Search found 33 matches

by dolio
Thu Aug 09, 2012 10:05 pm
Forum: Investing - Theory, News & General
Topic: 46.1% of S&P Company Sales Outside the USA in 2011
Replies: 56
Views: 6968

Re: 46.1% of S&P Company Sales Outside the USA in 2011

Here's a follow up question to Taylor's: If Bill Gross says stock returns can't exceed GDP growth, isn't he ignoring the percent of sales of U.S. companies that occur outside the U.S.? Where the sale occurs shouldn't matter (I think). GDP measures production. This does mean, though, that companies in the US could be growing substantially while not contributing any (or, as much) GDP growth to the US, because all their production occurs outside the US. I suppose this could explain the disconnect between some undeveloped countries with large GDP growth simultaneously having poor stock returns. All the GDP growth could be due to companies in developed countries outsourcing their labor to the newly developing countries. In that case, the GDP gr...
by dolio
Thu Aug 09, 2012 2:55 pm
Forum: Investing - Theory, News & General
Topic: College Bubble Popping
Replies: 72
Views: 8015

Re: College Bubble Popping

The going rate for some of the most in-demand highly qualified professionals (think: surgeons, lawyers, doctors) is about $800 per hour. How many hours in class that meets once per week - usually they run about 50 minutes or one psychiatry hour (after paying those tuition bills you should see a shrink :P ) - say it meets for 15 weeks, about $12K or make that $20K after accounting for time spent grading, reading papers and possibly meeting with one or two students. Most college courses have about 3 hours of lecture per week in my experience. A few have 3 hours of lecture plus an hour of problem set review or the like. If we use your numbers above (and just the 3 hours/week number), then a professor teaching 3 courses (not unreasonable) shou...
by dolio
Fri Aug 03, 2012 11:40 am
Forum: Investing - Theory, News & General
Topic: ETF = VT
Replies: 19
Views: 3403

Re: ETF = VT

Nothing wrong, although note that that looks like it probably holds world market weights. A lot of people in the US like to hold something like 70/30 US/other allocation, or maybe even less foreign, but that ETF is probably more like 45/55 (?).
by dolio
Wed Aug 01, 2012 8:44 pm
Forum: Investing - Theory, News & General
Topic: thoughts on Bill Gross' most recent PIMCO note
Replies: 53
Views: 10080

Re: thoughts on Bill Gross' most recent PIMCO note

CoderDude wrote:What if the dividend rate is equal to inflation? Currently, VTI is yielding 1.9%, while the CPI is 1.7%. So without capital appreciation, the real return of stocks is 0.
If there is inflation, then (some of) the goods and services that make up the GDP must presumably have been inflated. So under the assumption that capital appreciation tracks GDP growth, there would have to be a decrease in GDP in real terms for there to be zero nominal capital appreciation during a period of inflation. Or, to put it another way, even in a steady state, one would expect capital appreciation to track inflation, and then you'd have dividends in addition, I suppose. Unless I'm wildly mistaken.
by dolio
Tue Jul 31, 2012 6:48 pm
Forum: Investing - Theory, News & General
Topic: Should I use NAV ?
Replies: 5
Views: 503

Re: Should I use NAV ?

i think i've done a novice mistake :oops: pls take a look at http://finance.yahoo.com/q?s=VBK&ql=0 i just noticed that it says "as of oct 10" at the NAV. so that should clear things up a bit. but other than that, is my point valid? should I consider the difference between NAV and price or that in true situations the difference isn't that big to make a difference? If you really found an ETF such that the market value was 20% above the NAV, it'd probably be a bad idea to buy it. If it were 20% below... I'm not sure, it still might be a bad idea. I heard that not long ago some folks got crushed in a certain ETF. The issuer temporarily stopped issuing new shares via the mechanism that is supposed to keep the price pegged (close) ...
by dolio
Sat Jul 07, 2012 10:49 am
Forum: Investing - Theory, News & General
Topic: Do 2013 tax law changes affect fund placement rules?
Replies: 51
Views: 6775

Re: Do 2013 tax law changes affect fund placement rules?

