Stock market anyone?

[jcampbell]

Originally Posted by EMrider

Just a guess.....but I'll bet you're an independent advisor? Some of the worst fee abuse comes from the large multi line firms. The individual is most important, but I do see a pattern on the fee abuse issue.
R

There is really no difference in whether your a independent or with a Major Firm. Some independents are just a little too eccentric and can only sell on fees. Some are just on a power trip and want their own business, some just like the freedom, relationships, and life being an independent provides, and some just suck so bad at the major firm that they have to leave cause they are on the chopping block and their accounts are already being reviewed by the corner office crone. Its the truth.

Personally I just like the benefits of being self employed and the freedom I have as an independent. I was never worried about my job at the Morgan, but I didn't like the fact that I wouldn't get paid on any account less than 100k. That kind of sucked. I loved the firm otherwise, oh well except for getting fat on all the crap food they fed us at our daily meetings. Retirement and benefits were awesome and miss that. Also having a big name behind you was a great tools. Its what built my business so successfully.

We all have discretion with Wraps and the fees are all governed with a max at 3%. Truthfully, its pretty competitive sometimes and people won't go with you since your charging this and some twerp undercut your fee. Happens all the time with none referral clients. Referred clients want to pay me more. Crazy actually but I take it as a compliment. Independents actually get a larger cut than people at wirehouses do. That may be why they have to charge more at the wirehouses. I know annuities definitely pay more on the outside. Doesn't mean much since I think I sold three of them in the last 5 years to people that demanded it. Outside they have 7% commissions, inside wirehouses its 4%. Its a big difference when you looking at 500k and up tickets. Just remember that that's all you get to manage it for 7 years so its really 1% a year.

[Abui]

Originally Posted by Collette

This might be a stretch, but does anoyone here option trade?

My dad got me into it a few years back. You'll still need a day job, but ever since I started, my bike habit's been covered, and we recently paid off both cars with money left over to help with the mortgage.

You'll need a strong math background though.

A day job helps hold off the boredom waiting for a fill. I prefer large cap stocks - instant fill and time to ride.

I studied Black-Scholes and found it was a theory, but in real life B-S. Neil Chriss in Black-Scholes and Beyond lists 7 non-real world assumptions.

Originally Posted by mntbiker12

Okay, give me the hot tip

Actually, I've always wanted to dabble in this. Care to share a way to get started?

IGNAX fundamentally.

Originally Posted by jcampbell

Plain and simple... some people have it, some people don't.

Agree.

Besides theories Wall Street (CNBC) treats the public to the ridiculous "Buy, Sell, or Hold?" In my world if a stock is not a Buy then it is a Sell.

And Suzie Orman is wrong, it's OK to borrow against your 401K.

[Kid A]

alot of info here and only skimmed but a few thoughts. Not all options are "risky", really depends how deployed (i.e. what strategy). Options can be used to speculate or hedge (i.e. act as insurance) as well as generate income. (such as selling a covered call). myriad strategies exist but everyone knows the real fun is in the futures market. my personal favorite...FCOJ. "One minute you're up half a million in soybeans and the next, boom, your kids don't go to college and they've repossessed your Bentley. Are you with me?"

[LBmtb]

Originally Posted by Kid A

they've repossessed your Bentley.

I hate it when that happens.

Me . . . I've gotten my feet wet with the stock market but might be forced to take that money out soon to pay for school expenses and upcoming auto body bills. Most of my money is in apple stock, which I bought at 138/share in September. (It's now at 187)

[SpunnOne]

Originally Posted by jcampbell

If anyone is interested, I do have an investment club that has one slot open (the members are very advanced though and seem to like stochastics and the group wants to interview with whoever is interested). I manage the money on this one due to the account setup but I was thinking of starting another one for a younger group where it would start with ideas and grow from there and I would not be the manager of the money. The one spot does have investment fees, the group hired me.... but the new one has no adviser fees unless they want to.

