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

481–490 of 509 posts

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

#481

Post by anm89 »

tlow wrote: post #23
anm89 wrote: post #14

This may be frowned upon but : I am in a nearly identical situation, within a few percent of your dollar amount. Ive been looking for a while for a partner for a lifestyle business, something along the lines of a maker space but open to a wide variety of ideas, most of them somehow variations on buying a large commercial space cash and using the free rent to build a business that creates community. Me email is in my…

I'm currently starting a new maker space in Texas, please feel free to reach out, happy to share what we know and have learned.

Thanks! Sent you an email.

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

#482

Post by lmnice »

Retric wrote: post #358
lmnice wrote: post #307

Earlier quoted context omitted.

Just a nitpick: > a management culture that appropriately balances shareholder interest (by paying dividend) In theory a company should invest in whatever has the most favorable risk-return profile. If it pays dividends, that means dividends are judged by management to be the best risk-return profile among all other alternatives. A company can pay zero dividends and still protect shareholders interests.

That’s not quite accurate. A company is ultimately controlled by it’s owners who may prefer dividends. One possible example is maintaining the current ownership structure while providing an income. Think someone owning 51% and wishing to maintain control.

> A company is ultimately controlled by it’s owners who may prefer dividends.

If the reason they "prefer" dividends is not because they evaluated the alternatives and decided that the risk-return profile was favorable (for the company, not for themselves in particular)), then they are acting against the interests of the minority shareholders. That may carry legal consequences or not, depending on your jurisdiction. In my country (Brazil), there are laws protecting the interests of minority shareholders. If you have 51% of a company that is listed on the stock exchange, you have significant but not unlimited power.

Also, maybe the company sees it as a risk that, in reducing the dividend, it may suffer in the short term due to the outflux of shareholders who see it as a dividend play. In that case, the risk-return profile of paying zero dividends is not favorable.

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

#483

Post by ta17711771 »

mancerayder wrote: post #177
stu2b50 wrote: post #164

Earlier quoted context omitted.

Well, yeah, that's absolutely expected. The promise of index funds isn't "you'll always make money!!" over any short-term period, the promise is that if the stock market as a whole increase, which it tends to do, you'll also benefit from that. >Surely we can pick names based on how we think those technologies are likely to be successful. Time and time again, especially now, "fundamentals" has proven to be a poor pred…

Fine, over 20-30 years. I'll be too old in 20-30 years to enjoy that money. I'd rather swing trade and buy myself a new couch. :-)

Founder here - can I have your old one?

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

#484

Post by arcticbull »

wocram wrote: post #478
arcticbull wrote: post #306

Earlier quoted context omitted.

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.

To clarify, using put sells to enter into a position that you would otherwise have opened, today, to hold long-term with a is generally better than a market or limit order. As an income-generation strategy, selling put options is, on average, a moneymaker so long as realized volatility remains lower than implied volatility. That is typically the case, but of course, March flipped that on its head, and there's no "one" strategy.

If you would have otherwise bought 100 shares of SPY on Friday, it would cost you $326.52 (x100, so $32650). If you sell 1 put option expiring 8/31 "at the money" (i.e. a $326P) you will receive a net credit of $7.20 per share today ($720).

That money is yours at the moment you sell the put option, so if SPY closes at or above $326 on 8/31 (excluding early expiry), you've made $720 on $32600, or a one-month gain of 2.2%. That is an annualized return on your staked capital of 29%. You can then keep making an annualized 29% return every month until you get assigned (assuming IV rank remains stable).

Alternatively, if SPY closes below $326, you've actually bought it for a $7.72 per share discount ($7.20 + $0.56), or $318.80 over what it's trading at right now. As you plan to buy and hold for the long run, you got a much better entry price than you would have with a market order.

If you're planning to buy and hold today, it's hard to lose with selling a put to open. You either collect a nice premium, or you buy the shares at a discount. If your goal is to own the shares long term, you're feeling good either way. Make sense?

What you could theoretically miss out on is a big run up from the moment you bought the shares in excess of the premium.

You can get more aggressive too, and sell puts you don't think you'll get assigned on, at the highest price you'd be willing to pay for SPY and play the long game. Sell $300 8/31 puts for $2. There's a 80% chance you'll keep that premium, and it's an annualized 8.2% return on staked capital. Then if you get assigned it's actually a $28/share discount -- 8.5% -- below today's price.

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

#485

Post by arcticbull »

wocram wrote: post #478
arcticbull wrote: post #306

Earlier quoted context omitted.

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.

I realized I didn't reply specifically to your question about why $PUTW ticker price looks the way it does.

