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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?

#321

Post by refurb »

justinmeiners wrote: post #79
chii wrote: post #74

Earlier quoted context omitted.

“Far more money has been lost by investors preparing for corrections, or trying to anticipate corrections, than has been lost in corrections themselves.” — Peter Lynch

Any evidence to back up the quote?

Scroll down to the table.[1]

[1]https://www.fool.com/investing/2019/04/11/what-happens-when-...

Basically, between 1998 and 2018, if you were out of the market during the best 10 days, you cut your return in half. And the more days out, the worse it gets.

Of course, this is artificial in the sense that you'd be pulling out one day, then back in 2 days later and doing it again and again, but the point stands, you can miss a week in the market and it can have a huge impact on returns.

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

#323

Post by refurb »

Tiktaalik wrote: post #38

Buy land in Portugal or Malta and leverage it to get a EU Passport.

You'd have to be careful! From what I understand, you can do it in Spain as well, but spend more than 6 months of a year there and you're now a resident for tax purposes.

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

#324

Post by [deleted] »

jannotti wrote: post #313
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…

Please stay away from leverage equity index funds. https://capitalallocatorspodcast.com/wp-content/uploads/2017... Edit: For more clarity - risk parity can make sense, but I don't think you ever need to use leverage on your equities to get risk parity. The fundamental insight of risk parity investing is that at commonly recommended ratios (50/50, 60/40) the risk (variance) from equities totally dominates the risk fro…

[deleted]

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

#326

Post by crack-the-code »

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…

> Even if you invest at the worst possible times (right before crashes) you’ll come out way far ahead of leaving it in cash.

I don't like this argument, because it seems to imply you would indefinitely leave it in cash. In this hypothetical situation, where a market crash is impending, and individual could invest at the bottom and make significantly higher returns than investing prior to the crash.

This of course goes without saying, "you can't time the market", but it's a bit dishonest to indicate that you can't beat the market here.

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

#327

Post by phanindra_veera »

shados wrote: post #236
akrymski wrote: post #232

Real estate. Great hedge against long term inflation. And a mortgage allows you to borrow 5X at low interest rates, with rental yields generating a profit. Example: you can borrow 2M at 2% (interest only) and rent out at 3%. Real estate rising 3% on average means a capital gain of 70K a year, which is a 16% yield on your 450K investment.

the problem with real estate is that it's work. Even if you hire a management company (which does hit your profit), shit like bad tenants can really screw you up, if only in term of time spent on paperwork and legal garbage. In the best case scenario it's low (but not zero) work, but in the worse case it's a LOT of work.

Get LEGAL Indian immigrants as tenants. Especially the ones with tech related jobs. We always pay our rent. We dont want bad credit. We keep things normal.

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

#328

Post by imtringued »

reducesuffering wrote: post #296
ummonk wrote: post #162

Earlier quoted context omitted.

If the market is efficient, why is (infrequent) stock picking so much worse than buying an index fund?

Psychological reasons. Retail traders performance chase, selling things when they have temporary (multi-year) losses and buy when they have temporary high gains. It's incredible how strong it is even for people who are somewhat knowledgeable about finance like Bogleheads. It's also been studied by Jack Bogle himself. There was a famous study comparing Value vs. Growth stocks he noted where retail traders who invested…

The highest gains are also only available for a few days in the year. If there are three really good days for a stock then you're going to hit all of them if you hold it for the entire year. If you buy and sell shortly after you might miss all of them.

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

#329

Post by gfodor »

marvin wrote: post #211
gfodor wrote: post #207

If you seek out average advice, expect average results. You are going to get a bunch of people talking about equities, Bogleheads, bla bla bla. Read the book “Expected Returns” and start pulling threads.

Average results isn’t a bad thing to aim for, honestly. Most who shoot higher miss.

average results when it comes to investing means loss of principal.

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

#330

Post by arcticbull »

jannotti wrote: post #313
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…

Please stay away from leverage equity index funds. https://capitalallocatorspodcast.com/wp-content/uploads/2017... Edit: For more clarity - risk parity can make sense, but I don't think you ever need to use leverage on your equities to get risk parity. The fundamental insight of risk parity investing is that at commonly recommended ratios (50/50, 60/40) the risk (variance) from equities totally dominates the risk fro…

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 from volatility, and the 3X leverage is used to add volatility in, exaggerating the returns.

I think you might find the post interesting because it seems like you are interested in investing. What you're saying is again explicitly addressed there, and factored into the calculation. They work an example of that kind of decay, and how it's mitigated. Specifically, it doesn't matter that you have volatility decay in one of the ETFs because they're uncorrelated, and when one goes up the other goes down, canceling out the effect.

Your blanket statement does not apply to this specific strategy. It's not wrong in general, but it's not relevant here.

If you don't want to read the bogleheads write-up it's also addressed on Seeking Alpha [1].

> "That, sadly, means you lose about 11% on the year."

Not if, as you see in the write-up, you pair it with an uncorrelated 3X leveraged asset and rebalance periodically.

The post includes a backtest to 1987.

[1] https://seekingalpha.com/article/4308489-why-leveraged-etfs-...

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