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First jump into the stock market - shocking

Inexorable Username

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So here was my kind of crazy initial jump into investing on the stock market....

Note
In an effort not to ramble, I've titled certain paragraphs ramblegraphs and provided a summarization. If you'd like to skip the fluff and skim effectively, read my ramblegraph headers, enclosed in // // . FYI. Ramblegraphs were written in during post-processing. Just so you know. It's not like I summarized my thought first and then proceeded to undisciplinedly ramble on about it. Yes that's a word, because I say so. And I'm the writer. So suck it. :rainbow:

// ramblegraph. //
// I suck at making money/being money-motivated but my parents are money-skilled people and I felt inspired by them, and people here, to hop into the stock market. //


Okay, so - partly inspired by @Serac and @Rebis, partly inspired by my parents, I decided to test the waters with the stock market. Mom is an INTJ, and she likes to help other people make themselves profitable. Dad's a self-made man who is quite stock-savvy. I'm a space cadet and a weirdo visionary who does the art thing and the anti-social thing, and gets off on research rabbit holes and doing data analytics...My potential for making money is, I would say, average or less so. I struggle to be money-motivated. Typically, the thought of having to "make money" just depresses me - I associate it with grueling discipline and boredom, and to be honest, I'm a very down-to-earth kind of girl with cheap needs. I like my white board, my markers, my art stuffs, and I have a really nice electronic Kurzweil keyboard that is my "big thing" - in addition to my computers - and that's pretty much all I want in life. Simple needs for simple people. Oh - and wine. I like my wine.

Wait....I had a point here. It seems to me I was making this post for a reason. OH!
That's right. Okay. More on that reason. Wait - more backstory first....sorry. Fingers feel compelled to type more backstory. They come here to play so I let them have at it - I exercise reservation elsewhere in life. This - this is my outlet. Right...so.

// ramblegraph. //
// It was bought to my attention that I might have a skillset that could be valuable to me if I played the stock market, and that playing the stock market could be the very thing I needed to make my not-for-profit project a reality. Also, this was largely because of my awesome mom. Thanks mom! Love you lots. //


So the thing about me - even though I suck at making money, and I'm not very money-motivated, I'm good at helping other people make money. I get inspired by making other people's dreams come true - which is why I love my job - media marketing. But I also love my job because it suits my lifestyle. I LOVE researching. Today, in fact, I realized that my research has been getting far too undisciplined and random because YouTube's algorithm thought a hot video pick for me would be "Analyzing 12 strains of rice under a microscope and cooking them" - something to that effect. You know when a computer has decided a video such as this suits you best - you've got to reign in the random research binges...right, in any case.
So typically I'm the lazy visionary artsy kind of person who loves doing excessive amounts of research, and adores data analytics and writing research reports - and especially graphs and real-time numerical metrics. Oh my gosh, real-time numerical metrics...be still my heart. If a man had ever said "Why don't you come in? We can drink wine and watch real-time data on trends in the marketing industry"....I might have ended up married. Not sure. It could have happened. (dodged that bullet! whew!)
Anyways...since no guy ever offered to "data analytics & chill" with me, here I am - a solitude-obsessed hermit who spends all day researching and making marketing assumptions. Due to a lack of being brilliant, though, it just never occurred to me that this skillset could translate in a valuable way to playing the stock market. The stock market has always scared me. Big, nasty, money-thing that it is....scaring people with percents and red stuff. (I don't trust money. Money and I...well we have a weird relationship). It's my mom that connected the dots and told me that not only might I be very good at stocks BUT I have a stock wizard for a father and if my dream lifestyle is really to not have to work with people, but to spend all day researching and drawing up infographics and things such as this, then I should take a peak at the stock market. With her encouragement and enthusiasm, I soon found my money motivation - which would be the ability to self-fund my pet project. A not-for-profit for animal welfare and charity.
Which is awesome, because the idea of having to try to get investors has been the major hang up in this project for me. It's paralyzed my motivations. Sigh.


Devising my stock market strategy....

Dad encouraged me in a certain direction and I rolled with it. I came up with a plan that I think, potentially, could help me make about 8% - 10%, on average, about 4 times a month. Very obnoxiously limited by the fact that when you sell your stocks the stuff doesn't go through for three days (counting sale date). Ugh.


Getting into the market....

So anyways, I start this e-trade account, and I felt like what I really needed was to try to get a bit of practice. So I decided to do a little bit of research, check out what's trending, do some analysis and compare some graphs, and make some very small investments in some low value stocks so I can learn by experience. I'm a big "learn by experience" kind of girl.
When I pick a new subject to learn, I'm okay with putting money towards quickly learning the basics. In the case of digital painting, I hired a couple of tutors, but in this instance, I figured a few cheap experiments would get the ball rolling.

So I thought - well, how do we approach this. I searched tech stocks for 2020 on Google and Youtube, read a few articles, and observed some live data from Yahoo's real-time trending stock page..thing....And I decided, hey, I'll do this stock "INPX". Everyone's talking about it, it's trending, it's going up. I could buy it now and sell it at the end of the day, and probably make a profit. (At the time I didn't realize everyone sells at the end of the day - beginner's learning experience #1!)

My stock "jackpot"? (aka curse)....

