Ask HN: What kind of personal financial investment do you do? • Hacker News Board

Re: Ask HN: What kind of personal financial investment do you do?

#91

Post by jblow » Wed, Feb 09, 2011, 5:23 PM UTC

rabidsnail wrote: post #81

tastybites wrote: post #64

What I'm about to say might be controversial. It goes against the grain of the 'Look at me I'm so frugal' meme/arms race here on HN. The financial crash of 08/09 left such a bad taste in my mouth (as in I lost many tens of thousands of dollars) that I have completely lost faith in the stock market and anything associated with it such as ETFs, mutual funds, 401k, etc. Getting a 'real' job and putting money into my ret…

Your time horizon is too short. If you had left your money where it was instead of taking it out at the first sign of danger then it's likely you would have made it all back by now. There's a lot of volatility in the stock market (that's why the returns are higher than savings, money markets, etc), but the spikes and dips average out if you're thinking in terms of decades and not months. That's not to say that your s…

I go into more detail on this in my post below, but I think that this is actually not true any more, because the basic nature of the economy has changed. If you adjust for honest estimates of inflation, stocks have been down consistently for 15 years. That starts to look a lot like a "new normal". Then you start adding in survivorship bias, selection bias, etc; the picture is not pretty.

Maybe it's not the new normal, and maybe stock markets will start rising again as they have historically, but when you see a lull this long, it at least suggests the strong possibility of a pattern break.

Re: Ask HN: What kind of personal financial investment do you do?

#92

Post by alnayyir » Wed, Feb 09, 2011, 5:23 PM UTC

I do the same thing as tastybites, sans expensive car.

I might buy rental properties later or something.

I'd rather die sitting on a motorcycle than on a bunch of equity that won't help me in the grave. I'm not an Egyptian Pharaoh.

Re: Ask HN: What kind of personal financial investment do you do?

#93

Post by pascal-louis » Wed, Feb 09, 2011, 5:25 PM UTC

From Andy Rachleff, Vice Chairman, University of Pennsylvania endowment investment committee President & CEO, Wealthfront Inc.:

Financially sophisticated individuals start with an asset allocation. For someone under 40 you should probably allocate around 30% of your assets to fixed income securities (probably half in treasuries and half in TIPS) and the remainder in securities that have more appreciation opportunity (10% in real estate, 35% in US equities, 20% in foreign equities and 5% in emerging market stocks). it's very hard to outperform the market in fixed income so i recommend buying treasury and TIPS ETFs. For your US, foreign and emerging market equity allocation you might want to try wealthfront.com to identify money managers who have outstanding track records (I am a co-founder of wealthfront). Wealthfront currently doesn't offer any real estate managers so a REIT ETF is probably the best bet.

Re: Ask HN: What kind of personal financial investment do you do?

#94

Post by illumin8 » Wed, Feb 09, 2011, 5:25 PM UTC

mberning wrote: post #78

I got out of employer 401k. Yes they are tax advantaged, but your money is hostage and you will be harshly penalized if you ever need it for some unapproved use. I find that these penalties cause me to be much more conservative with the amount of money that I am willing to invest. Since I got out of tax advantaged accounts I now use an online broker to buy exclusively index funds. In the past I was only comfortable i…

Sorry, but this is terrible advice. You could be sheltering $16,500 per year from all taxes until retirement, not to mention possible employer matches.

Right now, you probably have to earn about $23,000 (assuming 30% tax rate) just to invest the same $16,500. Then, you have to pay capital gains taxes or regular income tax every time you receive dividends, yields, or sell a stock at a profit. These taxes can eat anywhere from 20% to 38.5% of your profit on every single transaction.

If you sat down with a calculator and figured out the difference between saving $16,500 in a 401k and saving that much in a non tax advantaged account, you are literally throwing away over $1 million throughout the course of your career.

Not to mention, you can take a loan against your 401k if you really need the money.

Re: Ask HN: What kind of personal financial investment do you do?

#95

Post by riemannzeta » Wed, Feb 09, 2011, 5:28 PM UTC

Still chuckling about Bucheit's suggestion of spreading cash out into a huge number of FDIC-insured savings accounts -- "Think of it as RAID for your cash" he says, as I recall.

