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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?

#251

Post by gcb0 »

darawk wrote: post #231
edoceo wrote: post #160

Earlier quoted context omitted.

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.

> If you want income from your equity portfolio, just periodically sell shares.

how much continuous growth do you expect the market will have exactly?

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

#252

Post by gcb0 »

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…

You are correct in the analysis. But you missed the point that "it's a feature".

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

#254

Post by nodesocket »

adaisadais wrote: post #243
kp98 wrote: post #227

Earlier quoted context omitted.

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

Clearly it won’t work in the long term. No one knows what the market might do tomorrow. We might think we know but no one can ever truly know (legally speaking). What I’m advocating for is mainly based on the timing: the market corrects, on average, every 8-12 years. Right now, many Robinhood investors (like you probably are) are extremely bullish and are inflating the market. When the bubble pops I will see you at t…

> People like you will be blown out in the future. > Right now, many Robinhood investors (like you probably are)

First off, I am not a robinhood investor. I've been in the market since 2002, with a significant amount of capital invested now, weathered 2008 and this years Covid action and seen many bear markets. I find the fractional Robinhood "traders" comical and a train wreck waiting to happen. Buying Hertz, Kodak, Nikola.... That ain't me, so don't make assumptions. I have cash on hand, I have large percentage in J.P. Morgan ($JPST) a bond traded ETF which pays a monthly dividend and has a 8% return the last 3 years.

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

#255

Post by coliveira »

WA wrote: post #178
edoceo wrote: post #160

Earlier quoted context omitted.

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.

Dividends are left-pocket right-pocket. Dividends can help you psychologically, but in a way, it’s like forced selling once per year or per quarter. Edit: if it helps you to invest, by all means, do it. But since dividends are mostly psychological, there is no point in limiting your stock picks to companies with a high dividend.

it's not psychological at all. Dividends give you returns that can be reinvested in whatever you want, so it helps with diversification. Now, in the US companies have muddled the field so good dividends don't mean much, but it is still useful to remember this.

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

#256

Post by hydroreadsstuff »

throw0101a wrote: post #218
hydroreadsstuff wrote: post #179

Earlier quoted context omitted.

He might mean debt monetization. When the Fed buys treasuries. I think the video didn't touch on that. M2 money supply changes nicely correlate with S&P500 performance. So there is truth to his statement. I'd also throw out the assumption that the Fed will reduce the balance sheet eventually. They tried and failed in 2019. It's not going to happen. They are in fact "spending" (through the Treasury and their bond-buyi…

> They tried and failed in 2019. That's because COVID-19 happened. :) The Fed is buying up bonds: at some point they will mature and the US government will have to either (a) increases taxes to come up with the money to repay them (thus taking money out of circulation via the IRS), or (b) roll the debt forward by issuing new debt to pay the old debt. Given that a few years ago the UK rolled forward some debt from the…

They lowered the rates for corona, but they expanded the balance sheet for that overnight lending rate spike before that.

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

#257

Post by e15ctr0n »

wcerfgba wrote: post #63

Since you have $750K in assets, you could consider investing in a social enterprise or giving to charity. I support GiveDirectly because their model -- direct cash transfers -- is very efficient. Otherwise, as other people have said, it depends on your time frame and the amount of risk you are willing to take on. If you can wait 5+ years, a fund blending index tracking with some bonds (for stability) is an excellent…

> consider investing in a social enterprise or giving to charity

You could even set up your own private foundation for serving a good cause dear to your heart.

https://www.investopedia.com/terms/p/privatefoundation.asp

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

#258

Post by anonymousiam »

You don't say much about how much time you want to spend managing your investments. That is an important consideration. On one end of the spectrum, you may have several hours per day to track your portfolio along with market indicators and news -- On the other end, you may not be qualified, or have the time to spend.

No investment advice offered here will be worth anything until you decide where you are on that spectrum.

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

#259

Post by tgma »

Apes wrote: post #167
brianwawok wrote: post #140

Earlier quoted context omitted.

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.

TL;DR: Interest rates don't just affect one side of thing. They are tied to all aspects of pricing.

That's very simplistic one-sided view of interest rates. If interest rates stay low or go lower, the stock prices will keep skyrocketing which balances the equation on the other side increasing your stock portfolio returns. The P/E capacity will be much higher than it is today in a perpetual low-interest-rate environment.

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

#260

Post by satyrnein »

ummonk wrote: post #162
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.

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

The market being efficient means individual stock you picked is priced currently, but you're foregoing the benefit of diversification.
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