Ask HN: Investments
What do you use to invest your savings? How do you decide what stocks to buy/keep?
12 comments
Just head over to /r/wallstreetbets to see all the things to not do. Or... leverage x3, yolo, and join in the yacht club. Up to you.
Want safe returns? They're smaller but have less risk. Index funds, CD's, t-bonds. Want lots of money? You take a gamble.
Unless you are applying machine learning etc into higher freq trading, I'd avoid stock picks in general. The market thrives off little guys shoveling cash into the mouths of big movers who have faster connections and data sources (bloomberg terminals), know more, and move faster on info. Algorithmic trading accounted for over 85% of market volume in 2012!
If you are really interested though, I think the key differentiator for those who still pursue more risky options is hedging techniques.
I'm just a sysadmin learning data science and wanting to apply it to the market, only paper trading so far, so take what I say with a grain of salt.
Want safe returns? They're smaller but have less risk. Index funds, CD's, t-bonds. Want lots of money? You take a gamble.
Unless you are applying machine learning etc into higher freq trading, I'd avoid stock picks in general. The market thrives off little guys shoveling cash into the mouths of big movers who have faster connections and data sources (bloomberg terminals), know more, and move faster on info. Algorithmic trading accounted for over 85% of market volume in 2012!
If you are really interested though, I think the key differentiator for those who still pursue more risky options is hedging techniques.
I'm just a sysadmin learning data science and wanting to apply it to the market, only paper trading so far, so take what I say with a grain of salt.
I agree with the bottom line here, but there is plenty of opportunity for market making strategies without going into high frequency trading (which you're not going to be doing as a solo retail investor anyway). There are opportunities where demand is available but liquidity is disproportionately lower. You'll need a lot of capital, but as a smaller investor it might be worth it for you whereas larger firms might not find it worthwhile (or know about it, yet).
Just a clarification, because it seems like the most mentioned facet of what traders do these days is something with "machine learning" and "high frequency trading", but the actual use of either of those in active trading is small. Even in algo trading, the "machine learning" is very often just rebranded statistics, and not very complex statistics either (think linear regression).
That said, unless you have a real plan to do better than average in the market, you probably won't, so the advice to just invest passively is right on the mark.
Just a clarification, because it seems like the most mentioned facet of what traders do these days is something with "machine learning" and "high frequency trading", but the actual use of either of those in active trading is small. Even in algo trading, the "machine learning" is very often just rebranded statistics, and not very complex statistics either (think linear regression).
That said, unless you have a real plan to do better than average in the market, you probably won't, so the advice to just invest passively is right on the mark.
I'm a big fan of index funds or robo advisors (on top of index funds) for the bulk of one's investments. A little individual stocks on the side and a high-interest checking / savings account are a decent way to round it out.
If you're looking at investing five figures or more and unsure of allocation, it's worth doing a bit of research or sitting down with a financial professional.
Also remember that everyone has their own risk tolerances. If people give you advice like "never buy individual stocks", that's just their way of saying that their risk tolerance is below average. It's worth feeling out how much you'd be comfortable losing in exchange for potentially greater rewards.
If you're looking at investing five figures or more and unsure of allocation, it's worth doing a bit of research or sitting down with a financial professional.
Also remember that everyone has their own risk tolerances. If people give you advice like "never buy individual stocks", that's just their way of saying that their risk tolerance is below average. It's worth feeling out how much you'd be comfortable losing in exchange for potentially greater rewards.
My primary investment is in Australian residential property, secondary is broad index funds (Vanguard ETFs), third is cash. I don't trade stocks, it's too much like gambling IMO.
I've been looking into Vanguard ETFs recently but it looks like the quarterly dividends don't even make up for inflation. The total stock market ETF is paying about $2 yearly at a market price of around $125.
What specific index funds do you invest in?
What specific index funds do you invest in?
> Vanguard ETFs recently but it looks like the quarterly dividends don't even make up for inflation
The gain is expected from capital growth, not dividends.
