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Ask HN: I have $450K cash, what should I do to maximize my return?

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Re: Ask HN: I have $450K cash, what should I do to maximize my return?

#101

Post by mensetmanusman »

quotemstr wrote: post #81
throw0101a wrote: post #29

> I'm not comfortable investing the entirety into an index fund, given the current socio-political climate. Over the the long term there is not really anything better to do with it than equities: the Great Depression, World War 2, gold standard retirement, 1980s inflation, etc. Even if you only invested in the peaks, you'd still do quite well over the decades: * https://awealthofcommonsense.com/2014/02/worlds-worst-m…

I'm an index fund skeptic. What would happen in a world where everyone invested in index funds? Capital allocation would go haywire. You can't create value out of nothing. ISTM that the more people push on index funds, the more overvalued equities in the index become relative to those outside the index. I'm not sure that retrospective analysis saying index funds are the best applies going forward in a world where ind…

Because there are already hundreds of gatekeeper entities involved with getting a company listed.

You are basically investing in the idea that:

‘On average, these companies are run by people who want the company to succeed, and as long as the population of the world grows, and the middle class grows, this will make money’

Everyone could invest in index funds, and this would still be true, because if the stock price gets too low, it would be rational for the company to purchase its own stock on the cheap which would set the price floor.

Re: Ask HN: I have $450K cash, what should I do to maximize my return?

#102

Post by bryananderson »

quotemstr wrote: post #81
throw0101a wrote: post #29

> I'm not comfortable investing the entirety into an index fund, given the current socio-political climate. Over the the long term there is not really anything better to do with it than equities: the Great Depression, World War 2, gold standard retirement, 1980s inflation, etc. Even if you only invested in the peaks, you'd still do quite well over the decades: * https://awealthofcommonsense.com/2014/02/worlds-worst-m…

I'm an index fund skeptic. What would happen in a world where everyone invested in index funds? Capital allocation would go haywire. You can't create value out of nothing. ISTM that the more people push on index funds, the more overvalued equities in the index become relative to those outside the index. I'm not sure that retrospective analysis saying index funds are the best applies going forward in a world where ind…

Obviously not “everyone” will ever invest in index funds. HFT firms, leveraged buyout folks, and prop traders at investment banks aren’t going to stop betting on individual securities. The people who have more information, quicker ability to act on information, or superior ability to analyze information shouldn’t buy index funds (they’re also the people who contribute meaningfully to price discovery).

A smart individual retail investor is statistically unlikely to “beat” those people, and should buy index funds.

Re: Ask HN: I have $450K cash, what should I do to maximize my return?

#103

Post by blahbhthrow3748 »

aboodman wrote: post #96
ericmay wrote: post #13

What’s your goal? That’s the first question that needs to be answered here before trying to identify an investment strategy.

Investment managers always ask this question and I never know what to answer. I feel like everyone's answer must be the same: maximize return, minimize risk. What are possible answers to this question you're looking for?

Time frame - if you need the money next year your risk tolerance is very different compared to if you need the money in 10 years. You can't minimize both risk _and_ return, there's no free lunch

Re: Ask HN: I have $450K cash, what should I do to maximize my return?

#104

Post by oh_sigh »

Since people are handing out general investment advice, is it possible to invest in a country? e.g., if I think Central African Republic is going to be the next South Korea over the next 20 years, how would you invest to reflect that without just investing in a specific business operating in CAR?

Re: Ask HN: I have $450K cash, what should I do to maximize my return?

#105

Post by PaulDavisThe1st »

aboodman wrote: post #96
ericmay wrote: post #13

What’s your goal? That’s the first question that needs to be answered here before trying to identify an investment strategy.

Investment managers always ask this question and I never know what to answer. I feel like everyone's answer must be the same: maximize return, minimize risk. What are possible answers to this question you're looking for?

Time period would be a good place to start.

Re: Ask HN: I have $450K cash, what should I do to maximize my return?

