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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?

#471

Post by kokey »

itsoktocry wrote: post #334
mancerayder wrote: post #111

Earlier quoted context omitted.

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 sam…

I'm also an index fund skeptic mainly because it's now such a convention that taxi drivers and shoeshine boys will tell you that's where you should put your money. People used to say the same things about investing in real estate and many other things and for a time in history those things were demonstrably the best investment long term, until it wasn't. It looks like now is that time again for the stock market to look good. It still doesn't mean it's a bad investment either and no one will blame you if you suffer with everyone else when it goes wrong. However, it's also never worth putting all your money into unless you can afford to ride through a slump that could last well over a decade.

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

#472

Post by overcast »

Sschellbach wrote: post #452
overcast wrote: post #360

Earlier quoted context omitted.

Yes I do. Significantly more so than the weeks/years since. There was weeks and weeks of heavy volume, as it declined to $3000. If you bought over $10k, you've had money tied up doing nothing for 2.5 years in nonsense. Prices don't go parabolic like that unless dumb money gets involved, and subsequently wiped out. https://www.tradingview.com/x/73konLcD/

your chart has a couple candles, but doesn't address my point that very little volume was transacted at 20k. People aren't going to stop storing value on the Bitcoin network, so I suggest you lighten up

There is weeks / months of volume well above the current price. No one is “storing value” in Bitcoin. They are speculating, hoping the value goes up enough to unload on the next sucker. It doesn’t take a rocket scientist to look at your comment history, and see you’re a shill for garbage investments.

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

#473

Post by mariojv »

owenversteeg wrote: post #45

Ever since John Bogle created the first index fund about 50 years ago, the advice of simply put your money in, don't try to time the market, and divide between an allocation of stocks and bonds based on your risk tolerance has performed far better than anything else. This includes periods where the market has been very over-inflated. If you had the worst possible timing and put your money in around the absolute peak…

Aren't short-term treasuries more at 0.2% right now? Looking at yield to maturity here: https://investor.vanguard.com/mutual-funds/profile/VFISX

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

#474

Post by overcast »

ajuc wrote: post #461
overcast wrote: post #436

Earlier quoted context omitted.

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.

With PUTs the maximum you can earn is 99.999% With inflation you can lose much more.

What? That’s completely false. The last S&P dump in May net me roughly $1550 per $150 SPY contract.

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

#475

Post by Bloggerzune »

A well-written and illustrated explanation like this one? I can't imagine preferring a video unless someone just wants some background noise and they don't really care about understanding the subject. https://www.bloggerzune.com/2020/05/high-da-dofollow-profile... There is one way you can beat dollar-cost averaging when you're investing large lump sums like this. Selling cash-covered put options until you get assigned. This is the only strategy that has proven to outperform buying and holding. The reason is obvious: you're buying at a discount if you get assigned, and you get to keep the premium if you don’t.

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

#476

Post by voisin »

Justin_K wrote: post #439
icedchai wrote: post #425

Earlier quoted context omitted.

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.

I think it is 4% nominal, which leaves some excess returns to keep pace with inflation.

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

#477

Post by arcticbull »

hcknwscommenter wrote: post #454
arcticbull wrote: post #267

Earlier quoted context omitted.

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…

I don't think you can deduct the interest on the margin loan. The rules are fairly simple. The margin loan funds must be used for investment and not for use. Putting a down payment on a primary residence is certainly personal use.

If you have $10K in your checking account and a $440K investment portfolio, and you need to make a $90K down payment, it works like this:

(1) Sell $80K in assets, and use the proceeds, on top of your checking account balance to make a wire transfer.

(2) Now you have $360K in your investment account. You take a margin loan out in the amount of $80K.

(3) Use that $80K to re-establish your $440K investment portfolio.

You haven't used your margin loan to make a down payment, you've sold your assets and used the proceeds to make a down payment. You've then re-taken your investment position using a margin loan. The margin loan isn't collateralizing your down payment, it's making up for a reduction in the net liquidation value of your investment account as a result of your having used it to make a down payment, allowing you to retain your the prior level of exposure to equities in your trading account.

You don't have to go through the actual song and dance, and re-taking your equity positions would result in an IRS wash sale anyways, but that's why withdrawing cash on margin to make a down payment means the margin loan remains an investment expense -- it's there to allow you to retain your desired level of exposure to equities.

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

#478

Post by wocram »

arcticbull wrote: post #306
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…

There is one way you can beat dollar-cost averaging when you're investing large lump sums like this. Selling cash-covered put options until you get assigned. This is the only strategy that has proven to outperform buying and holding. The reason is obvious: you're buying at a discount if you get assigned, and you get to keep the premium if you don’t. Selling a put is basically being paid to put in a limit order.

Why do you think this is true?

$PUTW is an ETF that implements the strategy and it has not done well in recent years.

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

#479

Post by IvoCass »

dmoy wrote: post #445
Justin_K wrote: post #440

Earlier quoted context omitted.

Based upon what?

It's not 4% ROI, it's 4% withdrawal rate. And even that is not super safe if you're retiring for many decades (the RE part). You can use a variety of online calculators to back test a 4% withdrawal rate - maybe 80% safe, but 20% of the time you'll go broke before dying.

Why isn't it safe? Or where can I read more on that?

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

#480

Post by gfodor »

triceratops wrote: post #423
gfodor wrote: post #417

Earlier quoted context omitted.

Saying that index based investing doesn’t involve luck is exactly what I was getting at by the usual advice. Unfortunately, buying index funds, particularly US stock market index funds, is a matter of investing based upon selection bias. On the long timelines demanded by index investing, staking your claim on the US equities market is hugely risky, particularly when you are doing so without an investment thesis that…

> Ask yourself if there is any condition where you would deallocate from stocks. It's reasonable to deallocate from individual stocks, or to sell to reallocate to other investments and keep to your plan. Deallocating from the stock market entirely, long-term is a much stronger position to take. There would need seismic shifts in the global economy to do that, because it's like admitting that on aggregate companies ar…

Jackass Investing and Millionaire Fastlane are good layman books. Expected Returns is a more advanced but accessible one. Also the Missing Risk Premium is good food for thought since if its thesis is correct nearly everything you read about risk management in typical indexing investing literature is bogus and the opposite of true.

Tl;dr is two much more sane approaches to investing are return driver focused or income generation focused capital allocation instead of asset appreciation and compounding based upon speculative indexing. These btw are what rich people do with their money (hedge funds, managed futures, income generating investments) not park it in index funds and hope the underlyings appreciate due to asset prices going up. Rich people pay 2/20 management fees because the fees pay for true diversification. Diversification is real but requires diversifying return drivers not asset classes. (Asset price changes are just one return driver.) If you are just sitting in asset backed index funds there are a variety of tail events (non-apocalyptic ones) where their action correlation goes to one and you’re perma-in the red until you die.

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