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(Vice)   From humble beginning to YOLO to the "Had a bad day" song, a Robinhood story   (vice.com) divider line
    More: Fail, Option, Investment, Risk, Call option, Futures contract, single stock option, half years, Editor's note  
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1133 clicks; posted to Business » on 02 Dec 2021 at 7:45 PM (7 weeks ago)   |   Favorite    |   share:  Share on Twitter share via Email Share on Facebook



20 Comments     (+0 »)
View Voting Results: Smartest and Funniest
 
2021-12-02 8:04:35 PM  
"I don't believe in passive index investing. You know how Warren Buffett made a multimillion dollar bet that the index will outperform a bunch of hedge funds over a decade long period? My truthful belief is I don't necessarily believe passive investing to be the answer."

Well, at least he didn't soil his experience with a valuable lesson.
 
2021-12-02 8:29:08 PM  
My father tells me that 'the rich count their pennies' or some other such nonsense. I'd say not.
 
2021-12-02 9:05:50 PM  
The internet has a wealth of free research on how to invest for a secure future.  The internet also has loud noises and flashing lights about getting rich quick.

I've been invested in alibaba since March 2018. I put some cash on alibaba and the other half of cash on Mercado Libre on the same day.  I considered it my international Amazon copycat hypothesis. 

I still hold both.  Alibaba is down 35%.   Mercado Libre is up 178% (but off 50% for the year).   These two stocks represent about 1% of my portfolio.  The lesson is that you must diversify and stop listening to survivorship stories of big winners.  Big wins are rare.  It's fun and challenging to invest in individual stocks.  They're little lotto tickets.  But you probably won't win. The pros don't win most of the time.   Be safe and just invest most of your money in a lot of boring stocks and funds.  You won't get rich, but you won't starve.
 
2021-12-02 9:40:22 PM  

farkalt: My father tells me that 'the rich count their pennies' or some other such nonsense. I'd say not.


It seems an old money vs new money issue, with a healthy dash of FOMO.

The poor kid got a taste of success, mainlined the hype and figured, "how could Jack Ma possibly ruin Alibaba?" Right as Jack Ma completely duked on Winnie the Xi's chest.
 
2021-12-02 9:49:24 PM  
He got greedy and took huge risks. If you spread your money out in a diversified portfolio you don't get wiped out if one company crashes and burns. Less potential to get rich overnight but I like knowing my retirement is somewhat stable.
 
2021-12-02 10:04:53 PM  
Should have invested in soy.
Fark user imageView Full Size
 
2021-12-02 10:08:29 PM  
I work in tech, and a lot of my colleagues were worth, like, $10 million.

Colleagues worth $10 million ... Just you passive income from $10 million is over $400k/yr. What could a job possibly give when you have $400k/yr doing nothing?
 
2021-12-02 10:15:10 PM  

mr0x: I work in tech, and a lot of my colleagues were worth, like, $10 million.

Colleagues worth $10 million ... Just you passive income from $10 million is over $400k/yr. What could a job possibly give when you have $400k/yr doing nothing?


They probably weren't worth 10 million.  That net worth puts you in the 98.5 percentile.  And this guy works alongside them at 20 something years old?

Many investors are constantly in a dick measuring contest.  He believed the lie.
 
2021-12-02 10:30:13 PM  
stayhipp.comView Full Size
 
2021-12-02 10:33:02 PM  

OccamsWhiskers: "I don't believe in passive index investing. You know how Warren Buffett made a multimillion dollar bet that the index will outperform a bunch of hedge funds over a decade long period? My truthful belief is I don't necessarily believe passive investing to be the answer."

Well, at least he didn't soil his experience with a valuable lesson.


i.imgur.comView Full Size


In his defense, Warren Buffett didn't become Warren Buffett by investing in the index either.

Buffett did his due diligence and bought good businesses, and used the profits from those businesses to invest in other good businesses, which is how Berkshire Hathaway became a thing and Buffett became a household name.

Where our ahemt got wrong was that even Buffett isn't afraid to admit when he's wrong and sell a losing business. Or to sell when someone offers him a price that's higher than what he thinks the business is actually worth. Because, well, he's Warren Buffett, and he's been doing this for so long that it's all second nature to him.

Buffett operated on timescales of years, but the same idea applies to timescales of days, weeks, or even minutes. Cut your losses short, let your winners run.

Deciding when to buy is the easiest part of the game. You can always decide to do nothing, and doing nothing costs you nothing.

(Warren Buffet himself missed out on the first dot-com bubble. He admitted he didn't understand what these tech stocks did. So he didn't buy them. BRK.A underperformed the Nasdaq for a few years, which probably frustrated his shareholders somewhat, but BRK.A still trades. Which is more than can be said for Pets Dot Com.)

