Financial Spread Betting?

[Gondorian]

(Apologies if this is in the wrong place or inappropriate.  Feel free to delete if it is.)

 

Since this site seems to be about making money, I thought I'd raise the subject of another income-generator I have looked into, which requires zero storage space, but can use similar bargain-finding skills: the stock market!  Or, more specifically, financial spread betting which doesn't involve buying shares but is effectively the same, except no capital gains tax to pay and you can leverage your money to "buy" more stock than you otherwise could have, and shorting is easier too (although not really recommended because of the huge risk involved).

 

Anyway, I'm not sure if I would recommend it, but I wanted to see if anyone wanted to talk about their experiences with it.

 

The main trouble I see with it is that you are never really out unless you walk away.  So you could be

[Quacs]

While this is an investing site, Brickpicker focuses on Lego as its traded "commodity" instead of stocks.  I don't think many will have much to add - I certainly don't.  I feel the same as Stephen - I don't mind the post, but if it strays too far from the purpose of this site and its forum, it will be locked.

 

My caution with any investment (and this goes for Brickpickers too) is to know exactly what you're investing in, do your research, and only invest what you can afford to lose.  Simple advice that everyone hears constantly, but it can't be stressed enough. 

 

As the old saying goes, "A fool and his money is easily parted."  Don't be a fool!

[Veegs]

Having to walk away to make a profit sounds difficult to wrap my head around.  I'd prefer rolling over my Lego stock, selling off older sets and pocketing some of the $$ and reinvesting the rest.  Seem safer to me than betting on stocks.

[Sauromosis]

I had to look this up, hadn't heard of it.  I guess this is way more popular in the UK? 

 

I suppose you could recreate this sort of thing with options.  I've heard options be compared to fire, they can light your home or burn it all down.

 

What we need is Lego futures...buying and selling without ever owning a set!

[kerrmando]

I've played with both stocks and legos.... I've made more money on Legos =P

[Gondorian]

Having to walk away to make a profit sounds difficult to wrap my head around.  I'd prefer rolling over my Lego stock, selling off older sets and pocketing some of the $$ and reinvesting the rest.  Seem safer to me than betting on stocks.

 

Well, I guess the point here is that what most of you guys seem to be doing here isn't investing, but trading.  You buy something cheap to sell later for profit.  You then build up realised gains over time, after your sales, which you use to do more trading with.  You can see your profits in your bank account from making the money on each item.

Actual investing is a long-term thing, where you buy something and hold it, to get dividends and usually only sell when you think it's become overpriced, so you can pick some other bargains.

 

I am sure there are some actual Lego investors here, who buy and hold/hoard, but I keep seeing people talking about "flipping" which is pure trading and not investing.  Maybe a new thread asking people about whether they are mostly trader or investor would be in order, since the two are quite different, with the latter generally being "in" most of the time and therefore not really getting the profits until they walk away (i.e. sell their stash).  In terms of Lego, I will likely just be an investor, holding onto my collection for years and years.

[Alcarin]

Gondorian is right....

 

I mean if we look it logical then every shop is ''investor'' because they do exactly like us... buy as low as possible sell ''high'' (higher)

 

we are LEGO shoppers speculative part of LEGO business

[emes]

Well, I guess the point here is that what most of you guys seem to be doing here isn't investing, but trading.  You buy something cheap to sell later for profit.  You then build up realised gains over time, after your sales, which you use to do more trading with.  You can see your profits in your bank account from making the money on each item.

Actual investing is a long-term thing, where you buy something and hold it, to get dividends and usually only sell when you think it's become overpriced, so you can pick some other bargains.

 

I am sure there are some actual Lego investors here, who buy and hold/hoard, but I keep seeing people talking about "flipping" which is pure trading and not investing.  Maybe a new thread asking people about whether they are mostly trader or investor would be in order, since the two are quite different, with the latter generally being "in" most of the time and therefore not really getting the profits until they walk away (i.e. sell their stash).  In terms of Lego, I will likely just be an investor, holding onto my collection for years and years.