J. - Can you give a little more detail as to what would be involved should you create this new group? I've never been a part of anything like that - but you've piqued my curiosity...

[Evil Chocula]

Also good points. I've been in the business 5 years, and I manage 200 $500k + portfolios. We use Deep-Value Fundamental Analysis, tactical asset allocation and sepratley managed accounts, so I agree with you in a way. I woudn't say we're an MPT Shop, I'd say were a Top Down Fundamental Shop.

However, the facts do point to MPT, no matter how you cut it, traders hate it because it makes them look bad.

I love duking it out with you old school stock pickers .

PS We've down really well with high yeild CA munis the last couple of years too.

Originally Posted by jcampbell

Didn't Al Gore just win a Noble Prize as well yet he still flys in a corporate jet?

Plain and simple... some people have it, some people don't. Don't believe the traditional complaint that most traders don't beat the market, by the way, which market are we talking about. Dow, S&P, maybe one of the Russells... or a combination of three or 4. Yes a lot don't beat their respective indices but many do. And most larger money is not with Mutual Funds, its direct with Money Managers or a similar form. They don;t really give much information on those guys... also something you don't get from a discount broker.

How's the last 15 years with no negative return, not a one, and a 17+ percent average annual over those years for a Moderate/Aggressive Balanced Portfolio. Also you have to remember who is preaching the Modern Portfolio Theory, is it Wall Street's traders (I think not) or is it a Theory that has been embraced by rather large institutions and their lawyers to sell managed money.

Please don't take this the wrong way its just I always get hit with this load of crud. In Theory it works, but there are times you don't want to have anything to do with an asset class. Sticking to the Theory and not making a strategic move would be a detractor to the portfolio. In the last few years my portfolio has ran a 20% allocation to Euro stocks alone. International has been 35% to 40%, sounds like a lot, but with the falling dollar, its a calculated risk that gave me a rather large cushion on Losses.

Also, every Money Manager out there doesn't practice Modern Portoflio, they invest in their asset class and sector only. Balanced Funds usually use a combinations of Money Managers so they are still only investing in their own asset class. Its something the Marketing Firms use to sell sell sell, and to diminish risk and major losses with average investors.

A large portion of my business is managed money so I don't completely knock the Theory, its a great starting point for new investors, or investors you would have to have discretionary account to make moves cause you can never get a hold of them.

By your comments you sound like you have been in the business or still are. If so, think about your largest clients, they don't have anything to do with this Theory. How many long term positions do they have... usually at the least 5. I have a clients that kills it with Junk secured Muni's. the guy ends up owning property all over the place and pulled 15% tax free last year. The guy is good, I have a hard time even keeping up with him. In fact I think I learn more from him than he does from me. Great relationship.

Anyway, don't get caught up on how cheap the trade is, be careful not to get pinched by the discounts either with their third parties little fingers. It could end up costing you more money than you realize. Always use Limits unless you just have to have it, and have fun. Don't get to caught up with gains, or what you left on the table when you sold too early. You'll end up getting greedy and Wall Street will kick your ass back home. Sell off half and let the rest ride with a stop loss in place. Then forget about it. Don't forget to limit all your positions. If you get stopped out, forget about it and move on.

Originally Posted by EMrider

I think that MPT is quite useful, but agree with you that it has its limits and can overshadow other important issues like asset allocation. And for individuals, asset allocation is critical. Most are grossly overallocated to low risk and low return assets (within any structure, 401k, IRA, etc.....). The folks I've seen do very well over long time periods, with little or no sophistication, did so largely by assuming an appropriate degree of risk and sticking to their plan. "Appropriate" is a subjective term, but IMHO that means having 65% or more in equities during your working years, with a generous exposure to non-US assets. Sadly, I've also seen many realize in their mid to late 50s that they are way behind on saving for their retirement and panic. They often swing for a grand slam, with little or no knowledge. Sometimes this ends badly. My point is simply that you don't have to be an expert or sophisticated investor to accumulate plenty of wealth to retire comfortably. You just need to start early, take some risks and stick to a plan.

