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

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

#221

Post by _skel » Sat, Aug 01, 2020, 7:17 PM UTC

MuffinFlavored wrote: post #216

jordanmarshall wrote: post #51

Just skimming some of the replies here makes me think you will get better advice on the Bogleheads forum [1]. Despite the minimalist appearance it is actually a great place to get sensible financial advice. I would start with the wiki page on managing a windfall [2], then search through older replies to similar questions. This kind of question gets asked there a lot, so there should be some recent threads. [1] https:…

Why isn't the tl;dr: 1. put 6 months of expenses in a high-yield savings account that is easily accessible + liquid in case of emergencies 2. max out tax-advantaged accounts. $19.5k/yr 401k + $6k/yr IRA. allocate into anything similar to a target date retirement fund with healthy exposure to US total market/probably light bonds depending on age 3. put the rest in a brokerage account, allocated in the same things your…

That's good retirement planning advice for normal situations. Having a $450k cash windfall adds a few wrinkles -- there are more investment options available (e.g. buy a house with cash), and the tax consequences of those various options can be very different.

I don't think most people need a financial advisor, but if I had a $450k pile of cash and I wanted to understand the tax consequences of various investments I would definitely pay for a consultation.

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

#222

Post by hedora » Sat, Aug 01, 2020, 7:17 PM UTC

hedora wrote: post #198

IgorPartola wrote: post #31

Earlier quoted context omitted.

You are trying to time the market. If your goal isn’t to cash out within a year, don’t look at the prices, just buy S&P index fund like VTI and a bonds fund in some proportion. Rule of thumb is 100 - your age is the percentage that goes into stock fund, your age is percentage that goes into bonds.

The strategy I described is sometimes called “time cost averaging” It is a form of timing the market. The idea is to buy at about the average price over some time period to avoid getting bitten by volatility. For reasons not involving investments, I had to have a large cash position until we were well into the recovery from the last crash. Buying index funds at all time highs during the biggest economic downturn of o…

One other thing, I recommended a robo over a manually rebalanced vti/bond split because they include some money in foreign indexes (increasing diversification), and auto-rebalance. Some also do fancy stuff like tax loss harvesting.

All of that complexity supposedly beats simple manual approaches by a percentage point or two (after tax).

Also, most robos are idiot proof.

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

#223

Post by mixmastamyk » Sat, Aug 01, 2020, 7:19 PM UTC

Right now one should have a significant position in gold/metals for a couple of years to hedge governments severely inflating their currencies to fight the crisis/reduce their obligations.

Quality stocks and real estate, typically hold their value as well during volatile times. Do not panic during short term crashes. These should be bought on ten-year+ time frames.

As things improve over the next few years you can start selling the gold and buying other hard assets again. If approaching retirement, it will be time to start moving into more conservative income options like dividend-stocks, bonds, etc.

The one thing you don't want to do now is leave a bunch of cash sitting around. It will get hammered.

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

#224

Post by triceratops » Sat, Aug 01, 2020, 7:19 PM UTC

jasoneckert wrote: post #88

My advice is unconventional. Why maximize your return? Money is a renewable resource, but time is not. If I were you, I'd spend the money to enjoy my time with others I care about and donate the rest to others in need.

It's $400k, not $4m. OP still has to think about money if they want to live a median US lifestyle. Good stewardship of this windfall will give them more free time and independence in the future. Your objective is reasonable but your advice won't help OP.

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

#225

Post by _s4uu » Sat, Aug 01, 2020, 7:20 PM UTC

As someone who has been a partner in a fund in the past, I've done a solid amount of research, and for someone who is risk averse, one of the best strategies of the last 50 years has been 33% of your investment in real estate, 33% in hedge funds, and 33% in a portfolio balanced between stocks and bonds. I don't have the study on hand, and I also don't have the time to search for it, but doing research into the hedge fund field will probably yield this study. good luck

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

#226

Post by triceratops » Sat, Aug 01, 2020, 7:21 PM UTC

latchkey wrote: post #121

tzury wrote: post #82

Use it as down payment for three condos in Austin TX and rent them.

I thought about doing rental properties and then came to the conclusion that the amount of work to make that happen, just isn't worth it for the average person. You're either stuck hiring some management firm or doing it yourself. It isn't easy to get the capital back and will take years to see any sort of returns. Never mind the fact that we're in a pandemic where ~1.4M people a week are losing their job. Who are yo…

It may also mean there are desperate landlords looking to sell. If you can deal with reduced/no rent for a year, there might be some great bargains maybe?

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

#227

Post by kp98 » Sat, Aug 01, 2020, 7:23 PM UTC

nodesocket wrote: post #171

adaisadais wrote: post #163

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.

> We will see an adjustment by the middle of 2021 at the latest. I love people who claim they know what the market's going to do, and continuously call for a crash. These are the same people who have been calling for a crash for the last three years. Here's the deal, sure we eventually have corrections, but if you have cash on the sidelines then you just buy more and lower your dollar cost average. I did this pretty…

You realize that this strategy isn't going to work indefinitely? People like you will be blown out in the future. Sorry if that sounds awful, but it always astounds me how people think investment managers are tantamount to tea leaf readers, and that they've figured it out by simple dollar cost averaging. I just don't understand the mindset

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

#228

Post by throw0101a » Sat, Aug 01, 2020, 7:27 PM UTC

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…

> 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.

This is why one diversifies. Only investing in the stocks of the country you live in is called "home country bias":

* https://www.investopedia.com/terms/h/home-country-bias.asp

Using a football ('soccer') analogy:

* https://www.franklintempleton.co.uk/investor/resources/inves...

Being slightly over-weight at home isn't totally bad (it helps with currency swings), but for most folks they'd do well to go international to a certain extent. An analysis for a bunch of Anglophone countries (US, CA, UK, AU):

* https://www.vanguard.com/pdf/ISGGEB.pdf

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

#229

Post by baby » Sat, Aug 01, 2020, 7:28 PM UTC

In my circle a lot of people just use robo-advisors (wellfront, betterment, etc.)

The whole point is that it doesn't cost much and it saves you time on learning about finance.

If you are interested in learning finance, then of course this might not be the best approach.

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

#230

Post by baby » Sat, Aug 01, 2020, 7:29 PM UTC

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 hear this again and again, but something that went up throughout history is not a proof that it will continue to go up in our time. It's definitely highly likely, but it's not a certainty. A lot of people spread their investment in more than just the market to account for that.