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

Post by throw0101a » Sat, Aug 01, 2020, 6:10 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…

Post by mancerayder » Sat, Aug 01, 2020, 6:13 PM UTC

stu2b50 wrote: post #147

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…

You're conflating index funds with S&P 500 Index funds, though. You can buy an index fund with _zero_ tech stocks. You can buy something like VINIX which has considerably less weight on the BigN tech firms.

Post by owenversteeg » Sat, Aug 01, 2020, 6:14 PM UTC

actuator wrote: post #89

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…

This has been true for the US markets till now but I am always scared to think of a scenario where they go the way of UK markets have done in the last decade. Look at one[1] of the FTSE 100's Index fund returns. They stand at 3.58% annualised, i.e your money is now 1.4x of the original amount. This is considering the fact that we are looking at returns from Aug 2010 levels when the FTSE index was already 20% down fro…

Post by jayrobin » Sat, Aug 01, 2020, 6:15 PM UTC

aboodman wrote: post #96

ericmay wrote: post #13

What’s your goal? That’s the first question that needs to be answered here before trying to identify an investment strategy.

Investment managers always ask this question and I never know what to answer. I feel like everyone's answer must be the same: maximize return, minimize risk. What are possible answers to this question you're looking for?

Post by edoceo » Sat, Aug 01, 2020, 6:16 PM UTC

sushshshsh wrote: post #134

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…

Ok so say I have enough risk tolerance to put my money in something other than cash, but not more aggressive than a fund that tracks the S&P, what precise steps should I do to live off of my cash stack while doing absolutely 0 work other than sitting on my couch?