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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?

#431

Post by icedchai »

simonebrunozzi wrote: post #279

This is my advice: make sure to spend enough time to educate yourself about financial investments. My rule of thumb is to spend one hour per $1,000 you have in assets. So, with $450k in cash, dedicate 450 hours of the next 1-2 years to build a solid education for yourself. Don't simply follow the specific advice that you feel makes more sense. If you think this is a lot of time... 104 weeks in 2 years = you need to s…

Some education is good, but that much could result in paralysis by analysis. He'd be better off taking a relatively small chunk (say $25K) and learning by doing. Open a brokerage account and experiment with different investments.

Some people do not have the right "temperament" for investing. They're afraid to buy. Afraid to hold, so they sell too soon. They can't handle the volatility, so they get out at the first sign of trouble. It takes practice. Paper trading can help, but it doesn't get you the same feel as working with "real" money and markets.

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

#432

Post by mehrdada »

lumost wrote: post #372
tgma wrote: post #259

Earlier quoted context omitted.

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 environme…

that should be a temporary swing though right? once the P/E capacity normalizes to the lower interest rates appreciation should be proportional to the base rate.

Yes but only if people are convinced to make the call to consider interest rates to remain this low for a long time at once. If they gradually do it and the underlying businesses continue to generate the earnings and growth expected, the outcome is different. In any case if you have made your money today and investing it, 4% may still be quite reasonable.

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

#433

Post by fratlas »

tutfbhuf wrote: post #161
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..

Exactly this. Put your cash in S&P500 and live a peaceful life. For optimization: take out a little bit more when the price is considered to be high and take out a little bit less if it's low.

Is this not timing the market? How do you calculate what is "high" and "low" - rolling average increasing 7% per year, compare current price to that expectation?

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

#436

Post by overcast »

ajuc wrote: post #24
overcast wrote: post #9

Earlier quoted context omitted.

If you're betting on a crash soon, why not just hedge your existing positions on long dated PUT options? That's what they are for , insurance. As far as OP is concerned, there's not much point into cashing everything if the timescale is greater than 5+ years for needing any of it. Trying to time the market is just a fools game, consistent investments in the indexes always works out in your favor long term. Regarding…

If you bet on a huge crash then your PUTs will lose the value anyway. So what if they give you 50% profit when the inflation is 1000%.

A huge crash will net you much more than 50% profit, you can pull that any day of the week for the last 4 months with the market volatility.

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

#437

Post by stevespang »

arcticbull wrote: post #267
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:…

Bear in mind Personal Finance is pretty conservative. Depending on how much time you have in the market you can take some more aggressive bets. I'm not suggesting r/WallStreetBets style investing but something like a risk parity adjusted pairing of 3X leveraged S&P with 3X leveraged treasuries can yield dramatically better returns over time [1]. I'm not recommending it per se, to each their own risk tolerance and res…

Yeah, right. The link posted at: https://www.bogleheads.org/forum/viewtopic.php?t=272007 was showing performance right before covid19 hit.

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

#438

Post by peferron »

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…

I'm happy you've been beating index funds and hope you can keep that streak going. Have you considered the opportunity cost of spending time researching and picking stocks though? You don't just need to beat index funds, you need to beat index funds plus whatever you could earn by spending that time on something else.

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

#439

Post by Justin_K »

icedchai wrote: post #425
Justin_K wrote: post #421

Earlier quoted context omitted.

4% roi is far worse than market and real estate averages.

4% is what FIRE folks consider "safe" over long periods of time. It is based on the well-known Trinity study: https://en.wikipedia.org/wiki/Trinity_study

...but it's still worse than market averages.
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