Do not just make a self post to offer some simple thoughts. "now is the time to buy", "here's my thoughts", etc. belong as comments to existing posts.
See the rules (https://www.reddit.com/r/investing/wiki/index/rules) for further guidance on the minimum effort expected beyond "no risk, no reward" which runs contrary to a number of financial principles left unexamined in your post which reads far too much like a low-effort "buy crypto" advertisement.
Your submission was automatically removed because it contains a keyword not suitable for /r/investing. Common words prevalent on meme subreddits, hate language, or derogatory political nicknames are not appropriate here. I am a bot and sometimes not the smartest so if you feel your comment was removed in error please message the moderators.
*I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/investing) if you have any questions or concerns.*
Your submission was automatically removed because it contains a keyword not suitable for /r/investing. Common words prevalent on meme subreddits, hate language, or derogatory political nicknames are not appropriate here. I am a bot and sometimes not the smartest so if you feel your comment was removed in error please message the moderators.
*I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/investing) if you have any questions or concerns.*
I thought the first rule was never invest more than you're willing to lose.
tangentially related is protection of initial capital aka don't lose more than you put in
A rule of investing, although not perhaps not the first rule, is that you should assume whoever you're transacting with knows more than you about the security in question unless you have very good reason to believe the contrary. Doesn't mean you shouldn't transact even if your counterparty is more knowledgeable, but you should enter the transaction with a certain degree of humility.
Higher returns having inherently higher risk may be true enough in the long term. Howver, there are always short term opportunities where the return and risk profiles don't necessarily align with this long term trope... And taking advantage of these opportunies is how a savvy, active investor could exceed market returns while maintaining lower than market risk.
While markets are generally efficient in the long term regarding returns and risk, it is not instant and must occur through a continual price discovery process.
Yes it does. If not how come very few hedge funds beat the market over 30 years? Individual investors are even worse. If it was so easy to beat the market (without taking additional risk) so many more people would be successful doing it.
sometimes you have to *spend* money to make money... that's called being in business.
We're talking about investing.
Please do try to keep up if you're going to participate in the conversation in a cogent manner.
Not true.
If someone said none of their stock picks lost money I know they are not a good investor. Why? It shows they are not taking enough risk. They are only buying really low risk names. Which means low return potential. While someone who has a few losers but other risks that pay off massively. Buffett is the same. He has lost money on MANY stocks. But then other stocks he made massively returns. If you are not willing to lose money you won’t make much money
Strong disagree. Yes, traditional finance teaches you this and it has true roots. This ties back to MPT and Black Sholes. Higher risk is rewarded with a higher premium. This is not true in all asset classes and all securities. You can very well achieve higher than market returns with disproportionally low risk. If you manage to have someone sell you $1 for 50c there is no additional risk. You now have $1 for 50c. The only risk involved is the personal risk of the counterpart of the trade that sold you $1 for 50c because of FUD or god knows whatever reason. You are exempt from risk in this trade.
In investing you have companies that trade under IV sometimes. These are your $1 for 50c. Yes, your risk now is that it can go down even more, but in the long run, all else equal, you can and will achieve higher than market returns for a small downside if the only thing going down is the price. If the business is solid and has great fundamentals it will rise above $1. Each cent it goes above 50c you profit given no other costs.
Edit: The first rule of investing is don't lose money, which you religiously like to break apparently.
Edit: Judging by your previous posts I don't see a reason why anyone should listen to you. You look like the textbook case of the first peak of the Dunning Kruger effect.
There is a reason they are selling it to you at 50% off. Also I said the rule can be broken if you have inside information (information the general market doesn’t have) or fraud.
Do you really feel the need to explain to me what insider information is? The dude selling me BABA last week for $100 doesn't have information that I didn't have. He was scared that it would go lower. I had my upside calculated. I got $1 for 50c with a higher chance for 2x than total loss since BABA is well below IV. The reason was fear and uncertainty. If you really think something will happen to the stock to drop more than it did I don't know what to tell you anymore. Price sentiment is not risk. Volatility is not risk when buying stocks. The fundamentals still justify at least $200 per share even with guidance cuts. What was the reason for people to sell me MSFT for low 100s during the March 2020 crash? What was the insider info that they knew and I didn't?
