It\'s time for poker players to start putting their money to work.
 

I am in my late 30s and retired from the hedge fund business. Went to top schools, MBA, etc.

Ok, that was fun to brag.

Now the meat of the post. I know eventually I am going to get bored (wife won't let me play poker all the time)...but I find the poker world interesting (and I think related to skills necessarily for stock selection). I have been trying to come up with unmet needs in the poker community that could be attacked from a business standpoint. I don't have to work, but I like to pursue interesting ventures. One thing that strikes me from reading these boards, in general, is that many of the folks here have amassed cash earnings that outstrip their investment acument (which puts them in good company with most people in the US). I am wondering if there is an opportunity to focus on the investment needs of this niche.

My guess is the main problem is that, for all the success of the professional poker players, there are not that many who have real bankrolls that are investable (say, at least $100k). But I might be wrong. I am confident that these people would be well served by having their investment program directed by experienced professionals...and the key is to avoid the usual (1) b.s. weasel wire tips which are the blind leading the blind and (2) the usual weasel brokers (i am not a broker) who would be selling cars if not selling stocks and don't know what they are doing.

Any thoughts? I have relatives who play poker professionally and I direct their portfolios...I know that it has made a significant difference for them and I assume the situation is similar for others. In addition it would be an opportunity to get educated about portfolio management so that folks could ultimately have a more participatory role in the management of their money.

I think I am unusual in that I have managed billions but am now a degenerate lurker on these boards. Maybe I can combine the two.

Re: It\'s time for poker players to start putting their money to work.
 

Scoprion I would assume liquidity is a huge factor for most professional players. The swings online are massive in the shorthanded games.

Post deleted by Mat Sklansky
 

Re: It\'s time for poker players to start putting their money to work.
 

The problem is that will all the time it would take to learn to invest wisly it would be -EV as the time could better be spent playing poker. Most pros my age has no way to measure a professionals skill and intentions so even going with a professional may not be the best idea. (I have read Lair's poker and am leary of brokers).

Re: It\'s time for poker players to start putting their money to work.
 

Yeah, I realize the age thing. It's precisely why I posted in the first place. Youth is good for many things, but perspective and forethought are not top of that list.

Good2CU...your response about "negative EV" is way way way way off. I made more money with my investing skills last year than you did with your poker skills...I promise. I am not saying you could have done that, because it takes capital to accomplish that. But almost all of the rich people in the world made it through starting a company or investing...not playing poker. Your view of what "rich" is will also change as you get older. People do not realize that a couple million bucks is not "retiring money" when you get older, particularly if you live in a metro area.

I think of pro poker players a bit like pro athletes, but with smaller bank rolls. You are good at something. You earn more than many of your peers young because of it. You have no family and whatever you are making seems like all the money in the world.

You have to understand that long term, understanding investing is CRUCIAL and highly positive EV. I am sure Degen understands this because his posts are intelligent and demonstrate this longer term perspective. Many people blow their hard earned money because they don't understand investing. So, there is really a dual path here...at the least, find someone you can trust to steward your money so that it is wisely invested over time. This avoids the problem I see often (not poker specific) of people who get misled by idiot brokers and piss away their hard earned money.

As a side benefit, you will start to be curious about money and ask questions...and it is key to have someone who is good to answer those questions. ETrade can't do that for you. 80% or more of brokers can't do that for you (and won't be interested in you because you are young and haven't amassed significant assets yet)...

Investing is how to make money without being on the hourly clock. It's also interesting to many people.

The one thing that I find poker players do not understand is that, while they are making good money....in the the long run the vast vast vast majority of them are not going to be making the really big money. They have a lack of respect for what it takes to make 10 figures a year, not 6 or 7. They have a lack of understanding that there is a whole other level out there of financial success, and that they might learn something from those people.

Sadly, I assume most people on these boards will make bad financial decisions with their earnings...buy expensive cars and other depreciating assets, for example. The reason I thought to post here was that I see a parallel to pro athletes, and poker players could use "coaches" -- both for investing and also for spending decisions. The guys who have maturity will understand that this is the path to long term prosperity and will wake up when they are 30 with big bankrolls and portfolios.

I hope to get more replies to this...I know for sure that people need it. My interest in making money was always rooted in a search for security, not a quest to accumulate material things. Investing is a core competence necessary to creating a secure financial future.

