don't you just wonder over the the roulette tabe and plop $20,000 on red...

 

[Lowrider]

Oh and I forgot to mention that the 10% annual return over 25 years DOES NOT INCLUDE dividends and since about 90% of my stocks have dividends that would probably amount to another 2 or 3% per year in returns

 

[desertwolf]

A professional player told me that he tries to turn his bankroll over each year. I don't know if that is realistic or not, but if he really does that, it would be a 100% return on investment, which is a lot better return than the stock market.

I have increased my bankroll by only 11% in 4 and a half months. Thats less than I was hoping for but better return than elsewhere.

 

[Midwestern]

A professional player told me that he tries to turn his bankroll over each year. I don't know if that is realistic or not, but if he really does that, it would be a 100% return on investment, which is a lot better return than the stock market.

I have increased my bankroll by only 11% in 4 and a half months. Thats less than I was hoping for but better return than elsewhere.

Turning over your bankroll each year and making 11% in 4 months is possible when your bankroll is 50k.

Real money is harder to turn over, which is why people take 5-10% returns in the market. Bankrolls of $100 Million that earn 10% a year are doing relatively ok. A $1Billion hedge fund that knocks it out of the park making 20% is doing really well for themselves.

No one could bet those kinds of nosebleed bankrolls in BJ or poker with any kind of longevity.

 

[Gamblor]

A professional player told me that he tries to turn his bankroll over each year. I don't know if that is realistic or not, but if he really does that, it would be a 100% return on investment, which is a lot better return than the stock market.

I have increased my bankroll by only 11% in 4 and a half months. Thats less than I was hoping for but better return than elsewhere.

But again, comparing apples and oranges, factor in labor.

People who work at a job for wages can claim they made an infinite return on their BR, with 0% risk of diminishing their BR.

 

[LovinItAll]

Screw all investing 'strategies' that promote anything other than buying and holding value stocks (and that hopefully pay a dividend).

Better yet, Brk.b and have a nice day, as long as WB is alive, anyway. I'd say Brk.a, but you "only" have $20k.

Remember when the WSJ did the 'throw the darts against the experts' thing? http://www.automaticfinances.com/monkey-stock-picking/

Those weren't average investors, they were top analysts and only picked 11% better than 50%. They had more knowledge and information at their disposal than 99.9% of 'average Joe's'.

During the 90's, I (along with everyone else who was dabbling) made a bunch of money in the market, especially trading options. I thought I had the Midas touch. In retrospect, one had to be at complete odds with the Karmic universe to lose money during that period. Yes, I took my short-term hit, but most of the companies I was long on I still own and they have recovered.

Note: Listen to me at your peril! I thought that GM at $5 was practically the nuts. So they were having some problems - the gov't would step in, shoot them some cash like they were doing for every other company that came begging, and if nothing else, I could get out at $6 for a tidy 20% (I know I said buy and hold, but....).

Hmm. Everyone knows the story now, but who in the world would have imagined that yes, the government would step in, allow GM to declare bankruptcy, screw every owner of common stock, and then IPO a zillion year old company. I lost $5k, but I'm FAR more bothered about the series of events than I am with the tiny sum of money.

Only in America, baby......

 

[Thunder]

Screw all investing 'strategies' that promote anything other than buying and holding value stocks (and that hopefully pay a dividend).




Only in America, baby......

I strongly disagree with your statement. I am living proof that trading can work but being able to use technical analysis well enough to succeed on your own requires lots of studying and isn't for the weak.

 

[LovinItAll]

I strongly disagree with your statement. I am living proof that trading can work but being able to use technical analysis well enough to succeed on your own requires lots of studying.

That's why I didn't say '100%' (please see my PM to you). Clearly there are investors who are not analysts, yet they put the time in and have developed an advanced skill set. That may include you, and I have no reason to doubt that you have a successful track record. I wish you continued prosperity.

If I ask 100 random people that invest in the market if they are successful investors (not the buy and hold to which I was referring), a large percentage of them are going to tell me that they are. Statistically, it just ain't so. Very few people possess the skill to buy and sell securities on a regular basis and make money (again, excluding long term value investors). See: 'Monkeys And Darts' in my earlier post.

To accept the premise that amateurs can get healthy returns without doing a lot of homework would be tantamount to calling Warren Buffet a liar. I'm not prepared to do that.

To reiterate: I'm not speaking about investors who research and acquire under-valued securities and hang on for the long haul. I'm talking about 'active traders'.

You still may not agree with me. If that's the case, I respect your position, even if I don't agree with it.

Best ~ L.I.A.

