I'm going to propose a counter-argument based on an experiment I'm running on myself. I recently started trading stocks because I wanted to expose myself to a different news-sphere. I believe that I will grow and understand more about the world from doing so. Is it addicting? Maybe, but if I learn more about machine learning because I'm running models on stock data, then it doesn't seem too unhealthy to me. Am I going to gamble all my money away on the news cycle and models that I'm developing? Hell no. But then, maybe I haven't had whatever hit I would need to be super addicted to it.

Another hypothesis: the difference is whether you view it as a means or an end. I do not believe that stock trading will ever make me rich. But I believe it is a means to teach me things. Thus it is less addictive.

That's kind of the point of the article's argument, which is to say that if you compare your trading to an "index stock" then the index is likely to win, by a big margin.

So, good luck with ML, but make sure you reality test against the "set and forget" solution of indexes.

A follow-up question is if Robinhood (by massively reducing trading costs/friction) is socially positive or not. Their career pitch is that they democratize America's financial system (https://careers.robinhood.com/), but looking at how the reduced friction just leads to Average Joe losing more money, you could credibly view this as a type of destructive "excessive democracy".

They are increasing access to markets for the average person. They're also encouraging uninformed investment decision-making by doing things like sending push notifications when big name stocks swing way up or down, earning money by selling users' trading data to the highest bidder (increasing the overall fraction of "national product" that ends up in the pockets of financiers as the purchasers of that data make fast moves on that info) , plus that whole debacle with their "checking & savings" product.

What do you mean by “users’ trading data”? If different from the trades themselves?

I just meant the transaction history.

Don't forget trading on margin and access to options.

If the Average Joe loses more money, maybe they should rename it SherrifOfNotingham as it would be stealing from the poor to give to the rich.

Individuals are actively choosing to make investments. Although I will say that it seems that their risk assessment department is seriously lacking. (see: u/1r0nyman)

I dunno, he doubled his money — I think his assessment of risk was spot on ;)

simply reduce it down to is gambling socially positive or not

Some day in the future we will look back on present day paternalism as a terrible evil.

This attitude of “Those people are too stupid to do what they want. We should stop them.” Is awful.

Enough.

> Well that is a click baity title

From the article:

> “People are trying to teach you to come in and trade actively in stocks,” he told his audience. “Well, I regard that as roughly equivalent to trying to induce a bunch of young people to start off on heroin.”

It's actually a pretty accurate description of the most sensational part of his speech.

> trade actively

The key phrase in the sentence, which I think people are glossing over here

There are plenty of comments here that advocate for active trading, so Munger's quip still rings true.

Active trading does make sense for certain participants (e.g. certainly for HFT firms, but arguably for many others, e.g. maybe even for a well-educated individual investing in under-researched small cap), and as the fraction of investment money that is passive increases it starts to make sense for more of them.

Active trading with options is a great way to make money. I always suggest it's good to park money in something like AAPL and collect dividends from it, as it's the market leader, if it drops, everything will. Alternatively put most of your money in an index fund and just keep adding. Something like 10% of your portfolio in options trading, and 90% in an index fund/powerful stock, preferably a dividend paying one. Then limit your options trade to 3% of your options trading account. This way you can make money from options and grow your account at the same time using the buy and hold methodology.

> he is a big proponent of index funds

Oddly, when I entered the passive index world I got absorbed into checking in on my index ETF purchases every day, multiple times per day, and resisting the urge to sell and buy (more index ETFs, lol). I knew in my head this made no sense - the prices will follow the market by design - yet this urge went on for like 2 weeks before I forced myself to stop.

If you follow the rule that you are not experienced enough to pick out individual stocks you should also follow the rule not to pick various sectors or all the other possible index funds that exist.

Following this invest in only two funds. A total index fund for the companies in the country you want to live in (and hopefully the one you already do live in :) ) and a global total index fund of some type. I would choose a global fund that invests only in places that had a decent rule-of-law culture, but that's just me.

The nice thing about index funds is there are so many different ones to buy and trade. Years ago, I made a portfolio of many ETFs. One idea that I found attractive for a while was to equal weight by country, on the basis that it should be better diversification than owning the world, cap weighted.

Is value investing, as a general method still work, when everybody knows about it, unlike the past ?

Or just a lucky few beat the index funds with it today ?

Value has not performed particularly well over the last decade: see page 6 in https://www.yardeni.com/pub/style.pdf

Most of these charts rely only on quantitative measure of value like P/E and that has certainly under performed by a lot. But value investing goes beyond such quantitative measures.

Sure, it’s not just a question of ratios. But I think it’s hard to make the case that « value » has worked lately as well as it used to work.

Active value is not outperforming either: http://news.morningstar.com/fund-category-returns/

If you think those are closeted indexers we could look at hedge funds and I don’t think value stars have shined in the last years (but maybe my perception is not fair and it’s the result of over-reporting of the misfortunes of value investors: https://www.google.ch/amp/s/www.bloomberg.com/amp/news/artic...).

But the fact is that even Warren Buffet is doing just “ok” in relative terms. (Yes, he has a lot of money to manage. But he also has access to investment opportunities that nobody else has.)

It still works, because not everyone is in it for the long term. Some want to chase profits on shorter timescales, so will use their capital in other ways rather than sit and hold.

Value investing works even better when you're not in the public markets.

That's only if you can access private equity. For the average retail investor, it may as well not exist.