HN Explorer

Ask HN: How do you invest your money?

63 points by sergiotapia ↗ HN
/r/personalfinance has turned me on to the idea of investing for retirement.

How does HN invest their money?

- Passive robo-investing with Wealthfront/Betterment?

- Actively searching for stock on the rise/timing the market?

- Real estate purchasing then renting those out?

89 comments

[ 3.5 ms ] story [ 148 ms ] thread
baccredited 

  house       8.1%
  US stocks   36.6%
  Intl stocks 12.8%
  bonds	      16.0%
  real estate 4.6%
  P2P lending 3.5%
  vc          6.4%
  college 529 6.7%
  cash        5.4%
Arcten
I invest using mutual funds through Vanguard. Some percentage US stock fund, some percentage US bond fund, some percentage international stock, and some percentage international bond. This is by far the simplest and easiest approach. I currently invest using VTTSX which is a Vanguard fund that does this splitting for me.

You can read more about this investment philosophy here: https://www.bogleheads.org/wiki/Three-fund_portfolio

warsharks
buy bitcoins

that is all

AnimalMuppet
That is terrible advice.

"Divide your fortune into seven, or even to eight, for you do not know what misfortune may occur on the earth." - Ecclesiastes 11:2

xiphias
Not worse advice than buying index funds which is strongly correlated to the globally connected over-leveraged bond market.

I'm not against diversification, but cryotocurrencies are a good non-correlating asset class

HockeyPlayer 

  Vanguard index funds & Berkshire Hathaway 
  LP real estate investing
  AngelList and VC
If you are new I'd recommend Arcten's Three-fund approach and don't forget to rebalance annually.
gnicholas
There's a tension between "invest in what you know" and avoiding correlation between your financial investments and your job.

Most HNers know the tech sector better than other sectors. But investing (long) in tech would not be a great idea from a diversification perspective. If the tech market tanks, your job prospects will suffer (you could get fired/furloughed, your startup could stagnate) and your portfolio will drop simultaneously.

One way to resolve this tension is to take short positions on tech trackers and long positions on particular stocks that you think will outperform the sector. On days when everything goes up, you won't win as big. But on days where everything goes down, you'll be glad you have the hedge.

russellbeattie
I remember explaining to my mother in the mid 2000s that Qualcomm owned the vast majority of the technology powering CDMA, which would power billions of smart phones in the future. So she bought QCOM. I was right about smartphones, yet the stock did nothing... What you know about tech and what Wall Street thinks about a company is entirely two different things.
thisisit
Just a piece of advice here. Buying stocks on the rise is no better than momentum chasing in stocks and you end up with stocks which are not worth it. It is advisable to find good businesses to invest in if you have time and inclination to do so. If not passive index investing is great.
benjohnson
Conversely.. I wait for a wait for a stock to rise - it's another signal that others have come to the same conclusion, and I'm ok with leaving some money on the table as a payment for that information.
kowdermeister
Because I don't have serious money to invest, I invest in building my network, "buying" time and then... relaxing.
soperj
Vanguard and the non-market etf ~ Berkshire Hathaway.
austenallred
I'm not convinced there's any passive investment that will beat a Vanguard S&P 500 index in the long-run. 99% of people would be best-served to just dump 100% in that.

I've made some pretty incredible returns researching and investing, but in retrospect even though I did very well I would have been better off spending that time earning more money rather than investing it. My net worth isn't big enough that an extra percentage gain moves the needle that much.

minsight
I'd be more inclined to take this approach, but to diversify geographically and to also include some fixed income in there, too. The US market may pause someday, but there is a much slimmer chance that the entire world's equities and their fixed income will get nailed at once.
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vladimirralev
S&P is too US-scoped. One bad president pick and it will be all gone. It's better to diversify 20-30% worldwide and a little into assets with different source of value like gold, real estate, crypto, oil, whatever. Just S&P is not going to cut it forever. I know central banks are buying it now too, so it may find itself being very political soon.
austenallred
> S&P is too US-scoped. One bad president pick and it will be all gone

Respectfully, if that were true it would all have been long gone a long time ago :)

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nugget
If you want a single index fund that you can buy and hold, and never worry about again, SPY is one of the best. Even Warren Buffet has endorsed this approach many times.

