Would you like to have a stock market/business forum?

[+ bigjoey]

Regarding from whom to get your investment advice, I'm no great shakes, but I have always trusted my own instincts and I always included index funds from Vanguard for all the obvious reasons.

 

In any event, it is common knowledge here I was a general dentist. Over the years I had a few patients who where stock brokers and one actually managed a noteworthy hedge fund. One day the fund manager was sitting in my chair and given the fact that hedge funds are noted not only for risk taking, but also for using all sorts of sophisticated techniques to manage the risk, I jokingly asked him for some tactical investment advice. Before he could answer I then stated that perhaps I should look elsewhere as I was not sure that I would trust the advice coming from someone who was just about willingly to have a hole drilled in his head. As I said that I positioned the chair. He laughed. I said, "Open please!"

 

Is there not a study where randomly picking stocks by throwing darts did just as well as many a fund manager?!?! And we're there not monkeys throwing the darts?!?! Or were they shoeshine boys!

 

Incidentally this same fund manager was approached by a certain Bernie Madoff and he was smart enough not to get involved in any way.

 

PS: I think we just started an investment forum!

 

 

Something like 85% of all actively managed funds over time do not surpass their benchmarks. That means that for any area of investing, a low cost index fund is a better bet.

[+ quoththeraven]

Hey girl, I knew that you were smart! Plus, since I totally agree here's the link to the thread with your suggestions!

 

http://m4m-forum.org/threads/pension-rollovers.101835/page-2#post-937662

 

Being self employed with Qualified Plans for myself and staff it was often a challenge to get thing totally right, as I decided where to invest as well. I began doing so since 1977 with an old Profit Sharing Plan. Eventually a Money Purchase Plan was added. That meant submitting two Form 5500's to the IRS. Many accountants did not know how to fill the damned form out at the time so I learned how and did it myself. It's always best to be in charge of your own destiny and know why and how your money is allocated. It's easier to do it now with SEP IRA's, 401k's etc.

 

The challenge now is to decide how to manage it now that I'm retired.

 

Thanks for hunting down that thread for me. I was already frustrated from losing a couple of links I needed to finish off a post (still not done) and not up for looking around for it. I would never have guessed it was more than a year old.

 

Also, I think I misstated the expense ratios. Actively managed fund ratios run 1-2%, as I said, but the highest indexed fund expense ratio is .5%, not .05%. More typically, I've seen expense ratios of .25-.33%, but keep in mind it's been awhile since I looked at these.

 

Argh, Forms 5500! I filled out a few of those in my time and looked at a lot more of them. Did you ever have a 401(k) component or did you do all the investing for the qualified plans you provided?

[+ quoththeraven]

Regarding from whom to get your investment advice, I'm no great shakes, but I have always trusted my own instincts and I always included index funds from Vanguard for all the obvious reasons.

 

In any event, it is common knowledge here I was a general dentist. Over the years I had a few patients who where stock brokers and one actually managed a noteworthy hedge fund. One day the fund manager was sitting in my chair and given the fact that hedge funds are noted not only for risk taking, but also for using all sorts of sophisticated techniques to manage the risk, I jokingly asked him for some tactical investment advice. Before he could answer I then stated that perhaps I should look elsewhere as I was not sure that I would trust the advice coming from someone who was just about willingly to have a hole drilled in his head. As I said that I positioned the chair. He laughed. I said, "Open please!"

 

Is there not a study where randomly picking stocks by throwing darts did just as well as many a fund manager?!?! And we're there not monkeys throwing the darts?!?! Or were they shoeshine boys!

 

Incidentally this same fund manager was approached by a certain Bernie Madoff and he was smart enough not to get involved in any way.

 

PS: I think we just started an investment forum!

 

Yes to Vanguard. If you want to learn about low-cost investing, buy Vanguard founder John Bogle's book, the name of which escapes me. It may go into modern portfolio theory as well.

 

You're right about the study about actively managed funds, which do no better than the market, monkeys, or randomization.

 

Glad to hear your patient didn't get sucked in by Madoff. The SEC should have listened to the investment professional from Boston who contacted them saying Madoff's results couldn't be right, that no one could sustain that rate of return year after year.

[+ quoththeraven]

I wish we could take a vote...

 

We seem to be voting with our posts. I'm fine with a de facto subforum within the Lounge running from this thread. I was voting in favor of the topic more than adding another forum to discuss it. I agree that probably adds some extra complexity that is unnecessary.

[whipped guy]

Argh, Forms 5500! I filled out a few of those in my time and looked at a lot more of them. Did you ever have a 401(k) component or did you do all the investing for the qualified plans you provided?

