Financial Quiz

[I Love America]

Why give yourself a headache. Buy any good index fund. Over the past 50 years index funds have outperformed virtually every other type of investment out there. If you're not buy and hold, then become a market timer. Go out and buy the program "How to trade like the pros". Get into algo trading, fibronacci analyses, Elliot Wave theory, hedges funds, options, futures, and default swaps. Buy high speed ram chips, and by the way get five more monitors to see everything you need to see at the same time. You'll need two bluetooth headsets, one for one ear when you yell "buy" and the other when you yell "sell". Buy cases of Red Bull cuz you'll need it for your 18 hour days at your computer. Finally, keep a Glock in your top desk drawer, since you may want to use it after you lose all your money.

Sounds exactly like the way Warren did it

 

[Anonymous]

In Wisconsin,when the going gets touch the democrats run to ILLINOIS!

 

[Anonymous]

Sorry-tough...my bad!

 

[GorgeousGAMS]

If it were only that simple to choose a good investment. Rule One: companies LIE (Oh, my) on their debt to income ratios as well as how much they made/lost annually (insert time peroid here). Rule two: while one year tracking might be great for initial picks, three and five year tracking will help you decide to buy unless you are playing the market which case, you are better off with short sells or higher risk stocks/funds. Predictions on innovation are also great ways to determine what to buy.

So, no, you cannot base investing on something so simple. Hence, there is MorningStar where even an idiot can look up and track potential investments. ETFs are scoring high right now. Mine are earning 18-22%. I am considering rolling 70% into these accounts. Anyway, as usual ILA HAS ALL the answers.

 

[I Love America]

If it were only that simple to choose a good investment. Rule One: companies LIE (Oh, my) on their debt to income ratios as well as how much they made/lost annually (insert time peroid here). Rule two: while one year tracking might be great for initial picks, three and five year tracking will help you decide to buy unless you are playing the market which case, you are better off with short sells or higher risk stocks/funds. Predictions on innovation are also great ways to determine what to buy.

So, no, you cannot base investing on something so simple. Hence, there is MorningStar where even an idiot can look up and track potential investments. ETFs are scoring high right now. Mine are earning 18-22%. I am considering rolling 70% into these accounts. Anyway, as usual ILA HAS ALL the answers.

Another internet millionaire who never takes losses LOL

 

[Anonymous]

The ETFs are earning. Sadly, most of my money is in accounts that are either flat or lost. Hence, my thoughts to move over to the ETFs. It seems a tad risky but I cannot afford to have four more flat years. . . So, no, I'm not an "internet millionaire".

 

[Anonymous]

I thought Warren Buffet was the king of buy and hold?

Also typically the word invest implies holding for a minimum of 5 years, normally 10.

I wouldn't invest in a company that highly leveraged, $100 million. If it needs 100 million to earn a profit of $2million, I'd say it has some major trouble going on. It could flop in a heartbeat and stock holders are last in line to get a dime back.

Now if the company was a friend of the Obamunist, then it can't go wrong. It'll be bailed out everytime. So if you support the corruption, then you might as well support and buy that stock. I can't.

I'll stick with gold, silver, guns and ammo. I haven't lost a dime ever doing that.

 

[I Love America]

The ETFs are earning. Sadly, most of my money is in accounts that are either flat or lost. Hence, my thoughts to move over to the ETFs. It seems a tad risky but I cannot afford to have four more flat years. . . So, no, I'm not an "internet millionaire".

Why did you log out to respond GG? Nevertheless, I am not sure you understand ETFs.

They are nothing more than mutual funds with one uniques aspect. You can trade them like stocks without penalty.

It is like saying "my mutual funds are earning"

 

[I Love America]

Now if the company was a friend of the Obamunist, then it can't go wrong. It'll be bailed out everytime. So if you support the corruption, then you might as well support and buy that stock.
that.

