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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?

#371

Post by arcticbull »

BlackJack wrote: post #367
arcticbull wrote: post #330

Earlier quoted context omitted.

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 f…

I like the strategy and employ it on a portion of my 401k. I think you need to do it in a tax-advantaged account, otherwise rebalancing + short term gains will eat away your profits. Also, that strategy fails in a rising interest rates environment like in the 50s and 60s (not sure of exact years). Fed has indicated keeping rates low for the next two years, but if they start hiking rates after, I think the strategy wo…

You are probably better off doing this in a tax advantaged account, or if you have a large lump sum you want to invest you can do the rebalancing by adding money over time instead of selling the winner and redistributing it to the loser.

The strategy would fail if both interest rates went up and equities went down or stayed flat. While the potential exists for an underperform condition there in a couple of years I personally suspect the fed won’t raise rates unless equities are performing spectacularly. I’m quite skeptical if their 2 year time frame, even to say we may be looking at the new normal.

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

#372

Post by lumost »

tgma wrote: post #259
Apes wrote: post #167

Earlier quoted context omitted.

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.

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.

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

#373

Post by vmladenov »

coliveira wrote: post #255
WA wrote: post #178

Earlier quoted context omitted.

Dividends are left-pocket right-pocket. Dividends can help you psychologically, but in a way, it’s like forced selling once per year or per quarter. Edit: if it helps you to invest, by all means, do it. But since dividends are mostly psychological, there is no point in limiting your stock picks to companies with a high dividend.

it's not psychological at all. Dividends give you returns that can be reinvested in whatever you want, so it helps with diversification. Now, in the US companies have muddled the field so good dividends don't mean much, but it is still useful to remember this.

So does an equivalent increase in the share price of the underlying

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

#374

Post by presto8 »

If you decide to invest it (in an index fund, for example SPY or IWM), I am not seeing any downside to selling cash secured puts. For example, on SPY, you could sell a short 48-dte 30-delta put (strike $312 on Sept 18) for $616 premium. If it is assigned (SPY goes below $312 on Sept 18), you will get 100 shares of SPY for $31,200 but you are no worse off than if you had bought today and also you will have reduced your cost basis to $30,584. If SPY goes up, the shares will not be assigned; pocket the $616 premium and repeat the cycle. Repeat this loop until your entire $450k is invested. This also has the advantage of spreading out your purchases, and thus dollar cost averaging them. Just a thought... I welcome any criticism of this approach :-)

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

#375

Post by ryandrake »

itsoktocry wrote: post #351
throw0101a wrote: post #159

Earlier quoted context omitted.

> Yes, and not only that, but the index funds a skewed towards entities with large market caps. There are index funds of every publicly traded company in the US: * https://en.wikipedia.org/wiki/Russell_3000_Index Vanguard themselves have changed things so that employees no longer have the option of choosing the S&P 500 fund in their own retirement accounts, but rather the Total Market fund: * https://www.marketwatch.…

> Anyone investing in equities is just in it for the ride, as it is impossible to predict what will happen So people like Jim Simons are merely the luckiest people alive? The average person earns the average market return, less fees; that's a tautology. Unless you have some reason to believe you aren't average, most people are better off following your advice. It's what I do, personally. But the idea that no one is w…

There's always someone out of approx. 1 million who will flip a coin heads 20 times in a row. The guy who does is always the poster boy for active management. You can (of course only after the fact) interview him, ask him how he thinks he became such a good coin flipper, and read investment books about him, or just passively invest and accept market returns.

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

#376

Post by nazka »

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?

Why not the Vanguard Target Retirement 20xx Fund? Unless you really know how to assess your risk or manage a portfolio I think it’s what you are looking for.

(20xx is the year you should be retired)

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

#377

Post by blacksqr »

arcticbull wrote: post #330
jannotti wrote: post #313

Earlier quoted context omitted.

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 f…

I've been using 3x ETFs for the past few years to pursue a Permanent Portfolio style strategy in one account, and an All Weather strategy in another, rebalance annually, and both have been doing well.

Low net volatility, high returns. Backtesting of the strategy shows total returns just under 3x the return of the unleveraged portfolios, just what I expect given the leverage costs.

I expect both strategies to be both market-agnostic and age-agnostic. About as close to fire and forget as you can get.

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

#378

Post by PascLeRasc »

Sschellbach wrote: post #286
conchy wrote: post #276

Any answer here that includes the word bitcoin will be downvoted to oblivion, but it was the right answer 10 years ago and it is still the right answer today. Ignore and downvote at your peril!

If you want to secure your current wealth by saving, the fiat standard is not for you. Bitcoin is saving technology

So I have a Coinbase account and from all their free crypto promotions I have around $150 of Eth. I'd like to start adding some more to this to hold very long-term - is there a certain exchange or some other way you'd recommend, like Kraken or a hardware wallet?
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