Announcement

Collapse
No announcement yet.

One Up on Wall Street

Collapse
X
 
  • Filter
  • Time
  • Show
Clear All
new posts

  • One Up on Wall Street

    That's the title of the book by Peter Lynch who had phenomenal returns with the Fidelity Magellan Fund. It was published in 1989 and I still have the yellowed pages on my bookshelf. Between 1977 and 1990 he averaged a 29% return. I know most of you are Bogle believers and would ascribe it to dumb luck. I disagree. It's been a while since I've read the book, but as I recall the basic premise was to look around you and when you see products or companies that you like they may make good investments. Sure, you have to do your diligence, but it's a place to start. He also said to invest in what you know. So a physician may look at Medical or Pharm, but also look at your day to day. I'm not a big stock trader and have mostly low cost Etfs with a smattering of individual stocks. But the book made sense to me. So, I recall reading about a company in the AMA news about 20 years ago that was inventing a robot to help with surgery. I thought that was pretty amazing and checked out the stock, yes Intuitive Surgical and I think it was about six bucks a share. So I took a little piece. I was also shopping at Costco regularly at the time and liked that one too. Got my first iPhone in 2008 and was impressed with that as well. While none of these made me rich they all went form four to six figures. This isn't something I've done a lot, I'm not a big trader. And I recall a few other double and triples and some that went down a little. My point is take a few percent and invest in what makes sense for you. If you're doing everything else right the downside is what is, a few percent, but the upside can be much more.

  • #2
    If life were measured by winners alone….Much different investment world than that of early Lynch, Buffett,or for that matter Gabelli, Rainwater, Heine etc. I was fortunate to have caught a few of those fast horses in the eighties and early nineties, including MSFT, HD, JNJ, PFE and many others that I still own. But Bogle was so right when he described reversion to the mean- all of the big names revert and underperform as they get bigger and time goes on. After 50 years of investing, I don’t consider myself an amateur, but all I invest in is the S&P

    Comment


    • #3
      “But Bogle was so right when he described reversion to the mean- all of the big names revert and underperform as they get bigger and time goes on. After 50 years of investing, I don’t consider myself an amateur, but all I invest in is the S&P”
      If you apply those principles then it seems you should be investing in small stocks, not the bigger “underperforming” S&P stocks.

      Comment


      • #4
        Originally posted by Auric goldfinger View Post
        If life were measured by winners alone….Much different investment world than that of early Lynch, Buffett,or for that matter Gabelli, Rainwater, Heine etc. I was fortunate to have caught a few of those fast horses in the eighties and early nineties, including MSFT, HD, JNJ, PFE and many others that I still own. But Bogle was so right when he described reversion to the mean- all of the big names revert and underperform as they get bigger and time goes on. After 50 years of investing, I don’t consider myself an amateur, but all I invest in is the S&P
        This seems to be quite the big turnaround from the 1960s when as I recall you were more focused on US Treasuries and Gold, Mr. Goldfinger. I, for one, applaud you for your personal growth.

        Comment


        • #5
          The amount of info now , is so abundant even the amateur has a lot of resources to make a good informed decision. To find those stocks that know one else knows about is not impossible but highly unlikely. Many great investors , esp Buffet and Munger continue to make money not only with great purchases but also mitigating risk and avoiding big losses. Being average , with average returns statistically has a better chance of success than trying to be better than average for most non professionals and many professionals.

          Comment


          • #6
            I think historically it was easier to beat the market by putting in the work when information wasn't readily available. Jim Cramer used to go to the library and search microfiche for a leg up on the competition.

            Now information is abundant, trading more accessible but dominated by algorithms. So indexing makes sense for most investors.

            With that said, I do invest in companies I like and if their financials/growth make sense to me. If you invest solely in companies you like, you may accidentally get caught up in a company like Peloton at the wrong time. But it just takes 1 Tesla/Chipotle/Domino's/Costco/Apple to balance out 4 Pelotons or Robinhoods.