There is no tax on the gains of your share of a tIRA or a ROTH. The tIRA does not convert capital gains into ordinary income. Is this true? When I converted my non-deductible tIRA to Roth a couple of years ago, I had to treat it ad ordinary income for tax purposes although all I had in the tIRA was LTCG. The advantage of an IRA (unless you don't qualify for certain advantages or something) is that you don't pay capital gains taxes. In a roth, you pay now, so the government's take is removed up front. In a traditional account, the government's take is removed when you withdraw. They also get the gains on their portion, and what their portion is is based on your tax situation at withdrawal. But they don't tax your portion additionally. In a ...
by dolio
Fri Jul 06, 2012 11:58 pm
Forum: Investing - Theory, News & General
Topic: Do 2013 tax law changes affect fund placement rules?
Replies: 51
Views: 6775

Re: Do 2013 tax law changes affect fund placement rules?

SGM wrote:I understand this differently. If you look at the tables on the initial wiki reference even if you are in the 25% bracket in 2012 with 15% qualified dividend tax rates; your new bracket will be 31% with 31% dividend tax rates. This more than doubles the tax and you will pay $1600 extra on every $10000 of dividend income in 2013 once you reach the 31% bracket. This will hit retirees who were depending on qualified dividends hard at the marginal rate. For higher incomes the increase to 39.6+3.8 is almost a tripling of the qualified dividend rate.
That table's shifted up. The 10% and 15% brackets are getting folded into 15%. 25% becomes 28%, 28% becomes 31%, and so on.
by dolio
Fri Jul 06, 2012 8:42 pm
Forum: Investing - Theory, News & General
Topic: Bonds, the emperor has no clothes.
Replies: 53
Views: 7540

Re: Bonds, the emperor has no clothes.

Is that accurate? Do bond funds internally sell bonds for cap gains as they age? Some bond funds must, because otherwise, say, Vanguard's long-term treasury funds would be loaded with short-term treasuries. They'd have to buy increasing numbers of the longest term treasuries to offset the maturing bonds if they wanted to keep the average duration the same over time. The only possibility that I can think of is that they shuffle the bonds between their various funds somehow, and make new long term purchases using matured securities from the very short term; maybe they do that, I don't know. If not, then any gain in market value will ultimately be given back when the bonds mature at face value. This will be true even if rates don't rise. I gu...
by dolio
Mon Jul 02, 2012 8:37 am
Forum: Investing - Theory, News & General
Topic: Old School Debate: Putting 100% in index funds is foolish
Replies: 26
Views: 3207

Re: Old School Debate: Putting 100% in index funds is foolis

rkhusky wrote:What was the expense ratio and turnover rate in 2007?

Edit: Currently ER = 1.77%, deferred sales charge = 0.95%, and turnover rate = 47%. Based on those numbers, I probably would not invest in it. Although, if I was tempted, due to the excellent past performance, I would not put more than 5% of my portfolio into it.
What if its expense ratio were 0.29%? And forget the sales charge. Then its expenses would be identical to and turnover would be slightly better than Vanguard's Windsor admiral shares.

But, it doesn't appear that would have saved you from blowing up and losing 30% or so of your investment so far.
by dolio
Mon Jul 02, 2012 1:47 am
Forum: Investing - Theory, News & General
Topic: Active Passive Bet Year 6: Active Winning
Replies: 155
Views: 19137

Re: Active Passive Bet Year 6: Active Winning

He didn't win anything yet. He said there's still a year to go on the bet. And anything could happen, since if you look at the chart, Windsor II was ahead by 7.9% at the beginning of 2010, and then only ahead by 0.35% 3.5% (off by a decimal, I think) by 2011. Not that you should hold your breath.
by dolio
Sun Jul 01, 2012 10:48 am
Forum: Investing - Theory, News & General
Topic: Active Passive Bet Year 6: Active Winning
Replies: 155
Views: 19137

Re: Active Passive Bet Year 6: Active Winning

I own STAR now VGSTX has Windsor 7.7% and Windsor II 14.3% as a portion of its portfolio. I like a little value in the folder. Windsor and Windsor II are both large cap value, though. Both from Vanguard. Their expense ratios differ only by 4 basis points. Or 2 if you're using admiral shares. They have almost the same name. Their portfolios differ in various ways, but I have no idea if the numbers are significant or not (P/E and P/B are pretty close). And their management differs, but you gave me what sounded like an endorsement for Windsor (although, it's not the same management as in 95). But, if you made this bet with Windsor, you're losing by about $200, instead of winning by $800 with Windsor II. So I was curious how the decision was m...
by dolio
Sat Jun 30, 2012 6:57 pm
Forum: Investing - Theory, News & General
Topic: Active Passive Bet Year 6: Active Winning
Replies: 155
Views: 19137

