Warp daddy
Well-known member
- Joined
- Jul 21, 2020
As far as market prognosticating goes , Two truisms: the future ain't what it used to be and opinions are like well ya know
Market Philosophy
- Thread starter JTG
- Start date
Somebody made a movie.Once again, a new "asset class" that I never took the time to understand, has come and gone:
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Exclusive: At least $1 billion of client funds missing at failed crypto firm FTX
While it is known that FTX moved customer funds to Sam Bankman-Fried's Alameda trading desk, the missing funds are reported here for the first time. The financial hole was revealed in records that 'SBF' shared with other senior executives a week ago.www.reuters.com
Is it really digital currency really gone? Somehow I doubt it.
Anyone have any insight or opinion on the future?
DomB
Well-known member
- Joined
- Aug 25, 2020
So this chart is interesting. And tricky, I think.
Note that the classes probably bleed into each other - I own almost all my investments through mutual funds, so I would be in the 22% bucket, even though as a matter of common sense, I should be in the household bucket. Similar point for ETFs, as those are just like mutual funds except they can get redeemed in a market setting (and don't have to have their price directly tie to NAV - usually there is a small spread). I just don't do mutual funds because I don't like the idea of a spread between NAV (value) and trading price. In panicky times, ETFs can trade below their NAV. In euphoric times, above.
x10003q
Well-known member
- Joined
- Jul 21, 2020
Another dumb 'smart' guy. Zero wisdom. Will be spending time in the pen.
Harvey
Administrator
- Joined
- Jul 15, 2020
Morningstar is a fun tool, if you like investing.
This is a Morningstar approximation of the total size and makeup of the (US) stock market:
The largest companies make up 15+31+27% (a lot) of the total US market. 73% in fact. Medium size companies are 19% and small companies are 9%. These companies are all generally "large" as they are publicly traded. "Medium" and "small" are only relative to "large."
Stocks are also divided in Growth, Core and Value categories. What follows is a big oversimplification.
Generally speaking companies that are expected to become more valuable in the future (stock price expected to rise) are on the right side of the nine boxes (Growth stocks).
Stocks on the left side (Value stocks) are not expected to rise in price, but are more likely to pay dividends. Core stocks are judged to be somewhere in the middle.
So each kind of stock offers a different reason to buy it.
Generally, if you believe in diversification, you should probably have something in each box. Growth and Value, and Large and Small stocks react differently under different market conditions. In reality if your investments are in FUNDS you probably have something in each box anyway.
In my (admittedly simple) mind there are three kinds of individual investors:
1 - Stock pickers: I can beat the market, or at least do just as well, after costs.
2 - Total stock marketers: If I buy the total stock market (like the boxes above) I'll do as well as the market, minus costs. I can get my cost down very low if I choose Vanguard or Fidelity, or something similar. Over the long haul the market returns maybe ~8%, and I'll get close that, which is good enough. If I start saving early in life and never stop.
3 - Value slanted TSMer's: Over the years I have found a certain group of investors that generally follow a Total Stock Market philosophy, EXCEPT that they try to counteract the TSM's tendency to favor LARGE GROWTH stocks. Some of these people overweight VALUE stocks and some overweight SMALL CAP VALUE.
In general Small Cap Value stocks are MORE VOLATILE/risky then the market as a whole. More upside and down.
See this fund comparison:
Total Stock Market (BLUE) vs Small Cap Value Index (RED) 20+ years
Of course I'm think about this now because value has been on a tear for 3 months, and really since the market started to recover from the pandemic. So now is maybe not the best time to add value if you are thinking of starting now.
I've always had a bit of a small cap value bias compared the total stock market. But it's not that much:
Anyone else think about this stuff? What kind of investor are you? Do you fit into any of my 3 categories?
This is a Morningstar approximation of the total size and makeup of the (US) stock market:
The largest companies make up 15+31+27% (a lot) of the total US market. 73% in fact. Medium size companies are 19% and small companies are 9%. These companies are all generally "large" as they are publicly traded. "Medium" and "small" are only relative to "large."
Stocks are also divided in Growth, Core and Value categories. What follows is a big oversimplification.
Generally speaking companies that are expected to become more valuable in the future (stock price expected to rise) are on the right side of the nine boxes (Growth stocks).
Stocks on the left side (Value stocks) are not expected to rise in price, but are more likely to pay dividends. Core stocks are judged to be somewhere in the middle.
So each kind of stock offers a different reason to buy it.
Generally, if you believe in diversification, you should probably have something in each box. Growth and Value, and Large and Small stocks react differently under different market conditions. In reality if your investments are in FUNDS you probably have something in each box anyway.
In my (admittedly simple) mind there are three kinds of individual investors:
1 - Stock pickers: I can beat the market, or at least do just as well, after costs.
2 - Total stock marketers: If I buy the total stock market (like the boxes above) I'll do as well as the market, minus costs. I can get my cost down very low if I choose Vanguard or Fidelity, or something similar. Over the long haul the market returns maybe ~8%, and I'll get close that, which is good enough. If I start saving early in life and never stop.
3 - Value slanted TSMer's: Over the years I have found a certain group of investors that generally follow a Total Stock Market philosophy, EXCEPT that they try to counteract the TSM's tendency to favor LARGE GROWTH stocks. Some of these people overweight VALUE stocks and some overweight SMALL CAP VALUE.
In general Small Cap Value stocks are MORE VOLATILE/risky then the market as a whole. More upside and down.
See this fund comparison:
Total Stock Market (BLUE) vs Small Cap Value Index (RED) 20+ years
Of course I'm think about this now because value has been on a tear for 3 months, and really since the market started to recover from the pandemic. So now is maybe not the best time to add value if you are thinking of starting now.
I've always had a bit of a small cap value bias compared the total stock market. But it's not that much:
Anyone else think about this stuff? What kind of investor are you? Do you fit into any of my 3 categories?
Last edited:
DomB
Well-known member
- Joined
- Aug 25, 2020
I am a slight twist on this against value. I do US total market and world total market. But world total market trades at a discount to US total market. I overweight US as a proportion to world because I believe the rules we have in the US allow for more value creation than in Ex US world.
Q*bert Jones IV
Well-known member
- Joined
- Sep 1, 2020
I’d guess austerity programs in Europe and population crises in the Far East might explain that a bit.
Harvey
Administrator
- Joined
- Jul 15, 2020
@Benny Profane moved this over here.
I get this in principle but haven't found an easy way to do this.
This is what I am seeing with my intermediate bond fund. Yes prices are down, almost as much as stocks, over the last 12 months. But the dividends are up (a lot) and as they get re-invested they are buying comparatively more shares.
So like any investment, as long as I don't HAVE to sell NOW, how bad is it, really?
And this is like the worst year ever for bonds right?