#106

Post by jefftk »

actuator wrote: post #89
owenversteeg wrote: post #45

Ever since John Bogle created the first index fund about 50 years ago, the advice of simply put your money in, don't try to time the market, and divide between an allocation of stocks and bonds based on your risk tolerance has performed far better than anything else. This includes periods where the market has been very over-inflated. If you had the worst possible timing and put your money in around the absolute peak…

This has been true for the US markets till now but I am always scared to think of a scenario where they go the way of UK markets have done in the last decade. Look at one[1] of the FTSE 100's Index fund returns. They stand at 3.58% annualised, i.e your money is now 1.4x of the original amount. This is considering the fact that we are looking at returns from Aug 2010 levels when the FTSE index was already 20% down fro…

> They stand at 3.58% annualised, i.e your money is now 1.4x of the original amount.

Do you have a typo?

Re: Ask HN: I have $450K cash, what should I do to maximize my return?

#107

Post by TruffleLabs »

Great to hear you are able to have these kinds of decisions to make!

Maximize return needs input * when do you plan to use the money? * what does maximize mean to you (more money is not always what people mean: Examples maximize social good, maximize for long term use in a trust, etc)? * what are your goals?

There are many other questions that could be asked.

Recommend you hire a fee only financial planner.

Also take a personal finance class to help you understand the different types of investments you have (cash, index funds, real estate, land, etc) and to learn how each type of investment is measured over time.

Hope you find your path to your goals :)

Re: Ask HN: I have $450K cash, what should I do to maximize my return?

#108

Post by mensetmanusman »

aboodman wrote: post #96
ericmay wrote: post #13

What’s your goal? That’s the first question that needs to be answered here before trying to identify an investment strategy.

Investment managers always ask this question and I never know what to answer. I feel like everyone's answer must be the same: maximize return, minimize risk. What are possible answers to this question you're looking for?

Are you looking to help others, or help yourself? E.g. your goal could be to help low income children have better lives.

Your goal could be to live on an island mansion in 20 years.

Re: Ask HN: I have $450K cash, what should I do to maximize my return?

#109

Post by throw0101a »

quotemstr wrote: post #81
throw0101a wrote: post #29

> I'm not comfortable investing the entirety into an index fund, given the current socio-political climate. Over the the long term there is not really anything better to do with it than equities: the Great Depression, World War 2, gold standard retirement, 1980s inflation, etc. Even if you only invested in the peaks, you'd still do quite well over the decades: * https://awealthofcommonsense.com/2014/02/worlds-worst-m…

I'm an index fund skeptic. What would happen in a world where everyone invested in index funds? Capital allocation would go haywire. You can't create value out of nothing. ISTM that the more people push on index funds, the more overvalued equities in the index become relative to those outside the index. I'm not sure that retrospective analysis saying index funds are the best applies going forward in a world where ind…

> ISTM that the more people push on index funds, the more overvalued equities in the index become relative to those outside the index.

What "index funds" are you referring to? The S&P 500? Dow Jones? NASDAQ 100?

If you purchase a Russell 3000 index fund you are purchasing a piece in every publicly traded company in the US:

* https://en.wikipedia.org/wiki/Russell_3000_Index

Any 'pricing irregularities' are discovered, then they will be pounced on any few remaining active investors. I recommend you read up on the following:

> So what would happen if the majority of investors started to buy the market and stopped trying to beat the market?

> Mispricings would start to develop regularly, and the people that had continued to try and pick stocks would be able to profit. The profits that these people made would attract other people, and eventually everyone would return to chasing the dream of beating the market. Behavioral finance plays a huge role in market efficiency; nobody wants to accept being average by taking what the market gives them when there are hot shot managers that promise to consistently beat their benchmark. There is a lot more emotional attraction to investing with the guy, or to being the guy that can beat the market.

* https://www.pwlcapital.com/the-grosman-stiglitz-paradox/

* https://en.wikipedia.org/wiki/Grossman-Stiglitz_Paradox

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