Patient but not that lucky

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skor99
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Patient but not that lucky

Post by skor99 » Sat Oct 28, 2017 7:45 am

As I was looking at the rally in Nasdaq and the tech stocks yesterday, I started thinking back to the late 1990s and early 2000s and also to the 08-09 crash. It is said that the main thing one must have to invest in the stock market is patience. Being lucky is another that is not mentioned as much. I have been a patient long term investor and have held many stocks/ETFs/MFs for 15+ yrs. Some of them have doubled or tripled in value over that timeframe while others fell, but I have not had any of the AMZN/GOOG/PCLN/NFLX 10-15x type luck. Pretty much all the tech stocks I bought during and even after the tech bubble crashed and burned. I did think many times of buying one of these 10-15x ones, but could not muster the courage.

I have done OK overall in my investments, but do feel now that luck plays a major part in investing, even more so than long term buy hold etc. How do folks deal with such feelings ?

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KlingKlang
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Re: Patient but not that lucky

Post by KlingKlang » Sat Oct 28, 2017 8:17 am

If you are going to gamble on the Nasdaq and tech stocks then you need a lot of luck. I have never had a lot of luck so I don't gamble (anymore). Buy and hold funds or ETFs that cover the entire domestic stock/international stock/bond universe plus some cash reserves and then be patient and take what the markets give you.

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David Jay
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Re: Patient but not that lucky

Post by David Jay » Sat Oct 28, 2017 9:06 am

If you're not lucky... OWN THE HAYSTACK (i.e. Buy the whole market)
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

skor99
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Re: Patient but not that lucky

Post by skor99 » Sat Oct 28, 2017 9:11 am

KlingKlang wrote:
Sat Oct 28, 2017 8:17 am
If you are going to gamble on the Nasdaq and tech stocks then you need a lot of luck. I have never had a lot of luck so I don't gamble (anymore). Buy and hold funds or ETFs that cover the entire domestic stock/international stock/bond universe plus some cash reserves and then be patient and take what the markets give you.
That's exactly what I have done, (maybe holding more cash than I should ) and my average returns over the past 20 years of saving and investing reflect that. I put a few K of play money in tech stocks like NOK and LU for example and held them for years while they rose and fell, but did not have the fortune to put in AMZN or GOOG.
I know I have the capacity of buy and hold ( still have atleast half of my individual stock holdings from 2000 ) and some of them have done well, but nothing close to the FANG stocks. A few K at the right time in a couple of these would have meant an extra MM or so in the portfolio and a 15 % IRR instead of 5 % over 20 years. And that right time was not days or months, but years, so there were plenty of opportunities .

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BolderBoy
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Re: Patient but not that lucky

Post by BolderBoy » Sat Oct 28, 2017 9:49 am

Remove "luck" from the equation by owning the entire market.
“Where you stand, depends on where you sit” - Rufus Miles | "Never underestimate one's capacity to overestimate one's abilities"

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arcticpineapplecorp.
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Re: Patient but not that lucky

Post by arcticpineapplecorp. » Sat Oct 28, 2017 9:55 am

As stated by William Bernstein, author of The Four Pillars of Investing:
...concentrating your portfolio in a few stocks maximizes your chances of getting rich. Unfortunately, it also maximizes your chance of becoming poor. Owning the whole market—indexing—minimizes your chances of both outcomes by guaranteeing you the market return.” (The Four Pillars of Investing by William Bernstein, pg. 102).“
You do realize that the index fund beats 80% of active fund managers every year, right? And the one's that beat the index one year don't do it consistently. If these guys and gals with their millions to play with, supercomputers, located right next to the exchanges to get the best price, a team of analysts pouring over balance sheets for 60 hours a week can't reliably beat the indexes, what makes you think you can?

Once people realize this, they stop gambling (speculating) and start investing (by owning the entire market). The return of the market is there for you to get. All you have to do is own the market. Could you do better picking stocks? Maybe (sounds like no by what you said). Could you do worse? Definitely.

Since the same rate of return is available to everyone (who owns the market) then the only luck really involved is what time period you start and end investing. For instance, Warren Buffett often says he's lucky because of the time period he started investing. But nothing can be done about that (you can't change when you were born). So why worry about something you have no control over? Focus on the things you can control and don't worry about what's out of your control.
Last edited by arcticpineapplecorp. on Sat Oct 28, 2017 10:01 am, edited 1 time in total.
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Doom&Gloom
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Re: Patient but not that lucky

Post by Doom&Gloom » Sat Oct 28, 2017 10:01 am

Luck has nothing to do with it unless stocks are bought and sold randomly or haphazardly.

