[squiffy]

Talk about coincidence! This is a pretty popular website with people contributing from all over the U.S.!!! One of the judges I used to work with lives in Hanford and commutes to Fresno every day. I have never been to Hanford, but one of my lifelong goals is to visit Hanford before I die to visit the cows. Just kidding!!!! But yeah, I do know of Hanford.

Well, if you read the fresno bee hard copy or online, you know how much Fresno and California real estate have been going up!!!


BACK TO STOCKS


Unlike poker, real estate and stocks are stacked in your favor. If you are patient, take reasonable risks, and keep contributing money, the chances of you winning big are huge. Put another way, I think an investor with average intelligence, patience, and effort stands to do very well over the long run in stocks and investing. Whereas I think the average poker player just breaks even or makes only a tiny profit, so that poker is fun, but not a legitimate source of wealth generation, unless you are in the top top top percent of skilled and hard working players.

If you look at a chart of the DOW over, whatever, 80-90 years or at the S&P 500 over its entire existence (not sure how long, say 50-60 years???) the chart basically just goes up. Even the 1929 crash is just a temporary blip, over the long long long run.

So, if you are investing in the top U.S. companies, it's hard to lose. Because over time, they will PROBABLY make money, and a lot of it. They attract the best minds, ideas, and resources. And America, to date, has been a strong capitalist nation, with ample resources, political influence, and economic know-how.

So a long-term stock investor, investing in reputable companies, (not BS penny stocks), is basically investing in one huge 80 year bull market for top U.S. stocks. So it doesn't take a lot of talent, in that sense.

Let's look at your play. It's a good example of a smart play, though some might quibble with your holding period. But it's basically sound and conservative.

There seems to be strong anecdotal and research evidence that a January effect exits.

Is this theory logical? Yes. Absolutely. Human beings invest in the stock market and humans sometimes follow patterns.

For example, I notice at my local card club that early in the month tends to be busier than later in the month and Fridays tend to be busier than Mondays Tues. Wed. And several employees confirmed this when I asked about it. They theorized that it coincides with the issuance of paychecks at end of the week or beginning of the month. Or perhaps the paycheck is issued at the end of themonth and the person comes in the following weekend. And it makes sense that Psychologically, people stay up late Friday to celebrate the end of the week and because they can sleep in Sat. and Sun. So human beings and animals SOMETIMES follow patterns.

If you are hunting deer, maybe you wait at a salt lick or near drinking water??? Why because at a certain time of day, deer come by to drink or lick, etc.

Because people pay taxes, they often sell losers at the end of the year to lock in tax losses, then reinvest in late Dec. or early Jan. Similarly mutual funds want to close out their books toward the end of the year.

There also may be psychological and economic effects. People may give or accept financial gifts at year end. If people want to invest in an IRA, they want to deposit it as soon as possible during the New Year so that their money has maximum time to earn dividends and appreciate in the market, etc.

So perfectly plausible that this Jan. Effect really does exist. We could be wrong. It could be an illusion. But you have to make a call based on the available evidence sooner or later and decide whether to invest or not to invest.

So, you choose to invest. A sound decision.

The upside is simple. The S&P goes up, you make a paper profit, and decide when to sell. Easy.

The downside is the market may go down. Huge terrorist strike, assassination of Bush, Vioxx scandal, dead body found not buried at a cemetary owned by your company (this really happened to one of my stocks formerly called SCI and I took huge losses, unbelievable!!!!)

But based on historical data, the S&P 500 tends to go in which direction. UP UP UP. Now, if you need the money in one month to pay tuition, then you should not invest. Your personal situation means that you will be forced to sell at a loss. So investing under those conditions is foolhardy.

But if you can afford to wait 1-2 years for the market to recover from a recession or war scare or some other economic problem, you will be fine. So if you CAN AFFORD TO BE PATIENT, you aren't really facing much downside, except sitting around praying for the market to recover and feeling pretty bad in the meantime.

In addition to data, you should read what top fund managers and famous investors say. Bogle obviously is a fan of Vanguard. And even Warren Buffett has been quoted as saying that putting your money into a low cost index fund is a perfectly reasonable move for an investor who lacks the time and inclination to pick individual stocks, or who has too small a bankroll to properly diversify.

The only downside is that by Buffett's standards, when you buy the S&P 500 you are over-diversify and almost guaranteeing yourself a lower return, but the upside is you also are facing less risk. So it really depends on your interests, abilities, and risk profile.

So all factors point to it being a good move.

The only thing is, selling so soon may be a slight inaccuracy. You may leave some money on the table if Q1 2005 for whatever reason turns out to be a strong quarter. But you need to analyze the economy, the pattern of the S&P 500 (typically a super year, a so-so year and a down or negative year in 3 year cycles, with the occasional mega bull or mega bear cycle).

You also need to consider the Jan effect question, which seems to imply that small caps go up, then back down again in Feb./Mar.

Though this year, the effect seems to be hitting large caps, which calls into question the entire validity of the Jan effect theory.

In any event. I would say, probably some truth to the Jan. effect theory. But even if there isn't, there is historical data showing Dec. and Jan. are typically strong months for the market (perhaps after strong Christmas sales and the psychological effect of being positive about the New Year).
So not much downside to your decision. And in hindsight it did work.

2003 was a strong year for the market recovering from the long pseudo-recession triggered by Sept. 11, 2001 terrorist attack.

2004 was a slow year, but picked up in Nov./Dec. after the election. So you benefitted from that. (post election pro-Bush pro-market euphoria is another factor, so you can never just point to one factor and be sure that it was THE CONTROLLING FACTOR. (That is one of the problems with economics. It's hard to perform any kind of controlled study or experiment to show why a particular stock or the market in general went up or down on a particular day.)

Anyway. Investments are like poker and chess. You keep reading, keep playing. Keep analyzing each of your moves that worked or failed. And analyze why it didn't work or fail. And compare your moves with moves you read about in the Wall St. Journal, Business Week, etc. I especially like reading books by or about famous investors to see how they made certain kinds of investments, their logic analysis etc.

You won't always be able to duplicate their plays, but it may give you some ideas that you can safely and reasonably apply to your own situation.

Keep posting here. If we can make this forum as strong as the poker forum, then we can all benefit.

I have tried the Yahoo message boards, but you generally see a lot of idiots there. Though occasionally I see a few helpful posts. Though little analysis, just unsubstantiated tips about some bs stock.

Here, at least, you have some analytical types, who have been influenced by the more rigorous analysis of the poker site in thinking carefully about how to play a particular hand.

I think the more specifics we can all give about our personal situations and decisions, the more we can offer helpful advice and benefit.

Of course, don't give out your social security number, bank account and home address.

But age, amount of investment, name of stock, date of investment, investment goals, investment knowlege, etc. are all important.

If you are 21 and have plenty of extra cash, you can take greater risks than a 65 year old who is about to retire and absolutely needs to make sure the money is there. A 65 year old needs to think twice about betting on Amazon at a PE of 500, because his entire life savings may disappear. And he cannot afford to wait 5 years for it to recover, if it recovers at all.

If one is an A student and a whiz at math and have the time and interest to read a lot about economics and finance, then it is more likely you can succeed at stock picking.

If one is a D student who hates to read and can barely do math, then index funds may be best, etc.