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Ask HN: How do I turn 100K into 1 million?

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Re: Ask HN: How do I turn 100K into 1 million?

#81

Post by joelreymont »

mlLK wrote: post #51
aaronblohowiak wrote: post #12

Ahoy! Sailing is great, I've got a personal goal to do the SHTP in 2014. You have a terrible investment track record and a good programming track record. Go with your strength. Since you have a short attention span, you should focus on short projects that you can ship quickly. Bring maritime weather / charts to the iphone, I'd buy that :-)

I concur, maybe invest in learning R first and build a couple prototypes that monitor a market trend and report some sort of result then just start iterating and building applications for investments that interest you.

I own a Mathematica license and played with R a bit. I just don't know how to develop an edge with statistics yet.

Re: Ask HN: How do I turn 100K into 1 million?

#82

Post by joelreymont »

rjett wrote: post #47

Invest in adderall and see where that takes you. Joking. In all seriousness, drop the desire to turn 100k into 1 mil in x amount of time. That will lead you into wreckless, speculative behavior. Trading is tempting for you because it offers instant feedback. With one or two successful trades, people tend to extrapolate their returns into future returns, believing that it's possible to repeat these trades over and ove…

What led to my blockbuster year? Luck and my desire to work more. I used to work 1-2 weeks out of 4, that was enough for everything since my burn rate is low (3-3.5K EUR/mo). I sailed for about 8 weeks in the first half of 2008, for example. The relaxed work style didn't let me save much, though, not enough to get a shot at independence.

Re: Ask HN: How do I turn 100K into 1 million?

#83

Post by vessenes »

tansey wrote: post #58
joelreymont wrote: post #24

Earlier quoted context omitted.

Thanks! I don't hate people, I just get tired of lots of people around me and need the solitude of my office. My timeline is 10 years or less and I could, likely, add 50K a year. I don't have a penchant for gambling, I traded twice in ... ugh... 15 years or so. I stopped because I figured I didn't know enough and wasn't capitalized well. Real estate is great long-term. There are some awesome deals to be had in Teneri…

> My timeline is 10 years or less and I could, likely, add 50K a year. Just a quick note here: With 100k in year 1, plus 50k per year after, for a total of 10 years, you need to get about 11.5% annualized return after taxes and fees. Good luck. :)

$50k plus an additional 50k per year at 10% = $1,006,245.8 (compounded annually). What fees are you referring to? Different investments carry different loads, including nearly no load (or one included in calculations), for say real estate or direct stock purchases.

Re: Ask HN: How do I turn 100K into 1 million?

#84

Post by joelreymont »

grandalf wrote: post #75

1) take $50K to a casino 2) buy a color on the roulette wheel 3) set up a bet that has some fun characteristics ... maybe a 10% chance of paying 1m and a 30% chance of losing entirely (with some variety in the middle). Let the wheel spin and enjoy the adrenaline. Worst case you go back to your lucrative consulting gig. Consider that you already paid the amount you lost in taxes and you don't even miss it.

I don't pay taxes. Mine is an offshore company and I'm not yet a resident of Spain. I hope to start paying about 20% in taxes by the end of this year, I'm sick and tired of being an illegal alien.

Re: Ask HN: How do I turn 100K into 1 million?

#85

Post by HSO »

pdx wrote: post #29

Why do you want a million euro? Are you going to spend one million euro on something? I bet the answer is that you aren't going to spend $1M on anything. You intend to put the $1M in some very safe investment and live off the interest, correct? So you don't really need $1M, what you need is $100K per year passive income. It's the same thing. If you look at your problem that way, things seem more doable. Instead of sp…

When I first read the question, I thought Oh boy, there's going to be some asinine suggestions to this one. But this is one of the most sensible answers I can think of. Seeking to turn 1 buck to 10 in the markets, and quick, sounds like the beginning of a disaster. Reframing the question to one of passive income, one can view the 100K as a sort of financial buffer that can finance or cushion different forays into passive income generating ideas (for example, take a month off regular work, take 5K (or whatever it costs to maintain your family) out of the buffer, and work on some crazy idea that may or may not work out. You could do this 20 times (although I doubt anyone could be so dumb as to totally lose it all 20 times in a row!) and even if it's all financially unsuccessful, you would have learned a ton! That sounds doable and realistic and actually fun.

On a personal note: I'm in a similar position to the OP, except I inherited the money a few weeks ago, and am still trying to figure out how to go about this. Thanks a lot for this new perspective!!!

Re: Ask HN: How do I turn 100K into 1 million?

#86

Post by joelreymont »

grandalf wrote: post #77

Here's an idea. There is an instrument called a "straddle option" that is essentially a bet on volatility. I think it'd be interesting to try to formulate a strategy that made aggressive purchases of these around various product announcements. edit: Perhaps this wasn't the wisest comment ever, but not sure why it was modded down.

I tried buying strangles and stradles a few times, up to a few small bets ($40-50) at a time. There's a substantial difference on whether the earnings announcements are after hours in the evening or in the morning, for example.

