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Autumn 2018 stock market drops

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Re: Autumn 2018 stock market drops

#175070

Postby Backache » October 19th, 2018, 6:13 pm

odysseus2000 wrote:Good points, and you could also add changes in demographics, such as a lower birth rate, can have dramatic effects on property prices.

Nevertheless in my experience of studying investment, property has done well even though all the caveats that you raise have existed in various forms all the time but I do not know the future.

Yes, if you stick to low load investments and are happy with that then there is very little skill required and given favourable circumstances the returns can be better than what one could get in a bank, especially over a long period.

It always comes down to what an investor is happy doing and how much return he or she wants.

In a forum like this most folk, at least to my belief, are trying to do better than market returns and to do that requires skills that many do not have. One can say the same about property, it is just that in my experience most of the folk I have known who have dabbled in property have done a lot better than the folk I know who dabbled in equities.

Regards,


Yup fair enough, I am certainly not trying to argue that beating the market is in any way easy or indeed predictably possible.

I suspect many of us indulge in that side as a slight hobby and many of my own stock market investments are basic trackers and a lot more probably would be had I not started investing before they were widely available.

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Re: Autumn 2018 stock market drops

#175741

Postby TheMotorcycleBoy » October 23rd, 2018, 12:28 pm

odysseus2000 wrote:If you were to go and ask prop traders (folk who trade money for others) what is most predictable & manageable, they will tell you it is day trading, anything beyond that they will mostly avoid and/or use options to reduce risk. If you start in prop trading you are often forbidden to hold over night positions.

I had never even heard of this thing called prop trading before so I looked it up here. I read that one of the reasons for investment banks activity here (in addition to outright profiteering!) was to add liquidity.

Given this, and the fact that, as you mentioned, they are sometimes forbidden from overnight positions; is this why, sometimes I have observed quite noticeable e.g. 6% changes in price of certain small cap shares near to the end of the day? For example we hold Focusrite (TUNE), and I remember that at about 4.20ish one afternoon, Mel and I were just browsing our portfolio, and we noticed their price was making some quite quick movements which we couldn't explain by referring to said company's news items.

thanks
Matt

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Re: Autumn 2018 stock market drops

#175759

Postby odysseus2000 » October 23rd, 2018, 1:39 pm

TheMotorcycleBoy wrote:
odysseus2000 wrote:If you were to go and ask prop traders (folk who trade money for others) what is most predictable & manageable, they will tell you it is day trading, anything beyond that they will mostly avoid and/or use options to reduce risk. If you start in prop trading you are often forbidden to hold over night positions.

I had never even heard of this thing called prop trading before so I looked it up here. I read that one of the reasons for investment banks activity here (in addition to outright profiteering!) was to add liquidity.

Given this, and the fact that, as you mentioned, they are sometimes forbidden from overnight positions; is this why, sometimes I have observed quite noticeable e.g. 6% changes in price of certain small cap shares near to the end of the day? For example we hold Focusrite (TUNE), and I remember that at about 4.20ish one afternoon, Mel and I were just browsing our portfolio, and we noticed their price was making some quite quick movements which we couldn't explain by referring to said company's news items.

thanks
Matt


Potentially yes, especially with small caps few traders want to hold them over night as they are often very volatile & giving up profits or worse losing money can have a prop traders access to cash reduced or worse.

Small caps in my opinion are extremely dangerous vehicles to trade. The number of shares outstanding is often low in absolute number & of course in capitalisation & the equity price can easily move on no news or news that one only learns about when it is too late.

Sort of rule of thumb is that of say 10 small caps, investors can expect 3 to fail completely, total loss, several others to be zombies & maybe a couple to do well. These are not odds that I like, but some private investors specialise in them.