Re: It\'s time for poker players to start putting their money to work.
 

Can you do significant better for me than broad index funds? If so I'm willing to listen, but I like Degen's idea of having at least some of the information public on this forum.

[ QUOTE ]
Sadly it makes sense, for people making $500-$1000 an hour or more playing poker, time is better well spent doing that than learning to invest.

[/ QUOTE ]
I'm not sure if I entirely agree with you and good2cu here. If you're saving a significant portion of the big paydays then squeezing out an extra percentage or two now will result in an enormous increase in returns throught your entire life. I agree that doing active trading doesn't make much sense, but if we could find a better passive form of investment or a capable individual to invest the money it would be well worth our while.

Re: It\'s time for poker players to start putting their money to work.
 

No one can promise to outperform broad index funds (or anything else for that matter). I was in the business of creating returns for over a decade. My tax returns from 1994 to 2005 showed material gains in my personal portfolio each and every year (including the disaster stock market years of 2000-2002). My professional record showed gains in 9 of the 10 years in which I had a measured portfolio (the down year was -2%).

I hesitate to write that, because my intention in posting here was not to say "boy, am I good" (although I am, wink).

My intention is to say i am 1000% better than what most people on these boards are doing...which is either nothing, or acting on tips from friends if they are buying individual stocks. I am not a broker...I couldn't take money directly from people if I wanted to - I am not licensed.

But investing is an entire discussion...for some people matching the indexes is a good outcome...for others, they are interested in outperformance, which can only come from individual stock or sector selection. Then you are talking about getting in bed with someone whom you respect and taking the increased risk of stock selection.

As an example of what you can do with small amounts of money that are invested in a concentrated fashion...my parents had a little account with $20k in it that I directed starting in 2001. The market is barely up in that time and they have $75k.

This is not a short "how to" discussion. It is specific to each person's goals, earnings power, asset base, liquidity needs, family situation, risk tolerance, etc.

For most of the people in this forum, the first step is to develop a relationship with someone who will keep them out of trouble, as well as begin to direct them to other possibilites, including individual security selection.

I guess my question is this -- is there enough of a base of poker players out there that one could create a boutique financial practice catering to their particular needs and questions -- combo of tax planning, investing, and given their age (if they are smart enough to listen) -- advice on overall spending and financial management.

I don't know what makes people credible in these forums...I passed on an opportunity to run a fund that would have been news enough to be reported in the Wall Street Journal. I know what I am talking about.

Post deleted by Mat Sklansky
 

Re: It\'s time for poker players to start putting their money to work.
 

OK - we get it: you are the [censored] and we need to start investing.
What now? My plan was to read the advice of this forum and invest in index funds so that I don't have to do too much work. Are you suggesting that is a bad idea?
You say not to go to a broker but that we need to talk to someone who knows what they are doing. How do we do that?
You can obviously offer some valuable advice, so please, stop being vague.

Re: It\'s time for poker players to start putting their money to work.
 

I will give a little advice, but you have to understand that your questin is like asking -- How do I play jacks in no limit hold'em? Please answer in 5 sentences or less...as you know, its much more nuanced and situation specific than that.

I am talking about developing lifetime habits of saving and investing, as well as developing a lifetime relationship with a financial advisor (something that most people desperately need and few do).

That said, in response to your specific question...investing in index funds is much better than buying individual stocks for an investing novice. During most environments it is hard to go really wrong this way. You are rarely going to make big returns (e.g. 40%+), but the same can be said of big mistakes.

The key caveat is that every 15-50 years we end up in an environment where even indexing is dangerous. The year 2000 was an obvious case...many people began indexing to the Nasdaq during this period and lost 80% in short order. I cannot tell you in an internet post how to identify when you are in an environment with the potential to inflict this kind of damage. My current opinion is that we are not in that kind of environment today.

Re: It\'s time for poker players to start putting their money to work.
 

[ QUOTE ]
I will give a little advice, but you have to understand that your questin is like asking -- How do I play jacks in no limit hold'em? Please answer in 5 sentences or less...as you know, its much more nuanced and situation specific than that.

I am talking about developing lifetime habits of saving and investing, as well as developing a lifetime relationship with a financial advisor (something that most people desperately need and few do).

That said, in response to your specific question...investing in index funds is much better than buying individual stocks for an investing novice. During most environments it is hard to go really wrong this way. You are rarely going to make big returns (e.g. 40%+), but the same can be said of big mistakes.

