[NA]Stock market graphing question[NA]

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Let'sgoflying!

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Dave Taylor
I am looking for an accurate way to compare the stability or volatility of gold vs mutual fund investments for another person, who is asking this question of me.

Said other person is suddenly keen to buy gold, replacing the nest egg which is currently in mutual funds. Who knows maybe those infoarticles posing as 'news' proclaiming the dollar is about to tank are right. Or not.

I think some history of the two investments, compared visually, would be useful.
Raw dollar value of Gold compared to the Dow for example would not be comparable, I am thinking two graphs showing the % change on the y axis might be better.

Yes, I know. Seek professional investment advice, don't ask questions like this here. Why are you thinking of buying any of these things, or advising anyone about this, or in this manner.
Great. Now that is out of the way with, if anyone has helpful suggestions I am all ears. Otherwise, I respectfully request your silence.
 
not what you asked for, but:
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Jimmy cooper said:
Do what Warren buffet will do for his survivors...index funds.
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And Peggy's first graph shows why having a good index fund is worth considering. I'm seeing at least a 50% growth over the period the graph demonstrates.

I recall a radio program around 2003-2004 touting that DJIA reaching 10,000 was to be a phenomenal event. Now we're not too far from 20,000
 
I would seek the advise of a professional advisor,before making any major investment changes.
 
Google Finance has this S&P vs GLD(but only goes back to 2004): https://www.google.com/finance?chdn...NYSEARCA:GLD&ntsp=0&ei=lgQTVbGlGK2asge-ooDABA

Maybe this one:
http://2.bp.blogspot.com/-9hn9PmmZJF0/UYBWtcnVyCI/AAAAAAAAIFU/fFAYFZUztM8/s1600/gold.png

None of those are helping your cause for not investing in gold. I'm a fan of index funds myself but the truth of the matter is gold has outperformed the S&P for the last few years when it became popular among daytraders. It's just a hell of a lot more volatile.
 
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frfly172 said:
I would seek the advise of a professional advisor,before making any major investment changes.
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I have been following that advice for about a decade now. Prior to that, I was making all my own decisions. The best things my adviser talked me into doing was "nothing". He kept me from panic selling and he kept me from jumping blindly into a bad deal.
 
frfly172 said:
I would seek the advise of a professional advisor,before making any major investment changes.
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An advisor who will promptly tell you that you are doing it all wrong and recommends to take the money out of the index funds you have it in and move into the managed mutual funds he is selling. He'll have great graphs and powerpoints to show you how this is more better for you.

Most investment advisors are commissioned salespeople for a particular mutual fund company. They get a sales commission up front and an ongoing cut from your investments. Their recommendations will be shaped by whatever fund pays them the best commission.

If you want to get professional advice, particularly for such a major decision like moving from mutual funds to gold, get it from a independent fee based advisor whom you pay by the hour or as a percentage of your portfolio that is independent of allocation.
 
frfly172 said:
I would seek the advise of a professional advisor,before making any major investment changes.
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Hahaha - that's great, exactly my type of humor - thanks for the moment of levity.

Thank you also to everyone else for the useful comments and helpful suggestions!
 
FastEddieB said:
Sure.

But it remains to be seen if they can in any meaningful or useful way predict future moves.

I think there are fundamental reasons why they cannot.

Lots of people try, though.
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I dont think they can tell you much about the future behavior of a commodity price like gold. I do believe there is some statistical validity to the graphing of stock prices. The reason for that is that so many trades are made by automatic trading systems that end up interacting in a somewhat predictable way.
 
weilke said:
The reason for that is that so many trades are made by automatic trading systems that end up interacting in a somewhat predictable way.
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I remain open to that possibility.

I'm skeptical because over my decades of following this sort of thing, I have not seen anyone able to profit consistently by trading based on charts.

Let's say there is such a system that clearly works - so clearly that within months every investor is using it. Do you see the inherent flaw in that?