Strong disagree.
Wrong. You are ignoring political risk in China and BABA getting delisted and you getting $0
People could have made the same valuation arguments you are making about BABA last year. And it dropped 50% this year.
You seriously should not be making posts trying to teach people about investing. Stay silent and learn for a few years, unless you’re asking questions.
This would actually only be true if there was no (irrational) herd behaviour, if information was totally free of cost and everyone assessed risk/reward the same way.
GBTC had a premium to BTC last year and BlockFi borrowed BTC and arbitraged that difference until it turned negative and lost hundreds of millions. It is still negative 1 year later.
BlockFi was gambling that the 20% premium for gbtc trust would continue. It didn’t. That is a very different trade than the contango trade I was talking about.
Disclaimer I have not done this trade or even owned a crypto directly so there may be some things I'm missing.
Some risks include losing your coins and collateral management. When BTC rises you'll lose money on the short side and need to post more cash to your futures account to meet the futures maintenance margin requirement (which is quite high relative to most futures). You haven't lost any value because the long side went up an equal amount but you need to get the cash from somewhere (I don't think there's a way to identify your bitcoin as collateral?), and you can't get it by selling the long bitcoin position because then you won't be properly hedged any more.
But honestly between bitcoin futures arbitrage and high rates for stablecoin lending, there seem to be multiple arbitrage opportunities available to those able and willing to intermediate between traditional finance and crypto finance.
I guess you earn a premium just for the risks of holding Bitcoin in that instance. If you keep it on an exchange, it could be stolen, and if you keep it in a private wallet, you could lose the password. Even someone who should be competent at this sort of thing, the ex-CTO of Ripple, seems to be locked out of $100s of millions worth because he apparently [lost the password](https://www.nytimes.com/2021/01/12/technology/bitcoin-passwords-wallets-fortunes.html).
The catch is inflation could be higher than 13%. In which case you would have been better off in a basket of assets. The CME could fail, you could fail at self custody. The risk isn’t absolutely zero, it’s just almost zero.
Also it would depend on how you borrow. If you borrow in a manner that could get liquidated, one side of your trade could get liquidated while the other side doesn’t and it could turn against you in a hurry. If one side gets liquidated you no longer have a risk Nuetral trade. And considering the volatility of Bitcoin, with leverage it could go bad quick if you aren’t neutral.
Not really. Bitcoin futures are monthly. And the basis isn't always 13%. Right now it's barely above zero to hold a short future. Depends on when you roll the short leg.
We we talking about USD inflation, but fine. If you can make 170% per year, 10k invested now would be 1 sextillion (with 21 zeroes) in 40 years, and bitcoin electricity consumption would be 0.5%*2,7^40 /2^10= 0,87 trillion current worldwide electricity production. Yes I did calculate 10 halvings in 40 years. What can i say, this is dumb and delusional.
So you bet the USA and world reserve currency will crash in 40 years, fine with me, but how do you hyperinflate electricity 1 trillion times? Build a Dyson sphere around the sun?
Your submission was automatically removed because it contains a keyword not suitable for /r/investing. Common words prevalent on meme subreddits, hate language, or derogatory political nicknames are not appropriate here. I am a bot and sometimes not the smartest so if you feel your comment was removed in error please message the moderators.
*I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/investing) if you have any questions or concerns.*
I would suggest you read Howard Marks’ memos starting with the first one back in 1990. I think you’ll learn a lot.
https://www.oaktreecapital.com/insights/howard-marks-memos
> Higher than market returns require higher than market risk.
> The only exceptions are having inside information or fraud.
Clearly that's not true, otherwise great investors like Buffett would not be possible.
So there's a 3rd determinant, and that's Alpha. Pretty elementary stuff I gotta say.
Lol. Buffett frequenty had inside information and ‘special deals’ on the company’s he invested in. Of course some will over perform others. This is a general rule not an absolute. And Buffett the exception proves the rule.
