Ready to invest in the stock market for the first time in my life

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Topic Author
NoobInvestor123
Posts: 31
Joined: Tue Dec 24, 2019 10:18 pm

Ready to invest in the stock market for the first time in my life

Post by NoobInvestor123 » Tue Dec 24, 2019 10:30 pm

Hello awesome people of the internet,

I am starting my stock market investing journey very soon and wanted to share my overall thoughts and a few questions I had about what I learned before actually getting my feet wet investing stocks. I'll jump right into it:

I read over and over from many different sources that the vast majority of people (and CERTAINLY beginners) would do best to simply invest everything in the S&P 500 and wait as long as possible instead of investing in individual stocks and trying to "time the market". But, well, to be honest, I have doubts about this advice... last year, the S&P 500 had a return of about 35%... looking at a few stocks that are majorly popular and recommended by financial advisers (like Microsoft, AMD, Roku, Apple, Shopify, Mastercard, and so many others, you can literally just google "best stocks" to find them), their 2019 performance looks amazing! They had returns that absolutely crushed the S&P 500's 35%! Most of them were over 100%... Investing in any one of those single stocks ALONE would have yielded substantially higher returns than the S&P 500.

Here's my question: is me doubting this advice (that its best for noobs to invest in S&P 500 rather than individual stocks) coming from a place of naivety? Is it actually in reality a LOT harder to "beat the market" then I think it is? Is what I am doing right now (cherry picking individual stocks that had great performance last year and then expecting they'll have great performance next year) a recipe for disaster? Would I do best to simply invest everything in the S&P 500 like everyone is saying, even though I feel like I can do so much better with those few stocks mentioned above?

Thanks for any insight!

KingRiggs
Posts: 361
Joined: Wed Dec 12, 2018 12:19 pm
Location: Indiana

Re: Ready to invest in the stock market for the first time in my life

Post by KingRiggs » Wed Dec 25, 2019 9:41 am

The answer to all your questions is YES.
Advice = noun | Advise = verb | | Roth, not ROTH

User avatar
David Jay
Posts: 7501
Joined: Mon Mar 30, 2015 5:54 am
Location: Michigan

Re: Ready to invest in the stock market for the first time in my life

Post by David Jay » Wed Dec 25, 2019 9:41 am

Welcome to the forum!
NoobInvestor123 wrote:
Tue Dec 24, 2019 10:30 pm
Is it actually in reality a LOT harder to "beat the market" then I think it is?
Yes. There is a whole industry of professionals who research every publicly traded company. This is called “information asymmetry (they have more information, you have less). Based on trading volume, you will most likely to be purchasing your stock from one of those professionals, who think they are getting a great deal by selling that stock at the price you are buying that stock. Only one of you will be right. I am betting on the professional, not the amateur.
Is what I am doing right now (cherry picking individual stocks that had great performance last year and then expecting they'll have great performance next year) a recipe for disaster?
“Disaster” is not guaranteed, but long term underperformance is almost certain. Anyone can Monday morning quarterback, which is what you are doing. But 2019 overperformers are unlikely to be 2020 overperformers, in fact last year’s overperformers tend to underperform, use the search function for “reversion to the mean”.
Would I do best to simply invest everything in the S&P 500 like everyone is saying, even though I feel like I can do so much better with those few stocks mentioned above?
Yes, the key word in the above quote is “feel”. How you feel does not change reality.

[edit] If you decide to “test the waters” of individual stock investing, please, PLEASE keep detailed records and benchmark yourself. So often folks say “I have done great” but they are still underperforming the market averages. I have “been there, done that”: I was using a strategy that was really working well, but when I actually benchmarked it I found I was underperforming the SP500 total return by about 1% per year.
Last edited by David Jay on Wed Dec 25, 2019 9:49 am, edited 1 time in total.
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

User avatar
David Jay
Posts: 7501
Joined: Mon Mar 30, 2015 5:54 am
Location: Michigan

Re: Ready to invest in the stock market for the first time in my life

Post by David Jay » Wed Dec 25, 2019 9:43 am

Do you have any retirement plans at work? Or do you qualify for an IRA? These are great places to hold your stock investments.
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

Triple digit golfer
Posts: 3925
Joined: Mon May 18, 2009 5:57 pm

Re: Ready to invest in the stock market for the first time in my life

Post by Triple digit golfer » Wed Dec 25, 2019 9:51 am

Yes to all.

If you chase the best performers from last year, you're buying high. This year's top performers are rarely next year's top performers.

retiredjg
Posts: 39035
Joined: Thu Jan 10, 2008 12:56 pm

Re: Ready to invest in the stock market for the first time in my life

Post by retiredjg » Wed Dec 25, 2019 10:15 am

NoobInvestor123 wrote:
Tue Dec 24, 2019 10:30 pm
I read over and over from many different sources that the vast majority of people (and CERTAINLY beginners) would do best to simply invest everything in the S&P 500 and wait as long as possible instead of investing in individual stocks and trying to "time the market".
The advice here is not to delay investing in individual stocks but not to invest in individual stocks at all. The exception is that maybe it's ok to have a small portion of your portfolio in individual stocks...as a play account.

Here's my question
Yes, yes, highly probable, and yes.

Investing is about risk. Individual stock picking is a very risky thing. Good companies do not always mean good stocks. Good companies go bad and disappear. If you invest in 3000 stocks, it won't matter much if a few go poof.

MotoTrojan
Posts: 7674
Joined: Wed Feb 01, 2017 8:39 pm

Re: Ready to invest in the stock market for the first time in my life

Post by MotoTrojan » Wed Dec 25, 2019 10:52 am

Just to clarify, the advice you’re referring to as provided to “noobs” isn’t meant to be only applicable to new investors, it’s merit is for everyone. Studies show that the average active manager cannot beat the market consistently net of fees, and these managers are not noobs.

GE was a steady earner once, literally on top of the market.