Well this stock blew up. It got to the point where I actually put a somewhat decent amount into it to follow my tiny investment.
Now - I'm in this awkward position! I have a stock that I think long-term will end up realizing significant gains, BUT - a few things.
  • Firstly, on paper, this stock is super shady looking.
  • Secondly, I've been told that the goldilocks range for stocks is apx $10-$70 (roughly), and this is a penny stock, which I've been cautioned against. (I only invested in it because it was a cheap way to experiment, and I thought it seemed like it had real potential, so when I lost my money and way proven wrong, it would be a very useful lesson in learning where my thought process was illogical.)
  • Thirdly, I feel like this stock's success has been a result of the stock being blown out of proportion by the media, and a whole bunch of frivolous stock-buyers (myself included), are bound to get cold feet the moment the hype dies down.
I really wasn't expecting to have to make a "heavy decision". On the one hand, like I said - I actually see a lot of potential in this company. That comes from my media marketing background, my experience with tech companies, and things like this...if this company were a client, I'd jump on the opportunity to work with them. But that's my experience in media, marketing, and business...I have NO experience with the stock market. I'm in no way, shape, or form, and investor. Yikes.

So on the one hand, some people are saying "Stocks like this only come around once in a millennia! Anyone who sells now is a fool!". On the other hand, there's day traders swamping the internet being like "Yeah, you got to get while the getting is good. There's bulls and bears and lions and things - get on this other stock instead."

@_@ You guys...this is like...it's so anxiety inducing.
Ahh...If I make the wrong decision, I'm going to start thinking I'm shit at stocks, and probably I'll go wander off to do non-profitable things with my life. Maybe. The risk is real. I'm a wanderer.
Brain: Inex sabotages herself again...
Body: (does that mean we can stop dieting now?)
Brain: Only if she gets super flaky about the promises she makes to herself.
Body: (wow. roasted.)
Inex: Shut up you guys.
Body: (but we're hungry....bring on the roasting!)

Anyways. I don't know. Maybe you guys have some ideas?
I chose to keep the stock, being that it's Friday. Honestly, I didn't pour so much money into it that I would be distressed if I lost my investment. My policy atm is pretty much to invest to learn, and consider the money "spent". I have no delusions about my ability to succeed in stocks. Being a numbers/data freak and a great lover of stuff like tycoon games and in-game video game markets does not make me a wizard at humaning in the real world.

So I figured, for the price I spent ($450), and the potential lesson to be learned here...and the growth potential (maybe?), I'd probably regret losing the money less than I'd regret taking it out if the stock does what I think it will do. On the other hand...that cash could be used to further my fairly solid plan for how to almost always end up in the green, even if it's a bit slower that way...Ugh.

Nobody told me how anxiety-inducing and emotionally addictive the stock market is!
Especially the live data. Wow. What a way to guarantee that I will remain glued to a screen for four straight hours.

The Question
  • What do you guys think?
  • Was it a mistake to stay in INPX for the weekend?
  • How would you have made that decision?
  • Do you think that the growth and potential of the stock outweighs the fact that it's a risky penny stock that flunked 2019?
  • Is it worth holding for a year?
  • How do you decide how long a stock should be held for - if you play the market?
Have you a story to share, similar to this experience? I'd love to hear your anecdote.

About this stock...

It's super sketch.
  • They had a lot of times where they "split" the stock, I guess? They've done this splitting thing three times...apparently to compensate for the fact that their price per share was too low, because I guess some mutual funds won't invest in any stocks under $5. (Talk about a red flag, Inex. Colorblind much?)
  • They really took off when they initially went public, and then dropped like a rock and have remained low. Major ouch.
  • They're not a startup - not really, so there's not much of an excuse for them to remain in the dead zone for as long as they've been there. Somebody is potentially asleep at the helm when it comes to making company decisions.
Intuitively, I feel potential.
  • The concept behind the product is excellent - very marketable to a large range of clients.
  • They recently acquired a government contract, which is likely to be much more stable, with lower overhead, than their previous approach in B2B corporate-level marketing. This change in target audience suggests the company is pivoting. The product has implications for industrial defense and real cyber security that could actually work. (not the snake oil software nonsense)
  • My experience with tech companies tells me that they are volatile and experience extreme downturns, but, given enough capital, and the right target audience, they have a massive potential to pivot and become exponentially productive.
  • If this company were a client, I would feel extremely excited about their prospects and working with them.

Some other thoughts
  • They seem to suck, somewhat, at marketing. Their material is high-quality but their strategy is scatter-brained. They don't seem to know exactly who they're looking to target or which target audience represents the most value.
  • They appear to potentially have been guilty of making poor decisions, and sticking with those decisions. Perhaps they're pivoting, but they probably should have done this much, much sooner. That suggests that whoever they have working for them from a market-research standpoint probably is not that great at what they do, or the head honchos don't listen to them.
  • I wouldn't have that much confidence in the business guys who are managing this company, really, if I worked with them as a client. Based on their track-record, I would assume that, potentially, these business guys are the arrogant sort that think they know how to market their product and who to market their product to - or they've been duped by a marketer that doesn't know their trade all that well. The "business guys" that run a company are, in my mind, one of the biggest liabilities to a company's success. If you've got dumb guys at the top, and they can't manage, and their employees either (A) hate working for them, or (B) fail at what they do, that's a problem. Even a company who is holding the golden goose can shoot themselves in the foot by just being managed by an arrogant, greedy, condescending, small-minded business man - and these creatures are PLENTIFUL in business. I would say probably a majority. I left my last major clients because one of these people was at the helm, so despite their excellent prospects, I knew they weren't going to fly high enough fast enough to be worth the time and energy on my part, from the perspective of boosting my professional portfolio. Sorry. That sounds cold. It's the truth though - I'm cold like that. I don't work with people who won't succeed. It damages my value as a contractor.
Further Thoughts....

