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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?

#111

Post by mancerayder »

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 agree with the (downvoted) guy who said, I'm an index fund skeptic.

Something is true with index funds that was less true historically, which is the concentration of a few large companies in the largest indexes - as in, the amount of percentage of capital they have. Fact, FAANG make up 10% of the s&p 500 index, tech makes up 20+ %. It's NOT at all averaged out in the way the Bogleheads might think it is. Is it a "bet on the economy," or is it a bet on the stocks of big tech?

Which brings me to something else that appears to have changed: big tech stocks are viewed as a safe haven, increasingly. With the overall economy being in a shambles combined with a virtual work world, this is even more important.

Put those two things together, and the S&P 500 index isn't diversified.

Edit: we're at the top of the cycle right now, or so it seems. We're all waiting for the other shoe to drop.

But it's worse. What happens if you stick everything in there, you need the money in 5 or 10 years and you just hit the bad part of the cycle (look what happened in March).

I'm doing the opposite of what the Bogleheads do, even though I'm extremely familiar with this extremely conservative approach. What's the fun in risking my capital with some index fund that's tied to concentrated entities like that, when I can risk a small percentage of my capital on highly volatile stocks, and make a similar return? You can repeatedly swing trade stocks like SPCE and some of the biopharma stocks and make money over and over again with a tiny percentage of your capital.

I'm more interested in understanding how the bond market will work now in this strange new reality. Are bonds not a safe haven place to park cash?

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

#113

Post by kqr »

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?

You can't both minimise risk and maximise return. They're polar opposites. ("Risk" is a bad word for the concept. It's more about volatility. The more volatile the asset, the higher the fluctuations, and the less you can expect to still have tomorrow, but the more you'll have in 20 years.)

The expected answer is mainly about what risk you are able to tolerate, i.e. how soon you will need the money back again.

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

#115

Post by mtooyoulabs »

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

#116

Post by hydroreadsstuff »

throw0101a wrote: post #71
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…

> The key, of course, is "on a long enough time frame". If you think there's a reasonable chance you might need the cash in two or five years, then you should either significantly reduce your exposure to equities like the S&P 500 or eliminate it entirely. The shorter the timeframe that the money is needed, the higher the allocation to bonds. Vanguard has (in Canada) a bunch of 'all-in-one' ETFs that have as their hol…

We are in unprecedented times (Lowest bond yields, highest debt, Crazy P/Es). Back-testing is only so useful. And only 20 years even less. We just had a GDP drop which is the largest since WW2 for some, or since 1929 for the U.S. Look at Japan's stock market index e.g. for what the future could look like.

Historically low bond yields: The room for rates to go lower is low. I would suggest to be careful with investing in them. If a rate hike comes eventually, both bonds (depending on maturity) and stocks (see december 2019 S&P 500) will fall. With negative real yields (bond yields - inflation), precious metals and related companies are lot more interesting. Perhaps REITs or some blend of solid dividen-paying companies. Anything that is somewhat inflation resistant.

Did you adjust your calculations for inflation? For the S&P 500, the absolute worst-case is 58 years of not being up, I believe. 1929 - 1987. Edit: This ignores dividend reinvestment. It seems to be 1929-1944.

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

#117

Post by mensetmanusman »

Trias11 wrote: post #16

Buy oceanfront real estate in Panama and rent it out. Residency comes with this. You may use both if things in USA gets from bad to worse - from political, economical, financial and social aspects.

Try Mexico, where our southern border friends keep putting decapitated heads on poles.

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

#118

Post by guenthert »

quotemstr wrote: post #92
branweb wrote: post #85

Earlier quoted context omitted.

Not the op but I wish downvoters would comment giving their reasons. I remember seeing something about this in the atlantic a while back, and it would be good to know if/why it's a bad argument.

There's this weird social energy surrounding index funds that's very aggressive about preaching that they're the only viable option and that everything else is ridiculous. To be honest, this energy is another input that increases my skepticism of the whole thing. These days, whenever you see an argument downvoted instead of rebutted, there's likely something to it.

I didn't downvote the earlier comment (and wouldn't as I'm quite clueless about financial matters), but felt the need to downvote another comment in an unrelated article recently. There I noticed, that once I applied the downvote, I couldn't see the comment being downvoted anymore. I meant to reply then to that comment on why I downvoted the comment, but couldn't anymore. I guess, that's the reason why one sees here so many downvotes by anonymous cowards.

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

#119

Post by guenthert »

jefftk wrote: post #106
actuator wrote: post #89

Earlier quoted context omitted.

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?

CL-USER> (expt 1.0358 10)

1.4215397

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