I am glad I began investing 20+ years ago. If I were considering starting now, I would likely not do it. Why?
1) Too much data. There are too many factors to consider in investing. That there is a wealth of data to consider is certain, but what are the right factors to look at?
2) Crowded. More people and firms are investing. The competition is higher.
3) There are more games in trading. Makes it a lot harder to get good executions. The low costs of transaction have created monsters.
4) ETFs affect the market as a whole. They allow average people to speculate on broad trends, without telling most of them that they are noise traders, and are getting taken for a ride. Dollar-weighted returns are far less than that for buy-and-holders in ETFs. The traders are getting creamed.
5) Social media leads to groupthink, which lowers overall returns, at least for those that get there late.
6) ETFs allow investors to play well outside their circle of competence. Beyond that, some ETFs don’t always do what they promise because of the derivatives that they use, roll, etc.
7) We are in a macroeconomic environment where we are delevering. That is not the best environment for making money.
In general, I think most individual investors are cows for the institutions to milk. But there are a few ways to immunize yourself from this:
a) Hold very short or very long. I lean toward the latter. Don’t give up quickly on your investment ideas. Buy and hold for years, not months. Ignore the chatter, and read the data from the company and trusted third parties.
b) Use a value bias, and focus on companies where there is a margin of safety. Buy the shares of companies with lesser growth prospects, that are selling cheaply. Who cares if earnings aren’t growing if the earnings yield is over 15%.
You say “ETFs”, but presumably a straight-up S&P 500 ETF held for decades is a good idea.
I was taking the CFA and CAS exams and (of course) finished the CFA charter first. Took a hard look at investments, stuck to the CAS route and invested in the S&P 500 ETF. I’d rather spend my time studying than doing third-tier home-based research on companies.
My research so far on ETFs in general indicates that those who trade them, for the most part do badly. This is still a work in progress, so when I have a full result, I will publish it. Buy-and-hold is another matter, for what few that can plug their ears, and not listen to the tauntings of the Rabshakeh (Isaiah 36).
[...] David Merkel: Actually, it's a rather complicated time to be an individual investor… (AlephBlog) [...]
One of my great weaknesses as an investor is that I am an emotional being. It is hard for me to be an innocent bystander as an investor. I get excited one way or the other, and it has cost me a lot over the years.
[...] Now is NOT a good time to be an individual investor. (Aleph Blog) [...]
[...] Now is NOT a good time to be an individual investor. (Aleph Blog) [...]
You must be logged in to post a comment.
blog advertising is good for you google_ad_client = "ca-pub-2776072933217634"; /* Original Tower */ google_ad_slot = "0844014105"; google_ad_width = 160; google_ad_height = 600; google_ad_client = "ca-pub-2776072933217634"; /* Small box */ google_ad_slot = "9411777964"; google_ad_width = 160; google_ad_height = 90; google_ad_client = "pub-2776072933217634"; //160x600, created 12/14/07 google_ad_slot = "7459798277"; google_ad_width = 160; google_ad_height = 600; google_ad_client = "pub-2776072933217634"; //160x600, created 12/14/07 - 2 google_ad_slot = "0041018587"; google_ad_width = 160; google_ad_height = 600; Disclaimer David Merkel is an investment professional, and like every investment professional, he makes mistakes. David encourages you to do your own independent "due diligence" on any idea that he talks about, because he could be wrong. Nothing written here, at RealMoney, Wall Street All-Stars, or anywhere else David may write is an invitation to buy or sell any particular security; at most, David is handing out educated guesses as to what the markets may