The Stock Market Delimma

[Solitaire]

Oh, it must have been two years ago. I suggested that we buy stocks
in the down market and see how we were doing a year later - sort of a
contest. I got a share of each: ADVP, COCO, PFCB, and SCRI. Well, didn't
do too well compared to the guy who put it all on ORCL.

Anyway, my new broker called me up and said that CMX was buying ADVP.
Why on earth are they doing this?

Anyway he asks me if I want to sell. I have no idea.
Does anyone here know how to evaluate a takeover?

P.S. Yeah, I know, I should've bought YHOO and AMZN, much simpler.

 

[Malachi151]

Looks to me like now is the time to sell. I go by the take the money and run strategy in the stock market.

It hit $47 today in high volume, I would have sold just as soon as it started to level off, which was juust under $47.

How much did you get it for?

BTW, I made a few bucks yesterday myself on ASTM. Bought it at $1.10 and sold it at $1.40 over a 4 or 5 week day period. Of course I had a lot of shares, not that I made a fortune, but thats how I doit, I just make many modest amounts, whcih I find a much more sure way to profit then trying for the big gains.

BTW, I;m not sure if you get the Wall Street Journal, but they rate it at a moderate buy.

Personally I'd sell it ASAP assuming that you paid less than $30 for it. When you said a share did you mean you bought litterally ONE share? If so then why even worry about it?

 

[Jaggy Bunnet]

Personally I'd sell it ASAP assuming that you paid less than $30 for it. [/B]

Why does the price you paid have any relevance to whether you should sell it now?

Surely you sell it now if you think the price will go down and hold it if you expect the price to increase? Neither of these is in any way affected by what you paid for it.

 

[Ziggurat]

P.S. Yeah, I know, I should've bought YHOO and AMZN, much simpler.

If you actually want simplicity, it's really quite easy. Buy a low-cost total market index fund, and keep buying on a regular basis. That's how to make money on the stock market. Otherwise, chances are it's just going to be your broker making money off you.

 

[Jon_in_london]

Why does the price you paid have any relevance to whether you should sell it now?

Well if the price you paid is higher than what its worth now than its probably not a good idea to sell is it, dumbass!

 

[Malachi151]

Re: Re: The Stock Market Delimma

If you actually want simplicity, it's really quite easy. Buy a low-cost total market index fund, and keep buying on a regular basis. That's how to make money on the stock market. Otherwise, chances are it's just going to be your broker making money off you.

Not really, that's good way to have lost about 60% of your value over teh past 3 years.

 

[The Don]

60 % ?

Presuming that you're talking about the Dow Jones Industrial Average....

All time high.... 11722.98

Current value 9550(ish)

loss - around 20%, less whan you factor in the fact that there will be divident payments included in the fund value

 

[Malachi151]

60 % ?

Presuming that you're talking about the Dow Jones Industrial Average....

All time high.... 11722.98

Current value 9550(ish)

loss - around 20%, less whan you factor in the fact that there will be divident payments included in the fund value

The Dow is not an all market index, its the DOW Index....

 

[swellman]

Well if the price you paid is higher than what its worth now than its probably not a good idea to sell is it, dumbass!

Nice! You showed him!

Do trade professionally?

 

[The Don]

The Dow is not an all market index, its the DOW Index....

It does represent the largest corporations and therefore the majority of the stockmarket value.

Using the S&P 500 - a wider measure accounting for a greater proportion of the overall marke

Value on 5 September 2000 - 1512
Value today - 1024

Difference, a little over 30%, again excluding dividend income

More than 20% but nowhere near your crass 60% figure

 

[Ziggurat]

Re: Re: Re: The Stock Market Delimma

Not really, that's good way to have lost about 60% of your value over teh past 3 years.

That's exactly what I've been doing for the past three years, using the Vanguard Total Stock Market index (which tracks the Wilshire 5000), and I haven't lost any money. I bought high at the beginning, but bought low during the dip, and the market value is above my cost basis right now. That's the wonder of dollar-cost averaging. And in the long run I'm guaranteed to beat most mutual funds out there just on the basis of low costs and low turnover. At no point was it ever even close to 60% down from its high. You don't seem to have your facts straight.

 

[Ziggurat]

Originally posted by Jon_in_london
Well if the price you paid is higher than what its worth now than its probably not a good idea to sell is it, dumbass!