I think I would have made money with a trailing stop but Thinkorswim did not have trailing stops at the time. The problem, of course, is the volatility drop-off right after earnings announcements. You also need to evaluate what the company is doing and see if there's a good chance the stock will move.

I found http://www.theflyonthewall.com to be excellent for research.

The volatility drop-offs doesn't happen right away after the earnings announcements, at least that's what I noticed. There's still a bit of time (minutes?) where traders are slugging it out.

It's virtually impossible to monitor several positions for volatility drop-offs on Thinkorswim, though. ZenFire is available on the Mac but ZenFire equities and options are only available through a couple of brokerages where a large account is required. Contrast with futures (and options on futures) that I can get over ZenFire through my Mirus/Dorman account for a $500 deposit.

Re: Ask HN: How do I turn 100K into 1 million?

#87

Post by nagrom »

joelreymont wrote: post #36
HeyLaughingBoy wrote: post #32

If you were in the US, I'd suggest real estate. At this point in the real estate cycle, you could probably buy two single homes, or a duplex/triplex and rent it out and have positive cashflow immediately. I used to be a landlord, but sold the house and I sometimes regret that decision since it was bringing in about $400/month with no work on my part. Rental property isn't a bad investment if you're willing to do the…

Spanish real estate has been tanking. Over 1.5mm units unsold. I think it's a good time to buy, perhaps towards the end of the year. My wife is a self-employed travel agent catering to the Russian market (I'm Russian/Cuban). I she would love to go into property management, specially if the property is ours. I'm reading about LBOs in "Barbarians at the gate" and I think it's a bit like that. You need to figure out the…

I was in Tenerife earlier this year and I was shocked at the number of properties that were lying around, half completed. It seemed like every cove and beach along the south and west coasts of the island had uncompleted holiday/retirement apartment buildings lying semi-built. I was also amazed that prices in the local agents seemed ridiculously high given the obvious devastation in the market. I would be extremely wary about entering the Spanish real estate market right now...

Re: Ask HN: How do I turn 100K into 1 million?

#88

Post by p_h »

joelreymont wrote: post #39
pdx wrote: post #29

Why do you want a million euro? Are you going to spend one million euro on something? I bet the answer is that you aren't going to spend $1M on anything. You intend to put the $1M in some very safe investment and live off the interest, correct? So you don't really need $1M, what you need is $100K per year passive income. It's the same thing. If you look at your problem that way, things seem more doable. Instead of sp…

You are right. I don't need the million euro since I don't know what to spend it on. What I'm looking for is freedom to learn and do new things that interest me. I used to do this by working 6 months out of a year at most but I still don't own a house and don't have a nest egg. Nothing to ensure my family has a comfortable life if, God forbid, anything happens to me. I like your perspective of growing passive income…

Well then for starters maybe you should spend some of that money on life insurance.

Re: Ask HN: How do I turn 100K into 1 million?

#89

Post by arthurdent »

mynameishere wrote: post #61
arthurdent wrote: post #55

Earlier quoted context omitted.

How did you find work at an investment bank without being sufficiently savvy to realize? Is this deliberately intended to be disparaging? 1. There are plenty of people at investment banks whose principal function isn't to understand options. 2. What makes it so clear that buying options is a "guaranteed way to lose money over time". At any rate, the only people profiting on derivatives are the market makers. And even…

What makes it so clear that buying options is a "guaranteed way to lose money over time". Derivatives are mathematically zero sum minus costs. That's why. For traders in aggregate, they are a certain loss. Tack on leverage via credit cards, well... Is this deliberately intended to be disparaging Sort of. The guy needs to realize that he's capable of really stupid mistakes before he opens that fresh new brokerage acco…

Derivatives are mathematically zero sum minus costs. That's why. For traders in aggregate, they are a certain loss.

1. Fair enough. HSO makes the point that this is true for all financial transactions. So by your logic, investing in the stock market is also a guaranteed way to lose money over time. I don't think this is your contention, but this is really going to end up being a silly conversation if we have it. We'll just agree to disagree.

2. On a different note, in the interest of sharing something I learned recently. Options almost always trade at a volatility premium to their realized volatility. The reason for that is that vol traders want to price in the future uncertainty in vol.

Derman writes about this a bit here by comparing it to interest rate term structures: http://ederman.com/new/docs/gaim-trading_volatility.pdf

3. Also, historically (if that matters) selling vol is actually positive EV. BXM is a buywrite index and has outperformed the SP500 on a risk adjusted basis (http://ederman.com/new/docs/gaim-trading_volatility.pdf) indicating that option vols have not been fairly priced.

4. Countering #4 is the popular Taleb wisdom about selling vol. Taleb is a net buyer and won. His general contention though is that kurtosis of the distribution is mis(under)priced. So from those 2, you might think that selling at the money options is positive EV and buying "tails" is positive EV. Of course the rest of the Taleb intuition is that we have no idea what the actual yield distribution should look like, so all pricing is out the window.

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