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

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

#151

Post by johngalt »

Investing is one of those things that can take a lot of additional time for rapidly diminishing returns. You could spend 40 hours a week trying to pick stocks and come out under the performance of a good index fund that you can set and forget. Even if I could do slightly better, my time has value associated with it. I'd liken it to real estate. Go ahead and buy the house you plan to live in, but once you own multiple properties you become a landlord. Whatever other profession you have quickly becomes secondary.

So for me it's a basic auto-deduction 401k split equally into five low fee index and mutual funds. They rebalance annually. It's a dead simple dollar cost averaging approach that does well enough and I don't have to think about it.

Oh and FYI, both my parents are/were bankers. One is investment licensed, and I've worked as a banker in the past. So even with training in this area I choose the simple approach.

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

#152

Post by [deleted] »

jpiasetz wrote: post #123
tastybites wrote: post #90

Earlier quoted context omitted.

> Your time horizon is too short That's not really the point, I think the point is that I shouldn't have been investing in something that could evaporate on paper in 3 months. Either way, yes, the point is I'm a terrible equities/retirement investor and a better small business person. Everyone here has excellent reading comprehension, as I would expect on HN. > That's not to say that your startup isn't a better inves…

Everything can evaporate in 3 months. The world is a risky place, tomorrow someone could come out with something to make your startup irrelevant. Houses prices dropped, used car values drop with the GM and Ford bail out, we mine more gold every year. You show me an investment that is always going to beat inflation and I'll show you a scam. The only way to real be secure is diversification and never stop innovating an…

[deleted]

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

#153

Post by mixu »

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…

>Your time horizon is too short.

Didn't John Keynes say:

"The long run is a misleading guide to current affairs. In the long run we are all dead. Economists set themselves too easy, too useless a task if in tempestuous seasons they can only tell us that when the storm is past the ocean is flat again."

Though apparently, he was talking about inflation in this case... but the point is, the nature of risk is such that while it works out on average, you still end up with an individual outcome at a fixed point in time which may vary a lot from the expected payoff. Not that I do completely agree with tastybites, but I see the logic.

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

#154

Post by bretthoerner »

jblow wrote: post #117
illumin8 wrote: post #104

Earlier quoted context omitted.

Your long rant basically says don't invest money at all, just keep cash in your mattress? Who in their right mind would follow this advice? Let's say we don't worry at all about saving money, and just funnel our energy into "creative endeavors." If those creative endeavors are profitable, what are you going to do with the money? It doesn't take a lot of energy to setup a 401k or Roth IRA. It doesn't take a lot of ene…

I actually do have a 401k (as well as an additional retirement fund), but I only have those things because I have surplus money sitting around. The problem with something like a 401k is that there is a heavy opportunity cost: you don't get to use that money, ever, until you retire. If there were something productive you could have done with the money instead, that were still relatively safe, maybe you should have don…

> you don't get to use that money, ever, until you retire

You can typically loan to yourself, especially for things like first home ownership (considering the average age here, most of us are probably in that bucket).

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

#155

Post by bradshaw1965 »

arthurdent wrote: post #54
bradshaw1965 wrote: post #45

Earlier quoted context omitted.

...I don't buy bonds A lot of people would argue that even for a young person a portfolio with a small bond allocation is actually less risky with higher returns then a 100% allocation to stocks.

1. a lot of people argue for things without backing it up. 2. it depends what you mean by " risk ". arguments claiming bond allocation in your portfolio are less "risky" describe risk as "volatility of returns", which in finance are measured over shorter intervals than 40 years. patrick is specifically accepting short term volatility in return for the higher EV of returns. the marketplace prices debt instruments (esp…

So why not move even further up the risk chain to all Emerging Markets or invest at greater then 100% equity by using leverage? Fact is, adding a small amount of fixed income investments smooths investment returns and has very little effect on total return whether you accept standard deviation variance as a measure of "risk" or not.

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

#156

Post by tachibana »

khafra wrote: post #122
tachibana wrote: post #83

Warren Buffet's rules of investing: 1) Never lose money. 2) See rule #1. I use municipal bonds to immunize my expenses ( http://en.wikipedia.org/wiki/Immunization_%28finance%29 ). Municipal bonds (affectionately called "munis") are not subject to federal income tax because of a Supreme Court decision in the 1890s. Most states also exempt the interest on their own municipal bonds from their own income tax (of course,…

Aren't municipal bonds paying better these days because of fear (justified or otherwise) that lots of them--especially in California--are going to start defaulting?

Quick SEC disclaimer... I'm not an investment professional; I'm just sharing my personal experience.

