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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?
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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?
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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
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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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