Went with Ameritrade and invested in some stocks.

[Hector13]

Originally posted by: SuperMachoMan
There are reasons why they are underperforming the market, not the least of which is they are holding a couple percentage points back for themselves both on top of and beneath the table.

That is just pure bulls*t. If you have proof of this, cite it. Otherwise don't spew worthless nonsense to try to win a meaningless argument.

You said you are aware of the fact that actively traded funds tend to underperform the passively held ones, yet you concede most mutual funds are actively traded. You claim to be a Wall Street professional, yet you have stated that you try to time the market. Do you have any idea how much money you are losing your clients with that strategy? Do you also use crystal balls in your "market forecasts"?

whoa.. slow down.. where did I ever say I "time the market". I have in fact said the opposite.. many, many times. Like my views against stock picking, I thinking market timing is moot too.

Don't you think the better strategy would be to buy and hold your stocks and to not try to time the market?

That is exactly what I do and what I suggest. I don't know where you got any other perception.

A trained monkey throwing darts at a newspaper will do better than the average wall street professional. This is an empirical fact.

Agreed... in fact I don't understand what you are arguing about.. this is what I have been saying all along.

And yes I assure you I do know more about my industry and the companies I deal with than you do.

I am sure you do... I never claimed that you didn't. But I guarantee you I can call an analyst at a big wall street firm tomorrow who has personally talked to your company's CEO/CFO (assuming it is a large company) as well as with those of other big players in your industry. I am not claiming that "smoozing" with CFOs and what not will by default make these people smarter... my only point is that they have access to resources and people that retail investors will almost never have.

It is these peoples' jobs to know the industries they cover. And don't say that these analysts are just stupid. They are not. They are typically very bright people who went to the very top schools and have been doing this for a very long time.

 

[Draknor]

Originally posted by: SuperMachoMan

I think the better question is why can't Wall Street "Pro"s beat the market? There are reasons why they are underperforming the market, not the least of which is they are holding a couple percentage points back for themselves both on top of and beneath the table.

You said you are aware of the fact that actively traded funds tend to underperform the passively held ones, yet you concede most mutual funds are actively traded. You claim to be a Wall Street professional, yet you have stated that you try to time the market. Do you have any idea how much money you are losing your clients with that strategy? Do you also use crystal balls in your "market forecasts"?

Don't you think the better strategy would be to buy and hold your stocks and to not try to time the market?

A trained monkey throwing darts at a newspaper will do better than the average wall street professional. This is an empirical fact.

Wall street professionals are human beings like everyone else, subject to the same biases and errors in judgement as everyone else. The fact that they are schmoozed regularly by CEOs is not a point in their favor. I have many friends and acqaintances who work and teach in the finance industry. I take investment advice from the likes of Warren Buffett and Benjamin Graham, not from them.

And yes I assure you I do know more about my industry and the companies I deal with than you do.

Ok, I'm going call BS. While I generally agree with the concept (random stock-picking > avg wall street professional), hyperbole is not "empirical fact".

If you have information showing that monkeys were trained to throw darts at newspapers, and the stocks those darts hit did better than the Wall Stree average, I'll withdraw my complaint. I just have a general problem with people making up facts and using them to support their arguments. (Yes, I know this is ATOT, but still.... )

 

[Hector13]

Originally posted by: Draknor

Originally posted by: SuperMachoMan

I think the better question is why can't Wall Street "Pro"s beat the market? There are reasons why they are underperforming the market, not the least of which is they are holding a couple percentage points back for themselves both on top of and beneath the table.

You said you are aware of the fact that actively traded funds tend to underperform the passively held ones, yet you concede most mutual funds are actively traded. You claim to be a Wall Street professional, yet you have stated that you try to time the market. Do you have any idea how much money you are losing your clients with that strategy? Do you also use crystal balls in your "market forecasts"?

Don't you think the better strategy would be to buy and hold your stocks and to not try to time the market?

A trained monkey throwing darts at a newspaper will do better than the average wall street professional. This is an empirical fact.

Wall street professionals are human beings like everyone else, subject to the same biases and errors in judgement as everyone else. The fact that they are schmoozed regularly by CEOs is not a point in their favor. I have many friends and acqaintances who work and teach in the finance industry. I take investment advice from the likes of Warren Buffett and Benjamin Graham, not from them.

And yes I assure you I do know more about my industry and the companies I deal with than you do.

Ok, I'm going call BS. While I generally agree with the concept (random stock-picking > avg wall street professional), hyperbole is not "empirical fact".

