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Comment by apalmer | Hacker News Reader

Honestly Stock Market investing is not nor has it ever been for the common man. The hyper aggressive day trading & HFT sector is not for the common man. As for the slow long term investment route, the biggest section that gets abused by the savvy investors is the institutional pensions and such.

Bottom line if you are not going to put in significant effort you are not going to get much out of the stock market except by pure luck, and on average your going to lose... for the common man the effort necessary to make an extra 15% on your yearly income in the stock market, is more than if you did overtime or even went out and got a part time second job to earn that extra 15%

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Day trading and HFT are not for the common man. But regular long term investing is.

Getting a part time job is only a good idea if you have very few assets. Suppose you have 50k in salary and 50k in assets, then it's much easier to earn an extra 5k per year than it is to get an extra 10% return on your investment.

However, if you have 50k in salary and 500k in assets the story is the other way around. Investing 500k for 10 years with 6% interest instead of 3% interest leads to gains of 395k and 172k respectively. In this case making an effort in investing your money sensibly will lead to an extra 22k every year. A substantial difference. And as your assets increase your investment strategy only becomes more important.

Then there's the issue that not investing your money simply isn't a viable option. Inflation will chip away at your money at 3% per year, so you lose 25% of your money every 10 years if you stick your money in a checking account. Then there's the issue of employer-based 401k matching. You pretty much have to invest here, otherwise you lose out on free money. And if you just pick some investment funds at random you're going to do very poorly indeed (because many 401k funds are basically scams)[1].

[1] See http://www.pbs.org/wgbh/pages/frontline/retirement-gamble/

> Day trading and HFT are not for the common man. But regular long term investing is.

I drop a portion of my money each month into selected ETFs and it's done well for me (ha, the market has been on a bull rush, of course it did well for me).

Baloney. I've spent maybe 120 hours studying the stock market over the past 3 years, and have seen (in the current bull market) about a 25% gain in my ETF-based assets over the past two years.

On average, you should expect your money to move with the market, less costs of admin. Reading prospectuses is not fun, but its not hard to do to figure out which funds will take you for a ride and which are being decent.

Frankly, it's like free money after you finish your initial investigation.

Short-term speculation is, as everyone should know, a high risk high gain occupation. This is not rocket science, this does not take massive intelligence.

First, that's not really that good as 25% is significantly underperforming the market which is up around 40% over the last two years.

Second, even if you were beating the market, how do you know you're not just being fooled by randomness (In the Nicholas Taleb sense)

pnathan is not beating the market return and he is not aiming to. One buys ETFs to try and match the market. And any decent ETF will get very close to the ETF's benchmark. This tells us that the markets he is following must not have raised 40%. Which is good because it means he is diversified.

As for randomness, ETFs provide exposure to thousands of stocks which better than anything else averages the randomness.

First, I'm diversified and I'm fundamentally seeking to beat the savings & CD account rate. The ETFs I generally buy are holding around the DJIA, occasionally beating it. Woo.

Second, I don't care if it's just a large number of random numbers or an actual performance: if I can draw out lots of money (lots more than I put in) when I am ready to, I win. :-) Angsting hard about this doesn't gain me much.

Can you expand on that - an interesting idea / any proof / demonstration

I was told it was always sensible to invest in index trackers with minimal really low admin costs.

>for the common man the effort necessary to make an extra 15% on your yearly income in the stock market, is more than if you did overtime or even went out and got a part time second job to earn that extra 15%

You're right. And why should it be any other way?

People often forget that underneath the glitz, glamour and dazzling array of numbers of the stock market and Wall Street, the purpose of "the game" is moving real capital to real businesses in need. And there are real risks associated with that.

The last 20 years have been seemingly "easy" for investors, or at least the years (prior to 2008) have been portrayed that way. But in no way should people believe he or she should be able to throw darts at the stock page and earn a 15% return. Aiming for the maintenance of the purchasing power of your savings, while generating those savings through work at which you're actually adept, is a far more reasonable and sensible goal.

> People often forget that underneath the glitz, glamour and dazzling array of numbers of the stock market and Wall Street, the purpose of "the game" is moving real capital to real businesses in need.

Well, if it is a public offer, yes. But most of the time people are just buying stuff on the secondary market, meaning that the ownership of the company changes (a bit), but there is no capital move to and from the company. Nevertheless, this might help companies to create and time new rounds of public offers.

The secondary market actually does serve a capital allocation function. It provides liquidity to the original shareholders, and to the people who bought from the original shareholders, and so on. This, in turn, encourages people to become original shareholders, and to provide capital to the company.

Illiquidity is one major reason that private companies sell for lower multiples than public companies of equivalent size.

Secondary market provides liquidity to the shareholders, but not to the company. There is no cash-flow to or from the company if you buy an AAPL or GOOG. As I've said: the cash comes to the company only if it decides to have another public offering.

I see where you are going with the "what motivates people to buy ownership" part, and it has truth in it. My grandparent response was to the part "moving real capital to real businesses in need". Many people don't realize that the secondary market is not moving capital to the business, only the public offering.

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