            Comment


            • #7
              Originally posted by pit.alumni View Post
              That's the title of the book by Peter Lynch who had phenomenal returns with the Fidelity Magellan Fund. It was published in 1989 and I still have the yellowed pages on my bookshelf. Between 1977 and 1990 he averaged a 29% return. I know most of you are Bogle believers and would ascribe it to dumb luck. I disagree. It's been a while since I've read the book, but as I recall the basic premise was to look around you and when you see products or companies that you like they may make good investments. Sure, you have to do your diligence, but it's a place to start. He also said to invest in what you know. So a physician may look at Medical or Pharm, but also look at your day to day. I'm not a big stock trader and have mostly low cost Etfs with a smattering of individual stocks. But the book made sense to me. So, I recall reading about a company in the AMA news about 20 years ago that was inventing a robot to help with surgery. I thought that was pretty amazing and checked out the stock, yes Intuitive Surgical and I think it was about six bucks a share. So I took a little piece. I was also shopping at Costco regularly at the time and liked that one too. Got my first iPhone in 2008 and was impressed with that as well. While none of these made me rich they all went form four to six figures. This isn't something I've done a lot, I'm not a big trader. And I recall a few other double and triples and some that went down a little. My point is take a few percent and invest in what makes sense for you. If you're doing everything else right the downside is what is, a few percent, but the upside can be much more.
              It’s a good book but as you say was written in a different era. It’s much harder to find ten and hundred baggers now given widespread coverage of nearly all corners of the publicly traded markets.

              No one doubts that alpha exists, it’s just much more rare than most people think and after paying for that alpha (fees) and associated taxes due to higher trading costs and capital gains realization) the chances of benefiting from alpha is very low, probably under 5% of all equity funds over any ten year period, properly benchmarked.

              I knew this social media company once back in 1998. I thought it had this fascinating idea of connecting people, on line, for free, and generating revenue by selling ads. I checked out the website and it seemed pretty cool. I bought a few hundred bucks worth (I was in med school at the time, that was a lot of money). You can check out their history, The Globe dot come , ticker symbol TGLO. Great idea, wrong time, wrong execution. Social media is now a multi trillion dollar business but TGLO went to zero.

              There are winners and losers. Glad you’ve had some winners. You will have some losers, too, and there are very few people who will beat the markets, year after year, net of fees and taxes and trading costs like bid-ask. Be honest with your performance, track it over time, track after tax performance, and if ten years later you’re the next Peter Lynch open a mutual fund company or better yet a hedge fund and see how you do.

              Comment


              • #8
                Magellan was my very first investment. Yes Peter Lynch was impressive. But when you look at the returns after it was opened to the public (it was a private vehicle for the Johnsons) it is less impressive.
                Tried to mimick his research.
                Buffet too.
                Full disclosure, I am not Peter Lynch nor Warren. Buffet.
                I did cave to my wife, she wanted some Apple.
                I knew people and had business with Cisco and Microsoft.
                What I learned is great companies does not mean a great investment Even an educated guess is like a monkey throwing darts.
                Even if you have data, the real key is how the “market” will interpret the info. Can’t do that.

                Comment


                • #9
                  I’m not saying I believe I can beat the market. But I do believe in risking a few percent to invest in things I believe in. As I mentioned the downside is limited, whereas the upside is not. I agree that statistically active managers underperform. But if you buy an individual stock your trading costs are basically zero. Also, no one is measuring your performance quarter to quarter, so you have no pressure to bail to juice your numbers. Additionally, you can invest in much smaller companies that no large asset manager can really touch. I’ve also taken this philosophy outside the stock market into RE. Frankly, I think the WCI does a great service and I refer young physicians to his website. I probably made every mistake in the book. I saved too little, spent too much and took a lot of time off along the way. But after perusing the website I’ve looked at my numbers and if I’d done everything right my NW would be half of what it is today. The journey is everything and beyond reaching FI it’s important to have fun along the way. Am I smart or lucky, I’d like to think it’s a bit of both.

