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How would you make money ? - Guest - 12-15-2004
Pete,Dec 15 2004, 08:42 PM Wrote:If you lose, then good for me, for the money you pump into the market will most like help to drive up my long term investments ;)You can lose money from long term investments;remember Enron? All those retired people who relied on their pension funds to pay the pensions;now they have no money left to live...
--Pete
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How would you make money ? - Fragbait - 12-15-2004
Hi.
The irony lies within:
The person who speculates on stock rises with short-time heavy investments could as well play roulette. That would have more to do with gamble than anything else. If he had insider information, however, it wouldn't be gamble anymore, but a sure thing to make money.
That's forbidden, unfortunately. Now, if he claims to be an expert in short-time ( = speculative) funds, he just ain't telling the truth. He may know the ropes concerning the firms he invests in, but as we already mentioned, if the period's too short, the assigning of money will turn into gambling. If he continues to claim his expertise after having been confronted with this truth he is either ignorant & lucky, or well aware & criminal.
To actively gain money by long-term investment strategies is entirely possible*, though. The crux about this is that each and everyone wants to make their money quickly, and the news items about someone's equity fund making a solid 6% income return every year of the last decade are hardly ever noticed.
*by self-informing about the stocks you invest in, as well as a profund schooling that allows to rightly interpret stock index curves and the trends that can be derived from them.
Greetings, Fragbait
How would you make money ? - --Pete - 12-15-2004
Hi,
Abramelin,Dec 15 2004, 01:54 PM Wrote:You can lose money from long term investments;remember Enron? All those retired people who relied on their pension funds to pay the pensions;now they have no money left to live...[right][snapback]62915[/snapback][/right]Yes. You can lose money on any investment. That is why some things pay better and some pay worse -- some are riskier, some safer.
Any investment strategy requires that the investor look at what he/she is trying to accomplish. Whether it is the 'put it all on black' recommended by DeeBye or CDs, the value of the investment is the sum of potential payoffs multiplied by the probability of each payoff. Any investment with a positive value could be a 'good' investment. The rate of an investment is the value over time. And it is the rate which is often best correlated with the risk.
And any pension fund that is tied to only one company is a fund managed by morons. Especially if the company holding the fund is the company paying for the fund.
--Pete
How would you make money ? - --Pete - 12-15-2004
Hi,
Fragbait,Dec 15 2004, 02:05 PM Wrote:To actively gain money by long-term investment strategies is entirely possible*, though.Exactly. Day trading, or any other short term 'investing', is more like a job than it is just 'letting your money work for you'. Earlier I mentioned poker. The requirements for successful day trading are not that different from any other form of successful gambling. You have to know the odds, you have to really learn the game, you have to research and analize, you have to have discipline to stick to your program and not let wins and losses 'tilt' you. As a bunch of professional gamblers will be happy to tell you, it's a hard way to make an easy living.
*by self-informing about the stocks you invest in, as well as a profund schooling that allows to rightly interpret stock index curves and the trends that can be derived from them.
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If someone wants to take a large sum of money and use it to make their everyday life better, then using it to enable working in a profession of one's choice is probably the best thing. Opening, say, a hobby shop might bring in as much or more income than day trading and in addition, it can give great satisfaction to someone involved in the hobby. The windfall can be thought of as a 'do what you love, the money will follow' enabler.
Now, a *big* windfall is a different matter. If the amount is enough to ensure a sufficiently luxurious remainder of one's life, then just investments (and possibly a money manager) are all that are required to free one for the jet-setter (playboy? whatever the recent idiom is for 'rich air-head') life. But I got the impression that that is not what's being discussed in this thread.
--Pete
How would you make money ? - whyBish - 12-16-2004
Abramelin,Dec 16 2004, 09:54 AM Wrote:You can lose money from long term investments;remember Enron? All those retired people who relied on their pension funds to pay the pensions;now they have no money left to live...
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Anyone with a clue about investment will tell you to diversify. Having all your money with one company/industry/sector/country is riskier than having it spread accross multiple. The amusing thing is that you can diiversify away a lot of your risk while still keeping most of the return.