I’d stick to indices, maybe with some factor tilts to keep it interesting.

peterwantstosave
Posts: 279
Joined: Fri Nov 24, 2017 8:28 pm

Re: Ready to invest in the stock market for the first time in my life

Post by peterwantstosave » Wed Dec 25, 2019 11:17 am

Welcome to the forum!

Recommend you get started here: https://www.bogleheads.org/wiki/Getting_started

Feel free to post your portfolio, once you've been through the videos linked above

P
403b: VTSAX (70%) / BMTKX (20%) / QCBMRX (10%) | GRSA: QCSTRX (90%) / QCBMRX (10%) | Roth: FIPFX (100%)

User avatar
F150HD
Posts: 2572
Joined: Fri Sep 18, 2015 7:49 pm

Re: Ready to invest in the stock market for the first time in my life

Post by F150HD » Wed Dec 25, 2019 11:58 am

I am starting my stock market investing journey very soon
Meaning....you are not yet old enough to invest?

Picking winning stocks isn't as easy as it looks, Google searches make returns look like easy :dollar .

OP- what is the difference between these two formulas?

Image
-
Image

User avatar
1789
Posts: 635
Joined: Fri Aug 16, 2019 3:31 pm
Location: OR

Re: Ready to invest in the stock market for the first time in my life

Post by 1789 » Wed Dec 25, 2019 12:23 pm

You can buy any of those and beat SP500 easily for a couple years. Problem is historical data (future maybe different) shows that over 25/30 years it is almost impossible to beat SP500. Investing in SP500 brings diversity of sectors and eliminates individual stock risks.

(....like Microsoft, AMD, Roku, Apple, Shopify, Mastercard, and so many others)

Lets assume you picked AMZN stock last year

AMZN YTD: 20%
SP500 YTD: 30%

You see the risk now?
"My conscience wants vegetarianism to win over the world. And my subconscious is yearning for a piece of juicy meat. But what do i want?" (Andrei Tarkovsky)

User avatar
Phineas J. Whoopee
Posts: 9035
Joined: Sun Dec 18, 2011 6:18 pm

Re: Ready to invest in the stock market for the first time in my life

Post by Phineas J. Whoopee » Wed Dec 25, 2019 12:29 pm

Past performance does not guarantee future results.
PJW

User avatar
climber2020
Posts: 1254
Joined: Sun Mar 25, 2012 8:06 pm

Re: Ready to invest in the stock market for the first time in my life

Post by climber2020 » Wed Dec 25, 2019 12:42 pm

If you want to invest in something that has done relatively poorly over the last many years compared to the SP500, you could always allocate some of your money to an international stock index fund.

If it helps, I was in your position when I first started investing in 2012. The SP500 has gone up a huge amount by that point too and people were predicting an imminent crash. I’m glad I took the advice of people here and dumped everything in.

DesertDiva
Posts: 697
Joined: Thu Mar 01, 2018 12:49 pm
Location: In the desert

Re: Ready to invest in the stock market for the first time in my life

Post by DesertDiva » Wed Dec 25, 2019 1:10 pm

Many people believe they can beat the markets or develop some kind of secret process to produce above-average returns. They may realize that many before them have failed, but they still believe it won’t happen to them. “This time it will be different.”

The problem is that no one can predict the future. Any individual stock can suffer severe losses. Look at what’s happening to FedEx right now. All is takes is a negative headline, a management misstep, loss of competitive advantage, etc, and the downfall to an individual stock can be sudden and swift. Indexing removes the shock of these events and stabilizes your portfolio.

You need to learn more about Indexing. Go to the “amazon” link at the top of this page. Read Bogle’s book carefully. Then read “The Bogleheads’ Guide to Investing”. This approach may not give you the adrenaline-rush you are seeking, but it will give you a solid, disciplined approach to managing your investments.

Ferdinand2014
Posts: 1026
Joined: Mon Dec 17, 2018 6:49 pm

Re: Ready to invest in the stock market for the first time in my life

Post by Ferdinand2014 » Wed Dec 25, 2019 1:15 pm

NoobInvestor123 wrote:
Tue Dec 24, 2019 10:30 pm
Hello awesome people of the internet,

I am starting my stock market investing journey very soon and wanted to share my overall thoughts and a few questions I had about what I learned before actually getting my feet wet investing stocks. I'll jump right into it:

I read over and over from many different sources that the vast majority of people (and CERTAINLY beginners) would do best to simply invest everything in the S&P 500 and wait as long as possible instead of investing in individual stocks and trying to "time the market". But, well, to be honest, I have doubts about this advice... last year, the S&P 500 had a return of about 35%... looking at a few stocks that are majorly popular and recommended by financial advisers (like Microsoft, AMD, Roku, Apple, Shopify, Mastercard, and so many others, you can literally just google "best stocks" to find them), their 2019 performance looks amazing! They had returns that absolutely crushed the S&P 500's 35%! Most of them were over 100%... Investing in any one of those single stocks ALONE would have yielded substantially higher returns than the S&P 500.

Here's my question: is me doubting this advice (that its best for noobs to invest in S&P 500 rather than individual stocks) coming from a place of naivety? Is it actually in reality a LOT harder to "beat the market" then I think it is? Is what I am doing right now (cherry picking individual stocks that had great performance last year and then expecting they'll have great performance next year) a recipe for disaster? Would I do best to simply invest everything in the S&P 500 like everyone is saying, even though I feel like I can do so much better with those few stocks mentioned above?

Thanks for any insight!
Yes. Yes, way harder, if not impossible. Yes, it is a recipe for disaster. Yes you would.
“You only find out who is swimming naked when the tide goes out.“ — Warren Buffett

User avatar
bertilak
Posts: 7029
Joined: Tue Aug 02, 2011 5:23 pm
Location: East of the Pecos, West of the Mississippi

Re: Ready to invest in the stock market for the first time in my life

Post by bertilak » Wed Dec 25, 2019 1:19 pm

The S&P500 return is the average of all the stocks that make up the S&P500. There will always be about half of those stocks that are above average and about half below average. Which is which is easy to determine looking backwards, but impossible to determine looking forwards.