do. David is fond of saying, "The markets always find a new way to make a fool out of you," and so he encourages caution in investing. Risk control wins the game in the long run, not bold moves. Even the best strategies of the past fail, sometimes spectacularly, when you least expect it. David is not immune to that, so please understand that any past success of his will be probably be followed by failures. Also, though David runs Aleph Investments, LLC, this blog is not a part of that business. This blog exists to educate investors, and give something back. It is not intended as advertisement for Aleph Investments; David is not soliciting business through it. When David, or a client of David's has an interest in a security mentioned, full disclosure will be given, as has been past practice for all that David does on the web. Disclosure is the breakfast of champions. Additionally, David may occasionally write about accounting, actuarial, insurance, and tax topics, but nothing written here, at RealMoney, or anywhere else is meant to be formal "advice" in those areas. Consult a reputable professional in those areas to get personal, tailored advice that meets the specialized needs that David can have no knowledge of. Aleph Blog FeedIndividual Investing Can Be ToughBook Review: Acts of God and ManBook Review: Encyclopedia of Municipal BondsExpensive High YieldSorted Recent TweetsOn Multiple Asset Allocation MethodsStocks versus Gold and BondsThe Best of the Aleph Blog, Part 13A Proposal for Money Market Funds IIAgainst Risk Parity, ReduxPagesAbout Me & The BlogBrokerage StatementsCategorized Book ReviewsAccountingAsset AllocationBusinessCrisisEconomicsHistoryInvestingMacro InvestingMiscellaneousPensionPersonal FinanceQuantitative InvestingRisk ControlSoftwareTechnical AnalysisWealthContact MeMajor Article ListMy PortfoliosPosting Rules (please read prior to posting)PresentationsPrivacy PolicyThe Eight Rules of my InvestingCategoriesAcademic Finance (77)Accounting (103)Asset Allocation (152)Banks (91)Best Articles (42)Blog News (118)Bonds (734)Book reviews (154)Christianity (18)Currencies (151)Ethics (115)Fed Policy (357)General (98)Home Schooling (14)Industry Rotation (127)Insurance (332)Macroeconomics (857)Pensions (94)Personal Finance (198)Portfolio Management (631)public policy (348)Quantitative Methods (268)Real Estate and Mortgages (341)Speculation (279)Stocks (757)Structured Products and Derivatives (332)The Rules (15)Tweets (1)Value Investing (428)Monthly ArchivesFebruary 2012 (15)January 2012 (34)December 2011 (22)November 2011 (24)October 2011 (22)September 2011 (27)August 2011 (29)July 2011 (20)June 2011 (27)May 2011 (19)April 2011 (25)March 2011 (25)February 2011 (14)January 2011 (19)December 2010 (33)November 2010 (19)October 2010 (26)September 2010 (26)August 2010 (22)July 2010 (23)June 2010 (16)May 2010 (20)April 2010 (20)March 2010 (27)February 2010 (19)January 2010 (24)December 2009 (25)November 2009 (21)October 2009 (21)September 2009 (26)August 2009 (18)July 2009 (24)June 2009 (22)May 2009 (29)April 2009 (30)March 2009 (24)February 2009 (24)January 2009 (41)December 2008 (37)November 2008 (37)October 2008 (36)September 2008 (40)August 2008 (40)July 2008 (28)June 2008 (36)May 2008 (43)April 2008 (44)March 2008 (47)February 2008 (39)January 2008 (46)December 2007 (36)November 2007 (29)October 2007 (29)September 2007 (39)August 2007 (50)July 2007 (35)June 2007 (25)May 2007 (27)April 2007 (28)March 2007 (34)February 2007 (19)CalendarFebruary 2012SMTWTFS« Jan 1234567891011121314151617181920212223242526272829 BlogrollAbnormal ReturnsAleaBronte CapitalBruce KrastingCFO MagazineChina financial marketsCrossing Wall StreetDistressed Debt InvestingFalkenblogFinancial AdviserHumble Student Of The MarketsInner WorkingsinterfluidityMacroeconomic ResilienceRajiv SethiRIABIzThe Accounting OnionThe Cody Wordthe research puzzleOther Investing LinksWall Street All StarsPersonal LinksReformed Presbyterian Church of North AmericaThe Tav BlogTrinity Reformed Presbyterian Church MetaRegisterLog inEntries