This is the classic mistake of sunken costs. It makes no difference what you paid for an asset, you already paid, and you can never "recover" that cost. Either the asset will go up in value in the future or it will go down, and that rarely has any correlation to what it did in the past. Waiting for a depreciated asset to come back up in price to what you paid for it is just asking for trouble. I find it ironic that you got hostile towards another poster, insulting their intelligence, when it is you who clearly doesn't understand the basics. Next time, try a little more humility - you won't look so ridiculous when you're wrong, and it doesn't hurt when you're right either.

 

[Malachi151]

It does represent the largest corporations and therefore the majority of the stockmarket value.

Using the S&P 500 - a wider measure accounting for a greater proportion of the overall marke

Value on 5 September 2000 - 1512
Value today - 1024

Difference, a little over 30%, again excluding dividend income

More than 20% but nowhere near your crass 60% figure

Yes 60% was an exageration, but the Dow and a total market index are nothing at all alike. The Dow generally covers the most successful companies in the market while in reality there are more losers than winners in the total market. The Dow, or the SNP 500 ot the Wilshire 5,000 are all cream of the crop indexes.

They are generally going to outperform the total market.

That's exactly what I've been doing for the past three years, using the Vanguard Total Stock Market index (which tracks the Wilshire 5000), and I haven't lost any money

Well, duh, if you bought in right after the major crash then of course that will be the case. If you are talking about more general strategies though simply putting all your money into index funds and leaving it there is no guarentee of success at any given time and no protection against major market collapses.

When the market crashed I moved my money our of stock indexes and into bonds, precious metals, and real estate, which combined saw a rise of over 40% or so in asset appreciation. Over the past 5 months I have moved it slowly back into stocks and out of the bonds. That's a lot more profitable than just dumping stuff into index funds and letting it sit.

A lot of my "investing" though is just trading, where the money goes in and out of stocks in short periods of time, days or weeks. This can be somewhat tedious, but it provides a steady and relatively secure way to build up money as I just take small profits of a quarter point to a whole point at a time, and then trade again, which pockets the profits safely every time and has no risk of long term failures or crashes. You can make money buying or shorting when the market is going up or down, and you can make money while the markets or chrashing or booming, it makes no difference.

On the few stocks that I pick that don't go the way I wanted I just hang on to them until they do eventually, but that's less than half of what I trade. I generally just buy, and then set a limit order to sell on and whenever it hits that limit it sells, and that typically takes 1 day to 1 week, but in a few cases its taken months, and I have a few stocks still hanign around waiting to hit those limits.

But, that's all on top of investments in mutual funds, indexes, bonds, etc.

 

[Solitaire]

Originally posted by Malachi151
Looks to me like now is the time to sell.
I go by the take the money and run strategy in the stock market.

I'm a buy and hold type, I generally stay in a stock from five to ten years.
I've decided to stay because I believe that the combind company is worth
more in the future than the current price. It has gone up another dollar a
share today and the volitility has decreased - something I care about.

 

[Solitaire]

Re: Re: The Stock Market Delimma

Originally posted by Ziggurat
If you actually want simplicity, it's really quite easy. Buy a low-cost total
market index fund, and keep buying on a regular basis. That's how to make
money on the stock market. Otherwise, chances are it's just going to be
your broker making money off you.

True.
But I still like to pick the stocks despite the efficient market hypothesis.
Mutual Funds May Not Be Problem Free

 

[Ziggurat]

Well, duh, if you bought in right after the major crash then of course that will be the case.

You misunderstand. I bought before, during, and after the crash. I continue to buy on a regular basis, every month. It's called dollar cost averaging. Surely you've heard of that?

If you are talking about more general strategies though simply putting all your money into index funds and leaving it there is no guarentee of success at any given time and no protection against major market collapses.

Of course not. Nothing is a guarantee of protection against market collapse. Active trading strategies aren't either, because you have to guess when a collapse is going to happen. You also have to guess about when to buy back in. Most people are not likely to get both guesses correctly.

When the market crashed I moved my money our of stock indexes and into bonds, precious metals, and real estate, which combined saw a rise of over 40% or so in asset appreciation. Over the past 5 months I have moved it slowly back into stocks and out of the bonds. That's a lot more profitable than just dumping stuff into index funds and letting it sit.

