Investing tools, infomercial deals ?????
Hudson Valley Carpenter
| Posted in Business on
There are lots of informercials on TV about investing, mostly late at night, touting their method of making money in the stock market. I’ve yet to meet anyone who has bought into one of these deals so I’m curious if any BTers have stories to tell.
Replies
Bottomline, they make more money selling this their "methods" that they would running their "strategies."
OTOH, they are describing existing methods and strategies that have been successfully used by "some" in the past. What they are leaving out is the years of experience gained by the errors we all make.
Bottomline, they make more money selling this their "methods" that they would running their "strategies."
That's the little deception about their sales pitch that always puts an ironic smile on my face.
OTOH, they are describing existing methods and strategies that have been successfully used by "some" in the past.
So, as someone with no experience in the stock market other than mutual funds, how do I acquire the knowledge they're packaging and selling as their own. Do you have any books, authors or web sites to suggest?
I had a one month free membership to one of those and found that they had a system set up to do pretty much what I was already doing myself with free tools all over the internet, stock screens etc.
The thing they do is automate more of it for you, but the problem is that appeals to those who are either too lazy or too ignorant to do their own in depth research. Anybody who fits that description should not be managing their own investments.
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I had a one month free membership to one of those and found that they had a system set up to do pretty much what I was already doing myself with free tools all over the internet, stock screens etc.
Would you care to share any of that information? I'd like to get some personal recommendations from BTers whose judgement I trust. Even if it only saves me a few hours of searching and reading, it'll still be appreciated.
The thing they do is automate more of it for you, but the problem is that appeals to those who are either too lazy or too ignorant to do their own in depth research. Anybody who fits that description should not be managing their own investments.
Last year I went to a free evening "seminar"-sales pitch for one of the 4X trading software deals, held in a conference room of a big name hotel.
The software they were selling was supposed to be able to analyze trends, allowing anyone not colorblind to invest with confidence, using their green and red arrows.
When it came time for question from the audience, I asked, "If we're winning, who's losing"?
Knowing that currencies are traded by professionals didn't make me confident that any software could get much of an edge in that market, not when said software was readily available to everyone.
The answer to my question was that no one has to lose money in the currency market, in order for someone else to profit. Yeah, right.
My second question was, "How long do you expect this software to be an effective tool"? The answer was "four or five years but by then we'll have something much better to replace it". I note here that I haven't seen an infomercial for any of those 4X deals in about six months. The "seminar" I attended was last summer.
My skepticism makes me suspect that all or most of these schemes are, as you suggest, aimed at people who are too ignorant or lazy to do their own research. In fact I've yet to watch more than a few minutes of any of the infomercials due to immediate boredom from the condecending nature of the presentation.
Yet I still hold out hope that there's some way I can make a decent profit in the stock market, investing on my own according to sound strategies.
As a resourceful person with some skills and knowledge related to residential construction and real estate, I'm not depending on any thing outside myself for my income but I'd still like to diversify by learning how experienced investors make their investment capital work well.
Edited 6/12/2008 8:47 pm by Hudson Valley Carpenter
they were right about the currency market, to a point. Someone doesn't have to lose, but sometimes they do. It works simular to stock market only very unregulated. I had thought about it at one time, but didn't have the time, now I have the timebut not the money.
"Would you care to share any of that information? I'd like to get some personal recommendations from BTers whose judgment I trust. Even if it only saves me a few hours of searching and reading, it'll still be appreciated. "This can be a good thread, tho I am not real sure exactly where to start because of the years it took to evolve my thinking and sources. I even look forward to hearing criticism and evaluation from the pros like Scarecrow and Peteschlagor.I hear the wife rattling the dinner dishes upstairs tho, so I will return to the thread later after I ponder this awhile, then collect the links to websites I frequent or e-letters I get for free.
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You're right, Paul,
It could be very useful to have this topic discussed candidly on BT, for all of those tradespeople like me, who've lived hand to mouth for many years or invested in more tangible things, like real property, with their discretionary income.
I'm about to sell a home I've been working on and putting money into for some time. That's going to put a fairly large amount of investment capital in my hands.
It's not uncommon for this kind of thing to happen, at least once or twice, for lots of working people who have no practical knowledge of or familiarity with investing.
When it does happen, sometimes unexpectedly, we're stuck with the fearsome task of guarding our new wealth instead of having a solid investment plan to follow.
When we look for help from professional brokers they often seem like agreeable sharks, rather than the kind of helpful friends we find on BT.