 

No, this is very poorly described.

 

Investing is the act of putting money into something for a potential profitable return. There are many ways to invest. Long-term holding and short-term flipping are both forms of investing. Whether or not something qualifies as investing has nothing to do with the time-frame.

 

The presence or absence of dividends does not make something an investment.

 

What is actually done by members here is called arbitrage. Arbitrage is buying something in one market, or at one time, and selling in another market or at another time for a profit. Arbitrage is a form of investing, and it's irrelevant whether it's a long-term hold or a short-term flip, other than doing the short-term flip for a profit means you get your investment and your profit more quickly. Whether long or short-term is more of a mentality or approach that each individual decides, hopefully based on the situation.

 

As a community we need to get away from saying that one approach is absolutely better than any other. There are as many approaches to investing as there are people. Some approaches are better in some situations than others. It's always situational. Posts like the one I've quoted smack of there being an overall quality difference between flipping and holding things long-term. There's not...it's a preference and both can work in different conditions and different situations.

 

Personally my approach is best described as neither of these, rather my approach is all about hitting a target return, regardless of how long that takes. Practically though given that my target return is 30% profit, I trend towards the flipping end of the discussion.

 

Also, I think comparing what is done by members here to stock trading is a really bad comparison. It's really nowhere near the same thing for many reasons. Part of the reason we're able to do what we can do with LEGO and generate profits is due to limited limited production, limited distribution, and limited knowledge in the market. A better comparison is a commodities market, but one where you have to take actual physical delivery of the commodity.

 

As far as the original topic of the thread, I have no idea what you're talking about. That might mean nothing, but it's probably significant given that I've spent most of my career working in IT for financial services firms (~25 years), and I currently own a consulting and training company that specifically consults on technology and training issues for large financial services companies, so generally topics in that space are something I'm fairly familiar with.

[emes]

Another way that you might look at what is done here, and I challenge you all to consider things this way, is that what we're really doing is agreeing to put up cash for a product now, that we will then sell to someone for a profit at a future point in time.

 

In this sense what you're really doing is providing future buyers with a high-interest loan. You have the cash now that you're willing to invest, and you "agree" to sell something to someone at a future date for a premium over the purchase price.

[Gondorian]

As far as the original topic of the thread, I have no idea what you're talking about. That might mean nothing, but it's probably significant given that I've spent most of my career working in IT for financial services firms (~25 years), and I currently own a consulting and training company that specifically consults on technology and training issues for large financial services companies, so generally topics in that space are something I'm fairly familiar with.

 

I think it's because you are based on the U.S.  Gambling in the U.K. is tax-free and financial spreadbetting is classified as gambling.

 

Maybe the other stuff you wrote is related to differences between U.K. and U.S. too.  I dunno.  I think it's best we agree to disagree.

[Alcarin]

No, this is very poorly described.

 

Investing is the act of putting money into something for a potential profitable return. There are many ways to invest. Long-term holding and short-term flipping are both forms of investing. Whether or not something qualifies as investing has nothing to do with the time-frame.

 

The presence or absence of dividends does not make something an investment.

 

What is actually done by members here is called arbitrage. Arbitrage is buying something in one market, or at one time, and selling in another market or at another time for a profit. Arbitrage is a form of investing, and it's irrelevant whether it's a long-term hold or a short-term flip, other than doing the short-term flip for a profit means you get your investment and your profit more quickly. Whether long or short-term is more of a mentality or approach that each individual decides, hopefully based on the situation.

 

As a community we need to get away from saying that one approach is absolutely better than any other. There are as many approaches to investing as there are people. Some approaches are better in some situations than others. It's always situational. Posts like the one I've quoted smack of there being an overall quality difference between flipping and holding things long-term. There's not...it's a preference and both can work in different conditions and different situations.

 

Personally my approach is best described as neither of these, rather my approach is all about hitting a target return, regardless of how long that takes. Practically though given that my target return is 30% profit, I trend towards the flipping end of the discussion.