Well, somehow I filled out those damned forms for too many years.

 

Once I got into a kurfuffle with the IRS when they said that I never sent in the form. However, I held my ground. The penalty is up to a thousand dollars per day for each day that it is late. We locked heads for over a year and even after I supplied a duplicate. They ultimately said that it was their mistake so all penalties were dropped.

 

Another time the IRS admitted to loosing page four of the form. Only page four? I got a bit test and asked if they had page three. They responded in the affirmative. My retort was that if you have page three you simply have to turn it over and page four is on the other side! The agent then explained that each page is photocopied and sent to a different department to be scrutinized. Somehow they lost page four in the process. I sent them a copy.

 

Eventually we rolled all the archaic qualified plans to traditional IRAs and got a SEP with Vanguard and they took over the infernal paperwork, reporting, etc.

[+ quoththeraven]

Well, somehow I filled out those damned forms for too many years.

 

Once I got into a kurfuffle with the IRS when they said that I never sent in the form. However, I held my ground. The penalty is up to a thousand dollars per day for each day that it is late. We locked heads for over a year and even after I supplied a duplicate. They ultimately said that it was their mistake so all penalties were dropped.

 

Another time the IRS admitted to loosing page four of the form. Only page four? I got a bit test and asked if they had page three. They responded in the affirmative. My retort was that if you have page three you simply have to turn it over and page four is on the other side! The agent then explained that each page is photocopied and sent to a different department to be scrutinized. Somehow they lost page four in the process. I sent them a copy.

 

Eventually we rolled all the archaic qualified plans to traditional IRAs and got a SEP with Vanguard and they took over the infernal paperwork, reporting, etc.

 

If you ever saw how often Office Services in a medium-sized law firm returned copies of odd numbered pages but no even numbered pages because double-sided originals weren't copied that way, you wouldn't be so surprised. Yay to letting Vanguard deal with it. One unpleasant surprise clients had was to find out that even though they were relying on outside help, if anything went wrong, it was the client that bore legal responsibility for the mistake, not the service provider. I'm sure Vanguard did fine, though. Probably.

[whipped guy]

If you ever saw how often Office Services in a medium-sized law firm returned copies of odd numbered pages but no even numbered pages because double-sided originals weren't copied that way, you wouldn't be so surprised. Yay to letting Vanguard deal with it. One unpleasant surprise clients had was to find out that even though they were relying on outside help, if anything went wrong, it was the client that bore legal responsibility for the mistake, not the service provider. I'm sure Vanguard did fine, though. Probably.

Well the odd even thing was totally the fault of the "esteemed" IRS! No problems with Vanguard at all since switching over to the SEP. Of course, if Vanguard had problems with the "esteemed" IRS I would have no clue as I am now thankfully totally out of the loop.

[+ FreshFluff]

Here's some advice: unless you have a lot to invest in the market, do not buy individual stocks, etc. Invest in mutual funds, preferably low-cost indexed funds. (This is somewhat redundant; indexed funds are by their nature low-cost.)

 

Learn and apply modern portfolio investment theory. I offered a quick primer on it awhile ago in response to a question about IRA rollovers, but I'm too lazy to hunt it down.

 

Be skeptical if anyone tries to convince you that markets are efficient. Academic studies and anecdotes both show the opposite.

 

Also, remember that every time you invest in a fund with >=1.5% fees, you're providing bubbly for many needy kittens.

[AdamSmith]

Once I got into a kurfuffle with the IRS when they said that I never sent in the form. However, I held my ground. The penalty is up to a thousand dollars per day for each day that it is late. We locked heads for over a year and even after I supplied a duplicate. They ultimately said that it was their mistake so all penalties were dropped.

Good for you!

 

Every scrap of papyrus I send to the IRS goes Certified, Return Receipt against exactly this likelihood.

[jawjateck]

Be skeptical if anyone tries to convince you that markets are efficient. Academic studies and anecdotes both show the opposite.

 

Also, remember that every time you invest in a fund with >=1.5% fees, you're providing bubbly for many needy kittens.

 

Financial markets are rife with manipulation. I don't whine about it. I observe and study its behavior, then profit from it.

[+ quoththeraven]

Well the odd even thing was totally the fault if the "esteemed" IRS! No problems with Vanguard at all since switching over to the SEP. Of course, if Vanguard had problems with the "esteemed" IRS I would have no clue as I am now thankfully totally out of the loop.

