To all you financial experts
- Thread starter Robert Mugabe
- Start date
You nailed it!
The House (brokerages and financial advisors) always wins because of the rake.
Very true. Gambling. Nary a word of warning when it crashes. In spite of all the information out there. The pigs get slaughtered.
No one is going to look better after your money than you. I would suggest that you learn Technical Analysis of stock charts and make buy and sell decisions based on that knowledge.
There are many books on that subject and YouTube is definitely your friend as well.
Open up a free stock chart site, like TradingView and look up your stocks. Go to the weekly chart and use a 30 moving average. A picture is worth a thousand words. You will immediately see how good or bad your stock is doing. A stock price can only do 3 things. It can go up, it can go down or it can move sideways. So if the 30 moving average is going up and the stock price is above the 30 moving average, you are doing well and most likely should hold on to it. And if the 30 moving average is going down and price is below it, your stock price is going down and probably will continue to do so.
This of course is a very simplistic way of explaining Technical Analysis but even such a simple technique will give you some insight into the stocks you own and might give you an incentive to learn more about it. And you will never have to rely on others to take care of your money. :encouragement:
There are many books on that subject and YouTube is definitely your friend as well.
Open up a free stock chart site, like TradingView and look up your stocks. Go to the weekly chart and use a 30 moving average. A picture is worth a thousand words. You will immediately see how good or bad your stock is doing. A stock price can only do 3 things. It can go up, it can go down or it can move sideways. So if the 30 moving average is going up and the stock price is above the 30 moving average, you are doing well and most likely should hold on to it. And if the 30 moving average is going down and price is below it, your stock price is going down and probably will continue to do so.
This of course is a very simplistic way of explaining Technical Analysis but even such a simple technique will give you some insight into the stocks you own and might give you an incentive to learn more about it. And you will never have to rely on others to take care of your money. :encouragement:
Thanks for pointing out my error, but I was still right in that you have to consider tax consequences before doing things on a whim.
And this (using technical analysis) is the worst advice you can get. The second-worse is "look at specific stocks" (too much volatility with the same expected return) or "find an investor divisor" (the best advice he can give is "buy passively-managed ETF" which is the best thing to do, so, no need to pay money for it; however, to "show" to you that your are paying him for something, he can recommend specific stocks, which means same return but higher risk).
Can you please explain why you think that Technical Analysis is bad? As it is a major component along side fundamental analysis of any professional trader's and investor's strategy.
Also you misunderstood OP's question, he wants to know if he should hold or sell stocks that he currently holds and not what to invest in. My advice was on how to determine quickly what shape his stocks are in.
Your statement about ETF's is completely wrong as well. Any individual underlying asset of an ETF will have a potential of much greater return than the ETF itself. As a trader volatility is your friend and using technical analysis allows you to navigate the highs and lows accordingly. The only people that are scared of a volatile market are people who do not know anything about it. I would suggest that you belong to that group.
Technical analysis has no underlying explanation behind it: it is simply based on past found relationships and, given myriad of possible relationships, there is always some to be found not because they are valid, but because of limited data. The only possible theory behind technical analysis is that some unobservable behavioural bias exists that all investor are subject to (which is not a valid explanation since institutional investors represent a much large portion of all investors) or the is a "tag war" between different trading algorithms where one tries to make money based on other who use different trading algorithms. When others change their algorithms, the wining algorithm is no longer winning. There is no "correct" way to use technical analysis: it is more like a superstition. It may be a part of trading algorithm for high-frequency traders where "near-arbitrage" situations exist, but for investors, and even for daily traders, it is, at best, useless, and, at worst, prevents one from proper diversification.
"In finance, technical analysis is an analysis methodology for forecasting the direction of prices through the study of past market data, primarily price and volume." Something similar to what the flattening of the curve means in relation to Covid-19 infection rate. As the numbers of infected people keeps rising there is an assumption that that numbers will keep on rising until such time the the numbers start getting smaller hence we will have a trend reversal and expectation will be that less and less people will be getting infected. It might not be true but statistically that's whats most likely is going to happen.
Technical analysis is a study of price action. And everything, all the information, good or bad news about a certain stock is already priced in. Price action is the true reflection of current investor sentiment about specific stock. Technical analysis allows you to determine the current trend of specific chart. Is it bullish or bearish, is it going up or down? It's not a crystal ball that tells you what will happen it simply indicates a trend which will continue until it stops and reverses. And technical analysis will help you to determine when that happens as well.
