If people could spend such a small amount of time and get 60% returns every year then everyone would do it …until it finally reverted back to the mean. Nobody would even bother to go to work.

I don’t have much respect for money managers or investment banks …they have done some pretty boneheaded things these past few years. However, the idea that someone can spend an hour or two a week and significantly BEAT people that do this as a profession is silly. If someone offered to remove your appendix after doing surgery for an hour a week what would your response be?

I personally like the 2* shorts and longs …gives you closer to the return of an individual stock without the significant added risk of a single missed earning or bad news report that can potentially cripple a company’s stock price for a long time.

Reminds of a great quote: “There’s no such thing as a risky investment, only risky investors.”

Translation: educate yourself and invest in things you understand.

The best way to invest in my opinion is not to start investing. The best way to invest is to start your company and invest your money there and then learn how to make it very profitable and successful long term. Once you do that, you’ll know how/what to look for in other businesses which, after all, are what stocks are (chunks of ownership in other businesses … how they are put together is simply based on the marketer behind it — hedge fund, ETF, socially responsible fund, alternative energy fund, etc etc):

So: (1) learn how to create a profitable business, (2) do it, and (3) invest in other businesses (or groups of businesses) that make sense to you and that you like the ‘ins’ (financials, management team, etc) and ‘outs’ of (market, e/p ratios, etc). Also, I think it’s very important to understand your own risk spectrum and allocate your investments across that spectrum. I, personally, have most of my money in either very liquid investments like money market accounts and in real estate because that’s my business (and then I have my own ‘intra-investment risk spectrum’ … for example, for real estate: 10% in development projects, 60% in cash flowing apartments and shopping centers, 20% in turn around projects, and 10% in highly speculative projects such as raw land).

Matt

A single GOOG can set someone up for life. With a stop loss, their risk is -10%. Is that akin to buying a lottery ticket? Maybe, maybe not.

However, you raise an interesting point and I thank you for sharing it.

It takes time to look for “bottom feeders” and setting stop-losses. You time is worth X. Unless you are managing a lot of money or you have the secret sauce for stellar returns (no one does), then my thesis is it isn’t worth it.

The reason most investors fall short isn’t primarily a lack of discipline, but arrogance that they believe they are smarter than the market.

-accept that you can lose 10% on any investment and be religious about setting stop losses at -10%, no exceptions
-set a goal for your gains and sell your winners when you reach your goal.
-never start a ground war in Russia in winter and NEVER hold any stock from May to August

I like range trading and bottom feeding. Find a stock in a range and trade the range. Also, in August I think there will be plenty of bargains. Remember we’ll have a new President in November and sentiment will turn, even if fundamentals don’t.

You can lump me into those who enjoy tracking stocks. I’m not terribly successful, but I get by enough to keep at it.

Taking advantage of that human flaw keeps a lot of people employed and results in most people performing worse than the indexes.

However, sitting back and accepting average returns via mutual returns or ETF’s goes against human nature. We not only want to keep up with the Jones’s, we want to beat them. We want to ‘hope’ to beat the market…we want a chance. Which, when I think about it, is not unlike playing the lottery in some ways…although the risk is lower.