RSSComments RSSWordPress.orgRecent Commentsmiguelmartinez: One of my great weaknesses as an investor is that I am an emotional being. It is hard for me to be an...David Merkel: My research so far on ETFs in general indicates that those who trade them, for the most part do badly....tapertaper: You say “ETFs”, but presumably a straight-up S&P 500 ETF held for decades is a good idea....ljoneill: David, good and interesting analysis. This is another “keeper” to keep in the toolkit for...ljoneill: I’ll raise my hand as the original asker of the question. David, I appreciate you taking the time to...Recent TrackbacksGerer la crise: Liens JeudiAbnormal Returns: Thursday links: a zero sum gameThe Reformed Broker: Hot Links: Back to RealityLearnBonds.com: Are junk bonds expensive? An Investor's & Trader's ViewHedge Fund News, Doug Whitman Insider Case, Soros, Rogers"¦: Sorted Recent Tweets (Aleph Blog)Subscribe in a reader
Subscribe in a reader (comments)
Enter your Email Preview | Powered by FeedBlitzThe Aleph Blog
Top markets blogs
Blog Catalog Blog Directory WallStreetBlips Finance Blog Rankings wallstreetblips_blog_ranking_13(1); new TWTR.Widget({ version: 2, type: 'profile', rpp: 4, interval: 6000, width: 'auto', height: 300, theme: { shell: { background: '#333333', color: '#ffffff' }, tweets: { background: '#000000', color: '#ffffff', links: '#4aed05' } }, features: { scrollbar: true, loop: false, live: true, hashtags: true, timestamp: true, avatars: false, behavior: 'all' } }).render().setUser('AlephBlog').start(); OnToplist is optimized by SEOAdd blog to our blog directory. AdvertisementOnline stock trading and brokerage services from Fidelity© 2011 FMR LLC. All rights reserved. widgetContext = {"widgetid":"web_widgets_inline_4001cf73e37456b9f9470aa073873272"}; widgetWidth = 300; widgetHeight = 267;Copyright David Merkel (c) 2007-2012 Disclaimer: David Merkel is an investment professional, and like every investment professional, he makes mistakes. David encourages you to do your own independent "due diligence" on any idea that he talks about, because he could be wrong. Nothing written here, at RealMoney, Wall Street All-Stars, or anywhere else David may write is an invitation to buy or sell any particular security; at most, David is handing out educated guesses as to what the markets may do. David is fond of saying, "The markets always find a new way to make a fool out of you," and so he encourages caution in investing. Risk control wins the game in the long run, not bold moves. Even the best strategies of the past fail, sometimes spectacularly, when you least expect it. David is not immune to that, so please understand that any past success of his will be probably be followed by failures. Also, though David runs Aleph Investments, LLC, this blog is not a part of that business. This blog exists to educate investors, and give something back. It is not intended as advertisement for Aleph Investments; David is not soliciting business through it. When David, or a client of David's has an interest in a security mentioned, full disclosure will be given, as has been past practice for all that David does on the web. Disclosure is the breakfast of champions. Additionally, David may occasionally write about accounting, actuarial, insurance, and tax topics, but nothing written here, at RealMoney, or anywhere else is meant to be formal "advice" in those areas. Consult a reputable professional in those areas to get personal, tailored advice that meets the specialized needs that David can have no knowledge of. _qacct="p-37GEOW7Y76-VY";quantserve(); var sc_project=2500170; var sc_invisible=0; var sc_partition=23; var sc_security="aacd9be3"; View My Stats _uacct = "UA-1957608-1"; urchinTracker();
Powered by WordPress | Entries (RSS) | Comments (RSS) | Green Apple WordPress™ Theme by RoseCityGardens.com
