Investing in stocks- who’s right?

[dennis thompson]

Trading stocks has always looked to me (as an outsider) as just another form of legalized gambling, like casinos and horse racing, so I haven't paid it much attention. I take a gamble when I buy a used machine, or when I bought my house in an auction, but for me the potential gain is worth the potential risk in those kind of situations. Ben Hecht said, “Trying to determine what is going on in the world by reading newspapers is like trying to tell time by watching the second hand of a clock." and it's only gotten worse since then as information keeps moving faster and faster.

The difference between the stock market and gambling is that, at least historically, over the long run you will most likely lose money gambling ( that’s why casinos exist) and make money investing (not short term trading) in the stock market

[Zachary Hoyt]

Trading stocks, stock futures, puts, calls etc., is a lot like gambling. However investing in stocks (and more importantly) well diversified stock funds is quite different and has allowed many a common blue collar worker, who slowly and consistently invested year after year, to retire with more money than they ever even earned on the job.

Yes indeed, that's why I said trading in my first post. Long term investing is not something I've done, but it makes a lot more sense to me.

[Malcolm McLeod]

Nothing is ever that simple and clear cut & hindsight is always 20/20.
Do you know someone that has managed to do this- invest $30k @ $30 a share and sell it later @ 10 times it's face value?
I think that's such a rare thing it would fall under the category of a fluke.

Anyhow - it isn't the actual taxes that people like myself want to avoid, it's the type of tax and where the money goes. That's why people will give millions to a charity in order to avoid paying millions in taxes.

Yes, sort of - - My father was on home office payroll, and his company did a lottery of those employees to offer options at $2/. Bad Dad was selected and accepted the offer. The company did IPO at $6/, went to to $60/, split 10:1, went back to $66/, split 10:1 again, and last I remember settled down around $40/ after 2-3 yrs IIRC. He retired at 56.

My (former) company offered me stock options. They went bankrupt.

Not long ago, I read about land for sale in a nearby suburb for what i considered a heady $10k/acre. I lamented that when I moved to the area I could have bought that entire side of town - all of it - for $10k. My BIL laughed, shrugged, and said his family did own it. At the time I moved, I didn't buy it 'cuz I didn't have $10k; his family sold it 'cuz they needed $10k.

...Luck? Investing? Gambling? Each will have to decide.

And my father... he struggled to come up with the cash to buy those options, and it wasn't a lot, certainly not by today's income standards. His windfall IPO did not make him wealthy, since the initial investment was relatively small, but with military retirement, it did allow some breathing room. Good thing he didn't know what the future was at the time... he probably would have sold me into slavery to buy more options. I'd probably do the same.

[Greg Funk]

I heard Elon Musk sold 10 billion of his Tesla stock. A few months latter he sold another 10 billion to cover the tax bill.
Bill D.

He actually bought a pile of stock using options that were to expire this year. The purchase of stock triggered a large tax bill forcing him to sell to cover the taxes.

[Jerome Stanek]

I'm waiting for my CVS stock to split they were saying when it hits $122 a share that they would split. $103 today.

[Rich Engelhardt]

Over what time horizon? My uncle claims to have had a stock do this. Peter Lynch is pretty famous for calling certain stocks 10 baggers for this reason, so he's done it. I'd have to check my retirement account inflow/outflow to know if I've done this with my index funds. I think if you mean overnight or a few weeks/months, absolutely gambling, if you mean over 20-30 years, that doesn't seem unreasonable. I think it's also going to depend on the stock. I don't expect Apple or other large staid companies to go 10x, I would not be surprised to see some of the new pot stocks do that in the next 5-10 years. I believe AMD has done it over the past 5 or so years, as they have had a serious turn around, going from $2 a share to $110.

Time & the ability to have spare funds to invest - are the flies in the ointment where these stories are concerned.
You might hear of one or two - but - you never hear about the millions of people that threw away money on tech stocks like 3Com, US Robotics, Wellfleet, Gateway, Tandy, Packard Bell and a whole host of others I can't come up with on the spur of the moment that were giants in that field that all had ups and downs over the years, then finally went down for the last count.
Even Apple looked like it was down for the count numerous times.
I have to wonder how many investors hung on to Apple stock when Steve Jobs was fired?

I believe AMD has done it over the past 5 or so years, as they have had a serious turn around, going from $2 a share to $110.

AMD has a history of doing that. Matter of fact, when I retired in 2010 - their stock was at an all time low. Had I invested $30k in it and left it there for 30/40 years, I would have maybe broken even at best.

My whole point here is - I don't know enough about "playing the market" & how best to turn my losses into profits.

[Andrew More]

Time & the ability to have spare funds to invest - are the flies in the ointment where these stories are concerned.

Not really. It's pretty simple, spend less than you make, and invest the rest. And that's not a matter of being a high income earner, there are numerous stories about broke doctors and millionaire receptionists.

You might hear of one or two - but - you never hear about the millions of people that threw away money on tech stocks like 3Com, US Robotics, Wellfleet, Gateway, Tandy, Packard Bell and a whole host of others I can't come up with on the spur of the moment that were giants in that field that all had ups and downs over the years, then finally went down for the last count.