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Sandtrap
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Re: Patient but not that lucky

Post by Sandtrap » Sat Oct 28, 2017 10:05 am

For most of my life, I have been "lucky" to have sat at the feet of senior R/E investment income property masters with substantial wealth.
A common teaching was that I needed to be "patient", "determinedly self-educated in everything re: R/E and finance (and people)", "tough", "sensible" and . . . . "lucky". Over time I realized that the more I applied those taught basics, the "luckier" I got.

I seems that "luck" also increases with the greater application of Boglehead basics.
Does the Nasdaq fit well into "Bolgehead basics"?
j

tibbitts
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Re: Patient but not that lucky

Post by tibbitts » Sat Oct 28, 2017 10:27 am

Doom&Gloom wrote:
Sat Oct 28, 2017 10:01 am
Luck has nothing to do with it unless stocks are bought and sold randomly or haphazardly.
Even assuming investing in broad index funds, we have to realize that lots of people have dramatic swings in income during their careers. Few at SatuMedia would advocated trying to DCA over decades, so it really does end up with luck determining a great deal of return, because some people may end up investing a high percentage of their income at highs or lows in the market. Just as importantly, some people need to withdraw their money for unexpected reasons at completely unpredictable times (terminal illness, etc.) We assume a typical career progression (which is becoming less typical) and average lifespan, and the Boglehead investing model works well if we assume that combined with historical long-term market returns. But we have to recognize that even diligently following the Boglehead model may not overcome luck for many people, although that doesn't mean there's a viable alternative.

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arcticpineapplecorp.
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Re: Patient but not that lucky

Post by arcticpineapplecorp. » Sat Oct 28, 2017 10:33 am

Put it another way. You ARE extremely lucky to be living right now...for you can simply buy an index fund, get the return of the market, and get on with your life.

Previous generations were not as lucky to own the market as cheaply as we can now (thank you Jack Bogle). They had to risk their life savings on the prowess of their stock picking abilities.
"Invest we must." -- Jack Bogle | “The purpose of investing is not to simply optimise returns and make yourself rich. The purpose is not to die poor.” -- William Bernstein

TheHouse7
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Re: Patient but not that lucky

Post by TheHouse7 » Sat Oct 28, 2017 10:33 am

I have had friends tell me how lucky they have been trading in and out of tech stocks. After much deliberation, they admits it is harder to remember the amount of losses they have made compared to gains. :oops:

The financial industry would like you to make as many trades as possible. :twisted:
"PSX will always go up 20%, why invest in anything else?!" -Father-in-law early retired.

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Watty
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Re: Patient but not that lucky

Post by Watty » Sat Oct 28, 2017 10:35 am

Doom&Gloom wrote:
Sat Oct 28, 2017 10:01 am
Luck has nothing to do with it unless stocks are bought and sold randomly or haphazardly.
If not luck then what?

In theory all the available information is priced into the stocks so to pick superior stock you would somehow need to be smarter than everyone else. Not only do you need to be smarter, you also need to be consistently smarter since one bad year can wipe out decades of outperformance.

tibbitts
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Re: Patient but not that lucky

Post by tibbitts » Sat Oct 28, 2017 10:49 am

arcticpineapplecorp. wrote:
Sat Oct 28, 2017 10:33 am
Put it another way. You ARE extremely lucky to be living right now...for you can simply buy an index fund, get the return of the market, and get on with your life.

Previous generations were not as lucky to own the market as cheaply as we can now (thank you Jack Bogle). They had to risk their life savings on the prowess of their stock picking abilities.
Well, many years ago people had bigger problems than poor stock picking skills (even once markets existed in a form roughly similar to today), but in terms of a more recent generation or two, we have to remember there have been some "sweet spots" in pensions, social security, reasonable real rates on savings, and health benefits that didn't exist before or now, so during those times stock picking skills would have been icing on the cake. Of course in other ways life is better today than at any time in the past.

KlangFool
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Re: Patient but not that lucky

Post by KlangFool » Sat Oct 28, 2017 10:56 am

OP,

I was lucky that I lost 50% of my whole life savings 10+ years ago by gambling on the individual stocks. There was enough time for me to learn my lesson and recover from my mistake. It looks like you may not be as lucky. You had yet to suffer your big loss and learned from your lesson.

KlangFool

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Sandtrap
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Re: Patient but not that lucky

Post by Sandtrap » Sat Oct 28, 2017 11:00 am

KlangFool wrote:
Sat Oct 28, 2017 10:56 am
OP,

I was lucky that I lost 50% of my whole life savings 10+ years ago by gambling on the individual stocks. There was enough time for me to learn my lesson and recover from my mistake. It looks like you may not be as lucky. You had yet to suffer your big loss and learned from your lesson.

KlangFool
+1
War Stories.

livesoft
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Re: Patient but not that lucky

Post by livesoft » Sat Oct 28, 2017 11:08 am

How much of Google / Alphabet would you realistically own and hold in your portfolio if you decided to purchase Google / Alphabet stock?

