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Ask HN: I have $450K cash, what should I do to maximize my return?

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Re: Ask HN: I have $450K cash, what should I do to maximize my return?

#361

Post by JackMorgan »

mancerayder wrote: post #154
stu2b50 wrote: post #147

Earlier quoted context omitted.

You're conflating index funds with S&P 500 Index funds, though. You can buy an index fund with _zero_ tech stocks. You can buy something like VINIX which has considerably less weight on the BigN tech firms.

The VINIX is down 3% YTD while the rest of the market ballooned. Looks like we "picked stocks" by picking the indexes here, too? I just don't understand the insistence on indexes. We're afraid of picking stocks that go bankrupt? We work in tech, and a lot of us are science nerds. Surely we can pick names based on how we think those technologies are likely to be successful. We have access to a lot more information tha…

I highly suggest following /r/wallstreetbets for any length of time. If you see a "great deal" put in a reddit remindme and go back and figure out your "gains". You'll quickly realize stock picking with all the "better information" we have today means every other single investor has the same info. It's a madhouse of everyone seeing the same things and rushing for it, but you're doing it with Robinhood with delays and the big players have hardline terminals a dozen feet from the stock exchange.

Re: Ask HN: I have $450K cash, what should I do to maximize my return?

#362

Post by bllguo »

arcticbull wrote: post #267
jordanmarshall wrote: post #51

Just skimming some of the replies here makes me think you will get better advice on the Bogleheads forum [1]. Despite the minimalist appearance it is actually a great place to get sensible financial advice. I would start with the wiki page on managing a windfall [2], then search through older replies to similar questions. This kind of question gets asked there a lot, so there should be some recent threads. [1] https:…

Bear in mind Personal Finance is pretty conservative. Depending on how much time you have in the market you can take some more aggressive bets. I'm not suggesting r/WallStreetBets style investing but something like a risk parity adjusted pairing of 3X leveraged S&P with 3X leveraged treasuries can yield dramatically better returns over time [1]. I'm not recommending it per se, to each their own risk tolerance and res…

thanks for the link, i will need to give this a thorough read. I understand why most investing advice is conservative and I do plan on having most of my money in those strategies, but I've always thought there must also exist some relatively simple but informed methods for those with higher risk appetites

Re: Ask HN: I have $450K cash, what should I do to maximize my return?

#364

Post by overcast »

Sschellbach wrote: post #284
overcast wrote: post #11

Earlier quoted context omitted.

Any mention of Bitcoin or cryptocurrency investing should be banned on HN.

you support censoring technology topics on a technology forum?

Yes, when it's nothing more than a bunch of shills potentially convincing the naive into buying into their pyramid scheme.

Re: Ask HN: I have $450K cash, what should I do to maximize my return?

#365

Post by throw0101a »

itsoktocry wrote: post #334
mancerayder wrote: post #111

Earlier quoted context omitted.

I agree with the (downvoted) guy who said, I'm an index fund skeptic. Something is true with index funds that was less true historically, which is the concentration of a few large companies in the largest indexes - as in, the amount of percentage of capital they have. Fact, FAANG make up 10% of the s&p 500 index, tech makes up 20+ %. It's NOT at all averaged out in the way the Bogleheads might think it is. Is it a "b…

> " It's NOT at all averaged out in the way the Bogleheads might think it is. " Correct. There are smart people doing research out there right now demonstrating that "passive" isn't really passive, and that people regularly buying into indices at any price is skewing the market. No one is clear on what the ramifications of this are, but as the old adage says, "past performance no guarantee of future success". The sam…

> […] and that people regularly buying into indices at any price is skewing the market.

And at what price should people be investing in the market? Sitting on the side in cash, waiting for the dips and crashes to occur, will give you mediocre results:

* https://ofdollarsanddata.com/even-god-couldnt-beat-dollar-co...

Further, trying to miss the worst days on market down turns often means missing the days with the best returns:

* https://theirrelevantinvestor.com/2019/02/08/miss-the-worst-...

For most people, most of the time, the best thing they can do is just chug along putting a little bit of money away every month. Put in what you can, but a good goal (if you can afford it) is to put away at least 5% of your income (and maybe up to 10%).

> The same goes for buying the SPY and forgetting about it.

You're not wrong, but: what's the alternative? Unless you can show something that's demonstratively better than a low-fee S&P 500 or Russell 3000 index fund (perhaps tempered with some bonds for risk/volatility management), bemoaning the situation is not very productive.

Re: Ask HN: I have $450K cash, what should I do to maximize my return?

#366

Post by lightgreen »

xutopia wrote: post #363

How about your return on happiness. Why not consider where you would want to spend your retirement and invest in making that place a reality. Forget ROI... think happiness.

Maybe they don't want to think about retirement now. They just want to invest the money and forget about the issue, and do now whatever they make them happy, which is not planning for retirement.

Re: Ask HN: I have $450K cash, what should I do to maximize my return?

#367

Post by BlackJack »

arcticbull wrote: post #330
jannotti wrote: post #313

Earlier quoted context omitted.