 

Also, I think comparing what is done by members here to stock trading is a really bad comparison. It's really nowhere near the same thing for many reasons. Part of the reason we're able to do what we can do with LEGO and generate profits is due to limited limited production, limited distribution, and limited knowledge in the market. A better comparison is a commodities market, but one where you have to take actual physical delivery of the commodity.

 

As far as the original topic of the thread, I have no idea what you're talking about. That might mean nothing, but it's probably significant given that I've spent most of my career working in IT for financial services firms (~25 years), and I currently own a consulting and training company that specifically consults on technology and training issues for large financial services companies, so generally topics in that space are something I'm fairly familiar with.

 

Yeah but by that logic Shops(Toy shops) are investing also...

[Gondorian]

This is my source for my P.O.V. btw:

 

http://www.investopedia.com/ask/answers/12/difference-investing-trading.asp

 

Maybe that site sucks though.

[Fcbarcelona101]

I agree with everything emes just said in his post, but isn't arbitrage supposed to be an immediate thing? Like buying a clearanced LEGO set for $10 at Walmart and selling it quickly for $80. I am not sure if buying it today and selling it in 2 months could still be called arbitrage.

[emes]

Yeah but by that logic Shops(Toy shops) are investing also...

 

Why do you think they're not?

 

I'm not making up the definition of an investment.

 

Again, we as a community need to get away from some pretend prestige associated with calling something an "investment."

[emes]

I agree with everything emes just said in his post, but isn't arbitrage supposed to be an immediate thing? Like buying a clearanced LEGO set for $10 at Walmart and selling it quickly for $80. I am not sure if buying it today and selling it in 2 months could still be called arbitrage.

 

There is a form of arbitrage called "temporal arbitrage". Arbitrage is taking advantage of differences in price between markets. Markets can exist at different times.

 

If you were buying something, then adding value to it, and selling it 2 months later, I'd say that's not arbitrage. That's called "value added reselling". I'm assuming that most members here aren't adding value or changing their sets, they are simply selling the set as-is in the future market.

[Fcbarcelona101]

There is a form of arbitrage called "temporal arbitrage". Markets can exist at different times.

 

If you were buying something, then adding value to it, and selling it 2 months later, I'd say that's not arbitrage. That's called "value added reselling". I'm assuming that most members here aren't adding value or changing their sets, they are simply selling the set as-is in the future market.

Thanks for the clarification.

[Alcarin]

Why do you think they're not?

 

I'm not making up the definition of an investment.

 

Again, we as a community need to get away from some pretend prestige associated with calling something an "investment."

 

Yeh but by that logic everything is investment.... either wholesale or whatever else...  

 

So if i buy chocholate bar today and prices go up 2 cents tommorow I did investment... my entire fridge is an investment...

 

its a dumb definition ...

 

if you'll go out on the street and ask 10000000000 people not even 1% would call either an investment. 

[emes]

Yeh but by that logic everything is investment.... either wholesale or whatever else...  

 

So if i buy chocholate bar today and prices go up 2 cents tommorow I did investment... my entire fridge is an investment...

 

its a dumb definition ...

 

if you'll go out on the street and ask 10000000000 people not even 1% would call either an investment. 

 

I knew better than to respond to Alcarin..forgive me.

[emes]

There is a form of arbitrage called "temporal arbitrage". Arbitrage is taking advantage of differences in price between markets. Markets can exist at different times.

 

If you were buying something, then adding value to it, and selling it 2 months later, I'd say that's not arbitrage. That's called "value added reselling". I'm assuming that most members here aren't adding value or changing their sets, they are simply selling the set as-is in the future market.

 

Not a huge fan of quoting myself, but if you want to see an interesting take on value added reselling, look at what people do with Pokemon and MTG cards. There are artists out there who modify the cards, and then sell them on eBay, etc.. for much higher prices. Some are highly collectible and sought-after.

[Gondorian]

 

Again, we as a community need to get away from some pretend prestige associated with calling something an "investment."