Deciding when to sell is the hardest part of the game. You can sell when it's down 5% and admit you were wrong, only to gnash your teeth in frustration as the stock takes off to the moon. You can sell when it's up 20%, only to gnash your teeth in frustration as the stock takes off to a 200% gain.

But if you do nothing when it's down 5%, you can wake up the next morning to find yourself down another 5%. And by the time it's down 50%, you now have to double your money just to break even. And you'll have to admit you made a big mistake. And there's always the possibility that it might just take back off to the moon after you sell. So you hold. And maybe it'll turn around. And maybe it won't. And with options, you can't even sit on your hands forever, because they have an expiration date, and the closer you get to that expiration date, the smaller the odds are that the stock turns around, and the less the options are worth, and that's how this guy ended up blowing up a $400K account.

That, and a 100% bet size, which generally correlates to a 100% risk of ruin. The Kelly Criterion is a concept that explains how to gauge your bet size as a function of your bankroll and your expected probability of winning on any given hand (or trade).

Fark user imageView Full Size


Here's a blackjack player playing 1000 hands in six parallel universes. The same cards come up and he plays the same strategy, but bets 1%, 2%, 4%, 8%, 15%, and 25% of his account on each hand.

Blue: 1% per hand. Never really capitalizes on the hot streaks, but does OK and walks away with a profit.
Orange and grey: 2% and 4% per hand, in this instance, turned out to give better returns. So kick it up a notch?
Yellow: ...but at 8% per hand, one really bad streak of luck around hand 540-570 knocks him under his alternate selves.
Blue: At 15%, he's bankrupted by that bad streak after the 540th hand.
Green: At 25%, he's bankrupt after barely 120 hands.

Fark user imageView Full Size


His other mistake was, after a few wins, thinking that his actual win rate would be greater than his real win rate. Which is why the real-world optimal bet size for something like stonks, where, unlike blackjack, you cannott pre-calculate the odds of your strategy winning or losing, because we're not playing cards, we're wondering what Jerome Powell will say to Congress and if this Omicron thing is for real and will the shutdown be averted and those are just things that happened in the past seven days), you probably want the real-world bet size to be less than what the Kelly Criterion would suggest.
Fark user imageView Full Size


But lessons? Oh, he learned one. And if his fellow apes can learn from his mistake, and if he can learn from his mistake, they can all go on to have successful careers as investors. (Buying the index, at least insofar as stocks always go up, also qualifies as a successful career as an investor. The object of the game is to make the most money, not to be able to brag about how much fun you had trading stonks and YOLO options. It turns out that actually making money is also fun. It just doesn't sound fun. But it's fun too.)
 
2021-12-02 10:55:15 PM  

Twilight Farkle: OccamsWhiskers: "etc."


....could you say that in more words for clarity?
 
2021-12-02 11:33:40 PM  

Valter: Twilight Farkle: OccamsWhiskers: "etc."

....could you say that in more words for clarity?


Fark user imageView Full Size
 
2021-12-02 11:37:22 PM  
More than half of this country doesn't have $400k to lose.  In short, who cares about some rich fark.
 
2021-12-03 1:53:57 AM  
YOLO, but FOMO can become FAFO.
 
2021-12-03 3:35:23 AM  
Add him to the list:

Legendary Wallstreetbets YOLOs | Tier List
Youtube XKPmtbCmkE4
 
2021-12-03 9:12:48 AM  

OccamsWhiskers: "I don't believe in passive index investing. You know how Warren Buffett made a multimillion dollar bet that the index will outperform a bunch of hedge funds over a decade long period? My truthful belief is I don't necessarily believe passive investing to be the answer."

Well, at least he didn't soil his experience with a valuable lesson.


Just spot on. This kid is still ignorant. He may even be dumb as he was given a harsh lesson and failed to understand it.
 
2021-12-03 10:34:25 AM  
This idiot put everything he had into a single option in a single stock.

I didn't think anyone could be that dumb.

See also, Martingale betting.
 
2021-12-03 2:09:14 PM  
The first lesson in investing is the same with gambling:

Don't risk what you can't afford to lose.
 
2021-12-03 3:12:15 PM  

89 Stick-Up Kid: The first lesson in investing is the same with gambling:

Don't risk what you can't afford to lose.


And don't put all your eggs in one broken basket.

Diversification, at least, can provide some safety. Chances are better that you won't lose it all on one stupid bet.
 
2021-12-03 3:29:30 PM  
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for the rest of us
 
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