
Ask HN: What’s needed to make a living by investing - quietthrow
What all needs to be true if I wanted to make a living by investing&#x2F;trading stock? In other words what are all the things that need to happen for me to quit my job and make money by working for myself <i>from anywhere</i> and generate the same amount of money as my current salary(say $180k gross)<p>I am trying to understand the needs from different areas&#x2F;domains perspective. Eg: you next at least X in capital. You next a llc or inc company. You need knowledge of statistics etc.
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bouncing
First, you need some kind of insight into the market that others don't have
and can't obtain. If you're asking this question, you're not a prodigy of
economics, math, or statistical analysis. Why would you be able to predict
market trends better than anyone else, and especially better than the kinds of
experts your competitors have?

~~~
quietthrow
Because I believe I can learn. Because I have grit. Because I am passionate.
Because my back is against the wall.

~~~
nostrademons
Expect to lose a lot of money in the process then. Your competition has all of
the above, plus they're already aware of a bunch of ways trades can go south,
of what sort of information you need to have a leg up on the competition, of
what it takes to get that information, and of how quickly you need to act on
it before others get it (which, BTW, is often measured in microseconds these
days).

If you're really serious about this, I'd recommend starting with play money
(or none at all - use a fantasy portfolio), and then actively trading like
you're doing your best to make money. Do this for a while - at least 6 months
to a year, and ideally _through_ a down market - and _benchmark your portfolio
results to the overall market performance_ (say, an S&P 500 index fund). A lot
of people look at the absolute dollar value of their returns, say "I made $10K
trading stocks, woohoo!", and don't realize that if they'd just put that money
in an index fund they would've made $25K for a lot less work. Also remember
that there's a large random component to stock prices - just because some of
your stocks made money doesn't mean you can double down on what you did with
them, because those stocks might just happen to be the ones that went up
randomly. You need to track your personal returns with them against _how the
stock did by itself_ , i.e. what you would've made if you had just bought and
held it, and see whether your entry and exit points really made sense.

~~~
quietthrow
I hear yea on the microseconds but I am not thinking about hft or algo
trading. I am more inspired by warren Buffett’s way and that’s what I would
like to do.

Play money is a good idea. Any sites you recommend for this?

~~~
bouncing
Warren Buffet did not make his fortune as an absentee investor playing the
stock market. Not even close.

He invested one-on-one, in businesses he thoroughly understood, after a lot of
research and understanding of the business. Think less scanning a spreadsheet
or stock data and more CNBC's "The Profit" \-- walking around a factory floor,
looking through accounts receivable, talking to the assembly team, talking to
customers. THEN making a decision to invest a lot of money and steer the
direction of the business.

~~~
quietthrow
I doubt he was walking through the factory floors of every company he
considered. That kind of approach can’t scale. I think he might have done
something like that but without being physically there for companies that he
narrowed down to 1 or 2. Specially before he was warren buffet. Company’s
don’t allow (give time of the day) to rando’s who are investors and want to
evaluate them

~~~
bouncing
Actually, yeah, he probably does. His approach _doesn 't scale_ \-- not at
all. He bets big on individual companies. As much as Berkshire Hathaway has
scaled, it's by having employees who are similarly _involved_ in the process.
They aren't armchair investors -- not now and not in the past.

And no, companies don't give tours to randos. You have to do it with a lot of
money on the table. Buffet isn't rags to riches; he's medium-rich to super-
rich, and he got his start in much smaller businesses.

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codegeek
If you have no experience trading stocks yet, the best bet is to make enough
money so that you can get a rate of return. S&P over the last 100 years has
returned an average of about 10%. So to make 180K gross, I would say you need
$1.8 Million cash and then invest in S&P ?

If you don't have that, you are in for real fun. I mean most people lose money
in stocks or investments. Heck, my 401K investment funds cannot even beat S&P
on a constant basis and I have tried to rebalance the heck out of portfolio.

I am sure there are folks making 180K gross by investing in stocks but I would
bet most of them do that because they have plenty of cash/capital already that
generates something along S&P index.

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marketgod
Trade options. Save up $300K, and then doing 50% is not really hard to do. If
you are trading options, you can do 100% per year, but just aiming for 50% is
a good number, making sure you cut losers, and let winners run.

$180K is a high salary to aim for though. For example, what I recommend is
$30K if you want to double your account, but you would go into 5 plans at
once, for $1,000 per plan. So if they all fail, you still have 4-6 more
attempts ( _some plans can go for $2000_ ), to rebuild the account.

With a $300K account, going $20K per trade, is reasonable enough to do 50% per
year. It's risky, but exciting, and doable.

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LeoSolaris
A large enough amount of money to be reasonably good with a 2% ROI, then stash
it all in blue chips that are somewhat stable-ish. That way you're not temped
to do much change to which stocks you have.

Hire a financial advisor that actually has a fiduciary duty rather than a
salesman in a nice suit, and ask the adviser to treat your fortune like
retiree money.

Basically, the only way to have a better than slim chance to live off of
investing is to have a good deal of money to live off of the interest.

~~~
quietthrow
I firmly believe no one will care for your money than you. In that sense I
don’t trust financial advisors fully. I would use them the get knowledge on
options I have for a specific scenario.

To have a large amount of money in the first place I would need to make a
living and when I get good at it I would be able to (hopefully) green rate the
large amount of money. I want to be able to make a living by avoiding the 9-5
which have too many variables for me to make a large amount of money-
promotions; working on right project ; find a diff project cos this one didn’t
have the right growth opportunity. I would much rather focus on one thing and
compound my knowledge,skills and abilities. Hence the investing/trading route.

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altairiumblue
What's needed:

\- large amounts of capital. if you want to be earning $180k/year that would
be in the millions.

\- being able to handle losing money without your judgement being affected

There are many other factors but I'll stop here because in one of your
comments you mentioned how you believe that you can succeed because you're
passionate and your back is against the wall. Those are the opposite of the
two points above.

~~~
quietthrow
Good points. What are the other factors ?

I said what I said in another comment cos the comment prior to that completely
missed the point and all it said was how it couldn’t be done because you are
not a prodigy. While what I said is true I know it’s not the only thing I
need. Else I wouldn’t post.

~~~
airbreather
Often luck plays a significant part, but those that got lucky won't admit it
or see it.

Two kinds of luck - dumb luck, like you fat fingered a large trade in AAP
instead of APP, just at a lucky time.

Then there is sizing luck, noticing small/unusual things ignored or out of
sight by others and acting to capatilise.

The bottom line is for every winning trade, a losing trade occurred and if it
was easy, everyone would do it.

Sounds like you are heading to fund someone else's new Tesla via process known
as wealth transferrance. Why not just cut the process short and place a series
of largest allowed bets on 13 Black, probably better odds and near instant
discovery.