The key caveat is that every 15-50 years we end up in an environment where even indexing is dangerous. The year 2000 was an obvious case...many people began indexing to the Nasdaq during this period and lost 80% in short order. I cannot tell you in an internet post how to identify when you are in an environment with the potential to inflict this kind of damage. My current opinion is that we are not in that kind of environment today.

[/ QUOTE ]

well diversification is the key when buying index funds. Anyone who lost a lot in 2000-2002 was just gambling in tech stocks/megacap, and a diversified portfolio with large/mid/small/int'l funds would have held up a lot better during this period.

Re: It\'s time for poker players to start putting their money to work.
 

Better....but still easily 35% .... i would have to go back and do the math. Emerging markets were horrible too. The simple fact is that in the bubble most young guys like people on this forum would have gone the tech route.

Re: It\'s time for poker players to start putting their money to work.
 

First off, congratulations on all of your success and what not. I'm wondering how I go from someone who does not know very much about investing, to someone who could potentially make a career in it (the field interests me). What helped you get started? After getting started in the field I'd assume work experience/some natural ability carried you up? Do you have any books or other resources that you would reccomend?

Thank you for your input/general advice in this thread.

Re: It\'s time for poker players to start putting their money to work.
 

Hmmmmmmmmmm. That is a lot of questions, some with not very short answers. Trying to be brief:

How did I do it?
Worked my ass off from very early, great grades (all the way through), went to (IMO) the top 2 schools in the country, one for undergrad, one for MBA. Had good jobs every step of the way (started a successful business between summers at school, worked for a consulting firm my last summer).

Post MBA I identified a young and growing field (hedge funds) and focused on it when others were not (they are now, however). I also had a ton of drive and worked my butt off at those jobs and, most importantly, performed in terms of investment acumen.

In terms of getting started, you have to be genuinely interested. I bought my first stock when I was 10 years old ($40 total purchase). I was the only kid at summer overnight camp who got the investor's business daily mailed to him (sad, I know). The way you guys feel about poker and are this board debating things...it sure helps to be that passionate about stocks. This will show when you interview for jobs.

It is hard to answer your getting started question without knowing anything about you. The answer for someone who is a senior at Harvard with a 4.0 GPA is very different than the answer for a 33 year old unemployed poker player. If you tell me more about yourself, I could give you a better answer.

For starters...read everything in sight. Start with the Wall Street Journal daily, and include books. To make a career in investing you have to understand accounting for sure. It very much helps to understand finance, although its not 100% necessary (but its probably hard to get a job without it).

Also, the question of how to learn to invest on your own is very different than the question of how to get a job investing. I loved it. Investing in stocks has a lot in common with playing poker. You also get to be very knowledgeable about the world around you and have the responsibilty to ask, at every turn...how does this busienss make money? How do they defend their market position? What is happening to their pricing power and inputs? An MBA helps frame these questions...although I have not figured out if getting an MBA from a second rate school is worth the time and cost.

I will recommend books to you if you reply and tell me what it is you are trying to accomplish.

Re: It\'s time for poker players to start putting their money to work.
 

Thank you for the reply.

As for background information, I'm an 18 year old college freshman just starting out at a state school. My Major won't be declared until junior year (need to apply to the business school) but I'm planning on doing either Finance, or Management Information Systems with Entrepreneurship. I'm not making too much from poker, but currently manage my college fund.

The kinds of books I'm looking for are books that will give me the basics. I know very little about how the bond market works, how short sales work, futures etc.


edit: hit submit too early.

Re: It\'s time for poker players to start putting their money to work.
 

Good. You are still young and haven't screwed things up yet.

#1, get great (not good, GREAT) grades. if you don't do this, it makes everything infinitely harder

#2 do everything you can to separate yourself from the rest of your class..this can take many forms, but in some ways its similar to getting into college -- "extra curricular" activities matter. So do the summers.. a LOT. You are going to be competing against all the other college grads...you have to have a story to tell about your summers that is a combination of interesting, relevant to the jobs you want, and impressive...i.e. shows your prospective employer that you will work harder and smarter than the other candidates.

#3 Get educated about your chosen fields. If in an interview you can mention you have read 100 investment books and have been investing your own money (even if its very small) for years, you are much more credible than other candidates that cannot say either.

