All these Financial guides are very interesting. But beware of falling into the illusion of being a good-enough active investor. It's like entering the Pro league as an overconfident amateur. The other players are the best in the universe. And they have cybernetic extensions: algorithmic trading with virtually limitless amounts of resources and information. And sometimes they have "alpha" you'll never, ever get your hands on. They prey on "dumb money" like naive/retail investors and pension/mutual funds.
And at these times of high rates and inflation, the only safe move seems to be money market accounts and take the delta inflation hit. Try to focus your time in more valuable things like your friends and family. And keeping your sources of income.
Agreed, strongly. Which is why the online edition has some “Cautionary words”:
> Pricing Money is a beginner’s guide: it says so in big letters on the front cover. I believe it to be an excellent beginner’s guide — presumably many authors believe their own books to be excellent — but, being a beginner’s guide, it will not immediately make you a world-renowned expert.
> It was written around the turn of the pedant’s millennium. In some parts it shows its age. It has been slightly freshened by the addition of green-boxed updates, but these have been written very concisely, more to point to developments than to explain them fully.
> Please do learn from and be informed by Pricing Money. But also be cautious: it is not enough to make you a world-renowned expert; it does not list the many details that are both dull and necessary; some things have changed since it was written; it cannot be your risk manager.
I’m not going to argue that asset managers and trading desks have plenty of resources and that they can transact very quickly and cheaply. But having been on the inside of small and large asset managers for almost ten years, I can say there’s a lot of groupthink and rather brain dead behaviour to be seen on a trading floor.
Call me jaded but I’ve worked with both systematic and discretionary traders. The algos I’ve seen tend to be heavily overfit, and stop working as soon as they hit production. The discretionary traders usually have a tonne of gambler’s tics and have a bad habit of assigning narratives to market noise.
Most institutional traders aren’t the best in the universe. They just do dumb things faster and at bigger scale than day traders.
Indeed, institutional traders and asset managers are still the "buy side" and as such are not crazily more informed than retail.
The real sharks are on the sell side, using low-latency arbitrage and massive leverage, and have the ability to unwind risky positions over months. Fleecing buy side and retail is highly profitable for them.
In their defense of course they'll say they're "providing liquidity", and given how much buy side tends to pile up on one side of the trade, you can see their point: somebody's going to take the other side of these big moves.
Agree that people should not do active investing, although the solution would be passive investing (index funds), which allow you to focus on friends & family without missing out of the economy's long term gains.
Hot take but I'll bite, what's your rationale? We're only ~9% down from VTI's ATH and what happens now doesn't matter when your investing horizon is 15+ years.
This is terrible advice BTW. I got it in 2007, also HN and FT forums convinced me. So I put significant savings in a couple of index funds. I lost 40% within months. Left it there and recovered only after 8 years (and that's not even adjusting for inflation or MM rate). Please be a bit more self-aware. I spent many years in finance and the more I learned, the more I realized how much I don't know.
If you're investing a chunk of every paycheck, you'll keep plowing money into the index fund through every dip, which historically makes up for the money you add at peaks. You can spend a few years derisking as you approach retirement, which is similarly not that susceptible to recessions.
I meant to put money in index funds right now. Not ongoing investment over a long time.
And going back further to my original point, if I had money in funds now I'd move it to Money Market accounts because the risk of a stock market downturn is big (1987/2001/2008 style). You are not Soros/Buffett/Munger or a multi-billion dollar hedge fund.
- Recession now undeniably starting (several friends in Tech are losing their jobs in companies doing well)
- Ballooning deficits and debt at every level
- High rates making debt ballooning faster
- USD dominance decreasing
That's known and now not matter of opinion but hard facts. Now, where to invest? I have no idea (and I'm pretty sure traditional investment knowledge doesn't work anymore), so I do money markets and take the hit until I figure something out. Maybe there's a non-hype AI application opportunity somewhere, who knows. Worrying too much makes you do dumb life-altering things. In uncertain times, I chose to invest the time in enjoying life a bit. Wait and see.
Core inflation is going down, just not as fast as other sectors. People losing their jobs is not a hard fact of a recession, we have one of the lowest unemployment rates in history.
I'm just indexing and staying happy, worry free, it worked for the last 100 years and I'm sure it'll work for my lifetime.
I have a similar outlook. If the stock market starts losing against inflation over my time horizon (several decades) then we have bigger problems. There will be recessions in the future. I'll keep tossing money into index funds through the bottoms and enjoy coming out the other side. Every three months, I get a statement in the mail telling me how much money I've made or lost. That's all the attention I need to pay to my longterm finances.
i feel that this assumes the large investors on wall.street are playing the same game as retail investors. Given the size and scale of their accounts, I'd imagine it's an entirely different playbook.
My (limited, retail only) experience tells my gut that most retail investors do it to get rich, and not to learn the markets, learn the risks, and build a business. They are different goals, granted both do seek to make long term gains.
I like to believe that retail investors can make it if they put in the effort and learn to manage risk appropriately. At least I need to tell myself that as I work towards making money in the markets myself.
I am definitely dumb money right now, and I could also be delusional, but saying there is no hope so give up and just do something else completely is just defeatist.
Surely it must be possible to learn how to do whatever these so called "smart money" types are doing. Or at the very least learn how they operate so we can identify and avoid their attempts at predation.
And at these times of high rates and inflation, the only safe move seems to be money market accounts and take the delta inflation hit. Try to focus your time in more valuable things like your friends and family. And keeping your sources of income.