Comparing Stock Market Strategies

Quote: billryan

I'd start by determining which sector is currently out of favor, then look for long-term market leaders that have underperformed.

As a sector, I'd pick commercial real estate, which leaves about thirty stocks to do a deep dive on.
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Quote: SOOPOO

Quote: billryan

I'd start by determining which sector is currently out of favor, then look for long-term market leaders that have underperformed.

As a sector, I'd pick commercial real estate, which leaves about thirty stocks to do a deep dive on.
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Too vague for me. Was Enron a ‘long term market leader’? How about Ford? Underperformed? What do you exactly mean by that? Underperformed their main rival? (Like Coke versus Pepsi). Underperformed ‘Wall Street expectations’? Underperformed an index like the Dow, Nasdaq, Russell 2000?

I do happen to own a good amount of O (Realty Income). But as I tried to make clear, I have NO confidence in my ability to do a successful ‘deep dive’ on any stock.

But seriously, thank you for the advice. I did buy one of your suggestions a month or so ago.
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Quote: SOOPOO

If a stock is trading at 100, why is that? The answer is easy…. half the people think it should be 101, half 99. (You get the idea.) when you say ‘just buy undervalued stocks’, that’s like saying in sports betting ‘just bet on winners’.

Quote: AutomaticMonkey

My thing is Dividend Capture. That's when you buy stocks just before the ex-div date, take the dividend, then sell.

"But wait- that's a zero-sum strategy! The prices adjust at the ex-div, so what you gain with the div you lose on the price. You can't make money that way!"

That's true. Dividend capture is zero-sum. You can't make money that way. But I do make money that way. What am I doing?

Show Spoiler

I don't necessarily capture the dividend. What I am really chasing is the run-up before the ex-div date, and I settle for a small percentage of what the dividend would be. So I am capturing the captors! If I buy and nobody bites, worst case is I get the dividend and sell when it recovers a bit from the price adjust. If actual dividend capture worked perfectly without the price adjust it would yield 300-400% per annum, but doing it my way yields a miserly 20-30%.

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Quote: lilredrooster

from the first link:

"Warren Buffett said that 99% of investors should not even try to beat the market. He said they would be much better off investing in a low cost index fund."

from the 2nd article quoting various financial professionals:

"I think the market can be beaten but even a broken clock is right twice a day. Best way to describe it - it's possible but not probable."

"All the evidence supports the disappointing fact that regular investors as a whole underperform the market. As long as they try to 'beat the market' they actually underperform."


https://seekingalpha.com/article/4070923-warren-buffett-says-that-99-percent-of-investors-should-not-even-try-to-beat-the-market



https://www.investopedia.com/articles/trading/10/beat-the-market.asp

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Quote: lilredrooster

from the first link:

"Warren Buffett said that 99% of investors should not even try to beat the market. He said they would be much better off investing in a low cost index fund."

Quote: Archvaldor1

Quote: lilredrooster

from the first link:

"Warren Buffett said that 99% of investors should not even try to beat the market. He said they would be much better off investing in a low cost index fund."

Buffet has underperformed the market for 20 years.
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Quote: lilredrooster

Quote: Archvaldor1

Quote: lilredrooster

from the first link:

"Warren Buffett said that 99% of investors should not even try to beat the market. He said they would be much better off investing in a low cost index fund."

Buffet has underperformed the market for 20 years.
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per the link Buffett has beaten the S&P 500 11 times out of the last 20 years - see link

from the article:

"more importantly the 20 year return for Berkshire Hathaway (Buffett is the CEO who directs the company's investment strategy) is 669% compared to a 20 year return of 621.2% for SPY" - (the 500 index)

so it looks like he beat the market but not by much

and he is considered to be one of the world's truly great investors - he is the 8th richest person in the world with a net worth of $147 billion according to Bloomberg

think you can outperform Warren Buffett - ? - go for it


https://www.benzinga.com/general/education/25/01/42832123/warren-buffett-beats-sp-500-in-2024-how-oracle-of-omahas-returns-compare-over-past-20-years

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Quote: Archvaldor1

I have outperformed Buffet for the last 20 years. So have a lot of people. Literally everyone with primary investments in tesla and bitcoin for example.