Second Wind :

Looking ahead, I think we'll see another flare up from this stock once their work with the government starts bringing them into the green from a budget perspective. Investors will get all excited about their initial growth on the market, and assume that the same may happen again. The question is - should I sell then, and what should I be looking for to indicate that this growth may be coming?

Politics vs Stocks :
I don't keep track of elections, but I think we're heading for them this upcoming year. Correct? Well, if we get a Democrat here the in the USA (which seems unlikely), then I'm almost positive that this stock will not only bomb miserably, but that they may lose their contract with the government. Not a lot of presidents care very much about technology and security. One of the people the democrats think is going to run against Trump is some super old guy that seems to maybe have some mental degeneration going on. I can't see him being overly invested in improving the government from a technological standpoint.

Concluding
Let me know if you guys play with the market. I'd love to hear some perspectives from fellow INTPs about how they feel about stocks, and maybe some decisions they've made and stories they have. Learning from the experiences of other people is a major weapon in my arsenal when it comes to understanding a subject I'm largely unfamiliar with.

I still wonder if it's maybe just better to take that investment and put it towards something that offers solid returns...Hmm...Decisions decisions.
 

Ex-User (14663)

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well we have to keep in mind some basics here

1. market efficiency. Certain people (mostly academics) believe that it's not only difficult to beat the market beyond replicating the return of a broad index like S&P500 (which has an expected return of 5% or so annually), but that it's impossible. The idea being that the market discounts all public information into stock prices immediately, leaving no opportunity to make extra money. Now, having worked in the financial industry I would say market efficiency is definitely not true, yet I would say that it nevertheless should be the default assumption when entering the stock market, because although it might not be perfectly efficient, most of the time it's very close to it. Thus only the absolutely most innovative and sophisticated players in the market are able to beat it. These are hedge funds like Renaissance Technologies, I think they have been making 30%-40% annualized for a few decades. Those numbers are astronomical compared to the rest of the market, so when you say 8-10% 4 times a month, and I assume this means 8-10% weekly, that's like 1.08^52 - 1 = 5371% annualized. If you could make those kinds of returns you would become a trillionaire pretty soon.

2. market inefficiency. Ultimately if the goal is to beat the market, it becomes sort of like a poker game; as in, when you buy a stock, someone is on the other side selling it to you, and they have their own reasons to sell it. So then you have to assume you understand the value of that stock better than the counterparty, in which case the question becomes: what is your edge over the counterparty, similarly to how a poker player would ask themselves at a poker table "what is my edge" when they are playing against particular players. If you cannot tell what that edge is, then you are probably the fish at the table. Or as the more colloquial version goes; if you can't tell who the sucker is, then it's probably you.

3. superficial analysis of the fundamentals of a company will not work. It's as simple as that, and it relates to point 2. If one's reason for buying a stock is something like "I think their product looks good", or "their management seems like competent people" etc, then we have to understand that in the light of the poker analogy, it's like sitting down at a table with the world's best poker players and say: "I think I'm better than these guys because I know that a flush beats a straight".

I would also add that hyper-volatile penny stocks is maybe not the best place to start, although it sure will provide a lot of excitement lol.

regarding this one particular trade you did and whether you should have exited on friday or not: if you can't tell why one option would be better over another, then from your perspective the expected value of closing the position vs keeping it is the same, i.e. it doesn't matter what you do.

----

my pointers for beginners would be these:

1. learn about who comprises the market. This will teach you the incentives and goals of the various players, and it will teach you that every trade you make has a counterparty with similar goals as you – i.e. making profit – and that the market is not some lifeless machine containing money for you to take like some huge piggy bank.

2. learn about portfolio theory, in particular portfolio optimization. The relationship between risk and return, and what "risk" means in the market (e.g. market beta, portfolio variance, factor exposure etc), are things that are very poorly understood among unsophisticated investors yet are absolutely essential.

3. focus more on macro than micro, i.e. instead of trying to pick single stocks (which is a fool's errand anyways), try to understand broad dynamics of the economy, industries, geopolitics etc, and then trade stuff like stock sectors, industries, commodities, currencies etc. This has the additional profit that you will learn a lot of useful stuff even if you don't make any monetary profit.

4. essential read: "Fooled by Randomess" by Nassim Taleb

... and lots of other stuff
 

Cognisant

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Anticipating the success of a service or product requires an in-depth understanding of the market it's for and the solution it's providing, if you don't have that knowledge you're really just gambling. How brilliant a product is also doesn't really matter much in terms of how profitable it is, you have to consider the manufacturing cost, the retail cost, and what profit margin you can make on top of those overheads.

Pop! Vinyl figures are absolute garbage but they're incredibly cheap to make (blow molded vinyl), they're non-perishable, aren't damaged by rough handling and they don't take up much shelf space so their retail cost is relatively low and because they're of licensed characters they sell for a ridiculous amount which makes them a near perfect product in terms of profitability.

