

Ask HN: Where do you invest online? - maguay

I'm looking into investing into stocks/bonds and potentially an IRA, and was wondering what online broker others are using. Any reason why you picked the one you did?
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patio11
Sharebuilder. Super low fees for buying stocks/ETFs, they have good automated
investment options, and you can buy partial shares. This means that if you are
doing, e.g., $250 a month in a Roth IRA and telling it to buy $1,000 of shares
in an index fund ETF every time it hits $1,000 balance, this will result in
vanishingly little loss to trading fees and you'll always get that $1,000
invested no matter what the share price is.

It automatically grabs money from my main checking account every week from
April to December ($100 a week because the yearly limit on a Roth IRA is $5k)
and I top it off when I do my taxes every year. That's also when I take a look
at the portfolio and set it to put money towards whatever bit needs
rebalancing. About 75% of my money gets invested in index fund ETFs and 25% in
funny-money investments. I understand that the math is very much against me if
I pick stocks for myself but, hey, I played WoW and enjoy the feeling of
seeing pixels move on command, so that 25% is essentially buying myself
permission to not touch the other 75% ever. (Ironically, I lucked out on one
of my picks -- Chipotle -- and now burritos are a larger contributor to my net
worth than anything but bingo cards.)

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chromatic
_I understand that the math is very much against me if I pick stocks for
myself..._

Don't sell yourself short! If you learn a few things about how to value
companies and if you're really disciplined about waiting for great
opportunities (with the proper margin of safety) and letting undervalued
prices turn rational again, the math is on your side. Picking a good stock is
very similar to buying into a good business.

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tptacek
This is more or less the opposite of the conventional wisdom on this topic;
Malkiel, Bernstein, Swensen, Andrew Tobias all wrote whole books more or less
dedicated to the premise that you should invest passively through indexing.

Here's a great Derek Sivers comment:

<http://news.ycombinator.com/item?id=1157768>

I'm sure a bit of stock picking isn't going to kill you, as long as your
portfolio is mostly passive. (Every time this discussion comes up, someone
points out Malkiel picks a few stocks for himself).

On the other hand, there is a whole financial industry lined up more or less
directly against your interests in picking stocks; they have better research,
direct access to company principals, influence over the markets, a drastically
lower cost of trading, and the ability to wait out irrational conditions far
longer than you can stay liquid.

I'm doing what Sivers suggested; it makes sense to me.

On the other hand, I've been telling a friend of mine to stop investing Apple
since, oh, 2006. So, grain of salt.

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chromatic
Passive investing through indexing is great. If your investment philosophy is
"I want to make decent returns without researching companies or exploring
financial statements" then indexing is the right approach.

Note however that the choice between "smart investing" and "hyperactive
investing" is a false dilemma. Timing the market and worrying about technical
analysis is definitely a way to lose money to traders with quicker access to
information and greater ability to profit from arbitrage. Solin's comments on
the marketplace of financial experts is right, but indexing isn't the only way
to avoid that mess.

Sure, 80% of my portfolio is in a couple of indexes, but that other 20% I
don't count as mad money. I don't make blind guesses; I'm very careful about
where I put it. So far my strategy of five or six smart trades a year has paid
off _very_ well. That's hardly day trading.

I suspect the ratio of 80/20 will get change in favor of active investments as
I get more confident.

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tptacek
Your 5 trades per year, just curious, how many of them are in any way related
to tech?

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chromatic
I only hold one tech-related stock directly. It's a semiconductor company
where a good friend works, so I have a decent understanding of the business
and its prospects. I've made about 400% on it in five years.

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tptacek
Interesting. One reason I'm wary of picking stocks is that most of my
expertise is in technology; if my field goes south, I don't want my
investments tracking it. But you don't have that problem. I'm worried I would;
my best picks have always ended up being tech companies.

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chromatic
Your concern is valid. You do want to invest in companies you understand, but
you don't have to be an expert. (It _helps_ , especially if you're looking for
what Peter Lynch calls an edge.) I approach things from the other direction: I
wrote my own stock screener that analyzes financial reports and suggests
companies which might be dramatically undervalued at their current prices. If
a few minutes of research on my own reveal that I don't understand the
business or that the numbers are obviously skewed by something which jumps out
(the company increased its free cash dramatically by taking out hundreds of
millions of dollars of short term financing and that skews the return on
invested cash numbers), then I look further.

If I don't understand the company or the industry, or if it's a coinflip
either way of being undervalued, I move on.

As a concrete example, I have a pretty good idea of what Apple makes and where
it can sell and where it might go in the future, but I don't believe it can
keep up the 30% returns on invested cash rate for the next ten years. I don't
buy it.

Maybe I'm wrong in that case, but my backtests work even with eyeballing
numbers.

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flagman5
check out vanguard mutual finds, funds such as VSCGX, VASGX, VASIX, VSMGX are
all very diversely balanced and their past performances weren't too shabby
consider how low risk the funds are. if you were looking to take risks and
actively buy/sell your positions, then those funds arent for you. but if you
are looking to just grow your money conservatively because online savings are
pay close to 0%, these funds are the right vehicles for your investment. as
with all investments, do your homework and research and never put down what
you cannot lose.

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actionbrandon
getcollc.com