Traders might have an ear open for news, often operating in packs via 'rooms' so that they like prey species have the best chance of spotting opportunity & avoiding predation, but most trading is based on price action & risk management & the latter usually means day trades only and/or options if available to protect positions. Small caps may not have options. It is a full time job & requires skills that can be taught but which are not easy for many to master. Soread betting for example has a loss rate such that about 80% of punters lose money.

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Re: Autumn 2018 stock market drops

#175803

Postby TheMotorcycleBoy » October 23rd, 2018, 4:38 pm

Thanks for your reply, Odysseus,

odysseus2000 wrote:Potentially yes, especially with small caps few traders want to hold them over night as they are often very volatile & giving up profits or worse losing money can have a prop traders access to cash reduced or worse.

Small caps in my opinion are extremely dangerous vehicles to trade. The number of shares outstanding is often low in absolute number & of course in capitalisation & the equity price can easily move on no news or news that one only learns about when it is too late.

Sort of rule of thumb is that of say 10 small caps, investors can expect 3 to fail completely, total loss, several others to be zombies & maybe a couple to do well. These are not odds that I like, but some private investors specialise in them.

Yes, although we have a couple of aim/small caps, the bulk of our ISA S&S equity is in a few FTSE 100 firms and a World equity index tracker.

On reading various investment books on small/large caps recently, the main message is to prefer large caps. I'm reading two such books presently, in "The Intelligent Investor" (Graham) the guidance is definitely toward larger firms, however in the other "Value Investing" (Greenwald et al.) it was pointed out that often small caps offer better "value" as they are deliberately ignored by large investment institutions, and thus may, in certain cases have cheaper prices for that reason.

odysseus2000 wrote:Soread betting for example has a loss rate such that about 80% of punters lose money.

Spread betting is most definitely not for me!!

Matt

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Re: Autumn 2018 stock market drops

#175807

Postby odysseus2000 » October 23rd, 2018, 5:20 pm

MotorcycleBoy
On reading various investment books on small/large caps recently, the main message is to prefer large caps. I'm reading two such books presently, in "The Intelligent Investor" (Graham) the guidance is definitely toward larger firms, however in the other "Value Investing" (Greenwald et al.) it was pointed out that often small caps offer better "value" as they are deliberately ignored by large investment institutions, and thus may, in certain cases have cheaper prices for that reason.


For what its worth I would argue that most of the classical texts are out of date, the information and metrologies obsolete and reading them and applying what you learn is likely to bring financial pain.

The world has changed significantly in the last decade and the rate of change continues to accelerate. Would anyone do anything based on what was common practice 20 years ago.

Buffett and Munger have publicly acknowledged that they have both benefited enormously from talking to the younger people in their team and this has led to substantial investments in Apple, something Buffett said he wouldn't consider when he went for IBM but that turned into a dog and he learned and adapted.

One of the extreme problems with the financial world from the outside is that there is an entire industry devoted to making money from telling folk how to invest/trade not from investing/trading and a lot of this is laughable if you can make the transition after a lot of work to a more insider like approach.

As I have said investing is hard. The easy approach is to use time to your advantage, but to make money relatively quickly and consistently requires a lot of work and a lot of unlearning about all the stuff the media including things the like the FT tell you week after week.

Good Luck!

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Re: Autumn 2018 stock market drops

#175910

Postby OhNoNotimAgain » October 24th, 2018, 8:53 am

odysseus2000 wrote:
For what its worth I would argue that most of the classical texts are out of date, the information and metrologies obsolete and reading them and applying what you learn is likely to bring financial pain.

The world has changed significantly in the last decade and the rate of change continues to accelerate. Would anyone do anything based on what was common practice 20 years ago.

Buffett and Munger have publicly acknowledged that they have both benefited enormously from talking to the younger people in their team and this has led to substantial investments in Apple, something Buffett said he wouldn't consider when he went for IBM but that turned into a dog and he learned and adapted.

One of the extreme problems with the financial world from the outside is that there is an entire industry devoted to making money from telling folk how to invest/trade not from investing/trading and a lot of this is laughable if you can make the transition after a lot of work to a more insider like approach.

