

Programmers Should Invest - mojuba
http://melikyan.blogspot.com/2010/01/programmers-should-invest.html

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ig1
He's making a fundamental flaw, he's investing on the basis that Google and
Apple make good products and that information isn't already reflected in the
current price of AAPL or GOOG. Which obviously isn't true, everyone knows
Apple and Google make good products.

Furthermore you can't assume that a good product means that a company will do
well. Plenty of companies launch "better" products that fail, and the
technology sector has no lack of examples Betamax, Amiga, BeOS, etc.

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mojuba
The prices of GOOG and AAPL already reflect their brilliance in whatever they
are doing, true, but best thing about them is they will innovate more. Apple
is not just iPod, it's everything they have done since the 80s and will
probably do in the near future. And that in a way explains why sometimes
seemingly "good" products like those you mentioned fail: because a given
company can't keep up and innovate _constantly_.

Of course there are companies that fall under "constantly innovating" category
and yet some of the things they come up with fail. It's hard to tell, or if it
was easy, there wouldn't be good or bad investors, but only good ones. That's
the whole point of investment: you place your bets using your knowledge and
intuition. It's a game in the end.

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houseabsolute
> but best thing about them is they will innovate more.

The price of the stock already reflects this as well (at least to the extent
people in the market guess that it is true). When you buy the stock on the
basis that the company will innovate more, what you're really betting is that
it will innovate not just more, but more than other people thing it will.

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byrneseyeview
If you're going to invest, you might use stocks to hedge instead of doubling
down. For example, if you love Apple, you might decide to "invest" 20% of your
working hours in building an iPhone app. Since the net present value of your
working hours is bigger than the value of your stock portfolio (probably), you
are making a massive, undiversified bet on Apple's continued dominance. To
hedge, short Apple stock and buy MSFT. That way, as long as you develop a good
app, you'll come out okay whether the iPhone gets more popular (you lose money
on the short and make money on the app) or less popular (you wasted your time
on the app, but made money on your short).

In other words, do arbitrage, not directional bets.

(Note that this is almost never the right decision to make. The only exception
might be if you got most of your income from working on Linux, and you bought
shares of a patent troll--the events that make them do well will also hurt
your normal income.)

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ggrot
This is horribly bad. He bought some apple stock, it happened to go up, and he
beat the market. I once bought myself black at a roulette table, it happened
to be the next color, and I beat the house. Should I write a page about the
fundamentals of gambling that I read about and ultimately ignored for the fact
that people like black better than red.

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cloudkj
Agreed. It's also important to point out that the timeframe was in the span of
weeks, which is minuscule in the scope of typical investing timeframes.

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kees
I still don't grasp why a programmer should invest, but the subject is
interesting.

A programmer could have a better understanding of the computer/tech industry,
especially if you see a programmer as a well connected professional. A
professional, who knows a lot details about a bunch of different tech
companies, who knows the people, the shakers and the movers. But this
characteristic is not only related to programmers but to other professionals
in the industrie as well. Of course this could lead to a bias, namely that you
overestimate yourself and will bet to much on specific companies, what you
didn't do when you weren't a professional.

A remark must be made. Because the tech sector is so innovative. And still be
a dominant factor for productivity growth. The trend on this kind stocks will
always be upwards. And there will always be new companies, with a potential of
amazing growth and idem dito stock prices. Maybe stockpicking in the the tech
fields just gives you better odds.

Overall, I think that programmers have an advantage, because most of the time
they are early adaptors. They will use products, before these are well known
to the public ( and stock analysts) Personally, they're just spending more
time on their computer and will always use the products which will increase
their productivity, which of course are probably produced by the most
succesfull companies. But also, professionally, a lot of professionals are at
frontier of their field.

Maybe, Non-progammers should observe what all the tech savvy people use to
increase their productivity or what kind of gadgets they buy. Or which start-
ups are popular by the programmers. And make the decision whether this is
business savvy or not.

At the end, you should check WHAT you're actually programming, and what you
boss want you to do.

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scotty79
I highly recommend reading "The Drunkard's Walk: How Randomness Rules Our
Lives"

People perform worse than monkey while predicting random future events because
they search patterns everywhere, they think they 'figured things out' and they
choose less randomly which is not a good idea if you are betting on truly
random event (such as raise or fall of stocks) since by not betting on
outcomes mistakenly identified as unlikely reduces your chances.

Investment advice: 1\. You can predict nothing so don't play short term and
don't watch the stock market information, it doesn't help people that spent
entire life trying to predict stock market even a bit so it won't help you but
it will take a lot of time and will trash your emotions. 2\. Buy whenever you
have money. 3\. Sell whenever you need money (and by need I mean REALLY need).

You may postpone buying a little bit if you see declining trend and loosen up
a bit on 'really' in 'REALLY need' if you stock is currently worth much more
than some time ago and tighten it up if you lost some money on your
investments, but I am not sure if that does any good or harm.

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ct
Just getting lucky with one stock doesn't make you a great investor. Do this a
several more times over a period of 5 to 10 yrs then check back.

Also with 20 yrs of development experience (and assuming starting to code at
20 yrs old) - I take it he's around 40 and so are now just starting to invest?
Kind of late in the game to plan for retirement. But I guess it's better than
never.

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ggrot
The argument about monkeys beating investors has nothing to do with investor
biases. The point is that professional investors charge fees for their stock
picking strategies and that due to the fees alone, these returns will be
smaller than randomly choosing stocks (market weighted) with no fees. The
moral of the story is that few people can successfully beat the market, and if
they could they wouldn't be letting you in on their strategy for a reasonable
fee.

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maxklein
Don't do this. You don't have any more expert knowledge than the pro investor
- he knows a LOT more than you and he has access to the same websites you
read. If code clarity were relevant to stock price, then the programmer has an
advantage, but it's business sense + consumer perception that is important,
and a lot of other people have that advantage.

In any case, if you can program, given 4500 you can easily make 20000 in a
year by programming something. With stocks, it is VERY difficult for a naive
beginner.

Put your money in something more fruitful.

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motters
I tried gambling on the stock market years ago, and only ever lost money. The
thing is that the value of stocks has almost nothing to do with the quality,
innovativeness or technological superiority of the products being sold by
companies, so as such it's very difficult to get a handle on things without
delving into the world of rumour and gossip - something which I have very
little inclination or aptitude for.

I even wrote software to predict stock prices using fancy techniques, but also
found that this is no panacea. My conclusion is that the markets are only
predictable on a very short time scale, so unless you're investing in large
volumes of stock it's unlikely that automated systems are going to help you.
Worse, there are many factors of a very human psychological nature which are
just extremely difficult to design into the prediction system.

Also buying and selling stocks is just another form of gambling - like betting
on horses or football teams - so the same rules apply. If you can't afford to
lose it, don't gamble it away.

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bjoernw
It's so frustrating when people don't understand that the market has already
priced everything into the price of a stock. When someone buys a stock that
person thinks he/she knows more about the price of the stock than the rest of
the market. There is plenty of academic research that shows stock picking
doesn't work and shows that actively managed mutual funds do as well as
passively managed funds. No fund manager can create a positive alpha over the
long run.

I cringed when I read the title...

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xsmasher
The idea is that the techie may have more insight into the value of a company,
because of their insight into technology. A techie may value Google over AOL
and Apple over Dell, instead of just seeing "two web companies" or "two
computer companies."

However, a techie isn't in a good position to judge whether a company is
overleveraged, etc. if they can't read a balance sheet.

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stcredzero
It would've been amusing if CmdrTaco had taken his advice and shorted Apple
stock.

