The Stock/Investment Thread

[Dreadnaught]

I bought into a short term bond fund, and am considering getting some medium/longer term bond funds out of my 401K. Was going to buy a discounted income-producing stock such as the Realty Income Corp, but I still feel prices will likely melt-down a bit again in October.

But sometimes I remember that my time horizon is still extremely long and think I should just stop trying to anticipate the dips. I'm terrible at dollar averaging, and I've yet to be punished with a major mistake (when I really should).

[Being]

Timing looks good for me. Go Bears.

[GGT]

Dread, most people don't use the stock market/exchanges like a lottery, even though the "house" has all the advantages. Caveat emptor, buyer beware.

Loki, I have no idea what you're trying to say, other than you know best.

[Dreadnaught]

Who is the House?

I've withheld making any moves. If REITs take a plunge tomorrow I may buy a fund of REITs or Realty Income. But I'd prefer either a clearly medium-term bear market or some clear sign that the stock market is moving in tandem with economic news instead of just rate news.

[GGT]

Who is the House?

I've withheld making any moves. If REITs take a plunge tomorrow I may buy a fund of REITs or Realty Income. But I'd prefer either a clearly medium-term bear market or some clear sign that the stock market is moving in tandem with economic news instead of just rate news.

"The House" means institutions in the banking/financial sectors that have more power, with help from the political process, that can skew their profits to look like Freee Market capitalism. In other words, it's like one of Trump's casinos, or Walmart, that poses as an "employer", but uses public resources they don't pay for.

If you're trying to time the market, you've already lost.

"The House" always wins in games of chance since they hold all the cards.

And the US stock market is basically a rigged game.

[Being]

I'm thinking of doing some individual investing and need to choose a broker. Anybody have preference between

1. TD Ameritrade
2. Schwab
3. Fidelity
4. E-Trade
5. Scottrade

[GGT]

Being, those are just trading platforms. If you already know what you want to buy, pay attention to their contracts, service fees, and fine print. If you're looking for investment advice, none-of-the-above.

[wiggin]

I'm thinking of doing some individual investing and need to choose a broker. Anybody have preference between

1. TD Ameritrade
2. Schwab
3. Fidelity
4. E-Trade
5. Scottrade

I have used Schwab for a Roth IRA and Fidelity for an employer's 401(k). Obviously didn't choose Fidelity but honestly they are both fine. I'd say you should just go for the lowest costs possible - research what asset classes you'd like to invest in, and make sure your broker offers no-load, low management fee options that meet your needs. That's why I chose Schwab - they had a very low cost set of index funds that didn't require a large up front investment and lots of commission free ETFs. Other options you might want to add to your list include Vanguard, TradeKing, and OptionsHouse.

If you plan on trading regularly, other things might come into play, like the user interface/ease of use, trading costs, etc. But if you're just doing pretty boring buy-and-hold, most of these should be fine.

[GGT]

Merrill Lynch and Lehman Brothers said the same thing.....

[Dreadnaught]

I'm thinking of doing some individual investing and need to choose a broker. Anybody have preference between

1. TD Ameritrade
2. Schwab
3. Fidelity
4. E-Trade
5. Scottrade

TD Ameritrade is the most sophisticated, with probably the best technology platform. Though they are more expensive. That said, I think there's something to be said for going with a company whose main business is being a brokerage.

I actually consolidated with Vanguard recently. Their brokerage options are a bit clunky, and they provide no access to any analyst reports or sophisticated reporting but I get that elsewhere. But they are super stable, I can buy Vanguard funds in-house and their per-trade fees are low. I'm rarely trading with enough frequency to require all the wizardry.

I did make a risky but decent move this week and bought an oil/gas pipeline company (Kinder Morgan) whose shares were getting hammered irrationally. People just lump all the energy companies into one without thinking about what they do. A mid-stream oil pipeline company is basically just owning the energy transmission and its revenues aren't hugely impacted by energy prices. I think the market is undervaluing relative to the broader market, so I bought a bunch (plus it had a 7% dividend at the depressed prices!). So far have been rewarded. We'll see if the whole market falls apart this month.

[wiggin]

I agree that oftentimes sector-wide slowdowns are irrational, but I question your assertion that pipeline transit fees aren't impacted by energy prices. Low prices can have all sorts of effects on pipeline revenues, and it's far from clear what those are - highly dependent on the pipelines in question.

