i buy what i personally like and use and have made substantially more than the market on Apple, Amazon, Starbucks, PayPal, etc. am I a professional equity analyst? no. but is this "gambling"? I don't think so.
Tech has done very well the past few years. In the long run, who knows.
Gambling is taking on excess risk for excess profit, especially when the odds are against you (expected value is negative). This could be poker or active trading. It's gambling.
Buy and hold long term is not active trading. You’re conflating two completely different things.
It’s odd when I find HN to be so risk adverse when working in tech is all about risk. Fortunes are made with risk. Then as an industry we’re apparently all just degenerate gamblers if buying and holding Apple stock is akin to playing roulette.
If that were true literally no HN reader would work at a startup, but we know that isn't the case. Or take any compensation in the form of equity in one company, even at a large one.
First of all, financially and statistically speaking, working at a startup almost never makes sense compared to working at a FAANG or similarly high-paying company. (There have been countless articles and discussions about this on HN, so I won't rehash the arguments.) Second, there are other reasons for working at a startup that have little or nothing to do with money (it's more fun/rewarding, you learn more, work/life balance, etc). The latter doesn't really have a parallel in investing unless you only invest in sustainable/ethical companies or something like that, but then the conversation about maximizing profit and beating the market is kind of moot anyway.
> Or take any compensation in the form of equity in one company, even at a large one.
Public stocks are liquid enough that you can sell them as soon as possible and immediately "cash out", so any equity-based compensation at a public company can reasonably be treated as cash. The same applies to a private VC-backed company with an upcoming IPO, though obviously there is a little bit more risk involved there.
That doesn't follow at all. I work at a tech startup because it's a business in which I think I can add value. I don't think I know enough about finance to move the needle.
As for big-company equity, I'm happy to take RSUs in a FAANG , and sell them the day they arrive. Nothing radical there.
Working in tech is not "all about risk"; being a founder/entrepreneur is in any industry, but just an average employee that writes code is hardly risky.
Of course it is, because you can't predict the future. You could have just as easily lost money investing in individual stocks, even ones that seemed like no-brainers at the time. Why do you think you're better than most other investors at making those investment choices?
> But if that is your definition of gambling then every human gambles every single day just by living.
I would indeed argue that this is the case, but that's probably not useful for the purposes of this discussion. :)
> Personally I don’t think minimizing risk as far as I can is a particularly enlightened or interesting way to live ones life, but to each their own.
That's perfectly fine, and I'm not trying to dissuade you or anyone else from actively trading if it is interesting and enjoyable to you. (FWIW I have also made very good returns doing this in the past, and had a lot of fun doing it—I only stopped because my risk tolerance changed.) But, except in specific circumstances[0], to call it anything but gambling is a bit disingenuous, and statistically speaking, you will most likely underperform the market.
[0]: In particular, if you have something that most other investors don't, such as data/information, faster algorithms, etc, it's entirely plausible that you can have an edge on the market and tip the odds in your favor. But this does not describe the vast majority of investors, let alone individuals doing this in their free time.
Best to compare it to a known and easily accessible baseline such as index funds / passive investing. You are gambling relative to passive investing, in that you hope for higher returns but statistically you will achieve lower returns. Not that complicated.
Maybe median wise, but not mean. Most ETFs still have fees and they use Authorized participants to make the trades from individual stocks to the ETFs and thus they are also taking a cut. Investing yourself using a no fee broker involves no middleman whatsoever so it cannot possibly achieve a lower return in aggregate.
Yes, of course ETFs take a cut. They are not run by non-profits. They are still a reasonable baseline and standard marker for the broader market, given their typically quite small management fees.
More importantly are you suggestinging individuals buy and weight all components of an ETF like VOO (500 stocks) themselves? Pretty ridiculous. Tracking error is real and there is an extreme time cost which makes hypothetical strategies like that unreasonable for most investors.
I also just don’t understand what your comment has to do with mine in the first place.
Yes, if you used a no fee broker to buy and sell (everyday...) the constituent 500-5000 stocks typically in a large index fund you could avoid the very low management fee.
In practice, that’s ridiculous. The management fee on a good ETF is less than pennies on the dollar. It’s the full time jobs of many people to do this. It takes a lot of time. If you tried to replicate it yourself on an individual basis there would be significant opportunity costs as well as far increased tracking error, as well as other things I’m probably not thinking about off the top of my head. There is a reason no one does that.
I was not commenting about myself. Simply correcting your mistakes. You are not a very sophisticated retail investor and it’s wrong for you to opine to others like this in the face of substantial evidence.
Why do you think you're better than most other investors at making those investment choices?
Not OP, but the simple answer is: “because my returns over the years prove that I can.” I’ve heard this question enough times over the years that I usually just ignore such silly questions and go back to buying deep-in-the-money AAPL calls. Conversely, if it makes one feel better, continue to tell yourself individuals can’t beat the market (which is mostly true).
> Not OP, but the simple answer is: “because my returns over the years prove that I can.”
But I could make the same argument as to why my "strategy" playing slots or roulette is good, but in reality it just means I've gotten really lucky, and I might wipe out all my earnings in the span of an hour if that luck suddenly turns. That's not to say there aren't legitimately profitable trading strategies—"you can't beat the market" is, strictly speaking, demonstrably false—but "buy stocks of companies I like" is not one of those, and is entirely equivalent to gambling.
Lucky is making a few trades that went well. When one can do it consistently for twenty years, is it still luck? Yeah, maybe it’s luck that deep-in-the-money AAPL calls (as one example) consistently make money. Maybe my occasional “disaster” strategy (buys calls for UAL, Equifax, et. al., after bad press that’ll blow over) is luck. But, man, both examples consistently work. /shrug
Anyway, I have little desire to repeat the same old arguments, nor convince anyone else. However, one might consider the differences between a slot machine (which tells you up front that you will lose money in the long term, and has no stop orders) and trading equities. Or don’t, matters little to me because I have no argument to win.
> When one can do it consistently for twenty years, is it still luck?
If you take a few million people and have them invest in put or call options every year, you're still going to have some streaky winners after 20 years. Very few individual investors I have talked to have convinced me they are even tracking results well enough to back their claims of outperformance.
