Daily General Discussion and spitballin thread - October 01, 2021 Investing |
- Daily General Discussion and spitballin thread - October 01, 2021
- Daily Advice Thread - All basic help or advice questions must be posted here. October 01, 2021
- Are safe long term investments like SPY as safe for millennials as they were for previous generations?
- $SPY Bullish take for the short term
- FPE - Inflation and bearish defense
- Index Funds vs Low Leveraged Futures?
- Which Features Would You Like to See in a Social Sentiment Tool?
- Peter Schiff: Worth listening to or following?
- My Thoughts On Why Retail Investors Have An Advantage Over Institutional Investors
| Daily General Discussion and spitballin thread - October 01, 2021 Posted: 01 Oct 2021 02:02 AM PDT Have a general question? Want to offer some commentary on markets? Maybe you would just like to throw out a neat fact that doesn't warrant a self post? Feel free to post here! This thread is for:
Keep in mind that this subreddit, and this thread, is not an appropriate venue for questions that should be directed towards your broker's customer support or google. If you would like to ask a question about your personal situation or if you are asking for advice please keep these posts in the daily advice thread as that thread is more well suited for those questions. Any posts that should be comments in this thread will likely be removed. [link] [comments]  |
| Daily Advice Thread - All basic help or advice questions must be posted here. October 01, 2021 Posted: 01 Oct 2021 02:01 AM PDT If your question is "I have $10,000, what do I do?" or other "advice for my personal situation" questions, you should include relevant information, such as the following:
Please consider consulting our FAQ first - https://www.reddit.com/r/investing/wiki/faq And our side bar also has useful resources. Be aware that these answers are just opinions of Redditors and should be used as a starting point for your research. You should strongly consider seeing a registered financial rep before making any financial decisions! [link] [comments]  |
| Posted: 01 Oct 2021 01:49 AM PDT To be absolutely clear, I'm not talking about the recent, day to day drama, or even the year to year drama of debt ceilings, and shutdowns. I'm not even talking about black swan events like covid or 9/11. I'm not even talking about massive events like the 2008 crash. What I'm asking is: is there a chance we are right now at or around the peak of growth? Is climate change a genuine threat to the whole system? Is actual collapse feasible? And can the market respond to these threats and continue to grow despite them? [link] [comments]  |
| $SPY Bullish take for the short term Posted: 30 Sep 2021 03:41 PM PDT In light of all the negativity on TV and fintwit FURU's, I'd like a present a bullish perspective on SPY. It's mainly technical analysis; based on my ever optimistic view of the market...and life as well...so it can 100% wrong. But I hope it'll add some value to your own DD. I'm open for response and critique of $SPY, please refrain from childish ad-hominim attacks. Trolls have never added to my desire to learn and grow. https://www.reddit.com/r/DeltaTrading/comments/pyu8dk/spy_bullish_daily_chart_poc_435_100ma_support/ [link] [comments]  |
| FPE - Inflation and bearish defense Posted: 30 Sep 2021 09:14 PM PDT Looking for a temporary cash alternative for our current market conditions, I looked at performance from all bond classes and similar, aiming for a fund that would resist going negative and produce a reliable return that approximates the current inflation expectation of around 4%. This is where I ended up. https://www.ftportfolios.com/Retail/Etf/EtfSummary.aspx?Ticker=FPE https://finance.yahoo.com/quote/FPE At 4.5% yield (-0.85 expense) it should do the trick, plus the price behavior is steady (and positive) and resists mild drops. It did take a dive with everything else during the pandemic, but I don't think we are facing that kind of market instability right now. My thinking is that it could be an alternative to holding cash for short periods. Dividends pay monthly on the 3rd week. The holdings are BBB - BB class liabilities, so they can get risky if things get really bad, but I don't think we are at that type of risk now. [link] [comments]  |
| Index Funds vs Low Leveraged Futures? Posted: 01 Oct 2021 01:18 AM PDT Do you think it would be better to invest 2K per month into an sp500 index fund or into ES micro and keeping it at 20% margin of initial and rolling over every quarter? I'm thinking that with a lower margin I could still withstand significant pullback and even a 20% correction. Maybe including a put spread for any dips below 20%. Does anybody have a strategy similar to that? Thanks for any input. [link] [comments]  |
