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Thread: Hi: me X-AP vs average investor

  1. #1
    Hi
    Guest

    Hi: me X-AP vs average investor

    I have been doing full time gambling since graduation for two years and retired to start my career. I have lots of cash that's just earning interest; so I spoke to a financial planner briefly about investing. I was particular keen on index fund diversified across all asset classes for a 2-3 year period time.

    Anyway the financial planner was very concern about the 2-3 years investing period, which is far too short in his option. He says that there is a significant chance that I will end up losing money after 3 years; to which I replied ??I am ok with losing money after a 3 year period.??

    That's when he implied that I don??t have the right mind of framework in investing; that an average investor would not accept such a proposition; that an average investor would want to make money within their investing horizon; that an average investor would reduce their exposure to risk OR increase the investing period to ensure a (good chance of) positive return at the end of investment period.

    From my point of view, I will invest a proportion of my money in the index fund even if just for 12 months (disregarding tax and transaction cost). So what if my net worth is down 20% in 12 months time? I had a positive expectation at start, that's what count, right? (Note: I am not stock picking, I am just hoping for the 20 year average market rate.)

    If each 12 months period is viewed as a casino game, it has an expected 6% premium return over bank interest and a standard deviation of 15%. So even in the worst case you will lose 24% (30-6) for a chance to gain 6%.

    Isn??t that a 6% / 24% = 25% edge game, which would call for a 25% of bankroll bet? Further more, the two standard deviations is an extreme case, may be I can bet 1 or 2 time more than the 25%.

    How do you guys deal with your excess cash that you don't need for a few years?

  2. #2
    jblaze
    Guest

    jblaze: Re: me X-AP vs average investor

    are you honestly asking random people online how to manage your money?

    > I have been doing full time gambling since graduation
    > for two years and retired to start my career. I have
    > lots of cash that's just earning interest; so I spoke
    > to a financial planner briefly about investing. I was
    > particular keen on index fund diversified across all
    > asset classes for a 2-3 year period time.

    > Anyway the financial planner was very concern about
    > the 2-3 years investing period, which is far too short
    > in his option. He says that there is a significant
    > chance that I will end up losing money after 3 years;
    > to which I replied ??I am ok with losing money after a
    > 3 year period.??

    > That's when he implied that I don??t have the right
    > mind of framework in investing; that an average
    > investor would not accept such a proposition; that an
    > average investor would want to make money within their
    > investing horizon; that an average investor would
    > reduce their exposure to risk OR increase the
    > investing period to ensure a (good chance of) positive
    > return at the end of investment period.

    > From my point of view, I will invest a proportion of
    > my money in the index fund even if just for 12 months
    > (disregarding tax and transaction cost). So what if my
    > net worth is down 20% in 12 months time? I had a
    > positive expectation at start, that's what count,
    > right? (Note: I am not stock picking, I am just hoping
    > for the 20 year average market rate.)

    > If each 12 months period is viewed as a casino game,
    > it has an expected 6% premium return over bank
    > interest and a standard deviation of 15%. So even in
    > the worst case you will lose 24% (30-6) for a chance
    > to gain 6%.

    > Isn??t that a 6% / 24% = 25% edge game, which would
    > call for a 25% of bankroll bet? Further more, the two
    > standard deviations is an extreme case, may be I can
    > bet 1 or 2 time more than the 25%.

    > How do you guys deal with your excess cash that you
    > don't need for a few years?

  3. #3
    dbase
    Guest

    dbase: Re: me X-AP vs average investor

    > are you honestly asking random people online how to
    > manage your money?

    Try putting excess cash in different currencies and try
    to average 2%. This should be done with at least 30% of
    bankroll. The other 30% put in dividend bearing stocks.
    Like utilities stock or telecommunication stocks. They
    might pay around 3% to 4%. Be careful not to buy into
    stocks that are overpriced. Check out the P/E ratio
    and year hi/lo.
    regards
    dbase

  4. #4
    dbase
    Guest

    dbase: Re: me X-AP vs average investor

    Just a suggestion. I am not a 'pro' advisor.
    This is what I do with my spare cash(if I'am lucky
    to have any)

    > Try putting excess cash in different currencies and
    > try
    > to average 2%. This should be done with at least 30%
    > of
    > bankroll. The other 30% put in dividend bearing
    > stocks.
    > Like utilities stock or telecommunication stocks. They
    > might pay around 3% to 4%. Be careful not to buy into
    > stocks that are overpriced. Check out the P/E ratio
    > and year hi/lo.
    > regards
    > dbase

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