 

You do realize I used to work for the IRS? (Legal side, not audit.) I gave a partner at the form where I worked, eho unbeknownst to me know as under audit, the heebie-jeebies by telling him the work product coming out of the IRS legal office where I worked was the highest quality legal work of anyplace I worked. Still true to this day.

 

You might expect a private law firm to do better with photocopying than the IRS. You'd be wrong.

 

May Vanguard live long, prosper, and get everything to the IRS on time.

[+ quoththeraven]

Good for you!

 

Every scrap of papyrus I send to the IRS goes Certified, Return Receipt against exactly this likelihood.

 

Yup. The ironic part is that slows down delivery and receipt considerably.

[+ quoththeraven]

Be skeptical if anyone tries to convince you that markets are efficient. Academic studies and anecdotes both show the opposite.

 

Also, remember that every time you invest in a fund with >=1.5% fees, you're providing bubbly for many needy kittens.

 

The other Adam Smith is probably spinning in his grave. My Law and Economics professor would probably frown. But I'm too tired to dispute the statement about market inefficiency. (I think the real answer is it depends.) And fees exceeding 1.5% are likely excessive.

[AdamSmith]

The other Adam Smith is probably spinning in his grave. My Law and Economics professor would probably frown. But I'm too tired to dispute the statement about market inefficiency. (I think the real answer is it depends.) And fees exceeding 1.5% are likely excessive.

We could have a long seminar on what is "efficient." The behavioral economists and other recent researchers having given yet more fodder for this discussion. In the end it still seems the western capital markets are the least efficient except for all other formulations yet enacted.

[+ FreshFluff]

We could have a long seminar on what is "efficient." The behavioral economists and other recent researchers having given yet more fodder for this discussion. In the end it still seems the western capital markets are the least efficient except for all other formulations yet enacted.

 

I should be more specific: The Efficient Market Hypothesis says that asset prices fully incorporate and reflect all relevant information. Fortunately or unfortunately, they don't. That doesn't mean that markets are bad. It also doesn't mean they're being manipulated, although they sometimes are.

[whipped guy]

You do realize I used to work for the IRS? (Legal side, not audit.) I gave a partner at the form where I worked, eho unbeknownst to me know as under audit, the heebie-jeebies by telling him the work product coming out of the IRS legal office where I worked was the highest quality legal work of anyplace I worked. Still true to this day.

 

You might expect a private law firm to do better with photocopying than the IRS. You'd be wrong.

 

May Vanguard live long, prosper, and get everything to the IRS on time.

Over the years I have known two guys who were IRS agents. One was the sweetest, kindest guy imaginable. His nickname was "Nice Ed"! The other was a flipping SOB with the most miserable personality conceivable. Yes, the stereotypical IRS agent. He bragged that when anyone reached his desk they were really totally screwed. Unfortunately this second guy was my next door neighbor for way too many years.

 

If I told you how many times he had his property surveyed because he was always looking for an extra inch of territory to control it would make your head spin. The irony of it all was that every time that he had the land surveyed he seemed to loose a few precious inches! The last survey actuall placed some railroad ties that he placed along the property line as a line of demarcation on my side! I could care less, but if the shoe were on the other foot... Well!!!!!!!

 

When he retired from the IRS he was an accounting instructor at a local university. To this day I trade horror stories with a former student of his who hated his guts.

 

The only good thing that he did for me concerns the fact that it was he who advised me to start a Keogh profit sharing plan when I initially opened my office. He said the it was the only way for a self employed individual to "screw the govenment"! Even when referencing something completely legal he always thought in negative terms. So typical I guess!

 

Regarding QTR, I had no clue about your IRS connections. I've always thought of you as being a sweet and cuddly "nice raven"!

 

http://ecx.images-amazon.com/images/I/41Tkc8RTTnL._SY300_.jpg

[+ quoththeraven]

I should be more specific: The Efficient Market Hypothesis says that asset prices fully incorporate and reflect all relevant information. Fortunately or unfortunately, they don't. That doesn't mean that markets are bad. It also doesn't mean they're being manipulated, although they sometimes are.

 

Any hypothesis that assumes human perfection, whether it be perfect information or otherwise, is going to be at least somewhat wrong.

 

Imperfect information is the foundation on which arbitrage, for example, is based. But I'm pretty sure research demonstrates that over time in an open market system where exchange of public information is encouraged, markets self-correct toward efficiency.

 

A bigger problem may be evidence from behavioral economics that people are not as economically rational as we thought. An example: people are willing to gain less in order to prevent others from getting more. In other words, horizontal equity is more important than cornering as much money as possible. This suggests why income inequality is so hated: because the gap feels unfair. (Something a friend of mine had to explain to my friend the ultra-conservative French journalist.)