Many robotics startups have failed despite having brilliant products because they weren't profitable to manufacture, retail and support (some countries have mandatory warranty periods) or they were made to solve a problem that didn't really exist.
 

Ex-User (14663)

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btw here's the currently most used sources of alternative data in the financial industry, maybe they can provide some ideas:

4957
 

Inexorable Username

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if you can't tell why one option would be better over another, then from your perspective the expected value of closing the position vs keeping it is the same, i.e. it doesn't matter what you do.
Well, I mean, I have theories as to why I should have stayed in this stock. But obviously I can’t really “tell” yet because I’m not an expert at the stock market. When comparing options, based on my knowledge of media marketing/behavioral psychology and the tech industry, I felt like it was better to stay. Also, I just didn’t really realize how fast the day traders seem to do their trading and I only had about 40 minutes from the time the market opened to decide, in retrospect.

How brilliant a product is also doesn't really matter much in terms of how profitable it is, you have to consider the manufacturing cost, the retail cost, and what profit margin you can make on top of those overheads.
Well that’s something I have something of a handle on and that’s why I chose the sector I did, because I do media marketing, primarily with startups, and I have experience with the tech industry.

So, for instance, I know that when tech startups have a b2b corporate level target audience, that can really cause a lot of agony in the earlier stages of the company. It takes a lot longer to get a contract with a corporation, you often don’t get paid in full up front, and if you have hardware as these guys do, you can end up failing to produce the volume of product that is needed to satisfy a nationwide corporation. So, if they want to market to Target, for instance, it might be really difficult meeting the demand for not only products, but tech support, for enough target stores nationwide for the company to feel like your business is worth the effort. If you don’t get paid in full until you meet the demand, it can be hard to have the capital. Especially since you’ve hard to keep the company operational while finding contracts.
10% of tech startups fail, I believe. (Heard this from tech investors/VCs so it’s not actually from a study or anything).

These guys recently got a contract with the government though, so that’s a different story. Providing technology to the government means low overhead, low costs, great reliability from the client, and a good profit, I believe. I haven’t worked with a company like that personally but I have a general idea.

The product has great potential as far as government security is concerned, from what I can tell, and I don’t know if any products like it. Which doesn’t mean there aren’t any, obviously - just that I haven’t heard of them.
 

Inexorable Username

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@Serac

Thanks for the tips! I have been doing quite a lot of research on stock market patterns and the demographics of investors. I’ve only been at it for a few days, Mins you. But I know the fundamentals of things like a bullish/bearish market and bull/bear traders, as well as day traders and computer algorithms.

Currently, I’m listening to a stock book and taking the investing course from the great courses.

I could be wrong about my strategy...but, I really don’t think I am? It’s not really a unique strategy, per say, other people do it too.

Dad’s advice is the same as yours - stable stocks. He invests in large cap companies. The only reason I’m not doing that at the moment is because it doesn’t work with my strategy. I do know that day traders are almost entirely unsuccessful though, and h thy at stocks less than $10 a share are volatile and dubious.

Like I said - this investment in this stock was something I did as a learning experience. I did learn a lot so far from just watching the behaviors of people who are buying and selling the stock. It gave me a lot of concepts to research - for instance, I learned that the market for stocks tends to die off at around 2, day traders trade a lot in the morning, and that people like to cash in their stocks on Friday.

I know it’s a micro lesson, but it’s an affordable one. I don’t really consider myself an “investor” - just someone who is trying to gather data about the stock market to analyze for a better understanding.

I just was surprised though that the stock ended up doing as well as it did and then I didn’t know what to do about it! Haha. Something that was supposed to be a casual experiment ended up turning into a business decision. @_@

The strategy I use is investing in ex-dividend stocks. You know, you invest, then withdraw the money? Maybe it doesn’t work in your country. I have a stock that claimed to give me a 12% ex-dividend a little while ago, and I think there’s one I have on my calendar for February that supposedly will offer a 19% ex-dividend. Not all of them are that good. Some are around the 7% or 8% mark and some of the stocks are probably too sketchy to invest in. I’m lucky in that way because I have Dad to give advice.

Ex-divi dates seem to be on Wednesdays, mostly, and unfortunately...it looks like I have to wait 3 days after selling my shares to get my money, so that really limits things. The other thing is that on the actual ex-divi date the value of the shares drop quite a bit when everyone sells theirs, and if I’m late to the party, then I can either sell at a loss or I can wait for the stock to climb back up, which, from a video I was watching, appears to take about maybe three days.

I bought a couple of shares on the ex-divi date in one company to test that, and their stock has been slowly climbing, so maybe the three day time frame is a somewhat decent guideline.

Anyways - if I had to do that, it would tie up the money for the next company, so I’ve been practicing stop loss orders and things. I tried that with a penny stock and it worked out pretty well.

I don’t like the idea of making a stupid beginner’s mistake on something I invest a larger chunk of money in. So a couple of these cheap stocks can help me warm up. So far I haven’t lost anything, but...it’s also been a really good January, so people say. So, nothing to do with skill. Lol.

I’d like to invest in large cap companies. Right now though, I don’t have much money to start with and large cap is intimidating. I’m still working on understanding economics on a global scale. Even on a national scale. Macro economics is a bit of a foreign concept to me. I’m not terrible at it, because I’m good with marketing and research - but I’m like a 4th grader compared to college students in the economics department. So that’s something I’m working on.