So please, do get into this topic as time permits. I'd be very happy to read a few paragraphs a day, from those who have been studying the subject and can offer me and others some nuts and bolts advice, along with tips on current investment possibilities.
Edited 6/12/2008 8:43 pm by Hudson Valley Carpenter
The general rule is as soon as a system works and is known, it ceases to work.If they can make ####% a year like they claim, why are they running around to hotels doing "seminars" and charging $400 a head? They would be better off plying their system and relying on compound gains.A sucker and his money are soon parted.Or as stated above:
Bottomline, they make more money selling this their "methods" that they would running their "strategies."
OK, few paragraphs a day is easier to tackle.
I just got home from installing some hardware in the top end of a greenhouse all day.
After it had cooled off some while I was packing tools to leave, the thermostat at shoulder level was reading 88°. I am sure it was over a hundred at the top where I was much of the day so I am pretty dry right now.First thing to make up your mind about is whether you want to be an investor or a trader. Those systems you mention are mostly for traders. Being a trader can involve a lot of different strategies and means a significant amount of time daily spent watching and studying. It also CAN mean taking higher risks.I probably have 60% of mine in a diversified protfolio that I rarely touch other than to re-balance, but the rest gets moved much more often in active trades to increase my gains. Most of the advice I read here and there says to invest 90-95% in a well diversified portfolio constructed with your temperment ( tolerance for risk) and age in mind, and then use that 5-10% "play money" to dabble in trading the riskier fringes.
I have a good tolerance for risk and am confident in my own instincts, and I am old enough that I need to make up for lost time.so after you decide whether you are an invstor or a teader, then you need to study different strategies.But I think your fist Q was based on what tools are available for free on the internet.I'll be back to that with a list soon in another reply.BTW, the Fools have free emails that have a lot of ideas.
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so after you decide whether you are an invstor or a teader, then you need to study different strategies.
That's a very good question, one that will require a little thinking. I may as well put my thoughts and plans in print here, to keep the dialog real and useful to others as well. For purposes of simplicity, I'll write in the first person rather than include my wife.
I have three building lots which constitute the foundation of my old, conservative investment strategy. Their value is about one third of what I will have as investment capital after this house is sold and all bills are settled. Another third will be budgeted for building a new home.
That new home is meant to be sold in a few years as part of my main retirement income strategy; using my knowledge and skills to make the most of the RE market in my area as well as the capital gains exclusion on the sale of primary residences.
So that leaves about one third of my net worth in a liquid state. A portion of that, about one third, must be kept in a conservative, easily reclaimed condition. The remainder is for what you've defined as "active trading".
My backstop will be my home equity. There will be no mortgage on the new house because I'm basically retired from contracting. That could change but it's not what I've been working toward.
The home equity could be put to use as the basis for a construction loan/mortgage on the next home, to be paid off after the next home is completed and first new home is sold.
But I think your first Q was based on what tools are available for free on the internet.
That was the first question but the topic has now expanded well beyond it. I'll be very happy to learn how such tools may fit into your work as an investor/trader but please don't consider them to be the main focus of this thread anymore.
BTW, the Fools have free emails that have a lot of ideas.
I've been receiving their Emails on a regular basis but haven't made a habit of reading them as yet. If you believe them to worth the time, I'll make that part of my regular reading on this subject.
We waz typing at the same time.
A comment about the "Fool" and other popular "services."
At the foundation of how these things work is supply and demand. There's a million guys like you right now looking for a great idea to place their bets. They got no time for research, study, or discussion. They just want to place their markers.
Guess where they place them? Where they hear their daily news. "OOOww. The Fool has a great idea today, I'll pick up a couple thousand shares for a week or so."
A million guys playing the same game. And Piffin sits in the background noticing the unsubstantiated price rise, and sells it short the next day.
Guess who won?
You must get to know economics, charts, trading patterns, and have access to widespread news sources to be on the right side of these moves.
Don't get me wrong. There are simply phenominal returns to be had when making good trades. Individual securities offer the highest. It's how some people get rich. Believe me, I know. There's no feeling like entering 6 to 7 figure gains on your schedule D. And paying only 15% in taxes on it!
They also offer the highest losses. And you can only write off $3K a year.
Know your game. Know it well.
WOW! Both excellent posts with some of the best advice I've ever received on this topic. It's going to take me a day or more to digest all you've written but I'll be back at ya with some thoughts and questions soon.