"The strategy is designed to receive a premium from the option buyer by selling a sequence of one-month, at-the-money, S&P 500 Index puts (SPX puts). If, however, the value of the S&P 500 Index falls below the SPX Put’s strike price, the option finishes in-the-money and the Fund pays the buyer the difference between the strike price and the value of the S&P 500 Index." [1]

They aren't selling puts to open a position, they're selling SPX puts. SPX is a cash-settled, European-style option derivative product tracking the S&P index at a notional value of $100 per index point. When they get assigned because their position closes in the money, they write a check, instead of taking delivery of shares they bought at a discount and waiting for a recovery.

So what this ETF tracks is basically the spread between realized and implied volatility. When the implied volatility is higher than the realized volatility -- which is most of the time -- it tends to be a little bit lower. When the realized volatility is higher than the implied volatility -- which tends to only happen during dramatic market moves -- it tends to be a lot higher.

If you zoom out, they basically go up nice and smooth, until a major market event hits, then they get practically wiped out. Then they start recovering again.

If you sell puts with the goal of getting assigned on the underlying, and riding it back up, you actually want to get assigned at some point. These folks instead cut a check for their losses, don't take delivery of anything they bought at a discount, and start selling premium again, hoping the premium will make up for their losses. Doesn't look like a winning strategy huh?

tl;dr: $PUTW does not use the strategy I suggest. Did that address your question?

[1] https://www.wisdomtree.com/etfs/alternative/putw

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

#486

Post by WrtCdEvrydy »

overcast wrote: post #472
Sschellbach wrote: post #452

Earlier quoted context omitted.

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.

No one is “storing value” in housing. 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 fiat investments.

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

#487

Post by triceratops »

gfodor wrote: post #480
triceratops wrote: post #423

Earlier quoted context omitted.

> 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…

Thanks for the suggestions, I'll check them out.

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

#488

Post by imakwana »

_skel wrote: post #221
MuffinFlavored wrote: post #216

Earlier quoted context omitted.

Why isn't the tl;dr: 1. put 6 months of expenses in a high-yield savings account that is easily accessible + liquid in case of emergencies 2. max out tax-advantaged accounts. $19.5k/yr 401k + $6k/yr IRA. allocate into anything similar to a target date retirement fund with healthy exposure to US total market/probably light bonds depending on age 3. put the rest in a brokerage account, allocated in the same things your…

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…

Vanguard also offers "Tax-managed" funds which have significantly less yield/distributions compared to corresponding index funds [1].

[1] https://www.bogleheads.org/wiki/Tax-managed_fund_comparison

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

#489

Post by _skel »

imakwana wrote: post #488
_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…

Vanguard also offers "Tax-managed" funds which have significantly less yield/distributions compared to corresponding index funds [1]. [1] https://www.bogleheads.org/wiki/Tax-managed_fund_comparison

The choice between regular and tax-managed funds, and also the choice between regular and tax-exempt bonds, is not straightforward.

There are quite a few caveats in that wiki article, e.g. stuff like this:

> Your actual tax cost will be higher if you owe state taxes (add your state tax rate on the dividend yield, reduced by your federal tax rate if you itemize deductions and are not over the limit for deducting state taxes) or are in the phase-out range for some tax benefit such as the child tax credit (add 5% to all tax rates) or the personal exemption phase-out for the Alternative Minimum Tax (add 7% to all tax rates, but your overall tax on non-qualified dividends is 28%).

That's a bit complicated. I would still recommend paying for at least a one-time consultation with a financial and/or tax advisor before choosing where to put $450k.

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

#490

Post by imakwana »

throw0101a wrote: post #195
hydroreadsstuff wrote: post #116

Earlier quoted context omitted.

We are in unprecedented times (Lowest bond yields, highest debt, Crazy P/Es). Back-testing is only so useful. And only 20 years even less. We just had a GDP drop which is the largest since WW2 for some, or since 1929 for the U.S. Look at Japan's stock market index e.g. for what the future could look like. Historically low bond yields: The room for rates to go lower is low. I would suggest to be careful with investing…

> And only 20 years even less. I'm guessing you're in the US. I'm sure you can find papers and articles doing back-testing to the 1920s, which would include the Great Depression. If you can wait long enough, things have always recovered and earned a return. > Did you adjust your calculations for inflation? For the S&P 500, the absolute worst-case is 58 years of not being up, I believe. 1929 - 1987. Not my calculation…

Second this recommendation of the works of William Bernstein, all of his books are excellent and highly pragmatic for individual investors.
Post reply on HN