In that case buy GE (government electric) and GM (government motors)

 

[Anonymous]

The ETFs are earning. Sadly, most of my money is in accounts that are either flat or lost. Hence, my thoughts to move over to the ETFs. It seems a tad risky but I cannot afford to have four more flat years. . . So, no, I'm not an "internet millionaire".

"Tad risky" compared to what, bonds? Then-yes- they are risky. You are a market timer. Read what John Bogle and every financial professor at a top MBA says about market timers. Then read how the average buy and hold player will always beat the average market timer. These are not opinions. They are facts.

 

[Anonymous]

I thought Warren Buffet was the king of buy and hold?

Also typically the word invest implies holding for a minimum of 5 years, normally 10.

I wouldn't invest in a company that highly leveraged, $100 million. If it needs 100 million to earn a profit of $2million, I'd say it has some major trouble going on. It could flop in a heartbeat and stock holders are last in line to get a dime back.

Now if the company was a friend of the Obamunist, then it can't go wrong. It'll be bailed out everytime. So if you support the corruption, then you might as well support and buy that stock. I can't.

I'll stick with gold, silver, guns and ammo. I haven't lost a dime ever doing that.

Where does this rule about investing in a highly leveraged company come from? There are many flaws in this "rule." Maybe the company expects such high future returns that they would rather borrow (leverage) than sell treasury stock to dilute their own stock. They can borrow at a low rate and see their own stock possibly appreciate at a high rate. That's one possibility.

Also, how is returning $2 million on $100m debt different from returning $2m on $100m of sold treasure stock? Both return 2% but one is done on debt and one is done on non-debt.

Read Modigliani and Miller Theorem.

Why isn't your approach "I will invest in the companies that I believe will offer the highest return for the risk-level I am comfortable with?" Would you rather invest in a highly leveraged company if it returns more than a low leveraged company? I would.

 

[Anonymous]

Well, after 21 views it appears nobody knows the answer.

So I will provide it. Given the choice between Company A and Company, one should invest in Company B.

Some might thing Company A would be a better investment because it increased earnings 100% while Company B only increased earnings by 40%.

However, one must look at how each company utilized its capital to earn that money.

Company A had a return on invested capital of 1% (10 million/1 billion)

Company B had a return on invested capital of 2% (2 million/100 million)

Company B is utlizing its capital much more efficiently than Company A.

Truth be told, neither company is a great investment because they aren't acheiving a return above their WACC which is probably around 7-8%.

But, the point is to look for companies that have high ROIC preferably above 12%. Those are the companies you want to invest in, if they are cheap of course.

So you know the WACC of made up companies? Are you a wizard?

 

[Anonymous]

I agree with taking a profit and actively trading in the market. Buy and Hold is a thing of the past. Have been actively trading since 2005 and am up 150% in my portfolio since that time. Yes, that includes the crash of 2008. Saw most of that coming and was sitting in cash. I don't play puts and calls. We just came off the best December since 1991. If you do your research and pay attention, you can beat the market. Just my two cents.

In 6 years you have a weighted average of a 7% return (1.07^6). It's not impressive.

All the studies contradict your statements.

So you believe you can beat the market by reading something here and there- I don't think so. Read the "Arithmetic of Active Management."

 

[Anonymous]

I agree with taking a profit and actively trading in the market. Buy and Hold is a thing of the past. Have been actively trading since 2005 and am up 150% in my portfolio since that time. Yes, that includes the crash of 2008. Saw most of that coming and was sitting in cash. I don't play puts and calls. We just came off the best December since 1991. If you do your research and pay attention, you can beat the market. Just my two cents.

Also, if you saw the 2008 crash coming, you should have shorted the market, not sat in cash and your returns would have been closer to 2000%.

 

[I Love America]

In 6 years you have a weighted average of a 7% return (1.07^6). It's not impressive.

All the studies contradict your statements.

So you believe you can beat the market by reading something here and there- I don't think so. Read the "Arithmetic of Active Management."