No this is true, nobody knows what will happen in the long term, or even often the short term. However, the general trend is up, because the economy is expanding, and if you diversify into about 20-30 stocks you'll have winner to balance out the losers. You don't need to be right all the time, and it's not going to happen, you just need to be right more often than your wrong.

My whole point here is - I don't know enough about "playing the market" & how best to turn my losses into profits.

Then don't, buy a low cost index fund, and ignore it for the next whatever many years. The market effected by the economy, and that has been growing, so for the past 100-200 years the trend has been up. Don't feel comfortable with that, buy some US T-bills. Don't like that, hide it in a mattress. The truth is that there is no safety, and you need to make calculated risks. Even doing nothing and bemoaning your fate is a decision and action and it will have consequences.

[Rich Engelhardt]

Then don't, buy a low cost index fund, and ignore it for the next whatever many years. T

As I mentioned earlier - I don't and didn't. I chose to sink my money into something else & at 70 years old, I won't be changing any time soon - well - not in that way anyhow . I do have to work out the final details on the exit strategy so I can pass along as musch as possible to the people I think should get it and not the tax man and/or nursing homes.

[Jim Koepke]

My use of Apple was as an example.

My question was directed at the concept of those who say, "I don't want to make gobs of money because then I would have to pay taxes on it."

The unsaid part sounds like, "I would rather not have a million dollars if the government would get a dime of it."

That is what baffles me, a person so wrapped up against taxes they would avoid making some money.

For the record my stock picking prowess is nonexistent. That is why the professionals in the fund business do it for me.

jtk

[Kev Williams]

Throughout my life I've found that I have a gambling jinx. The type of gambling doesn't seem to matter. And I know how to casino-gamble, what to do, betting strategies, but when you're jinxed it doesn't matter. Our last weekend trip to Vegas was almost 20 years ago. During that trip, and I counted, I played 27 hands of blackjack, in 3 different casinos over 2 days; I pushed 7 hands, won 0. . What are the odds of going 0 for 27 on a basically 50/50 chance?

Long term investing? I started doing that 'somewhat' in the '80's. First try lasted about about 8 years, cashed out at around an 85% loss. Second try was a mutual fund I started the 90's. After around 12 years and nearly $110k invested via monthly payments, the recessions just kept wiping it out-- I finally cashed out $4400. This was a mutual fund that, before I signed on, posted an over 13% average return the previous 20 years, and I lost over 95% of the money I put in...

Short term investing? Lost $17k on unleaded gas and natural gas Call options one day after one POTUS TV news conference; 'we're going to start looking into these skyrocketing energy prices...' -- next day my options were worthless. Had I went with Put options, my money would have increased over 9x...

So yeah, 'a jinx' may be a bit tongue-in-cheek, but I have no stocks, bonds, retirement accounts, no investments of any kind. And we're way better off than we were 20 years ago...

--YMMV--

[Malcolm McLeod]

My use of Apple was as an example.

My question was directed at the concept of those who say, "I don't want to make gobs of money because then I would have to pay taxes on it."

The unsaid part sounds like, "I would rather not have a million dollars if the government would get a dime of it."

That is what baffles me, a person so wrapped up against taxes they would avoid making some money.

For the record my stock picking prowess is nonexistent. That is why the professionals in the fund business do it for me.

jtk

I guess I've never met this person(s), but admittedly they might be out there. However, I have met lots of people who very much factor taxes into any stock sale.

Except in very specific cases, an investor has complete control over the timing of a sale. Why wouldn't they adjust for when and how much tax burden is incurred?

[Thomas McCurnin]

Stocks are really not a guessing game. An educated guessing game, based on a company's past and projected performance, and whether you want stock value gain or dividends.

As for commodity stocks like oil, its all about the project value of the commodity in the next year. Oil is expected to go up, way up, so yes, I would buy oil stock, although the time to buy was about a month ago

Commodities like oil, pork bellies or gold are a bit of a crap shoot, but certainly having a stock portfolio with 10-15% of petroleum stock is never a bad thing.

[Rich Engelhardt]

My question was directed at the concept of those who say, "I don't want to make gobs of money because then I would have to pay taxes on it."

The unsaid part sounds like, "I would rather not have a million dollars if the government would get a dime of it."

That is what baffles me, a person so wrapped up against taxes they would avoid making some money.

I never said that.
What I said was, I never figured out how to keep the .gov from sticking their hands deep into my pockets by investing in the market - so - I just never got involved in it.

The unsaid part of it is - I would rather not have a million dollars if the .gov is going to take a huge chunk of it - when I can make a million dollars some other way that the 'gov isn't going to grab a bunch of it.

[Greg Funk]

The unsaid part of it is - I would rather not have a million dollars if the .gov is going to take a huge chunk of it - when I can make a million dollars some other way that the 'gov isn't going to grab a bunch of it.

Money laundering?

[Malcolm McLeod]

LT capital gains tax rate for most middle class incomes should be 15% IIRC. Hard to beat that … legally at least.

I’d probably go with moonshining; more job satisfaction than Mr. Funk’s idea.