| Which Features Would You Like to See in a Social Sentiment Tool? Posted: 01 Oct 2021 04:12 AM PDT Hi there, I've been working on a project for the last couple months. My intention is to create the most complete tool for social sentiment analysis. Here is what you can currently do: • Get the current social sentiment for any symbol updated every 10 minutes • Get up to 365 days of social sentiment historical data • Create custom alerts • Discover trending symbols by social sentiment Where is what you will be able to do (in future updates): • Track social sentiment data for lower timeframes (5min, 1min) Are there any features that you would like to see in a tool like this? Please let me know, I would love to hear from you. [link] [comments]  |
| Peter Schiff: Worth listening to or following? Posted: 30 Sep 2021 11:05 AM PDT Hi Folks, I used to be a big fan of Schiff because of his Austrian/Sowell style arguing on economic issues. I also liked his harsh criticism of the Fed. His understanding of crypto is too small to take seriously, but he is a contrarian which is worth hearing out. However, since Fed presidents got caught trading individual shares and playing the markets like traders, some have had to resigned. Schiff has not touched this issue once. This appears so hypocritical that I can no longer take him seriously. I am asking you guys what your thoughts are on Schiff at large, is worth listening to. I am also asking your thoughts on his lack of discussion regarding Fed presidents resignations regarding stock trading. Thanks [link] [comments]  |
| My Thoughts On Why Retail Investors Have An Advantage Over Institutional Investors Posted: 30 Sep 2021 06:53 AM PDT Hey Everyone, I wanted to share an analysis of why individual investors have an advantage over institutional investors and can beat the market. Would love to hear your feedback and thoughts. IntroductionImagine you're a new investor who just downloaded a brokerage app. Now image you're in charge of an actively managed fund with a team of PhDs working for you. Both of these parties are planning on actively managing their portfolios by selecting individual stocks or bonds. Which one is going to generate higher returns? The answer probably seems pretty clear. If there's any amount of inefficiency in the market worth taking advantage of it's going to be captured by those with the most resources and the best education, right? Wrong, which is what makes the stock market great. There are five key advantages individuals have compared to intuitional investors and passive funds.
We will dive into this in more detail, but first let's look at a bit of history. Advocates of passive index investing are quick to point out that passive funds have beaten active funds 86% of the time over the past 20 years [1]. Between 1991 and 1996 it was a tossup with active funds winning three years and losing three others [2]. That time frame was chosen so that we can have a fair comparison later on. In more recent memory, passive funds have won every year since 2013 with no signs of letting up. People quickly conclude that if actively managed funds with teams of PhDs can't outperform a market index consistently that it must be nearly impossible for a retail investor to do so. This comparison sounds pretty logical on the surface but doesn't look into the differences between the two groups. Retail investors can skip the management fees, can't be fired for underperforming, are able to invest in a wider range of companies, and can take on as much risk as they want. Armed with these advantages retail investors outperformed market weighted index funds 49% of the time before fees from 1991 to 1996, almost the exact same rate as the active funds [3]. If you include fees that number drops to 43%. However, many modern brokerages no longer have fees to place orders. Both sides have advantages and disadvantages when compared to the other. This race is a lot closer than most people think. Individual Investors Aren't Fired for A few Bad QuartersIf you're a fund manager who decides to go a little outside of the box and ends up buying a lot of stocks that aren't part of the S&P 500 you could run into an issue. Let's say those stocks you picked ended up doing really poorly this year while the S&P did fine. Managing this fund is your job. If you don't do well you could be removed from your position. Maybe they let one bad year slide, but could you underperform your peers for two years? How about three? At some point you're going to get fired. The retail investor could underperform for a decade and still come out on top. The market is very cyclical and some popular and reliable strategies just don't work for years at a time. Take value investing during the last decade as an example. The market has been dominated by highly valued growth stocks. Even if you carefully selected strong value stocks you would probably not be above the S&P 500 during this period. Despite this, value stocks have outperformed growth stocks by an average of 4.54% per year since 1928 [4]. Information has Been Democratized – Institutions are Still PayingWhen you have a team of PhDs working for you to help select your stocks you have to pay them. You also need to pay yourself, pay for the office, and for any other resources you use during