Algorithms had to be written down by humans and they based them on changes in price action as well.
Price action reflects investor sentiment about any given stock at this particular moment. Look at Tesla, it's stock went over $1000.00 today and yet Tesla is not a profitable company and they are loosing money. On January 2 this year Tesla stock was about $400.00. Using technical analysis and following the price action you could have made a lot of money. And you will be able to do it again and again using technical analysis.
BTW: Profitable Day traders make buy and sell decisions based strictly on Technical analysis! :encouragement:
Read this book:
Determine that even professionals can be beaten by a monkey. Good luck on your gambling!
Most day traders are momentum traders and technical analysis is virtually useless, although it might help to quantify the current risk environment they are working in.
Technical analysis can be potentially useful for trend traders, not day traders.
The problem is that it can take a long time for the signals to be triggered, and once you get in and out, it can take a really long time for the next tradable trend.
This is, indeed, a Technical Analysis and it is exactly my point: it is trying to find past patterns (that always exist since there are infinite number of patterns) and apply it to predict future performance. Markets may not be semi-strong form efficient, but they are definitely weak form efficient. The main question any investor or trader must ask himself: am I smarter then than everybody else and am I able to collect and analyse the same amount of data as large financial firms do. If the answer is no - the best way to do is passive ETF investment. Technical analysis has no real support behind it. You can, as well, look on correlation between the weather on Mars and stock market: I am sure you can always find some pattern.
XIU or VCN: they both track the market, have low MER and very liquid. If you want U.S. diversification - buy similar U.S. funds, but you will have to pay higher taxes on dividends paid by foreign companies (not a big deal since dividends are much smaller than expected capital gain)
Anytime you want to use such trading strategies, as yourself the following questions; how many people that are smarter than me and with more resources invest in the market? Momentum trading and mean reversion was a big thing a couple of decades ago, but almost any study that come up with some kind of algorithm base on the past data fails on new data.
Where are you getting your information from? What do you think "momentum" means?
"Momentum trading is the practice of buying and selling assets according to the recent strength of price trends. It is based on the idea that if there is enough force behind a price move, it will continue to move in the same direction."
Momentum means price action, the direction of price movement which Technical analysis helps to determine. It's impossible to be profitable day trader and not study price action and technical analysis. The simple calculation of Risk/Reword is strictly based on technical analysis.
Well, some people believe that the is a winning strategy to play roulette, some people believe in technical analysis, some even believe in God. What I have learned is that it is not possible to reason with true believer.
You suggest buying ETF's - no argument from me on that front, works well for a lot of investors.
What you do not seem to cover/suggest is what the OP should do with his existing stocks within his portfolio? Sell them all and flip over to ETF's only?
Most of these people have basically ignored the factors that are driving stock markets at this moment.
Federal governments have recently flooded societies with billions of dollars... and with interest rates at or near ZERO... all of that money has to go SOMEwhere (it can't all fit in a coffee can out back)... SO giant chunks of it are going into the stock market, and that is why stock markets are generally thriving right now.
Now in SOME ways, it is parallel (although not yet precisely equivalent to) those scenes you sometimes read about in South America where you need a wheel barrow full of cash just for a grocery run, AND where you HAVE to put your holdings in a bank overnight to draw interest that will keep most of the way up with inflation (translation: consumer prices ARE going up these days, at least in the short term)... so putting your money in the market, at even some small return, is better than the "zero" that is essentially your option.
Of course to diversify is a hedge against disaster... perhaps even some gold, in case things turn south in a huge way...
BUT, generally, with so many people needing to put their money SOMEwhere, the markets have detatched themselves from the general mayhem in the streets (or that which stays home from the streets (the malls, the auto dealers, and the airlines) in 2020)... and their general near-ish term outlook is fairly decent. The LONG-long term outlook is always pretty decent... so unless you plan to buy right NOW, and then sell in February to purchase that beachfront condo in the tropics... then markets are likely going to be one of your better present-day options for investing.
So, the question is what is the best way to reverse the poor decision made in the past? It is really about taxes. Sell as much as possible to have zero net capital gain and buy ETFs with the proceeds, keep the rest and get rid of it when you can do so with minimal tax consequences. It is good idea to try to have the remaining individual stocks in different industries too.