What I will say though is that I LOVE investors! Watching investors talk on YouTube is nothing like watching marketing people. Investors get to the point. They don’t beat around the bush and try to say cliche trendy catchphrases that make you want to barf. And unlike my colleges, investors share my love for graphs. I love graphs...so much.

I’m pretty sure I’m never going to be a trillionaire. Haha. If I’ve learned anything from my research of the stock market, it’s that if you think you have a good thing going, not to assume it’s guaranteed to continue. My dad remembers when our country switched to the floating dollar - which is insane to me. Really, if you think of it, the USA’s switch over from the gold standard wasn’t that long ago. It seems, too, that trading stocks around used to be way more expensive than it is today. The stock market seems to evolve and change quite rapidly in the grand scheme of things. Pretty soon I could be paying relatively high fees for each transaction I make, and I’ve even heard from someone that some democratic politician had suggested taxing unrealized gains. Could you imagine? Basically, anybody who didn’t come from money wouldn’t be able to afford to play the stock market. I hope it’s not true.

I’ll definitely check out your recommendation! Thanks for all of the advice! Hearing from industry professionals is a lot more educational than reading/researching, because you get the benefit of shrewd experience.

Thanks for your tip on researching portfolio building as well! I’ve been working on coming up with a plan for that. I’ve chosen two different sectors at the moment - tech, because it’s what I have the most experience with and because I’m interested in what VR technology is going to do, and finance...which I admittedly don’t have much experience with, but they pay great ex-dividends and I needed something other than tech.

I’m not sure how large a portfolio is supposed to be. Right now I have about 5 stocks. That feels comfortable.

One of the guys on YouTube that I really liked listening to is Ray Dalio. He really seems to share my outlook on life - the things he said really resonated with me. I liked hearing him talk about when we switched from the gold standard. Fascinating. Also he seems to share my appreciation for patterns, graphs, and creativity. He likes to layer graphs, like I do! I’ve never met a media marketer who layers graphs before, but I find it to be really useful for interpreting trends in a broader sense - like seeing the forest, rather than the trees.
 

Ex-User (14663)

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@Serac

Thanks for the tips! I have been doing quite a lot of research on stock market patterns and the demographics of investors. I’ve only been at it for a few days, Mins you. But I know the fundamentals of things like a bullish/bearish market and bull/bear traders, as well as day traders and computer algorithms.
4959

from "The Science of Algorithmic Trading and Portfolio Management" by Robert Kissell.

So this is from 2012 so things might look different now but one can see the trend: only about 7% of the market are retail traders (that is, regular people like you and me including day traders etc), 23% are asset managers which is funds and hedge hunds, and the rest is high-frequency/quantitative computerized trading.

Dad’s advice is the same as yours - stable stocks. He invests in large cap companies. The only reason I’m not doing that at the moment is because it doesn’t work with my strategy. I do know that day traders are almost entirely unsuccessful though, and h thy at stocks less than $10 a share are volatile and dubious.
this is a subtle point but large cap is not necessarily stable. For example when I'm running my portfolio optimization I almost never end up with large cap. For example here in Norway the large cap stocks are heavily exposed to oil price which make them quite volatile. In US large-cap tech stocks like Apple tend to be volatile too, as most tech companies are.

The strategy I use is investing in ex-dividend stocks. You know, you invest, then withdraw the money? Maybe it doesn’t work in your country. I have a stock that claimed to give me a 12% ex-dividend a little while ago, and I think there’s one I have on my calendar for February that supposedly will offer a 19% ex-dividend. Not all of them are that good. Some are around the 7% or 8% mark and some of the stocks are probably too sketchy to invest in. I’m lucky in that way because I have Dad to give advice.

Ex-divi dates seem to be on Wednesdays, mostly, and unfortunately...it looks like I have to wait 3 days after selling my shares to get my money, so that really limits things. The other thing is that on the actual ex-divi date the value of the shares drop quite a bit when everyone sells theirs, and if I’m late to the party, then I can either sell at a loss or I can wait for the stock to climb back up, which, from a video I was watching, appears to take about maybe three days.

I bought a couple of shares on the ex-divi date in one company to test that, and their stock has been slowly climbing, so maybe the three day time frame is a somewhat decent guideline.
not sure I understood that. You buy right before the ex-dividend date and then sell right after? The reason the price drops at that time is that the market basically subtracts the dividend from the share price. In theory that subtraction should be pretty much perfect, i.e. you would lose in share value what you gain from the dividend. But maybe I'm misunderstanding what you mean.

I’m not sure how large a portfolio is supposed to be. Right now I have about 5 stocks. That feels comfortable.
I also have 5 actually, but it's way too few. One still gets extremely concentrated risk with that number. I plan to add more. But there's a balance, because if one has, say, 200 stocks then one probably has a large market beta i.e. exposed to overall market. Probably somewhere between 20 and 100 is good.