The fallacy is thinking the backward look is the same as the forward look.
May neither drought nor rain nor blizzard disturb the joy juice in your gizzard. -- Squire Omar Barker (aka S.O.B.), the Cowboy Poet

User avatar
arcticpineapplecorp.
Posts: 4637
Joined: Tue Mar 06, 2012 9:22 pm

Re: Ready to invest in the stock market for the first time in my life

Post by arcticpineapplecorp. » Wed Dec 25, 2019 1:53 pm

NoobInvestor123 wrote:
Tue Dec 24, 2019 10:30 pm
Hello awesome people of the internet,

I am starting my stock market investing journey very soon and wanted to share my overall thoughts and a few questions I had about what I learned before actually getting my feet wet investing stocks. I'll jump right into it:

I read over and over from many different sources that the vast majority of people (and CERTAINLY beginners) would do best to simply invest everything in the S&P 500 and wait as long as possible instead of investing in individual stocks and trying to "time the market".

But, well, to be honest, I have doubts about this advice... last year, the S&P 500 had a return of about 35%...
First off, are you talking about "this year" or "last year"? Because last year, the S&P500 was down 4.5%, not up 35%

source: https://www.callan.com/wp-content/uploa ... e-2019.pdf

And if you're talking about over "this year", the S&P500 is up 28.58%, not 35%
source: https://www.marketwatch.com/investing/index/spx)

So I think it's important to get the numbers right, other wise you can believe just about anything somebody says.
NoobInvestor123 wrote:
Tue Dec 24, 2019 10:30 pm
looking at a few stocks that are majorly popular and recommended by financial advisers (like Microsoft, AMD, Roku, Apple, Shopify, Mastercard, and so many others, you can literally just google "best stocks" to find them), their 2019 performance looks amazing! They had returns that absolutely crushed the S&P 500's 35%! Most of them were over 100%... Investing in any one of those single stocks ALONE would have yielded substantially higher returns than the S&P 500.
Sure, and I just heard if you'd bought netflix over the last decade you'd be up 4000%.

So what, you know what else could've happened? You might have gotten so spooked after three years of extraordinary volatility with netflix (much, much higher than the total market) that you would have sold out in fear and done not much better than the market (which looked like a smooth ride in comparison. netflix in orange below, total market in blue):

Image

source
http://quotes.morningstar.com/chart/fun ... A%5B%5D%7D
NoobInvestor123 wrote:
Tue Dec 24, 2019 10:30 pm
Here's my question: is me doubting this advice (that its best for noobs to invest in S&P 500 rather than individual stocks) coming from a place of naivety? Is it actually in reality a LOT harder to "beat the market" then I think it is? Is what I am doing right now (cherry picking individual stocks that had great performance last year and then expecting they'll have great performance next year) a recipe for disaster? Would I do best to simply invest everything in the S&P 500 like everyone is saying, even though I feel like I can do so much better with those few stocks mentioned above?

Thanks for any insight!
there's reversion to the mean and Jack Bogle wrote a chapter in his little book of commonsense investing where he showed (for mutual funds) that often the best past performers are often the future underperformers. You can't go back and get the growth that occurred. Hoping it continues is not a strategy. Recency bias/hindsight bias is a danger for investors.

look at how much has changed with the biggest U.S. companies (based on revenue) just over the past 24 years:

https://americanbusinesshistory.org/lar ... 1994-2018/
"May you live as long as you want and never want as long as you live" -- Irish Blessing | "Invest we must" -- Jack Bogle

dru808
Posts: 277
Joined: Sat Oct 15, 2011 2:42 pm

Re: Ready to invest in the stock market for the first time in my life

Post by dru808 » Wed Dec 25, 2019 1:55 pm

If you think amazon is gonna secure your retirement go for it. :sharebeer

User avatar
Mactheriverrat
Posts: 150
Joined: Sun Nov 24, 2019 1:41 pm
Location: Works on the Mississippi River on the barges. Live's in Little Rock, AR.

Re: Ready to invest in the stock market for the first time in my life

Post by Mactheriverrat » Wed Dec 25, 2019 2:12 pm

If your going to buy individual stocks , then you should have a system for buying them . Don't blindly follow financial advisers as they have their own agenda.

May I suggest Guppy Multiple Moving Average (GMMA) by Daryl Guppy .

His book trend trading https://www.amazon.com/Trend-Trading-se ... 0731400852
You can also find his book in PDF form by searching google - daryl guppy trend trading pdf-
You can download the whole book for free.

A great video that boils the GMMA to simple terms https://www.youtube.com/watch?v=kjfW2BaeldU

Now a lot of bogle heads don't trade stocks as they just rather invest in the buy , hold and forget John Bogle way of trading.
Everything evolves. | May Every Sunrise Bring You Hope. May Every Sunset Bring you Peace.

HawkeyePierce
Posts: 863
Joined: Tue Mar 05, 2019 10:29 pm
Location: Colorado

Re: Ready to invest in the stock market for the first time in my life

Post by HawkeyePierce » Wed Dec 25, 2019 2:27 pm

Managing a portfolio of individual stocks takes a lot of time. Finding stocks to buy, deciding when to buy *and* sell, staying on top of their performance, etc.

A three-fund Boglehead portfolio takes about 15 minutes a year. You can use all the time you save to do something more interesting.

macheta
Posts: 170
Joined: Sat Nov 29, 2014 12:06 am

Re: Ready to invest in the stock market for the first time in my life

Post by macheta » Wed Dec 25, 2019 2:44 pm

dru808 wrote:
Wed Dec 25, 2019 1:55 pm
If you think amazon is gonna secure your retirement go for it. :sharebeer
My college financial class made me pick stocks in March of 2001 for my financial portfolio. I decided to invest 25k in amazon at $10.13 per share. We were not actually investing in the real market. I wish I had invested in them since was buying stuff from them around that time and I worked full time so I had some cash.