The reality is that Alphabet is 2.2% of Vanguard Total Stock Market Index fund:
https://personal.vanguard.com/us/FundsQ ... thEnd=true

Amazon and Facebook are 1.5%, so Alphabet / Amazon / Facebook are 5.2% of VTSAX. Add in Microsoft and Apple, then you are up to about 10%.
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skor99
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Re: Patient but not that lucky

Post by skor99 » Sat Oct 28, 2017 11:10 am

KlangFool wrote:
Sat Oct 28, 2017 10:56 am
OP,

I was lucky that I lost 50% of my whole life savings 10+ years ago by gambling on the individual stocks. There was enough time for me to learn my lesson and recover from my mistake. It looks like you may not be as lucky. You had yet to suffer your big loss and learned from your lesson.

KlangFool
I have learnt such lessons on a smaller scale and do not wish to be as 'lucky' as you. :-) In any case, if you read my posts I have mentioned that most of my portfolio is boglehead type . I am talking about play money ( 5-10 % of portfolio ) investments in stock picking that could be worthwhile if one manages to pick the right stocks in time. And my lament is that I am patient but not that lucky.

itstoomuch
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Re: Patient but not that lucky

Post by itstoomuch » Sat Oct 28, 2017 11:11 am

Luck with Insight, Ability, Willingness, and Tolerance, & maybe more.
(Not necessarily in that order)
YMMV :mrgreen:
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eye.surgeon
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Re: Patient but not that lucky

Post by eye.surgeon » Sat Oct 28, 2017 11:14 am

Not winning the lottery does not make you unlucky. For every "lucky" stock picker that bought Amazon last week there is an unlucky stock picker that sold it to him. Own the haystack.
"I would rather be certain of a good return than hopeful of a great one" | Warren Buffett

KlangFool
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Re: Patient but not that lucky

Post by KlangFool » Sat Oct 28, 2017 11:17 am

skor99 wrote:
Sat Oct 28, 2017 11:10 am
KlangFool wrote:
Sat Oct 28, 2017 10:56 am
OP,

I was lucky that I lost 50% of my whole life savings 10+ years ago by gambling on the individual stocks. There was enough time for me to learn my lesson and recover from my mistake. It looks like you may not be as lucky. You had yet to suffer your big loss and learned from your lesson.

KlangFool
I have learnt such lessons on a smaller scale and do not wish to be as 'lucky' as you. :-) In any case, if you read my posts I have mentioned that most of my portfolio is boglehead type . I am talking about play money ( 5-10 % of portfolio ) investments in stock picking that could be worthwhile if one manages to pick the right stocks in time. And my lament is that I am patient but not that lucky.
skor99,

1) I only have 5% or less of my portfolio in the "play money".

2) For my "play money", I only gamble on that stock that has the possibility of returning 10X to 30X.

3) I sell 1/2 of my holding whenever it triples.

4) I set a time limit (5 years) for how long that I am willing to hold on the stock.

My question to you is this. Are you gamble with your "play money" correctly? If the possible return does not justify the risk, why are you doing this? Please tell us which one of your current individual stock holdings has the possibility of returning 10X to 30X in 5 years? If not, why are you keeping them?

KlangFool

skor99
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Re: Patient but not that lucky

Post by skor99 » Sat Oct 28, 2017 11:24 am

I actually do not expect any of them to triple anytime soon. Most of my stock holdings now are the slow stable big name types that pay a dividend. I am always on the lookout though of the next AMZN type though. I have gotten somewhat lucky with FB ( 2.5x now ) but it was a smallish investment and I do not expect it to be 10x anytime soon. The difference is I will not sell when it is 3x, but continue to hold onto it unless I see a big issue with the company.

KlangFool
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Re: Patient but not that lucky

Post by KlangFool » Sat Oct 28, 2017 11:24 am

OP,

My main portfolio returns around 7% for the last 10 years. At 5% or less of my portfolio, my "play money" has to return 10X to 30X in order for it to matter. Anything less than that, even if I win, it won't matter. The amount is too small for me to waste my time. I have better games to play elsewhere. This is strictly business. The return has to justify the risk.

Don't gamble if even you win, it won't matter. Aka, it is not big enough to affect you financially. In that case, you are in a lose-lose proposition. You are wasting your time, energy, and money.

KlangFool
Last edited by KlangFool on Sat Oct 28, 2017 11:30 am, edited 1 time in total.

Doom&Gloom
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Re: Patient but not that lucky

Post by Doom&Gloom » Sat Oct 28, 2017 11:28 am

Watty wrote:
Sat Oct 28, 2017 10:35 am
Doom&Gloom wrote:
Sat Oct 28, 2017 10:01 am
Luck has nothing to do with it unless stocks are bought and sold randomly or haphazardly.
If not luck then what?

