Need advice on saving / investing

Saving & investing, frugality & simple living. They're all part of the wealth equation.
Here's the place to discuss getting (and keeping!) your money.

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DoingHomework
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Re: Need advice on saving / investing

Postby DoingHomework » Wed Nov 07, 2012 8:27 pm

Matthew Clinger wrote:This book shows conclusively that value investing beats regular investing in the stock market by a large margin.


This is a good example of the sharks that will swarm around you Justin.

Value investing has outperformed historically because it is a riskier approached. Value stocks perform in accordance with the CAPM just like other stocks. If you decide that value stocks are appropriate for you then you perhaps should look at the Vanguard or T. Rowe Price Value funds.

But before you make that decision or give any money to anyone, you should educate yourself thoroughly and learn to do your own analysis.

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Re: Need advice on saving / investing

Postby Matthew Clinger » Wed Nov 07, 2012 8:55 pm

DoingHomework, that post just shows how ignorant you are about value investing. Value investing is SAFER than indexing. In fact, you practically have to buy U.S. bonds to have something a bit safer. However, you lose a ton of the potential gains by doing so.

I never ask to manage funds. I create portfolios, which is to say I provide a list of stocks to people. They have their own accounts in which they buy and sell their stocks. I simply provide a service for creating portfolios of stocks.

The book covers more than 4 decades worth of data. It isn't based on "what's worked in the last few years", it is based on what has worked for more than 40 years! Of course, you've obviously never read the book or you wouldn't be insulting value investing by calling it risky.

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Re: Need advice on saving / investing

Postby Bichon Frise » Wed Nov 07, 2012 10:03 pm

Matthew Clinger wrote:DoingHomework, that post just shows how ignorant you are about value investing. Value investing is SAFER than indexing.


have you taken a statistics class during your time there in college? more volatility means more risk. you should also know that statistics are a very dangerous thing. they are easily manipulated and rarely understood well. Here's one for you, the average person has one tit and one testicle.

my prediction for the next chapter in this book is you are an english major. :rofl:
Bichon Frise

"If you only have 1 year to live, move to Penn...as it will seem like an eternity."

avocado wrote:Good to see you back, I was starting to miss your incisive commentary!

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Re: Need advice on saving / investing

Postby Matthew Clinger » Wed Nov 07, 2012 10:10 pm

Of course I know that more volatility means more risk. What you aren't looking at is where the profit is at. 18% standard deviation is much more risky when you are expecting a 9% return than when you are expecting a 17% return.

And no, I am an accounting major.

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Re: Need advice on saving / investing

Postby bpgui » Thu Nov 08, 2012 4:29 am

This is going to be entertaining.

Hmmmm, I can't find my eating popcorn smiley.

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Re: Need advice on saving / investing

Postby kombat » Thu Nov 08, 2012 5:11 am

Matthew Clinger wrote:My portfolios, which use value investing, beat the market consistently and often by large margins.


Over what time period?

Will you guarantee that your portfolios will continue to beat the market in the future? Will you put that in writing?

Of course not.

Matthew, we welcome diverse viewpoints, but you should be aware that this forum is not a very hospitable environment for stock-pickers and technical analysts. The prevailing wisdom around here agrees with the proven ideas that it is impossible to consistently beat the market over the long term, and thus the best way to maximize your return is to own the entire market while keeping fees as low as possible (read: indexing).

You're welcome to present arguments in support of your beliefs, but just be prepared for some enthusiastic rebuttals.

Also, please stop mentioning your website in every post. Spamming will get your posts deleted, and your account banned. Other than that, welcome to the forums.

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Re: Need advice on saving / investing

Postby Bichon Frise » Thu Nov 08, 2012 8:18 am

There are also people on the interwebz who have "picked" some stocks and made it work for them. The man who had the thankless job of fighting the good fight, DRIPGuy is one. But, he puts his money where his mouth is. Not your money where his mouth is.

I do believe that many people can take the time and succeed at picking stocks. I also believe that success is a function of the amount of time invested.

It's one thing to have a rational discussion about the merits of stock picking methods, it's quite another to have used car salesman-esque (not meant to offend the used car salesman) character pedaling their model with no intent to discuss its criteria.
Bichon Frise

"If you only have 1 year to live, move to Penn...as it will seem like an eternity."

avocado wrote:Good to see you back, I was starting to miss your incisive commentary!

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Re: Need advice on saving / investing

Postby Matthew Clinger » Thu Nov 08, 2012 12:23 pm

What would be the point of discussing stock picking criteria? That would be like discussing sight with a blind man. You haven't read the book I recommended. If you haven't read it, you can't realize the difference that value investing makes. If you don't realize the difference that value investing makes, it is pointless to argue what measurements of value investing are the most effective. And if you can't argue what measurements in value investing are the most effective, then it is pointless to share my view, which you would have to read the book or be provided general information from the book to even understand. On the one hand, I am sure that I can't post directly from the book here because of copyright issues. On the other hand, just giving you generalities will have you complaining about me giving you generalities. And giving you nothing on it has you complaining about me giving you nothing.

If you want to move toward an actual discussion on value investing, get the book, read it, and consider the information that is in it.

And no, I can't guarantee every year will beat the market. Even the most recommended portfolio in the book only beat the portion of the market it was compared to (stocks generally considered to be buy-able as compared to the lower cap companies it left out) only 85% of the time over single-year periods, while it beat it 100% of the time over 5-, 7, and 10-year periods. Yeah, you're probably thinking, "well what about the cost of buying and selling?". Unfortunately, the book didn't compute that so I can't give you anything that I can claim to be absolutely accurate. The one thing I will say is that the long-term implications of value investing make it superior to indexing. Indexing is the smart choice for people who can't trade well and know they can't trade well.