Elena
Posts: 343
Joined: Mon Nov 21, 2016 5:42 pm

Re: Ready to invest in the stock market for the first time in my life

Post by Elena » Wed Dec 25, 2019 2:55 pm

Behavioral question for your class:
You invest $25,000 in whichever stock or mutual fund. It does not matter. Within a week, portfolio value drops to $3,000. What would you do?

sambb
Posts: 2693
Joined: Sun Mar 10, 2013 3:31 pm

Re: Ready to invest in the stock market for the first time in my life

Post by sambb » Wed Dec 25, 2019 3:10 pm

To the OP: if you can confidently and consistently pick stocks to beat the market, then go for it. Most of us cant, but you may be gifted at this. We just dont know. its up to you to decide if you can do it.

dru808
Posts: 277
Joined: Sat Oct 15, 2011 2:42 pm

Re: Ready to invest in the stock market for the first time in my life

Post by dru808 » Wed Dec 25, 2019 3:33 pm

Elena wrote:
Wed Dec 25, 2019 2:55 pm
Behavioral question for your class:
You invest $25,000 in whichever stock or mutual fund. It does not matter. Within a week, portfolio value drops to $3,000. What would you do?
A fund, I wouldn’t worry. An individual stock? I don’t invest in them so no idea, probably be tempted to cut my losses.

dru808
Posts: 277
Joined: Sat Oct 15, 2011 2:42 pm

Re: Ready to invest in the stock market for the first time in my life

Post by dru808 » Wed Dec 25, 2019 3:34 pm

macheta wrote:
Wed Dec 25, 2019 2:44 pm
dru808 wrote:
Wed Dec 25, 2019 1:55 pm
If you think amazon is gonna secure your retirement go for it. :sharebeer
My college financial class made me pick stocks in March of 2001 for my financial portfolio. I decided to invest 25k in amazon at $10.13 per share. We were not actually investing in the real market. I wish I had invested in them since was buying stuff from them around that time and I worked full time so I had some cash.
Yup, and I wish I had fanngd. I wish, I wish, i wish. Lol :sharebeer

macheta
Posts: 170
Joined: Sat Nov 29, 2014 12:06 am

Re: Ready to invest in the stock market for the first time in my life

Post by macheta » Wed Dec 25, 2019 3:35 pm

Elena wrote:
Wed Dec 25, 2019 2:55 pm
Behavioral question for your class:
You invest $25,000 in whichever stock or mutual fund. It does not matter. Within a week, portfolio value drops to $3,000. What would you do?
good point

User avatar
JPH
Posts: 952
Joined: Mon Jun 27, 2011 8:56 pm

Re: Ready to invest in the stock market for the first time in my life

Post by JPH » Wed Dec 25, 2019 3:45 pm

If you believe it is possible to beat the market by picking individual stocks then just buy a managed fund and let a professional do it for you. There is a relatively small cost for doing it this way, but you almost certainly will make money in the long term.
While the moments do summersaults into eternity | Cling to their coattails and beg them to stay - Townes Van Zandt

User avatar
arcticpineapplecorp.
Posts: 4637
Joined: Tue Mar 06, 2012 9:22 pm

Re: Ready to invest in the stock market for the first time in my life

Post by arcticpineapplecorp. » Wed Dec 25, 2019 4:24 pm

JPH wrote:
Wed Dec 25, 2019 3:45 pm
If you believe it is possible to beat the market by picking individual stocks then just buy a managed fund and let a professional do it for you. There is a relatively small cost for doing it this way, but you almost certainly will make money in the long term.
but whether you will make more money than had you just owned the market is not very likely:

https://us.spindices.com/spiva/#/reports

no need to underperform the market (at higher cost) when the return of the market is available at a lower cost.
"May you live as long as you want and never want as long as you live" -- Irish Blessing | "Invest we must" -- Jack Bogle

User avatar
StormShadow
Posts: 768
Joined: Thu Feb 09, 2012 6:20 pm

Re: Ready to invest in the stock market for the first time in my life

Post by StormShadow » Wed Dec 25, 2019 10:05 pm

NoobInvestor123 wrote:
Tue Dec 24, 2019 10:30 pm
Here's my question: is me doubting this advice (that its best for noobs to invest in S&P 500 rather than individual stocks) coming from a place of naivety? Is it actually in reality a LOT harder to "beat the market" then I think it is? Is what I am doing right now (cherry picking individual stocks that had great performance last year and then expecting they'll have great performance next year) a recipe for disaster? Would I do best to simply invest everything in the S&P 500 like everyone is saying, even though I feel like I can do so much better with those few stocks mentioned above?
Yes.

Welcome to Bogleheads.

User avatar
Wiggums
Posts: 2425
Joined: Thu Jan 31, 2019 8:02 am

Re: Ready to invest in the stock market for the first time in my life

Post by Wiggums » Wed Dec 25, 2019 10:18 pm

NoobInvestor123 wrote:
Tue Dec 24, 2019 10:30 pm
Hello awesome people of the internet,

I am starting my stock market investing journey very soon and wanted to share my overall thoughts and a few questions I had about what I learned before actually getting my feet wet investing stocks. I'll jump right into it:

I read over and over from many different sources that the vast majority of people (and CERTAINLY beginners) would do best to simply invest everything in the S&P 500 and wait as long as possible instead of investing in individual stocks and trying to "time the market". But, well, to be honest, I have doubts about this advice... last year, the S&P 500 had a return of about 35%... looking at a few stocks that are majorly popular and recommended by financial advisers (like Microsoft, AMD, Roku, Apple, Shopify, Mastercard, and so many others, you can literally just google "best stocks" to find them), their 2019 performance looks amazing! They had returns that absolutely crushed the S&P 500's 35%! Most of them were over 100%... Investing in any one of those single stocks ALONE would have yielded substantially higher returns than the S&P 500.