This is a start. PM me with any other specifics.

good luck

Re: It\'s time for poker players to start putting their money to work.
 

[ QUOTE ]
I guess my question is this -- is there enough of a base of poker players out there that one could create a boutique financial practice catering to their particular needs and questions -- combo of tax planning, investing, and given their age (if they are smart enough to listen) -- advice on overall spending and financial management.

[/ QUOTE ]
I don't know about the rest of the forum, but I'm very interested.

Post deleted by Mat Sklansky
 

Re: It\'s time for poker players to start putting their money to work.
 

Whay do you want to do this scorp? It seems like it would be much less lucrative than, and would involve more tedious work (with less time to deal with the actual investment process) than a typical hf pm type role. Am curious.

Re: It\'s time for poker players to start putting their money to work.
 

[ QUOTE ]
Whay do you want to do this scorp? It seems like it would be much less lucrative than, and would involve more tedious work (with less time to deal with the actual investment process) than a typical hf pm type role. Am curious.

[/ QUOTE ]
I can't speak for the OP, but I'de assume that if he's retired in his late 30s he isn't very concerned with making money and more with doing something that he views as fun and helpful.

Re: It\'s time for poker players to start putting their money to work.
 

[ QUOTE ]
[ QUOTE ]
Whay do you want to do this scorp? It seems like it would be much less lucrative than, and would involve more tedious work (with less time to deal with the actual investment process) than a typical hf pm type role. Am curious.

[/ QUOTE ]
I can't speak for the OP, but I'de assume that if he's retired in his late 30s he isn't very concerned with making money and more with doing something that he views as fun and helpful.

[/ QUOTE ]

This is basically true. Doing something like this would earn about 1% of what you can earn being a successful HF manager. I have not been looking for a "job"...but I have been thinking about ways to do something related to either hedge funds or poker that would be engaging.

I also enjoy helping people, in particular if the people are smart and interested.

This has been the germ of an idea...whether I can execute on it in a way that makes sense, I am not sure.

My other challenge in answering some career questions of the "how do I get into this" genre is that I went about things in a certain way. When others have different backgrounds, I am less certain how to advise, because certain avenues that were open to me might not be open to them as a result of choices people have made along the way.

I am happy to continue this discussion and give people a hand if they are interested.

The original question was trying to tap this forum to understand if there are a lot of people out there like my cousin...earning 6 figures, having 6 figures in the bank, and really having no idea what to do with it or how to approach their financial lives (like the athletes we discussed earlier).

Thanks for reading.

Re: It\'s time for poker players to start putting their money to work.
 

I am like the type you are describing, yet I have at least some basic idea on how to approach my financial life (at least I hope so lol). It is true, however, that it would take tremendous amount of time for me to acquire good knowledge of investing theory and practice. I play nearly 100 hours per month as I think currently my time is better spent playing than analyzing finance. Earning six figures per year is my priority this year, but I can see that I could be making some money just with smart investing and (very) slowly retire from playing.

Since now, I have been investing in mixed mutual funds (half equity/half bonds) and little 100% equity funds. I realize that I should be probably pursuing a more aggressive approach. I would be very interested to get in touch with you and get some good advice.

Thanks

Post deleted by Mat Sklansky
 

Re: It\'s time for poker players to start putting their money to work.
 

I like the idea. Plus I need a place to hang my 7 before it expires. To build trust and establish a good rapport you could align the incentives by charging a fee based on the growth of customer assets. We don't make money unless you make money, so to speak. Could revolutionize the industry.

Re: It\'s time for poker players to start putting their money to work.
 

This is a very good topic. I think one of the general problems is the young age of most poker players. Mentioned earlier, most players are younger than 25 years old. I bet this age demographic in general, not just poker players, has little investing knowledge. Most young people know what investing is but don't know how or where to invest money.

Also, I think it is key to stress that investing can be simple. People don't have to research individual stocks or make frequent trades. A young poker player could simply buy and hold a total US stock market index, total international stock market index, and total bond market index and have a completely diversified, low cost portfolio. Investing in a target retirement fund is also a simple solution for a young investor starting a Roth or Regular IRA. Investing does not have to be complicated to be successful.

Scorpion Man, I am 18 and have been investing since I was 13 and am very interested in learning more about buying individual stocks. I am also very interested in the hedge fund and trading industries and wonder how to best position myself for a job in those industries. Could I pm you with more info and questions?

