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Ask HN: Getting Started Investing

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Re: Ask HN: Getting Started Investing

#71

Post by badfrog »

tedmiston wrote: post #61
badfrog wrote: post #47

Earlier quoted context omitted.

Isn't that just choosing wise places to put your capital? Where's the arbitrage?

The arbitrage is that the same amount of dollars to pay engineers goes further in the midwest than on the coasts which extends the runway of a company with the same amount of funding because of reduced burn rate. Drive Capital (ex-Sequoia) is a good example. You might be surprised how uncommon this idea still is today.

Arbitrage is about buying something that you can immediately sell somewhere else for a higher price with no risk. What you're describing just sounds like getting a good deal.

If you could buy 10% of a company for $1mm in Chicago and sell that 10% for $1.5mm in SF the next day, that would be a form of arbitrage.

From wikipedia:

> the practice of taking advantage of a price difference between two or more markets: striking a combination of matching deals that capitalize upon the imbalance, the profit being the difference between the market prices. When used by academics, an arbitrage is a (imagined, hypothetical, thought experiment) transaction that involves no negative cash flow at any probabilistic or temporal state and a positive cash flow in at least one state; in simple terms, it is the possibility of a risk-free profit after transaction costs

https://en.wikipedia.org/wiki/Arbitrage

Re: Ask HN: Getting Started Investing

#72

Post by twiceaday »

AlchemistCamp wrote: post #62
icedchai wrote: post #20

Do you really want to invest in early stage, high risk ventures that have a low probability of return? Open a Vanguard or Fidelity account. Buy index funds. Invest regularly. In 10 - 15 years you'll have a small fortune.

In my opinion, index funds are overrated at this point. Over the past couple of centuries, England and especially the US have had exceptional returns. Most indexes have zeroed out at some point, however. War, economic collapse, revolutions, etc happen. Even if we've reached "the end of history" and these risks no longer exist (which I don't think is true), then there's still the question of valuation. Stock markets h…

You seem to be aware of index funds but not of buy-and-hold index fund investing and you assume everybody is like you. I say this because an attack of index fund investing based on a prediction of low future returns makes no sense. A major point of index fund investing is resigning that you cannot reliably do better than the average. Predicting a lower market average doesn't change this. Such an investor would say that a slow market average makes it difficult for everyone to make money, not somehow just the index fund people.

I am also bewildered that you'd think buying index funds is good in an up-economy but is bad an a down-economy. You want the diversified gain and the non-diversified loss? It seems to me that if you could somehow make accurate market predictions you'd be better off doing the exact opposite strategy.

Re: Ask HN: Getting Started Investing

#73

Post by charlesdm »

twiceaday wrote: post #72
AlchemistCamp wrote: post #62

Earlier quoted context omitted.

In my opinion, index funds are overrated at this point. Over the past couple of centuries, England and especially the US have had exceptional returns. Most indexes have zeroed out at some point, however. War, economic collapse, revolutions, etc happen. Even if we've reached "the end of history" and these risks no longer exist (which I don't think is true), then there's still the question of valuation. Stock markets h…

You seem to be aware of index funds but not of buy-and-hold index fund investing and you assume everybody is like you. I say this because an attack of index fund investing based on a prediction of low future returns makes no sense. A major point of index fund investing is resigning that you cannot reliably do better than the average. Predicting a lower market average doesn't change this. Such an investor would say th…

You can totally do better than the average, especially with small amounts of money, but not for the same effort required of an index fund (i.e. close to none).

Re: Ask HN: Getting Started Investing

#74

Post by tedmiston »

badfrog wrote: post #71
tedmiston wrote: post #61

Earlier quoted context omitted.

The arbitrage is that the same amount of dollars to pay engineers goes further in the midwest than on the coasts which extends the runway of a company with the same amount of funding because of reduced burn rate. Drive Capital (ex-Sequoia) is a good example. You might be surprised how uncommon this idea still is today.

Arbitrage is about buying something that you can immediately sell somewhere else for a higher price with no risk. What you're describing just sounds like getting a good deal. If you could buy 10% of a company for $1mm in Chicago and sell that 10% for $1.5mm in SF the next day, that would be a form of arbitrage. From wikipedia: > the practice of taking advantage of a price difference between two or more markets: strik…

In the theoretical sense, yes. The usage in the here is much softer and less strict, not like in finance. I wouldn't get too caught up on the casual usage.

The way I've seen the word used in startups is more akin to "Tim Ferriss style" geo-arbitrage.

https://www.physicianonfire.com/geographicarbitrage/

Re: Ask HN: Getting Started Investing

#75

Post by AlchemistCamp »

twiceaday wrote: post #72
AlchemistCamp wrote: post #62

Earlier quoted context omitted.

In my opinion, index funds are overrated at this point. Over the past couple of centuries, England and especially the US have had exceptional returns. Most indexes have zeroed out at some point, however. War, economic collapse, revolutions, etc happen. Even if we've reached "the end of history" and these risks no longer exist (which I don't think is true), then there's still the question of valuation. Stock markets h…

You seem to be aware of index funds but not of buy-and-hold index fund investing and you assume everybody is like you. I say this because an attack of index fund investing based on a prediction of low future returns makes no sense. A major point of index fund investing is resigning that you cannot reliably do better than the average. Predicting a lower market average doesn't change this. Such an investor would say th…

I'm aware of "buy-and-hold index fund investing". I believe it was a good strategy because it was an an unpopular, undervalued asset class 100 years ago and has since become very popular and overvalued.

