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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?

#231

Post by darawk »

edoceo wrote: post #160
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?

You'll need a fund with good dividend payout. SPY is currently at $1.30 and cost $327. If you put $450k into SPY you make $1870 per quarter. So, might need to buy $2MM of SPY. But there are other good dividend funds and/or individual equities.

Do not do this. Dividends are not a good way to pick stocks. Dividends and buybacks are fungible, except that buybacks are more tax efficient. All equities should have the same risk-adjusted expected total return (i.e. including dividends, if markets are efficient), so you should not be picking stocks based on their dividend yield alone. If you want income from your equity portfolio, just periodically sell shares.

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

#232

Post by akrymski »

Real estate. Great hedge against long term inflation. And a mortgage allows you to borrow 5X at low interest rates, with rental yields generating a profit. Example: you can borrow 2M at 2% (interest only) and rent out at 3%. Real estate rising 3% on average means a capital gain of 70K a year, which is a 16% yield on your 450K investment.

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

#233

Post by hedora »

onelastjob wrote: post #209

Wait for the next crash and then buy up stocks and rental properties (apartment buildings) at a discount. See 2008 for reference. While you are waiting for the crash, you could put some of your cash into gold, which will do well when the US economy crashes.

I did that from 2008 to 2014 (but I didn’t buy gold).

It worked out terribly. I should have parked it in a diversified portfolio. Instead, housing and equity prices inflated, and I lost a ton of potential gains.

Buying gold during the crisis would have made it even worse:

https://www.macrotrends.net/1333/historical-gold-prices-100-...

If you must buy gold, it’s best to buy some when the stock market is booming. If you bought gold in 2011 or 1980, your current return would be 0%. It would have been very negative last year.

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

#234

Post by fennecfoxen »

sushshshsh wrote: post #134
nknealk wrote: post #123

Surprised not to see this mentioned anywhere. In finance, we don’t look at maximizing total return but rather risk adjusted return. Buying a lotto ticket has amazing total return if you hit the jackpot but really bad risk adjusted return. The thing you should spend some time doing is deciding what your risk tolerance is and how much variance in your portfolio you can stomach. Then you can start talking investment str…

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?

Ordinarily, I'd say you want a product like Vanguard Managed Payout Fund. But they've just revamped them into the Vanguard Managed Allocation Fund (VPGDX): https://retirementincomejournal.com/article/vanguard-reboots...

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

#235

Post by dap »

justinmeiners wrote: post #79
chii wrote: post #74

Earlier quoted context omitted.

“Far more money has been lost by investors preparing for corrections, or trying to anticipate corrections, than has been lost in corrections themselves.” — Peter Lynch

Any evidence to back up the quote?

I don’t know the original context, but I take a quote like that to be a reminder that there’s cost to preparation and you could go overboard.

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

#236

Post by shados »

akrymski wrote: post #232

Real estate. Great hedge against long term inflation. And a mortgage allows you to borrow 5X at low interest rates, with rental yields generating a profit. Example: you can borrow 2M at 2% (interest only) and rent out at 3%. Real estate rising 3% on average means a capital gain of 70K a year, which is a 16% yield on your 450K investment.

the problem with real estate is that it's work. Even if you hire a management company (which does hit your profit), shit like bad tenants can really screw you up, if only in term of time spent on paperwork and legal garbage. In the best case scenario it's low (but not zero) work, but in the worse case it's a LOT of work.

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

#237

Post by cft »

mancerayder wrote: post #111
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 "b…

There's also a possibility of (hyper) inflation. I would buy certain hand picked large stocks, Bitcoin, gold and Fx.

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

#238

Post by [deleted] »

qorrect wrote: post #65
DabbyDabberson wrote: post #52

I recently bought muni bond funds and SLV to hedge on inflation. PMO pays a nearly 5% dividend which is tax free. I'll take that over a 1% savings account (with taxes) any day.

AMZN has made a 75% return this year, and you're buying municipal bonds ? Someone is _really_ risk adverse ...

[deleted]

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

#239

Post by adaisadais »

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…

That’s two companies. Granted, they collect a larger proportion of revenues than many others within the NYSE.

The market overall is not healthy. As long term unemployment continues more and more people will hang on to their iPhones or cancel their amazon prime.

Those two companies, as well as Google, will be relatively protected during this period. The rest of the market hasn’t been truly exposed to the macroeconomic effects that COVID-19 will bring us in this country.

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