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?

#381

Post by PascLeRasc » Sat, Aug 01, 2020, 10:47 PM UTC

presto8 wrote: post #374

If you decide to invest it (in an index fund, for example SPY or IWM), I am not seeing any downside to selling cash secured puts. For example, on SPY, you could sell a short 48-dte 30-delta put (strike $312 on Sept 18) for $616 premium. If it is assigned (SPY goes below $312 on Sept 18), you will get 100 shares of SPY for $31,200 but you are no worse off than if you had bought today and also you will have reduced you…

The only argument against this that I can think of is that the market could continue to go up and up, and your premium gain might be less than what you'd gain through regular DCAing or lump summing in.

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

#382

Post by mandeepj » Sat, Aug 01, 2020, 10:50 PM UTC

Question, out of curiosity - How do founders manage those troves of cash after selling their startups for billions (sometimes even in cash)? I'm aware the amount is a mix of cash and stocks paid over 3,4 years. But, in some transactions the cash portion is not less than ~$300M.

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

#383

Post by aazaa » Sat, Aug 01, 2020, 10:51 PM UTC

> ... I have $450K in cash burning a hole in my pocket.

First, the urge to put money somewhere could be a problem. Examine why you feel this way - closely. It could be you're letting emotions take over and that's rarely a good thing.

Second, you didn't mention debts. If you have any, you might look at the interest rate (including government freebies) and compare that to the most likely return you'll get. If your interest rate is higher than your expected return, paying off the debt wins.

Third, what kind of reserve fund do you have? If you don't have 3-6 months of expenses in a ready cash, consider creating an emergency fund.

Fourth, if you have not maximized contributions to tax-advantaged accounts, consider doing that. If your employer offers a match, really consider that.

Fifth, avoid the temptation to tell others about your windfall.

Sixth, has someone helped you who is now in need? Think hard about it. If so, consider helping them out.

Seventh, be sure you understand the tax implications of receiving the money. How much will you owe, if anything. Make sure that money is securely set aside.

Eighth, if everything else is taken care of, think about the lifestyle you want to lead. Do you have enough money now to retire? How attractive does that possibility sound? Taking that path means taking less risk with the money.

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

#384

Post by kristopolous » Sat, Aug 01, 2020, 10:53 PM UTC

blacksqr wrote: post #377

arcticbull wrote: post #330

Earlier quoted context omitted.

Please read the write-up before replying with blanket statements that aren't relevant in this case :) That issue is addressed in the bogleheads post explicitly ("How much does the leverage cost?" and "Don't you know that leveraged ETFs are only intended to be held for one day?"), basically the ETFs are risk parity adjusted, and the volatility in the ETFs actually what generates the returns. The strategy makes money f…

I've been using 3x ETFs for the past few years to pursue a Permanent Portfolio style strategy in one account, and an All Weather strategy in another, rebalance annually, and both have been doing well. Low net volatility, high returns. Backtesting of the strategy shows total returns just under 3x the return of the unleveraged portfolios, just what I expect given the leverage costs. I expect both strategies to be both…

The right advice is "don't use a leveraged fund unless you want to be involved and look at the market every day"

I've made good money on them as well, but I shuffle money in and out frequently.

It's not a good strategy unless you really want to study things.

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

#385

Post by jkhdigital » Sat, Aug 01, 2020, 10:55 PM UTC

Since you’re looking to maximize return, not risk-adjusted return, you should buy Bitcoin and roll deep OTM weekly put options on large cap ETFs.

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

#386

Post by scarface74 » Sat, Aug 01, 2020, 10:57 PM UTC

arcticbull wrote: post #303

_skel wrote: post #221

Earlier quoted context omitted.

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…

For what it's worth, at 2.675% interest on a 30-year fixed, buying a house in cash makes very little sense, and a mortgage can counterintuitively earn you money. 1. In general, since the 1970s, house prices have across the United States tracked inflation. The price per square foot on a house, on average, is exactly the same as it was back then (houses are more expensive because the average US house has gotten bigger,…

With the new tax laws the home mortgage deduction is useless for most people. If you are married filing jointly, the standard deduction is $24000. I paid around $10K in interest last year on a $330K mortgage in its fourth year.

