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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?

#401

Post by paulclinger »

PascLeRasc wrote: post #370
quotemstr wrote: post #81

Earlier quoted context omitted.

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…

Your argument is exactly what Michael Green talks about [1]. The talk I linked is from January of this year and he basically predicted the exact crash we saw in February. Individual stocks were going up and down tracking the S&P 500 exactly, based on no news or any kind of information, just that they were in the S&P index. The price of the stock did not reflect the company's financials or outlook. We're about to see…

> If index funds didn't exist, why would I take $100 of Fifth Third Bancorp or TechnipFMC when I could get $100 of Apple or Slack instead?

Because you don't know which one will become the next Apple or Slack and will invest before they are valued as the next Apple or Slack benefiting from all their growth. Some of them will die, but the effect on the overall holdings will be small given their small size.

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

#402

Post by presto8 »

PascLeRasc wrote: post #381
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.

Thanks and yes, that is a good point. However, given that SPY is already at or near an all-time high, it seems unlikely that it would continue to go up every month or two by the premium amount (which itself is pretty substantial due to high volatility currently).

However, one adjustment if you have a bullish outlook is to reduce the delta from 30 to 20 or 10. Premium would go up and assignment is more likely.

OP, do it and report back :-) Even if you don't have any options experience, I am sure any broker will be happy to give you level 4 options (or at least level 2 which is what you need for cash secured puts) if you deposit $450k capital!

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

#403

Post by darawk »

imtringued wrote: post #319
darawk wrote: post #231

Earlier quoted context omitted.

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.

From the perspective of an investor this is spot on but on a societal scale it would be better if capital gains were taxed more than dividends. Dividends have to be paid from the income a company generates, meanwhile the stock price can be influenced by almost anything and it doesn't actually require the company to generate more value.

Ya, I think which way the rules should be here is a complicated question, but it certainly shouldn't be the case that we have two arbitrarily different taxation schemes.

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

#406

Post by banana_maker »

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:…

"Despite the minimalist appearance"

As time goes on, a site remaining minimalist like this is a good indicator of value. I'll never understand the desire to move away from high density UX like this to the modern web junk UX that looks more appealing but makes everything more convoluted.

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

#407

Post by seattle_spring »

bb88 wrote: post #245

So $450K is both a lot of money and not a lot of money. Yes you could maybe buy a house with it, but with the current economic climate of foreclosures just over the horizon, I would probably wait for the market to bottom out to do it. If it were me, I would start looking for vacation properties which are selling as a steal. Then when the real estate market recovers, sell it. And enjoy the wealth that comes with it.

Not sure if you've been following the vacation rental market, but it's exploding right now. At least that's the case in the northwest.

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

#408

Post by throw0101a »

itsoktocry wrote: post #351
throw0101a wrote: post #159

Earlier quoted context omitted.

> Yes, and not only that, but the index funds a skewed towards entities with large market caps. There are index funds of every publicly traded company in the US: * https://en.wikipedia.org/wiki/Russell_3000_Index Vanguard themselves have changed things so that employees no longer have the option of choosing the S&P 500 fund in their own retirement accounts, but rather the Total Market fund: * https://www.marketwatch.…

> Anyone investing in equities is just in it for the ride, as it is impossible to predict what will happen So people like Jim Simons are merely the luckiest people alive? The average person earns the average market return, less fees; that's a tautology. Unless you have some reason to believe you aren't average, most people are better off following your advice. It's what I do, personally. But the idea that no one is w…

> So people like Jim Simons are merely the luckiest people alive?

No one reasonable, not even Fama and French who came up with the Efficient Market Hypothesis, claim that the market is 100% efficient.

And given that no one knows anything about Jim Simon's Medallion Fund, we actually have no idea how successful they are. But given the quantities and/or trading volumes possibly involved, they don't have to be right very often.

In a perfectly efficient market, it's 50/50 whether you'll get the better end of the deal. Now think of a casino: for many games the house's edge is only 1.5% (e.g. blackjack, baccarat, three-card poker).

* https://www.gambling.com/ca/online-casinos/strategy/10-casin...

* https://wizardofodds.com/gambling/house-edge/

But that's still enough for a casino to make make money.

It may be the Simons et co have just an edge of a few percent points, but they make up their profit on volume.

> But the idea that no one is winning at this game flies in the face of a lot of evidence.

There are plenty of people that are winning. It's just the people that win one year rarely win a few years in a row (never mind 10+):

* https://www.tma-invest.com/spiva-data-reveals-15-years-of-ac...

* https://dividendstrategy.ca/what-is-spiva/

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

#409

Post by JMTQp8lwXL »

emit_time wrote: post #124

> I'm not comfortable investing the entirety into an index fund, given the current socio-political climate. The government is printing an awful lot of money right now. Keeping your money in cash isn’t a guaranteed return if inflation goes up significantly. You’re much better having it in assets with intrinsic value. (Stocks, real estate, etc) I would suggest investing the money over the course of a couple years into…

If OP isn't comfortable investing now, when would they be, or stated in other words, what about the socio-political environment needs to change to make investing 'comfortable'?

Depending on what kind of changes OP needs to see, they may not feel comfortable investing for years or even decades. And those years add up to many missed dividends and price appreciation.

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

#410

Post by devcpp »

chrismarlow9 wrote: post #389
perardi wrote: post #356

Earlier quoted context omitted.

“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, fee…

Overall, your post is more a critic on investment in this period rather than against index funds. Except for the presence of tech, which I'm not sure is this bad for people willing to take measured risk.

>there's too much cash being printed

Agreed, but then why hold on to cash until the election rather than buy gold or similar?

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