One of the guys on YouTube that I really liked listening to is Ray Dalio. He really seems to share my outlook on life - the things he said really resonated with me. I liked hearing him talk about when we switched from the gold standard. Fascinating. Also he seems to share my appreciation for patterns, graphs, and creativity. He likes to layer graphs, like I do! I’ve never met a media marketer who layers graphs before, but I find it to be really useful for interpreting trends in a broader sense - like seeing the forest, rather than the trees.
I have basically 2 people I'm a fan of in finance; Kyle Bass and Nassim Taleb. Kyle is exceptionally good at macro stuff, Taleb is more on the philosophical side.

classic Taleb clip (talking about the 2008 crash):
 

Inexorable Username

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@Serac

Hey! Just wanted to let you know that I read everything you had to say and I’m making a syllabus for myself based on the subjects you’ve suggested that I research.

I really appreciate the help! It’s awesome you’re so forthcoming with your expertise! Most investors seem to be of the opinion “Don’t get into the stock market. You’re just going to fail”

Which is wise advice, as it’s good to be reminded of how easy it is to make costly mistakes...but that’s about where the usefulness ends.

Taleb might be over my head. Not sure. It didn’t sound like he had much to say - but maybe that’s me being a victim of the d.k. effect.

I’m sketchy about the ex-divi strategy now...but I think it worked for me this past time around. I lost $24, but technically I should have gained $144. I might have done something wrong though.

I thought about what you said in regards to the money coming out of the stock prices when dividends are paid off...here is my understanding of how that works, and why I think the strategy still may be viable.

So, the strategy is, as you said, to buy the stock before the ex-divi date, then sell it the day of.

Here’s what I understand happens:
  • The company pays the ex-divi
  • The cost of the ex-divi is subtracted from the company’s profit
  • Stock holders sell their stock in the company on the ex-divi date
  • The value of the stock takes about three days on average (this I just got from a YouTube video so maybe it’s inaccurate) to recover

I also learned that there’s a lot that happens after the fact that can also influence whether or not the company actually pays the ex-divi, how quickly the stock recovers, etc.

But since the value of the stock price is a reflection of the market’s perception of the company’s value, and not a mathematical reflection of the company’s actual value, then the amount that the stock decreases on the ex-dividend date should be a reflection of public behavior, right? Which is why when I sold the stock I’d invested in for the ex-dividend, which I did the moment the market opened, I only lost $24, and not the entire value of the ex-dividend?

Please don’t take this as me not listening to your expertise. I feel really privileged that you were willing to give me advice. It’s really nice of you. I’m like one of those little sponge-in-a-capsule kids toys. You know the kind? It’s like a dehydrated dinosaur sponge that you put in the sink and it slowly transforms into a swollen, wet, full-sized dinosaur shaped sponge? That’s me. Lol.

I hope the ex-dividend experiment worked out because the market is being flaky right now and I only started last week so this is my first foray into that kind of behavior.

I think that the Iran/American conflict is potentially confusing a lot of investors. From what I can see of the market behavior across the Dow, s&p500, and the Nasdaq, market activity has been very volatile and unpredictable today.

I think that this foreign issue is a bit ambiguous for people because it involves the mechanics of macro economics which I think few people are really that well-versed in. To me, that means there’s a good chance that most investors are looking to influencer sources and following public sentiment rather than their own interpretation of quantitive data/market patterns.

From what I know of marketing, the internet can cause something of an echo chamber when it comes to situations like this that are (A) subjective, and (B) concerned with fields that most people lack expertise in. The resulting polarised opinions can cause a lot of push and pull - as with politics, for instance. And I know that when you’re trying to generate traffic on websites and social media, that kind of public leads to behavior that is very flaky and difficult to build reasonable projections from.

So...I guess my stance this week has been to not participate in the stock market. I haven’t done enough research to truly understand this demographic - and you pointed out a GLARING area in which my predictions were completely wrong. Which I’m really grateful for, because that really changes the way I interpret the trends I’m observing. I also just don’t have the experience to know what this kind of activity means really, in the grand scheme of things. It’s like I’m zoomed in on my computer on a tiny little piece of a much, much larger graph, and the pattern from this close up just doesn’t look like it has much of a rhyme or reason.
 

Inexorable Username

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Don’t feel the need to read this. I will probably move these thoughts to my “diary” thread soon.
This is just me processing my decision on that one stock I got into that ended up getting to be bigger than expected.

——-
I still feel a bit weird about my decision to stick with INXP for a longer period of time. Particularly since the market isn’t doing as well this week as it was last week, and it’s much more volatile now. I don’t know the stock market, but I have experience with volatile internet traffic and I know how fickle it can be...that’s the only paradigm I have by which to try to interpret the stock market, so I can only assume this current market climate isn’t safe to play in for someone with my limited experience/knowledge/abilities. Sitting back and watching the patterns of the market today after the Iran drama, I’ve labelled the market “Experts only”.
:/ No Inex idiots allowed. That’s okay though. Good time to watch and learn.

The INPX company ran into trouble because they were trading too low. So they had to do a split (a reverse spliwhereby they raised the value of the stock and lowered the number of stocks each stock holder owns to match it.

I suspect I could have seen this coming because they’ve done that three times in the past, but apparently, that was because the price off the stock had gotten too high. When I looked into it, the general sentiment was that these splits weren’t necessarily a “bad thing”. Since the sentiment was that most investors aren’t concerned with negative implications regarding those types of splits, I assumed that the splits may be something of a net positive, because the lowered stock prices would encourage more participation.