 

I never implied one was better than the other.  They are just different.  Given the space requirements of investing in Lego, I think position trading (i.e. buying now to sell in about 3 years) is likely the most practical approach and I think that's what most people here seem to be doing, based on my limited browsing of the site.

The short-term trading called "flipping" is just a byproduct of being aware of price disparities in different markets and a way to make quick income that can then be invested or position-traded.

[emes]

Well, I guess the point here is that what most of you guys seem to be doing here isn't investing, but trading.  You buy something cheap to sell later for profit.  You then build up realised gains over time, after your sales, which you use to do more trading with.  You can see your profits in your bank account from making the money on each item.

Actual investing is a long-term thing, where you buy something and hold it, to get dividends and usually only sell when you think it's become overpriced, so you can pick some other bargains.

 

I am sure there are some actual Lego investors here, who buy and hold/hoard, but I keep seeing people talking about "flipping" which is pure trading and not investing.  Maybe a new thread asking people about whether they are mostly trader or investor would be in order, since the two are quite different, with the latter generally being "in" most of the time and therefore not really getting the profits until they walk away (i.e. sell their stash).  In terms of Lego, I will likely just be an investor, holding onto my collection for years and years.

 

If describing something as "actual investing" isn't implying a quality difference, then I don't know what is....

 

Which approach you prefer is really irrelevant to me, but the reason I responded to this thread has little to do with you, and more to do with a discussions like this that come up all the time on this site.

 

That discussion is basically, "which is better, short-term flipping or long-term "investing"", which missed the point that both are investing, and further misses the point that someone who is successful at this is not limiting their toolbox to a single approach.

[Quacs]

Yeh but by that logic everything is investment.... either wholesale or whatever else...  

 

So if i buy chocholate bar today and prices go up 2 cents tommorow I did investment... my entire fridge is an investment...

 

its a dumb definition ...

 

if you'll go out on the street and ask 10000000000 people not even 1% would call either an investment. 

 

I think emes is right on this.  If you purchase anything with the intent of selling it at a higher price later, that's an investment. 

 

Your chocolate bar can be an investment if your intent is to resell it for more money.  People on eBay sell their food "investments" all the time. 

 

I think emes' larger point is that the term "investment" has changed over the years so that it now has a more sophisticated connotation that doesn't match its actual meaning.  The Investopedia definition is a perfect illustration of the finance world's venacular: "traders" swap stocks daily whereas "investors" buy and hold commodities in a portfolio.  Yet, when you boil it down there's no difference between the guy at JP Morgan that purchases SPDRs to add to his book of investments and anyone on this board that is trying to turnover Lego sets for profit.  The vehicle is different, the concept is the same.

[Gondorian]

If describing something as "actual investing" isn't implying a quality difference, then I don't know what is....

 

I think you're projecting your own views of whether investing is superior to other things here.

 

Saying something is "actual" or not says nothing about whether it's good to be "actual" or not.

[emes]

I think emes is right on this.  If you purchase anything with the intent of selling it at a higher price later, that's an investment. 

 

Your chocolate bar can be an investment if your intent is to resell it for more money.  People on eBay sell their food "investments" all the time. 

 

I think emes' larger point is that the term "investment" has changed over the years so that it now has a more sophisticated connotation that doesn't match its actual meaning.  The Investopedia definition is a perfect illustration of the finance world's venacular: "traders" swap stocks daily whereas "investors" buy and hold commodities in a portfolio.  Yet, when you boil it down there's no difference between the guy at JP Morgan that purchases SPDRs to add to his book of investments and anyone on this board that is trying to turnover Lego sets for profit.  The vehicle is different, the concept is the same.

 

 

Well said. You could invest in raw sewage if you thought someone would pay you more for it in another market or at a future point in time. 

[Gondorian]

Well said. You could invest in raw sewage if you thought someone would pay you more for it in another market or at a future point in time. 

 

You would then be trading raw sewage, not investing in it.