Re: Ask HN: What kind of personal financial investment do you do?

#96

Post by lionhearted » Wed, Feb 09, 2011, 5:30 PM UTC

Re: Roth IRA vs. Traditional IRA, I did a lot of research on it. I chose Roth because you can withdraw up to the amount you deposited without penalty at any time - this was big for me in case I needed the cash later for other things.

I'd recommend Roth to anyone who might want the cash for other investments later, especially entrepreneurs, unless you're in a top income bracket with literally no other tax writeoffs.

Re: Ask HN: What kind of personal financial investment do you do?

#97

Post by jblow » Wed, Feb 09, 2011, 5:32 PM UTC

pascal-louis wrote: post #93

From Andy Rachleff, Vice Chairman, University of Pennsylvania endowment investment committee President & CEO, Wealthfront Inc.: Financially sophisticated individuals start with an asset allocation. For someone under 40 you should probably allocate around 30% of your assets to fixed income securities (probably half in treasuries and half in TIPS) and the remainder in securities that have more appreciation opportunity…

By the way, when buying TIPS (or any kind of Treasurys), you are basically saying "Yes, I like the fact that the USA is deep in debt and I want it to go more into debt rather than balancing its budget!" That is what Treasury bonds are -- the USA borrowing money from you and promising to pay it back. This is where the debt comes from!

Somehow I do not think many people realize this...

Re: Ask HN: What kind of personal financial investment do you do?

#98

Post by tastybites » Wed, Feb 09, 2011, 5:32 PM UTC

meterplech wrote: post #80

tastybites wrote: post #64

What I'm about to say might be controversial. It goes against the grain of the 'Look at me I'm so frugal' meme/arms race here on HN. The financial crash of 08/09 left such a bad taste in my mouth (as in I lost many tens of thousands of dollars) that I have completely lost faith in the stock market and anything associated with it such as ETFs, mutual funds, 401k, etc. Getting a 'real' job and putting money into my ret…

This isn't controversial at all. This is pretty much the typical HN answer. But, the OP wasn't looking for this... "I realize the general consensus around here may be that the best investment would be in yourself (have 25k? start a business!), but surely some people have "normal" investments, too. How do you hack it?" Congrats on making this decision to do a startup, but that's not what he is looking for. For what it…

Oh come on, give me a little credit - here, I'll rewrite the facts of my original post, which you might find adheres to your expected response format (while presenting the same, and no new information information versus the original):

I put a small amount into my retirement accounts while spending or investing mostly on my startup business, real estate, sports cars, and keeping cash.

Which post was more interesting to read?

Re: Ask HN: What kind of personal financial investment do you do?

#99

Post by abyssknight » Wed, Feb 09, 2011, 5:33 PM UTC

tricky wrote: post #21

we (married) drive shitty cars. our 401k's are maxed out. I shop around for the best savings account rate. I wind up changing banks every year or two. I pick stocks and hold for the LOL's. Currently getting a 12% APY on about $5000 invested. No real plan and not interested in dumping a ton of money there. It's just more interesting than the casino. We bought the house we're going to die in. paying it off asap. After…

Its funny, but I think the richest people I know have all paid off their real estate. They don't pay rent, and they stayed in their homes til they could pay them off. It sounds simple, but it really takes a tremendous amount of resolve.

Re: Ask HN: What kind of personal financial investment do you do?

#100

Post by ydant » Wed, Feb 09, 2011, 5:34 PM UTC

tocomment wrote: post #67

tricky wrote: post #21

we (married) drive shitty cars. our 401k's are maxed out. I shop around for the best savings account rate. I wind up changing banks every year or two. I pick stocks and hold for the LOL's. Currently getting a 12% APY on about $5000 invested. No real plan and not interested in dumping a ton of money there. It's just more interesting than the casino. We bought the house we're going to die in. paying it off asap. After…

self storage building? What's that?

Self-storage might be a US phenomenon. It's basically someone building a bunch of windowless locked garages of varying sizes (some the size of a small closet, some bigger than a car) for people to store their excess stuff. The price per square foot is pretty high, and a lot of people will rent for years - never even interacting with the stuff.

If the renter defaults, the storage company typically (through contract) owns the material inside and can sell it off at auction.