As I have said investing is hard. The easy approach is to use time to your advantage, but to make money relatively quickly and consistently requires a lot of work and a lot of unlearning about all the stuff the media including things the like the FT tell you week after week.

Good Luck!

I don't often agree with this poster but he is largely correct here, especially about the importance of time.

The important thing to remember is that the bar has been raised by the provision of low cost dumb trackers in the last decade or so. That means the performance of a suite of VCT funds over the last 3 years ranging from 2.5% to 34% can now be assessed alongside that of a dumb passive fund that has delivered 21% over the same period.

The VCT managers have expended a huge amount of time, effort and money to achieve a net return that is comparable to that of an investment that is low risk for its asset class, transparent and can be redeemed for cash in 3 days.

The investing world has got tougher because costs have come down and people, finally, are starting to incorporate the finance theories first promulgated half a century ago. The tardiness of this adoption is entirely due to the vested interests of the financial chaterati who want to pretend they know something their clients don't.

But they don't.

The Internet has opened up the very simple rules of finance to everybody, which is good for consumers but bad for money managers as their share prices this year have demonstrated.

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Re: Autumn 2018 stock market drops

#175949

Postby TheMotorcycleBoy » October 24th, 2018, 11:35 am

odysseus2000 wrote:For what its worth I would argue that most of the classical texts are out of date, the information and metrologies obsolete and reading them and applying what you learn is likely to bring financial pain.

The world has changed significantly in the last decade and the rate of change continues to accelerate. Would anyone do anything based on what was common practice 20 years ago.

Buffett and Munger have publicly acknowledged that they have both benefited enormously from talking to the younger people in their team and this has led to substantial investments in Apple, something Buffett said he wouldn't consider when he went for IBM but that turned into a dog and he learned and adapted.

Whilst I'm sure WB and CM learnt a lot about newer companies (e.g. Apple) regarding their brand, product range and the insight/creative flair of Jobs from younger people in their team; I would very much doubt that they (WB and CM) would then cease using value accessing techniques which they have developed and fine tuned over decades. So whilst some things e.g. Graham's "net-nets" may have lost their relevance, I still believe that newbie folk like me benefit greatly in reading the kind of texts that I mentioned earlier (e.g. "The Intelligent Investor" and "Value Investing"). I certainly wish I had read them earlier!

Matt

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Re: Autumn 2018 stock market drops

#175950

Postby TheMotorcycleBoy » October 24th, 2018, 11:39 am

OhNoNotimAgain wrote:The Internet has opened up the very simple rules of finance to everybody, which is good for consumers but bad for money managers as their share prices this year have demonstrated.

Help me out here, what firms do you mean in your above? Do you mean the likes of HL and Numis, etc.?

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Re: Autumn 2018 stock market drops

#175992

Postby OhNoNotimAgain » October 24th, 2018, 2:41 pm

TheMotorcycleBoy wrote:
OhNoNotimAgain wrote:The Internet has opened up the very simple rules of finance to everybody, which is good for consumers but bad for money managers as their share prices this year have demonstrated.

Help me out here, what firms do you mean in your above? Do you mean the likes of HL and Numis, etc.?


Not really, but at least sites like Trustnet, HL, Morningstar and the FT enable investors to easily see what investments have done and what they contain. It is now easy to look inside a fund to see what it owns and get some ratios and measures that quickly and easily see what sort of fund it is.
They aren't perfect and they are sometimes a bit out of date but it is much easier now to get the raw data.

Of course the real game changer was the late lamented Motley Fool but Monevator is doing its best to continue the fly the flag for simplicity and cost cutting.

And not forgetting of course the simple but brilliant innovation of being able to see company results within 15 minutes of an announcement and being able to make your own decision, if you are that way inclined, to invest or disinvest.

There is also tons of stuff like the Credit Suisse annual reviews. Alas the invaluable Barclays Equity Gilt Study is still locked away.

