The Stock Market, Investments, and Investing Thread
#4
I have only been investing for 3 years but for me, passive investing has had the best reward to effort ratio. I currently invest in both all world share funds and ETFs and use a strategy where I keep my equity to cash ratio between 25 and 75%. When stocks rise, I sell proportionately to the rise and how much I'm currently invested. When stocks drop, I buy in similar proportions. Means I naturally sell high and buy low. This strategy won't make you rich from investing, but I believe that timing the market is a waste of time/gambling so may as well take emotion out of the game by following a simple and logical plan. Even those geniuses who predicted the financial crisis in 08-09 nearly burned because they shorted the market too early. I avoid bonds because I don't have enough dollar to be worthwhile researching. Banks offer better returns on cash in current accounts for small amounts anyway.

Active investing can be exciting but in my opinion should be done in combination with passive investing and only when you have a decent amount to invest in your active portfolio. The time required to do proper research on stocks that may yield a slightly better return then the market is only worthwhile when you have a large pot. e.g. if you can create an active portfolio that averages 10% a year vs the market doing 7% a year, but you only have $10k to invest, you have spent significant time researching for a $300 annual difference. For very small portfolios, the fixed trading costs also add up quickly. If your broker charges you $5 per trade, $5 per for a $1000 trade is 0.5% in negative before the market has even moved. $5 on a $10k trade is only 0.05%.

My favourite read on investing is intelligent investor by B Graham. It shows how people let emotions and reckless investing make them do exactly the opposite of what they should do every single time.
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RE: The Stock Market, Investments, and Investing Thread - by coffeedrinker - 06-02-2019, 09:12 PM

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