In theory all the available information is priced into the stocks so to pick superior stock you would somehow need to be smarter than everyone else. Not only do you need to be smarter, you also need to be consistently smarter since one bad year can wipe out decades of outperformance.
Poor decision making.

The available information is that the result of picking a number of stocks may be all over the map. If you think you are smart enough to outwit everybody else but don't, then you have made a poor decision. No luck involved at all.

Some may see it as a matter of semantics as to what constitutes "luck." Just because one can't predict a market result accurately, does not mean that it was due to bad luck. There were a finite number of factors that caused the result--not random intervention by the ether.

KlangFool
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Re: Patient but not that lucky

Post by KlangFool » Sat Oct 28, 2017 11:29 am

skor99 wrote:
Sat Oct 28, 2017 11:24 am
I actually do not expect any of them to triple anytime soon. Most of my stock holdings now are the slow stable big name types that pay a dividend. I am always on the lookout though of the next AMZN type though. I have gotten somewhat lucky with FB ( 2.5x now ) but it was a smallish investment and I do not expect it to be 10x anytime soon. The difference is I will not sell when it is 3x, but continue to hold onto it unless I see a big issue with the company.
skor99,

<< I actually do not expect any of them to triple anytime soon. Most of my stock holdings now are the slow stable big name types that pay a dividend. >>

So, you taking on individual stock risk and getting a lousy return at the same time. Why are you doing this? My diversified 62/38 portfolio is returning about 10% YTD. Is your individual stock providing the return of 20% to 30%? If not, it is lousy risk-adjusted return.

<<I have gotten somewhat lucky with FB ( 2.5x now )>>

Unless you think FB will triple in 5 years, why are you keeping it?

KlangFool

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arcticpineapplecorp.
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Re: Patient but not that lucky

Post by arcticpineapplecorp. » Sat Oct 28, 2017 11:30 am

tibbitts wrote:
Sat Oct 28, 2017 10:49 am
arcticpineapplecorp. wrote:
Sat Oct 28, 2017 10:33 am
Put it another way. You ARE extremely lucky to be living right now...for you can simply buy an index fund, get the return of the market, and get on with your life.

Previous generations were not as lucky to own the market as cheaply as we can now (thank you Jack Bogle). They had to risk their life savings on the prowess of their stock picking abilities.
Well, many years ago people had bigger problems than poor stock picking skills (even once markets existed in a form roughly similar to today), but in terms of a more recent generation or two, we have to remember there have been some "sweet spots" in pensions, social security, reasonable real rates on savings, and health benefits that didn't exist before or now, so during those times stock picking skills would have been icing on the cake. Of course in other ways life is better today than at any time in the past.
yes, i was going to say that they could rely on pensions and SS even if their stock picking skills stank so they were really only playing with funny money or money they did not need to depend upon, but I thought that seemed a bit harsh especially considering the ones who lost everything they invested (or saved) during the great depression, so I left it out of my previous post. Some things might have been better, but do remember that FDIC was not a thing in 1929. People literallly did lose their life savings even sitting in supposedly safe bank accounts.
"Invest we must." -- Jack Bogle | “The purpose of investing is not to simply optimise returns and make yourself rich. The purpose is not to die poor.” -- William Bernstein

skor99
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Re: Patient but not that lucky

Post by skor99 » Sat Oct 28, 2017 11:54 am

KlangFool wrote:
Sat Oct 28, 2017 11:29 am
skor99 wrote:
Sat Oct 28, 2017 11:24 am
I actually do not expect any of them to triple anytime soon. Most of my stock holdings now are the slow stable big name types that pay a dividend. I am always on the lookout though of the next AMZN type though. I have gotten somewhat lucky with FB ( 2.5x now ) but it was a smallish investment and I do not expect it to be 10x anytime soon. The difference is I will not sell when it is 3x, but continue to hold onto it unless I see a big issue with the company.
skor99,

<< I actually do not expect any of them to triple anytime soon. Most of my stock holdings now are the slow stable big name types that pay a dividend. >>

So, you taking on individual stock risk and getting a lousy return at the same time. Why are you doing this? My diversified 62/38 portfolio is returning about 10% YTD. Is your individual stock providing the return of 20% to 30%? If not, it is lousy risk-adjusted return.

<<I have gotten somewhat lucky with FB ( 2.5x now )>>

Unless you think FB will triple in 5 years, why are you keeping it?

KlangFool
I have also gotten about 9.5 % ytd, but this has been an especially good year for stocks overall. Obviously, Not all stocks can do 20-30 % every year, but that does not mean they are lousy investments.
Now, Since FB has gone up so much so fast already, I do not expect 3x more in the next 5, but would keep it for 20-50x maybe in the next 15-20 years like AMZN has since 2002. ( Did I already mention I am patient :-) ) It is a small enough allocation that I can try that approach and would still be OK even if it does not go up one point from here.

