Tldr : As a simple working class investor, is my best (and assured winning) investing strategy to holding Index funds till I retire rather try actively research and invest in individual trades ? —— I’ve heard that 90% day traders lose money. I’ve also heard that beating index is hard unless you’re actively picking best stocks. (Look at ARK or Amazon stock this year alone. Even Tesla was doing pretty bad till September since Jan whereas s&p market was giving 20% returns atleast till then) I tried testing how good I am with 3 accounts. Firstly I tried paper trading MeetKevin strategy of high growth stocks. Lost on half of my trades in March and May which never recovered. Luckily they were paper trades. My real active trading account became positive and beat index cause of Nvidia and Tesla but flat Amazon dragged it down. It was basically bunch of Tech stocks mostly. Whereas my index funds (QQQ & VOO) and pension accounts (target date funds) account are up 25% YTD which is almost same as my active trading account. I don’t use margin or options cause I’m a simpleton when it comes to finance right now and I realise there is lot more for me to lose than to gain an extra bit of cash. I do plan on learning more but it is bit hard to keep up with market and research when you’re working 10-12 hours at firm like FB So, basically I guess based on my performance in last 10-12 months and demanding nature of my job maybe I’m not cut out to be active stock selector and should just DCA into VTI or QQQ right ? I do feel Fomo when I read people used margin or call options and made trades that gained them much better returns on Their trades whereas I was simply DCAing in September. Any advice or POVs are highly appreciated by the community YOE 4 TC 220 #personalfinance #investments
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I am doing dollar cost averaging in index as well as individual stocks. I choose stable big companies that have low chances to go bust and also high growth stocks like Tech and then I also have lots of REITs. Also, Im buy and hold kind of a person. Hasn't been bad for me. Have seen some of the stocks in my portfolio been completely wiped off and then showing a profit now due to hold strategy.
How much % of your portfolio is index vs individual stock picks ? And any further diversification in index section like some parts VTI, QQQ or VTSAT ?
I know people will just say bull market but I have been averaging just around 20% gain per year, investing in individual buy-and-hold tech stocks for the past 10 years. I have no idea why index funds can’t perform as well.
QQQ gives those returns as it is tech index mostly, maybe S&P or VTI couldn’t
makes sense
Target date if your really don't want to think about it. Stupid to overweight tech if you are paid in RSU
Yeah but FB RSU may not grow if Metaverse fails to take off or something else. Even Amazon is flat since June 2020
Another reason not to overweight tech... Looking toppy...
High risk, high reward. But if you bet on high risk you better be well educated. If you don't have time or genuinely enjoy company research... index funds.
Time : Yes but need to invest it to get a promotion to a more senior level and even harder after that. FB is a demanding paymaster. Interested in Research: Yes but let’s face it I neither have a Bloomberg subscription nor any degree in Finance. So any models I make from my research will have huge gaping holes. I made this 20% purely by luck and investing in FAANMG basically one could say. Is QQQ a high risk high reward fund here ? Or does it have to be specific moonshot stock ?
Retail investor is by definition a person who is not actively researching/trading for a living.
Ah thanks. I thought “retail” meant anyone who is not an institutional investor or a broker for one
You were not wrong. Anybody who is not institutional investor is NOT someone who does stock research/trading or portfolio management for a living. Thus, a retail investor is really someone who is doing this as a way to generate passive income or hedge against inflation. In both scenarios, buy-n-hold is the only viable strategy when you are busy doing your regular job!
Options and margin is the best way to become poor fast for most people
Maybe I’m watching too much of Kevin lately cause it did feel like everyone just used margin, dumped on SPY and Tesla and made handsome profits in last 4 weeks alone. I understand risks of these tools and that’s why I stayed away cause I saw a family member blow up their account with futures and options trading and they come from a Finance background
Yes to throw your $$ into VTI for the most part - ignore the fomo, there will always be stories like that throughout your life. This is also true when the market tanks as you will hear stories of someone who sold right at the peak - VTI is much broader than qqq - feel free to take bets but siphon off a small minority for this purpose - you are already overly interested in FB and tech overall due to where you work / how you get compensated Of course you will hear differing philosophies on the passive v active "debate" but, especially for folks without any special skillset or access, I tend to err on the passive side. For me personally, I am mostly passive but held on to some of my rsus mainly as a lazy way to make bets. This isn't the best or well thought out strategy but I overall lucked out in that regard
I agree somewhat. I do need better returns to enjoy some of “my” basic needs like better lifestyle and better housing given that I’m slaving away half of my waking hours to my paymasters . But I really don’t want to keep researching for it. I made few bets and some like Amazon, Palantir, Twilio and others didn’t pay off and that brought down my returns substantially and I did researched a lot but couldn’t beat the index, so I feel what’s the point then ? Actually I’m a bit scared that I will probably lose if I played high risk high reward game cause “pigs” and noobs like me get slaughtered all the time in the market and pull the plug soon If this is a skill that can be mastered, sure sign me up but unless risk adjusted returns are substantial, is it worth it ?
Re substantial "risk adjusted" returns -- very doubtful. This is hard enough and questionable even with the large institutions and niche full time shops dedicated to this. It's ok if you want to take on more risks for potentially a big payoff but that's about it The most sure way to increase your returns if you want to eventually be financially independent is to increase your TC. Make sure you are on the best team for you to enable growth, and you have the right mentors and peers to support you
Wow, an overwhelming number of responses for indexes vs against
It’s the best strategy for professionals too (holding). Most investors including professionals are fucking dumbasses and it shows in their horrible returns
Why do you have target date funds in pension accounts? Why not index funds?
That was default fund that came with broker with bare minimum fees and majority of exposure to index funds in early years, so didn’t felt need to switch or transfer the pension to a different broker for a while. Plus returns didn’t lagged index so didn’t bother me much. In future I do plan on moving that lump sum to somewhere else though