Early in my career I had a great mentor who told me: Steer clear of complexity, and keep it simple. Did I listen? Hell, no!
In fact, even yesterday I spent a fair part of the evening researching stock prices, volume and gain/loss data for another in my wonderful series in which I hilariously try to come up with a “magic algorithm” that’ll help me pick winning stocks automatically while I sleep.
Using a single stock in my research, Carnival Cruise Lines, I determined many things (some of which were enlightening and others not so much….but none of which I can honestly say make for great blog post reading). Don’t get me wrong….I’m loving the research (I’ve got geek blood running rampant in these veins), but even I’m bored as I read my reports on the matter. In short, now that I’m deep in the weeds on this, looking at piles of data that I’ve accumulated, I think I’m going to discontinue sharing because it’s….well….kind of a mood killer to read. 😉
That doesn’t mean that there aren’t lessons to be learned from digging into this sort of project. My goal in this (besides building myself a magical ride to financial security) was to show a few points:
- The real technical analysis is difficult and lives “in the weeds.” It isn’t an easy task. If you aren’t going to stay on it, don’t try.
- Even if you DO stay on top of it, what’s the real point? By how many points will you beat an index fund? Is it worth ignoring your real job and your family?
- There are significant opportunities to come up with false data that on the surface looks fantastic….such as the myth that there might be a foolproof percentage that stocks will fall by (or, to my thinking, foolproof enough that you can average out your wins and losses and come out a winner often enough to make this attractive).
To those people who think that Wall Street can’t be beaten, I say, “baloney.” (On a side note, I love baloney, but I haven’t had any in years. Cheryl has banned it from the house.) A person with a small amount of money can deploy it into a handful of superior companies and achieve incredible results. I know some smart people who have done so. The problem comes when you have tons of money to invest (like a mutual fund or pension fund manager). The manager can’t move quickly enough to achieve above market results. Armed with oodles of time and the ability to tweak a system, you can definitely find great results.
But for the vast majority of people who read Stacking Benjamins, I’d strongly advise you to stick with a well reasoned and diversified financial plan (as I’ve reiterated from the beginning of this series)…and we’re going to go back to talking about that course starting tomorrow.
As for me? I’m going to keep playing with this formula because I think there might be an intriguing correlation between price drops, stochastic, and volume…
Mrs PoP @ PlantingOurPennies
So on days when you do a 1 mile slow jog the market the market goes up ~ .3%? Nice correlation. =)
Stock market is not everybody’s cup of tea and I am very much new into this investment world. What I have been following is diversified financial plan so that I do not risk much with my investments. All the best for your continued effort of finding the best formula
Thanks, Rita! It’s definitely more “play” than hardcore research.
Great advice here. People think that the more complex investment, the better the returns, but index funds are simple and can outperform actively invested funds. Good point about fund managers not being able to move quickly enough because they have so much money. I also like baloney but have no idea what is in it so try to avoid it.
An interesting story appearing lately, Andrew, is that managers are saying so many people index now that it might really be a great time for a good active manager to shine. Don’t get me wrong….I’m not signing up for the job….but it’s an interesting thought.
Funny about the bologna: the kids beg me to buy it every time we’re at the store, and there’s not much they beg for, but I just have to say “no”. There has to be something addictive in those slices of God-knows-what. 🙂
I’ve been working with some of those formulas after reading Rule #1 (Phil
Town). In the meantime, or maybe for the long run if I never get the magic
formula figured out, I’m concentrating on mutual funds. I do have one index
fund … nice because the management fees are so much lower.
I won’t even try investing on my own via picking stocks. I’m big on the simple age adjustment investment funds like via Vanguard. I may not make as many riches as people who do invest on their own but it’s a lot easier for me!