How would you make money ? - whyBish - 12-16-2004
Abramelin,Dec 16 2004, 07:35 AM Wrote:I don't understand why someone who day trade,let's say as an example,500,000 euros,can withstand the ups and downs much more easily than someone who day trade 50,000 euros.Losing 1,2 or 3 % of 500,000 euros is as bad as losing 1,2 or 3 % of 50,000 euros;it's just a matter of proportions,really.
Well, apart from what Pete said, you need a certain amount of income to live on, and that increases at a much lower rate than income increases at.
(i.e. you have a fixed amount of overheads)
How would you make money ? - whyBish - 12-16-2004
Chaerophon,Dec 15 2004, 05:36 PM Wrote:Not the image that comes to mind when you mention "day trading".The quote from Munkay was about the Stock Market, not Day Trading.
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How would you make money ? - whyBish - 12-16-2004
Munkay,Dec 15 2004, 07:47 PM Wrote:Doesn't this mean its still a horse race, but with the odds more in your favor?
Cheers,
Munk
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No.
Maximisation of profit requires that you invest in things that give the greatest rate of return. Anything that is negative sum is not going to be selected by a naive* investor that understands this concept.
(By naive I mean that they have no special knowledge about the horse races (or the sharemerket) that could make the game, for them, positive sum)
How would you make money ? - Guest - 12-19-2004
Pete,Dec 15 2004, 07:50 PM Wrote:Hi,All right Pete,I understand what you meant.
I suggest that until you *do* understand this, that you not take up any form of gambling, whether it be at casinos or on the stock markets.
Perhaps the best way to illustrate is with two kids matching coins. Let's say that one kid starts with fifty coins, the other with five. The odds of losing five times in a row is one in thirty-two. The odds of losing fifty times in a row is one in about 1,000,000,000,000,000. Now, most of the time the kids will be close to their original values, gaining a little or losing a little. But every now and again, one will have a 'bad streak'. The odds of a bad streak long enough to wipe out the five coin kid are about 1,000,000,000,000,000,000/32 as likely as those to wipe out the fifty coin kid.
Applying that to the market is a little bit tricky. First, except for a flat market, stocks are not 'zero-sum'. Second, in stocks, one has more of a choice of which 'games' to play and at what odds. And, third, by playing multiple games one can hedge the riskier bets. But the principle is the same -- the smaller the stake, the more likely you'll lose it all.
--Pete
EDIT: Just a brief note to clarify a point: while the odds of the respective streaks are as noted, the actual odds of losing all one's money in the simple game are
(the amount of money you start with)/(the total amount of money in the game, including yours).
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Still,one cannot compare casinos with stock markets;the first one is based on pure luck while the second one can be mastered by technical analysis.I don't have the knowledge to compete with the day traders,so I'll just don't buy/sell stocks;I leave that for the experts.You were right,day trading is almost like gambling,esp without any knowledge.As for casinos,I let that thing for the losers/gamblers.
Thanks everyone for you precious advice,except Deebye for his 'bet it all on black'.
How would you make money ? - --Pete - 12-20-2004
Hi,
Abramelin,Dec 19 2004, 01:07 PM Wrote:As for casinos,I let that thing for the losers/gamblers.
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Actually, casinos can be a lot of fun. Of course the house always wins, but one can occasionally hit a jackpot and take some friends out to dinner :)
Indeed, there are some circumstances where one can, with the right knowledge, make a living at gambling. Poker is one such, as are betting on the horse races and sports betting. Of coursee, one still needs to devote a lot of time to learning the fields, calulating the odds and fostering sources of 'inside' information. As I said elsewhere, a hard way to make an easy living.
--Pete
How would you make money ? - whyBish - 12-20-2004
Abramelin,Dec 20 2004, 09:07 AM Wrote:the second one can be mastered by technical analysis.
That's an open question, but I lean heavily towards the theory that any pattern that becomes known to be profitable is no longer profitable.
E.G. if there was a pattern where you buy on a Friday and sell on a monday, and make a profit, as soon as it becomes known, people will do it until it no longer becomes profitable.
If you are still interested in day trading you could have a go with no risk by manually recording what you would have traded (without actually buying/selling) and see how you get on. (I did that for 18 months before I got into the stock market.)