Re: Active Passive Bet Year 6: Active Winning

rustymutt wrote:I agree with btenny in that my facts don't show that MF beating the ETF, but rather the ETF outgrowing the MF.
You need to show us some proof of your figures.
There's no indication that I can see other than the numbers listed for each (share price), but that's probably a price chart, not a growth chart. Price charts don't incorporate dividends.
Grasshopper wrote:There is no Windsor I only Windsor and Windsor II. ....
Okay. That doesn't really answer the question. Unless you should (and Petrocelli did) pick Windsor II now because the team on it is better than the new manager of Windsor, or something of that sort.
by dolio
Sat Jun 30, 2012 6:16 pm
Forum: Investing - Theory, News & General
Topic: Active Passive Bet Year 6: Active Winning
Replies: 155
Views: 19137

Re: Active Passive Bet Year 6: Active Winning

How did you pick between Windsor I (which is neck and neck) and Windsor II? Flip a coin?
by dolio
Wed Jun 27, 2012 9:10 am
Forum: Investing - Theory, News & General
Topic: Can a zero-return asset actually improve a portfolio?
Replies: 156
Views: 16475

Re: Can a zero-return asset actually improve a portfolio?

richard wrote:In other words, there are three ways you'll do better on a risk adjusted basis than accepting market weightings, (1) you see something the market doesn't and can exploit it (which is very difficult if markets are efficient), (2) you are meaningfully different from the representative investor and (3) you are lucky.
Is 2 going to get better risk adjusted return than the market? Or is 2 merely willing to accept more (or less) risk for the possibility of more (or less) return than the representative investor?
by dolio
Sat Jun 23, 2012 2:50 pm
Forum: Investing - Theory, News & General
Topic: Can a zero-return asset actually improve a portfolio?
Replies: 156
Views: 16475

Re: Can a zero-return asset actually improve a portfolio?

archbish99 wrote:What implications would this have for negative real-yield bonds or zero-real I-bonds? Wouldn't this imply we should all be 100% stocks until interest rates improve?
I believe the claim under analysis is that adding a uncorrelated, volatile, zero-yield asset can reduce overall portfolio volatility without necessarily decreasing return (maybe increasing it).

Being in the bonds you mention are fine as long as you realize you're trading (expected) return for less volatility (that's like the the 'safe asset' red line in nisiprius' charts).
by dolio
Tue Jun 12, 2012 9:32 pm
Forum: Investing - Theory, News & General
Topic: Which is most "on sale?" VBMFX, VTSMX, VGTSX?
Replies: 73
Views: 8378

Re: Which is most "on sale?" VBMFX, VTSMX, VGTSX?

As the Bernstein quote I cited above points out, there is no rebalancing bonus if things move in a random walk. If the current price of something is $30, and there is no memory in the market, it doesn't know if its long-term average is $20 or $40. Random walk is a bad model. In reality, thing tend to have momentum in the short term and return to mean in the long term (the version of RTM in which previous outperformance is correlated with future underperformance). nisiprius' example isn't really a random walk, though. It's a walk with 0 momentum and long term reversion to a mean of 0%. So what happened? Incidentally, I wrote my own (simplistic) test. Instead of generating a random sequence, it tries all possible sequences, and computes the ...
by dolio
Mon Jun 11, 2012 7:48 pm
Forum: Investing - Theory, News & General
Topic: Small value performance
Replies: 131
Views: 10984

Re: Small value performance

WTR3RD wrote:Why is it that SCV tilters always want to compare SmB and HmL to "the equity risk premium"? Does anyone accept the ERP other than the tilters?
Yes. The majority of the people on this board believe that stocks are both riskier and have higher expected return than bonds. There are some exceptions, but they are the minority. It's why you may have heard people suggesting that you have to adjust your stock vs. bond ratio depending on your ability and need to take risk.
by dolio
Mon Jun 11, 2012 1:33 am
Forum: Investing - Theory, News & General
Topic: Small value performance
Replies: 131
Views: 10984

