summary of what I have learned with my funny money

[StarTrekDoc]

Our speculation account isn't about the math. It's about human behavior and guessing what it brings in the economic sense of a company.

Investing large sums over time is a recipe for disaster-- never bet against the house over time. That's the math.

The big success companies don't think about the math. I like to find that diamond in the rough and bet on its success. Been lucky recent years with likes of Amazon, visa and boa. But laid eggs with wamu and Nokia. Totally missed telsa and Facebook cause my coin flip went tails on those decision days ????

It is my equivalent of wild catting and sleucing and banking on what I believe our human behavior on those companies more than anything.

Eg noone e in their right mind would have invested in Amazon with their ratios, but I found myself buying and selling quite a lot on it from day one. So kept putting money where my habits were and worked out decently well

[kingsnake]

Sucked at stock picking of course, luckily no major losses, but losses. I learned I'd rather just spend or save funny money rather than take flyers.

Discovered Bogleheads Guide to Investing in 2010...age 36...switched to Indexing and pulled out of individual stocks, active funds, etc. Just in time as salary jumped to high 6 figures at that point too. It was a perfect storm. Never looked back. Up like 8% annually since then, can sleep at night, have simple accounts, on pace to FIRE by 45.

[Zaphod]

I dont even think its just that its difficult to make money trading individual stocks, its doable for some people obviously on a mathematical basis. Its just that it is so incredibly easy to get an excellent return on autopilot. It has to be one heck of a compelling situation to be able to compete against that.

[The White Coat Investor]

I agree that researching, buying, and selling individual stocks is neither fun nor profitable. Keep careful track of your returns, including the value of your time, and you'll likely give it up within a few years. If you're going to spend time on something to increase your returns, choose something where you're more likely to make a difference, like a less efficient market such as real estate.

[adventure]

I did this 10 years ago, and came out ahead (of $0). I decided I'd learned 2 things.

1. I could do this, and make money. No problem. I'd come out ahead of breaking even. Could I make enough? Don't know. Could I beat inflation or the indexes? Don't know. (data certainly suggests the clear answer...)

2. It'd take a lot of full time work, and I'd rather do something else with my time, life, and money.

3. Lots of risk too.

[Zaphod]

Vagabond MD wrote:

but took it in the shorts with Chipotle. All in good fun!

Click to expand...

You're the first to call it that!

.

[VagabondMD]

I purchased stocks in the past and did not have the temperament for it. In my "real account", we own two stocks, a small position in a local bank that I serve on an advisory board, and my wife's company, for which she is required to own a percentage of her salary at her retirement executive level.

I have a play account at Robin Hood, about $3000, which gets an additional $100/month. In it, I buy whatever tickles my fancy at the moment. No stress at all. Current holdings include two China ETFs, Berkshire Hathaway, B of A, Starbucks, JNJ, Target, and a couple others. I made a killing in Tessa a while back, but took it in the shorts with Chipotle. All in good fun!

[Matas]

OP - doesn't sound like "funny money" if you're stressing out about it. Maybe sell them and use the proceeds to something that is actually fun. Ski, mountain bike, race car school, travel, whatever.

[Neuro-doc]

I own one individual stock. It's down about 90%. I bought it years ago after reading a "this is a great stock" article in the newspaper and doing a bit of (useless) background research.

Fortunately, it represents less than 0.01% of my otherwise fully indexed portfolio.

I could sell the individual stock to harvest the capital loss. But instead, I keep it because even though it is only a tiny piece of my overall asset allocation, it serves a critical role in my portfolio:

Every time I log onto my investment account and see that stock in my list of holdings, the 90% loss slaps me in the face and reminds me not to do dumb things with my money ever again.

[Donnie]

Please don't buy individual stocks and definitely don't buy options unless it's for entertainment purposes. No one on this board knows what they are doing with regards to individual stocks, myself included.

