patrick.net

See? You've basically discovered what I've been saying forever. There seems to be a lot of people who invest in weird things like metals, houses, or whatever and would NEVER ever believe that old fashioned stocks would ever make them a dime. But yet they do, and have done so fairly predictably for the past 100+ years.

I- like you, basically bought a bunch of stocks and in 2007-2009 those stocks plummeted over 45%. As of now they are up significantly over what they were at purchase. So in a short time they not only did they recover all of those losses, but gained a large amount from where they started.

And so you have the magic of averages and ultimately compounded interest.

John, congratulations!

What I did this year is go for some real bottom dwellers. Things that were fractions of a cent. I bought like 100,000 shares for a few hundred dollars. But not randomly. I did my research, tried to see if they had a chance, had good people, a history.

But guess what...even some of those have gone up 30%-40%! Overall, my most reliable investment has been two small cap mutual funds which have produced about that same increase in these turbulent times.

I would never recommend any stock to anyone, or invite them to take this risky course.

But I am presenting this as something that is happening that "feels different" to me.

A lot of funds have gone up 100 percent from the bottom in 3/09. However, they have just begun to rise above the prior peak from 7/07. That's six years.

Well, if one's not a 'trader' per se, there's always the dividend reinvestment (DRIP) strategies, which pan out in both bullish and bearish situations, esp if your stocks have a solid track record of returning 3%-6% in dividends per year. That reinvestment is like compounding interest so that in time, your portfolio could go up anywhere from 10 to 15% per annum over the long haul.

Long term buying and holding of quality stocks or mutual funds will increase your capital (net worth) over time.

Owning the entire market i.e. an Index fund or ETF is one method some people use. Others like mutual funds where a manager tries to steer clear of dogs (loser companies).

I have a T.Rowe Price fund that I bought with the minimum investment in 1993 ($2500), then added $2600 in 2009. Today it's worth $28,561.

Back in those days I would buy various funds to try to see which ones I liked, which of course is a nearly pointless exercise.

Plenty of funds will to the job for you. "plain vanilla" stock funds are fine.
Funds like: Dodge&Cox Stock, Fidelity Contrafund, T.Rowe Price Blue Chip growth, Vanguard Index Total Stock market, Dividend Growth, Primecap, etc.

If you want to add some extra punch try: Vanguard Energy (VGENX). See its performance v. S&P 500 or Dow over time. oh man.

If you also want something interesting I like Swiss Stock ETF from iShares: EWL.

If you have ever been to Switzerland you would understand.

Compounding over time is how you really can get rich from owning stocks.

I'm going to try the Taleb 80-20 plan.

80% dividend/consumer staples
20% crazy shit like frontier etfs

Read up on bogelheads investment advice then forget about everything else. It is investment advice for people who don't want to spend years learning about everything. Most of my investing is done through vanguard, but I still like to pick stocks for fun though. Id like to thank eman for suggesting RIG. Ran the numbers on it and bought in at a little over 45/sh.

There's nothing weird about it, it's called QE ;)

Don't forget to cut the IRS their fair share

They earned it

mell says

There's nothing weird about it, it's called QE ;)

The QE policy from the Federal Reserve is directly borrowed from the Japanese implementation of it as intially introduced by Bernanke in his 2004 tome titled ""Monetary Policy Alternatives at the Zero Bound: An Empirical Assessment." If anyone cares about how this policy was to be carried out going forward then this document is the blueprint for it.

If QE was the cause of the rise in the U.S. stock market since 2009 with multi-trillions of dollars less than the Japanese have applied to their economy in the form of QE since March 2001 then the Nikkei 225 (N225) market should, in theory, be at least near the 25,100 level. Instead, the N225 is only +23.68% higher that the start of Japanese QE in March 2001.

Additionally, the gains in the stock market are not usual when considered in the context of a previous increases in the market when the Federal Reserve didn't exist from 1913 and prior.

Starting with the period from 1861, the average price of the 10 leading stocks (rails) based on trading volume went from the level of 50 to as high as 141 in early 1864. They subsequently declined from 141 in 1864 to as low as 43 by 1877, a loss of -69%. The following rise, from 43 in 1864 to the level of 121 in 1881, was an increase of over 79%.

After the 1881 peak in the 10 leading stocks at the 121 level, the average promptly dropped to the 65 level in 1884, a loss of over -46%. The rise from the bottom in 1884 took the index to 102 in 1890, an increase of +66%. This was quickly followed by a -41% decline 60. After trading in a tight range until 1898, the leading stocks rose to 180 by 1905, a gain of +200% in eight years.

QE isn't the cause of the rise in the stock market. Japan has proven this to be the case. Neither is other Federal Reserve policy responsible for the current rise. Periods prior to the Fed's existence demonstrates this. It would be giving the Fed too much credit.

Something's Weird: I'm Making Money on the Stock Market

Not weird, that is how it's supposed to work.

The monkeys receiving the banana reward keep pressing the bar and convince themselves that it is normal.

The question is: how much longer will stocks keep going up at their current rapid rate?

I suppose the perception that Bernanke "has their back" is keeping the market going. In economics, perception = reality.

Bogleheads is actually giving bad advice to people.

They are still on with the baloney of "own your age in bond funds". That's absurd nowadays.

They also believe in too high a % of international stock ownership. It's not necessary for diversification nowadays either.

When I disputed the bond allocation argument, they said I was spamming and threw me off.

Vanguard has some good funds, but my funds were closed I believe. New investors have different choices than I had.

I would suggest Vanguard Dividend Growth, Vanguard Energy (not too high% for any "sector fund") Total Stock market, International growth (not too much % necessary).

Stocks probably will not keep rising at this rate (27% since Jan 1!) but you can't be worried about the ups and downs.

Your goal in life is to acquire as many shares of good mutual funds and stocks as you can before you retire. Let the reinvesting of capital gains and dividends grow your pile of shares.