Thanks for the frank discussion and for explaining how you've become so knowledgeable. I wasn't expecting to find your level of experience on BT so I'm certainly glad that I asked the first question.
And are you REALLY interested in beginning a new hobby?
As you've described it, probably not.
I didn't plan the kind of retirement I've described...building custom homes to live in, then sell, at my own pace...with the aim of spending much of my free time in educating myself on a subject like investing.
I have a wide variety of out door hobbies to which I'm already devoted and two or three more of the inside type that I'm prepared to begin enjoying soon. Then there's my plan for several months of traveling for pleasure each year.
To be frank, according to your learning calendar I'm beginning the acquisition of knowledge and experience about fifteen-twenty years too late.
I accept that limitation as inevitable for anyone who does hard physical work for a living every day. I've usually been to tired in the evening for anything more than light reading so, even had I'd been motivated to study this subject earlier in life, it's not likely that I'd have gotten very far with it.
So it looks like I'll stick with what little I know about mutual funds and try to fine tune my holdings to provide what I need to persue those hobbies of mine which relate directly to energy prices.
Since your background as described is in homebuilding and real estate, some of the foundation of your investments should be a percentage given to sticking with what you know. Real estate is not liquid and is currently depressed in some places, but can be a good portion.Also in comparison to that part of your life as you think about trading vs investing - a trader is a house flipper, while an investor lives in the house, improving it and enjoying the dividends ( use of it) while watching it rise in value until the day he finally does sell.For tools, I use the charts and fundamental information available through my brokerage, Chas Schwabb and others as well. http://clearstation.etrade.com/redge.html
Clearstation has some fairly decent charts that load quickly for my dialup, but are a 20 minute delay. They have the fundamentals too, but seems behind current sometimes.http://moneycentral.msn.com/home.asp
MSM has a lot more background to see easily
Click the investing tab and under stocks see the stock screener.FORBES and SMART MONEY have screeners as well.Getting away from free, I have a subscription to the online Investor's Business Daily and take two newsletters, one from Morningstar and one from the Oxford Club.my general take is that hot money moves thru sectors of the market and of the world. The trick is to anticipate where it is going next.For a long while it was in housing here and before that in Tech stocks. needless to say, energy is hot right now. China is growing like crazy and demanding more and more of the world's resources, driving up the prices of almost all commodities.I don't know or understand commodities markets, but I gain from that trend ( oner rule of investing is "Don't fight the trend" or "The trend is your friend") by investing in the mining and materials companies that supply the needs and profit from it. Also the companies that make the equipment used to extract all the stuff from mother earth, and the ways of shipping stuff, like ships and trains.http://www.stockpickr.com/members/problog/
Stockpicker is a site that has some interesting ways of finding ideas, some similar to the Fools. It shows you portfolios of some succesful traders and investors. How current, I don't know.One of the best ways I learn about the market and market psychology is to spend time studying. I look at my portfolio regularly. When a stock of mine makes a big move, or seems to develope a trend in price movement for several days, I want to know WHY. I study all the recent news for that stock. It is always a learning experience.
Welcome to the Taunton University of Knowledge FHB Campus at Breaktime. where ... Excellence is its own reward!
i agree i too am drinking the pete koolaid, your post was also very good. i like what you said about how you analyze your portfolio.
and what pete said about knowing the game
what about those simulated stock trader games, where you go and pick a few, and then watch and study? you don't invest real money just a learning tool. i have heard about it in general terms like i describe, does anybody know any specifics about that?
I don't know about those games. depends how seriously you do it I guess. I mean I learn with real money. The way my brain is wired, I don't get serious with games - think of it as a game and get careless. I don't play games to win, just for fun. Pete said something about brokers learning with other people's money. I'm willing to bet that given the same training he had, I would learn faster with my own money than with somebody elses! That is because it is a piece of me at stake
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Thanks for the candid response. It's very helpful to learn from several seasoned people.
Whether it's carpentry or the stock market, anyone who has approached a subject with real interest and stuck around for a few years will have a different set of experiences from which to draw insights.
I'm going to peruse the websites you linked, then see if I can come back with some intelligent questions for you.
Meanwhile, to keep the thread alive, here is a bit on a part of my strategy.in part, this comes from the Oxford Club.They teach that if you handle a portfolio of twenty stocks, you split your dollars into twenty positions, then you use stop loss orders set about 25% below your4 purchase price.
