Since a lot of us here have expressed interest in not starving to death in a gutter, I figured I'd start a weekly thread to discuss financial matters.
Ground Rules
- Remember that we're all just Internet randos. Don't bet your life savings on a hot tip from this thread.
- Keep culture war in the culture war thread. Yes, global events may impact our personal finances, but that does not mean we have to incessantly harp on culture war aspects here. If you are going to discuss it, please stick to the practical impacts of it on an individual level.
- Be kind. Remember that everyone here comes from different circumstances. We all have different resources available and different risk tolerances.
- Don't let the perfect be the enemy of the good. Better is better. Celebrate people when they take a step up and work to move their finances in the right direction. Don't flame out because they haven't followed what you consider the optimal path. Everybody has to start somewhere.
Jump in the discussion.
No email address required.
Notes -
Has anyone here had any success actively trading over a long period of time (at least 10-15 years) and beat the average market return of 10% to 11.5% over that time period? Do you have confidence you will continue to beat market, and how much time and effort do you spend actively trading? If you are making a living actively investing (off your own portfolio, not managing other peoples money, what was the approximate size of your portfolio where it was feasible?
If you do active trading, do you also active trade in your IRA?
My thought is that for most people, active trading is an exercise in futility, and the data seems to back it up. Nearly all retail investors that actively trade don't beat the market average (or even lose money), and even like 70-90% of professionally managed funds don't beat the S&P 500 each year. Over a longer period of time, the percentage drops even more suggesting those funds were just lucky.
Every other week I hear coworkers/friends/people in discord servers I'm in talking about stocks, but I can't help but feel like they're mostly gambling rather than having a system that actually works. Some of them have had successes beating the market but they've also been only trading for like 2 years. I'm always wondering if it's like a gambler bragging about his wins but never sharing his losses (but at least in the stock market the expected returns are positive). Comparison is the thief of joy as the sayings goes so I guess it really doesn't matter how other's are doing on their finances as long as you personally are doing okay, but every once in a while I can't help but feel like maybe I ought to take some time to look more into individual stocks and see if I could do better. But at the same time, for someone in my age bracket I'm doing fine, so maybe I don't need to try to do better in this area, and I can put my mental effort towards other things.
Personally I have about 6% of my portfolio in individual stocks, 1% in crypto and the rest in various index funds. I'm thinking of just selling all the individual stocks and then not having to worry about my stocks ever again, the only reason I haven't sold them is because a good chunk of them are in SAAS and security tech companies who's valuation is lower because of the AI boom, and I'm hoping they recover since my belief is that AI has not yet provided meaningful advantages in those areas.
You need to learn to read charts, as well as accept that timing is possible + essential. If you're not at least willing to invest in some books and a TradingView subscription (or similar), you're not being serious about active investing.
Nobody would accept the possibility of performing surgery or any other skilled work without serious training, but people seem to expect to be able to do well in the markets without educating themselves and obtaining the tools.
If you want above average results, put in above average hours and build your own skills. Most of the information you need is either publicly available or available through relatively low cost books and services.
Do you engage in active trading, and if so have you consistently beat market average returns over a long period of time? How long have you been profitable?
If you do, how much time did you invest in learning before the effort was financially worth it? How much time do you spend now? At what size of your portfolio did it become an activity that became worth spending your time on (if we exclude it being an activity you do as a hobby).
Yes, but we can see clear evidence that people do put in the effort and become actual doctors and surgeons. I haven't encountered in my personal life anyone that day trades for a living. The previous VP of tech at my company did day trade, but considering he was still working as the VP of tech I get the feeling it was more of a hobby for him than anything else. Amongst the people who that maintain an online presence related to some form of active trade I found their success dubious or shady (often their online presence is a funnel to some sort of course which is their actual wealth generator). Cameron Ross is a name that gets thrown around as someone who successfully day traded but he engages in very risky trades and I haven't found evidence of anyone being able to replicate his success after taking his courses. On the contrary he had to settle with the FTC after they got sued for misleading his students about the success of following his courses.
Of course since trading is something so easy to get into the failure rates are highly inflated. I'm willing to accept that at certain markets and with enough retail investors playing the field you could get some sort of advantage by being more intelligent and disciplined, and that there could be retail investors with strategies that only work at a small scale that allow them to making a living off of trading. I'm looking for some actual stats on success rates though since there are plenty of other ventures, careers, side hustles etc that have more concrete evidence of success for a given level of effort. Some people have told me it takes on average 2 years before day trading becomes profitable but they didn't provide me with any evidence and the fact that they weren't day trading full time doesn't instill much confidence in that number.
Since we have this weekly thread now and the Motte has a lot intelligent autists I figured I might be able to get some actual perspectives from successful active traders (if there are any here).
Just saying put in more effort if you want to get good at something doesn't mean much, that's just obvious. Becoming a surgeon takes 13 to 15 years. A lawyer takes 7 years. You can land an entry level software engineer role if you dedicate 6-24 months of intense study. What's the average effort threshold for active trading, to say, beat the minimum wage if you had a portfolio of 1 million dollars compared to just passive investing? Last thing I want to do is spend 1-2 years on something that won't yield good results.
I'm still early in the journey. I started dipping my toes into investing only 2 years ago. I've done okay so far.
2 years of learning is on the short side. Many of the best traders in history spent 4-5 years or more on making mistakes before becoming consistently profitable.
If you want "proof" that great traders exist, or inspiring stories, you could start with reading John Boik's How Legendary Traders Made Millions.
After that you can read other accounts by some of the names featured in it. Darvas, Livermore, etc.
I wouldn't conflate active investing with day trading.
There are no exact stats, but approximate numbers I've seen a few times go something like this: 30 percent are consistent losers. Around 60 percent make a lot and lose a lot, riding the rollercoaster up and down. 10 percent of active investors are consistent winners. They make a lot of money. If you want to be one of them, do what 90 percent are unwilling to do. Do your homework. Combat your fears, doubts, defeatism, laziness.
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