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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?

#51

Post by mlLK »

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.

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

#52

Post by joelreymont »

mynameishere wrote: post #50

Then AOL ran out of capacity and I was back to my 700 bucks after paying about 200 in commission to Bear. How did you pay 200 dollars in commissions on a 700 dollar trade? How did you find work at an investment bank without being sufficiently savvy to realize that buying options on a credit card and then paying a gigantic commission is an absolute, guaranteed way to lose money over time? I'm genuinely confused here.…

It's a vague recollection but I think options commissions at Bear -were- $100 per side back in 1995/96. Now, I didn't work in investment banking, I was a lowly programmer in the Securities Lending department. Also, you had to use Bear to trade if you were working for Bear.

That said, I was green and didn't know anything about trading at that time. I found work by being good at what I do :D.

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

#53

Post by roel_v »

joelreymont wrote: post #24
vessenes wrote: post #18

Timescales: How long do you have to turn your 100k into 1mm? (I'm assuming here we're not considering inflation. ) If you need it in 10 years, you're going to need an annualized 25% or so rate of return. That's unlikely. If you need it in 25 years, you can get by with 10%. That's definitely possible, if you follow good principles. On the other hand, if you can put in an extra 50k a year, You should have close to $1mm…

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…

If they are that cheap, don't buy one paid in full, but buy three with 60% leveraged. Try to rent them out to long term tenants, or at least two of them, and maybe try your hand at the tourists with the third one, see if it can make a significantly higher ROI and get a feel for how much work it is.

With real estate, you need to be in it for the long haul. Let your tenants pay the mortgage and put the bit you have left over away so that you can buy a new unit every year or two. Real estate will appreciate with inflation and after 20 or 30 years (or 15 if you want to pay off aggressively) you'll be mortgage free and can retire on the rent. Or you can finance new properties with a mortgage on the equity in the other ones in 5 years... Real estate is awesome like that, but you'll get burned if you see it as a get rich quick scheme.

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

#54

Post by illumin8 »

My advice to you is to have a long timeline. If you try to turn it into a million in 1 year you're going to take too many risks and fail.

Diversify your investments. Putting $100K in 1 stock is how you lose money. Try picking 10-15 companies in different industries: technology, healthcare, finance, commodities, etc. Do your research and pick companies that have a lot of upside potential.

For example, if you wanted to make a bet that the mobile space is going to be the future of computing, which seems pretty likely, start buying up suppliers of tablet computers. ARM holdings, Qlogic, etc, find all of the chip makers that make chips in an iPad and research each one of them.

Finally, I would recommend you protect your earnings. My portfolio is up 35% in the past year, and I keep trailing stop limit sell orders on all of my securities to protect my winnings. The global economy is uncertain enough right now, and who knows if we're going to see a repeat of fall 2008 again (my bet is we are). I want to lock in my earnings. Consider pair trading, or hedging yourself in other ways.

Definitely think long-term, protect your earnings with stop limit orders or hedging and pair trading. This is the only way to come out ahead of the market.

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

#55

Post by arthurdent »

mynameishere wrote: post #50

Then AOL ran out of capacity and I was back to my 700 bucks after paying about 200 in commission to Bear. How did you pay 200 dollars in commissions on a 700 dollar trade? How did you find work at an investment bank without being sufficiently savvy to realize that buying options on a credit card and then paying a gigantic commission is an absolute, guaranteed way to lose money over time? I'm genuinely confused here.…

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 they blow up eventually.

This is empirically false. There are a lot of people who make money in derivatives. Vol stat arb funds have performed very well over the last 5 years, dispersion has long been a popular trade.

Bear stearns did not blow out in its marketmaking capacity.

Typically the options traders that are said to "blow up eventually" are premium sellers, not buyers, which is in direct contradiction to your previous comment about option buyers being guaranteed to lose money over time.

This is unnecessary and not really in the spirit of providing help to someone asking for advice.

You either think he's full of BS and are trying to call him out or are just being rude. I think he sounds sufficiently accomplished and is trying to understand a new field. Don't discourage that.

edit: had to look up how to properly italicize

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

#56

Post by roel_v »

dean wrote: post #45

"I rent but paid cash for a recent BMW last year" One tip I can offer is not to do things like that. A house or condo is generally an investment that increases in value, so you should buy that for yourself instead of buying it for your landlord. And paying a lot for a car that will be virtually worthless in 10 years won't help you achieve your goal.

Couldn't agree more. Seems like the OP needs to start with basic money management skills before doing fancy things. 100k isn't a lot. I suggest reading getrichslowly.org/blog, it's focused on getting out of debt but the same principles apply to personal finance beyond that point.

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

#57

Post by joelreymont »

illumin8 wrote: post #54

My advice to you is to have a long timeline. If you try to turn it into a million in 1 year you're going to take too many risks and fail. Diversify your investments. Putting $100K in 1 stock is how you lose money. Try picking 10-15 companies in different industries: technology, healthcare, finance, commodities, etc. Do your research and pick companies that have a lot of upside potential. For example, if you wanted to…

I think there's money to be made in trading Apple against Nokia, RIMM, etc. This just needs a LOT of research. I agree with the rest.

I'm not planning to use more than 25-30K if I trade and 0.5-1% of that on every trade. Proper money management and risk controls are key.

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

#58

Post by tansey »

joelreymont wrote: post #24
vessenes wrote: post #18

Timescales: How long do you have to turn your 100k into 1mm? (I'm assuming here we're not considering inflation. ) If you need it in 10 years, you're going to need an annualized 25% or so rate of return. That's unlikely. If you need it in 25 years, you can get by with 10%. That's definitely possible, if you follow good principles. On the other hand, if you can put in an extra 50k a year, You should have close to $1mm…

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. :)

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

#59

Post by joelreymont »

roel_v wrote: post #53
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…

If they are that cheap, don't buy one paid in full, but buy three with 60% leveraged. Try to rent them out to long term tenants, or at least two of them, and maybe try your hand at the tourists with the third one, see if it can make a significantly higher ROI and get a feel for how much work it is. With real estate, you need to be in it for the long haul. Let your tenants pay the mortgage and put the bit you have lef…

Agreed. My edge here is that my wife (receiving travel agent) gets a flow of tourists that need accommodation. It's not even necessary to rent the units long-term, packing the summer and a few winter weeks, for example, should pay the mortgage.

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

#60

Post by roel_v »

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…

"You need to figure out the potential rental income of a property and convince the bankers that it's enough to service the mortgage debt. All the while putting as little of your own money in as possible."

This last part is not true. 100% leveraged properties are hard to make serious money on, and it makes for a fragile business (you only need one down cycle to bring down the, ehm, house). Average return on rental in the private is 4-5% in most parts of Europe. Right now you can get a mortgage lower than that (I actually took one out this morning for this exact purpose) but only for variable rate ones, which will reset almost surely to above 4% in a few years. It depends on the circumstances what the most profitable thing to do is, but it's almost never to finance 100% (which would be 100%+ because of closure costs...)

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