If you're willing to spend 15-30 minutes per month managing finances, then buy the Bogleheads' Guide to Investing and read it cover to cover.

Once you've done that, head over to the Bogleheads forum [http://www.bogleheads.org] and you can learn as much or as little as you want. Taylor Larimore, one of the authors of the book (and former Band of Brothers WW2 paratrooper), is still active on the forum at the age of 93.

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tanderson92
Warren Buffet has endorsed holding an S&P500 index fund many times. He has not endorsed SPY as a vehicle for that. SPY is more than twice as expensive as Vanguard's or iShare's S&P500 funds, and has lagged them since inception. It is also the case that SPY is organized as a unit investment trust so it cannot lend shares for securities lending revenue, as other S&P500 index funds can and do. For all these reasons, I expect SPY to underperform VOO.

In fact Warren Buffett picked Vanguard's S&P500 fund for his long bet (http://longbets.org/362/)

Agree with the rest of your post. Taylor Larimore is a mensch.

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sharemywin
I worry about passive investing. Does it turn into winner take all?

If most everyone puts there money in a index tracker it would go up or down based on contribution and withdraw rates versus actual results of the market.

So, while there is more contributing than withdrawing it continues to go up which would attract more money to it.

politicalthrow
Index funds are therefore the next bubble?
maerF0x0
or maybe public investable assets? Too much money chasing too small a pool of assets? There are also a lot of private assets that could be superior investments, but average folks do not have access to.
sharemywin
Assumptions:

* index funds are larger and larger share of investing

* Median Baby boomer about 63

* 1/2 Americans in stock market

* In 2017, over 62 million Americans receive SS benefits

* US Adult Population 247,773,709 = 123M in stock market

* Only 25 M generation X

* Millennials don't invest in stocks http://www.businessinsider.com/why-so-few-millennials-invest...

Conclusion Drain of stock market as sellers begin to out number buyers

dbjacobs
This ignores just how skewed towards the rich stock ownership is. The liquidation of stocks owned by the middle class will not move the needles much. And the very rich don't need to liquidate their stocks to maintain their lifestyle.
maerF0x0
Passive investing is nice, but I have seen few good articles about drawing down when retirement actually hits.
austenallred
I don't worry about that at all.

The risk is that there is so much in index funds that the valuations of companies will become distanced form what they're actually worth.

The likelihood of that happening given how much money there is to be made in finding the inefficiencies in the stock market are, in my opinion, very small.

itamarst
While investing is important (personally it's 50/50 stock index fund and US treasuries), another important thing to do is reduce your expenses.

1. The lower your expenses the less money you need on an ongoing basis. This means you need less savings to fund your lifestyle.

2. The lower your expenses the more money you have left over to save and invest.

The combination means you have more money and it lasts longer. This is pretty important career-wise because it makes it much easier to find a better job: when you need to quit or lose your job you have much longer to find a good job, you don't need to take the first one you find.

Expanded version here: https://codewithoutrules.com/2016/08/08/living-below-your-me...

ryanwaggoner
You missed an important benefit: expenses are mostly post-tax, so reducing your expenses by $1 may reduce the amount you need to earn by $1.50 - $2.

Also, 50% in treasuries seems overly conservative for most investors, especially if they're young. That's basically just going to match inflation. You may have your reasons, just wanted to point that out :)

itamarst
Oh, huh, good point re post-tax benefit of expenses, hadn't thought of that.

I'm pretty conservative regarding investment, yes. Been through two massive bubbles+crashes so far :)

the_gastropod
AND the lower your expenses, the lower your 25x* expenses number is, so the less you need to save to be financially independent.

* If you are going by the 4% rule http://www.investopedia.com/terms/f/four-percent-rule.asp

carsongross
Being 50% in treasuries right now is not particularly conservative. The Schiller P/E ratio was only higher in 1929 and 1999:

http://www.multpl.com/shiller-pe/

So, broadly, equities look like a pretty bad deal right now.

the_gastropod
The Schiller P/E has historically been pretty useful, but it's not a great tool for comparing pre 2001 and post 2001 market valuations because of changes in GAAP. Check out http://www.philosophicaleconomics.com/2013/12/shiller/ for a more in depth explanation.
ryanwaggoner
I don't time the market. Studies are really clear that people suck at it. You may be convinced you're the exception. I'm convinced that I'm not :)
carsongross
That's certainly a reasonable position.
ryanwaggoner
I'm going to start responding to people who disagree like this :)
dmichulke
Bet on your beliefs, you either get wiser or richer.