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CyclingDuo
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Re: Patient but not that lucky

Post by CyclingDuo » Sat Oct 28, 2017 11:58 am

skor99 wrote:
Sat Oct 28, 2017 7:45 am
As I was looking at the rally in Nasdaq and the tech stocks yesterday, I started thinking back to the late 1990s and early 2000s and also to the 08-09 crash. It is said that the main thing one must have to invest in the stock market is patience. Being lucky is another that is not mentioned as much. I have been a patient long term investor and have held many stocks/ETFs/MFs for 15+ yrs. Some of them have doubled or tripled in value over that timeframe while others fell, but I have not had any of the AMZN/GOOG/PCLN/NFLX 10-15x type luck. Pretty much all the tech stocks I bought during and even after the tech bubble crashed and burned. I did think many times of buying one of these 10-15x ones, but could not muster the courage.

I have done OK overall in my investments, but do feel now that luck plays a major part in investing, even more so than long term buy hold etc. How do folks deal with such feelings ?
In terms of technology, you have to understand the "capitalistic game" of disruptive technology and follow the money flow. There were huge winners in the 1990's technology boom, just as there are and have been huge winners in the current boom. None of them remain secret for very long to the investing public, so the past 15 years have provided ample opportunity to follow the money flow. The companies on the fringe who sell the buckets and shovels for the big game winners are the company stocks to avoid (or at least tip toe around as shorter term investments as they are not at the top of the food chain) as they don't own the game. The amount of money the winners are generating will most likely continue until something else disruptive comes along. The 1990's was about the PC and the introduction of the internet. Now we are about the phone, and the data. It is hard to imagine that data is going to be disrupted any time soon. The barriers to entry for the huge data centers and delivering the data are simply going to be too difficult to usurp.

The patient, safe strategy is to own it all in the index funds. The higher risk-reward scenario is to invest a portion of your portfolio in the disruptive technology life cycle by carefully following the money flow to the winners - and then being patient through various economic cycles in the process as the titans continue to dominate the war. That can be done in sector funds/ETF's, active management - or individual stocks. It's not "luck" as the process is no secret, and the money flow to the winners is well tracked/followed/used for investment decisions. Certainly, the stocks you mention have been no secret the past 15 years. Nor has the capital flow into those stocks been secret. Nor have the games they are winning been secret. In terms of capitalism, it's all out war when it comes to the technology adoption life cycle. Brutal war.

One thing is certain - there will be other generational technology boom cycles in the future just as we saw in the 90's and have been seeing the past 15 years.

The good news about index funds is you capture it all.

goingup
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Re: Patient but not that lucky

Post by goingup » Sat Oct 28, 2017 11:58 am

skor99 wrote:
Sat Oct 28, 2017 11:24 am
I am always on the lookout though of the next AMZN type though.
No, I don't think like that. We have (mostly) broad index funds and accept Market returns. Consistent saving over decades has made us pretty lucky. :wink:

skor99
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Re: Patient but not that lucky

Post by skor99 » Sat Oct 28, 2017 12:09 pm

goingup wrote:
Sat Oct 28, 2017 11:58 am
skor99 wrote:
Sat Oct 28, 2017 11:24 am
I am always on the lookout though of the next AMZN type though.
No, I don't think like that. We have (mostly) broad index funds and accept Market returns. Consistent saving over decades has made us pretty lucky. :wink:
I fully agree and follow the same approach. It is what is left after the 'mostly' is what I am talking about here. That 10K investment in AMZN/PCLN in 2002 would have looked pretty sweet now, wouldn't it ? Atleast for me, it would have been close to the combined returns from all my other investments. This is where the luck comes in, patience alone does not help.

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Re: Patient but not that lucky

Post by KlangFool » Sat Oct 28, 2017 12:23 pm

skor99 wrote:
Sat Oct 28, 2017 11:54 am
KlangFool wrote:
Sat Oct 28, 2017 11:29 am
skor99 wrote:
Sat Oct 28, 2017 11:24 am
I actually do not expect any of them to triple anytime soon. Most of my stock holdings now are the slow stable big name types that pay a dividend. I am always on the lookout though of the next AMZN type though. I have gotten somewhat lucky with FB ( 2.5x now ) but it was a smallish investment and I do not expect it to be 10x anytime soon. The difference is I will not sell when it is 3x, but continue to hold onto it unless I see a big issue with the company.
skor99,

<< I actually do not expect any of them to triple anytime soon. Most of my stock holdings now are the slow stable big name types that pay a dividend. >>

So, you taking on individual stock risk and getting a lousy return at the same time. Why are you doing this? My diversified 62/38 portfolio is returning about 10% YTD. Is your individual stock providing the return of 20% to 30%? If not, it is lousy risk-adjusted return.