Also, I'd never suggest that it is easy to beat a broad market index in any asset class. It is difficult and most can't over the long term. Most professional investors are specialists within a given asset class and in that arena, the competition is brutal. But that is good for those who want solid returns over time. The weak are knocked out pretty fast.

And last item while I'm on the soapbox, fees can hurt your realized returns badly over time. This is often where individuals get slammed the hardest and unfortunately, they usually have no idea it is happening. A lot of advisors are solid and looking after their client's best interests. But many are simply pushing whatever will generate the highest fee or what is on their firms shelf that day. Good advisors learn this is a road to ruin for their careers, because it hurts their client. I've seen advisors charge between 1.5%-2.0% per annum just for putting client assets into some "wrap" structure. The actual day to day management of the assets is done by professional managers, who usually get paid another 0.3% to 0.7% on top of what the advisor skims. Yes, the advisor gets paid 3-5 times more than the person actually managing the money. If you are paying more than 1% per annum for advise or money managmenet, do yourself a favor and ask some pointed questions and/or shop around. A 1.5% per annum headwind over 20 years will take a HUGE bite out of your assets.

Rob

Thanks Rob, you did a better job of articulating my point than I did.

Originally Posted by jcampbell

I was never worried about my job at the Morgan, .

I knew it! I can smell a Wire House broker from a mile away!

[mullarks]

Its actually Harry Markowitz who won the Noble prize and it was like 40 years after he developed his model. And I would love to read the white paper that states those number. Is it one of the Ibbotson papers? I am always leary of those stats but I still think asset allocation is the most important aspect to creating a good portfolio.

Originally Posted by Evil Chocula

Thats a good point. Whenever your attempting to time the market, or buy undervalued stocks, look for uptrends, etc. you have to consider that the vast majority of mutual funds with CFAs and huge research teams can't beat the market for any extended period of time. If they can't do it, can you? Most do-it-yourself stock pickers (or options traders) I've worked with find they aren't beating the market on the long term (not even close) when they(I) actually break it down in a gain/loss statement that includes trading costs and taxes. You can still make really good money, but underperform a simple S&P 500 Exchange Traded Fund.

Ill end my preachy rant now, but Modern Portfilio Theory (the theory of asset allocation) won a Noble Prize, and it states 91% of portfolios return is due to Asset Class Selection (large cap, small cap, international, bonds, etc). 5% is due to market timing (options) and 3% to security selection (individual stocks).

[Evil Chocula]

Originally Posted by Kid A

alot of info here and only skimmed but a few thoughts. Not all options are "risky", really depends how deployed (i.e. what strategy). Options can be used to speculate or hedge (i.e. act as insurance) as well as generate income. (such as selling a covered call). myriad strategies exist but everyone knows the real fun is in the futures market. my personal favorite...FCOJ. "One minute you're up half a million in soybeans and the next, boom, your kids don't go to college and they've repossessed your Bentley. Are you with me?"

Thats true, but the majority of people reading this thread (as are the majority of Americans) probaly aren't financially sophiscated enough to properly deploy said options strategies, and could easily wipe out thier retirement/life savings. Just my $.02.

Originally Posted by mullarks

Its actually Harry Markowitz who won the Noble prize and it was like 40 years after he developed his model. And I would love to read the white paper that states those number. Is it one of the Ibbotson papers? I am always leary of those stats but I still think asset allocation is the most important aspect to creating a good portfolio.

Those numbers are from a study on institutional trading in NY... it might be the Ibbotson papers, I'll find out for you.