And more risk, and more effort. And I don't advocate just "dumping" money into an index fund, I advocate dollar cost averaging into an index fund over a long time period. Here's a simple, low-risk alternative to your plan: have a balance between indexed stocks and bonds. When stocks go down, you sell bonds to buy stocks, keeping your balance. When stocks go up, you sell stocks and buy bonds, again, keeping your balance. You reduce your risks greatly (you don't overinvest in stocks when the market gets in a bubble), and you make sure you're buying when the market is down. Yes, it can be beaten if you time the market and you're right. But that's a very risky bet. If you want something simple and low-risk, your approach is not appropriate. The approach I laid out is simple enough for anyone, requires very little effort, and is guaranteed to beat most investors. Congratulations if you can beat the market, but it's foolish to suggest that most people should even try, because almost all will fail.

 

[Ziggurat]

Re: Re: Re: The Stock Market Delimma

True.
But I still like to pick the stocks despite the efficient market hypothesis.
Mutual Funds May Not Be Problem Free

Which is why you need to be careful about which mutual funds you buy. The scam you're refering to reduces returns for long-term investors. But even without knowing that these funds were being abused in this manner, it wouldn't be hard to figure out that the funds in question had problems. Why? Because of high turnover. The fund has to continually buy and sell shares. High turnover is common among mutual funds, and hurts long-term investors even if it isn't being explicitly exploited. Keep an eye out for high turnover, as well as high management costs, advertising costs and loads.

More specifically, you can also find mutual funds that specifically discourage such short-term speculation through their terms of service - ie, they'll forbid more than a few round trips (buying, selling, buying again, etc) in any given time period. These kind of policies protect long-term investors against such scammers.

Unless you have a very large portfolio, it's hard to get diversified with individual stocks, meaning you're taking on more risk than you need to. And even if you have a large portfolio, you either need to pay someone to manage it (in which case you really just have your personalized mutual fund) or else you have to do it yourself, which is a lot of time and effort. Not a good approach for most people.

 

[Malachi151]

This isn't that complicated.

S&P 500 over the past 5 years:

Long term bond index over teh past 5 years:

Around late 2000 I started moving my money from High Growth Mutual funds and stock indexes into Long term Government Bonds.

By mid 2001 I had zero in stocks anymore in my retirement account and everything in bonds, metals, and real estate, all of which have gone up dramatically over the past 3 years while stocks have generally dropped.

Then, right before the war in Iraq I started moving my money out the bond index and into Value Growth mutual funds and Convertable Securities. Actually around the first of 2003 I moved about 25% out of my bonds into Convertable Securities, then later moved more into stocks. Now less than half my funds are in bonds, but I'm still not too sure about this recover so I still have about 35% in bonds, and I'm starting to move out of the precious metals into stocks. I'm just leaving the real estate alone.

No, I have no desire to put money into sinking ships. I knew good and well, especially after the 9/11 deal that the economy was going to have a long downturn, thats why I pulled my money out of stocks and put it into bonds, my money has seen sustained growth non stop for essentially the past 4 years since I really started investing.

Yes it does require knowing what to do, but I do know what to do so I do it. I was especially proud of myself when I moved a large portion of my money out of bonds right before they fell. I've pretty mcuh times everything correctly over the past 4 years within weeks of major moves, always a little ahead of the game, its because I pay attention and have an understanding that goes beyond the news and major headlines.

I bought United Airlines stock when it fell and have made money on it several times as it has gone up and down, its dropped two times in which I bought it at the bottom and sold it when to rallied back up. I am still holding a little now because I missed the news when they announced that the shares will likely be worthless when they finish bankrupsy, but its not a big deal as I've already sold most of it and made money, so I'm just going to hold it and see what happens and its already come up from 0.40 back to 0.75. I was thinking about buying more at 0.50 but I decided against it, but if the shares don't go worthless, which they probably will, then its going to go over $4 pretty quick I am sure, so I'll just let the littel bit I have left ride.

Lots of strategies can work in the stock market, but some work better than others. Moving you rmoney to the right place at the right time is better than dollar cost averaging, but it does take more work, more research, and more understanding and more paying attention, and it assumes that the future is always going to be bright.

I'm going to stop investing in American stocks anyway and start investing more in Asia and South America. Now that the Cold War is over I think that South America is going to do pretty well now that the CIA has its as out of there so much and isn't killing union workers left and right. South Korea is risky due to the threat of NK but as things get closer to election time if I thnk that Bush is not going to be elected then I'm putting money in South Korean indexes. Thailand has been good and still is a good place to invest, Indonesia is doing better now that the CIA is out of there so much. The Asian Tiger is going to just keep rising and rising, so that's where my money is going to go. Eventually I'll get around the researching the Russian stock market and probably put money there too. Russia has a lot fo investment potential right now, just still a little shakey with some corruption and such in the markets right now.