BTW, I found this book a worthwhile read for any investor:

mediaspotlight.jpg
 
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frfly172 said:
I would seek the advise of a professional advisor,before making any major investment changes.
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Actually it would take less time and effort if you just flush 2% of your money down the toilet every year and it would achieve the same , maybe even a better, result.

It is a fact that the average professional loses money for his/her clients: https://us.spindices.com/documents/spiva/spiva-us-year-end-2014.pdf?force_download=true

It is also a fact that it is impossible to predict a manager's performance based on past results: https://us.spindices.com/documents/spiva/persistence-scorecard-dec-2014.pdf?force_download=true

That these are not better-known facts is a tribute to the investment industry's gargantuan efforts to snow the investing public.

A little more from a Nobel prize winner: http://web.stanford.edu/~wfsharpe/art/active/active.htm

A little more from Forbes: http://www.forbes.com/sites/rickferri/2014/03/24/3-to-1-odds-favor-index-investors/

From the NYT: http://www.nytimes.com/2015/03/15/y..._th_20150315&nl=todaysheadlines&nlid=57060507

From The Economist: http://www.economist.com/news/finan...ers-dont-beat-market-practice-makes-imperfect

If you like serious videos: https://www.youtube.com/watch?v=9SbP_HyQlfk

If you like funny videos (this one from William Sharpe): https://www.youtube.com/watch?v=SlXVGMOn4XY

For books, the Taleb book previously recommended is good. Nate Silver's "the signal and the noise" is particularly good on economic forecasting. Burton Malkiel's "A Random Walk Down Wall Street" is the classic and should be read first. For Malkiel, be sure to get the latest edition. Pay attention to what he says about gold.

Here's a quick and easy read from William Bernstein: https://dl.dropboxusercontent.com/u/29031758/If You Can.pdf Most of his stuff is a little slower going but after you have digested Taleb and Malkiel it is worth tasting.

Old option: http://www.bogleheads.org/wiki/Bogleheads®_investment_philosophy

New options: https://www.wealthfront.com/ , https://www.betterment.com/ , https://intelligent.schwab.com/

(I have all this stuff at hand because I just went through it for a nonprofit's investment committee that I am on. HTH)
 
I did, in fact, read "A Randon Walk Down Wall Street" decades ago, and I think it helped form my opinion on this.

I will stipulate that markets may not be 100% efficient. The bigger question is if one can nibble at the edges of perceived inefficiency well enough to come out ahead after transaction costs. The vanishingly small number of day traders that have amassed fortunes with their charts or schemes kind of points to that - if in fact there are any at all that succeed long term.
 
FastEddieB said:
I remain open to that possibility.

I'm skeptical because over my decades of following this sort of thing, I have not seen anyone able to profit consistently by trading based on charts.

Let's say there is such a system that clearly works - so clearly that within months every investor is using it. Do you see the inherent flaw in that?
Click to expand...

Oh, it does work, for the people who have billions to play with and who program those automated systems. I dont think it works for the guy with a pencil and graphing paper (or a 15min delayed retail brokerage account display).
 
AggieMike88 said:
And Peggy's first graph shows why having a good index fund is worth considering. I'm seeing at least a 50% growth over the period the graph demonstrates.

I recall a radio program around 2003-2004 touting that DJIA reaching 10,000 was to be a phenomenal event. Now we're not too far from 20,000
Click to expand...

Growth of what though? Imagination?
 
FastEddieB said:
Even those with billions are competing against others with billions and equally sophisticated programs.

They can't all win!

BTW, great RadioLab segment on program trading as one of three segments entitled "Speed".

http://www.radiolab.org/story/267124-speed/

Very well produced and well worth a listen.
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Correct, our entire financial/economic system is a Ponzi scheme running under Highlander rules, and we are the suckers feeding it.
 
FastEddieB said:
Even those with billions are competing against others with billions and equally sophisticated programs.

They can't all win!
Click to expand...

'Winning' doesn't require you to make money, 'winning' can just mean that you siphon sufficient transaction fees off your customer before he moves on to the next guy with great powerpoints.
 
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