# It seems to simple!?



## Desdemonia (Jan 16, 2011)

So I'm 29 and with 100k in investments between RRSP and TFSA I feel at this point I need to seriously evaluate my invsetment strategy to make sure its the best for me. I do have the time to learn and implement other strategies so I just want to make sure I'm doing the right thing. Some of the basic concepts I've pickup up (which are all so simple and make a ton of sense)---> 

1) Dollar cost averaging
2) No Load, Low MER Funds to minimize commisions
3) Index funds (cant outguess the market, efficient market hypothesis)
4) Don't time the market!
5) Diversify holdings to reduce risk

#3 really hits home with me...but all these concepts add up to a couch potato approach, which is what I currently employ. 

My problem (well not necessarily a problem, more of a curiousity) is all of the folks here picking stocks on their own and purchasing when they think the "price is right"...trying to beat the market it would seem. How can one justify that strategy? By doing so and picking your own stocks are you not implying that you are smarter than the market!?? Perhaps someone can suggest some reading material for me so I understand why someone would implement these different strategies and the justification behind them.

thank you!


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## GoldStone (Mar 6, 2011)

I think you might have gotten a wrong impression. Lots and lots of folks here use couch potato. It's a very popular approach among CMFers.

Stock pickers tend to be far more active on the board. Their discussions are kind of "in your face". Unlike coach potatoes, they have a lot to talk about on a daily basis. 

If you believe that coach potato is right for you, stick to your convictions. Put your portfolio on autopilot and move on with your normal life. Ignore the daily chatter of stock pickers.

If the siren song of stock picking is too strong to resist, set aside 10% of your portfolio as "play money". Track your stock picking performance a few years in a row. See if you can consistently beat the rest of your portfolio.


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## P_I (Dec 2, 2011)

Great reply GoldStone. The OP is already seems to be on the right track. Quoting John Bogle of Vanguard "Over the years, I’ve come to respect Von Clausewitz’ epigram, “the greatest enemy of a good plan is the dream of a perfect plan.”", from The Dream of A Perfect Plan


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## Rusty O'Toole (Feb 1, 2012)

It's human psychology. It has been proven over and over again that these giant brains of ours aren't cut out for investing. The very traits that kept us alive in the cave man days, work against us when it comes to investing.

Even the investment professionals with high IQs, PhDs, all the information in the world and every other advantage, frequently underperform the market averages. 

Almost all individual investors eventually come to the conclusion that they would have been better off if they put their money into an index fund and went and played golf.

The exceptions to the rule are guys like Warren Buffet who is a stone miser who has been obsessed with profit since he was a boy, and a few others with unusual mental traits. One guy who made $200,000,000 off the real estate collapse in 08 turned out to have Asperger's syndrome which he was not aware of at the time. His obsessive nature led him to dig way deeper into the mortgaged back securities than anybody else, which is how he knew to bet against them.

He is now obsessed with guitars. He doesn't play the guitar, he just collects them. He could as easily have been obsessed with guitars in the first place and then he would have missed out on the $200,000,000 pay day.

If you want to develop the mentality of the winning stock picker look up the work of psychologist Van K. Tharp. He has made a study of winning investors for over 20 years. He came to the conclusion that they share certain characteristics that can be taught. If you have the right mental makeup you can be a successful investor no matter what investing method you chose. Likewise, if you do not have the right mental makeup you will not succeed. And the investing methods everyone automatically thinks of, are the ones most likely to lose money.


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## Desdemonia (Jan 16, 2011)

GoldStone said:


> I think you might have gotten a wrong impression. Lots and lots of folks here use couch potato. It's a very popular approach among CMFers.


Goldstone - No not quite...I fully understand that coach potato is a popular approach. I just don't see why anyone would want to stray from this strategy? I mean it is based on such simple yet powerful and convincing concepts. I could never justify straying away from that strategy based on what I've read, so I guess I am looking for some insight from those that do as to why.

Something else I am wrestling with...It appears to me that index funds are a relatively new product. They do seem like a logical choice as an investment vehicle as they are aligned with the concepts I mentioned...but I am afraid they are the flavor of the month so to speak..similar to what mutual funds were 10+ years ago. For example in 5 years will some genious marketing manager invent some new rules and also develop a product that *SURPRISE*! meets the new investment environment they have created? 

Or perhaps index funds are infact the be all end all solution, and that investment companies realized people were getting smarter by cutting out the middle man. Therefore this new popularity is a result of them joining the parade with their index products and marketing them aggressively. 

But you are right I do subscibe to "keep it simple stupid", and until someone can give me a valid reason to deviate I will keep planting my potato crop


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## Argonaut (Dec 7, 2010)

Index funds are not a new product at all. You do sound like you are well suited to the potato strategy, though.