<<I have gotten somewhat lucky with FB ( 2.5x now )>>

Unless you think FB will triple in 5 years, why are you keeping it?

KlangFool
I have also gotten about 9.5 % ytd, but this has been an especially good year for stocks overall. Obviously, Not all stocks can do 20-30 % every year, but that does not mean they are lousy investments.
Now, Since FB has gone up so much so fast already, I do not expect 3x more in the next 5, but would keep it for 20-50x maybe in the next 15-20 years like AMZN has since 2002. ( Did I already mention I am patient :-) ) It is a small enough allocation that I can try that approach and would still be OK even if it does not go up one point from here.
skor99,

<<Obviously, Not all stocks can do 20-30 % every year, but that does not mean they are lousy investments.>>

We are talking specifically your stock pick. If it is not doing 10X to 30X, why are you keeping them?

<<would keep it for 20-50x maybe in the next 15-20 years like AMZN has since 2002.>>

1) Then, it may be worthwhile for you to keep FB. But, why are you keeping any other stocks?

2) So, all those individual stocks consist of how many % of your portfolio?

3) How many of those stocks has the possibility like FB? If they don't, why are you keeping them?

KlangFool

skor99
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Re: Patient but not that lucky

Post by skor99 » Sat Oct 28, 2017 12:35 pm

Those individual stocks comprise around 15% of my portfolio and they are there, because per my research,I expected them to do relatively better as compared to the generic index fund.
Those are stable big names so no FB like returns, but still have done better thus far than my index funds. Now, as we are getting old in this bull market, I am slowly reducing that 15% to a lower number and increasing my MF/ETF share correspondingly, as the market might be less forgiving to lesser than expected performance from any particular company in the future

Dottie57
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Re: Patient but not that lucky

Post by Dottie57 » Sat Oct 28, 2017 12:35 pm

BolderBoy wrote:
Sat Oct 28, 2017 9:49 am
Remove "luck" from the equation by owning the entire market.

Bingo

KlangFool
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Re: Patient but not that lucky

Post by KlangFool » Sat Oct 28, 2017 3:09 pm

skor99 wrote:
Sat Oct 28, 2017 12:35 pm
Those individual stocks comprise around 15% of my portfolio and they are there, because per my research,I expected them to do relatively better as compared to the generic index fund.
Those are stable big names so no FB like returns, but still have done better thus far than my index funds. Now, as we are getting old in this bull market, I am slowly reducing that 15% to a lower number and increasing my MF/ETF share correspondingly, as the market might be less forgiving to lesser than expected performance from any particular company in the future
skor99,

<< Those individual stocks comprise around 15% of my portfolio and they are there, because per my research,I expected them to do relatively better as compared to the generic index fund. >>

How much better? 10% per year? 15% per year? If not, why bother? You are taking on individual stock risk versus a fully diversified index fund. If it is not significantly better, why waste your time?

Are the stock meeting your expectation?

KlangFool

Shallowpockets
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Re: Patient but not that lucky

Post by Shallowpockets » Sat Oct 28, 2017 5:39 pm

Sometimes it is not luck but guts. You have to be able to risk. If not, stay in the index funds. But if you have a portion to invest or gamble otherwise you can learn and maybe luck will be there for you.
If you are talking tech than you can make some money. There is a herd instinct here and a momentum play. Not for everyone. But, if you held AMZN and saw it go up $130 a share after earnings, you would say luck was with you. The other techs are up also. All the index funds hold tech, so in some fashion you luck out there also.
Anyone who only wants to invest in a single stock that they are looking for 20-30x increase is highly speculative and down in some penny stock world. The FANG is not that. You do not need 20-30x.
I do not look at percent on stocks but dollars increase. It is not unusual to buy the FANGs and hold it and take $500 plus off the table in a few days or weeks. I don't care the percent, I see that $500 plus and I take it. You do that 20x times you are ahead $10k. And you are out of the stock(s). Waiting on some dreamy elusive return on a speculative stock is crazy. If something goes up twice its value you may as well take it on a single stock.
Percent is a misnomer. Dollars are where it is at. Look at Amazon this week. If you had bought Monday, one share, and it went up $130 share, would you be ecstatic? Even though
that was about 15% in one day. No, you would not, because it was only $130. But, if you had 100 shares, well, then your dollars would be significant. You would smile.
It is like I tell people (if they ask) that they need to add to their portfolio because if you are only putting $100 in your 401 and it goes up 20% in the year, you say, big deal, $20. What's $20, even though it is a good 20%.
However if you get to 10k in your 401 you see that 20% is $2,000 you get a little excited. I is motivating once it reaches a certain level. So reach that level.
Same with individual stocks, if you can stomach it. You get $1000 ahead, real money, take it.
I would not encourage anyone to dive into single stocks. You need the index fund as your base layer and some security there before you should ever trade otherwise. Could be an expensive and sleepless nights learning curve.