Quote: lilredrooster

Quote: Archvaldor1

I have outperformed Buffet for the last 20 years. So have a lot of people. Literally everyone with primary investments in tesla and bitcoin for example.

okay
I do agree with you there
an investor may (no guarantees) be able outperform with a very small # of high performing stocks or investments such as bitcoin
they must be willing to assume a greater amount of risk
if an investor wants to try to generate spectacular returns and is willing to assume the risk - I can't fault him for that
I own some crypto - but I would never be willing to make it a primary investment
I think that is a strategy that many, including myself, would not be comfortable with
but each to his own

Buffett a "celebrity investor who emerged from a large sample size mainly thru sheer luck, which has nothing to do with his skill"_________?__________no I can't buy that one

so you outperformed Warren Buffett - the last I saw his net worth is $146 billion - did you outperform him in net worth too_____?

you're comparing yourself to Warren Buffett - now you've really lost me - end of conversation - I'm outta here

you've strayed into total ridiculousness

Quote: Archvaldor1

Oh, the guy cut-and-pasting basic 1992 financial advice has left the conversation. I will try to restrain my tears and anguish.

Quote: lilredrooster

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is buying the index an outdated strategy______?

from the link - Morningstar -

"In calendar year 2024 just 13.2% of these investments (U.S. equity mutual funds) beat the S&P 500. The average gain was 13.5% barely half the return of the S&P 500."

https://www.morningstar.com/news/marketwatch/20250116648/most-mutual-funds-dont-beat-the-market-but-whats-the-market-anyway

Quote: billryan

Complaining about a 13.5% return is beyond hoggish.

Quote: lilredrooster

it has to do with doing the best that you can in whatever you do

Quote: DRich

One interview with Buffet that I saw he said he does not recommend anyone own more than four stocks. He said if his money wasnt tied up in Berkshire that he would at most only invest in four companies at a time. He also said he wouldn't care if the markets closed fr multiple years because he is investing in the company and they will still be producing even if you can't sell.
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Quote: Archvaldor1

Your entire thesis in this thread is "don't try put all your money in an index fund".

That's a horribly depressing lack of ambition.
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Quote: lilredrooster

Quote: Archvaldor1

Your entire thesis in this thread is "don't try put all your money in an index fund".

That's a horribly depressing lack of ambition.
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no, if you go back to my reply to MDawg I posted, "I would never say that a great trader shouldn't trade"
this thread is aimed at those who have other ambitions
I'm not willing to put in the time and effort to become a great trader - I think there are many who feel the same as I do - that was the purpose of the thread - the purpose was not to claim that this is a spectacular strategy
I have other things that occupy my time
this is the best I can do easily, no sweat - I should have clarified that
if you are a great trader - more power to you - I can't touch that - and don't wanna try

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Quote: Archvaldor1

Quote: lilredrooster

Quote: Archvaldor1

Your entire thesis in this thread is "don't try put all your money in an index fund".

That's a horribly depressing lack of ambition.
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no, if you go back to my reply to MDawg I posted, "I would never say that a great trader shouldn't trade"
this thread is aimed at those who have other ambitions
I'm not willing to put in the time and effort to become a great trader - I think there are many who feel the same as I do - that was the purpose of the thread - the purpose was not to claim that this is a spectacular strategy
I have other things that occupy my time
this is the best I can do easily, no sweat - I should have clarified that
if you are a great trader - more power to you - I can't touch that - and don't wanna try

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Yes we got that.

The disagreement is around buy and hold vs alternate strategies. As Bill states this isn't anything like as difficult as you are making out or a lot of financial literature does.

To use a deliberately absurd example the aforementioned Chris Camilo got rich doing stuff like betting into trends on Tik Tok dance videos and the popularity of children's goo products on youtube. This is not especially clever, Camilo describes it as "dumb" money.

To use a slightly more sober example: I made some shrewd investments simply on the basis of the fact that pollsters systemically overstate the vote share of center-left political parties by around 2-10%. Again there is nothing very complex going on here: I just noticed they screw up all the time and no one ever questions it. Any one can go and check the record on this it is all there, yet the markets never factor it in.

For about 5 years you could have significantly outperformed the market by simply looking at google trends for searches like "real estate" or employment and get a jump on the market of about 1-2 months. The Bank Of England wrote a really good paper on this - they and the SEC in the states use it in their projections. You are literally just typing words into google. The profitability of this strategy declined over time as the big investment houses caught on but there is still plenty of more subtle opportunities.

I just do not see any evidence of this incredible efficiency random walkers tend to go on about. On the contrary in many ways stocks are easier to beat than gambling games.