 

Sloghtly, but not entirely, off-topic: Thesis: Filing claims of monopolistic practices is a waste and inefficient because missteps and changes in the market take care of it over a period not significantly longer than the time it takes to litigate. Examples: IBM antitrust case - the introduction of personal computers (largely by IBM!) broke IBM's market chokehold. Microsoft antitrust case - while Windows is still important, IE is practically dead, and Microsoft is no longer a stock everyone wants to own. (That would be Apple.) I think there's at least one more example, but I can't think of it off the top of my head. Dispute or support.

[+ quoththeraven]

Over the years I have known two guys who were IRS agents. One was the sweetest, kindest guy imaginable. His nickname was "Nice Ed"! The other was a flipping SOB with the most miserable personality conceivable. Yes, the stereotypical IRS agent. He bragged that when anyone reached his desk they were really totally screwed. Unfortunately this second guy was my next door neighbor for way too many years.

 

If I told you how many times he had his property surveyed because he was always looking for an extra inch of territory to control it would make your head spin. The irony of it all was that every time that he had the land surveyed he seemed to loose a few precious inches! The last survey actuall placed some railroad ties that he placed along the property line as a line of demarcation on my side! I could care less, but if the shoe were on the other foot... Well!!!!!!!

 

When he retired from the IRS he was an accounting instructor at a local university. To this day I trade horror stories with a former student of his who hated his guts.

 

The only good thing that he did for me concerns the fact that it was he who advised me to start a Keogh profit sharing plan when I initially opened my office. He said the it was the only way for a self employed individual to "screw the govenment"! Even when referencing something completely legal he always thought in negative terms. So typical I guess!

 

Regarding QTR, I had no clue about your IRS connections. I've always thought of you as being a sweet and cuddly "nice raven"!

 

http://ecx.images-amazon.com/images/I/41Tkc8RTTnL._SY300_.jpg

 

I love the sweet, cuddly raven you found! My experience was that the people who worked for the IRS were reasonable, intelligent, and mostly left-of-center. I knew one revenue agent/auditor who was tough on taxpayers, but that had more to do with substance and less with being a hardass. I also think that as a woman, she felt she had more to prove to earn good evaluations and promotions.

 

The office I worked in was great most of the time. (Sometimes the cases themselves weren't too interesting.) One of the less-great aspects was that my first boss was widely believed to be engaged in an affair with a secretary from the US attorney's office. (Both were married and I am near-certain neither of thrir marriages were open ones.) They had "lunch" together every day. When he left to head a larger office (last I knew, he was in DC), the attorney who was promoted from within to replace him discovered that his chair was broken. :eek:. We all made certain assumptions as to how that happened.

[AdamSmith]

I think there's at least one more example, but I can't think of it off the top of my head. Dispute or support.

The AT&T breakup.

 

In the short run one can think of a few cases where antitrust makes sense, such as preventing all the U.S. cable providers from becoming one. But that's a prospective application of it. Agreeing with you, I can't think of a single retrospective case that made sense -- waging legal war to undo a supposed monopoly. Exactly as you say,

free-market competition does it first.

 

Clearly in the days when physical-asset-driven businesses such as railways ruled the economy, arguably it was very different.

[+ quoththeraven]

The AT&T breakup.

 

In the short run one can think of a few cases where antitrust makes sense, such as preventing all the U.S. cable providers from becoming one. But that's a prospective application of it. Agreeing with you, I can't think of a single retrospective case that made sense -- i.e., waging legal war to undo a supposed monopoly. Exactly as you say,

free-market competition does it first.

 

Clearly in the days when physical-asset-driven businesses such as railways ruled the economy, arguably it was very different.

 

The one aspect of antitrust law that still makes sense is the prohibition on price-fixing. See the antitrust litigation against Apple (everyone else settled) over agency pricing for ebooks, which Apple is appealing.

[AdamSmith]

discovered that his chair was broken. :eek:. We all made certain assumptions as to how that happened.

http://33.media.tumblr.com/tumblr_lpbrrlZ29I1qecfwa.gif

 

[+ FreshFluff]

Any hypothesis that assumes human perfection, whether it be perfect information or otherwise, is going to be at least somewhat wrong.

 

Imperfect information is the foundation on which arbitrage, for example, is based. But I'm pretty sure research demonstrates that over time in an open market system where exchange of public information is encouraged, markets self-correct toward efficiency.

 

If the market is "efficient over time" then it's not efficient in any meaningful way. If there are profits to be made due to unused (or incorrectly used) information, then it's possible to beat the market with active management.