Re: It\'s time for poker players to start putting their money to work.
 

[ QUOTE ]

Also, I think it is key to stress that investing can be simple. People don't have to research individual stocks or make frequent trades. A young poker player could simply buy and hold a total US stock market index, total international stock market index, and total bond market index and have a completely diversified, low cost portfolio. Investing in a target retirement fund is also a simple solution for a young investor starting a Roth or Regular IRA. Investing does not have to be complicated to be successful.



[/ QUOTE ]

This is all true. You are wise beyond your years. Feel free to PM...

Re: It\'s time for poker players to start putting their money to work.
 

Scorpion,

I am a junior in college, 21 in a few months, with a major in Early Childhood Education and minors in Math and Spanish. Currently I have around 5K I would like to invest. I make a nice amount of money from poker (for a college student at least) and am very interested in getting into investing. If you were me what kind of things would you be doing? Thanks for the help.

Mike

Post deleted by Mat Sklansky
 

Re: It\'s time for poker players to start putting their money to work.
 

This is good2cu posting on a friends account because I'm currently banned from 2+2.

Scorpion Man -

I am 19 years old and have been playing poker professionally for 6 months. I will probaly around 300k this year unless I hit a big tourney score. I currently have a liquid net worth of 150k, most of which I need for my poker bankroll. I currently have 10k in ingdirect, and 25k in vanguard funds. 12k in Emerging markets index funds, 5k in a SP500 Fund and 8k in an Internal index fund. I plan on adding a small cap US stock fund and adding 10k evenly to each fund every month. I have very few expensives beside the lavish trips I take and all the money I spend at clubs (have to live life). What would you suggest for me? How should I go about filing my taxes (I have never paid taxes before), will any CPA be fine?

Re: It\'s time for poker players to start putting their money to work.
 

Hmmm.
1) Do your parents have an accountant that is any good? I would start there if they like him. If not, network through friends here to get a guy who has done a lot of work with poker players. There is no substitute for experience in terms of making the right decisions around tax reporting. You are doing the right thing paying them, btw.

2) Sounds like you are doing a good job dollar cost averaging. As you hopefully know, you are taking the high risk approach with your selections. (I assume by "internal index fund" you mean "internet index fund"). As a % of your portfolio, it is pretty unusual to have this kind of allocation to emerging markets and internet stocks...on the other hand, you are young, you are earning a bunch, and your portfolio overall is a relatively small piece of your net worth. So you can handle that swing. Just pointing out that this is not a prototypical portfolio and is higher beta (meaning risk) than most.

It's a really good start and it would be fine if you never did much more than would you are doing, although I can't see keeping that allocation over time as your portfolio grows, in particular because I doubt you have any real reason for being in emerging markets other than that they sound sexy.

Re: It\'s time for poker players to start putting their money to work.
 

[ QUOTE ]

I am a junior in college, 21 in a few months, with a major in Early Childhood Education and minors in Math and Spanish. Currently I have around 5K I would like to invest. I make a nice amount of money from poker (for a college student at least) and am very interested in getting into investing. If you were me what kind of things would you be doing?
Mike

[/ QUOTE ]

One general thought on this topic...This may be overly obvious to people but I figure it's worth writing down.

The importance of your investment strategy is a function of the ratio of your portfolio to your earnings and your spending. (IMO, if your earnings are outsized compared to your portfolio, you are either just getting started or you are spending too much). So...when you have a small amount of money, like $5k, the main reason to start investing is to get into good habits and learn. Your odds of making enough after tax money to matter to you are very low. You also cannot buy invidivual stocks very cost effectively and have any kind of diversification at all.

If I had $5k and wanted to get exposure to the market i would split it between SPDRs (ticker SPY...its the S&P 500) and VTI (vanguard total market return) and perhaps the IWM (Russell 2000 -- a small cap index).

This is not particularly scientific, and a more sophisticated portfolio might be reweighted over time to vote on whether you think big or small caps would be outperforming....but this is not a bad way to start.

you could also use or substitute QQQQ (Nasdaq) if you want more technology weighting. I don't love the QQQQ because it is overly weighted in some megacaps - MSFT, QCOM, AAPL, GOOG are 20% of the index!

Other possibility is the EFA for broad international exposure.

This is a good place to learn what you are actually buying when you buy ETFs:

http://www.etfconnect.com/

Re: It\'s time for poker players to start putting their money to work.
 