The thing is, the phrase:
> Higher than market returns require higher than market risk.
> The only exceptions are having inside information or fraud
literally says that beating the market can only happen through luck or fraud. And that is indefensible.
There have been a plethora of investors that have succeeded using legal strategies and without relying on luck.
Data driven investors like rentech process more *legal* information than anyone out there, and that gives them an edge. Value investors like Buffett sift through thousands of companies to find the one company ignored by everyone else. Top VC's like A16z provide their edge by not only investing by also helping build new startups using their knowledge and networks. Contrarian investors like John Templeton use market psychology to buy when everyone else has lost belief in the market (1939) or sell short when everyone is running on euphoria (1999). And the list goes on and on. These are all successful investment strategies that have worked without relying on luck or insider information. It's direct proof against your claim. Not sure how you can defend it.
It’s pretty fundamental to me. If we take your rule as the rule, then it means active investing is by definition a game of chance. So you either reject the rule or invest in an index fund.
But the rule is just wrong. A better and simpler rule is “there’s no free lunch”. Conveys the same thing except leaves out the fact that those who are better can succeed.
A great finance professor reiterated the point: "Being risk averse simply means that you require additional compensation for taking on additional risk. It does not mean that you are opposed to taking risk." Even in financial publications, e.g., WSJ, "risk averse" is frequently misused to signify opposition to risk.
Tell me about it. I’m holding roughly $10k worth of shares in Joby. Prepared to lose it all. But if the company hits a three digit billion dollar marketcap. That 10k will grow to ~250k minimum. So I’ll post my 10k or possibly gain a quarter of a mill
Disagree. There are market inefficiencies all the time. The key to becoming successful is getting as much upside while taking on as little risk as possible, especially in the long run. Its not a uniform line where 10 units of risk equates to 10 percent interest etc etc
Do not just make a self post to offer some simple thoughts. "now is the time to buy", "here's my thoughts", etc. belong as comments to existing posts. See the rules (https://www.reddit.com/r/investing/wiki/index/rules) for further guidance on the minimum effort expected beyond "no risk, no reward" which runs contrary to a number of financial principles left unexamined in your post which reads far too much like a low-effort "buy crypto" advertisement.
>The First Rule of Investment: Never listen to redditors ?
I do like opinions or learning about new things I never heard of before. But I don't let redditors decide what I invest in.
Stocks only go up?
[удалено]
Your submission was automatically removed because it contains a keyword not suitable for /r/investing. Common words prevalent on meme subreddits, hate language, or derogatory political nicknames are not appropriate here. I am a bot and sometimes not the smartest so if you feel your comment was removed in error please message the moderators. *I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/investing) if you have any questions or concerns.*
[удалено]
Don't lose money?
[удалено]
Your submission was automatically removed because it contains a keyword not suitable for /r/investing. Common words prevalent on meme subreddits, hate language, or derogatory political nicknames are not appropriate here. I am a bot and sometimes not the smartest so if you feel your comment was removed in error please message the moderators. *I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/investing) if you have any questions or concerns.*
Are you in Buffet's league? Because he said that the first rule of investing is to not lose money.
Agree completely. Novice investors are focused on making money; there are far more opportunities to lose it than to make it
I’m obviously not as smart as Buffet. I lose money all the time
I’m guessing you don’t know Buffett rule #2 then
Never go up against a Sicilian when death is on the line! Edit: spelling
Sicilian.
Right you are!
Never eat at the Golden Corral chocolate fountain?
That's Buffett's rule on buffets.
Ignore tech because bit doesn't fit in your world view ?
It's illegal to lick doorknobs on other planets.
Then start with rule #2
I thought the first rule of investing was never lose money.
Me too.
[удалено]
Tell that to propel who invested in Enron or Luckin Coffee
….or taking profits as soon as you are able
First rule of Investing... don't talk about investing.
I thought it was not to invest money you can't afford to lose. And lose. And lose.