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Re: Autumn 2018 stock market drops

#176014

Postby TheMotorcycleBoy » October 24th, 2018, 5:45 pm

OhNoNotimAgain wrote:but bad for money managers as their share prices this year have demonstrated.

Sorry to be pedantic.....so who's "share prices" were you referring to by your earlier remark?

Matt

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Re: Autumn 2018 stock market drops

#176127

Postby OhNoNotimAgain » October 25th, 2018, 8:34 am

TheMotorcycleBoy wrote:
OhNoNotimAgain wrote:but bad for money managers as their share prices this year have demonstrated.

Sorry to be pedantic.....so who's "share prices" were you referring to by your earlier remark?

Matt


https://www.ft.com/content/df348647-344 ... 46cc483c46


Many of the world’s largest listed asset managers, including Invesco, Janus Henderson, Standard Life Aberdeen and Franklin Templeton, have suffered share price falls of at least 30 per cent this year, despite markets hitting new highs in many countries.

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Re: Autumn 2018 stock market drops

#176190

Postby TheMotorcycleBoy » October 25th, 2018, 12:53 pm

OhNoNotimAgain wrote:
TheMotorcycleBoy wrote:
OhNoNotimAgain wrote:but bad for money managers as their share prices this year have demonstrated.

Sorry to be pedantic.....so who's "share prices" were you referring to by your earlier remark?

Matt


https://www.ft.com/content/df348647-344 ... 46cc483c46


Many of the world’s largest listed asset managers, including Invesco, Janus Henderson, Standard Life Aberdeen and Franklin Templeton, have suffered share price falls of at least 30 per cent this year, despite markets hitting new highs in many countries.

Ah ha! I couldn't open the link - needed to subscribe etc., but I do get the gist. Was Legal and General on the list in the full FT document out of interest? We've got shares in them, but I'm not sure whether they are in exactly the same line, i.e. they are more pensions and insurance I believe.

So anyway, returning to points raised in your earlier post, are you implying that such firms are (in part) losing some of their popularity because many more private UK investors are actually trying to make their own assessments of investment instrument value, e.g. due to the internet opening up that possibility to them more and more?

Despite Mel and I only being in private investment since March this year, I am amazed by how easy it is for someone with an amount of computer skills to analyse firms. For example I can obtain annual reports and financial statements for any UK Public ltd co. with ease online. Then figures can be copy+pasted into spreadsheets and analysed. It takes me a couple of hours to set up 4 or 5 years previous years of a firms business in a sheet and make some views/judgements on their financial strengths/weaknesses. Then if needs be the PDF files can be converted text files and word counts performed i.e. counting occurances of words like "headwinds", "challenging", "covenant" etc.

Whilst I'm not saying that any of the above "makes me a better investor" :lol: far from it!, but clearly this kind of thing has only really been accessible for about the past 10-15 years or so. (I know we had the net and PCs prior, but the likes of I had very poor comms. i.e. broadband, links until, well actually quite recently).

Indeed I'm impressed by how well people have performed prior to the PC/internet revolution.....presumably people only got wind of annual reports via. the post, and had to spend hours poring over them.

Is the kind of thing that you were alluding to earlier?

Matt

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Re: Autumn 2018 stock market drops

#176194

Postby Dod101 » October 25th, 2018, 1:11 pm

I doubt very much that all private investors, or many of them, spend hours pouring over Annual Reports and analysing them. I certainly do not. Good luck to you if you do. Whether it will make you a more successful investor well all I can say is it ought to but I would not bank on it.

I try to assess the management of a company of interest and if that passes muster I may invest. Obviously I have read two or three years of Annual Reports by then and have liked what I have read, but to me culture and a strong family influence particularly in smaller companies is important.