[Edit]: I'm actually going to take a stronger position than my post above might indicate. From the referenced article:

"Additionally, the performance of the pros versus the Dow Jones Industrial Average was less impressive. The pros barely edged the DJIA by a margin of 51 to 49 contests. In other words, simply investing passively in the Dow, an investor would have beaten the picks of the pros in roughly half the contests (that is, without even considering transactions costs or taxes for taxable investors)."

This was over 14 years, not one sample, so the 'long run' was factored in. Unger quotes economist Burton Malkiel in the article who concurs with his opinion, to wit:

"The long-story short is that, except in a very rare occasion, I'm not knowledgeable enough to beat the market over an extended period of time with my investment choices. And neither are you."

We're talking about individual securities and not funds, of course.

 

[assume_R]

Okay, with a full time job 20-hrs/mo is still quite doable. zg

Agreed. In 4.5 months, I've been sitting at the tables 85 hours, which averages a bit under 20-hrs/mo just at the tables. But remember, I've probably spend about 20 hours this year scouting and looking for tables to play at, I've spent at least as much time on the road driving to and from the casinos (at least 3 hours round trip for each session), plus time at casinos eating, sleeping, etc.

So all that averages to about 30 hours per month thus far this year related to casinos (excluding practicing or running any sims or even on this message board at home).

 

[Automatic Monkey]

Stocks are the best passive investment: they don't require you to actually do anything, unlike a business or real estate, etc....

I don't agree! Trading stocks with +EV requires research and work comparable to pro sports betting, in my opinion. Markets set prices for stocks based on short-term trading value and long-term real value just like a bookmaker sets a line. You have to have more information than most of the bookmakers to beat the lines and you have to have more information than most of the money invested in the market to beat the market. But doing so is as intellectually stimulating and rewarding of intelligence and creativity as the kind of AP we do here.

 

[moo321]

I don't agree! Trading stocks with +EV requires research and work comparable to pro sports betting, in my opinion. Markets set prices for stocks based on short-term trading value and long-term real value just like a bookmaker sets a line. You have to have more information than most of the bookmakers to beat the lines and you have to have more information than most of the money invested in the market to beat the market. But doing so is as intellectually stimulating and rewarding of intelligence and creativity as the kind of AP we do here.

TRADING stocks is a lot of work, and almost no one does it well.

INVESTING by buying an index fund and hanging on to it, requires no work, and it's the best way to invest for most people.

 

[moo321]

IMO, most "little guys" can't make money in the stock market these days, at least short term. It's a rigged game. Insider trading is rampant, 75% of all trades nowadays are millisecond trades done by super computers in NYC and Hoboken.

10-20% is WAY too optimistic, even in the heyday of the bull market of the 90s. 5%/year is a more realistic number, long term.

If you are going to put money in stocks, I echo previous posters' sentiments and go with ETFs/index funds of the major indices.

I have to completely disagree with this. Citation please.

 

[Automatic Monkey]

TRADING stocks is a lot of work, and almost no one does it well.

Perhaps so. But almost no one plays Spanish 21 well either. :toast:

 

[1357111317]

when a company gives dividends they are saying "here we have too much money. maybe you can do better with it than us." then why did i invets int he first place? a company that doesnt pay dividends is one that has so many opportunities and is spending their time producing value instead of seeking loans when they already have the money.

I don think this is true. I think it has been proven that companies that pay dividends have had better returns in the past than non dividend paying stocks. Not to metion these stocks will be much less volatile then stocks that don't pay dividends.

 

[1357111317]

I have to completely disagree with this. Citation please.

I think the part about the millisecond trades is true. I read something where these computers basically catch orders before they get to the exchange, buy the stock that order wanted to buy, and then sell it back to them at a slight markup. I will try and find the link.

EDIT : http://www.nytimes.com/2009/07/24/business/24trading.html?hp

There is the link. Kind of scary for your average investor.

 

[Automatic Monkey]

I don think this is true. I think it has been proven that companies that pay dividends have had better returns in the past than non dividend paying stocks. Not to metion these stocks will be much less volatile then stocks that don't pay dividends.

It depends. Sometimes dividends are a way for insiders to trundle money out of the company. A company that is selling off its productive assets and paying them out as cash is having a going-out-of-business sale, not necessarily a good investment. Often what a company pays in dividends represents all of its profits, and that's not a bad thing but if all you are looking for is cash payment and not growth you'd be better of with a bond or preferred shares than common stock.

One way to quickly tell the difference is with technical analysis- look at its price history relative to its dividend payments. On the ex-div date the price drops such that yesterday's price is roughly equal to today's price plus the dividend payment. If the company is paying out ongoing profits the graph should look like a sawtooth- straight down on one ex-div day then creeping back up before the next ex-div day. But if it looks like a staircase, going down, that's a sign the company is cannibalizing itself to pay the dividends.

 

[moo321]

As a broad generalization, companies that pay a dividend outperform companies that don't.