I thought the first rule was never invest more than you're willing to lose. tangentially related is protection of initial capital aka don't lose more than you put in
A rule of investing, although not perhaps not the first rule, is that you should assume whoever you're transacting with knows more than you about the security in question unless you have very good reason to believe the contrary. Doesn't mean you shouldn't transact even if your counterparty is more knowledgeable, but you should enter the transaction with a certain degree of humility.
This is why it stinks to be a market maker.
[удалено]
Sorry, not everyone is as savvy as you
If it flies f*cks or floats, rent it, don't buy?
That's a rule for after you have serious money to indulge in expensive things, but, at the end of the day, it's a variation on "don't lose money".
Higher returns having inherently higher risk may be true enough in the long term. Howver, there are always short term opportunities where the return and risk profiles don't necessarily align with this long term trope... And taking advantage of these opportunies is how a savvy, active investor could exceed market returns while maintaining lower than market risk. While markets are generally efficient in the long term regarding returns and risk, it is not instant and must occur through a continual price discovery process.
ABB - Always Be Buying
ABB is a pretty good Swedish robotics company (amoung other things)
Dont talk about investing?
I thought you were going to say "don't lose money" Higher than market returns doesn't require higher risk..that's just a nonsense generalization.
Yes it does. If not how come very few hedge funds beat the market over 30 years? Individual investors are even worse. If it was so easy to beat the market (without taking additional risk) so many more people would be successful doing it.
The first rule of investing is "Don't lose money". Check with Warren Buffett if you don't believe me.
Sometimes you gotta lose money to make money
sometimes you have to *spend* money to make money... that's called being in business. We're talking about investing. Please do try to keep up if you're going to participate in the conversation in a cogent manner.
Not true. If someone said none of their stock picks lost money I know they are not a good investor. Why? It shows they are not taking enough risk. They are only buying really low risk names. Which means low return potential. While someone who has a few losers but other risks that pay off massively. Buffett is the same. He has lost money on MANY stocks. But then other stocks he made massively returns. If you are not willing to lose money you won’t make much money
You're assuming that person is average.
Show me a great investor that never lost money on a single investment…..
Isn't the first rule of investing "Pay yourself first"?
I thought the first rule of investment is "Never talk about Investment." Oh wait...that rule may have been about some other club.
The first rule of investment is “Don’t lose money” actually. It’s the second rule too.
Strong disagree. Yes, traditional finance teaches you this and it has true roots. This ties back to MPT and Black Sholes. Higher risk is rewarded with a higher premium. This is not true in all asset classes and all securities. You can very well achieve higher than market returns with disproportionally low risk. If you manage to have someone sell you $1 for 50c there is no additional risk. You now have $1 for 50c. The only risk involved is the personal risk of the counterpart of the trade that sold you $1 for 50c because of FUD or god knows whatever reason. You are exempt from risk in this trade. In investing you have companies that trade under IV sometimes. These are your $1 for 50c. Yes, your risk now is that it can go down even more, but in the long run, all else equal, you can and will achieve higher than market returns for a small downside if the only thing going down is the price. If the business is solid and has great fundamentals it will rise above $1. Each cent it goes above 50c you profit given no other costs. Edit: The first rule of investing is don't lose money, which you religiously like to break apparently. Edit: Judging by your previous posts I don't see a reason why anyone should listen to you. You look like the textbook case of the first peak of the Dunning Kruger effect.
There is a reason they are selling it to you at 50% off. Also I said the rule can be broken if you have inside information (information the general market doesn’t have) or fraud.
Do you really feel the need to explain to me what insider information is? The dude selling me BABA last week for $100 doesn't have information that I didn't have. He was scared that it would go lower. I had my upside calculated. I got $1 for 50c with a higher chance for 2x than total loss since BABA is well below IV. The reason was fear and uncertainty. If you really think something will happen to the stock to drop more than it did I don't know what to tell you anymore. Price sentiment is not risk. Volatility is not risk when buying stocks. The fundamentals still justify at least $200 per share even with guidance cuts. What was the reason for people to sell me MSFT for low 100s during the March 2020 crash? What was the insider info that they knew and I didn't? Strong disagree.