However, this split was in the opposite direction, and a lot of participants sold. I wonder if I made the wrong decision to stay with the stock long term? I still think that the outlook of their company is hopeful, based on my experiences with technology and marketing....but perhaps it was foolish to tie up my money in a company that IF they do well, will probably take at least 3 months to get there.
If nothing else, my mistake was to buy into the stock when I did. There was so much market hype - I should have waited until it died down and the price dropped. I had guessed that it would. I guess at the time though, I wasn’t planning on holding onto the stock long-term and although my initial buy in was decently on-point as far as getting into the stock early, when I saw it going up I thought perhaps my initial investment was too low so I put a bit more in...that second purchase didn’t end up faring quite as well. It was about middle-range along the upward swing.

I think what I’ve learned from this is that, in the future, if I think a stock is going to go up I will have to make the decision ahead of time how much I think it will increase, how much money I’m willing to bet, how long it will take me to make my initial capital back, and how long I will keep my investment in the stock. That all seems like pretty obvious basics when making an investment...but my mistake was to think that I could make those decisions while the market was open, incorporating new information with which to make better choices.

What I’ve really learned, so far, from this stock experiment, is that the market changes fast, that new information is dubious and misleading, and that I would have made a better decision if I had made it in its entirety in the beginning, rather than editing my decision as I went. That would have also freed up my time to research more important matters, rather than getting sucked into watching the numbers change. It’s worse than getting stoned and watching your computers sceeensaver.

So next time, I will research my choice for a longer period of time, make up my mind before the market opens, and by the time I purchase the stock I will already have decided when to sell it. At least...that’s what I’ll try for my next experiment.

I might journal this stuff here on the forum so anyone else who is interested in the stick market can have the opportunity to learn from my mistakes.
 

Inexorable Username

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@Serac

Can I ask a couple of quick questions?
You really don’t have to answer these. Especially if you’re busy. You definitely don’t have to answer them quickly, either, because I’ve been busy/sick anyways. Any advice you give is enormously welcome but I really don’t want you to feel like you’re obligated to help. No judgement for ghosting! Ghost at your leisure, no explanation


(1) Are there any online resources, news outlets, softwares, or advanced search programs you recommend?

I like using Yahoo! finance because it shows stock behavior in real time.

(2) Would you say that there is an average amount of time you tend to hold on to a stock for? More than a year? Less than a year?

(3) Do you think that quantitive data/data analytics are more, or less useful in predicting weekly or bi-weekly trends in the stock market than behavioral psychology? Or would you say that predicting market trends at the weekly level is an exercise in futility?

(4) Do you ever get paid online for contracting work? There’s a contracting website I use that I often hire consultants or tutors on. If you’re someone who gets paid for remote consulting, I would be interested in working with you if it’s something I could afford as a person who is just starting out.
 

Ex-User (14663)

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(1) Are there any online resources, news outlets, softwares, or advanced search programs you recommend?

I like using Yahoo! finance because it shows stock behavior in real time.
I have pretty much 2 sources of news that I use: reuters and zerohedge.com. The former is obviously more raw news, latter is more interpretative.

that being said, ultimately one would need to know what to look for, as there's obviously a sea of information out there. When it comes to individual stocks I sometimes read quarterly/annual earnings reports because it often contains the management's comments on what drivers are relevant for them. Here's for example last quarterly report for your favorite company INPX:

https://ir.inpixon.com/news-events/...orts-third-quarter-2019-financial-results-and

when it comes to equity price data, that can be found pretty much anywhere – like you said Yahoo, your broker probably provides it too, otherwise there's the exchanges themselves etc. A good source for a wide range of data – not just equity prices – is quandl.com

when it comes to software I use programming languages like R and Python. I do portfolio optimization in R, for example. To me, knowing a programming language like that is essential when it comes to investing and trading.

(2) Would you say that there is an average amount of time you tend to hold on to a stock for? More than a year? Less than a year?
depends quite a bit on what the strategy is. I mostly just hold a volatility-optimized portfolio, which I rebalance a couple of times per quarter.

(3) Do you think that quantitive data/data analytics are more, or less useful in predicting weekly or bi-weekly trends in the stock market than behavioral psychology? Or would you say that predicting market trends at the weekly level is an exercise in futility?
I'm not gonna say it's an exercise in futility, but I'll say it's exceedingly difficult.

as an anecdote, I was talking to a proprietary-trading firm in London once who did something close to high-frequency trading (they had the usual setup with computers close to the exchange to reduce the travel time for the signals, but had latencies of about 200 milliseconds which is considered super slow nowadays). They said that whenever they had a profitable strategy, it usually took about 3 months before the rest of the market caught up and reduced their profits to zero.

also, at some point I worked for a company that did natural-language processing of news. They could algorithmically read an article, interpret the contents, and produce a buy/sell signal for the relevant stock within 50 milliseconds of the release of the article.

and btw one of the things I worked with was looking at the profitability of trading strategies using that technology, and I could see that the profits declined quite steeply over the past few years, indicating that more and more people were doing this type of trades.

these things illustrate that if the goal is to outperform the market, you are in competition with the market. I'm not going to say that shorter-horizon trading is impossible, because for all I know there's some brilliant ideas out there that I don't know about, but from the above you can imagine what sort of competition one is dealing with. It's very hard to see what sort of advantage one would have over that.

