How to buy stocks

What Hacker News says

1. btillyOct 2009
   I've seen the claims that a pure cash investing strategy has a track record as good as the US stock market over very long periods of time. I've looked into them. They are wrong.

   The basis of the claim is the stock market index. You look at where it was at one time, look at where it was another, then figure out the effective interest rate between them. And lo and behold, at the bottom of the crash that interest rate was not very good!

   The problem with this claim is that the indexes just aggregate stock prices. But companies frequently pay dividends. When a company pays a dividend, the stock price drops by the value of the dividend. This money is not lost though, it is returned to the investor for cash and is free to be reinvested.

   When you add back the dividends, stocks perform much better than they do when you don't. As an extreme illustration, look at the DOW through the Great Depression. Before the crash the DOW hit a peak of 381.17. It then crashed and did not return to that peak until November 23, 1954. So it looks like you lost money for decades. But the classic How to Buy Stocks looked at how investments would do if you reinvested dividends. That story is very different. Over many decades they could not find a 5 year period in which the stock market lost money, or a 10 year period in which you made less than 7%/year, compounding annually. (The worst period was actually the early 70s.)

   Now how realistic is that analysis? If the money is in a tax sheltered retirement plan, very. If the money is not tax sheltered, then you're going to be taxed on your dividends, and your returns are going to suffer. (But you're also going to be taxed on returns in a money only strategy.) Working out the full details is very complex. But no matter how you look at it, there is no lengthy period of time in the USA in the last century in which cash only strategies have been competitive with the stock market. None. And if you find a study that says otherwise, then look at how they computed the numbers. I guarantee that they got that result by ignoring dividends.

   Now this is not to say that there isn't a role for cash in your investment strategy. Of course there is. There is real value in limiting volatility, and there are times when it makes sense to adjust how exposed you are to the market.

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2. DonHopkinsAug 2018
   I know a non-zero number of people who picked up telecommunications panels, terminals, monitors, trunk test equipment, access codes and other items and plugged them in at home.

   https://en.wikipedia.org/wiki/Kevin_Poulsen

   https://archive.org/stream/JustinTannerPeterson/1346919-0_-_...

   >A couple of hours later, Neal accompanied Poulsen to his condominium down the street from SRI. Against one wall stood a six-foot-long phone monitoring station. Strewn on the floor or stuffed in the closet were line-testing equipment, trunk test sets, telecommunication panels, terminals, monitors, cables and a switching device. At the same time that he had an SRI security clearance, Poulsen had been pulling nighttime burglaries on Pacific Bell facilities, stealing manuals, passwords, anything that might provide access, the San Jose indictment charged. The handful of books and papers ranged from "How to Buy Stocks" to a copy of "Watchmen," a violent comic book scries, to a bright yellow report binder that might have been scribbled by an eighth-grader but for its title. "Burglar Alarm Procedures."

   >A police photograph taken at the scene showed Poulsen leaning against the door, a sour look on his long face. "I had him sign a copy of what we were taking away," says Neal. "I think he finally realized there wasn't going to be an easy way out."

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