jleopold stock trainer app is the only one I've played around with. If you want to make money, stay away from fund picking. Even Warren Buffet knows that index funds are the way to go. Day traders work 14 hour days, 7 days a week. On top of that they have entire teams of researchers backing their trades. Picking stocks on the market for an average person is very similar to jumping into an NFL game because you've played flag football a few times. It's going to hurt. That said, sometimes the temptation can be hard to avoid, or sometimes people have extra money they are fine with gambling. I keep less then %1 of my portfolio in "play money". That way, even if I lose it all, I still make money for the year. And it encourages me to save more, since if I want to pick the next hotness first I have to save some safe money. This 1% includes a few stock picks, my ESPP stock I hold, and my silly bitcoin stash.
Soooo... an index fund just has a similar shape of one of the major indexes and a hedge fund is personally managed by a broker or yourself? Like I said, I'm just getting into this. To the other point, I've been thinking about this because I want to put my money to the stocks of companies that I like as long term companies - Google, Netflix, Tesla, Blizzard, and so on. That's easy to say, but the reality is that my mini portfolio up there isn't very diverse and I'm no where near brash enough to gamble with a mass of my retirement money. So, I'm trying to figure out how to make moves in stages. I feel like a fake portfolio is a good place to start to see if I'm making some kind of return on my investment, then maybe I can buy a stock or two. I'm trying to learn more about the common pitfalls and whether I really want this responsibility.
The guys at Ivyvest do a pretty good primer. Here's an important consideration: the actual value of a company has nothing to do with the worth of a company, at least in the near-term. The market is interested in the spread between what the market thinks and what the stock actually does at earnings. One of my most seminal experiences was talking to a friend at RealNetworks back in 2002. I asked him how his stock was doing. He said "It's amazing. We're the only profitable dot-com left. We posted a thirteen-cent-per share dividend. We beat our estimates by twenty percent. But because Moody's predicted we'd beat our estimates by thirty percent, our stock took an eight percent hit yesterday." Now - long-term, RealNetworks wasn't a good bet. His particular group was building mobile RealNetworks codecs for Symbian, a dead-end if ever there was one (he runs a boutique app development studio now). But you woulda been grand at RealNetworks from 2002-2007. Except since the Market decided RealNetworks was done, RealNetworks was done. Google, Netflix, Tesla and Blizzard are often described as cult stocks - as in, properties that are desired and traded far above valuation by people who don't understand stocks but sure think Elon Musk is cool. Money can definitely be made on cult stocks, and Netflix has certainly evolved out of the space... but the important thing to remember is that when you're betting on a moon-shot like that, your only safe move is buy and hold. As David Rosenberg at Gluskin Sheff likes to say, "it isn't timing the market, it's time in the market." There are two types of gains to be had in the market: alpha gains and beta gains. If you look at a stock, its calculated "beta" is right there; that's a coefficient where the amount over "1" indicates the volatility of the stock. Basically, if a stock has a beta of 1 it will make money in direct correlation to stock market rises. Since no one would participate in the market if it didn't make money long-term, you can safely predict that beta gains will come to you unless you fuck around messing up your portfolio like a crazed day-trader. Alpha gains are why you mess up your portfolio like a crazed day-trader. Alpha gains mean that the stock's gain outperforms the market. Since the market is a closed ecosystem, for any stock to gain a dollar, other stocks have to lose a dollar. Beta gains are positive-sum. Alpha gains are zero-sum. And in a zero-sum gain, you will be beaten by those with insider trading knowledge, dark pools, arbitrage opportunities and other advantages that will never be available to you. Full disclosure: I bet 100% of my portfolio in emerging markets in 2004 and crushed the market. Then I shoveled all of my money in indexed annuities in 2008 and crushed the market again. My wife's portfolio is also in an indexed annuity, except for the $20k we left at Prudential because why not, and all that money is in mutual funds. It crushed the market. Now - I'm not stupid enough to think I have some magical skill with stocks; my play is basically "macro paranoia". I am not a wise investor. Follow my advice at your peril. But also recognize that my experience flies directly in the face of all this "ETF! ETF! RAH RAH RAH!" bullshit that every fuckin' stock picker on the planet is pushing. An ETF is basically just another kind of derivative... and while ETFs are hella safer than the CDOs that nuked the economy in 2008, buying GLD isn't buying a safer form of gold, it's buying gold through ETrade. We were going to get away from my financial planner. I wasn't entirely happy in my annuities because they're sketchy. But you know what? I'm not liking the macro-economic signals I'm seeing and I like the diversification my wife's Prudential portfolio has (not entirely sold on the fees, but too busy to deal with it right now). I backtested it against every single Lazy Portfolio there is and it's slaying. So me, with my wild-hair annuities and managed mutual fund portfolio - the two most toxic assets you can own, according to the conventional wisdom of every stock pundit you'll meet - am kicking ass over the S&P. That's through a recession and two stock bubbles. So be careful of conventional wisdom. Alex over at Ivyvest advises you to shovel 5% of your holdings into play-the-ponies stocks. 5%. So that would be 5% of your portfolio in Netflix, Google, Tesla, Activision Blizzard, etc. He also advises that you don't bother with your play-the-ponies portfolio until you have $100k safe. Food for thought.
