Post #386,425
2/13/14 6:41:30 PM
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Why?
Collectibles markets are very much subject to public perception.
Beanie Babies went from dynamic with high publicity and anticipation of the next issue to static - no publicity and nobody cared. It did this practically overnight.
Art investments fluctuate radically depending on what period or artists are in style at the moment - always tempered by very skillful frauds.
Precious metals are a pump and dump scheme, currently entering into the downward spiral.
Wine investment is tanking from an unbelievable high due to rampant fraud, market manipulation, cost of storage and cost to authenticate what you have is actually real.
Stamps? Dying from lack of interest as stamp collectors die of old age.
Coins? Diamonds? Gemstones? You've been screwed so badly getting in it'll be two decades before you can get out for what you paid.
Why stocks? Well, that depends completely on the skillfulness of the selection, and timing. Generally, I let Inez do what she thinks is right, and she uses a rather conservative approach. The result is, all my holdings pay dividends - between 2.2% and 8.00%. Weighted average (weighted by how much money is invested) is probably around 5.7%, which I understand is better than most savings accounts pay right now.
Appreciation is on top of this. Every once in a while Inez calls and says, "This is pretty high right now, I think we should bail" I let her bail, because she's right most of the time (being right is her job). Of course, if she sells something high, I have to pay taxes on the gain, but in the words of a multi-billionaire many years ago (don't remember who), "Ill take every taxable dollar I can get".
If you are logical and very careful, return is proportional to risk. Lacking either or both of those virtues, you are screwed - the saber tooth tigers are everywhere.
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Post #386,426
2/13/14 7:49:26 PM
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Re: I have to pay taxes on the gain
That's what you call a high class problem.
Alex
ÂThere is a cult of ignorance in the United States, and there has always been. The strain of anti-intellectualism has been a constant thread winding its way through our political and cultural life, nurtured by the false notion that democracy means that "my ignorance is just as good as your knowledge.Â
-- Isaac Asimov
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Post #386,431
2/14/14 8:28:55 AM
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Re: If you are logical and very careful.
And lucky. You left out the biggest necessary trait of all. I'm happy you're winning at the Capitalist Casino. But come on, do you really think that stocks are anything other than gambling chips on hype (or what's generally perceived by Armani wearing brokers as "good")? I can purchase futures on the weather. Goldman Sachs is the world's largest oil company. Do you really believe Google is worth $400 billion? Of course not. But there are $400 billion worth of bets that the stock price will go up.
And that in the most precise terms is all "purchasing a stock" means. You're placing a bet in a New York Casino. You're not contributing anything, you're just gambling.
I've no aversion to gambling (back in my assistant golf pro days gambling was the only way I could reliably eat). But gambling doesn't really contribute anything to society as a whole. Sure, there is value added when the winning gambler spends his money (if he does and doesn't shuttle it off to the Caymans, Ireland or Switzerland). But let's stop with all this Orwellian speech. Let's henceforth refrain from speaking of "investing" and call it what it is, "gambling."
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Post #386,441
2/14/14 10:49:10 AM
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There's gambling and there's gambling.
There may not be quite a sure thing, but there are definitely some long shots. It's possible estimate where in the spectrum of risk a company belongs. The point is you can control to some degree how much risk you want to take.
One of the other ways you control risk is to diversify your investment among different market sectors. You may think you know a lot about say the Technology sector but if you're putting all your eggs in that basket you can get in deep trouble. Recall the "internet bubble" of 1999-2000. Part of that is also to cap the percentage of your investments in a sector to say 20% and an individual company stock to a third or a quarter of that.
It might be too much work to manage your investments so one can always go with an ETF such as SPY which tracks the S&P 500. You would find that SPY, which is pretty much automated, would do better than 90% of "managed" mutual funds. In 2013 SPY returned over 30%. To be fair, in 2008 during the financial collapse, it lost a similar amount.
Anyway, over time, the stock market provides a better return than any other investment that's generally available.
Alex
ÂThere is a cult of ignorance in the United States, and there has always been. The strain of anti-intellectualism has been a constant thread winding its way through our political and cultural life, nurtured by the false notion that democracy means that "my ignorance is just as good as your knowledge.Â
-- Isaac Asimov
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Post #386,443
2/14/14 11:04:25 AM
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And how exactly does this differ . . .
. . from anything else in life? You place your bets - and the more carefully you place them, the more "lucky" you are likely to be.
Luck is the overriding factor in every aspect of life, from the family you are born into, to career success, to being killed by a falling tree branch.
But, as to the worthlessness of this stock "after-market" - if it did not exist, companies would be unable to raise any money to expand except by "private placement", a much more difficult and limited course, or by loans from bankers, and you know what nice folks they are.
Why would anyone buy stocks if there were no market through which to sell them when the need for cash arises?
Yes, of course you can go the "high risk" route, betting on stocks that are rising fast. Perhaps you will become very rich - or end up sleeping on a park bench. You can end up on that park bench investing in nothing too.
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Post #386,445
2/14/14 12:03:52 PM
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Re: Why would anyone buy stocks if there were no market ...
Why would anyone buy stocks if there were no market through which to sell them ...
For the dividend. You share in the profits of the company. That's why they're called "shares". --
Drew
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Post #386,450
2/14/14 12:26:18 PM
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Dividends are fine - but . . .
. . it's going to be a loooooooooong time to even break even if you can't recover your principal - and for that, you need an active market.
Well, you could pass the investment on to your descendants if you're into that, but what if you have a sudden need for cash? For that you need a market.
I get calls every week from guys trying to sell me shares in oil and gas well drilling. The returns can be pretty good, but I'll have nothing to do with them, because I know it's almost impossible to cash out.
I've also carefully read the terms for these, and other private placement investments (medical stuff, etc.). The company has all the rights, and the investor has practically no rights at all.
On the open market you buy and sell as you please - the company and it's terms aren't involved at all.
Liquidity is king.
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