Thanks for the help, I'll definitely look into some of this. Yeah, I know 5K isnt much, but I figure the sooner I get my foot in the door the better, so I've been trying to do some research and see what I can find.

Re: It\'s time for poker players to start putting their money to work.
 

What about indexes and other funds with a large portfolio? Right now I'm invested in:

Vanguard Small-Cap Index Fund Investor Shares
Vanguard European Stock Index Fund Investor Shares
Vanguard Large-Cap Index Fund Investor Shares
Vanguard Emerging Markets Stock Index Fund Investor Shares
Vanguard 500 Index Fund Admiral Shares
Vanguard International Value Fund

but I didn't really know much when choosing these. I have an extreemly high risk tolerance and am mainly looking for the highest expected long run returns. Are there any funds that you don't like in the above list? Are there any ones that I'm missing that might be a good idea to include?

Re: It\'s time for poker players to start putting their money to work.
 

Scorpion man's path to the markets is the traditional one, but you don't necessarily have to do it that way. I have a couple friends that can watch a stock for awhile, get a "read" on it just like a poker player, and trade it for a nice profit. One of them started actively trading at 17 and opened his own hedge fund at age 22. Neither of these guys have had any formal training or "education" in this field. They learned at the school of hard knocks, and I'd be willing to bet that when a small cap or bulletin board or pink sheet stock starts moving, they can find out who's doing it faster than the average guy at Goldman can.

Re: It\'s time for poker players to start putting their money to work.
 

What I have written is NOT the best way to get rich investing. In fact, I bought my first index 6 months ago, at the ripe age of 37. I never bought indexes...its nowhere near as good as individual stocks.

That said, buying indexes is much better than slinging individual stocks against a wall if you don't know what you are doing. There are basically no 20 year olds who know what they are doing in the market. There were a lot of guys like your friends in the bubble, pretty much all of them go toast.

If they can't read a balance sheet, they are not going to be consistent winners in the market in the long term, IMO.

After my other post to the $5k portfolio question, I went for a run and realized that I was giving advice I never followed myself. The real answer for a $5k portfolio is 2 buy 2 stocks, maybe 3. The problem is that most people with a $5k portfolio are not qualified to pick those stocks. If you have a rich uncle or something who is good in the market, that is the way to go.

Re: It\'s time for poker players to start putting their money to work.
 

"After my other post to the $5k portfolio question, I went for a run and realized that I was giving advice I never followed myself. The real answer for a $5k portfolio is 2 buy 2 stocks, maybe 3. The problem is that most people with a $5k portfolio are not qualified to pick those stocks. If you have a rich uncle or something who is good in the market, that is the way to go."

Doesn't that have a very high risk of ruin? I mean even the best traders still pick bad stocks occasionally don't they? I agree with you if the 5K isnt that important enough that you don't mind busting it, but if someone only has 5K to play with and losing it would be a huge loss, wouldn't it be better to go the safer route? Personally I'm just starting at 5K this month and hope to be adding a few K each month so I would probably go for some individual stocks (assuming I feel comfortable picking some stocks and am confident in what I am doing, if not I will probably just hit some indexes like you said)

Re: It\'s time for poker players to start putting their money to work.
 

[ QUOTE ]
"After my other post to the $5k portfolio question, I went for a run and realized that I was giving advice I never followed myself. The real answer for a $5k portfolio is 2 buy 2 stocks, maybe 3. The problem is that most people with a $5k portfolio are not qualified to pick those stocks. If you have a rich uncle or something who is good in the market, that is the way to go."

Doesn't that have a very high risk of ruin? I mean even the best traders still pick bad stocks occasionally don't they? I agree with you if the 5K isnt that important enough that you don't mind busting it, but if someone only has 5K to play with and losing it would be a huge loss, wouldn't it be better to go the safer route? Personally I'm just starting at 5K this month and hope to be adding a few K each month so I would probably go for some individual stocks (assuming I feel comfortable picking some stocks and am confident in what I am doing, if not I will probably just hit some indexes like you said)

[/ QUOTE ]

Yeah...which is why I gave that advice and wasn't recinding it. Its good advice...kinda like telling someone to play TAG. But the best LAGs are better, no? The analogy is a little stretched...but it's MUCH MUCH better to buy individual stocks in a concentrated fashion if you know what you are doing. Of course you get some wrong...great investors are right maybe 60% of the time...but the good ones tend to have bigger indvidual gains than losses as well.