There are lots of problems with a "buy and hold" strategy which is why I no longer employ it.

Now please bear in mind, I am not telling anyone what they should do. If you like "buy and hold", good for you.

But, what if you invested in a buy and hold strategy and started investing in 2000? 1999?

You have been pissing money down a rat hole.

Oh, I know what the adherents are going to say.

"That is only 10 years"

"Give it time, it will come back"

To that I would suggest this as it pertains to the stock market. Look at the demographics. The worthless baby boomers are about to retire, whether by choice or by law, they will eventually start dipping into their 401Ks, IRAs, etc. The only way they can dip into those instuments is by selling off positions.

Now I am not suggesting that they will sell off all at once, just merely suggesting that over time, there will be more sellers than buyers in the stock market.

Now, I know I ain't no financial wizard like summa deze smarty pharma MBAs on CafePharma, but my mama done tole me dat when day is mo sellas dan buyas, prices go down.

Just sayin

 

[Anonymous]

There are lots of problems with a "buy and hold" strategy which is why I no longer employ it.

Now please bear in mind, I am not telling anyone what they should do. If you like "buy and hold", good for you.

But, what if you invested in a buy and hold strategy and started investing in 2000? 1999?

You have been pissing money down a rat hole.

Oh, I know what the adherents are going to say.

"That is only 10 years"

"Give it time, it will come back"

To that I would suggest this as it pertains to the stock market. Look at the demographics. The worthless baby boomers are about to retire, whether by choice or by law, they will eventually start dipping into their 401Ks, IRAs, etc. The only way they can dip into those instuments is by selling off positions.

Now I am not suggesting that they will sell off all at once, just merely suggesting that over time, there will be more sellers than buyers in the stock market.

Now, I know I ain't no financial wizard like summa deze smarty pharma MBAs on CafePharma, but my mama done tole me dat when day is mo sellas dan buyas, prices go down.

Just sayin

You can say it all you like. You speak with no facts to support your case.

And what was it about Arithmetic of Active Management that was flawed? What errors did you find in his math?

Facts are facts. The average "buy and hold" will beat the average market timer. Buying and selling results in increased transaction costs without providing a better than market return.

This is why Vanguard was formed. Educate yourself.

 

[I Love America]

You can say it all you like. You speak with no facts to support your case.

And what was it about Arithmetic of Active Management that was flawed? What errors did you find in his math?

Facts are facts. The average "buy and hold" will beat the average market timer. Buying and selling results in increased transaction costs without providing a better than market return.

This is why Vanguard was formed. Educate yourself.

You have your belief system and you are wedded to it. I hope it works out for you. I notice that you haven't said that you made a "boatload" with buy and hold the last 10 years. But, maybe you have more time to wait it out as the baby boomers start cashing out.

For the record, I never claimed that I was a market timer. I said I was a stock trader. There is a difference. I make trades that I think are going to go up in value and attempt to lock in small gains while minimizing losses. It isn't very complicated. It just requires some research and discipline in staying with a trading system. The difficult thing is not letting emotion get involved. The biggest thing I had to overcome is not chasing after a stock. I would have my entry point, but the stock would run up. Then I would get scared that I missed the boat and buy in during the runup. Cost me every time. Now, I have my entry point, my exit point and my stop loss all figgered out before I make the trade. If I don't get in at my entry point, no problem. It will come back around. And if it doesn't, there will always be another stock.

And yes, I use ROIC as a major marker for investing in a company. I don't want to invest in a company that is pissing away capital.

 

[Anonymous]

You have your belief system and you are wedded to it. I hope it works out for you. I notice that you haven't said that you made a "boatload" with buy and hold the last 10 years. But, maybe you have more time to wait it out as the baby boomers start cashing out.