Here's my question: is me doubting this advice (that its best for noobs to invest in S&P 500 rather than individual stocks) coming from a place of naivety? Is it actually in reality a LOT harder to "beat the market" then I think it is? Is what I am doing right now (cherry picking individual stocks that had great performance last year and then expecting they'll have great performance next year) a recipe for disaster? Would I do best to simply invest everything in the S&P 500 like everyone is saying, even though I feel like I can do so much better with those few stocks mentioned above?

Thanks for any insight!
Welcome to the forum

I invest in the three fund portfolio.

Individual stocks carry additional risk and therefore the potential for a bigger reward. I don’t hold individual stocks any longer because I wound trade them too often and either lose money or generates taxable events. I’m sure you don’t mind watching Apple go from 142 to 284 this year. How about the other direction? Are you going to sell or hold on?

Topic Author
NoobInvestor123
Posts: 31
Joined: Tue Dec 24, 2019 10:18 pm

Re: Ready to invest in the stock market for the first time in my life

Post by NoobInvestor123 » Thu Dec 26, 2019 5:14 pm

Hi guys,

Wow, thank you all so much for your replies! Sorry for just getting back online I was just with my family for christmas... hope you all had a good time as well :)

I think that the reason I am having these desires to beat the market so bad is because I am simply so new to this world (investing)... I feel like even though every intelligent source out there is telling me to invest in the S&P 500, I just can't, I wouldn't be satisfied... I guess my best way of explaining it is, I would rather TRY to beat the market right now, and LOSE money in the beginning, and then move onto the S&P 500, then just put everything on the S&P 500 right from the start... I almost feel like I HAVE to lose money by doing it the way I think it can be beat (individual stocks) before going on to what everyone is telling me to do... does that make sense? I have set a limit for myself, and that limit is a thousand dollars - if I lose a thousand dollars, then I will vow to never try to beat the market with individual stocks again... I kind of see this as a "right of passage" that I just have to go through, just for the learning experience if not anything else... does that make sense to you all? Or do you think that is foolish and naive of me? Have you (or do you know anyone else who has) ever entered into the stock market with this kind of mentality, and then lost their entire life savings to this kind of mindset?

You can be totally honest, I appreciate your brutal honesty with no sugarcoating.

Thank you all so much

User avatar
Stef
Posts: 358
Joined: Thu Oct 10, 2019 10:13 am

Re: Ready to invest in the stock market for the first time in my life

Post by Stef » Thu Dec 26, 2019 5:18 pm

What if you never lose money but underperform the market substantially?

KingRiggs
Posts: 361
Joined: Wed Dec 12, 2018 12:19 pm
Location: Indiana

Re: Ready to invest in the stock market for the first time in my life

Post by KingRiggs » Thu Dec 26, 2019 5:24 pm

Or even worse than losing money or lagging the market, say you DO beat the market in 2020 with individual stock picks. That might well lead you to believe that it’s always easy to do (as easy as a Google search!).

You will spend the next several years chasing that dream again, sure enough that you did it once, so you can do it again...

There are thousands of people who do this every day for a living, with huge amounts of information and resources at their disposal. And 80% of them don’t beat the market consistently. Are you better at their jobs than they are?
Advice = noun | Advise = verb | | Roth, not ROTH

Trader Joe
Posts: 1442
Joined: Fri Apr 25, 2014 6:38 pm

Re: Ready to invest in the stock market for the first time in my life

Post by Trader Joe » Thu Dec 26, 2019 5:50 pm

NoobInvestor123 wrote:
Tue Dec 24, 2019 10:30 pm
Hello awesome people of the internet,

I am starting my stock market investing journey very soon and wanted to share my overall thoughts and a few questions I had about what I learned before actually getting my feet wet investing stocks. I'll jump right into it:

I read over and over from many different sources that the vast majority of people (and CERTAINLY beginners) would do best to simply invest everything in the S&P 500 and wait as long as possible instead of investing in individual stocks and trying to "time the market". But, well, to be honest, I have doubts about this advice... last year, the S&P 500 had a return of about 35%... looking at a few stocks that are majorly popular and recommended by financial advisers (like Microsoft, AMD, Roku, Apple, Shopify, Mastercard, and so many others, you can literally just google "best stocks" to find them), their 2019 performance looks amazing! They had returns that absolutely crushed the S&P 500's 35%! Most of them were over 100%... Investing in any one of those single stocks ALONE would have yielded substantially higher returns than the S&P 500.

Here's my question: is me doubting this advice (that its best for noobs to invest in S&P 500 rather than individual stocks) coming from a place of naivety? Is it actually in reality a LOT harder to "beat the market" then I think it is? Is what I am doing right now (cherry picking individual stocks that had great performance last year and then expecting they'll have great performance next year) a recipe for disaster? Would I do best to simply invest everything in the S&P 500 like everyone is saying, even though I feel like I can do so much better with those few stocks mentioned above?

Thanks for any insight!
Welcome to the forum. The answer to your question is a easy. A definitive yes.

I only invest in VFIAX or VTSAX and I am very happy.

User avatar
1789
Posts: 635
Joined: Fri Aug 16, 2019 3:31 pm
Location: OR

Re: Ready to invest in the stock market for the first time in my life

Post by 1789 » Thu Dec 26, 2019 7:46 pm

NoobInvestor123 wrote:
Thu Dec 26, 2019 5:14 pm
Hi guys,

Wow, thank you all so much for your replies! Sorry for just getting back online I was just with my family for christmas... hope you all had a good time as well :)

I think that the reason I am having these desires to beat the market so bad is because I am simply so new to this world (investing)... I feel like even though every intelligent source out there is telling me to invest in the S&P 500, I just can't, I wouldn't be satisfied... I guess my best way of explaining it is, I would rather TRY to beat the market right now, and LOSE money in the beginning, and then move onto the S&P 500, then just put everything on the S&P 500 right from the start... I almost feel like I HAVE to lose money by doing it the way I think it can be beat (individual stocks) before going on to what everyone is telling me to do... does that make sense? I have set a limit for myself, and that limit is a thousand dollars - if I lose a thousand dollars, then I will vow to never try to beat the market with individual stocks again... I kind of see this as a "right of passage" that I just have to go through, just for the learning experience if not anything else... does that make sense to you all? Or do you think that is foolish and naive of me? Have you (or do you know anyone else who has) ever entered into the stock market with this kind of mentality, and then lost their entire life savings to this kind of mindset?

