50 Unfortunate truths about investing
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re: 50 Unfortunate truths about investing
Posted by Fat Bastard on 3/11 at 9:08 pm to foshizzle
quote:

If you're doing it for the excitement your bankroll is in trouble.



where did i say i did it for excitement??

as far as investing in the markets goes not that i do not invest in stocks or funds but futures is more exciting.


i stand by my statement.


This post was edited on 3/11 at 9:09 pm

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Posted by Fat Bastard on 3/11 at 9:09 pm to LSU0358
quote:

but he sometimes views it to much as a trip to the casino.



if he is treating futures as a gamble he needs to get out then if he is not taking this seriously and have a plan before getting back in.



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Posted by Fat Bastard on 3/11 at 9:12 pm to slackster
quote:

They work for no other than the fact that people expect them to work. The basis for technical analysis is absurd IMO, but it's been around for so long that people who use it have poisoned/influenced their own data.



complete and utter BS. it has worked for me just fine. as well as others. as a matter of fact i have taken a loss before at times when all i used was FUNDAMENTALS. chew on that.



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Posted by Vols&Shaft83 on 3/11 at 9:18 pm to Fat Bastard
quote:

as far as investing in the markets goes not that i do not invest in stocks or funds but futures is more exciting.


Well playing high stakes blackjack is more exciting than buying mutual funds too, but one is a significantly more effective investing strategy (at least in my experience).


Not equating what you do to gambling, but I go by the most important 2 rules in investing:

Rule #1: Never lose Money

Rule #2: When in doubt, refer to Rule #1




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Posted by OFWHAP on 3/11 at 9:25 pm to Fat Bastard
quote:

complete and utter BS. it has worked for me just fine. as well as others. as a matter of fact i have taken a loss before at times when all i used was FUNDAMENTALS. chew on that.



I think one reason people bitch about technicals so much is that they tend to over-rely on technical indicators and lose their arse when things don't work out. For instance they buy/sell at a support/resistance level, only to see the asset prices continue to fall/rise. Or they convince themselves that an obvious head and shoulders is forming, only to have the security rally instead of plummeting.

Investors need to realize that technical indicators should be used as part of a much more exhaustive investment strategy. If you see WTI crude reaching a resistance level, you shouldn't sell if there is news stating that Canada has decided to cut off oil exports to the US; you'd get smashed by the influx of buy orders coming in at increasingly higher prices.

And once again, since so many professional traders use technicals, that means they exist and should be taken into account when trading. It doesn't matter whether or not they're self-fulfilling prophecies.



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Posted by Bayou Tiger on 3/11 at 9:49 pm to Vols&Shaft83
quote:

Rule #1: Never lose Money

Rule #2: When in doubt, refer to Rule #1
This is ridiculous. I would have missed out on way more winners than losers with this approach.

What is the logic here - invest in CD's, put your money in a mattress, or just hedge everything to the nth degree (a cost in itself, especially if used on everything)?



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Posted by Vols&Shaft83 on 3/11 at 9:59 pm to Bayou Tiger
quote:

This is ridiculous. I would have missed out on way more winners than losers with this approach.

What is the logic here - invest in CD's, put your money in a mattress, or just hedge everything to the nth degree (a cost in itself, especially if used on everything)?



Since Peter Lynch, Sir John Templeton, John Bogle, Warren Buffet, Charlie Munger, and Benjamin Graham pretty much all agree with those 2 rules, I'll go ahead and agree with them too.

The quote is meant differently than you're interpreting it.



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Posted by TyOconner on 3/11 at 10:27 pm to Fat Bastard
What is "futures"? J/W


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Posted by LSUTOM07 on 3/11 at 11:10 pm to Bayou Tiger
quote:

For many, a house is a large liability masquerading as a safe asset.


Can someone explain this? Other than a down real estate market, how is it a large liability?



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Posted by GenesChin on 3/12 at 1:46 am to LSUTOM07
I know a bit of that mindset. Houses are extremely illiquid assets that have high upkeep costs. People throw a lot of money for a big house under the assumption that worst case they can sell it and maybe even make money

The bigger/nicer the home and property, more it costs you in property taxes energy bills and such. Then when you are looking at selling, you will have tp sink some money in renovation to maximize profit.

Finally, lots of general upkeep in homes that are more costlier the bigger they get. Yardwork which costs time or money. Breaking down of ACs, plumbing or electrical and so on.

Finally, housing market can be volatile. When you sign a 15-30 year mortgage you are locked in to something you cant afford outright and will cost you if there needs to have had something sold.



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Posted by OFWHAP on 3/12 at 1:53 am to LSUTOM07
quote:

Can someone explain this? Other than a down real estate market, how is it a large liability?