For the record, I never claimed that I was a market timer. I said I was a stock trader. There is a difference. I make trades that I think are going to go up in value and attempt to lock in small gains while minimizing losses. It isn't very complicated. It just requires some research and discipline in staying with a trading system. The difficult thing is not letting emotion get involved. The biggest thing I had to overcome is not chasing after a stock. I would have my entry point, but the stock would run up. Then I would get scared that I missed the boat and buy in during the runup. Cost me every time. Now, I have my entry point, my exit point and my stop loss all figgered out before I make the trade. If I don't get in at my entry point, no problem. It will come back around. And if it doesn't, there will always be another stock.

And yes, I use ROIC as a major marker for investing in a company. I don't want to invest in a company that is pissing away capital.

Again, you frame this as "I have my opinion, you have yours." Except that my opinion is based on studies by world-class financial professors and winners of the Nobel prize.

You base it on what you saw on a 2am infomercial.

I don't know why you keep harping on the last ten years. You're so caught up on that. I am a buy-and-holder of low-cost index funds as advocated by the previously mentioned Nobel prize winners and an incredible amount of data.

I'll be investing for the 30 years. By the way, when the markets go up and down you get the benefit of dollar cost averaging.

There's no proof that your system will provide a higher rate of return and you're most likely going to get a lower rate of return because your frequent trading will result in higher transaction costs.

You are throwing darts blindly at a board and think it's a system. In the mean time, you are wasting your time and energy. I'll beat you in the long run and spend virtually no time on it.

 

[I Love America]

Again, you frame this as "I have my opinion, you have yours." Except that my opinion is based on studies by world-class financial professors and winners of the Nobel prize.

You base it on what you saw on a 2am infomercial.

I don't know why you keep harping on the last ten years. You're so caught up on that. I am a buy-and-holder of low-cost index funds as advocated by the previously mentioned Nobel prize winners and an incredible amount of data.

I'll be investing for the 30 years. By the way, when the markets go up and down you get the benefit of dollar cost averaging.

There's no proof that your system will provide a higher rate of return and you're most likely going to get a lower rate of return because your frequent trading will result in higher transaction costs.

You are throwing darts blindly at a board and think it's a system. In the mean time, you are wasting your time and energy. I'll beat you in the long run and spend virtually no time on it.

OK, you want facts. Let's talk facts.

1) The article which your entire investing philosphy clings to was published in 1991. It is 2011. A lot has changed since then dontcha think?

2) Sharpe only compares actively managed funds with passively managed funds. He doesn't compare passively managed funds with active individual traders such as myself. I don't invest in actively managed mutual funds for the precise reason Sharpe says you shouldn't. The costs are too high relative to the returns.

3) As I point out above, Sharpe only presents a limited argument. That of actively managed funds vs passively managed funds. Given only those two choices, Sharpe is correct passively managed wins out every time.


Now I think even you and Sharpe would have to admit that a whole lot has changed since 1991. Let's take a look shall we?

1) Transaction costs have dropped dramatically, as low as $4.95/trade for some services. Let's say you buy 100 shares of AAPL at the Market on 5/27 and sold it yesterday at the close. That is a nice 3.3% gain for a total of $1117.60 minus $15.90 in commissions. I will take that trade every day and twice on Sunday.

2) Since 1991 we have the advent of the internet. Have you heard of it? It is easy to search information on stocks unlike back in 1991 when you were left to looking up quotes in the paper.

You ask why I am focusing on the last 10 years and I am telling you that if you were a buy and holder, you got your ass kicked. I got my ass kicked in 2001 after the dot com boom and decided right then and there I wasn't going to be a passive sheep. So I decided to start buying and selling my self. It was a painful learning process, but over the past 10 years, I have devised what I think is a pretty good strategy and since 2005, I have consistently beat the market. You can scoff if you want. You can call me a liar and cling to your 1991 article. That doesn't mean every trade goes swimmingly well. I lose some, but I win more than I lose. Because, I search out what I believe to be undervalued stocks and I trade them. Some I have a short term trading strategy because that fuels the gambler in me. Some I hold onto for an intermediate or long term duration, but never longer than a year. I will always opt int to locking in gains.