                  Comment


                  • #10
                    Originally posted by pit.alumni View Post
                    But after perusing the website I’ve looked at my numbers and if I’d done everything right my NW would be half of what it is today.
                    I’d be curious to see the math behind this. If you’ve only taken a few percent to put in individual stocks and RE and doubled your net worth from where it’d be if you had done ‘everything right’ then you’ve hit monster home runs.

                    Comment


                    • #11
                      I do not know if I guy the whole "look around at what you use" idea. I am a pretty odd guy and I like things that many people do not. Any tons of people like things that I just do not get. So I do not think my experiences in life would lead me to good investing . It is easy to look back and think "hey I have been using amazon forever, why didn't I invest" Hindsight clouds your judgement.

                      Also this whole few percent of your investment idea. Say you play with 5%. What if you nail it and it is now 25%? Do you sell your hot stock and rebalance? I would argue most would not.

                      Say it craters. Do you take from your traditional funds and buy more stocks? I would guess most do.

                      Comment


                      • #12
                        Physicians should be able to reach great wealth while only accepting the market return provided they save enough money. It would be a real shame to not get there after striking gold so many times in life (smart, born in america, got into med school, residency) only because the market return didn't seem good enough.

                        Comment


                        • #13
                          CordMcNally RE and leverage did the heavy lifting with this, not stocks. And yes, it is turning into a monster home run. My timing was great at the height of the RE crash. But I looked at RE for years before jumping in so I don't think it was just luck, but a conviction that this was a good direction. Currently in my retirement portfolio 10 percent of my portfolio is invested in two individual stocks. I've held these for two stocks for 15-20 years and the initial investment was much much smaller at the time. Here's an example of one compared to the S&P. My point is not to tell folks to invest in individual stocks or RE, but rather the downside of 5% outside the bread and butter is at most 5% if you lose it all, and the upside is unlimited.

                          Click image for larger version

Name:	COST_YahooFinanceChart.png
Views:	935
Size:	115.7 KB
ID:	319644

                          Comment


                          • #14
                            Turf Doc That depends on your definition of great wealth. By my definition I'm not there yet, but I have all I need and am happy.

                            Comment


                            • #15
                              Originally posted by pit.alumni View Post
                              CordMcNally RE and leverage did the heavy lifting with this, not stocks. And yes, it is turning into a monster home run. My timing was great at the height of the RE crash. But I looked at RE for years before jumping in so I don't think it was just luck, but a conviction that this was a good direction. Currently in my retirement portfolio 10 percent of my portfolio is invested in two individual stocks. I've held these for two stocks for 15-20 years and the initial investment was much much smaller at the time. Here's an example of one compared to the S&P. My point is not to tell folks to invest in individual stocks or RE, but rather the downside of 5% outside the bread and butter is at most 5% if you lose it all, and the upside is unlimited.

                              Click image for larger version

Name:	COST_YahooFinanceChart.png
Views:	935
Size:	115.7 KB
ID:	319644
                              I understand that you said you put four figures in a few stocks that are now worth six figures and I'm well aware of which stocks have done this. There are also a lot of people who go into stocks that were all around them, as you mentioned, and those stocks went to zero. There is definitely a survivorship bias to these types of stories.

                              As far as real estate, I assume you put in much more than a few percent of your net worth?

                              You mention that the downside is limited and the upside isn't. While this is technically true, it's not a great mindset to have. We're all aware that for a majority of people a lost dollar hurts more than a gained dollar does good. A (limited) downside of going to zero can completely wreck somebody financially and do much more damage than that stock going up would do good. I'm glad it's worked out for you but you're likely still the minority and you understand it's better to be lucky than good.

                              Comment

                              Working...
                              X