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#1
10-30-2005, 08:31 PM
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Buying stocks at random
Does an average stock (across all types of business and technology) go up, down or stay the same in a certain time frame (such as a year).
The reason I ask is this: Suppose you bought 100 shares of 100 randomly chosen companies (from all sectors of business) at $10 each. After a year (or other amount of time), would the total worth of your stocks have (on average) gone up, down or stayed the same? As an aside, can anybody recommend any books or essays regarding trading from solely a numbers/odds perspective, as opposed to sociologoical/economical/psychological perspective? 
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#2
10-30-2005, 11:04 PM
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Re: Buying stocks at random
The market has gone up over recent history. You can buy funds that track market averages. They are called index funds. You are probably looking for a book like A Random Walk Down Wall Street.
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#3
10-31-2005, 12:56 AM
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Re: Buying stocks at random
A good trader, can throw darts at the newspaper to pick stocks, flip a coin for direction, and with proper money management, make $$$.
Obviously, any improvements to that random scenario would increase their odds! You might enjoy, Trade your way to financial freedom by Van K Tharp.
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#5
10-31-2005, 11:22 AM
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Re: Buying stocks at random
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#6
11-01-2005, 03:21 PM
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Re: Buying stocks at random
[ QUOTE ]
Stock market INDEXES have gone up over recent history. You can buy funds that track market averages. They are called index funds. You are probably looking for a book like A Random Walk Down Wall Street. [/ QUOTE ] You need to keep in mind that stocks get dropped from indexes all the time for various reasons (usually dealing with poor performance) so the stock market very well might be a negative expectation game.
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#7
11-01-2005, 04:38 PM
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Re: Buying stocks at random
[ QUOTE ]
You need to keep in mind that stocks get dropped from indexes all the time for various reasons (usually dealing with poor performance) so the stock market very well might be a negative expectation game. [/ QUOTE ] The most common reason for a stock to be removed from an index is a merger or acquisition! The stock market is definately a positive expectation game, for as long as this country continues to grow and prosper.
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#8
11-01-2005, 06:15 PM
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Re: Buying stocks at random
[ QUOTE ]
You need to keep in mind that stocks get dropped from indexes all the time for various reasons (usually dealing with poor performance) so the stock market very well might be a negative expectation game. [/ QUOTE ] The simplest rebuttal to this is to look at the performance of index funds. Anyone can buy them, and they've returned substantially positive returns over time. For specific evidence, look at the Vanguard 500 Index Fund. Scroll to the bottom of the page, where it's annualized return is 12.15%, over 29 years. Thats some major positive EV.
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#9
11-01-2005, 09:11 PM
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Re: Buying stocks at random
[ QUOTE ]
Suppose you bought 100 shares of 100 randomly chosen companies (from all sectors of business) at $10 each. After a year (or other amount of time), would the total worth of your stocks have (on average) gone up, down or stayed the same? [/ QUOTE ] One year is a pretty narrow range. Chances are it will stay the same over this period because the near future growth rates and valuation have been taken into account for the pricing.
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