Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

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

news.ycombinator.com

Post reply on HN
Print view View original

341–350 of 509 posts

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

#341

Post by [deleted] »

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?

[deleted]

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

#342

Post by egsmi »

arcticbull wrote: post #303
_skel wrote: post #221

Earlier quoted context omitted.

That's good retirement planning advice for normal situations. Having a $450k cash windfall adds a few wrinkles -- there are more investment options available (e.g. buy a house with cash), and the tax consequences of those various options can be very different. I don't think most people need a financial advisor, but if I had a $450k pile of cash and I wanted to understand the tax consequences of various investments I…

For what it's worth, at 2.675% interest on a 30-year fixed, buying a house in cash makes very little sense, and a mortgage can counterintuitively earn you money. 1. In general, since the 1970s, house prices have across the United States tracked inflation. The price per square foot on a house, on average, is exactly the same as it was back then (houses are more expensive because the average US house has gotten bigger,…

On average this analysis makes sense but cash flow is also important to consider. If the thing you’re investing in to get 7% doesn’t make payments, or has a single bad year and doesn’t yield like it’s supposed to, you could be up the creek.

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

#343

Post by imtringued »

marvin wrote: post #208
mancerayder wrote: post #150

Earlier quoted context omitted.

Yes, and not only that, but the index funds a skewed towards entities with large market caps. Someone could make their own "index fund" with 10% of it allocated to FAANG, maybe 20% of it in the largest tech names overall, and then a distribution of the largest market cap names, and lo and behold, one has an s&p 500 "index fund". Tesla's about to be added to the S&P 500. There are strong opinions on both sides - it's…

Index funds are strongly a momentum investment strategy. I don’t see this appreciated so often. But of course, a properly diversified index fund portfolio contains much more than just the S&P500. Mine has some thousand global stocks, on the order of 5000.

There is a weird argument by one of the commenters further up. Index funds are too risky because are not diversified enough and mostly focus on tech companies (mostly wrong). Why not buy 5000 stocks individually? Who is going to pick 5000 stocks by hand?

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

#344

Post by imtringued »

quotemstr wrote: post #92
branweb wrote: post #85

Earlier quoted context omitted.

Not the op but I wish downvoters would comment giving their reasons. I remember seeing something about this in the atlantic a while back, and it would be good to know if/why it's a bad argument.

There's this weird social energy surrounding index funds that's very aggressive about preaching that they're the only viable option and that everything else is ridiculous. To be honest, this energy is another input that increases my skepticism of the whole thing. These days, whenever you see an argument downvoted instead of rebutted, there's likely something to it.

Index funds allow amateurs to make money without losing it to "competent" active fund managers. That's all there is to it. You might not understand how many middlemen insert themselves between the amateurs because you're not one of them.

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

#346

Post by brianwawok »

Apes wrote: post #167
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..

The current risk free rate is absurdly low, which would suggest a much lower sustainable draw down than 4% for the next 10-30 years, probably only around .5 to 1.5% at most.

You can take a 4% draw based on any 50 year period in the past 100 years. It is not risk free correct. There are many books and articles on the topic that are not worth trying to fit into a comment.

For most people, being able to retire and never work again with 95% certainty enough, especially when tweaking consumption and tweaking side income are easy knobs to turn. No reason to delay retirement 20 years to be 100% confident. Raises the risk a lot you just die before you retire.

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

#347

Post by ThrustVectoring »

There's an amount of money you could plausibly need to avoid life consequences. You get laid off or your business fails, and you have to dip into savings to keep a roof over your head and food on the table.

Figure out how much that is, and leave it in cash or other extremely safe assets. This is a highly personalized number and it's hard to give good advice for it.

For the rest of your money, you now know that you'll basically never need to sell it. The only thing that matters here is the total return over thirty-plus years. This is broadly-diversified stock index funds - the standard boglehead advice works great here. There's always a risk that today's stock price is the best you'll ever see, so the historically superior plan for how to get money in the market is to just dump it all in and ignore the current price.

So yeah. Enough cash to make you "safe", rest in the stock market and ignore the current price and any price movements over the next three decades.

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

#348

Post by arcticbull »

egsmi wrote: post #342
arcticbull wrote: post #303

Earlier quoted context omitted.

For what it's worth, at 2.675% interest on a 30-year fixed, buying a house in cash makes very little sense, and a mortgage can counterintuitively earn you money. 1. In general, since the 1970s, house prices have across the United States tracked inflation. The price per square foot on a house, on average, is exactly the same as it was back then (houses are more expensive because the average US house has gotten bigger,…

On average this analysis makes sense but cash flow is also important to consider. If the thing you’re investing in to get 7% doesn’t make payments, or has a single bad year and doesn’t yield like it’s supposed to, you could be up the creek.

Indeed, I was basing the 7% return on the S&P hence assuming liquidity in the investment. Liquidity matters and, yeah, YMMV. Still works if you invest in CDs instead but it’s not nearly as attractive.

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

#349

Post by infinite8s »

throw0101a wrote: post #152
quotemstr wrote: post #137

Earlier quoted context omitted.

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…

> A market with no active management would allocate capital arbitrarily, without an eye to returns. I recommend you read up on the following (from me elsewhere on this topic): > So what would happen if the majority of investors started to buy the market and stopped trying to beat the market? > Mispricings would start to develop regularly, and the people that had continued to try and pick stocks would be able to profi…

The GP isn't disagreeing with you. They just said in the limit that all investment couldn't be passive. There is probably some equilibrium value between active/passive investment.

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

#350

Post by csmiller »

BbzzbB wrote: post #261
nemild wrote: post #146

Earlier quoted context omitted.

One more to add is Reddit's Personal Finance, where this question gets asked a lot. The wiki (second link, search for Windfall) esp has a number of great articles on topics like this. https://www.reddit.com/r/personalfinance/ https://www.reddit.com/r/personalfinance/wiki/index

PF will say the same thing as always (not that it's wrong), i.e. SPY if you're risk-tolerant, some Vanguard I don't recall (VOO?) if you're less so.

Maybe VTSAX?
Post reply on HN