A stop order means that your brokerage should automatically sell that stock if the price drops to that price.Theoretically, that means your portfolio would not be likely to lose more than one percent in a day - each stock is 5% of the total and with a 25% stop, the lost money on a diving stock price is 1% of the total portfolio. A diversified selection of quality stocks is less likely to see too many of its stocks drop 25% in a day or a week.In practice, this is a fairly safe way of protecting your money, but not quite as safe as it might seem. For one thing a stop loss order does not always execute on the money. When a price is doing a nose dive the price can be falling too fast for the broker to find a buyer at the price you name in your stop order. Then there are trading costs for the broker's fees also.And some brokerages only hold such orders for a limited period of time, then it expires. you can forget to renew. You should update stops regularly anyways. As the price of a stock goes up, you want to safegaurd your gains to be able to lock them in too.This strategy is a decent way to protect your money especially when you cannot watch the market every day. I saw a couple pretty heavy losses this winter when traveling and out of contact. This was on companies that I thought were too safe as they were without needing stops. But that loss was a lesson in itself, underlining the fact that a great company can see market psychology punish the stock price, even while the company is making money hand over fist.Back to the 20 positions thing. let's say you only have ten grand to invest, you do not want 20 positions. That is spreading the money out too thin and you can get some decent diversification with five or so positions, if carefully chosen.
By spreading too thin, I mean that you want to consider trading costs.
I.E. Say a trade will cost you ten bucks to buy and ten bucks to sell. If you have only a thousand bucks on a position, that means your trading costs are 2% for the broker, so you need to be pretty sure you are going top gain well more than 2% before entering that position.
But if you can get into the same stock with $2000 for the same brokerage fees, your cost is 1% - half as much!Now all of mine is in IRAs but if this is a taxable account, you also have some more record-keeping and taxes to pay on the gains to consider.OK, Now imagine that you have chosen yourself 5-10 really good stock positions that you are comfortable with. As you follow and study those companies, you get to know them and how the stock prices for them move. Some folks play the swings in stock prices. Suppose you started to recognize that one of your companies always seems to hit it's annual high price in april or may, and then go down until november. so you might consider cutting a position in half in may and then doubling up in november to take advantage of the seasonal swing. ( MON is one such. They sell the seed through winter via advance orders and the n most seed is already in the ground by summer)
http://clearstation.etrade.com/cgi-bin/details?Symbol=MON&csize=10&PositionId=3203092&Event=peek&period=d
There are lots of other ways or reading and anticipating prices swings as well.It takes work and increases your risk to play it this way though. Probably nothing for a novice to worry about yet.skipping stock selection for the most part, but getting more for your buck than the average mutual fund can be done with ETFs. There are plenty of current articles out there explaining what ETFs are. If you are confident that a certain country will see large gains ahead, there are country ETFs. For instance EWZ for Brazil, or EWC for Canada, both of which are doing well because of exporting resources to China.
http://clearstation.etrade.com/cgi-bin/details?Symbol=EWZ&csize=10&PositionId=4943892&Event=peek&period=d
http://clearstation.etrade.com/cgi-bin/details?Symbol=EWC&csize=10&PositionId=8716308&Event=peek&period=dsuppose you think that agriculture is a good sector to invest in because the world's population is growing and most of them have increasing standards of living and incomes. They are all wanting to eat better...So do you take a position in ADM farming and foodstuffs?
Or in POT fertilizers?
Or in john deere tractors?
You have a good theory on the sector but don't know yet how to analyse the individual stocks or are afraid that the one you like may be already overpriced and ready to take a dive for awhile.So buy the ETF, MOO to get an indexed basket of companies that are spread across that sector
http://moneycentral.msn.com/investor/partsub/funds/holdings.asp?ETF=true&Symbol=MOOI guess that's enough for now.
Like the old lady gossiping over the fence with her neighbor, "I have to go now Mildred, I've already told you more than I know.";)In other words, take all investment advice with a grain of salt and do your own research, 'cause it is your own money.
Welcome to the Taunton University of Knowledge FHB Campus at Breaktime. where ... Excellence is its own reward!
thanks piffin
Paul,
Thanks for taking the time to explain your methods and their supporting concepts. I read and re-read it all carefully and also spent some time on the sites you linked.
The impression I'm left with, a very sound one, is that I'm not nearly ready to do my own investing in the stock market. I'd be better off handicapping thoroughbreds than picking stocks.
This is good to learn, in exactly this way, from friends who have no reason to make the business of investing/trading seem simpler than it really is.
If I were more scholarly by nature, I might find this subject interesting enough to dig into, but that's not my personality...at all.