the selection process. These costs are going to be passed onto the investors of the fund in the form of management fees. These fees often cost between 0.5% and 1% annually [5]. This piece is taken each year whether the fund does well or not. This means that even if the retail investor and the fund held the exact same stocks the retail investor would come out ahead. Time is on Your SideAny active fund is going to be extra aware of their quarterly and annual goals. They're going to be frequently rebalancing to meet certain requirements whether it be a risk level, an amount of diversification, or a reevaluation of their pick's financials [6]. A retail investor can hold a single stock for 40 years if they believe in the long term future of the business. Let's say both the retail investor and the fund bought Apple at the same time 20 years ago. Apple has grown an insane amount during this time frame. As one stock outpaces the rest it starts to take up a larger and larger portion of your portfolio. The fund would likely end up selling some of their shares to bring the size of their Apple holding back in line with the rest. This also lowers their exposure to the tech sector which they would also want to keep at a certain level. The retail investor on the other hand has no such limit. He can buy it and hold it until he retires. Size Matters But Individual Investors Can Use it WiselyThe average retail investor is buying thousands of dollars of stock at most. The average fund is buying hundreds of thousands of dollars and often millions. This is important for a few reasons. Thousands of dollars will not have any effect on the price of most stocks whereas a million dollars can move a sizeable company. The more money being invested the more it can push the price. When you are buying tons of shares the price is going to creep upwards as you look for more and more sellers. This means that the more you buy the worse your average entry price will be. The same thing happens when you sell. Unloading millions of dollars in shares is going to drop the price which means you get a poor exit price as well. The retail trader does not have to deal with this and will have better prices on both ends which leads to better performance, even if the same stocks are picked! The size of the investment doesn't only affect the prices you get, it also influences what you can even attempt to buy in the first place. Some publicly traded companies have market caps of 50 million or less. It's just not feasible for huge funds to be buying into these companies. If a fund ever buys so much of a company that it owns 5% it will need to register that with the SEC and is forced to file beneficial own reports [7]. The retail trader will never run into this issue. Individual Investors Can Use Risk to Their AdvantageWe've seen a few reasons why funds tend to stick the S&P 500 companies. We've also seen that they are surprisingly risk averse. Whether it be buying smaller companies, having a more concentrated portfolio, or making use of derivatives like long term call options, the retail investor has the ability to take on as much risk as they want. If you're familiar with the statistics behind optimized betting you'll know what the Kelly Criterion is. In short, it's a way to determine the optimal size bet you should take**.** The Kelly Criterion says that you should be holding a little more than 200% in the S&P 500 for maximum returns, at least historically [8]. This is a heavily leveraged and high risk account but was able to survive both the Dot Com Bubble and the 2008 Financial Crisis. Despite higher returns in the long term this portfolio underperforms the market for years after each crash. This makes it unrealistic for a fund manager to try to execute, but if you can handle the risk it's an option available to every retail investor who has a long time horizon. Final Thoughts: If Managed Properly, These Advantages Allow Individual Investors to Beat the MarketIt's true that most actively managed funds do not outperform their passive counterparts. This is often used to cast doubt on the performance of retail investors. If the experts can't outperform, how could you? Well, it turns out there are a lot of differences between billion dollar funds and some guy on his Robinhood app. A surprising amount of these differences offer the retail investor an advantage, or at the very least an additional degree of freedom. Using actively managed funds as a benchmark is incredibly misleading. The odds are not in your favor as an average stock picking retail investor, but they're not nearly as bad as they're usually portrayed**.** In the same 1991-1996 study 25% of retail investors outperformed the index by 6% or more annually. If you dedicate the time and have good emotional control you can capitalize on these advantages most people don't even know they have. ---- TLDR; The individual investors has a number of advantages over institutional investors and can beat the market Sources:
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