So that was my point. If you have any access to stock picking, given your age, etc, the higher risk but higher reward strategy is an individual stock strategy. The problem is that most people don't have the access....hence my original answer to you.

But here is the thing....if you are serious about adding $2k per month to a $5k portfolio, risking "ruin" ain't no big thang, now, is it?

You have to keep it in perspective with your overall financial picture.

Re: It\'s time for poker players to start putting their money to work.
 

[ QUOTE ]
[ QUOTE ]
I like the idea. Plus I need a place to hang my 7 before it expires. To build trust and establish a good rapport you could align the incentives by charging a fee based on the growth of customer assets. We don't make money unless you make money, so to speak. Could revolutionize the industry.

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This is how hedge funds operate. It is a bad model for a financial adviser. They may be willing to take much larger risks (even -EV ones) with your money in the hopes of a big payday. Thats bad.

A much better model IMO is a flat fee per hour or a % of assets per year, regardless of performance. If you aren't happy with the services (not Scorpian per se, any adviser) just fire them.

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Not totally true in the hedge fund world. Management fee is fixed and can be a significant source if income for a decent sized hedge fund.

Re: It\'s time for poker players to start putting their money to work.
 

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What about indexes and other funds with a large portfolio? Right now I'm invested in:

Vanguard Small-Cap Index Fund Investor Shares
Vanguard European Stock Index Fund Investor Shares
Vanguard Large-Cap Index Fund Investor Shares
Vanguard Emerging Markets Stock Index Fund Investor Shares
Vanguard 500 Index Fund Admiral Shares
Vanguard International Value Fund

but I didn't really know much when choosing these. I have an extreemly high risk tolerance and am mainly looking for the highest expected long run returns. Are there any funds that you don't like in the above list? Are there any ones that I'm missing that might be a good idea to include?

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newt this looks fine...vanguard has low fees (i checked a couple of these they look ok, although i bet ETFs would be a little cheaper). You wont go really wrong this way. if you have a high risk tolerance and want to swing for the fences you need to figure out a way to get into individual stocks. Frankly, I have never bought a mutual fund. the guys running them suck, and they don't have your best interest at heart. most of them are just trying to not trail the indexes too badly. all of the talent has gone to the hedge fund industry. so if you are going to buy funds, i like buying these passive funds. at least some idiot is not going to screw you while charging you extra for the privilege.

Re: It\'s time for poker players to start putting their money to work.
 

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There are basically no 20 year olds who know what they are doing in the market.

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I turned 20 last month.

This is what I look for when researching fundamentals (I use Valuelines).

• A high industry rank, ideally top 25%
• A good one year timeliness rank
• Safety (low volatility compared to other stocks)
• Low debt, ideally less than 3% of capitalization
• Beta, ideally between 0.95 and 1.1
• Sales and earnings growth ideally greater than 15%
• Consecutive years of sales and earnings growth
• Good projected revenues, dependent on size of company
• Projected sales and earnings, ideally greater than 19%
• Earnings growth faster than sales
• Dividends less than half E.P.S.
• Estimated price appreciation for next 5 years greater than 15%
• Low P/E ratio
• Strong management, increasing profits, have handled past challenges and are anticipating future trends
• No impending lawsuits

This is a conservative strategy but not all criteria have to be met. No; I can't read a balance sheet but I can read the Valueline reports.

Next I look at the technicals (I use TeleCharts):

• Place trendlines, identify channels and areas of support and resistance.
• Look for divergences and leading divergences in volume and price/volume indicators.
• Check that stochastics, MACD and RSI are oversold (or at least not overbought)
• Use candlestick patterns, Bollinger bands and moving averages to time entry point.
• Use trendlines to determine stop-loss position, unless selling covered calls.

I feel that I have a better trading knowledge than the 'average' investor. If this is 'not knowing what I'm doing in the market' than I apologize for making you read this long post.

The point of this post was to show that not all 18-21 year olds are clueless about the market, we may be inexperienced but we learn quickly [img]/images/graemlins/wink.gif[/img].

Naturally I respect your accomplishments and trading ability, all your advice has been excellent and I have enjoyed reading this thread. As such any recommendations for improving my trading strategy will be greatly appreciated (from all posters).