You can be totally honest, I appreciate your brutal honesty with no sugarcoating.

Thank you all so much
It is OK to try and fail. It is just problem to do with huge amount of money. You can allocate like 5-10% of your total savings and try couple years and compare your results. You will have some huge winners and very bad losers. Overall your results may barely match or underperform. What are you losing in this case? TIME! And for a person like me, it is more important than money. (Which most likely would be less than when i start, as i think this is losers game)
"My conscience wants vegetarianism to win over the world. And my subconscious is yearning for a piece of juicy meat. But what do i want?" (Andrei Tarkovsky)

User avatar
F150HD
Posts: 2572
Joined: Fri Sep 18, 2015 7:49 pm

Re: Ready to invest in the stock market for the first time in my life

Post by F150HD » Thu Dec 26, 2019 8:05 pm

I would rather TRY to beat the market right now, and LOSE money in the beginning, and then move onto the S&P 500, then just put everything on the S&P 500 right from the start... I almost feel like I HAVE to lose money by doing it the way I think it can be beat (individual stocks) before going on to what everyone is telling me to do... does that make sense? I have set a limit for myself, and that limit is a thousand dollars - if I lose a thousand dollars, then I will vow to never try to beat the market with individual stocks again...
$1000 is peanuts, go for it. One request....post your success or failures here. Not so folks can bash you but just to see the outcome.

Good luck!

racy
Posts: 242
Joined: Sun Mar 30, 2008 7:38 am
Location: Nebraska

Re: Ready to invest in the stock market for the first time in my life

Post by racy » Thu Dec 26, 2019 8:49 pm

I was young once, anxious to make money, business college grad, and pretty 'smart'. Nevertheless, I lost money investing in hot individual stocks. But, you're young. You'll most likely think us old guys are dumb. So, go ahead. Pick some stocks. Learn on your own. (And, don't think your future advice will be worth much to new investors!) :wink:

retiredjg
Posts: 39035
Joined: Thu Jan 10, 2008 12:56 pm

Re: Ready to invest in the stock market for the first time in my life

Post by retiredjg » Fri Dec 27, 2019 9:28 am

NoobInvestor123 wrote:
Thu Dec 26, 2019 5:14 pm
You can be totally honest, I appreciate your brutal honesty with no sugarcoating.
Some people can learn from others with more experience. Some have to learn everything themselves, even if that means "the hard way". You seem to fall into the latter category.

Do yourself a favor and limit how much you risk in this, rather than go all in. You'll have some wins and want to put more in, but don't.

Topic Author
NoobInvestor123
Posts: 31
Joined: Tue Dec 24, 2019 10:18 pm

Re: Ready to invest in the stock market for the first time in my life

Post by NoobInvestor123 » Sun Jan 12, 2020 7:26 pm

Hey guys,

So sorry for the delay! Wow, it's been crazy long since I posted this, I got swamped by life and running around for the holidays (I live in the Philippines with my own business over there so I only come to the states once a year, so I try to cram seeing all my friends and family into just one month, haha...)

Ok, I'm gonna take the time right now to reply to everyone who wrote something on this post. Also, I already started investing (pretty safely I think, and with the guidance of a friend who used to work on wall street) and I made $200!! So pumped about this, haha...

I will also post my entire history here of what I choose to invest in, as someone pointed out...

Ok, I'll respond to everyone right now, cheers

Topic Author
NoobInvestor123
Posts: 31
Joined: Tue Dec 24, 2019 10:18 pm

Re: Ready to invest in the stock market for the first time in my life

Post by NoobInvestor123 » Sun Jan 12, 2020 7:43 pm

David Jay wrote:
Wed Dec 25, 2019 9:41 am
Welcome to the forum!
NoobInvestor123 wrote:
Tue Dec 24, 2019 10:30 pm
Is it actually in reality a LOT harder to "beat the market" then I think it is?
Yes. There is a whole industry of professionals who research every publicly traded company. This is called “information asymmetry (they have more information, you have less). Based on trading volume, you will most likely to be purchasing your stock from one of those professionals, who think they are getting a great deal by selling that stock at the price you are buying that stock. Only one of you will be right. I am betting on the professional, not the amateur.
Is what I am doing right now (cherry picking individual stocks that had great performance last year and then expecting they'll have great performance next year) a recipe for disaster?
“Disaster” is not guaranteed, but long term underperformance is almost certain. Anyone can Monday morning quarterback, which is what you are doing. But 2019 overperformers are unlikely to be 2020 overperformers, in fact last year’s overperformers tend to underperform, use the search function for “reversion to the mean”.
Would I do best to simply invest everything in the S&P 500 like everyone is saying, even though I feel like I can do so much better with those few stocks mentioned above?
Yes, the key word in the above quote is “feel”. How you feel does not change reality.

[edit] If you decide to “test the waters” of individual stock investing, please, PLEASE keep detailed records and benchmark yourself. So often folks say “I have done great” but they are still underperforming the market averages. I have “been there, done that”: I was using a strategy that was really working well, but when I actually benchmarked it I found I was underperforming the SP500 total return by about 1% per year.
hey, sorry for the delay! I am just replying to everyone right now, I was so busy these last few weeks.