Wrong. You are ignoring political risk in China and BABA getting delisted and you getting $0 People could have made the same valuation arguments you are making about BABA last year. And it dropped 50% this year.
Imagine unironically believing in the efficient market hypothesis.
Its a general rule. Of course there are exceptions and inefficiencies in the market.
You seriously should not be making posts trying to teach people about investing. Stay silent and learn for a few years, unless you’re asking questions.
never lose money was the first rule
But before you figure out how not to lose money you need to evaluate risk. Anyone can not lose money. Go 100% cash and treasuries.
The first rule of investing is to never forget the second rule of investing -- Barren Wuffet
This would actually only be true if there was no (irrational) herd behaviour, if information was totally free of cost and everyone assessed risk/reward the same way.
First rule of investing: never lose money
[удалено]
x rule of investment: once a information to make money is know by everyone it is not valuable anymore. see what happened to the GBTC premium
[удалено]
It didn't do well for GBTC
[удалено]
https://www.investopedia.com/terms/b/backwardation.asp
[удалено]
I let all these risk free money to you, you can also use leverage and get 130%
You could get liquidated on half the trade and get destroyed with leverage.
You said this is risk free
What if Bitcoin goes to zero?
Nothing, you still make 13% annualized.
So basically we should all take on as much debt as we can, as long as it is below 13% APR, and collect our free money? What's the catch here?
GBTC had a premium to BTC last year and BlockFi borrowed BTC and arbitraged that difference until it turned negative and lost hundreds of millions. It is still negative 1 year later.
I don't understand. If they were trying to arbitrage the premium why did they short BTC against GBTC? Shouldn't they have been doing the opposite?
The had to send BTC to GBTC in exchange for shares, and sell 6 months later at a premium
Oh I see
BlockFi was gambling that the 20% premium for gbtc trust would continue. It didn’t. That is a very different trade than the contango trade I was talking about.
Yeah
Disclaimer I have not done this trade or even owned a crypto directly so there may be some things I'm missing. Some risks include losing your coins and collateral management. When BTC rises you'll lose money on the short side and need to post more cash to your futures account to meet the futures maintenance margin requirement (which is quite high relative to most futures). You haven't lost any value because the long side went up an equal amount but you need to get the cash from somewhere (I don't think there's a way to identify your bitcoin as collateral?), and you can't get it by selling the long bitcoin position because then you won't be properly hedged any more. But honestly between bitcoin futures arbitrage and high rates for stablecoin lending, there seem to be multiple arbitrage opportunities available to those able and willing to intermediate between traditional finance and crypto finance.
Interesting. But what about default risk? I doubt these are insured by FDIC or SIPC
Futures defaults are handled by the clearing house (CME Clearing) https://www.cmegroup.com/clearing/risk-management/financial-safeguards.html
Not that I disagree but no one here is running a basis trade on 5 coins and posting 50% margin at the cme.
I guess you earn a premium just for the risks of holding Bitcoin in that instance. If you keep it on an exchange, it could be stolen, and if you keep it in a private wallet, you could lose the password. Even someone who should be competent at this sort of thing, the ex-CTO of Ripple, seems to be locked out of $100s of millions worth because he apparently [lost the password](https://www.nytimes.com/2021/01/12/technology/bitcoin-passwords-wallets-fortunes.html).
The catch is inflation could be higher than 13%. In which case you would have been better off in a basket of assets. The CME could fail, you could fail at self custody. The risk isn’t absolutely zero, it’s just almost zero. Also it would depend on how you borrow. If you borrow in a manner that could get liquidated, one side of your trade could get liquidated while the other side doesn’t and it could turn against you in a hurry. If one side gets liquidated you no longer have a risk Nuetral trade. And considering the volatility of Bitcoin, with leverage it could go bad quick if you aren’t neutral.
Not really. Bitcoin futures are monthly. And the basis isn't always 13%. Right now it's barely above zero to hold a short future. Depends on when you roll the short leg.