I'd add that buy and hold is not exactly a safe strategy right now. The S&P is heavily weighted towards US tech stocks. If AI proves to be a bubble for example, then everyone who invested in it is going to get badly hurt, since big tech has tripled down on it. According to the AI I just asked the chance of a significant correction is 65%.
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Quote: SOOPOO

Quote: Archvaldor1

Quote: lilredrooster

Quote: Archvaldor1

Your entire thesis in this thread is "don't try put all your money in an index fund".

That's a horribly depressing lack of ambition.
link to original post

no, if you go back to my reply to MDawg I posted, "I would never say that a great trader shouldn't trade"
this thread is aimed at those who have other ambitions
I'm not willing to put in the time and effort to become a great trader - I think there are many who feel the same as I do - that was the purpose of the thread - the purpose was not to claim that this is a spectacular strategy
I have other things that occupy my time
this is the best I can do easily, no sweat - I should have clarified that
if you are a great trader - more power to you - I can't touch that - and don't wanna try

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link to original post

Yes we got that.

The disagreement is around buy and hold vs alternate strategies. As Bill states this isn't anything like as difficult as you are making out or a lot of financial literature does.

To use a deliberately absurd example the aforementioned Chris Camilo got rich doing stuff like betting into trends on Tik Tok dance videos and the popularity of children's goo products on youtube. This is not especially clever, Camilo describes it as "dumb" money.

To use a slightly more sober example: I made some shrewd investments simply on the basis of the fact that pollsters systemically overstate the vote share of center-left political parties by around 2-10%. Again there is nothing very complex going on here: I just noticed they screw up all the time and no one ever questions it. Any one can go and check the record on this it is all there, yet the markets never factor it in.

For about 5 years you could have significantly outperformed the market by simply looking at google trends for searches like "real estate" or employment and get a jump on the market of about 1-2 months. The Bank Of England wrote a really good paper on this - they and the SEC in the states use it in their projections. You are literally just typing words into google. The profitability of this strategy declined over time as the big investment houses caught on but there is still plenty of more subtle opportunities.

I just do not see any evidence of this incredible efficiency random walkers tend to go on about. On the contrary in many ways stocks are easier to beat than gambling games.

I'd add that buy and hold is not exactly a safe strategy right now. The S&P is heavily weighted towards US tech stocks. If AI proves to be a bubble for example, then everyone who invested in it is going to get badly hurt, since big tech has tripled down on it. According to the AI I just asked the chance of a significant correction is 65%.
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You WAY overestimate the ability of MOST investors. They ARE NOT going to factor in historical polling errors into their investment strategies.

I help a friend’s wife. She’s a nurse. On most subjects I’d call her ‘bright’ and also ‘perceptive’. She had a dismal advisor who had her in high cost mutual funds, and HE was also high cost. I suggested low cost ETFs like SPY, QQQ, etc.. Her question to me was ‘can I lose ALL my money in those’? You think she’s going to look for Google trends to make her REIT selections?

I think you need to be smart AND sophisticated to invest like you do successfully!

For the VAST MAJORITY of investors, buy and hold is the best REALISTIC strategy. It’s worked for me!
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Quote: lilredrooster

...Vanguard has a technology index fund - VGT - which I also own - which has outperformed the 500 index by a lot - take a look

2024 - 29%
2023 - 52%
2022 - (29%)
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Quote: TomG

A good trader will be able to beat the market.

Proof by contradiction:

If no one could beat the market, no rational participant would try. Throwing darts would have the same expected value as a total market fund, which would have the same expected value as anything else a participant could possibly do. Which means market prices would be determined by dart throwers and irrational money. Which would make for an inefficient market. Which would make it beatable.

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The problem with trying to beat the market is that it requires capital, labor, time, and expertise. Most common way to get capital is to sell our time and labor. Then when we finally do have sufficient capital to earn more than pennies off market investments, our expertise is in another area, which provides better returns than the stock market.
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Quote: TomG

Most 16-year-olds don't have much capital to really see much from stock market investments. Invest all the summer job money into stocks and in a year it will have returned enough for one car payment.

Young people have an endless number of paths to go out and get sufficient capital. But by the time they've accumulated enough as a firefighter, or teacher, or dentist, or gambler, they're probably better off continuing along that path.
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Quote: SOOPOO

You WAY overestimate the ability of MOST investors. They ARE NOT going to factor in historical polling errors into their investment strategies.

I help a friend’s wife. She’s a nurse. On most subjects I’d call her ‘bright’ and also ‘perceptive’. She had a dismal advisor who had her in high cost mutual funds, and HE was also high cost. I suggested low cost ETFs like SPY, QQQ, etc.. Her question to me was ‘can I lose ALL my money in those’? You think she’s going to look for Google trends to make her REIT selections?