Thanks so much for your advice! I looked up reversion to the mean - scary right now, considering everything is at an all time high (reversion to the mean would suggest it would tend to go down from here)... oh yea, I plan to test the waters at first with a small portion of my money... for anyone reading, I have 30k to invest, and actually, I have learned a lot from the last time I was on here till now... I guess I'll ramble about what happened in that time right here in this reply... so what happened was, I played around with about 7.5k of the 30k, and I made like $200! Not much I know lol but for a total noob it's exciting... the stocks that I am invested in right now are as follows:

Apple
Microsoft
AMD
Nvidia
Shopify

I am invested with around $1,500 in shares for each of those 5 companies, so that is around $7.5k total. The reason I picked these stocks is because they are all stable, good US companies that have seen really good growth in the last few years. That's about all I can say about these stocks... I don't know the first thing about technical or fundamental analysis, haha

About 5 days ago, I was daytrading. I was completely new to daytrading and I wanted to test it out to get my feet wet. I decided to day trade Tesla. I won about $100 over the course of 3 hours, and then proceed to lose $80 of it over the next 15 minutes. This experience has made me decide to never day trade again. I still very much want to "play around" with the stock market, but I definitely will not be doing any more daytrading any time soon.

I have learned a lot about index funds, and in particular, ETFs. I understand that ETFs are kind of like the "stock" version of index funds. For this reason, they are attractive to me, since they can be bought and sold instantaneously. In particular, I have been looking at VOO and XLK. I understand that most any professional adviser would tell me I could not go wrong with VOO, however, XLK is much more intriguing to me. I understand that XLK is one of the most popular ETFs tracking the tech industry, and I can see that the tech industry has been outperforming the S&P 500 for a number of years, consecutively. Because of this, is there any reason why I should go with VOO over XLK? I would be inclined to always go with XLK because of the consistent outperformance it's had over VOO.

Sorry if this response is long and boring! I'm gonna be reading and responding to every other response that was posted in this thread over the next few hours and days. Thanks so much everyone for the advice you gave!

Topic Author
NoobInvestor123
Posts: 31
Joined: Tue Dec 24, 2019 10:18 pm

Re: Ready to invest in the stock market for the first time in my life

Post by NoobInvestor123 » Sun Jan 12, 2020 7:45 pm

David Jay wrote:
Wed Dec 25, 2019 9:43 am
Do you have any retirement plans at work? Or do you qualify for an IRA? These are great places to hold your stock investments.
Hey, thanks for the response and sorry for the delay!

Yes, I am currently in the process of opening up a Roth IRA. I am 27 years old and have enough money to open up a Roth IRA and continue to invest money (30k) into the stock market. I just hate how long it has to stay in there before you can take out your gains, haha...

CoastalWinds
Posts: 717
Joined: Sat Apr 06, 2019 8:28 pm

Re: Ready to invest in the stock market for the first time in my life

Post by CoastalWinds » Sun Jan 12, 2020 7:47 pm

Stock picking is easy. Just get yourself a time machine and you’re all set.

Topic Author
NoobInvestor123
Posts: 31
Joined: Tue Dec 24, 2019 10:18 pm

Re: Ready to invest in the stock market for the first time in my life

Post by NoobInvestor123 » Sun Jan 12, 2020 7:50 pm

Triple digit golfer wrote:
Wed Dec 25, 2019 9:51 am
Yes to all.

If you chase the best performers from last year, you're buying high. This year's top performers are rarely next year's top performers.
Hey, thanks for the response and sorry for the delay!

Oh crap, is that true? That sucks, lol... because I am so new to this, it seems "logical" to me to buy what has been trending up fastest in recent times, with the assumption that because they are going up so much faster than everything else, they will be more likely than everything else to continue going up... but maybe then, that just shows I have a lot to learn, lol

I have been thinking of investing all 30k into an ETF, like perhaps a tech ETF, like XLK... what do you think of that?

Topic Author
NoobInvestor123
Posts: 31
Joined: Tue Dec 24, 2019 10:18 pm

Re: Ready to invest in the stock market for the first time in my life

Post by NoobInvestor123 » Sun Jan 12, 2020 7:54 pm

retiredjg wrote:
Wed Dec 25, 2019 10:15 am
NoobInvestor123 wrote:
Tue Dec 24, 2019 10:30 pm
I read over and over from many different sources that the vast majority of people (and CERTAINLY beginners) would do best to simply invest everything in the S&P 500 and wait as long as possible instead of investing in individual stocks and trying to "time the market".
The advice here is not to delay investing in individual stocks but not to invest in individual stocks at all. The exception is that maybe it's ok to have a small portion of your portfolio in individual stocks...as a play account.

Here's my question
Yes, yes, highly probable, and yes.

Investing is about risk. Individual stock picking is a very risky thing. Good companies do not always mean good stocks. Good companies go bad and disappear. If you invest in 3000 stocks, it won't matter much if a few go poof.
Hey, thanks for the response and sorry for the delay!

Ok, got it... yup, I plan to have at the very least a small portion of my 30k to invest into individual stocks as a "play account"...

What do you think about investing in ETFs, and in particular, tech ETFs? Like XLK? I have been reading a lot about them and they seem very interesting to me... being that tech seems to be one of the fastest growing industries right now, I would expect a tech ETF to be a very solid mix of risk and growth, no?

Topic Author
NoobInvestor123
Posts: 31
Joined: Tue Dec 24, 2019 10:18 pm

Re: Ready to invest in the stock market for the first time in my life

Post by NoobInvestor123 » Sun Jan 12, 2020 7:56 pm

MotoTrojan wrote:
Wed Dec 25, 2019 10:52 am
Just to clarify, the advice you’re referring to as provided to “noobs” isn’t meant to be only applicable to new investors, it’s merit is for everyone. Studies show that the average active manager cannot beat the market consistently net of fees, and these managers are not noobs.

GE was a steady earner once, literally on top of the market.

I’d stick to indices, maybe with some factor tilts to keep it interesting.
Hey, thanks for the response and sorry for the delay!

Oh yea, I heard about what happened with GE, that's scary! Definitely wouldn't want that to happen with a stock that I'm invested in...

Oh, indices is another word for indexes, right? Is that correct? I am looking up what factor tilts means now...

Topic Author
NoobInvestor123
Posts: 31
Joined: Tue Dec 24, 2019 10:18 pm

Re: Ready to invest in the stock market for the first time in my life

Post by NoobInvestor123 » Sun Jan 12, 2020 8:03 pm

peterwantstosave wrote:
Wed Dec 25, 2019 11:17 am
Welcome to the forum!