I enjoy using my gray matter to solve physical problems creatively. I also get high on Eastern Philosophy, as a student and practitioner.
So I believe I'll stick with what I know and what's easy to understand in the world of investing.
And, if the need arises, I can hand pick a job or two, in order to keep playing with my more expensive toys. That fits me much better than risking my hard earned savings on something about which I know too little.
Given your personal temperment in regards to this then, if you do have investment money, the way to handle it is to look around and find a good experienced CFA to handle your money - one who understands your goals and philosophy.
Welcome to the Taunton University of Knowledge FHB Campus at Breaktime. where ... Excellence is its own reward!
Temperment isn't the word I'd choose...unless I was talking about you. ;-)
Yes, it's temperment and it's also about time. Once I get back to NY State, my time will be taken up with many more activities than I've had to sustain my interest, here in L.A.
I just won't have the time or energy to take classes in economics, etc., or follow any other long course of formal study, in order to become qualified to compete on a level field with professional investors or traders...some years down the road.
In the past I've found that mutual funds are a good fit for me, as they are for many people who have no real understanding of what drives the stock market and/or how to take advantage of that while also safe guarding their future interests.
But wait! What light through yon window breaks? I still have one more web site, suggested by Pete, to study and digest before closing the door on this subject, so we'll see what comes of that.
What's a CFA? And why do I feel that I'm leaving the door open for some great one liners?
FA must be financial advisor, right? So the C is for certified or certifiable?
I've spoken with several "financial advisors" and stock brokers in the past. Not one of them has inspired any confidence in me.
That's why I decided to try these questions here.
So far I've been very impressed by what you two have posted here but I'm also perplexed about what kind of education it takes to be a succesful investor/trader.
Taking the safer path, particularly at my age, seem wiser than poking my stick in a hornet's nest so I'm happy to return to the mutual fund menu and select a number of them as a relatively safe and progressive means to my goals.
"but I'm also perplexed about what kind of education it takes to be a succesful investor/trader"
The best performers I've ever seen in my 20 years of running money were older people with a good sense about value and human behavior. Little or no book learning.
They focus. On one stock or one industry they know well. They understand that stock's or industry's characteristics and trends. They have learned how people react to that stock or industry. Then, it's like shooting fish in a barrel.
It's pattern recognition. You see many patterns around you in your work and life. You have learned how to deal with a pattern that you have studied.
Once you understand the patterns behind a certain stock, industry or commodity, you've earned your ticket.
You don't HAVE to take the classes. But it's a cheep way to pick up how to recognize the patterns.
Thanks for the tutorial on the significance of pattern recognition.
I've made that the keystone of my real estate investments, buying building lots in specific locations which have advantages that are easy to recognize as important, based on previous observations of growth over ten years or more.
I'm happy to say that all three of my lots are now in high demand and will make wonderful places upon which to build profitable new homes.
I'll keep what you've said in mind as I read and contemplate the information on that web site you linked for me.
Edited 6/17/2008 12:11 pm by Hudson Valley Carpenter
Let's give you an example. Maybe some could call it a bone.
GE.
Almost the biggest company in the US, let alone the world. Has a triple A credit rating. The best. Widely diversified company, even internationally, with perhaps the most admired management on the planet. Heavy into energy and alternatives
That gets rid of any concern about the underlying fundamentals of the company.
But it's trading at $29 a share. Less than half of what it hit back in double ought. 30% less than it's high within the last 12 months. Pays a dividend of 4.3%. And that dividend gets increased EVERY year.
Could it go lower? Heck yes. What's the odds of it being lower in the time frame you have targeted for the use of this money? What's the odds of it going higher? What does that record of annual dividend increases do to help the stock keep it's value?
But why's it down? Looking at the Standard & Poor's consensus analyst estimates and recent earnings reports, I can quickly see earnings has been on the low side of expectations and future estimates for later this year have been trimmed from $2.50 a share to being flat at $2.20. That occured over the last 7 to 8 months. Those same analysts (16 of them) give a spread of opinions from buy to hold. 4 buy. 4 buy/hold. 8 hold. Sorta pessimestic for this company. (Frankly, I have found the best pricing on stocks to be when the analysts are pessimestic. Just be sure there's a light at the end of the tunnel.)
I also see those same analysts expect earnings to increase anywhere from 7 to 17% into 2009.
So's if your bet is the US will pull out of it's Bush recession with whomever wins (how could it be worse?), it's quite likely GE will push those earnings estimates higher, and thus the stock's price.
