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Started By
Message
228% return in 3 months
Posted on 4/22/08 at 11:01 pm
Posted on 4/22/08 at 11:01 pm
So I have this fella in my Investments class who is sporting a 228% return in our stock market simulation (we start with a million, and it tracks the real market exactly) while I am proudly holding down a 20% mark (3rd best). I basically try my hand at everyting while he absolutly dominates the agriculture market, how does this college student know something no-one else does? I mean wouldn't someone else have realized this clearly dominating strategy?
And believe me I'm not joking......
And believe me I'm not joking......
8
Posted on 4/22/08 at 11:05 pm to datdude3384
Did he invest in fertilizer companies like PCS and Mosaic? They are up big time since the fall.
Posted on 4/22/08 at 11:08 pm to datdude3384
You invest in something you know and he knows the market for agriculture. Your just getting beat because your not specializing in an area and doing the right amount of leg work. Take your five year trend and a market to how it did with similiar results during a similiar period where we were borderline recession. Problem though is you wont encounter a period when we were in a borderline huge recession since the 80's. Try comparing the data from from a similiar period since 2001 when we were on verges of real recessions and see how your market rebounded. If it held or grew when the economy was stalling, it will give you a clue to how it will respond in the future.
So to sum it up, find a similiar period of decline such as the one we are experiencing now. Preferably in the past five years and see which direction it turned. Of coarse, remember to check the financial returns and recent company news for additional clues.
So to sum it up, find a similiar period of decline such as the one we are experiencing now. Preferably in the past five years and see which direction it turned. Of coarse, remember to check the financial returns and recent company news for additional clues.
This post was edited on 4/22/08 at 11:15 pm
Posted on 4/22/08 at 11:23 pm to datdude3384
it's likely just luck
Posted on 4/22/08 at 11:47 pm to datdude3384
Your friend is just lucky. I strongly urge you to read " A Random Walk Down Wall Street," by Burton Malkiel.
Posted on 4/22/08 at 11:50 pm to datdude3384
quote:
I mean wouldn't someone else have realized this clearly dominating strategy?
ever heard of a hedge fund? naw, but seriously my group in high school had a +150% return, speculating can work against you sometimes.
but he hit it good w/ food, b/c there is kind of a global food shortage hitting right now
Posted on 4/23/08 at 12:26 am to Tigahs
He's doing so good because he is taking substantial risks that he wouldn't take had the money been real.
shite, you diversified like an intelligent investor and what one would likely do had it been real money.
I'd give you an A and him an F because, over the long-term, you would end up well off and his strategies would leave him in rags.
....and he may have to pull out over the next year because of his strategies volatility and pay short-term capital gains tax which would be pretty large on income of $1mil+
shite, you diversified like an intelligent investor and what one would likely do had it been real money.
I'd give you an A and him an F because, over the long-term, you would end up well off and his strategies would leave him in rags.
....and he may have to pull out over the next year because of his strategies volatility and pay short-term capital gains tax which would be pretty large on income of $1mil+
Posted on 4/23/08 at 12:59 am to LSUKTR
quote:
and pay short-term capital gains tax which would be pretty large on income of $1mil+
About $630,000.
Posted on 4/23/08 at 1:59 am to KosmoCramer
He does know a lot about the grain markets; however, the huge returns are due to the fact that he got lucky in in his corn and soybean futures contracts early in the semester. The prices for these commodities were clearly going up but I don't think he realized how much so. Also, he traded a lot during the day and constantly followed the spots. I have class with him prior to Lin's and he was constantly working on his stocktrak. Now he is just sitting on a huge lead because he will get his 5 points. Had he shorted oil like he suggested to others when it topped 100, he would have lost a good bit of those returns. Basically, he got lucky on his timing and once he got on top, drastically reduced his trading volume, not to take away from any of his strategies because he does seem extremely well informed for someone his age.
Posted on 4/23/08 at 9:01 am to Southbound
This happens in every stock-picking contest that lasts such a short time. Someone out there will get lucky but over time will fade down the stretch.
Happened to me at LSU, in fact. At the time there was a USA Today contest along similar lines. Every month they awarded a T-shirt (with the AT&T logo, of course) to the top portfolio holder in each state, and a bunch of cash to the top ten after three months.
I was the top person in LA after two months with something like 100% return (and still have the T-shirt somewhere) and 7th nationwide. Sadly, my darling holdings didn't maintain the pace and I finished well out of the top 10, something like 100th or so. But it was all b/c of one or two holdings.
Being the very best over a very short timeframe requires insane chances that would lose everything over a longer period. And if everyone is taking insane chances, someone will get lucky briefly, which is all it takes. It's just a lottery under those conditions.
Happened to me at LSU, in fact. At the time there was a USA Today contest along similar lines. Every month they awarded a T-shirt (with the AT&T logo, of course) to the top portfolio holder in each state, and a bunch of cash to the top ten after three months.
I was the top person in LA after two months with something like 100% return (and still have the T-shirt somewhere) and 7th nationwide. Sadly, my darling holdings didn't maintain the pace and I finished well out of the top 10, something like 100th or so. But it was all b/c of one or two holdings.
Being the very best over a very short timeframe requires insane chances that would lose everything over a longer period. And if everyone is taking insane chances, someone will get lucky briefly, which is all it takes. It's just a lottery under those conditions.
Posted on 4/23/08 at 9:18 am to datdude3384
high risk/high return. The other side of that is that if he'd been wrong on those futures contracts, he'd be at zero. Having said that, high risk strategies are the best ones for those class simulations that last 3 months.
How much are you allowed to lever up?
How much are you allowed to lever up?
Posted on 4/23/08 at 9:34 am to KosmoCramer
quote:
and pay short-term capital gains tax which would be pretty large on income of $1mil
About $630,000.
63%? I am no tax expert but I think you are a wee bit high with that figure.
Posted on 4/23/08 at 10:44 am to stout
quote:
63%? I am no tax expert but I think you are a wee bit high with that figure.
Ya, I thought that you just pay your regular income tax rate on short-term gains....and 15% on long-term (at least for the time being)
Probably about mid $300Ks would be taxes.
Posted on 4/23/08 at 12:00 pm to stout
If he made 228%, then 128% is taxed, which is 1.28 Million.
ETA: I looked at that an saw 1.8 Million. I'm dyslexic, whoops.
It's 448,000.
ETA: I looked at that an saw 1.8 Million. I'm dyslexic, whoops.
It's 448,000.
This post was edited on 4/23/08 at 12:34 pm
Posted on 4/23/08 at 1:09 pm to KosmoCramer
I would say luck.
Posted on 4/23/08 at 2:41 pm to KosmoCramer
The top marginal rates are 35% for federal purposes and 6% for louisiana purposes. With a 228% return he should have $3,280,000 in his portfolio. The $2,280,00 increase in poirtfolio value would all be taxed as ordinary income. The total tax would be about $935,000.
Posted on 4/23/08 at 2:56 pm to Poodlebrain
Sounds like the late 1990s when investors would make their income off the high risk investments.
Posted on 4/23/08 at 4:30 pm to Junky
This post has been marked unreadable!
Posted on 4/23/08 at 4:33 pm to Doc Fenton
quote:
Your friend is just lucky. I strongly urge you to read " A Random Walk Down Wall Street," by Burton Malkiel.
That book changed my life. FWIW, if I DID speculate, I would short March '09 oil.
Posted on 8/29/09 at 10:15 am to datdude3384
wonder how he is doing now.
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