It's a large liability in that the dollar value of most people's mortgages is several times their annual incomes. Over the past decade or so, people bought homes with the idea that they could take on outrageous debt levels to purchase and then sell houses at a handsome profit because real estate values were increasing at an unsustainable rate. Now that we're reverting back to the mean, people are starting to realize that they shouldn't buy real estate with the expectations that it will double in value every decade and will only increase in value.



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Posted by Vols&Shaft83 on 3/12 at 3:48 am to LSUTOM07
Assets put money in your pocket. Liability takes money from your pocket. Even if you own your house, you are still spending money on it.

Robert Kiyosaki



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Posted by Fat Bastard on 3/12 at 8:57 am to Vols&Shaft83
quote:

Not equating what you do to gambling,


that is right because it is not to make the comparison you did above is comparing prunes to oranges...forget the apples.

quote:

Rule #1: Never lose Money


you make trades you will have losses whether it is stocks or futures in the short term, possibly even long term. many fail. The key is having a plan and know when to cut your losses so they do not hurt you LONG TERM.

The only way to guarantee that is basically do not invest then. You can lose money in basically anything.defaults can happen.

LINK



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Posted by slackster on 3/12 at 9:05 am to Fat Bastard
quote:

complete and utter BS. it has worked for me just fine. as well as others. as a matter of fact i have taken a loss before at times when all i used was FUNDAMENTALS. chew on that.


The price of a stock should reflect the value of the company, do you agree? The value of a commodity should reflect the supply and demand of said commodity, right?

Technicals "work" because people want them to work and see things that are completely and utterly irrelevant. I think it is absurd that technicals must be taken into account when valuing an asset simply because a large portion of investors believe they have value, when in fact they should be irrelevant. For example, if a large chunk of investors believe Stock A should always be down 1% on Tuesdays, that would be an absurd, yet necessary piece of information to use in the valuation of said stock. Technicals are in the same boat.



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Posted by Fat Bastard on 3/12 at 9:40 am to OFWHAP
quote:

Investors need to realize that technical indicators should be used as part of a much more exhaustive investment strategy. If you see WTI crude reaching a resistance level, you shouldn't sell if there is news stating that Canada has decided to cut off oil exports to the US; you'd get smashed by the influx of buy orders coming in at increasingly higher prices.


right then you get ready just like you would if there was a drought or a freeze affecting orange groves and be ready to long it or if a great last minute crop report possibly short it.basically last minute fundamentals based on current events. Problem is many can lose by using seasonal fundamentals which is what i was referring to earlier. They do not always work out like many prognosticators proclaim. Been there. done that. first hand.


This post was edited on 3/12 at 10:31 am

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Posted by Fat Bastard on 3/12 at 9:50 am to TyOconner
quote:

What is "futures"?


I am basically referring to commodity futures.

LINK



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Posted by OFWHAP on 3/12 at 11:57 am to slackster
quote:

The price of a stock should reflect the value of the company, do you agree? The value of a commodity should reflect the supply and demand of said commodity, right?


It SHOULD, but it doesn't always work in practice.

quote:

Technicals "work" because people want them to work and see things that are completely and utterly irrelevant. I think it is absurd that technicals must be taken into account when valuing an asset simply because a large portion of investors believe they have value, when in fact they should be irrelevant. For example, if a large chunk of investors believe Stock A should always be down 1% on Tuesdays, that would be an absurd, yet necessary piece of information to use in the valuation of said stock. Technicals are in the same boat.


Once again, the irrational market doesn't care whether or not you believe that technicals SHOULD work. The truth is that technicals DO work, and therefore you should take them into account when trading. At the same time, if you're investing for the long term, technicals should mean very little to you. If you feel that XYZ is a great buy at $25.00/share, then buy it at $25.00/share and hold on. You don't need to worry about moving averages, volumes, candlestick patterns, etc.



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Posted by bpfergu on 3/12 at 12:32 pm to OFWHAP
I'd have to agree here. The true "overall value" of a company, not just in monetary terms but also in future perceived terms is a moving value that is never pin-pointed, hence why values are constantly moving up and down.

If a company has sound fundamentals, good leadership, etc., then it can be perceived in the long-term to be a good investment. However, the shorter-term ups and downs that it will go through as the true "overall value" is constantly tried to be pinned is where technicals shine.



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Posted by Fat Bastard on 3/12 at 1:00 pm to OFWHAP
quote:

At the same time, if you're investing for the long term, technicals should mean very little to you.


right, for stocks. commodities are a different animal. you put a stop loss and GTHO of a commodity position if it hits your exit point. There is no long term holding a loser in commodities.



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Posted by stonerolledaway on 3/12 at 1:05 pm to Vols&Shaft83

31. The low-cost index fund is one of the most useful financial inventions in history. Boring but beautiful.





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