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Re: Autumn 2018 stock market drops

#176198

Postby TheMotorcycleBoy » October 25th, 2018, 1:17 pm

Dod101 wrote:I doubt very much that all private investors, or many of them, spend hours pouring over Annual Reports and analysing them. I certainly do not. Good luck to you if you do. Whether it will make you a more successful investor well all I can say is it ought to but I would not bank on it.

I try to assess the management of a company of interest and if that passes muster I may invest. Obviously I have read two or three years of Annual Reports by then and have liked what I have read, but to me culture and a strong family influence particularly in smaller companies is important.

Dod

I know you don't Dod! But my last post was really trying to get OhNotHim to elaborate on one of his.

But regardless, the internet has opened up possibilities for private investors.....surely not? People can access information about companies so much easier online these days, e.g. than by post or reading newspapers or word of mouth which I assume was the case in the past.

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Re: Autumn 2018 stock market drops

#176204

Postby RececaDron » October 25th, 2018, 1:56 pm

Bear in mind that as a contemporary private investor performing detailed fundamental analysis of company accounts you are part of a rare breed that's becoming rarer still. Why do all that hard, pointless work when you can just buy the index, innit.


TheMotorcycleBoy wrote:Indeed I'm impressed by how well people have performed prior to the PC/internet revolution.....presumably people only got wind of annual reports via. the post, and had to spend hours poring over them.


Remember that better, more widely and easily distributed information is a double-edged sword: it helps others as much as you, inevitably improving market efficiency, reducing the scope for mispricing anomalies to arise (unless for example you move towards exploiting factors like illiquidity or time horizons that others may find it difficult to for some reason).

For UK PIs, the launch by Jim Slater & Peter Scott of Company REFS ("Really Essential Financial Statistics") in the early 1990s was a major advance - 25 years ago!

Arguably this opened up a golden window of opportunity where PIs could quickly, easily and inexpensively screen the entire market for stocks with certain characteristics. By analysing areas often overlooked by professional analysts, a relatively small number of PIs (such as me, and no doubt some other long-time investors posting here) had a great opportunity set to trawl and harvest from. A method I used combined value-based screening with simple price/sentiment analysis to find targets with asymmetric risk/reward: little downside but high short/medium-term upside, with typical holding periods of 6-18 months. It worked well and was highly lucrative for quite some time.

You'll need true greybeards to comment on earlier times, which I imagine could have been even more lucrative due to even larger pools of market inefficiency in which to fish, but requiring more effort to help identify the opportunities. I think you're reading the old value investing texts so will gain some feel for this.

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Re: Autumn 2018 stock market drops

#176212

Postby TheMotorcycleBoy » October 25th, 2018, 2:48 pm

RececaDron wrote:Bear in mind that as a contemporary private investor performing detailed fundamental analysis of company accounts you are part of a rare breed that's becoming rarer still. Why do all that hard, pointless work when you can just buy the index, innit.

Yes, I agree - I don't know the complete answer....I guess I'm considering it in part a hobby. And FWIW about 12% of our current stake ISA is in a World Equity Index Fund. We are also planning on purchasing a Bond fund, but somewhat bewildered by the choice TBH.

It's definitely very early days for us (i.e. since March 2018), we may well put more and more into funds/trusts etc. as time goes by. It's a work in progress at present and currently I find the analysis quite interesting, so I don't really see it as a chore.

TheMotorcycleBoy wrote:Remember that better, more widely and easily distributed information is a double-edged sword: it helps others as much as you,

For sure. I don't really see it a contest mind you....any more than all of us all competing over buying the same Index Funds. I view the whole escapade as probably better thing than either a 1.3-1.4% savings account, or buying a local wood which I had threatened to spend our savings on last year!!

TheMotorcycleBoy wrote:For UK PIs, the launch by Jim Slater & Peter Scott of Company REFS ("Really Essential Financial Statistics") in the early 1990s was a major advance - 25 years ago!