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

#387

Post by muzani » Sat, Aug 01, 2020, 10:59 PM UTC

I'm going to bet that there are tips at the bottom of this thread that actually work and were written by someone who has made a lot of money off it, but it's hard to sift through them and find out what works.

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

#388

Post by arcticbull » Sat, Aug 01, 2020, 11:02 PM UTC

scarface74 wrote: post #386

arcticbull wrote: post #303

Earlier quoted context omitted.

For what it's worth, at 2.675% interest on a 30-year fixed, buying a house in cash makes very little sense, and a mortgage can counterintuitively earn you money. 1. In general, since the 1970s, house prices have across the United States tracked inflation. The price per square foot on a house, on average, is exactly the same as it was back then (houses are more expensive because the average US house has gotten bigger,…

With the new tax laws the home mortgage deduction is useless for most people. If you are married filing jointly, the standard deduction is $24000. I paid around $10K in interest last year on a $330K mortgage in its fourth year.

Good to know, thanks! I’ve always itemized in the past.

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

#389

Post by chrismarlow9 » Sat, Aug 01, 2020, 11:03 PM UTC

perardi wrote: post #356

hlfy_hn wrote: post #355

"I have about $50K in an index fund, own land worth $150K (paid off) and another $200K in industrial real estate investments." 1. I don't like Index funds. They were a great investment in the past. They may be a disaster in the future. 2. "buy land they stopped making it" Mark Twain 3. "industrial real estate" could be top, could be a disaster, depending on what "industrial" means. Technology heavy REIT (IT, server,…

“I don't like Index funds. They were a great investment in the past. They may be a disaster in the future.” Care to explain? Are you worried about over-centralizing assets into index funds will screw with the market's ability to find the right prices for stocks? Because I worry about that myself, but, then, what do you do? How do I possibly outsmart the market given the information problem?

I'm not sure of hify_hn's reasons why, but I've exited index funds recently due to:

- the overweight holdings in tech in many of them.

- those same tech companies are responsible for most of the growth in the past decade.

- retail investors are chasing the tail of growth which is pumping the price out of realistic prices. many more have entered the arena with robinhood, etc.

- there's too much cash being printed, feels like hyper inflation.

- the current bubbles and shift in funds (pharma desperate plays, gold safe havens) make me think everyone has a finger on the "exit" button.

- most every major indicator I see says a fall is near.

I'm no pro and this is only my opinion. Been doing this about 3 years with a mix of daytrade style plays (earnings, swings, cannabis bubbles, etc) that seed long term etf dca purchases.

I'm sitting on cash for now until near US election time. I think the robinhood retail passive crowd that's only recently started will be left holding the bag for the pros near election, much like the crypto newbies in that peak a while back who tried to get in at the top. Too many similarities of people that seem to have no basic understanding of how things work under the hood of things and just chasing a "really hot run in blackjack".

though I'm happy to admit I don't fully understand every nuance of ETF's I see/hear conversations with people clearly not understanding what they're getting into and it's just too similar to any bubble I've ever seen.

I've also considered it may just continue to go up and all this is unfounded and wont matter and I've accepted the possible loses of potentially new profit for the rest of this year. It's a cost I'm very happy to pay for peace of mind, and get back to my strategy when the world makes sense again.

In a nutshell it seems like the ETF has just become a raffle ticket that's being sold through making it easy to simply stick money into it without really looking at what you're buying and if it makes sense. Like the ETF is no longer an investment vehicle, but a product with a bunch of hype.

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

#390

Post by arcticbull » Sat, Aug 01, 2020, 11:05 PM UTC

kristopolous wrote: post #384

blacksqr wrote: post #377

Earlier quoted context omitted.

I've been using 3x ETFs for the past few years to pursue a Permanent Portfolio style strategy in one account, and an All Weather strategy in another, rebalance annually, and both have been doing well. Low net volatility, high returns. Backtesting of the strategy shows total returns just under 3x the return of the unleveraged portfolios, just what I expect given the leverage costs. I expect both strategies to be both…

The right advice is "don't use a leveraged fund unless you want to be involved and look at the market every day" I've made good money on them as well, but I shuffle money in and out frequently. It's not a good strategy unless you really want to study things.

That’s true in general, but this strategy is basically set it and forget it (rebalance quarterly for best results), and it works because it’s been carefully balanced to offset decay.