If you have information showing that monkeys were trained to throw darts at newspapers, and the stocks those darts hit did better than the Wall Stree average, I'll withdraw my complaint. I just have a general problem with people making up facts and using them to support their arguments. (Yes, I know this is ATOT, but still.... )

Actually, this was a big thing that the wall st. journal used to do... they would get picks from "pros" every week (or month, can't remember) and compare them vs. monkeeys with darts.

While SuperMachoMan is exaggerating a bit, the monkeys did occasionally win (though I think the pros won much more often). I don't know why, but the journal stopped this "experiment" several years ago.

 

[Hector13]

Here is the aforementioned wall st. journal contest: http://www.investorhome.com/darts.htm.

Looking at the summary of the 100 contests (from 1990 - 1998), the average returns were:

Pros: 10.8%
Monkeys 4.5% (though it turns out they didn't actually use real monkeys...)
Dow Jones: 6.8%

Interesting facts:
1) the pros beat the monkeys 61 out of 100 months.
2) the pros beat the dow jones 51 out of 100 months.
3) monkeys beat the market 41 of out 100 months.

the page has some other interesting perspectives about the contest itself and whether or not people think the monkeys won or not..

 

[SuperMachoMan]

Originally posted by: Hector13

Originally posted by: SuperMachoMan
There are reasons why they are underperforming the market, not the least of which is they are holding a couple percentage points back for themselves both on top of and beneath the table.

That is just pure bulls*t. If you have proof of this, cite it. Otherwise don't spew worthless nonsense to try to win a meaningless argument.

You said you are aware of the fact that actively traded funds tend to underperform the passively held ones, yet you concede most mutual funds are actively traded. You claim to be a Wall Street professional, yet you have stated that you try to time the market. Do you have any idea how much money you are losing your clients with that strategy? Do you also use crystal balls in your "market forecasts"?

whoa.. slow down.. where did I ever say I "time the market". I have in fact said the opposite.. many, many times. Like my views against stock picking, I thinking market timing is moot too.

Don't you think the better strategy would be to buy and hold your stocks and to not try to time the market?

That is exactly what I do and what I suggest. I don't know where you got any other perception.

A trained monkey throwing darts at a newspaper will do better than the average wall street professional. This is an empirical fact.

Agreed... in fact I don't understand what you are arguing about.. this is what I have been saying all along.

And yes I assure you I do know more about my industry and the companies I deal with than you do.

I am sure you do... I never claimed that you didn't. But I guarantee you I can call an analyst at a big wall street firm tomorrow who has personally talked to your company's CEO/CFO (assuming it is a large company) personally as well as with those of other big players in your industry. It is these peoples' jobs to know the industries they cover. And don't say that these analysts are just stupid. They are not. They are typically very bright people who went to the very top schools and have been doing this for a very long time.

HEHE... Sorry that came off as kind of rude over the internet. I have this argument all the time with one of my friends. I actually can totally see where you are coming from...

1) The transaction fees/loads are a given. The mutual fund industry scandals are well documented (Putnam, etc.). Regarding the monkey thing... Why not just hire the monkey and save the transaction fees?

2) My mistake then. You said something about leveraging up or down in the market, I took that the wrong way.

3) I agree with you about the stock analysts being smart people. One of the guys I play poker with regularly is a stock analyst, he actually covers the video game industry for his brokerage... Very bright man, has a JD, MBA, former tax attorney... But he has a completely different views of investing than I do. I wouldn't be caught dead holding some of the stocks he is holding. Why is it that given any number of analysts covering a particular stock, half of them can have "strong sell" ratings while half have "strong buy"? Furthermore there is a certain amount of bias invloved in "covering" a company.

Furthermore there are a number of other reasons wall street pros are at a disadvantage to the individual investor... They can't invest in small caps without moving the price, they are limited percentage wise to the amount they can hold a particular stock, etc...

Wall Street pros don't hold much cred with me, it's something I feel very strongly about... I like to think more rational and level-headed than the vast majority of people. But maybe you are right, maybe I am deluding myself and just getting lucky with my investments...

Seriously no offense though. You are in smart company regarding the index fund thing, but we will just have to agree to disagree.

EDIT: I forgot to mention... I do think it is possible to beat the market by buying and holding undervalued stocks like Warren Buffett and Benjamin Graham. The key is the discipline to wait for only the most extreme of values and the patience to wait for the "buy and hold" approach benefits (earnings shielded from taxes, reduced transaction fees,etc.) to bear fruit. I ABSOLUTELY think its possible to know enough about a company to state that they are a great company and will be a good investment for the future. It's called business, and it happens everyday.