Arguably this opened up a golden window of opportunity where PIs could quickly, easily and inexpensively screen the entire market for stocks with certain characteristics. By analysing areas often overlooked by professional analysts, a relatively small number of PIs (such as me, and no doubt some other long-time investors posting here) had a great opportunity set to trawl and harvest from. A method I used combined value-based screening with simple price/sentiment analysis to find targets with asymmetric risk/reward: little downside but high short/medium-term upside, with typical holding periods of 6-18 months. It worked well and was highly lucrative for quite some time.

Yes that sounds good!

TheMotorcycleBoy wrote:You'll need true greybeards to comment on earlier times, which I imagine could have been even more lucrative due to even larger pools of market inefficiency in which to fish, but requiring more effort to help identify the opportunities. I think you're reading the old value investing texts so will gain some feel for this.

Yes. I guess they did not have the "advantages" of PCs and the www, but instead had more lucrative opportunities, e.g. post war booms, oil price rises, inflationary market places etc. etc.

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Re: Autumn 2018 stock market drops

#176227

Postby Dod101 » October 25th, 2018, 3:29 pm

TheMotorcycleBoy wrote:[I know you don't Dod! But my last post was really trying to get OhNotHim to elaborate on one of his.

But regardless, the internet has opened up possibilities for private investors.....surely not? People can access information about companies so much easier online these days, e.g. than by post or reading newspapers or word of mouth which I assume was the case in the past.


Sure. I am not knocking what you are doing in the least and you will end up better informed than most of us I suspect. The internet has given us all loads more opportunities there is no doubt about that and we should really take advantage of it. As a hobby well done. Whether it will make you a better investor, well who knows?

Dod

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Re: Autumn 2018 stock market drops

#176327

Postby odysseus2000 » October 26th, 2018, 12:03 am

MotorcycleBoy
Despite Mel and I only being in private investment since March this year, I am amazed by how easy it is for someone with an amount of computer skills to analyse firms. For example I can obtain annual reports and financial statements for any UK Public ltd co. with ease online. Then figures can be copy+pasted into spreadsheets and analysed. It takes me a couple of hours to set up 4 or 5 years previous years of a firms business in a sheet and make some views/judgements on their financial strengths/weaknesses. Then if needs be the PDF files can be converted text files and word counts performed i.e. counting occurances of words like "headwinds", "challenging", "covenant" etc.

Whilst I'm not saying that any of the above "makes me a better investor" :lol: far from it!, but clearly this kind of thing has only really been accessible for about the past 10-15 years or so. (I know we had the net and PCs prior, but the likes of I had very poor comms. i.e. broadband, links until, well actually quite recently).

Indeed I'm impressed by how well people have performed prior to the PC/internet revolution.....presumably people only got wind of annual reports via. the post, and had to spend hours poring over them.


You are doing exactly the sort of stuff I used to do, all the kind of things that will get you good marks in examinations etc and which will make you feel like you understand the financial world.

Maybe this will work for you, for me it was a complete failure.

My fundamental error was to believe that the methods I used in my physics degree, PhD and research would work in the world of finance. That logic and thought was all that was needed to master investing and trading as it was how I got to get my PhD and research contracts etc.

Investment and trading however are not logical pursuits and are instead disciplines of emotion, of crowd behaviour, over reaction and animal like passions. They are nothing like physics.

E.g. God or nature, choose your belief, does not suddenly decided that the inverse square law is boring and instead goes for an inverse cube or what ever as pleases and change again and again. Markets however do exactly this sort of thing. If by reading and analysing you get into your mind a set of beliefs, you are going to get murdered investing and trading.

Markets behave like crowds at a sports game, roller coasters of highs and lows although the players are constrained by the rules of the sport as to what can happen there are no rules as to how high or low the spectators can get.

The positives and virtues of a business can be loved by the market then in the next moment loathed and vice versa. None of this is ever caught in the annual reports which in the UK are only 6 monthly snap shots written to be as positive as possible and which often tell you things that are potentially useful at some time but they never tell you when.

