How safe is the stock market?

[pig4bill]

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anyone have any tips on accessing risk for a particular stock, sheerly based on it's numbers?

Like if i were to look at the financial + charts in the span of 1 minute on yahoo or google finance, what would be good indicators for a noob to look at?

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What you want to know is the volatility of a stock.

Generally, stocks with lower float are more prone to big swings because it takes less money to move them.

However, to actually quantify that volality is IMO impossible because investor psychology plays such a big factor in price movement.

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FYP

[Courtesy Flush]

I'm thinking perhaps the best thing for me is just to use one of the ETF portfolio's suggested on that site kimchi linked to. How does this look to you guys?

10% S&P Depository Receipts (SPDR) S&P 500 (SPY) LCB
10% Vanguard Value VIPERs (VTV) LCV
10% I-Shares Russell Microcap Index (IWC) SCB
10% Vanguard Small Cap Value VIPERs (VBR) SCV
10% Vanguard REITs Index ETF (VNQ) REIT
10% I-Shares MCSI EAFE (EFA) Int'l LCB
10% I-Shares MSCI EAFE Value Index (EFV) Int'l LCV
20% WisdomTree Int'l Small Cap Div Fund (DLS) Int'l SCV
10% Vanguard Emerging Markets VIPERs (VWO) EM


Is there any overlap or do any of you feel there are unnecessary choices in there? Are any additions or adjustments I should make? It was last updated in Januray so I really want someone's approval before I dive in. I'm starting with 10k by the way, but might add more later.

[DcifrThs]

[ QUOTE ]
[ QUOTE ]
anyone have any tips on accessing risk for a particular stock, sheerly based on it's numbers?

Like if i were to look at the financial + charts in the span of 1 minute on yahoo or google finance, what would be good indicators for a noob to look at?

[/ QUOTE ]

What you want to know is the volatility of a stock.

Generally, stocks with lower market caps are more prone to big swings because it takes less money to move them.

However, to actually quantify that volality is IMO impossible because investor psychology plays such a big factor in price movement.

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price change models by mandelbrot have the closest link to reality.

that is because it makes more sense that volatility scales vs. being linked by a normal distribution (as st.dev assumes). the relative probability of a 10% move vs. the probability of a 5% move should be similar to the relative probability of a .1% move vs. the probability of a .05% move.

this has held true in the empirical tests of his theory. the normal distribution has been widely defunct. it predicts something like 30 moves of >3% in a day over a century where we've had thousands of such moves in less than a century.

the problem is finding the estimates of the exponent and time factor in the power law distribution mandelbrot asserts. small changes in these estimates lead to huge chnages in results.

it isn't impossible to assess risk just because you think it is impossible to assess volatility though. that is what ranges around your inputs and monte carlo simulations are for.

Barron

[kimchi]

[ QUOTE ]
anyone have any tips on accessing risk for a particular stock, sheerly based on it's numbers?

Like if i were to look at the financial + charts in the span of 1 minute on yahoo or google finance, what would be good indicators for a noob to look at?

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Average True Range (ATR) is a useful measure of current volatility of a market. Plotting this as a 10 or 20-day EMA can help greatly in deciding how much of your portfilio to invest/risk in a particular market at a particular time

[joedot]

There is no growth in the U.S now, and will not be for a long time. The fed is wrecking the dollar, so you should be expeditious in getting rid of those dollars as soon as possible. Having said that, there are U.S multinationals that are enjoying growth from around the world particularly asia. So I wouldn't recommend these broader indexes that you mentioned which are largely tied to the domestic economy. If you don't know how to pick individual stocks, look for some ETF's. Do a search for ETF's and find the particular industry you want to index. Your best bet will always be individual stocks though, if you are decent at picking them. If you never try, you will never learn. I would recommend 40% gold equities (auy is my favorite here and will see tremendous upside in the next 5 years, abx and gg are also solid), 40% emerging markets, particularly china and india(HDB and IBN are great banks in India which should do very well as that economy continues to expand. Bidu is incredible and is only just beginning.), and 20% large U.S multinationals like PG or KO. You probably won't do what I said, but it is good advice, and I have done very well in the market for years. Whatever you do, don't buy anything all at once! Number one rule and so important. Spread out your buys over a few months so that you aren't buying in at the highs. You can pm me if you have any questions.

[jtollison78]

I own a little AUY. I don't think I like ABX. Here's a 5 part article that explains some of the nuances of buying gold companies while explaining some shady activities by Barricks execs.

http://oikonomika-blog.blogspot.com/...r-on-true.html


John

[Courtesy Flush]

So many suggestions and no knowledge to decide between them with. Sucks to be me.

[Foghatlive]

We're currently seeing an example of the inherents risks of the stock market. Citibank, the largest bank in the world, as blue as a blue chip can get, has lost 40% of its value in the past month.