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## Desdemonia (Jan 16, 2011)

Rusty I certainly don't see myself as being someone to beat the odds at "picking stocks". I'm just a regular beer drinkin guy stepping back and quantitatively challenging my strategy...I just picked up the title "The Intelligent Investor" so hopefully I obtain some insight from this classic. PS I don't have Aspergers nor do I particularily like guitars so I've got 2 strikes against me


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## GoldStone (Mar 6, 2011)

Index funds are certainly not a new product. John Bogle founded The Vanguard Group in *1974*.


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## donald (Apr 18, 2011)

I own 28 companies(it's important to realize you own companies,not ticker tape numbers ect) and i am a ''dividend growth investors".My main goal with investing is PASSIVE income.I like this approach and i am most comfortable with it.26 of my companies pay dividends(2 out of those pay monthly distrubutions)This method fills my brokrage acct constantly.(im 33 and have about 20/25 yrs to go until i will likely finish my plan,or maybe i will invest like this for life and set-up my future family)

First book i ever read about money was ''the richest man in babylon" and i believe this is the ''way"-I follow the frugal trader method(to use a finance blogger as a reference)Time and money,time and money-let capatilist america work for you.....i think it is a fairly striaght foward approach.Keep turning those divs back into more shares-i could care less if i ''beat'' whatever....as long as my stream keeps working and building.


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## Assetologist (Apr 19, 2009)

I have been fortunate to have had enough 'disposable' investment income to try many different stock market investing strategies and my personal makeup seems to resonate with two:

- swing trade large cap companies when their shares become unloved by other investors. Recent examples include CCO, G, TLM, ECA. These tend to be cyclicals with relatively strong future fundamentals and they all pay a dividend. These plays require a big enough investment to allow a decent return on a small (5-15%) share price increase not to mention the fortitude to stick with the thesis in the event of a continued fall. If you were elated and buying in early 2009 then this strategy may work for you. If you were very concerned and sold in 2008-2010 then do not try this.

- buy ,with the intent to hold for future generations, the shares of an elite group of consistent dividend growth businesses when their share prices dip. Examples include MCD, PG, JNJ, KO. These are the only holdings I allow to drip. Check out the drip calculator at BuyUpside.com for the astounding wealth creating effect of compounding returns! [try conservative MCD numbers for 30 years of compounding].

http://www.buyupside.com/calculators/dividendreinvestmentdec07.htm

I tend to translate the transitory capital gains from the former into the more permanent holdings of the latter.

One of the primary reasons I have personally evolved to utilize these prescribed methods is so the I am only influenced by the various markets in so much as the changing tides provide opportunities to buy and sell my selected businesses.

I am not a professional trader and cannot beat the pros at their game so I am evolving my own which, very importantly, suits my investment personality.

I strongly recommend to others, primarily new investors, to invest through a diversified basket of etfs while doing the heavy lifting and experiencing the emotional turmoil of small scale stock investing with disposable funds. It's the price of your education. Most should probably decide that the couch is the safest place for their hard earned dollars.

Good luck!


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## Eclectic12 (Oct 20, 2010)

Desdemonia said:


> ... I just don't see why anyone would want to stray from this strategy?
> 
> ... It appears to me that index funds are a relatively new product ...


Some have spent a lot of time learning and believe they can do better than the index. 

An one of many different examples, where the index is staying relatively the same, the gain for an index investor will be small where some CMF-ers are selling options so that they are up much more than buying into the index at the low this year. The trick is that unless one has the time, knowledge and mindset to be successful. 


For run of the mill index funds or ETFs - they have been around a long time. As long as you stick to the established players and established indexes, there shouldn't be a problem. Like mutual funds and other investments, there's lots of new products where some will stand the test of time and some won't (ex. "actively managed" or "covered call" ETFs).



Cheers


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## lonewolf (Jun 12, 2012)

Hi, Desdemonia

This might not be a method that suits your personality but you might want to consider giving it a try.


I dont agree with looking for reading material. Perhaps you have an eye for pattern recognition & you might see something that others do not see. Do your own thing & think of a way to do your own research that you see with your own eyes to develope a system that gives you an edge. 

I.e., get charts of the indexes & or stocks in both arithmatic & semilog form. Blow them up if you find them easier to work with. See if you can see patterns in them that repeat, Try using differnt measuring tools like a ruler or compass to see if they can help you see patterns with in the market.

Look for patterns in time & price & or ratios of

Be creative try using a calculator & see if you can find math that rules the market.

If you think something is causing the price to form precise market patterns try to think of a way to test it.

Never think your not smart enough it is always best to understand your system & the best way is to build one youself.


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## Desdemonia (Jan 16, 2011)

Thank you all for the advice and suggestions folks. I am going to stick with the coach approach for now!


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## Causalien (Apr 4, 2009)

It's like the war between Randians and Socialists. There's no one truth. Whatever your choice, pursue it and become an expert in it.


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## PF_Enthusiast (Jan 21, 2011)

Please tell me you're not pronouncing it as "coach" potato and it's merely a typo you repeatedly make


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