Re: Small value performance

Why didn't you just say so to begin with? Obviously the pros at JP Morgan, hedge funds, etc aren't smart and attractive enough to sidestep the risks while still collecting the rewards like you can. Obviously they're not sophisticated enough to understand how to improve portfolio efficiency by mixing weakly correlated components. Obviously they're not learned enough to have studied the market history like you. I doubt the pros over at JP Morgan are spending their careers running tilted index portfolios trying to eke out a couple extra percent above the S&P 500 when averaged over 50 years or so. They didn't lose $3 billion (or whatever) because they tilted to 50% mid/small cap instead of 40%. That isn't the kind of investing you get paid...
by dolio
Wed Jun 06, 2012 2:18 am
Forum: Investing - Theory, News & General
Topic: Is TLH a form of market timing?
Replies: 56
Views: 3963

Re: Is TLH a form of market timing?

If I had to bet, two S&P 500 funds from different vendors would be more likely to trigger a wash than two distinct TR funds. The S&P 500 funds may be more likely, but if one looks at the details, then switching between any of the target retirement funds looks a lot like: I own funds A, B, C (maybe up to E or so in the later years) in proportions X%, Y% and Z%. I sell all of A, B and C, and then immediately rebuy them in proportions I%, J% and K% which are a little different than X, Y and Z. It'd be hard to argue that isn't a wash sale. Even 2030 vs. 2060 is: 55.6% vs. 62.7% total stock, 23.8% vs. 27.2% total international, 20.6% vs. 10.1% total bond. So that's 89.5 out of 100 parts identical holdings. Two different S&P 500 fund...
by dolio
Wed May 30, 2012 10:38 pm
Forum: Investing - Theory, News & General
Topic: Rebalancing theory
Replies: 82
Views: 6379

Re: Rebalancing theory

I must be missing something. How are price movements related to riskiness? Even if the relative risk of stocks vs. bonds varies, it doesn't need to vary according to relative price changes. So if you want to keep a constant risk, you'd be rebalancing based on risk changes, not not-rebalancing based on price changes, right? Or is the point that: on a given day, I decided that 70/30 was the right risk level. Then stocks go up 100%, so I'm at 82/18, so if I go back to 70/30, I'm actually at less risk than I was initially, because I have significantly more money in the same proportions, so my chances of ending up at a given amount below my initial investment are lower. And the opposite happens if stocks fall relative to bonds and I rebalance. T...
by dolio
Wed May 30, 2012 9:38 pm
Forum: Investing - Theory, News & General
Topic: Rebalancing into Poverty...Part 2
Replies: 36
Views: 3295

Re: Rebalancing into Poverty...Part 2

3.) Money under the mattress (Almost), seems to be what a lot of you are proposing, which is certain failure. CDs at 1.35% (Now there is a gutsy financial move, locking up your money for a guaranteed loss due to inflation)...Oh yes, you'll move it to a better paying investment at the proper time. No one believed you could time the market before here, but suddenly a lot of folks believe in "market Timing". Are you smarter than everyone else? 1) There are banks/credit unions currently offering 5 year CDs at 2% or more, and 7 year CDs at 2.5% or so. Not 1.35%. 2) Comparable term treasuries are also locking you into a guaranteed loss due to inflation (5 year notes at 0.7% yield, 7 year at 1.2%, 10 year at 1.8%, even 10 year TIPS have...
by dolio
Sun May 27, 2012 9:02 pm
Forum: Investing - Theory, News & General
Topic: "Avoiding Costly Retirement Mistakes"
Replies: 10
Views: 1928

Re: "Avoiding Costly Retirement Mistakes"

umfundi wrote:* Not diversifying enough.
Hard to understand this one. Does it mean, investing too aggressively? See the previous point.
Could mean, "employer stock fund sounds good for my 401(k)." I saw an article not that long ago purporting that a lot of people make that mistake.
by dolio
Sat May 26, 2012 6:31 pm
Forum: Personal Investments
Topic: Roth 401(k) vs. Traditional 401(k) if match $1 for $1
Replies: 13
Views: 1299

Re: Roth 401(k) vs. Traditional 401(k) if match $1 for $1

if you put in $18, they put in $18 regardless which type (Trad vs Roth); they are "blind" to what type of money is going in, just the actual dollar amount. This is exactly my problem - if they are only matching dollars - wouldn't it'd be better to have her money taken out as traditional which would be a % of her gross pay as opposed to a % of pay after taxes which equals a higher dollar amount - of which they'll match (and treated as traditional pre-tax contributions either way)......again, in the example, matching $20 instead of $18. I will follow up with the plan administrator with her and will let you all know the outcome. They will match up to 4% of the eligible pay. That's $20 regardless of what type of contribution you make...
by dolio
Fri May 25, 2012 9:49 pm
Forum: Investing - Theory, News & General
Topic: The Death of Equities--Deja Vu All Over Again
Replies: 23
Views: 3068

