[andych]

It is said that 90% of individual investor end up losing. Let see if the bridge community beat the public.

I know at least one bridge player who is winning. You know who I am referring to ....

BTW could he be classified as "Individual Investor" though?

[PassedOut]

andych, on Sep 19 2008, 11:15 AM, said:

It is said that 90% of individual investor end up losing.

What is your source for this quote?

Over many years of investment, my family has gained substantially. Most of our investments have been in funds of one sort or another, mostly no-load, rather than in individual stocks. The few exceptions are stocks in companies that we know well from personal experience. We avoid churning.

However, that's not to say we haven't experienced losses along the way, sometimes painful losses. When the dot.com bubble burst, we had 6-figure losses in one particular fund. That was a blunder on my part, as I had thought I was out of that risk before the crash, but did not realize how heavily this fund had gone for the dot.coms (through my own carelessness).

But other investments have risks too. As a young man I made some good profits in real estate. But one partnership went completely south and I lost my whole investment. My seven partners, all of whom were experienced and very capable people, also lost their investments. The market had changed quickly in ways we did not foresee. That's a risk we knowingly took (although we certainly didn't like the result).

My own grandfather held stock and never sold a share in his life. He held on to stock all through the depression, as people told him he was foolish. His main holdings were in GM, AT&T, duPont, and some mining stocks. As a boy, I delivered newspapers and always checked the stock exchange listings so we could talk about his stocks (he was on my route). They split many times over his lifetime, which meant that his old age was comfortable and pleasant, just on the dividends from those shares.

I find it hard to believe that anything like 90% of individual investors end up losing.

[Lobowolf]

PassedOut, on Sep 19 2008, 12:36 PM, said:

andych, on Sep 19 2008, 11:15 AM, said:

It is said that 90% of individual investor end up losing.

My own grandfather held stock and never sold a share in his life. He held on to stock all through the depression, as people told him he was foolish. I find it hard to believe that anything like 90% of individual investors end up losing.

The 90% figure that most sticks in my mind is that something like 90% of fund managers don't beat index returns in the long run. Having said that, the notion that 90% of investors lose money doesn't sound too counterintuitive to me... unfortunately, though the opportunities are there to do extremely well in the stock market, the psychology often works against people -- they panic and sell at the bottom, and they buy at peaks (bubbles, even) after things have been going well and when the stocks or sectors are most overvalued.



btw...your grandfather WAS foolish to hold his stocks through the Great Depression...he should have been buying MORE!!
(that's a joke)

[helene_t]

This is the 4th or 5th crash during the 23 years I have held stocks. Although I do tend to buy at the wrong moments ( put some 30% of my money in Chinese stock just before the Indonesian forest fires, for example) in the long term prices go up. If I were to sell everything this year I would probably lose but who cares.... I won't need the money they first couple of years anyway.

[kenberg]

I'm oblivious. No doubt I have lost some money here in the short term but I haven't checked. I assume it will go back up. No doubt I should have sold short (if I knew how) on Wednesday morning and bought it back on Thursday morning but I don't even get my finesses right.

[Mbodell]

Yeah, for me it all depends on how you define winning and losing. I've lost money over the past year, but I've beat the indexes.

[barmar]

Another thing to look at is how much risk (based on historical volatility) you're taking to achieve your results.

I invest almost exclusively in mutual funds -- I have a couple of individual stocks, limited partnerships, and a REIT. I work with an Ameriprise financial advisor, and they have tools to evaluate the total risk in a portfolio.

I've been investing for about 25 years. I have a fairly aggressive growth-oriented portfolio, but it's very well diversified. Over the past decade it has beat the major indexes, yet with less risk.

Of course, I'm mostly down this year. Who isn't?

[mike777]

barmar, on Sep 20 2008, 10:25 AM, said:

Another thing to look at is how much risk (based on historical volatility) you're taking to achieve your results.

I invest almost exclusively in mutual funds -- I have a couple of individual stocks, limited partnerships, and a REIT.  I work with an Ameriprise financial advisor, and they have tools to evaluate the total risk in a portfolio.

I've been investing for about 25 years.  I have a fairly aggressive growth-oriented portfolio, but it's very well diversified.  Over the past decade it has beat the major indexes, yet with less risk.

Of course, I'm mostly down this year.  Who isn't?

1) I hope you know what the total risk is and just what that means. Total risk is not historical let alone current volatility. I hope your portfolio is being compared to the appropriate benchmark. Benchmark error is a common problem. Measuring beta and how stable it is is another issue. In times of trouble all or almost all correlations tend to go to one. How to define risk/quantify and compare is a never ending debate but there are some generally accepted definitions but we realize these definitions are limited at best.


2) You may be well diversified, lets assume so, but by your own definition that means it is well diversified in terms of a) aggressive growth. This is not the same as the traditional definition of a well diversified portfolio. Just keep this in mind.


3) If you have beat the major indexes I assume you mean the SP 500 with less risk...I worry if they are measuring risk correctly. Comparing your stated portfolio to the SP 500 would be an error.


4) If your portfolio has less risk than the SP 500 than it is far from aggressive growth.

5) Limited partnerships have all kinds of risks besides volatility. Again using an appropriate benchmark to compare them to is tough to find.
Liquidity being just one type of risk that is hard to quantify in terms of dollars and cents.