[Hatton]

I used to do quite a lot of individual stock investing.  The only individual stock that I own is Apple.  I bought it in 2008.  It has done very well. Please buy your iPhone Xs. Individual stocks require that you do lots of reading about individual stocks.  You need some familiarity with balance sheets and technical charts.  I used to pour over IBD before going into work.  I quit individual stocks and now index around 2008.  Individual stocks are much more work.  indexes never bankrupt

[lernd]

Zaphod wrote:

lernd wrote:

I put my fun (or funny) money into small/micro cap biotechs in late stage drug development.  I figure at least this way I know as much as the next guy.  I try to read the existing research/studies and make a “best guess” as to whether the drug will gain approval or have a successful Phase III based on a previous IIB study.  Companies like Facebook or Apple have teams of analysts working full time analyzing price, future performance etc.  There is no way I could ever know as much as they do so picking those stocks is like guessing.  I figure that the small cap Biotechs don’t have as much surveillance and financial analysts probably can’t read a medical research study like I can.  As one might guess, I’ve had some home runs and some major whiffs.  Counting only realized gains and losses, I’m only about 1-2% better than a total stock market fund (which is obviously not good considering the increased risk), and that isn’t factoring in taxes, which I keep to LT gains only.

 

Josh

Click to expand…

biotech in general is littered with fraudulent companies. I’ve picked apart so many crazy bull arguments from sites like Seeking Alpha, but those guys are nuts that on the bandwagons, and it can take companies years to die. Not worth it. Far easier to spot crap or those with unlikely scientific processes/goals, poor study designs, etc…or a tiny nanocap with a bazillion dollar idea with great clinical results, sure, thats why no ones bought them yet.

Most of what I’ve learned is when I have stocks, Im too impatient to hold til it works out. Literally have had several 100% plus moves that have happened in last years if I would have held. A couple of those I knew were big possible winners, but I was transitioning to indexes only at the time anyway due to above noted personal limitations. I dont think I had at the time of initiation an exit/timing strategy for my thesis to play out, but even if I had, it would have been difficult to not overplay.

Click to expand...

Agree that there is a lot of fraud - and those sites like seeking alpha (and motley fool) likely have agendas of their own to promote stocks etc.  That is why I do my own research.  A simple Market Cap/Industry screener will obtain a list of companies.  I also weed out companies not in the US or Western Europe (I figure more likely fraudulent if based elsewhere?), with market caps that are too small or stock prices that are too low (likely to get delisted from a major exchange).  Then I start looking the companies up directly by going to their websites - all should have a publications section.  Another method of finding companies is to simply peruse a big journal and look at large drug trials and who supported them.

[Zaphod]

lernd wrote:

I put my fun (or funny) money into small/micro cap biotechs in late stage drug development.  I figure at least this way I know as much as the next guy.  I try to read the existing research/studies and make a “best guess” as to whether the drug will gain approval or have a successful Phase III based on a previous IIB study.  Companies like Facebook or Apple have teams of analysts working full time analyzing price, future performance etc.  There is no way I could ever know as much as they do so picking those stocks is like guessing.  I figure that the small cap Biotechs don’t have as much surveillance and financial analysts probably can’t read a medical research study like I can.  As one might guess, I’ve had some home runs and some major whiffs.  Counting only realized gains and losses, I’m only about 1-2% better than a total stock market fund (which is obviously not good considering the increased risk), and that isn’t factoring in taxes, which I keep to LT gains only.

 

Josh

Click to expand...

biotech in general is littered with fraudulent companies. I've picked apart so many crazy bull arguments from sites like Seeking Alpha, but those guys are nuts that on the bandwagons, and it can take companies years to die. Not worth it. Far easier to spot crap or those with unlikely scientific processes/goals, poor study designs, etc...or a tiny nanocap with a bazillion dollar idea with great clinical results, sure, thats why no ones bought them yet.

Most of what I've learned is when I have stocks, Im too impatient to hold til it works out. Literally have had several 100% plus moves that have happened in last years if I would have held. A couple of those I knew were big possible winners, but I was transitioning to indexes only at the time anyway due to above noted personal limitations. I dont think I had at the time of initiation an exit/timing strategy for my thesis to play out, but even if I had, it would have been difficult to not overplay.

[lernd]

I put my fun (or funny) money into small/micro cap biotechs in late stage drug development.  I figure at least this way I know as much as the next guy.  I try to read the existing research/studies and make a "best guess" as to whether the drug will gain approval or have a successful Phase III based on a previous IIB study.  Companies like Facebook or Apple have teams of analysts working full time analyzing price, future performance etc.  There is no way I could ever know as much as they do so picking those stocks is like guessing.  I figure that the small cap Biotechs don't have as much surveillance and financial analysts probably can't read a medical research study like I can.  As one might guess, I've had some home runs and some major whiffs.  Counting only realized gains and losses, I'm only about 1-2% better than a total stock market fund (which is obviously not good considering the increased risk), and that isn't factoring in taxes, which I keep to LT gains only.

 

Josh