The idea that the modern world puts everyone on a level playing field is purely academic, it does not because everything endlessly changes and what was in a report is mostly already known and if not the share price will react very quickly and then it becomes a game of sustainability or not. To keep up with things you need the daily inputs from folk who are studying price action and buying or selling as they see fit, not according to some fundamentals but according to what the price has done and what other opportunities there are and a whole host of emotional things. This is exactly what the media does not provide, they are mostly writers who can't own equities and who get paid for crafting logical stories that often are at odds with what market participants are doing.

Going back through markets to Jesse Livermore and before there have always been people who could make a lot of money while others with similar and sometimes those with more sophisticated market intelligence did not. One can see the same with Buffett and Munger, they have no special knowledge in many cases and yet are billionaires whereas most money managers even those paid millions to manage money are not.

To prosper in the market you have to have a background of knowledge but that along is insufficient, you must also have market savvy, or emotional intelligence. This can be learned, some folk have it as a gift, most can't learn it and there are a large bunch of charlatans who profess to have market skills and prosper by convincing folk to pay them money for rubbish. This applies to both fundamental and technical analysis. Then there are the con folk often found on the AIM market who make a good living from the sort of villainy that Dickens used to rail against and who yet come over has clever and sophisticated market participants.

Large amounts of money can be made in markets and life changing opportunities come by each day and yet most people fail to make money and only prosper if holding are kept for a life time and then it is the children and those who inherit who splash the money against porcelain.

imho if you want to make some serious money in the markets in a time scale that will allow you to enjoy it you need to study a lot more than accounts and you need to trash most everything you have learned from the media and classic texts. All of this is extremely hard work and very few people manage it.

Good luck!

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Re: Autumn 2018 stock market drops

#176352

Postby OhNoNotimAgain » October 26th, 2018, 9:09 am

TheMotorcycleBoy wrote:
Whilst I'm not saying that any of the above "makes me a better investor" :lol: far from it!, but clearly this kind of thing has only really been accessible for about the past 10-15 years or so. (I know we had the net and PCs prior, but the likes of I had very poor comms. i.e. broadband, links until, well actually quite recently).

Indeed I'm impressed by how well people have performed prior to the PC/internet revolution.....presumably people only got wind of annual reports via. the post, and had to spend hours poring over them.

Is the kind of thing that you were alluding to earlier?

Matt


Yes, and I used to do that sort of thing for a living and it gives you a fantastic feeling of knowledge and confidence. Unfortunately, you are not alone.

It wasn't until I left the coal face of finance and read more widely that I understood the bigger picture. Yes, some hedge funds make tons of money, but a lot have gone to jail because they traded on inside information, others failed because of too much debt or their particular strategy fell out of fashion.

I know the likes of Dod and others will disagree but in my view, only four things matter in the long term:

Compound interest
Dividends
Time
Costs

Rely on the first, maximise the second and third but minimise the fourth.

Most changes in capital values are just noise; trying to distinguish signal from noise takes a very long time, beyond the time frame of most investors so they are mostly just trading noise. Great for them, traders, brokers, PR agents, marketing companies and the press but deadly for the investor.

Do as little as possible for as long as possible.

TheMotorcycleBoy
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Re: Autumn 2018 stock market drops

#176360

Postby TheMotorcycleBoy » October 26th, 2018, 9:34 am

OhNoNotimAgain wrote:Compound interest
Dividends
Time
Costs

Rely on the first, maximise the second and third but minimise the fourth.

Most changes in capital values are just noise; trying to distinguish signal from noise takes a very long time, beyond the time frame of most investors so they are mostly just trading noise. Great for them, traders, brokers, PR agents, marketing companies and the press but deadly for the investor.

Do as little as possible for as long as possible.

Thanks for OhNoNot..!

It sounds like very good advice. This definitely seems like the big picture that is emerging in my mind. I just hope that the OP has read your recent words too!

Matt


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