Biotechs were probably a good buy recently as well; they were all lumped into a big ugly mess after the Turing fiasco even though some of them are likely much less exposed to this kind of political risk than others. They had sky-high valuations before, so even after the drop they weren't cheap, but they were still a relative bargain.

[Dreadnaught]

I agree that oftentimes sector-wide slowdowns are irrational, but I question your assertion that pipeline transit fees aren't impacted by energy prices. Low prices can have all sorts of effects on pipeline revenues, and it's far from clear what those are - highly dependent on the pipelines in question.

They can in terms of impacting overall volume, but I don't think there is that much slack in the US pipeline infrastructure right now. And I don't think a pipeline -- which is mostly a fee-based asset -- is really impacted at the same rate as crude price swings.

[agamemnus]

Being, what about Robinhood? (no-cost trades) I have invites if you need.

Biotechs were probably a good buy recently as well; they were all lumped into a big ugly mess after the Turing fiasco even though some of them are likely much less exposed to this kind of political risk than others. They had sky-high valuations before, so even after the drop they weren't cheap, but they were still a relative bargain.

I think many biotechs were well-priced before the crash 2 weeks ago and they are still at basement prices. Especially compared to huge-to-no-PE "tech" companies like AMZN, LNKD, NFLX etcetc.

A few good ones that I follow or trade, roughly from low risk/reward to high risk/reward:
GILD
GERN
AERI
JUNO
ARWR

[GGT]

Scottrade got hacked the other day. Add "security" to the list....

[agamemnus]

Losing client info is technically getting hacked. I am one of the victims... I had an account during a very brief period a year or 2 ago, which I closed soon after (I didn't like the service). They probably kept the data as that would have been a huge coincidence that they got hacked at the same time that I had my account open.

Oh well, it's just client names and street addresses...

[agamemnus]

Guys, seriously, GET IN! Markets are rallying. Biotech is about to explode way past junk like Amazon.

Currently in or looking at: AERI CEMP GERN RDUS (least risk I.M.O.) || EXAS ITEK ESPR || ZFGN TTPH || OCUL OCAT SIEN ARWR || CLBS CYTX (riskiest)

[Dreadnaught]

I wouldn't do that if I were you.

I bought some things in the September volatility, but now I think I'm pretty much sticking to adding to short- and medium-term bonds probably for the rest of the year. Which feels wrong, because the chances of a US interest rate increase seem so slim and it will juice a stock market rally. Granted, I'm buying to hold forever so sometimes I feel I should just slowly and steadily buy. But simply doesn't feel right.

[GGT]

I bought some things in the September volatility, but now I think I'm pretty much sticking to adding to short- and medium-term bonds probably for the rest of the year. Which feels wrong, because the chances of a US interest rate increase seem so slim and it will juice a stock market rally. Granted, I'm buying to hold forever so sometimes I feel I should just slowly and steadily buy. But simply doesn't feel right.

Making up your mind isn't so easy, is it?. If you're "buying to hold forever" that means you're investing for the long-term and not short term capital gains. Don't feel bad that it doesn't "feel right" to simply buy low and sell high: that's the moral dilemma every ethical investor has in common.

[agamemnus]

So...

One of the ones on my list, OCAT, got bought out today. Up 90% today. (I didn't have shares... was thinking to buy in at a lower price!) CEMP, AERI, ITEK, GERN, RDUS, ESPR, OCUL, ZFGN, and EXAS ran very nicely as well since October 26. Still many bargains out there. The only ones not doing much were SIEN, ARWR, CLBS, and CYTX.

[Dreadnaught]

Making up your mind isn't so easy, is it?. If you're "buying to hold forever" that means you're investing for the long-term and not short term capital gains. Don't feel bad that it doesn't "feel right" to simply buy low and sell high: that's the moral dilemma every ethical investor has in common.

How much a few weeks changes things! Now with a small rate increase more likely.

I mostly aim to buy and hold forever, however I also feel this is a precarious time to do that. Timing still matters, as investing in particular companies or debt instruments at their peak will eliminate years of appreciation when those assets inevitably lose value.

Basically I'm having the dollar-cost-average vs. lump sums argument.