Please stay away from leverage equity index funds. https://capitalallocatorspodcast.com/wp-content/uploads/2017... Edit: For more clarity - risk parity can make sense, but I don't think you ever need to use leverage on your equities to get risk parity. The fundamental insight of risk parity investing is that at commonly recommended ratios (50/50, 60/40) the risk (variance) from equities totally dominates the risk fro…

Please read the write-up before replying with blanket statements that aren't relevant in this case :) That issue is addressed in the bogleheads post explicitly ("How much does the leverage cost?" and "Don't you know that leveraged ETFs are only intended to be held for one day?"), basically the ETFs are risk parity adjusted, and the volatility in the ETFs actually what generates the returns. The strategy makes money f…

I like the strategy and employ it on a portion of my 401k. I think you need to do it in a tax-advantaged account, otherwise rebalancing + short term gains will eat away your profits.

Also, that strategy fails in a rising interest rates environment like in the 50s and 60s (not sure of exact years). Fed has indicated keeping rates low for the next two years, but if they start hiking rates after, I think the strategy would underperform.

Re: Ask HN: I have $450K cash, what should I do to maximize my return?

#368

Post by 135792468 »

lowercased wrote: post #210
projektfu wrote: post #86

Earlier quoted context omitted.

If you do use a financial advisor, use one that charges hourly. The ones that charge a percentage win regardless of your outcome. I have been very unimpressed with their work when I have seen it in action. The flat fee ones are incentivized to give you less than what they would do in the same number of hours. Probably you can set up an initial allocation and learn about rebalancing, and you’ll only occasionally need…

"use one that charges hourly" - that's what I'd meant by "meeting with a fee-only advisor", but perhaps my term isn't the best phrase to keep in mind. yes, keep a fixed fee (hourly, whatever) - just don't tie a % of your portfolio as a fee for someone to 'manage' your money. Or... don't do it without careful consideration.

Where do you find them? I’ve been looking in my area and there are a few I’ve spoken with that don’t seem to be in tune with 2020 or my personal philosophies.

Re: Ask HN: I have $450K cash, what should I do to maximize my return?

#369

Post by ryandrake »

MuffinFlavored wrote: post #216
jordanmarshall wrote: post #51

Just skimming some of the replies here makes me think you will get better advice on the Bogleheads forum [1]. Despite the minimalist appearance it is actually a great place to get sensible financial advice. I would start with the wiki page on managing a windfall [2], then search through older replies to similar questions. This kind of question gets asked there a lot, so there should be some recent threads. [1] https:…

Why isn't the tl;dr: 1. put 6 months of expenses in a high-yield savings account that is easily accessible + liquid in case of emergencies 2. max out tax-advantaged accounts. $19.5k/yr 401k + $6k/yr IRA. allocate into anything similar to a target date retirement fund with healthy exposure to US total market/probably light bonds depending on age 3. put the rest in a brokerage account, allocated in the same things your…

I'd expand upon the emergency fund. I always feel when someone just says "put X in an emergency fund" and leaves it at that, they're missing the big picture of emergency planning. Emergencies can be long, slow burns, they can be short and acute, they can involve lack of access to financial institutions. I like to keep different tranches of emergency assets set aside for different kinds emergencies:

1. Something like Series I bonds for long-term future economic downturns or inflation

2. A CD ladder or money market for temporary job loss

3. Cash in a mattress and food/water for natural disasters

4. Guns, ammo, and containers of gasoline for the zombie apocalypse.

Weight each tranche by your assessment of each event's probability. You diversify the rest of your portfolio, why not diversify your emergency fund?

Re: Ask HN: I have $450K cash, what should I do to maximize my return?

#370

Post by PascLeRasc »

quotemstr wrote: post #81
throw0101a wrote: post #29

> I'm not comfortable investing the entirety into an index fund, given the current socio-political climate. Over the the long term there is not really anything better to do with it than equities: the Great Depression, World War 2, gold standard retirement, 1980s inflation, etc. Even if you only invested in the peaks, you'd still do quite well over the decades: * https://awealthofcommonsense.com/2014/02/worlds-worst-m…

I'm an index fund skeptic. What would happen in a world where everyone invested in index funds? Capital allocation would go haywire. You can't create value out of nothing. ISTM that the more people push on index funds, the more overvalued equities in the index become relative to those outside the index. I'm not sure that retrospective analysis saying index funds are the best applies going forward in a world where ind…

Your argument is exactly what Michael Green talks about [1]. The talk I linked is from January of this year and he basically predicted the exact crash we saw in February. Individual stocks were going up and down tracking the S&P 500 exactly, based on no news or any kind of information, just that they were in the S&P index. The price of the stock did not reflect the company's financials or outlook. We're about to see this when Tesla gets added to the S&P 500 - funds will be required to purchase Tesla stock at any price.

The reason that I'm personally an index fund skeptic is that I like to understand what I'm invested in. If you look through the S&P 500 members, there's dozens to hundreds of companies basically no one's ever heard of, and companies that I personally don't see a big future in. If index funds didn't exist, why would I take $100 of Fifth Third Bancorp or TechnipFMC when I could get $100 of Apple or Slack instead? The former is what you get when you invest in the S&P, while the latter are products I use everyday, and I feel that I understand how they make money.

If you hang around investing subreddits long enough, it starts to feel like everyone's parroting the same 5 sentences about expense ratios and diversification, with no analysis or critical thought put into what the actual investments are.

[1] https://youtu.be/x-rJciYZmi0

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