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Investing plan B

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    Investing plan B

    Originally posted by GJABS View Post
    Now that I am not working, and have some savings, I am going to work on a plan B - which is to download a list of fundamental data (balance sheets, profit and loss statements) from 4000 US and UK stocks from my stockbroker's API, load these into a SQL database, and then apply a number of investment rules derived from the best investment books you can buy (such as "The Intelligent investor" by Benjamin Graham (who was Warren Buffet's mentor) encapsulated into SQL statements, to generate a list of theoretical fair market prices for these stocks that can be compared with their actual prices to generate a buy/sell/ignore recommendation.
    The trouble is that I am competing with thousands of the best brains on Wall Street trying to do the same thing, and the possibility of my getting it wrong as a result is substantial.

    Thanks for reading.
    So I've been doing this for years. So some facts; you can't make more than the market average, you just can't. Everything is priced more or less "at value" the market price of any asset is the result of a gargantuan computer, i.e. thousands of traders all using their own algos. Algos are only useful for market traders trying to get the best price when trading huge volumes to get efficient prices not for retail investors.

    If you are going to invest you may as well go to wikpedia find 10 stocks in FTSE do some basic analysis and buy them. Even better samples from the major indices worldwide. Over the last 10 years you could have got 8% per year (divis plus capital appreciation). Your rate of return buying your own stocks is better than buying funds by something like 2% if you know what you're doing.

    Don't make it your plan B, but there is no harm in learning how to invest, but it does take a lot of knowledge, I can now "hoover up" on the markets but I still don't do any better than the average.

    If you are beginner always buy blue chip, steer clear of small caps, I've lost count of the number of small/medium caps I bought that are now worthless, blue chips rarely become worthless (though they do), and always be in a position to double your position after a crash.

    Good luck
    I'm alright Jack

    #2
    Originally posted by BlasterBates View Post
    So I've been doing this for years. So some facts; you can't make more than the market average, you just can't. Everything is priced more or less "at value" the market price of any asset is the result of a gargantuan computer, i.e. thousands of traders all using their own algos. Algos are only useful for market traders trying to get the best price when trading huge volumes to get efficient prices not for retail investors.
    But there are a fair number of idiots in the markets too, and naive, greedy, and fearful investors - not all market participants are professional or rational. My calculation is that you "only" need to be better than the money-weighted average of the other market participants in order to beat the market. Whether that is something I can achieve through coding I don't know yet, but it interests me, and I am curious to find out.

    Originally posted by BlasterBates View Post

    If you are beginner always buy blue chip, steer clear of small caps, I've lost count of the number of small/medium caps I bought that are now worthless, blue chips rarely become worthless (though they do), and always be in a position to double your position after a crash.

    Good luck
    That's interesting, as the book I'm reading on the subject says the same thing - stick to large cap stocks, and ignore the medium and smaller ones.

    Most of my money is in the FTSE100 at the moment, in cheap index trackers, so I'm not (yet) taking too many risks

    Comment


      #3
      Separated out from https://www.contractoruk.com/forums/...er-myself.html, as going a bit off-topic.
      Down with racism. Long live miscegenation!

      Comment


        #4
        So some facts; you can't make more than the market average, you just can't. Everything is priced more or less "at value" the market price of any asset is the result of a gargantuan computer, i.e. thousands of traders all using their own algos.
        Spot on. I built up a portfolio (technically 4 portfolios, a SIPP and ISA each for myself and my wife) using the principles of Long Term Buy-and-Hold and High Yield. It is fundamentally 'no-tinker' as attempting to second-guess the market is not possible for the likes of us. (I recommend a read of Flash Boys by Michael Lewis as a readable account of the tools available to market traders and their 'dark pools'.)

        I've done well enough to retire in my mid-fifties, with help from defined benefit pensions acquired through employment in the eighties and nineties. If I were starting now I would not try to pick individual stocks, (thanks Connect Group! ) but just chuck a regular sum into an index tracker plus a couple of other funds for income and growth. This is the regime I've set up for my son, who is just starting his career. Myself I am investing any spare dividend income now into a low cost FTSE tracker plus FUQUIT for exposure to global equities and Regional REIT for a relatively stable (I hope!) circa 8% income.

        You can't do too much research. The Intelligent Investor is indeed a classic plus Tim Hale's Smarter Investing : Simpler Decisions for Better Results gives basically the same advice from a UK perspective. A Random Walk Down Wall Street by Burton G. Malkiel is a must read, I enjoyed Alice Schroeder's biography of Warren Buffet, Snowball and there is much to be learned from Buffet's collected letters to his Berkshire Hathaway shareholders.

        Plus there's a raft of blogs written by people documenting their pursuit of FIRE (Financial Independence, Retire Early), though some have to be taken with a pinch of salt, some are just 'life coaches' flogging their services, and some actually monetise their blogs to generate income (e.g. Mr Money Moustache, $400K / year, apparently). Check out Retirement Investing Today or Quietly Saving for starters.

        Good luck!
        My subconscious is annoying. It's got a mind of its own.

        Comment


          #5
          Agree with all the posts here. If you’re going to put any effort into this, don’t put that effort into picking stocks, rather in choosing a platform with low fees for your type of investing and in selecting index trackers. Contribute regularly and also dump in as much as you can when the markets crash occasionally (you can’t time the markets, hence regular contributions, but you can exploit downturns). Day trading against professionals is a total waste of time, and the fees will hammer you over time.

          Comment


            #6
            Oh, and I have nothing against stock picking for pure entertainment, but don’t confuse it with investing (i.e. treat it like gambling).

            Comment


              #7
              Beating the market (index) is not that difficult. (Hint: premier anomaly)

              The challenge is having the discipline to stick with such a strategy, month in month out for years, come what may.

              The equity curve is smoother with funds (OEICs, ITs, ETFs) than individual stocks.

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