Another important consideration is that companies now go public much later than they did pre-Sarbox. The sad truth is that a company's biggest gains are generally behind them by the time retail investors are allowed in. There will be no repeat of the windfalls ordinary investors made[1] from the IPOs of Microsoft, Walmart, Starbucks and similar companies in today's batch of new IPOs. This in itself is a good reason not to reflexively discourage someone from learning about angel investing.

> I am also bewildered that you'd think buying index funds is good in an up-economy but is bad an a down-economy.

I don't think this.

Provided long-term real-GDP growth prospects are good, I think buying index funds when the funds themselves are under-valued is a good strategy. Looking at the underlying P/E, P/B, DCF or just about any metric you choose, you'll see that on average, publicly traded stocks[1] are very expensive compared to historical valuations.

1) both directly and through funds that index them

Re: Ask HN: Getting Started Investing

#76

Post by paulriddle »

Martin Shkreli said $100k is not enough money to start investing, you can't do anything with such a low amount. The reason for that is because investing is competitive, you have to make smart decisions. To make smart decisions you have to spend a lot of time and effort evaluating companies you want to invest in. If you actually spend this time and effort, you won't have enough time for anything else. With your $100k you will be happy to make 10% in one year, so it's $10k per year full time.

You need millions of dollars, then it starts being worth it. You should listen to Martin Shkreli, even though he is in prison for fraud, because he knows more about investing than almost anybody here on HN. Most people on HN will not be able to record 1 hour video talking about investing, let alone 35+ of them. They don't have the stamina and knowledge. They also don't have the results to back up their advice, unlike Martin Shkreli.

It seems foolish to think that you can spend just a few hours per week and think you're going to beat the market.

I don't want to insult anyone, I myself don't know much about investing. The reason why I mention Martin here is because his videos on youtube are very accessible for layman people who are uninformed about the market.

Re: Ask HN: Getting Started Investing

#77

Post by ronreiter »

You can't start investing in start-ups and expect to hit the good ones without excellent access and knowledge. You will almost certainly lose all your money.

Invest in the S&P 500 using an index fund, that's it. Investing in the S&P 500 is another way of investing in "the world's economy", and that will, hopefully, go up over time. And if it goes down, then at least you're not the only one who lost money so your money will be worth as much as it used to anyways.

Re: Ask HN: Getting Started Investing

#78

Post by shifto »

charlesdm wrote: post #69
o-__-o wrote: post #57

Earlier quoted context omitted.

Again way too many barriers to entry. I just need $100k to prove my idea. These funds have billions. They won’t lend 100k because it has a prototype app, a handful of interest, but no investor pitch? But they will give $1m to someone who can pitch a dream with no product? Please come to me with $100k and I’ll offer you simply a guaranteed 0% return (no loss on investment) so I can pad my bank account and make “real”…

Lol dude, "just" $100k. Barriers to entry? Totally honest: I'm an investor and I wouldn't invest $100k in you with a mentality like that. We're all in this to make money. What you need is to prove your idea. No one is going to put $100k (or $100 million for that matter) in an untested idea, unless you have a relationship with an investor. And investing is a relationship business. If a friend whom I trust and I know i…

Might be a bit late but do you have some more info on these EU funds? I'm just a very technical guy but somewhere on the horizon there will be a point where our proto is matured enough we probably should seek some funding if we want to do something with it. Thanks.

Re: Ask HN: Getting Started Investing

#79

Post by charlesdm »

shifto wrote: post #78
charlesdm wrote: post #69

Earlier quoted context omitted.

Lol dude, "just" $100k. Barriers to entry? Totally honest: I'm an investor and I wouldn't invest $100k in you with a mentality like that. We're all in this to make money. What you need is to prove your idea. No one is going to put $100k (or $100 million for that matter) in an untested idea, unless you have a relationship with an investor. And investing is a relationship business. If a friend whom I trust and I know i…

Might be a bit late but do you have some more info on these EU funds? I'm just a very technical guy but somewhere on the horizon there will be a point where our proto is matured enough we probably should seek some funding if we want to do something with it. Thanks.

I'm not up to date on the particulars for each country, but where are you based? Happy to help if I can.

Re: Ask HN: Getting Started Investing

#80

Post by tw1010 »

tedmiston wrote: post #74
badfrog wrote: post #71

Earlier quoted context omitted.

Arbitrage is about buying something that you can immediately sell somewhere else for a higher price with no risk. What you're describing just sounds like getting a good deal. If you could buy 10% of a company for $1mm in Chicago and sell that 10% for $1.5mm in SF the next day, that would be a form of arbitrage. From wikipedia: > the practice of taking advantage of a price difference between two or more markets: strik…

In the theoretical sense, yes. The usage in the here is much softer and less strict, not like in finance. I wouldn't get too caught up on the casual usage. The way I've seen the word used in startups is more akin to "Tim Ferriss style" geo-arbitrage. https://www.physicianonfire.com/geographicarbitrage/

In what sense is geo-arbitrage associated to Tim Ferriss for you? Genuinely curious. I've listened to a lot of his podcasts but can't recall that ever really coming up.
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