The gain is expected from capital growth, not dividends.
I suggest you do some reading before getting started with investing.
Bogleheads wiki and forum has good information and knowledgeable forum participants.
https://www.bogleheads.org
https://www.bogleheads.org/wiki/Main_Page
In addition, following books will give you good fundamental understanding of why and what of investing.
Your Money or Your Life, Vicki Robbins ...
Millionaire Next Door, Thomas Stanley
A Random Walk Down Wall Street, Burton Malkiel
Personally, 95% of my investment portfolio is in Index Funds/ETF. The other 5% I use as play money that keeps me engaged in investing, finance, and trying out new strategies and investments.
Bogleheads wiki and forum has good information and knowledgeable forum participants.
https://www.bogleheads.org
https://www.bogleheads.org/wiki/Main_Page
In addition, following books will give you good fundamental understanding of why and what of investing.
Your Money or Your Life, Vicki Robbins ...
Millionaire Next Door, Thomas Stanley
A Random Walk Down Wall Street, Burton Malkiel
Personally, 95% of my investment portfolio is in Index Funds/ETF. The other 5% I use as play money that keeps me engaged in investing, finance, and trying out new strategies and investments.
I have all of my investments in an S&P 500 ETF. I've been wondering - should I diversify my ETFs or go all-in on the S&P 500? In other words, go large cap only, or large + mid (and or small) cap?
You may want to consider reviewing Boglehead wiki link I posted, specially the section about Asset Allocation. If all your investment is in S&P500, you are exposed to US Large Company stocks only. You may want to consider diversifying your portfolio to other asset classes. At minimum, you want to setup 3 ETF/fund portfolio: Total stock market, Investment Bond, and International Equity.
Studies have shown that a 60:40 stock:bond portfolio performs almost as well as all stock portfolio but with lower yearly volatility.
Studies have shown that a 60:40 stock:bond portfolio performs almost as well as all stock portfolio but with lower yearly volatility.
Don't pick stocks. Put your money in index funds.
100% of my savings are in index ETF or funds.
But I have a small yearly budget (less than 5%) for gambling with stocks. I enjoy picking stocks and reading financial news. I got lucky with a few picks but mostly it is a wash. This is a hobby for me, just requires a lot of discipline to not go above yearly budget.
As for how I pick stocks; financial news, regular news, if I like the company & its CEO. I definitely read up on CEO's biographies. Finally, I would do financial analysis, mostly avoid companies with a lot of debt, or very high PEs.
But I have a small yearly budget (less than 5%) for gambling with stocks. I enjoy picking stocks and reading financial news. I got lucky with a few picks but mostly it is a wash. This is a hobby for me, just requires a lot of discipline to not go above yearly budget.
As for how I pick stocks; financial news, regular news, if I like the company & its CEO. I definitely read up on CEO's biographies. Finally, I would do financial analysis, mostly avoid companies with a lot of debt, or very high PEs.
Here's a similar Ask HN from five days ago if you didn't see it:
https://news.ycombinator.com/item?id=14256980
(I recommend using the search box at the bottom in the future.)
https://news.ycombinator.com/item?id=14256980
(I recommend using the search box at the bottom in the future.)
Thanks! I didn't see that one, I'll be sure to search first in the future!
Businesses I build my self. In a way when you buy a stock you are buying a fraction of a business at a premium rate.
Why not invest in your own business, you get total ownership at a huge discount to the stock market.
Why not invest in your own business, you get total ownership at a huge discount to the stock market.
How to invest in index funds as a foreigner residing outside US?
Vanguard automatic investment in S&P500 index fund. Make it every week to get 52 investments per year. Increase the amount of weekly investment each time your income goes up.
100% of my savings are in ETFs (XAW.TO and XIC.TO).
I'm looking at getting back into cryptocurrencies (Bitcoin and Ethereum).
I'm looking at getting back into cryptocurrencies (Bitcoin and Ethereum).