Separately, it's worth clarifying that I do sometimes sell things primarily to bail on ideas that were stupid. EG buying an oil tanker stock in mid 2008 without realizing how much shipping inventory was about to hit the market...during a major recession.

[Being]

Exp Ratio (NET)

Exp Ratio (GROSS)

I should probably understand the difference...right?

[Timbuk2]

Ok, so have now ventured into investing.

I have a small inheritance to play with, around 20% of which I have ploughed into investments.

I spent some time, as a complete novice to this world, investigating the different fund platforms provided by the likes of Hargreaves Lansdown, TD Direct, Fidelity etc, and decided that Fidelity ticked my boxes from a fees, accessibility and noviceability () point of view.

Sunk one chunk of cash into a middling-risk, middling-performance fund, with an allocation as follows;
Type: Net allocation (%)
Equity: 47.47%
Bond: 37.07%
Property: 0.05%
Cash: 7.55%
Other: 7.85%
Primarily US and UK equity holdings, with slightly less in the Eurozone, and then sprinklings elsewhere

And sunk another chunk, twice as big, into an Adventurous high-risk, high-performing fund, with allocation as follows.
Type: Net allocation (%)
Equity: 89.91%
Bond: 0.06%
Property: 0.01%
Cash: -9.51%
Other: 19.53%
Greater equity concentration on the US, 2/3rds as much on the UK, slightly less on the Eurozone, but a greater amount sprinkled on emerging markets and other areas as compared to the middling-risk fund.

These two funds I've considered as fire and forget, I'm adding a small automated amount each month to both funds, but that's it, they won't be touched for between 3 and 5 years, all being well.
Your views?

I've also stuck £2k into a simple share dealing account with Barclays who's trading fees are competitive, and with whom I mainly bank anyway. This is a small chunk purely for me to invest in shares for individual companies, and try to learn about market movements and how money can make more money.

LSE and AIM mainly, I suppose.

And this is where I'm a bit stumped as to where to start?
Do I sink £500 into Deutsche Bank for instance, as it's taken a hammering due to various FS circumstances, its share price is very low, it can only go up?? Is this the sort of thing I should be looking for?

[wiggin]

Two comments:

On your 'longish term' money I'm not convinced that an actively managed fund is the way to go. I assume the fees for your funds are pretty steep, especially the higher risk fund. You risk having your fees eat into whatever gains you manage above the market average. Unless you're really confident in the managers and the investment strategy, it probably makes more sense to go with a basket of index funds and not to try to beat the market. Just my 0.02.

For the 'play' money, your best bet is probably to stick with companies you understand and think are fundamentally undervalued. I assume you have a pretty good handle on Deutsche Bank's circumstances, but you have to ask yourself if the valuation is justified. Is there a substantial chance of a need to raise further capital, diluting your shares? Is there a chance of a bail-in, likely raising their cost of borrowing? Even if the above two don't happen, do we expect Deutche's return on equity to be better than lackluster in the coming years? These could all justify a low valuation, suggesting you wouldn't want to purchase the stock. However, if you feel like these aren't likely - and that Deutsche is in fact far healthier than the market is giving it credit for - it might be a decent medium-term pick. You could also trade based on news - if there is excellent news about Deutsche (such as a revised DOJ fine or whatever) that causes shares to rise (possibly temporarily) in response, you can pocket your gains and walk away without worrying about the longer term.

I think the important thing is to find a company who you feel has a solid business model and financial footing but which is - for one reason or another - currently at a low valuation. I've been wondering if Samsung is a decent bet right now - while the Note 7 debacle is indeed very bad for their brand, they might be able to get back on their feet quickly. That being said, their stock hasn't really taken that much of a hit. I would probably stay away from sectors with frothy valuations - much of tech and pharma in particular - but even there you can find some relative bargains.

Lastly, it's important to establish your risk tolerance and investing horizon for this money. Would you be freaked out if you lose 20% of it? What about 50%? Are you willing to buy something and wait for years, potentially, for your strategy to pan out, or are you interested in more frequent trading (as a corollary, how does the tax situation factor in regarding capital gains on short and long term scales?)? Some ideas might not work because they are either too risky or take to long to bear fruit.

[EyeKhan]

Two comments:

On your 'longish term' money I'm not convinced that an actively managed fund is the way to go. I assume the fees for your funds are pretty steep, especially the higher risk fund. You risk having your fees eat into whatever gains you manage above the market average. Unless you're really confident in the managers and the investment strategy, it probably makes more sense to go with a basket of index funds and not to try to beat the market. Just my 0.02.