If you don't want to put the work into securing your own financial future, then that is up to you. Instead of watching Dancing With The Stars like you, I spend a couple hours a night researching stocks. I will give you a hint. First thing I look for are stocks that have recently traded on increased volume. Increased volume almost always indicates a move up or down. Then I go from there. Like I said, it isn't hard. Despite your accusation, I don't throw darts. I have a strategy that I stick to. Which is the key.

Now, as I said, this is all opinion. You have yours and I have mine. I wish you luck.

 

[Anonymous]

OK, you want facts. Let's talk facts.

1) The article which your entire investing philosphy clings to was published in 1991. It is 2011. A lot has changed since then dontcha think?

2) Sharpe only compares actively managed funds with passively managed funds. He doesn't compare passively managed funds with active individual traders such as myself. I don't invest in actively managed mutual funds for the precise reason Sharpe says you shouldn't. The costs are too high relative to the returns.

3) As I point out above, Sharpe only presents a limited argument. That of actively managed funds vs passively managed funds. Given only those two choices, Sharpe is correct passively managed wins out every time.


Now I think even you and Sharpe would have to admit that a whole lot has changed since 1991. Let's take a look shall we?

1) Transaction costs have dropped dramatically, as low as $4.95/trade for some services. Let's say you buy 100 shares of AAPL at the Market on 5/27 and sold it yesterday at the close. That is a nice 3.3% gain for a total of $1117.60 minus $15.90 in commissions. I will take that trade every day and twice on Sunday.

2) Since 1991 we have the advent of the internet. Have you heard of it? It is easy to search information on stocks unlike back in 1991 when you were left to looking up quotes in the paper.

You ask why I am focusing on the last 10 years and I am telling you that if you were a buy and holder, you got your ass kicked. I got my ass kicked in 2001 after the dot com boom and decided right then and there I wasn't going to be a passive sheep. So I decided to start buying and selling my self. It was a painful learning process, but over the past 10 years, I have devised what I think is a pretty good strategy and since 2005, I have consistently beat the market. You can scoff if you want. You can call me a liar and cling to your 1991 article. That doesn't mean every trade goes swimmingly well. I lose some, but I win more than I lose. Because, I search out what I believe to be undervalued stocks and I trade them. Some I have a short term trading strategy because that fuels the gambler in me. Some I hold onto for an intermediate or long term duration, but never longer than a year. I will always opt int to locking in gains.

If you don't want to put the work into securing your own financial future, then that is up to you. Instead of watching Dancing With The Stars like you, I spend a couple hours a night researching stocks. I will give you a hint. First thing I look for are stocks that have recently traded on increased volume. Increased volume almost always indicates a move up or down. Then I go from there. Like I said, it isn't hard. Despite your accusation, I don't throw darts. I have a strategy that I stick to. Which is the key.

Now, as I said, this is all opinion. You have yours and I have mine. I wish you luck.

You simply don't get it. When he was talking about an actively managed fund, he was talking about you. You have your own actively managed fund. I'm glad you said you agree with him about an actively managed fund, because you are one.

Again, it's not an opinion. I've told you time and time again that. Didn't I show you earlier that you only got an average of 7% return. That's not impressive.

Second, the article was based on math. Hate to be the one to tell you but, no, math equations have not changed much since 1991. As the point of the article says, if you can add and subtract, you can get the point of the article.

You say you have beaten the market. Are you sure? How do you measure this?

Let's take a look at how you compare yourself to the market. You have to take each and every infusion of capital that was an investment as a SEPARATE entity, find what's it worth now, and find the rate of return over the time period you've had it invested. Again, you have to adjust this for time.

So I'm sure you've taken each separate investment and found an annualized rate of return on it. I'm sure you've taken the time to do that.

Once you've done this FOR EACH separate investment, you have to take a weighted average of ALL of your investments to get a combined rate of return.

How do you feel that two hours a night has given you a 7% return?