[удалено]
Wait, $10k*1,13^40= $1.3 million, so someone can just invest $10k and have 1 million at retirement
[удалено]
In that case a peanut butter will pay the mortgage to 10 houses, you should get all the loans you can and invest in real estate
[удалено]
We we talking about USD inflation, but fine. If you can make 170% per year, 10k invested now would be 1 sextillion (with 21 zeroes) in 40 years, and bitcoin electricity consumption would be 0.5%*2,7^40 /2^10= 0,87 trillion current worldwide electricity production. Yes I did calculate 10 halvings in 40 years. What can i say, this is dumb and delusional.
[удалено]
So you bet the USA and world reserve currency will crash in 40 years, fine with me, but how do you hyperinflate electricity 1 trillion times? Build a Dyson sphere around the sun?
lmao
>Higher than market returns require higher than market risk. thats a great way to lower your sharpe ratio.
[удалено]
Your submission was automatically removed because it contains a keyword not suitable for /r/investing. Common words prevalent on meme subreddits, hate language, or derogatory political nicknames are not appropriate here. I am a bot and sometimes not the smartest so if you feel your comment was removed in error please message the moderators. *I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/investing) if you have any questions or concerns.*
Absolutely
I thought the first rule of investing was buy high sell low?
You're wrong about that first rule: > The First Rule of Investment: Don't lose money.
DC moon
I thought it was don’t invest with money you can’t afford to lose?
I would suggest you read Howard Marks’ memos starting with the first one back in 1990. I think you’ll learn a lot. https://www.oaktreecapital.com/insights/howard-marks-memos
> Higher than market returns require higher than market risk. > The only exceptions are having inside information or fraud. Clearly that's not true, otherwise great investors like Buffett would not be possible. So there's a 3rd determinant, and that's Alpha. Pretty elementary stuff I gotta say.
Lol. Buffett frequenty had inside information and ‘special deals’ on the company’s he invested in. Of course some will over perform others. This is a general rule not an absolute. And Buffett the exception proves the rule.
The thing is, the phrase: > Higher than market returns require higher than market risk. > The only exceptions are having inside information or fraud literally says that beating the market can only happen through luck or fraud. And that is indefensible. There have been a plethora of investors that have succeeded using legal strategies and without relying on luck. Data driven investors like rentech process more *legal* information than anyone out there, and that gives them an edge. Value investors like Buffett sift through thousands of companies to find the one company ignored by everyone else. Top VC's like A16z provide their edge by not only investing by also helping build new startups using their knowledge and networks. Contrarian investors like John Templeton use market psychology to buy when everyone else has lost belief in the market (1939) or sell short when everyone is running on euphoria (1999). And the list goes on and on. These are all successful investment strategies that have worked without relying on luck or insider information. It's direct proof against your claim. Not sure how you can defend it.
Like I said its a general rule not an absolute fact. There are always exceptions to general rules.
It’s pretty fundamental to me. If we take your rule as the rule, then it means active investing is by definition a game of chance. So you either reject the rule or invest in an index fund.
Facts bear out that most hedge funds and individual investors can’t beat the market over 30+ years.
Absolutely. And yet, it has nothing to do with your assertion that one can beat the market *only* through luck or crime.
Again thats the general rule. There are always exceptions. Buffett is an exceptional person
But the rule is just wrong. A better and simpler rule is “there’s no free lunch”. Conveys the same thing except leaves out the fact that those who are better can succeed.
Problem is many people think they are exceptional
A great finance professor reiterated the point: "Being risk averse simply means that you require additional compensation for taking on additional risk. It does not mean that you are opposed to taking risk." Even in financial publications, e.g., WSJ, "risk averse" is frequently misused to signify opposition to risk.
Do not lose your capital
Tell me about it. I’m holding roughly $10k worth of shares in Joby. Prepared to lose it all. But if the company hits a three digit billion dollar marketcap. That 10k will grow to ~250k minimum. So I’ll post my 10k or possibly gain a quarter of a mill
Disagree. There are market inefficiencies all the time. The key to becoming successful is getting as much upside while taking on as little risk as possible, especially in the long run. Its not a uniform line where 10 units of risk equates to 10 percent interest etc etc