Re: Why Index Funds Are Like Subprime CDOs
Posted: Fri Sep 06, 2019 11:18 am
If you can get à job, you probaly can euthanize yourself.
--- The smartest, deepest, and most resilient rabbit hole of FIRE
I think it's a lot easier to learn how to become a competent investor (1000 hours) and maintain a certain level of acumen (similar to how employees maintain their employability by being employed) compared to spending 3000 hours learning a specialization and working 40 hours a week for 40 years. But to each their own.
I agree. My most significant learning has not been about the stock market or individual stocks, but my reaction to their performance. And also, learning about finance, math, business documents et al., does not come "naturally" to me like learning about things that can be taught with just words and not those annoying graphs with numbers and shit.
I personally believe that it’s best to get started when the money stack is smaller, as you’ll most likely make mistakes early on.Jin+Guice wrote:I guess the bigger my stack of money gets the more interested I'll get.
To clarify, I find it interesting according to my abilities and understanding. But I know those abilities place me in the everyday, consumer type of investor category. I like having a stake in a company. I like watching my money work for me. Could I get to the point that I'm in my attic with 100's of prospectuses at my feet making informed decisions? Maybe. But it would be the equivalent of Jeffrey Epstein attending an orgy at a senior center. It's not the kind of stuff I naturally want to look at.
Wow! This is a major change in your position on index funds. In the past you have been nothing but unrelenting in your attacks on index funds as an investment vehicle.
ERE FAQ wrote: Q: Why do you hate index funds?
A: Dude! I don’t hate index funds and the idea that I do has been greatly exaggerated by the louder members of a certain forum on the internet who feel compelled to call down a witch hunt whenever anyone questions their dogma (You know who you are!) In fact, I’ve used index funds myself to invest on occasion when the situation called for it. It’s just that I don’t hold any rigid views when it comes to my personal investment strategies. I reserve the right to change my strategy if the situation changes and so far that has worked out well for me.
I'd say that Michael Burry is looking at those inefficiencies, which he says. I also believe that Michael is improperly valuing Korean stocks.The market is not entirely owned by indexers, of course, and it never will be, and Bogle pointed out that as indexing increases to a certain point, it opens opportunities for active investors to exploit inefficiencies in the pricing of some stocks. But past that point, wherever it might be — somewhere beyond 75%, in his view — the market could become a dangerous place.
slowtraveler wrote: ↑Fri Sep 06, 2019 6:56 pmBut it is not 1000 hours. I've spent many thousands of hours researching stocks, reading 10-k's, reading all the big investing books, reading value line reports, learning about different ways to distinguish stocks and sale vs those overvalued, good vs bad companies, and all that. While it's helped me understand, I would have been so much better off just researching investor behavior, applying it, and sticking to the index. It's depressing how much better I would have done.
Even after 10000 hours, people who do this for a living fail to succeed.
What amazes me most about Jacob is his ability to self direct and his ability to learn new subjects with ease. I always get lost in the bullshit and terminology for a few years before I can figure out which was is up.Jason wrote: ↑Sat Sep 07, 2019 5:55 amI think most people have taken a class or gone into a program thinking this is what they want to study. But then they realize its a topic they want to study up to a point, not to the exacting standards required for professional status. Either their abilities and/or commitment level get stretched beyond their comfort level. And that's fine. It's better to cut and run. And the 1000 hour thing? Maybe that works with ironing or cleaning out your garage. But if JLF and I studied applied economics for 1000 hours, who's feet are people most likely to be sitting under after we're finished? When you're talking about a field with essentially no ceiling of understanding, it's a different matter.
Here is the plan I have been following for learning as I have it written. Credit goes predominantly to Jacob (and other forumites) as I picked it up from him (and others) over the years. But, I am NOT advocating this as Jacob's recommendation. It is simply what I have understood from the posts I have read. Not sure if this is exactly what you are asking, but this is the process I have been following. Also, I think things will become more clear to you as you read the textbooks in the curriculum. They cover a good deal regarding getting started. And sorry about the horrid formatting
jacob wrote: ↑Wed Jun 01, 2016 12:42 pmSo with that in mind, I hope this makes for a somewhat more rational and deliberate decision as to whether financial understanding is worth pursuing for a given individual. Should one do it? Well, that question requires three more questions?
1) Are you interested in learning the skills? It's pretty hard to learn anything if one isn't interested in learning it. There's simply a lot to learn for starters and it's an ongoing process that requires some maintenance once learned. If the markets aren't exciting to you, there's no need to bother. Go invest in index funds.
2) Do you have the talents? That's a really hard question to answer. So far the question can only be answered in the negative. That's what I tried to do with the cigar post above. If there's a difference between the dogmatic voices on in the personal finance space on internet forums (unfortunately, including this one) and successful investors, it's that the latter habitually question themselves as to whether they really have the correct understanding, both in terms of fundamental theory but also wrt current market developments. All these guys have what could be called a "learning-mind", always happy to latch onto anything that might increase or question their understanding. Conversely, dogmatic types, who are the anti-thesis of the learning-mind and not only think they know everything but specifically that it's impossible to learn anything new, should not bother. Instead go invest in index funds.
3) Are you capable of coming up with novel ideas? A good indicator that you're not is if you tend to lean heavily on argument by authority and wanting references for everything. This is not going to work. Investing is forward looking, not backward looking, because unlike the rest of the business world, investing is one of the few areas where most of the advantage goes to the first mover instead of the one who comes in, copies the idea, and executes it better. In other words, if you had to be completely honest with yourself, do you have some aspect of yourself that sets you apart from most other people (maybe it's an ability to concentrate really well, maybe it's the ability to see patterns in complex situations, ... )? If not, you probably shouldn't bother either. Instead go invest in index funds.