(4) Do you ever get paid online for contracting work? There’s a contracting website I use that I often hire consultants or tutors on. If you’re someone who gets paid for remote consulting, I would be interested in working with you if it’s something I could afford as a person who is just starting out.
when it comes to equity trading I'm not sure I have any consulting to give which is worth money though. But I'll answer as many questions as you like for free. My philosophy is very simple though – short-term trading doesn't work unless one is at the level of technological sophistication that I mentioned above (and if anyone tells you they can teach you how to profitably trade stocks, and that they charge a fee for that, they are 100% frauds, especially people who use "technical analysis"). The only things I think are possible are 1) risk management and optimizing a portfolio for volatility, beta, etc, 2) looking at macro stuff, because that requires more along the lines of wisdom and general broad human knowledge about the world (so far this is inaccessible to algorithms), 3) exploiting some very very rare cases where you have access to information which is public yet difficult/expensive to obtain for most people.

edit: incidentally there's an article on zerohedge now on the performance of actively managed funds: only 11% managed to beat the benchmark over the last decade. And these are professional investors who work full-time with analyzing the market. Once again goes to show how tough this game this is.
 

Ex-User (14663)

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So, the strategy is, as you said, to buy the stock before the ex-divi date, then sell it the day of.

Here’s what I understand happens:
  • The company pays the ex-divi
  • The cost of the ex-divi is subtracted from the company’s profit
  • Stock holders sell their stock in the company on the ex-divi date
  • The value of the stock takes about three days on average (this I just got from a YouTube video so maybe it’s inaccurate) to recover
I also learned that there’s a lot that happens after the fact that can also influence whether or not the company actually pays the ex-divi, how quickly the stock recovers, etc.
the default assumption should be that the dividend is permanently subtracted from the price, because this is money that is directly subtracted from the net income of the company. This is a case where one should think about the concept of a "free lunch". If it were as simple as the stock dropping by the dividend amount and then recovering 3 days later, everyone would become a millionaire by just buying the stock at the ex-dividend date. This would be a "free lunch". But if everyone would employ the strategy, they would drive up the price at the ex-dividend date until the drop would never even happen in the first place.

or as an alternative logic, if a stock is supposed to recover the drop associated with a dividend, then there wouldn't be any reason to sell it at the ex-dividend date to begin with, and the drop wouldn't even happen in the first place.

I've seen some papers that suggest there are some market inefficiencies in developing nations like Pakistan etc that make for potentially exploitable patterns in stock prices associated with dividend announcements, but if you have a standard stock market in the western world, I would say with 99.9% certainty that this strategy will not work.

a note btw: the thing you get paid is just called a "dividend". Wheras "ex-dividend" means without dividend, so e.g. ex-dividend date is the date from which you don't get the dividend if you buy.
 

sushi

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do you invest in long run or short run. long run should be five years or more to hold the stock. once again i recommend youtuber plain bagel. he gives good advice on finance. if you are a short term trader, i probably would recommend against it but its probably within the time frame of 2 years or less

it really depends on how knowlegable you are of that industry sector.

the most challenging thing is identify when to buy and sell, and cash out when there is a bubble.


.
Anticipating the success of a service or product requires an in-depth understanding of the market it's for and the solution it's providing, if you don't have that knowledge you're really just gambling. How brilliant a product is also doesn't really matter much in terms of how profitable it is, you have to consider the manufacturing cost, the retail cost, and what profit margin you can make on top of those overheads.

Pop! Vinyl figures are absolute garbage but they're incredibly cheap to make (blow molded vinyl), they're non-perishable, aren't damaged by rough handling and they don't take up much shelf space so their retail cost is relatively low and because they're of licensed characters they sell for a ridiculous amount which makes them a near perfect product in terms of profitability.

Many robotics startups have failed despite having brilliant products because they weren't profitable to manufacture, retail and support (some countries have mandatory warranty periods) or they were made to solve a problem that didn't really exist.
thats pretty much sum up what i would have said. its basically speculation of future demand and value of the product/stock.
 

Marbles

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If you can't beat the market, get an Inex fund. I'll let myself out.
 

Inexorable Username

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a note btw: the thing you get paid is just called a "dividend". Wheras "ex-dividend" means without dividend, so e.g. ex-dividend date is the date from which you don't get the dividend if you buy.
Ohhh! Thanks for the tip. Now I'll sound like slightly less of an idiot! Haha.

You guys, I'm going to post my update about my adventures in the stock market on my Inex diary thread and let this one die off. Serac - thanks so much for all the helpful tips & hints! I really appreciate it!

@sushi I'm excited to check out that guy you mentioned! Thanks!
 

enoumena

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If markets are unpredictable the good news is it’s just as hard to lose as it is to win.

The more frequent you trade the more important it is that you don’t give up the spread. Using market orders are a death wish. For example in the future market, buy and sell with market orders, basically cost you like 50$ just to play. If you are only playing for 200$ win or lose, you would have to win like 80 percent of the time to profit.

Philosophically It makes sense to filter macro to micro narrowing in and trying to accumulate tiny advantages and arrive on a stock to go long on.

Then the goal and mind set is to just win ONE tick when you buy somehow. Maybe being early to place a limit order at a highly traded past price.

Then the hold period you get market drift until you reach a size to offset commission and fees in terms of risk and reward. There isn’t anything to stress about while in the hold period. Assuming you aren’t risking it all.

Then when you sell the goal would be to win ONE tick some how.
 
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