I think you need to be smart AND sophisticated to invest like you do successfully!

For the VAST MAJORITY of investors, buy and hold is the best REALISTIC strategy. It’s worked for me!

Quote: TomG

yes, the real key to seeing the strongest returns on investment is the family a person is born into. If someone isn't given tens of thousands of dollars in gifts every year, making changes in that area should be the first priority, before any training, education, or time in the workforce.

Most 16-year-old who didn't take care of that will not have stock returns that can cover the entire cost of a car, which might lead to a monthly payment being the only option they're left with.
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Quote: billryan

Why do you think someone needs tens of thousands of dollars to develop a habit?

Quote: billryan

the habits I developed lasted a lifetime and allowed me to semi-retire in my mid-50s.

Quote: billryan

$100,000 invested in the stock market should grow at a historical rate of 75% per decade or better.

Quote: TomG

Quote: billryan

Why do you think someone needs tens of thousands of dollars to develop a habit?

Less than $10,000 has a one-year return of like less than one week in the workforce. You were the one who insisted young people in your family do have the capital to see much from those investments. I'm saying that with that little money, any time spent learning how to beat annual stock market returns is worth less than other ways of trading time for money.

Quote: billryan

the habits I developed lasted a lifetime and allowed me to semi-retire in my mid-50s.

None of those behaviors led you to beat the market. If you wanted that skill, it would have taken a lot more than a quarterly meeting and a regular visit to the bank. And despite a lifetime of such rosy money management, it still took close to 40 years of work until semi-retirement.
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Quote: lilredrooster

Quote: billryan

$100,000 invested in the stock market should grow at a historical rate of 75% per decade or better.

much, much better than 75% for those who invested in the S&P 500

from the article:

"the average annual yearly return for the S&P 500 is 10.57% over the last 100 years"

over the last 10 years you would be up roughly 126.4%

no need to beat the market to do well - so easy to match it


https://tradethatswing.com/average-historical-stock-market-returns-for-sp-500-5-year-up-to-150-year-averages/#:~:text=Stock%20Market%20Average%20Yearly%20Return%20for%20the%20Last%2010%20Years,including%20dividends)%20is%2010.021%25.

https://finance.yahoo.com/news/had-invested-1-000-p-180009879.html



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Quote: billryan

Quote: lilredrooster

Quote: billryan

$100,000 invested in the stock market should grow at a historical rate of 75% per decade or better.

much, much better than 75% for those who invested in the S&P 500

from the article:

"the average annual yearly return for the S&P 500 is 10.57% over the last 100 years"

over the last 10 years you would be up roughly 126.4%

no need to beat the market to do well - so easy to match it


https://tradethatswing.com/average-historical-stock-market-returns-for-sp-500-5-year-up-to-150-year-averages/#:~:text=Stock%20Market%20Average%20Yearly%20Return%20for%20the%20Last%2010%20Years,including%20dividends)%20is%2010.021%25.

https://finance.yahoo.com/news/had-invested-1-000-p-180009879.html



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The last ten years have not been typical, and you aren't factoring in taxes. 7.5% annual growth is a tad conservative but it's best to underestimate growth and be surprised than to overestimate it and be surprised.
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Quote: DRich

Quote: lilredrooster

Quote: DRich

Buying index funds is foolish and for the lazy. Does someone really believe that each company in the S&P 500 is a good value? Do your homework and find companies that are underpriced and invest in those without diluting your investments through 500 companies of which only probably a few are a good value.
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you have the right to your opinion - here are a couple of different ones

from the article:

"in 2007 Warren Buffett made a $1 million dollar bet that he could outperform hedge fund Managers over the course of a decade by buying an S&P 500 index fund . In 2017 he won"

and - "in general, I would say the S&P 500 is better, more well diversified than most investment strategies"

quote from Bryan Armour Director of Strategies at Morningstar

https://www.cnbc.com/2024/10/09/warren-buffetts-sp-500-bet-paid-off-some-experts-say-it-may-be-time-to-diversify.html

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Diversification is fine if you want to play it safe. If you want to win, just buy undervalued stocks.

I am terrible at picking stocks because I don't put the time and effort in. When buying a stock you should put in the same amount of time and effort as you would if you were buying the whole company. People seem to forget that when you buy stock you are buying a company.
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Quote: billryan

You keep focusing on the amount of money.