(It's important to know why you're making an investment. This is far more than placing a chip. The blue print above is our investment premise for this stock/situation.)
OTOH, if whomever wins in November does make things worse, that dividend is paying a lot more than a money market, CD, or savings account. So the downside is limited (unless he really screws up).
Could it eventually make a new high? That would be more than a double. Figger in the dividend and it's increases. Maybe even have your broker get the dividends reinvested.
Strategy wise, this is how you handle the buy(s):
Determine how much you're gonna invest in this stock. (Say, 30K.) Take one third of that amount (10K) and buy now. Wait and watch a few months. The election is still 4 to 5 months away. If it goes lower after a few months, buy another 1/3 worth. (Remember that it will go lower if more bad economic news comes out.) You only do that once, so make note and do it right. You do not ever buy more if it stays down. You wait until it goes up. Up above your original buy price. Then re-ascertain the stock. Is your investment premise (of the US economy improving after the election) still valid? If not, sell and take that small profit. If yes, buy your last third. And hold while your premise unfolds.
This doesn't require watching CNBC constantly or being freaked. You're earning more in dividends than the bank would pay - from a triple A rated company. Sleep. And go about your daily routine without worry.
Then simply look at the stock's price while you're having your Sunday morning cup of coffee. And don't worry. This stock is a proxy for our whole country and way of life. If that goes, you won't need the money anyway.
Now I'm using GE because it's at an annual low. Otherwise, Exxon could be used, but it's at it's high. Both stocks are where they are because of investor psychology. We're playing the pattern of 'Buy low and sell high.' That only happens when most people are displaying the opposite opinions.
A real trader would use the rankings and relative strength found in Investors Business Daily to better time his moves. He may save or gain a point here or there. But he works for that extra point or so.
Excellent example and a very clear analysis.
I watched two interviews of the former CEO of GE, Jack Welch, a few years ago, the man who re-built that company into an amazing performer. Very impressive, if ruthless approach which has clearly paid off well for those who got with the program.
That's the kind of investment which would be very attractive to me, for all the reasons you've outlined.
Thanks for the "bone". It gives me another solid reason to get this house on the market ASAP.
Technically, CFA's do research. However, most portfolio managers will have the CFA designation in addition to other credientials.
What you are referring to is professional money managers. Also known as portfolio managers. Similar to guys running mutual funds, but on a smaller scale. The primary credential these guys need is the series 65 or 66 license plus registering (filling out a form) with the SEC with the ADV forms, part I and part II. These guys do show up in the yellow pages. They will be called, "Registered Investment Advisors." (Note, this is not a miracle designation. Many, many imcompetents or beginners can easily gain this designation. The buyer of these services are advised to dig deep in their research. Read and compare ADV's, especially, part II.)
ANY manager of assets MUST provide these documents when he has discretionary control over how the assets are invested. (I should clarify, there are exceptions to the requirement, such as if you are a doctor or an engineer with less than 10 paying clients.)
But the bottomline issue when dealing with these guys is their track record and supervision. Track records can be "manipulated." Supervision means who's making sure they are following the complex system of rules governing record keeping, asset integrity, and much more. As a direct regular client, you have no idea whether they are or not. You have no idea what the rules are.
Professional money managers can be hired directly or thru an intermediary, such as your regular broker. The advantage of going thru your broker (besides knowing you're doing your best to put your broker's kid thru college) is the standardized reporting and supervision. First, any manager working with that broker will be scrutinized by the broker's back office to be sure the rules are being and have been followed. Second, the manager will be regularly monitored and visited. And third, performance will be audited as well as a second party performing an independent report.
Going thru a bigger firm will get you access to the top performing managers in the world. And you'll pay dearly for the privilege. And will need 7 figures to even apply. Some require 8 or 9.
But for the vast majority of us that qualify for the usually available managers, performance can be extraordinary. 'Can' is the operative word. I've seen some do moonshots, only to crater the following years. I watched a number navigate thru the 2000 - 02 crash. Frankly, I found mutual funds did a better job at protecting value than most of these guys. Listening to their commentary during the time lead me to believe they were no better than the rest of us, in denial like deer in the headlights.
Therefore, I moved my people into mutual funds and/or built our own portfolios at a lower cost. Took more of my time, which my boss didn't like, but what the hey?