About Me & The BlogBrokerage StatementsCategorized Book ReviewsAccountingAsset AllocationBusinessCrisisEconomicsHistoryInvestingMacro InvestingMiscellaneousPensionPersonal FinanceQuantitative InvestingRisk ControlSoftwareTechnical AnalysisWealthContact MeMajor Article ListMy PortfoliosPosting Rules (please read prior to posting)PresentationsPrivacy PolicyThe Eight Rules of my InvestingPage optimized by WP Minify WordPress Plugin
/* */ st_go({v:'ext',j:'1:1.2.2',blog:'2327063',post:'4572'}); var load_cmc = function(){linktracker_init(2327063,4572,2);}; if ( typeof addLoadEvent != 'undefined' ) addLoadEvent(load_cmc); else load_cmc();Subscribe in a reader (comments)
Enter your Email Preview | Powered by FeedBlitzThe Aleph Blog
Top markets blogs
Blog Catalog Blog Directory WallStreetBlips Finance Blog Rankings wallstreetblips_blog_ranking_13(1); new TWTR.Widget({ version: 2, type: 'profile', rpp: 4, interval: 6000, width: 'auto', height: 300, theme: { shell: { background: '#333333', color: '#ffffff' }, tweets: { background: '#000000', color: '#ffffff', links: '#4aed05' } }, features: { scrollbar: true, loop: false, live: true, hashtags: true, timestamp: true, avatars: false, behavior: 'all' } }).render().setUser('AlephBlog').start(); OnToplist is optimized by SEOAdd blog to our blog directory. AdvertisementOnline stock trading and brokerage services from Fidelity© 2011 FMR LLC. All rights reserved. widgetContext = {"widgetid":"web_widgets_inline_4001cf73e37456b9f9470aa073873272"}; widgetWidth = 300; widgetHeight = 267;Copyright David Merkel (c) 2007-2012 Disclaimer: David Merkel is an investment professional, and like every investment professional, he makes mistakes. David encourages you to do your own independent "due diligence" on any idea that he talks about, because he could be wrong. Nothing written here, at RealMoney, Wall Street All-Stars, or anywhere else David may write is an invitation to buy or sell any particular security; at most, David is handing out educated guesses as to what the markets may do. David is fond of saying, "The markets always find a new way to make a fool out of you," and so he encourages caution in investing. Risk control wins the game in the long run, not bold moves. Even the best strategies of the past fail, sometimes spectacularly, when you least expect it. David is not immune to that, so please understand that any past success of his will be probably be followed by failures. Also, though David runs Aleph Investments, LLC, this blog is not a part of that business. This blog exists to educate investors, and give something back. It is not intended as advertisement for Aleph Investments; David is not soliciting business through it. When David, or a client of David's has an interest in a security mentioned, full disclosure will be given, as has been past practice for all that David does on the web. Disclosure is the breakfast of champions. Additionally, David may occasionally write about accounting, actuarial, insurance, and tax topics, but nothing written here, at RealMoney, or anywhere else is meant to be formal "advice" in those areas. Consult a reputable professional in those areas to get personal, tailored advice that meets the specialized needs that David can have no knowledge of. _qacct="p-37GEOW7Y76-VY";quantserve(); var sc_project=2500170; var sc_invisible=0; var sc_partition=23; var sc_security="aacd9be3"; View My Stats _uacct = "UA-1957608-1"; urchinTracker();
Powered by WordPress | Entries (RSS) | Comments (RSS) | Green Apple WordPress™ Theme by RoseCityGardens.com
About Me & The BlogBrokerage StatementsCategorized Book ReviewsAccountingAsset AllocationBusinessCrisisEconomicsHistoryInvestingMacro InvestingMiscellaneousPensionPersonal FinanceQuantitative InvestingRisk ControlSoftwareTechnical AnalysisWealthContact MeMajor Article ListMy PortfoliosPosting Rules (please read prior to posting)PresentationsPrivacy PolicyThe Eight Rules of my InvestingPage optimized by WP Minify WordPress Plugin
/* */ st_go({v:'ext',j:'1:1.2.2',blog:'2327063',post:'4572'}); var load_cmc = function(){linktracker_init(2327063,4572,2);}; if ( typeof addLoadEvent != 'undefined' ) addLoadEvent(load_cmc); else load_cmc();Page optimized by WP Minify WordPress Plugin
Read Full Article »