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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?

#161

Post by tutfbhuf »

brianwawok wrote: post #140
sushshshsh wrote: post #134

Earlier quoted context omitted.

Ok so say I have enough risk tolerance to put my money in something other than cash, but not more aggressive than a fund that tracks the S&P, what precise steps should I do to live off of my cash stack while doing absolutely 0 work other than sitting on my couch?

If it’s all in the market, most wisdom says you can take out 4% a year and never run dry. Is 4% of your stash enough to live on? Congratulations you are financially independent. You can read through mr money mustache if you want more depth..

Exactly this. Put your cash in S&P500 and live a peaceful life. For optimization: take out a little bit more when the price is considered to be high and take out a little bit less if it's low.

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

#162

Post by ummonk »

stu2b50 wrote: post #147
mancerayder wrote: post #111

Earlier quoted context omitted.

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 "b…

You're conflating index funds with S&P 500 Index funds, though. You can buy an index fund with _zero_ tech stocks. You can buy something like VINIX which has considerably less weight on the BigN tech firms.

If the market is efficient, why is (infrequent) stock picking so much worse than buying an index fund?

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

#163

Post by adaisadais »

The markets are extremely overinflated as of now. We will see an adjustment by the middle of 2021 at the latest.

I would wait until the news starts to sound so horrible you can’t help to do anything but invest.

As many have mentioned, placing it in an index fund is a good idea. I would go for that! But just wait until the market has the next downturn, invest, and don’t look back.

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

#164

Post by stu2b50 »

mancerayder wrote: post #154
stu2b50 wrote: post #147

Earlier quoted context omitted.

You're conflating index funds with S&P 500 Index funds, though. You can buy an index fund with _zero_ tech stocks. You can buy something like VINIX which has considerably less weight on the BigN tech firms.

The VINIX is down 3% YTD while the rest of the market ballooned. Looks like we "picked stocks" by picking the indexes here, too? I just don't understand the insistence on indexes. We're afraid of picking stocks that go bankrupt? We work in tech, and a lot of us are science nerds. Surely we can pick names based on how we think those technologies are likely to be successful. We have access to a lot more information tha…

Well, yeah, that's absolutely expected. The promise of index funds isn't "you'll always make money!!" over any short-term period, the promise is that if the stock market as a whole increase, which it tends to do, you'll also benefit from that.

>Surely we can pick names based on how we think those technologies are likely to be successful.

Time and time again, especially now, "fundamentals" has proven to be a poor predictor, at least in the short term. You have companies with P/E ratios of 20-30 right now.

It's not just about the underlying product, perception and all kinds of human effects also matter, which makes it a perilous place to be.

Throw your money in a big bucket and over 20-30 years, you'll be up. That's the point.

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

#165

Post by ummonk »

hydroreadsstuff wrote: post #144
mancerayder wrote: post #111

Earlier quoted context omitted.

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 "b…

The historic worst case for the inflation-adjusted S&P 500 is not being up from 1929 - 1987 - 58 years. https://www.macrotrends.net/2324/sp-500-historical-chart-dat... Edit: This ignores dividend reinvestment as ummonk noted. https://www.officialdata.org/us/stocks/s-p-500/1900 suggests 1929 - 1944 was probably the longest time. We are in unprecedented times. Highest debt, lowest bond yields, crazy P/Es, historic GDP…

I think that worst case looks worse than it was because it is ignoring dividends.

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

#166

Post by polote »

If you have spare time in your life, go to your banker, ask for 450k loan, buy 2-3 houses, keep 200k cash, rent the houses, if stock markets loose 50% of its value, invest 100k on sp500 index.

There is almost nothing that can beat renting houses if you are a non finance expert

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

#167

Post by Apes »

brianwawok wrote: post #140
sushshshsh wrote: post #134

Earlier quoted context omitted.

Ok so say I have enough risk tolerance to put my money in something other than cash, but not more aggressive than a fund that tracks the S&P, what precise steps should I do to live off of my cash stack while doing absolutely 0 work other than sitting on my couch?

If it’s all in the market, most wisdom says you can take out 4% a year and never run dry. Is 4% of your stash enough to live on? Congratulations you are financially independent. You can read through mr money mustache if you want more depth..

The current risk free rate is absurdly low, which would suggest a much lower sustainable draw down than 4% for the next 10-30 years, probably only around .5 to 1.5% at most.

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

#169

Post by mancerayder »

hydroreadsstuff wrote: post #144
mancerayder wrote: post #111

Earlier quoted context omitted.

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 "b…

The historic worst case for the inflation-adjusted S&P 500 is not being up from 1929 - 1987 - 58 years. https://www.macrotrends.net/2324/sp-500-historical-chart-dat... Edit: This ignores dividend reinvestment as ummonk noted. https://www.officialdata.org/us/stocks/s-p-500/1900 suggests 1929 - 1944 was probably the longest time. We are in unprecedented times. Highest debt, lowest bond yields, crazy P/Es, historic GDP…

I tend to agree with this and I'm also long several gold miners, and I've swing traded some of them (one was a value buy with a long-standing issue with the Greek government that I was watching the news on for years).

It baffles me how this Bogleheads philosophy has taken tech people. People can't wrap their heads around the idea that gold goes up in times of trouble, or that work from home tech is likely to go up, or that oil is likely to go down, or whatever other myriad bets one can make.

My approach is to maintain almost all cash and to trade a small percentage of the cash on extremely volatile stocks, preparing to hold long-term if necessary. I rarely invest in fully scammy pump and dumps (but lately pharma has paid off, for obvious reasons).

I use the news cycle and try to anticipate what others are doing. You don't need to sell at the top and buy at the bottom to make money.

In contrast, I'm looking at my work 401K which is managed with those mathemetically unstoppable index funds. It's down 2 percent while I'm up 30.

Now what am I to do with the cash portion of my investment. I'm leaning in bond funds (because bond picking is something I have no idea about).

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

#170

Post by soldeace »

The answer is: nothing. At least nothing different than what was your strategy before that large sum of money entered your life. If I were you, I'd split up this sum in 10 or 20 chunks and mingle each part with the amount you invest monthly. The reasoning behind the split-up is that it's easy screw up when it comes to investment, so easing in rather than nose-diving prevents you from doing something stupid.

A last word of caution: maximized returns come with maximized risks

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