But the mechanicals of these guys:
They build a portfolio of however many stocks they feel comfortable managing. Some are more concentrated with 20 or fewer, others load up with 50, 75 or more different securities. Every client gets the same portfolio (unless he has employed a specific investment restriction in his investment policy - which you don't get with regular brokers, normally). The difference being how many shares. If the manager is running a $100,000 portfolio for you (commonly the minimum) and his portfolio is composed of 50 stocks, you'll get 2K worth of each. A million dollar portfolio will have 20K of each. The stocks are the same in either case.
The investment policy determines what type of manager one uses. Just like mutual funds, there are different types of managers. Oh, a firm (guy) may say he has a smalll cap, large cap, and international portfolios, but that's all he has. And he may only have one of those worthwhile. Managers need to be studied and monitored to be sure they keep in line with what the client needs. These guys are good at using the business slang to gloss over funny numbers. Someone needs to be in place to doubt them.
My personal experience leads me to believe that some investors using these managers have a special need to brag about their investments. They'll use the term, "my money manager" or "my portfolio manager" frequently when talking money. This separates them from the rest and feeds their egos.
On the other hand, when your investable assets exceed $5MM, the economies of scale seen with this style become to make sense. The internal fees can become lower than most mutual funds. The ability to have selective tax losses or gains realized at certain times is not seen in mutual funds. Swapping a bad manager for a new one in the available universe is commonly done without cost. One can move about within a mutual fund's family, but there's even more freedom of movement within a good firm's universe of managers.
And that investment policy. That can be something special in bad times. Should the manager fail to respect it and you lose, you have a pretty big gun at the arbitration hearing.
But one can easily become forgotten by his broker when involved with these guys. Don't let that happen. This system pays the brokers more than any other. Therefore, one deserves better attention when playing this game.
I think you meant CFP?? CFAs (chartered financial analysts) are almost all employed by money managers and mutual funds...their training is specific to analytics and technical data used in the "buy" side of the market...more institutional. CFPs on the other hand are more geared to individuals on the "sell" side. You may have indeed meant to say CFA, but there are few if any doing what this thread has been about: namely provided advice and investing for individuals.
Having been a money manager/broker for 23 years + , I think Pete's advice is well taken: the comments about experience and understanding how the markets work. It is about numbers AND emotions. Engineers and doctors and attorneys rarely get the emotional part of it. And neophytes don't get the numbers part. It is a combination of science and art. Hard to grasp, and hard to execute. That's why there are so many charletons...it's a very hard industry to do well in over the years. And as one other post said, once you identify something as a "system", it's already dated because someone else has figured it out too and it's old hat. Hudson Valley, Good luck, though. I've often said, "a good painter can make a bad carpenter look good, but a bad painter makes everything look bad". A bad investment adviser makes everyone look bad. It makes sense to take your time to make a decision."The nearest thing to eternal life we will ever see on this earth is a governmental program" -Ronald Reagan
You asked for a book or such.
Well, I have never spent time reading those books. I'm sure some are very good. I got my stuff thru classes and training and training and more classes. And experience. There's something about being able to learn how the markets work on someone else's dime! Which is what many brokers in the business less than 10 years or so are doing.
I'll be frank, It took about 15 years of being a broker before I really began to understand how to build portfolios and make money. Whatever happened prior was more or less luck. Or not. Even still, errors can be disasterous. And even now, extremely easy to make.
The very first thing you need to do about this upcoming wad of cash is to determine what the money is going to be used for.
Is it a temporary parkiing place between real estate transactions? Will you need all of it for the deal? If so, you don't wanna be playing with the market. Even if we believe there are wonderful opportunities ahead. The risks of going the other way and not having time to recover are too great.
Is the money going to be used for some goal 5 to 15 years done the road? Then we can talk about some areas of the market. Realistically, not all.
Or is the money going to be parked for the duration, providing you with (the present or the future) an income stream to replace your earnings as you slow down? Sometimes retirement vehicles or similar devices can offer enhancements to the income stream while still offering choices.
Each of these employ different strategies. If your desire is to learn about all parts of investing, go for it. But this is usually the first step to focusing upon the answer to what to do with the dough.
But beyond that, you'll need to understand the basics about the different classes of investments. Each of them offer their own special characteristic(s) towards money and time. There are so many books, magazines, and websites that talk about such, it's a waste to go over it now.
And then, you'll need to understand yourself. Seriously. This is the single biggest factor towards making investing successful or not.
Are you impulsive? A gambler? An engineer? A psychologist? Or builder?
Each of these type of people look at things differently. You need to understand the weaknesses of your point of view and/or your financial behaviors. I'm not saying to tell us what your soft spots are, I'm saying you need to tell yourself what they are and be on the lookout for when they take over.