Recommend you get started here: https://www.bogleheads.org/wiki/Getting_started

Feel free to post your portfolio, once you've been through the videos linked above

P
Hey, thanks so much for the link and sorry for the delay! Was away with family for the holidays...

Wow, the sheer amount of information on this matter boggles my mind (boggle, lol...) I'll be reading this now... as for my portfolio, it's still in the process of being made (lol) but at the moment with everything I've learned in the past few weeks, I am seriously considering dumping anywhere from 50% to 100% of my investment money (30k) into the ETF known as "XLK"... it's an ETF that tracks the tech market, and it seems like a good idea to me because the tech market has been growing super fast in recent years, and it's a lot better to invest in ETFs than individual stocks because of the diversification you get with them... what are your opinions on that?

My portfolio right now is as follows:

Apple
Microsoft
AMD
Nvidia
Shopify

I am invested with around $1,500 in shares for each of those 5 companies, so that is around $7.5k total. Actually, something interesting! I noticed that for the last 3 days (about how long my entire investment journey has been so far LOL) the gains I received from this portfolio are almost EXACTLY the same gains as that etf, XLK! So, in other words, I could have just saved the time and energy I put into cherry picking stocks and just went with that ETF from the get go! What do you make of that?

Thanks so much for your thoughts!

Topic Author
NoobInvestor123
Posts: 31
Joined: Tue Dec 24, 2019 10:18 pm

Re: Ready to invest in the stock market for the first time in my life

Post by NoobInvestor123 » Sun Jan 12, 2020 8:05 pm

F150HD wrote:
Wed Dec 25, 2019 11:58 am
I am starting my stock market investing journey very soon
Meaning....you are not yet old enough to invest?

Picking winning stocks isn't as easy as it looks, Google searches make returns look like easy :dollar .

OP- what is the difference between these two formulas?

Image
-
Image
Hey, thanks for the response and sorry for the delay!

Oh nope, I'm old enough to invest, I just meant I was taking time to learn everything before diving right in, haha...

Oh man, I could not tell you a single thing about EITHER of those formulas, LOL!

Topic Author
NoobInvestor123
Posts: 31
Joined: Tue Dec 24, 2019 10:18 pm

Re: Ready to invest in the stock market for the first time in my life

Post by NoobInvestor123 » Sun Jan 12, 2020 8:08 pm

1789 wrote:
Wed Dec 25, 2019 12:23 pm
You can buy any of those and beat SP500 easily for a couple years. Problem is historical data (future maybe different) shows that over 25/30 years it is almost impossible to beat SP500. Investing in SP500 brings diversity of sectors and eliminates individual stock risks.

(....like Microsoft, AMD, Roku, Apple, Shopify, Mastercard, and so many others)

Lets assume you picked AMZN stock last year

AMZN YTD: 20%
SP500 YTD: 30%

You see the risk now?
Hey, thanks for the response and sorry for the delay!

Oh yea, when you put it that way it does seem harder to "beat the market"... my friend who worked on wall street for 8 years told me that if he were to invest in any one single stock, it would be amazon, but amazon didn't even beat the SP 500 last year! So I definitely get that it just "looks easier" than it actually is to pick winning stocks, haha...

What is your opinion on tech ETFs, and in particular, XLK? I am thinking of investing in that ETF because it looks like it has been beating the S&P 500 for a long time...

Topic Author
NoobInvestor123
Posts: 31
Joined: Tue Dec 24, 2019 10:18 pm

Re: Ready to invest in the stock market for the first time in my life

Post by NoobInvestor123 » Sun Jan 12, 2020 8:09 pm

Phineas J. Whoopee wrote:
Wed Dec 25, 2019 12:29 pm
Past performance does not guarantee future results.
PJW
True, even though I don't want it to be! hahaha...

Topic Author
NoobInvestor123
Posts: 31
Joined: Tue Dec 24, 2019 10:18 pm

Re: Ready to invest in the stock market for the first time in my life

Post by NoobInvestor123 » Sun Jan 12, 2020 8:12 pm

climber2020 wrote:
Wed Dec 25, 2019 12:42 pm
If you want to invest in something that has done relatively poorly over the last many years compared to the SP500, you could always allocate some of your money to an international stock index fund.

If it helps, I was in your position when I first started investing in 2012. The SP500 has gone up a huge amount by that point too and people were predicting an imminent crash. I’m glad I took the advice of people here and dumped everything in.
Hey, thanks for the response and sorry for the delay!

Oh wow, "just dump everything in", those kinds of words make me want to invest, haha... that's comforting to know that others who are on this forum now were once in my shoes... I'm just so hungry to make as much money as possible, you know? I'm hungry, and greedy, and I want as much as possible... I'm probably the worst investor in this thread, LOL!

but in all seriousness, I was actually looking at tech ETFs, in particular, XLK... what do you think of that? XLK has outperformed VOO for a crazy long time... would I do well to just "dump everything in" to XLK?

260chrisb
Posts: 325
Joined: Wed Apr 28, 2010 7:26 pm

Re: Ready to invest in the stock market for the first time in my life

Post by 260chrisb » Sun Jan 12, 2020 8:14 pm

I don't think being a noob has anything to do with whether or not buying stocks is better than buying an index. Folks here are not here to tell you what to buy but to share the common belief that buying individual stocks may not be the best way to build wealth over the long haul. If you're ready to invest for the first time you're likely young which gives you plenty of time to start with a solid and proven approach and see results. Stop listening to all the chatter about beating the market and trying to pick stocks. It's generally a losers game. Start investing in a diversified portfolio of index funds and after you've built a base, buy some stocks if you want. I own a few and they've mostly done well (some VERY well in 2019) as do thousands of people here but they are a small percentage of my overall holdings. If you do nothing more than create a discipline and invest as suggested my guess is that in 5-10 years you're going to like the results. Good luck!

Post Reply