[Kid A]

Originally Posted by mullarks

Its actually Harry Markowitz who won the Noble prize and it was like 40 years after he developed his model. And I would love to read the white paper that states those number. Is it one of the Ibbotson papers? I am always leary of those stats but I still think asset allocation is the most important aspect to creating a good portfolio.

agreed Nobel was won may years after model developed.although not sure means anyting other than show how "cutting edge" thinkinbg was (IMO)

been a while and familiar with stats referenced as well. think 90% figure speaks to explaining the variability of return and was performed on instiutional portfolios (i.e. pension, endow, foundation. etc) and a few years later another paper came out refuring some of the methodolgy, sample size, etc. but cannot recall specifics on either side

[jcampbell]

words words words words.... if we all didn't think Google was overpriced when it was trading over 60 times it earnings back in the day, we would have all quintupled our coin! Had nothing to do with asset allocation, it was all Vegas mentality.

My dumb ass boycotted the weird IPO process in the beginning, which led me to allow my emotions come in and boycott the whole Google thing for a while until one of my clients literally smacked me on the back of the head at one of his parties and told me to practice what I preach. It was funny, but the truth. Since then I am on the bandwagon with a moving average stop.

[duke777]

WOW this is great reading and sounds like a lot people have done well and know what they are talking about.

Only one advice from Warren Buffet to people trying to get in the trading/investment thing.....Invest in what you know. He made a killing(obviously) in something he knows...insurance and did not touch high tech a bit.

Since I know some of the high tech companies I have done quite well but I won't venture into other markets unless I know(I haven't yet).

Anyhoo......this is all great information...how about we get some investment/stock rides in. We can argue about this all the way and over a beer after!

[nappyt]

Originally Posted by duke777

WOW this is great reading and sounds like a lot people have done well and know what they are talking about.

Only one advice from Warren Buffet to people trying to get in the trading/investment thing.....Invest in what you know. He made a killing(obviously) in something he knows...insurance and did not touch high tech a bit.

Since I know some of the high tech companies I have done quite well but I won't venture into other markets unless I know(I haven't yet).

Anyhoo......this is all great information...how about we get some investment/stock rides in. We can argue about this all the way and over a beer after!

I remeber that tip from college. It works. I went home and looked to see what stuff I had bought. I tracked the stocks found the ones that followed the patterns I was comfortable with and jumped in. I didn't make a lot but I didn't loose anything. I think I made 4% in four months. Not bad for the little money I had to start. It beat my CU savings account which was 3% at that time.

[Evil Chocula]

FYI, tech's coming back (I think!).

Originally Posted by duke777

WOW this is great reading and sounds like a lot people have done well and know what they are talking about.

Only one advice from Warren Buffet to people trying to get in the trading/investment thing.....Invest in what you know. He made a killing(obviously) in something he knows...insurance and did not touch high tech a bit.

Since I know some of the high tech companies I have done quite well but I won't venture into other markets unless I know(I haven't yet).

Anyhoo......this is all great information...how about we get some investment/stock rides in. We can argue about this all the way and over a beer after!

[spookydave]

Originally Posted by mechmann

yeah i have time too... and i didn't put in any sell orders so the money lost is just "virtual", but it still sucks to see your acct balance sheet plumeting

I look at it as things are on sale.

But I'm a total long term guy. I rarely sell anything. My dad and brother are both brokers. My dad got me started when I was 18. I've been paying myself once a month for 27 years now.

[nappyt]

I know this thread died but this was to funny to pass up.

For all you Forex traders out there check this out.

eToro

[sladnas]

Originally Posted by Caveman

And Suzie Orman is wrong, it's OK to borrow against your 401K.

Why would you want to though? The monies used to repay yourself would be after-tax dollars (I think), which would then be taxed again when you start pulling from the 401K at retirement...you also lose out on the growth of that money in the investments.

[jcampbell]

This is funny this topic is brought back today... As we speak I am going through an SEC audit today. What a bitch.

I need a beer.

Looking forward to the Beeks ride tonight.

[Evil Chocula]

Originally Posted by jcampbell