DrGoogle2017
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Re: Patient but not that lucky

Post by DrGoogle2017 » Sun Oct 29, 2017 1:15 am

I’m in the opposite situation as you, I’m lucky without the patience. I let go too soon.
If you pay attentention to the pundits on CNBC, they said this is the season for FANG stocks to breakout. I did get lucky playing with NFLX stock through options, but I made my bet so conservatively so that I was guaranteed to win and I did, but I wish I didn’t let go so soon. I left a lot of money on the table.

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TD2626
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Re: Patient but not that lucky

Post by TD2626 » Sun Oct 29, 2017 2:08 am

I do not personally agree with speculation, which I feel is akin to gambling. Styles of investment where an individual investor attempts to achieve excess returns through concentrated individual stock positions, with no real basis for why they will achieve those excess returns, are inherently speculative. The average dollar in the market must get the average (market) return. Why do individuals seem to perversely think they know better than the professional portfolio managers on Wall Street how to value companies?

There is of course randomness involved in all of human life, and all of human history. Throughout history, some people were lucky to be born into royal families, others were born into abysmal conditions, even abject poverty.

Index investing can cut down on randomness in investment outcomes - as broadly diversified index portfolios don't involve the risk that a single company's bankruptcy has a direct outsize impact on returns. Further, index portfolios generally don't suffer active management risk, the risk that the fund's stock-pickers will perform poorly. (Index funds generally just buy everything on the index). However, there is still staggering risk involved in even Boglehead-style index investing. Long term investors generally need equities in their portfolios for the growth potential they provide. However, the risk of 90%+ losses in enormous crashes (like the Great Depression) or a repeat of the Japan scenario (of markets down for decades) is always there. Diversification doesn't get rid of that risk. Whether you were born in a year that is good to investors (a year, say, where you will have good returns in ages where it counts) isn't something that you can control. There are clearly elements of luck (e.g. risk) in the even conservative, responsible styles of investing. Investors can control their own reactions, their own behavioral errors, and their own exposures to risks, though. I guess it would be best to focus on what is controllable (e.g. avoiding behavioral errors and investing based on their willingness, ability, and need to take risk).

David Scubadiver
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Re: Patient but not that lucky

Post by David Scubadiver » Sun Oct 29, 2017 2:24 am

Watty wrote:
Sat Oct 28, 2017 10:35 am
Doom&Gloom wrote:
Sat Oct 28, 2017 10:01 am
Luck has nothing to do with it unless stocks are bought and sold randomly or haphazardly.
If not luck then what?

In theory all the available information is priced into the stocks so to pick superior stock you would somehow need to be smarter than everyone else. Not only do you need to be smarter, you also need to be consistently smarter since one bad year can wipe out decades of outperformance.
Theory is one thing but reality can be quite different. I because the crowd’s mentality determines the market price by definition does not mean one can’t get rich by predicting how the crowd is going to behave. A perfect example is to buy when their is blood in the streets due to panic. It’s often a market being moved by fear and greed, and when it is moved by fear there is a tremendous amount of opportunity. Fortune favors the brave.

McGilicutty
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Re: Patient but not that lucky

Post by McGilicutty » Sun Oct 29, 2017 4:26 am

skor99 wrote:
Sat Oct 28, 2017 7:45 am
I have not had any of the AMZN/GOOG/PCLN/NFLX 10-15x type luck. Pretty much all the tech stocks I bought during and even after the tech bubble crashed and burned. I did think many times of buying one of these 10-15x ones, but could not muster the courage.

I have done OK overall in my investments, but do feel now that luck plays a major part in investing, even more so than long term buy hold etc. How do folks deal with such feelings ?
I'm a fellow investor searching for luck in tech stocks. I re-started investing in tech stocks in January of this year. I say 're-started', because I was also a tech investor during the late 90's bubble years. Back then, I had hardly any money, so it didn't make much of a difference that I ended up crashing and burning with most everyone else when the bubble burst.

My philosophy now sounds similar to yours -- I have 85% of my portfolio in index ETFs and 15% in individual tech stocks. I was going to stick at 90-10, but recently decided to add NOW, ALGN, TTD, MZOR, and ANET to my portfolio.

The way I deal with feelings about 'luck' is as follows:

(1) The Motley Fool has recommended investing in AMZN, GOOG, PCLN, and NFLX. So they've successfully picked those 10-15 baggers. However, the Motley Fool has also picked 100s of other stocks over tens of subscription services. I don't have the resources to invest in 100s of stocks but that is what it takes statistically to get a few 10-15 baggers. So, because I can only afford to invest in 10-20 stocks, I've come to terms with the fact that I will have to get lucky in my tech portfolio to outperform the market.