I agree totally. Data has shown that actively managed funds rarely beat the overall market in any consistent way. The most consistent thing about them are the comparatively steep fees. Index funds are the way to go.

[wiggin]

There are some things that index funds don't generally do - they aren't often leveraged (like Tim's high risk fund is), nor do they tend to provide exposure to alternative asset classes (excepting sorta property). For that you need more sophisticated investments. But for the straightforward 'set and forget', index funds are hard to beat.

[Timbuk2]

Thanks for your input Choobs, Wigs.

So, makes me wonder why managed funds exist, if it's generally accepted that a punter's money is better placed in index-linked funds?

Will look into moving my two managed funds into an index fund - don't think I pay a penalty on the switch.

[Khendraja'aro]

There are some things that index funds don't generally do - they aren't often leveraged (like Tim's high risk fund is), nor do they tend to provide exposure to alternative asset classes (excepting sorta property). For that you need more sophisticated investments. But for the straightforward 'set and forget', index funds are hard to beat.

I'm dubious on the value of active index funds, however, when the passive ones usually overtake them (due to performance but also due to higher fees). Or when they're overtaken by a cat.

[EyeKhan]

Thanks for your input Choobs, Wigs.

So, makes me wonder why managed funds exist, if it's generally accepted that a punter's money is better placed in index-linked funds?

Will look into moving my two managed funds into an index fund - don't think I pay a penalty on the switch.

Hmm. Why do managed funds exist... That's probably a more philosophical question than it sounds at first glance, and I'm sure answers abound. The higher fees are necessary to pay for the fund management expertise, which is advertised to deliver higher returns for investors than the overall market would. A lot of people believe a hot-shot fund manager can beat the market, so there's a customer base, and they are willing to pay for it in higher fees, so there is more money to be made vs an index fund. And the fees seem really low, as a % of the overall investment, but that's deceptive. It's probably not just cynical scamming BS - there really are fund managers who knock it out of the park compared to the overall market - some years. But apparently not every year, and not regularly enough for managed funds, on average, to beat the index funds over the long term, once the fees are taken into account.

Edit:

From the Motley Fool:

http://www.fool.com/investing/2016/0...ual-funds.aspx

[Timbuk2]

Thanks for the link - makes a lot of sense.

[wiggin]

Thanks for your input Choobs, Wigs.

So, makes me wonder why managed funds exist, if it's generally accepted that a punter's money is better placed in index-linked funds?

Will look into moving my two managed funds into an index fund - don't think I pay a penalty on the switch.

As EK suggested, it's complicated but it has a lot to do with history. Index funds only came into the scene in the 70s and by then professionally managed funds were well-entrenched. I think that most retail investors nowadays do see the value in index funds and put most of their 'real' savings into one because it's hard to beat. Even more sophisticated 'funds of funds' like target date funds or the roboadviser funds generally use index funds for their composition because they are cheaper and deliver solid returns (especially when fees are taken into account). There are some caveats - not all retirement accounts offer access to index funds (the subject of many lawsuits now), which is part of how the managed fund has managed to keep going. But there are people who have a lot more wealth than your typical retail investor and they want specialized advice, and much broader exposure. They want a fund manager who can be smarter than the market in certain circumstances - e.g. being greedy when everyone else is scared, to paraphrase Warren Buffett. And they also want the fund manager to pursue sophisticated strategies (a la hedge funds) that do more than just pick a stock or bond and wait. Even more so for stuff like investing in private equity, or venture capital, or infrastructure.

This approach can delivery crazy-good returns, but the chances of you being able to identify the small proportion of fund managers who can routinely do so are not very high. So for real money it frequently makes sense to stick with a simple basket of index funds (typically US investors do a mix of US stocks, foreign stocks (maybe with a split between a developed ex-US and developing world fund), and a bone market fund, and change allocation of funds from riskier to safer assets as one gets older).

For play money, though, go crazy! Have fun.


(BTW make sure you won't have a redemption fee or the like for your funds - you might need to wait a fixed period before moving your money out the managed funds, and I would definitely NOT advise switching to an index fund if there is a punitive fee. Wait out the redemption period and then you'll be good to go.)