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?

#331

Post by gfodor » Sat, Aug 01, 2020, 9:18 PM UTC

triceratops wrote: post #220

gfodor wrote: post #207

If you seek out average advice, expect average results. You are going to get a bunch of people talking about equities, Bogleheads, bla bla bla. Read the book “Expected Returns” and start pulling threads.

The best thing about average advice is that the results are pretty much guaranteed. Someone who's asking a question like this lacks the skill to differentiate between better-than-average and worse-than-average advice. So giving them average advice with nearly-guaranteed average results is doing them a great service.

Not if average results means they will lose their money, which is what usually happens to people who invest money without understanding enough to manage it themselves.

If you want advice about money listen to rich people not middle class people who read investing forums and get rattled when the stock market drops.

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

#332

Post by humanlion87 » Sat, Aug 01, 2020, 9:24 PM UTC

mancerayder wrote: post #169

hydroreadsstuff wrote: post #144

Earlier quoted context omitted.

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, o…

How long do you think you can keep up the 30% returns? How many active investors/traders do you know have had 30% returns year after year? I think it is easy to lose sight of the long term possibilities when you are thinking about the short term.

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

#333

Post by tomxor » Sat, Aug 01, 2020, 9:25 PM UTC

Buy a house, live in it.

Your return = time to do what you want.

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

#334

Post by itsoktocry » Sat, Aug 01, 2020, 9:26 PM UTC

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…

>" It's NOT at all averaged out in the way the Bogleheads might think it is."

Correct. There are smart people doing research out there right now demonstrating that "passive" isn't really passive, and that people regularly buying into indices at any price is skewing the market.

No one is clear on what the ramifications of this are, but as the old adage says, "past performance no guarantee of future success". The same goes for buying the SPY and forgetting about it.

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

#335

Post by imtringued » Sat, Aug 01, 2020, 9:26 PM UTC

hydroreadsstuff wrote: post #179

throw0101a wrote: post #142

Earlier quoted context omitted.

> the willingness of the Federal reserve to print money (create debt). Without restraint nowadays. Ben Felix, a portfolio manager at PWL Capital in Canada, just released a video explaining why this is completely wrong: * https://www.youtube.com/watch?v=K3lP3BhvnSo > Quantitative easing is a monetary policy whereby a central bank buys government bonds or other financial assets in order to inject money into the economy…

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…

The balance sheet can only be reduced during times of inflation. I think everyone can agree that we are far away from that.

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

#336

Post by joubert » Sat, Aug 01, 2020, 9:26 PM UTC

> Given this spread, what should I do with the cash?

There isn’t a single answer.

Depends on factors such as:

- your goals (e.g. would this be for future retirement, for paying your kids’ education, etc.)

- your age

- your risk tolerance

- etc.

What about the socio-political climate makes your risk averse to investing into an index fund? And are you referring to all index fund, which can vary on many dimensions such as region, cap size, type (e.g. equity, bond), etc.

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

#337

Post by reducesuffering » Sat, Aug 01, 2020, 9:26 PM UTC

fortran77 wrote: post #241

I'll give you a proper Hacker News answer: Invest it in software companies who develop in Haskell and Rust.

Haskell, eh. But companies using Rust are generally quite innovative and posed to do well in the next decade: Facebook, Dropbox, 10x Genomics, Cloudflare, etc.

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

#338

Post by imtringued » Sat, Aug 01, 2020, 9:36 PM UTC

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…

That's a pretty poor argument. What would happen in a world where everyone invested actively? People would switch to index funds to beat them. In your world people would switch to active investing to beat the index funds.

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

#339

Post by perl4ever » Sat, Aug 01, 2020, 9:38 PM UTC

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…

>In finance, we don’t look at maximizing total return but rather risk adjusted return

People don't regard variance as the same thing as risk, and that's why they buy lottery tickets. It's a sign the math is wrong, not that the people are wrong.

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

#340

Post by imtringued » Sat, Aug 01, 2020, 9:39 PM UTC

quotemstr wrote: post #137

throw0101a wrote: post #127

Earlier quoted context omitted.

> It's not a zero sum game necessarily. It is, actually. William F. Sharpe laid it out in the 1991 paper "The Arithmetic of Active Management": * https://web.stanford.edu/~wfsharpe/art/active/active.htm * https://www.jstor.org/stable/4479386?seq=1 Sharpe won the 1990 Economics Nobel for other work: * https://en.wikipedia.org/wiki/William_F._Sharpe The more active a trader is, over a longer time frame, the more likely…

That can't possibly be true in the limit though. A market with no active management would allocate capital arbitrarily, without an eye to returns. A company burning money on making millions of unwanted skunk-scented bouncy balls would be as likely to attract capital as one that made, say, food or medicine. Resource allocation would break down if nobody made active capital allocation decisions. The question is how hig…

I'm not sure why you assume that people are forced to engage in passive investment. You can conjure arbitrarily high percentages but they are ultimately meaningless if they don't happen in reality.