It depends. Munis come in all flavors and sizes; the best ones IMHO are state-level "general obligation" (i.e. backed by state taxpayers) that do NOT fund revenue projects (this will make them taxable anyways). The second best ones, again in my IMHO, are classified as UTX ("Unlimited Taxation"), which gives the local government the power to raise local taxes in order to pay bonds. The ones I would be most worried about defaulting are the ones classified as LTX ("Limited Taxation") that fund revenue projects like local stadiums or toll roads; these bonds are paid back by the money collected by the underlying asset. Obviously, these would be the easiest to issue, as they do not require a referendum vote like UTX bonds, or state legislature approval like GO bonds.

Some states like California are constitutionally required to pay bondholders before any state-funded programs. Some states (like California) are also legally required to maintain a sinking fund, i.e. they can't make interest-only payments, but must also set aside money to pay back the principle owed to bondholders ever year. The "budget crisis" in California is because after paying back the 2 constitutionally mandated budget items, the state doesn't have enough money to keep the same level of spending as before.

In California, The interest on bond payments is an automatically budgeted line item every year; lawmakers can not change this without making changes to the state constitution.

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

#157

Post by krschultz »

jblow wrote: post #88

I am kind of shocked by the uniformity of answers here, so I will add a dissenting voice. In the current economic climate, it is pretty much a waste "investing" in anything until you have, say, an 8-figure sum in cash laying around doing nothing. I don't have that, so I am not bothering with "investing". I put "investing" in quotes because I feel the word tends to be perversely used; people really mean speculation, t…

Rants like this come from two kinds of people

A) People who don't invest

B) People who bailed at the bottom of a downswing

Everyone who rode out the recession without panicking has made their money back. I've made a good deal of money over the last 5 years with nothing more than 2 ETFs and automatic contributions each week (dollar cost averaging), and percent based rebalacing. So I do maybe 2 or 3 things a year above and beyond the automatic deductions.

It's really not difficult, and its not all that risky. Check out the Truth About Money by Ric Edelman, or just listen to some of his free podcasts.

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

#158

Post by tachibana »

ipsin wrote: post #35

I'm curious to hear from those of you who deal with investment real estate, either self-managed or handled by a property management company.

Quick disclaimer: I am not a tax professional; please always consult your own professional help.

I don't want to sound like I'm lying, so I'll provide a very benign example of the "common, legal, and IRS sanctioned" income streams,

Let's suppose that I have a house that's paid off. Instead of selling it and incurring all sorts of taxes, why don't I: 1) take out a mortgage against it 2) rent it out

The mortgage is not really income, according to the IRS, but a valid business expense. By renting it out, I get the tenants to pay back the mortgage for me.

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

#159

Post by j0 »

seanos wrote: post #109
bradshaw1965 wrote: post #45

Earlier quoted context omitted.

...I don't buy bonds A lot of people would argue that even for a young person a portfolio with a small bond allocation is actually less risky with higher returns then a 100% allocation to stocks.

Actually, expected returns will be slightly lower but well worth it as the reduction in risk from the diversication away from 100% equities is huge. E.g. 20% in bonds will barely diminish expected returns whilst significantly reducing your overall risk.

Not always true, According to WSJ http://blogs.wsj.com/marketbeat/2011/02/07/depressing-chart-... "Through the close of trading Monday, the investors in 7-10 year Treasurys would have seen a return of 76% percent over the last 10 years, versus a return of 17.4% for stocks. So you could have socked your money in supersafe U.S. Treasurys and reaped a risk-free 80% gain. "

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

#160

Post by Swannie »

jlhamilton wrote: post #136
rabidsnail wrote: post #81

Earlier quoted context omitted.

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…

There is a chart at http://www.nytimes.com/interactive/2011/01/02/business/20110... that shows the average annual return for an investment in the stock market broken down by year of the start and end points. The returns are high if you invest early in a bull market and sell before the next crash, otherwise the returns are rather low. The conventional wisdom that holding stocks for several decades and getting annual r…

Thanks, means I didn't have to dig it out.

It really makes me wonder about investing my savings into my tracker fund when I saw that. I'm in the UK, and my guess is, due to very tight correlation between the markets we did the same sort of performance.

So long term, market beating, savings beating growth, is not assured. Especially not in "developed" countries. If you think the GDPs of Western countries is going to start increasing (significantly) any time soon, please explain why!

So if it isn't assured, I've been looking into index tracked funds in other markets, particularly APAC. Not sure if it's a great idea, but probably better than a UK indexed fund. I figure it's probably worth a try.

It's totally about when you put in. My parents are still down on a couple of their funds from 1999 ish. Break even happened just recently for them. They'd have been better off with that cash in a long term cash bond.

Why are there so many angel investors right now? Because only high-tech is offering any appreciable growth in the USA.

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