And are you REALLY interested in beginning a new hobby?
My first practical suggestion is to look at your local community college for a class in economics. College level is perfect. They will cover the above asset classes, their history and how different economic situations affect them. Classes are nice because they keep you on track and someone is there to explain things. And nothing is being sold to you.
Right now, focus on what happens when the dollar is weak, energy prices are high, the country is in a recession, and interest rates are low.
What happens in the years following those conditions? (Especially those years in which your goals from above will fall into.)
There are certain sectors of the economy that will do moonshots while others will wither and die. Don't take a salesman's opinion of what will move, you make your own decision.
And then, decide what method of investing suits your personality. If you are very interested and willing to contribute the time, pursue the individual security route. (Note I said "security." It could be a bond, stock, commodity contract, option, or piece of real estate.) If you are more consumed by other issues and really don't have the time, look for packaged products (mutual funds, REIT's, annuities, UIT's, managed money, etc.) that can act within your believed parameters.
And finally, determine what type of brokerage house is most suitable. If you know it all and are hostile towards others input, go online. If you want your hand held and have less than $200 to 500K, look at Edward Jones, Wachovia, or Raymond James type of houses. If you are over $1MM and have no concern about fees and are more interested in bragging about whom your broker is, chase the fancy names. The lower the number, the lower the level of #### kissing to be expected.
If your stash is less than $10K, don't expect much hand holding from a broker - unless he is brand new or desperate.
I'm prejudiced towards brokers with CFP in the "initial soup" following their name. I believe you'll get a better trained guy with better ethics without having to verify so yourself.
Avoid guys that seem like car salesmen. There are a lot of them that used to be. You want a guy/gurl that is sincerely interested in you and your situation.
Some gurls are pretty good at the business. Sadly, the better ones have been sitting in their chairs for a number of years, not spending time at the health club. So your expectations need to correspond to reality. What do you want, a hot chick broker losing your money or an old hag making it? (The same for your wife.)
That post there is so darn well written that I had to subscribe to this thread so I can find it again next time this comes up.
Great primer!
Welcome to the Taunton University of Knowledge FHB Campus at Breaktime. where ... Excellence is its own reward!
One of the more legitimate systems I've seen involves Investor Business Daily.
They offer a nice learning guide online: http://www.investors.com/learn/b.asp
Once you get their stuff down, I find it real hard to argue with their methods. And results. I've tried. Their system will work and keep your nose clean. and you can grow into options from it.
I've gained a lot from IBD and will renew when the time comes up
Welcome to the Taunton University of Knowledge FHB Campus at Breaktime. where ... Excellence is its own reward!
thanks pete, and piffin.
it sounds like hudson is losing interest, realizing he doesn't want to spend the time to learn this stuff.
i am not quitting yet, and hope to see the thread live. i am of the opinion that i can never retire, and that eventually even in very old age (if i live) i will still have to manage investments. which i call work and if you do that till you die you never retire, might get a few days off now and then but ...
In that case, here is another education tool for ya, hundreds actuallyhttp://www.investopedia.com
Welcome to the Taunton University of Knowledge FHB Campus at Breaktime. where ... Excellence is its own reward!
One of the more legitimate systems I've seen involves Investor Business Daily.
They offer a nice learning guide online: http://www.investors.com/learn/b.asp
Once you get their stuff down, I find it real hard to argue with their methods. And results. I've tried. Their system will work and keep your nose clean. and you can grow into options from it.
Wellllll now...there's a simpler and more optimistic point of view. I believe I can handle that much study with relative ease.
Thanks for posting that link. I'll focus on it's principles for a while and see where it takes me.
i frequently get ideas from those infomercials, but then i go to the web and research the ideas on my own.
the motley fool emailed me the other day recommending MKL as the next walmart, its an insurer that specializes in high risk underwriting, and its getting ready to explode.
i been watching it the last week, straight down.
I've been receiving Emails from Motley Fool for several months, without getting too excited either.
I might try out their service, next time I have some liquid capital, just because I like their anti-establishment name and because I've got the itch to try investing in the stock market.
the motley fool is just one of the many sources for information. i believe i first heard of Harry Dent in here on a post where Jeff Buck mentioned him. i like what he has to say, and would definitely combine his say with some research.
http://www.hsdent.com/
Thanks segundo, for the first nut (or bolt). ;-)
you are very welcome, its great to be first in something, even if it is being a nut.