As the book's one-year periods are based on the view from every month of the year, that means the book's more than 40 years worth of data translate to more than 500 1-year periods and more than 400 10-year periods.

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Re: Need advice on saving / investing

Postby DoingHomework » Thu Nov 08, 2012 5:48 pm

Matthew Clinger wrote:As the book's one-year periods are based on the view from every month of the year, that means the book's more than 40 years worth of data translate to more than 500 1-year periods and more than 400 10-year periods.


Nearly all in a rising market and declining interest rate environment.

Make no mistake Matthew, I think value investing is a perfectly good approach precisely because investors have been rewarded for the higher risk. The approach has certainly worked for Warren Buffett.

But value investing takes more than just running stock screens on a computer. Any industry or company that has done well and suddenly faces problems will often pop up in a value screen. Why? Because the "problem" makes investors scared, that leads to a price decline, and then the stock starts to look cheap. But that's all the more reason to dig into why the stock is cheap.

Imagine if you wanted to buy a ship in 1912 and you suddenly heard the titantic was selling cheap (perhaps because someone actually got a radio message out when it started sinking). Would it be a good deal? Of course not.

It is ironic that you have picked so many financial stocks. That is one industry that has done reasonably well but is facing implementation of Dodd-Frank in 2015. Until Tuesday there was hope that a Romney win would lead to major delays in implementation and possibly even repeal. Those hopes are now dashed and the market reacted predictably yesterday when financial stocks were hit hard. That could be why so many appear to be attractively priced.

I think value investing works because investors get paid for the added risk. That's also why small caps are good to hold as are international stocks. But value investing requires a great deal of hard work and fundamental research on the companies. That's why value investing is usually best left to mutual fund pros. (low cost, no load funds of course.)

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Re: Need advice on saving / investing

Postby kombat » Fri Nov 09, 2012 6:04 am

Matthew, I have 2 simple questions for you:

1) If Value Investing works, why doesn't everyone use it?
2) If everyone used it, would it still work?

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Re: Need advice on saving / investing

Postby Matthew Clinger » Fri Nov 09, 2012 1:39 pm

1) Have you ever tried to get a group of people to agree on a concept that is new to them before? Putting that aside, there will always be people that are convinced that some other investment is a better opportunity. If you've heard of all the different ways there are to pick stocks, you'll realize that there are quite a few different approaches and many different variations on those approaches. To get everyone to agree to one approach would be, in one word, impossible.

2)An interesting question here. If everyone used it in the same way, the market would likely stabilize and the stocks would likely be priced on how the company was doing with people having the option to buy or sell the stocks. Therefore, we would not have the big fluctuations we have today as all decisions would be based on data. Unfortunately, this would have the effect of people wanting to invest in growth stocks, as they would want the company numbers to improve. Therefore, it would probably not work that well as those that had the stocks with the best underlying data would want to keep them longer and there would be a shortage of sellers there. On the other hand, companies going downhill would likely have a shortage of buyers. Simply put, everyone acting competently as a value investor would not likely be viable. That other investors cause stocks to be over-valued and under-valued is what gives value investors the opportunity to make greater profits than the stock market in general.

DoingHomework, value investing is not merely about some stock being cheap. There are tons of stocks you could label falsely as "cheap". Value investing relies on the actual performance of the company relative to the market and its price. If there are two companies and each has the same price for their stock, the same market cap, the same number of shares.. but one has double the earnings of the other, value investing says that the company with more earnings is the better investment.

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Re: Need advice on saving / investing

Postby VinTek » Fri Nov 09, 2012 2:03 pm

Matthew Clinger: Let me fly your plane for you!

GRS: Why?

MC: I read a really great book on how do to it!

GRS: Have you completed your flight training?

MC: No...

GRS: Have you ever flown a plane?

MC: Well, I spent a little time on a simulator, and I did really well.

GRS: Ummm...no.

MC: You guys are obviously uneducated and blind.

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Re: Need advice on saving / investing

Postby Bichon Frise » Fri Nov 09, 2012 2:22 pm

El Senor Matthew Clinger,

I would like to sign up, how do I go about contacting you for payment?

Your website lacks any contact details.
Bichon Frise

"If you only have 1 year to live, move to Penn...as it will seem like an eternity."

avocado wrote:Good to see you back, I was starting to miss your incisive commentary!

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Re: Need advice on saving / investing

Postby Matthew Clinger » Fri Nov 09, 2012 2:58 pm

Bichon Frise, the first portfolio is free. However, I might recommend waiting a bit for it unless you are fine with a small portfolio. Stocks do not tend to move into or out of my portfolios that fast. (Example: 6 of the 22 stocks from the last portfolio I posted openly in my forums (May 4th) are on that portfolio created Nov 7th).

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Re: Need advice on saving / investing

Postby Bichon Frise » Fri Nov 09, 2012 3:10 pm

Matthew Clinger wrote:Bichon Frise, the first portfolio is free. However, I might recommend waiting a bit for it unless you are fine with a small portfolio. Stocks do not tend to move into or out of my portfolios that fast. (Example: 6 of the 22 stocks from the last portfolio I posted openly in my forums (May 4th) are on that portfolio created Nov 7th).


What's the 2nd portfolio cost?
Bichon Frise

"If you only have 1 year to live, move to Penn...as it will seem like an eternity."

avocado wrote:Good to see you back, I was starting to miss your incisive commentary!


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