(2) At this point, I'm pretty much out of 'play' money. I may push my portfolio to 80-20 if the tech bull continues, but after that, I will have to sell some stocks if I want to buy another one. Again, due to my limited resources, I've come to terms with the fact that luck will play a large role as to whether I outperform the market with my tech portfolio.

(3) Selling: In order to get that huge 350x gain in Amazon, one had to hold through a gruesome bear market. AMZN went from like 106 in December 1999 to 7 in October of 2001. I know that I cannot hold through a bear market like that, so I plan to sell any stock I own that falls 20% below my buy price. So far, due to the strength in the tech market, none of my stocks have done that. Again, it is total luck that none of my stocks have done that and I'm ok with that. I believe that I will be able to hold onto my index ETFs during the dips/crashes, but I have faith that it will come back -- with tech stocks, I am more likely to be holding the next NOK as opposed to the next AMZN.

To sum up my thoughts, I would say that I deal with feelings around luck, by just accepting that luck will play a large role in whether I'm successful in beating the market with my relatively few tech stocks.

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DaftInvestor
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Re: Patient but not that lucky

Post by DaftInvestor » Sun Oct 29, 2017 5:56 am

I got out of all individual stock investing years ago because I learned that I shouldn't rely on what you are calling "Luck" for anything in life. I learned individual stock picking is a fool's game for the average Joe (even for the Mensa Joe) and I don't believe in any superstitions including "luck". I don't play the lottery nor do I pick individual stocks. In my career - its hard work, dedication, and patience that have propelled me - with investing - its more about dedication and patience (after doing the hard work learning how to DIY so I'm not losing a percentage to an FA).

GLState
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Re: Patient but not that lucky

Post by GLState » Sun Oct 29, 2017 7:36 am

It is unlikely that we would have invested enough in AMZN, GOOG, APPL, FB, etc to make a difference in our life...they would only have a small allocation in our portfolio. It is unlikely that we would have held these throughout their ups and downs. Would we have sold when we had a 10%, 20% or 50% gain because we figured they could not go any higher? There are many more stocks that we are "lucky" that we didn't buy...GM, KMart, Nortel, Nokia, Worldcom, ....

I started invested about 1976. That same year, John Bogle came out with an index fund that tracked the S&P 500. This fund was something that in which I could have invested my whole portfolio and continued to invest in and hold to today. That would have made a bigger difference than owning a few hot stocks. As it was, it took me until about 2000 before I discovered indexes funds. It is better to be smart than "lucky".

BTW...I have owned AMZN, GOOG, APPL and other hot stocks in my index funds since 2000. I haven't missed out.

skor99
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Re: Patient but not that lucky

Post by skor99 » Sun Oct 29, 2017 11:05 am

GLState wrote:
Sun Oct 29, 2017 7:36 am
It is unlikely that we would have invested enough in AMZN, GOOG, APPL, FB, etc to make a difference in our life...they would only have a small allocation in our portfolio. It is unlikely that we would have held these throughout their ups and downs. Would we have sold when we had a 10%, 20% or 50% gain because we figured they could not go any higher? There are many more stocks that we are "lucky" that we didn't buy...GM, KMart, Nortel, Nokia, Worldcom, ....

I started invested about 1976. That same year, John Bogle came out with an index fund that tracked the S&P 500. This fund was something that in which I could have invested my whole portfolio and continued to invest in and hold to today. That would have made a bigger difference than owning a few hot stocks. As it was, it took me until about 2000 before I discovered indexes funds. It is better to be smart than "lucky".

BTW...I have owned AMZN, GOOG, APPL and other hot stocks in my index funds since 2000. I haven't missed out.

I guess that’s a good way to look at it. I am a patient investor, but if I saw my AMZN holding go down by 30% real fast during the 2000-2002 tech crash, who knows if I would have had the same patience that I showed with say my MSFT holdings. At least, it might serve as a good consolation point :-)

itstoomuch
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Re: Patient but not that lucky

Post by itstoomuch » Mon Oct 30, 2017 8:22 pm

I do the Bernstein method. I only do a handful of stocks at any one time. I limit my losses and watch the momentum and swings of good companies with a + future.
I did OK on BAMA, exiting this a.m. on a limit sale at +4 over Friday's after-hours.
This is Discretionary but could add another $5--7k gross annually to other incomes.
Ymmv
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GoldenFinch
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Re: Patient but not that lucky

Post by GoldenFinch » Mon Oct 30, 2017 8:53 pm

Since I can’t control luck, and luck can only be seen in hindsight anyway, I focus on what I can control: a) how much I save, b) expense ratios, c) asset allocation, d) tax efficiency.

:moneybag

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