I personally have

- Precious metals (physical / stored / miners)

- defense values (stocks)

- crypto currencies

- cash

Guess I'm not an optimist

legend2
https://intelligent.schwab.com/

The best robo offering available atm imo.

dmcy22
How does it compare to Wealthfront/Betterment?
basch
or just invest in Schwab Target Index Funds which acomplish the same thing at 0.13%, without the overly complex "customized for you" coat of paint, and have only $100 minimum.

https://www.schwabfunds.com/secure/file/P-9430864

Buy SWXKX. Done.

faet
They've lowered the ER on their target retirement mutual funds to 0.08%, SWYNX would be the equivalent.
basch
thats an institutional share. requires employer funded account or 10 million investment. said rate you cite is laid out in the link I provided.
hrez
It's not really the same. Schwab robo uses "Fundamental" funds which add value tilt which I like. Also, robo adds tax loss harvesting (for taxable accounts).
kaikoenig
I go for bluechips in sectors I understand. Yields 6-7% YOY
dandr01d
1. Maxing my 401K

2. Buying a home

3. Dumping everything else in index funds

oaktowner
Not only do I share the same investment strategy, but my phone is named the same as your HN handle.
extesy
I use Betterment. While I agree that for the upside market periods it won't be any better than a Vanguard ETF, but for volatile or downturn periods I was able to save quite a lot on their automated tax loss harvesting feature. Also automatically using slightly different portfolios between regular and Roth accounts to get yet another tax advantage is a nice touch.
pesfandiar
How you invest depends on many factors: e.g. your age, your family status, income, locale, tolerance for risk, and above all your investment goals.

I live in Vancouver, so real estate investment would be crazy for me. Since I don't like to dedicate time and energy to investing money, I'm just going with broad ETFs. More info: http://www.pesfandiar.com/blog/2015/05/01/how-i-invest-my-sa...

tanderson92
* Bogleheads investing philosophy -- http://bogleheads.org -- the single best financial forum on the internet (and praised as such by none other than John Bogle)

* Vanguard index ETFs, mostly.

* International investing in proportion to market capitalization -- i.e. the market portfolio. The truly passive choice.

* Buy and hold, low-cost tax-efficient strategy.

As for where my ETFs are actually located: Merrill Edge. They have commission-free trades on all ETFs/equity with a sufficient balance. And the credit card rewards with Bank of America are tough to beat.

tzs
> Vanguard index ETFs, mostly.

Is it safe to have most of your money in funds handled by one company? Are there scenarios that are at least remotely plausible where one could lose most of one's money in a Vanguard index fund where a similar fund at, say, Fidelity would be fine, or vice versa?

tanderson92
That is safe to say.

Such a scenario is not remotely plausible, in my opinion. The commonly claimed scenario is fraud at Vanguard, but I'm highly skeptical that this is possible given that Vanguard doesn't hold the stocks in the funds; they are held in trust at (last time I checked) JP Morgan.

The bigger concern is massive sustained outflows (for some reason) from Vanguard, triggering capital gains distributions which would hurt me tax-wise. I have thought about switching to pure ETFs rather than the dual share structure that Vanguard has with their mutual funds, for this reason.

xur17
I max out my 401k, and then once I have over $X in my bank account I transfer more into my Vanguard account, buying enough to rebalance based on my asset allocation spreadsheet (US Stock, International Stock, US Bond).

I limit myself to investing a max of 10% in individual stocks.

qwtel
Passive equity ETFs across all major regions, weighted by contribution to world GDP. A minor portion in various cryptocurrencies, so I can do some active 'trading' (really just losing money), but on a smaller scale, without getting anywhere near the ETFs (studies found that people who buy ETFs often fare poorly in practice because they start to actively trade them).
stevenmays
Main portfolio:

70% - VTSAX (total US stocks)

20% - VTIAX (total international stocks)

10% - VBTLX (bonds)

Taxable:

Wealthfront