Re: The Death of Equities--Deja Vu All Over Again

Since the beginning of 2008 the US stock market has posted negative cumulative real returns. Perhaps negative real returns are Larry Swedroe's idea of a doubling of market value. Negative real returns are not my idea of a doubling of market value. :) Opinions differ and innumeracy remains a widespread problem in present day America. That's because from 2008 to the first few months in 2009, there was a 50% drop, followed by a 100% rebound between the low point and now. Or something along those lines. So unless you got out completely prior to 2008, it's quite likely you only got the negative nominal returns, which is way worse than merely not keeping up with inflation. And anyone who got lucky and started in April of 2009 is doing pretty wel...
by dolio
Fri May 25, 2012 12:22 am
Forum: Personal Investments
Topic: Roth 401(k) vs. Traditional 401(k) if match $1 for $1
Replies: 13
Views: 1299

Re: Roth 401(k) vs. Traditional 401(k) if match $1 for $1

We probably need to have her ask HR - the "$1 for $1" is what is screwing me up - if they'd just say matching % - then it makes complete sense. But if they match pre tax dollars the same as post tax dollars - with all of the company contributions going in as pre tax - it makes a difference. $20 of "free" money is more than $18. The "$1 for $1" is presumably mentioned because not every company matches that way. My employer matches $1 for every $1 I contribute for the first 3% of my pay, and then $0.50 for every $1 I contribute for the next 3%. So if I contribute 3% of my eligible pay, they contribute 3%, and if I contribute 6% of my eligible pay (or more), they contribute 4.5% of my eligible pay. They don't phr...
by dolio
Thu May 24, 2012 10:04 am
Forum: Investing - Theory, News & General
Topic: Vanguard drops early redemption fees
Replies: 30
Views: 4869

Re: Vanguard drops early redemption fees

Tuxx wrote:
gkaplan wrote:
Tuxx wrote:They are just following changes implemented by Fidelity in order to keep up.
Excuse me, but it's the other way around. Always has been.
Started in 2008 that Vanguard started following Fidelity in changes.

Leading with "Attention Vanguard Index Fund Owners," Fidelity Investments of Boston launched an ad campaign in April touting its index funds as being 33% to 58% less expensive than those of The Vanguard Group Inc. of Malvern, Pa.
more: http://www.investmentnews.com/article/2 ... EG/8806230
But Fidelity's international index mutual funds still have redemption fees, according to their website. How was this change necessary to keep up with Fidelity if Fidelity isn't doing it?
by dolio
Wed May 23, 2012 4:25 pm
Forum: Investing - Theory, News & General
Topic: The Facebook Fallacy
Replies: 102
Views: 10426

Re: The Facebook Fallacy

I would never click a facebook link on another site, as I'm aware of how cross-site cookies work. But I don't really care about that sort of thing. Facebook knowing that I like sports isn't going to kill me. No, you don't have to click on the link. The button (or what have you) just has to be on the page, with associated scripting or whatever handles the cookies. For instance, every product page on Amazon has a 'share on facebook' button, although I don't know if it has the scripting the article was talking about. But if it did, they'd know all the products you viewed on Amazon, for instance. That's, of course, part of the business model. It's not just, "I have 500 million eyeballs to sell advertising to." It's also, "I have...
by dolio
Wed May 23, 2012 3:21 pm
Forum: Investing - Theory, News & General
Topic: The Facebook Fallacy
Replies: 102
Views: 10426

Re: The Facebook Fallacy

greg24 wrote:Facebook only has the data you post. You can be an active fb user and still keep your privacy.
You might be surprised. There was an article not that long ago about how those small 'post to facebook' buttons on web sites all over the place actually contain stuff that links your visit to said site to your facebook account via cross-site cookies (unless you've got those turned off). So they probably know a lot about your browsing habits as well.