So I was all set to share this and decided to button it down but then... Yeah, as it turns out I lied. In discussing this further I built out the sheet on my wife's funds a little better. Without rebalancing and without fees, she's at a... not great rate of return. Which, really, is why it's better to discuss this stuff in the open. Okay, moving up the call to Prudential.
Alright, so before I do anything I'm going to get a dictionary and look up all these words. Jeeze, stocks are a weird place. This is good though. I'm going to have to read it a few times to understand it in depth, but I generally agree that what everyone is shouting isn't usually the best advice - if for no other reason than it takes the masses six months to learn to turn experiences into words and amplify them above the noise, and six months is an eternity. It's good to know about the cult stock idea - I had a feeling that my admiration of those companies was probably well shared and that would likely have an odd effect on the stock. I like the tech market and I follow it for fun, so I figure that's a good place to start if I can actually get my head into things like what batteries are made out of and what public companies produce those elements. We'll see, I'll dive into your reading when I have some downtime.
Both of those books recommended are crazy cheap and crazy short. They're probably an afternoon of your time, or two if you're distracted. In order to sheep-dip yourself into an understanding of the larger forces, I recommend three leisurely, great reads: IOU: Why Everyone Owes Everyone and No One Can Pay The Big Short: Inside the Doomsday Machine Flash Boys: A Wall Street Revolt All three are entertaining as hell. Michael Lewis is great and John Lanchester is almost as good. He's also British so a more worldly perspective adds. Finally an anecdote: I have a modicum of internet fame as "that guy that helped the dude in prison." Long story short, I proofread his speech before his sentencing judge and acted as his internet conduit while he was in prison. Not mentioned in any discussion of that adventure is the fact that I've since done the same for a half-dozen people. I doubt I'll be asked again; I've pretty well turned my back on Reddit. HOWEVER the last guy who asked for my help was looking at fifteen years for stock manipulation. He was one of several in an archetypal boiler room that made calls and plays to pump up values ahead of dumping stocks. He'd defrauded a handful of pension funds out of tens of millions of dollars. He was 22. Finally, I'll leave you with this, from Nate Silver:
Hey we all start somewhere! 3 years ago I was googling what a bond is. KB layed it out pretty well, glamor stocks tend to be insanely overvalued. Even if you believe in (Activision)Blizzard long term, all of the known data is already factored into the price, it's really hard to make money on them. You're right about index funds vs managed funds. The former passively tracks a market, which means it's very low fee. Active funds are managed by someone on wall street, which means that someone is going to take a cut. It raises fees and (in my opinion) risk. KBs investment philosophy is very different from mine. If you want a very beginner friendly book and to learn more about my investing style I highly recommend "the bogleheads guide to investing". No previous knowledge required. The information is available for free on the bogleheads wiki but the book lays it out pretty well for beginners. Don't get overwhelmed! KB hit you with a ton of information and I'm adding even more. Finance is tricky, but the sooner you learn this stuff the better off you'll be long term. I do twice a year check ins, and I try to learn a bit more and do things a little better each time. Don't worry about getting everything figured out right away.
In what sense? Are you heavily into stocks? My investing philosophy is put some boring money where the boring people tell you to put it, and risk the fuck out of the leftovers. I prefer investments that I have a marginal amount of control over, however, so my stock portfolio is a drop in the bucket.KBs investment philosophy is very different from mine.
His funds are all actively managed, which I avoid. He also uses a lot of annuities, which don't make sense for me. I've also noticed in several finance threads on here(including the one he linked on Efficient Market Theory) people here tend to skew very pro real estate, which I am essentially terrified of. I'm not focusing on knocking his methods, they work for him, I just want to explain that there are different approaches. I use a mix of investment classes, but it's really pretty simple. My emergency fund and just in case money are in a mix of "safe" investments - cash, high yield savings, cds. and I will eventually add in TIPS. I largely don't own individual stocks. I instead buy index funds that track entire market. These are low fee and give me excellent diversification. Twice a year I check in, re-balance to keep everyone on track, then forget about it - it's why they are called lazy portfolios. This method works very well for me, I've beaten everyone I know who's tried the DIY approach. Here is my asset allocation. I included links to example funds I use but since this portfolio spans my 401k, Roth IRA, and brokerage account I use a mix of funds to get these numbers. 35% - US Index - FSTVX 30% - International index - FSGDX 5% - US Small Value - Not required, I value tilt to add a little flavor :) 9% - REIT - VNQ 20% - Bond - FTABX 1% - Play money - Cash, bitcoin, ESPP. No more then 5 - 10 trades a year.