If you care about that sort of thing.
by dolio
Wed May 23, 2012 2:38 pm
Forum: Personal Investments
Topic: Bond Funds: Why are these Safe or are they?
Replies: 31
Views: 3659

Re: Bond Funds: Why are these Safe or are they?

However, you don't have to sell your Bond, while still getting exactly what you signed-up for - which is $1,100 or $100 in dividends and $1,000 in principal from the issuer. And to be clear, you don't have to sell a bond fund either. You can hold it for the duration, and get back approximately (?) what you signed up for, the SEC yield of the fund at the time you bought it. (Approximately due to issues associated with reinvestment.) If I'm not mistaken, and assuming the fund invests in comparable bonds. Edit: Actually, that's not quite right, I suppose. Duration is said to estimate the time required to recover the capital loss. And the reinvestment of continually maturing bonds in the fund would complicate the process of getting back your $...
by dolio
Sat May 19, 2012 9:54 pm
Forum: Personal Investments
Topic: VBTLX vs. BND--newbie to ETFs--HELP!
Replies: 18
Views: 2869

Re: VBTLX vs. BND--newbie to ETFs--HELP!

I played around with ETFs a little, but decided I wasn't a huge fan. The low expenses are nice. And they're about the only way you can get into a Vanguard fund (for instance) for less than $3,000 in most cases (and at comparable expense ratios, you'd be looking at $10,000 per fund). But, I got annoyed crunching numbers to figure out how many whole shares to buy for the $N I wanted to invest, and figuring out what to do with the left overs. And futzing with orders to get a consistent price. And one thing that isn't on the wiki: if you aren't wild about keeping money in a vanguard money market account, due to the low interest, then if you decide you want to buy an ETF, it'll take about a week (in my experience) for a bank transfer to the mone...
by dolio
Sun May 13, 2012 10:02 pm
Forum: Investing - Theory, News & General
Topic: "The rational thing to do is get out of bonds now."
Replies: 135
Views: 15119

Re: "The rational thing to do is get out of bonds now."

When are stocks at a peak, and when are they at a bottom? You'll have to ask the guys that know how to time interest rates. He didn't say he was timing interest rates, though. He was saying that current bond and CD yields are comparable, and the latter are lower risk. For instance, vanguard's intermediate term index fund has a yield to maturity of 2.5%, and a duration of 6.4 years. But, a credit union I belong to offers a 5 year CD with an APY of 2.5%, and the early withdrawal downside is 6 months interest. So, if I've read the bond pages correctly, this means: If nothing changes, the CD and bond yields are comparable. If interest rates go up, the immediate NAV of both go down. However, the NAV loss of the CD is capped at 6 months interest...
by dolio
Thu May 10, 2012 10:46 am
Forum: Investing - Theory, News & General
Topic: 49% of Americans saving zilch for retirement
Replies: 44
Views: 5967

Re: 49% of Americans saving zilch for retirement

nisiprius wrote:
GRT2BOUTDOORS wrote:
mptfan wrote:I didn't start saving for retirement until I was 27, and even then it was small amounts. I think the IRA annual limit at that time was $2k. I didn't get serious until I was in my 30's.
Yup, it was a measly $2K.
It was $2K in 1982. $2K in 1982 = $4754 today. If $2K was measly then, $5K is measly now.
It is kind of measly if you compare it to what someone with a 401(k) or similar can do. $17K straight up + $5K since you get the IRA, too. And if you do tricks with post-tax money rolled into an IRA, and count employer match, you can get (theoretically) around $55K/year total, unless I'm mis-remembering some numbers.

I suppose it's unlikely that someone able to contribute that much wouldn't have access to a 401(k), though.
by dolio
Wed May 09, 2012 10:37 am
Forum: Investing - Theory, News & General
Topic: If rich people don't buy funds or ETFs why should you?
Replies: 79
Views: 9617

Re: If rich people don't buy funds or ETFs why should you?

"Seconds"? I think we are not talking along the same time frames. These big guys intercept incoming orders, read them, place their orders ahead of ours, make their profit and are out before incoming orders are executed. All in the span of time of less than milliseconds. Risk? That is for the rest of us. The thing about this (and subsequent posts related to it), is that this is arguably not investment in the stock market anymore. You're not making money by investing in stocks, you're making money by investing in (or starting) a single firm that does high frequency trading, which happens to involve the stock market. The risks are that you hire a bunch of computer folk, and spend lots of money to buy servers in the basements of vari...