Ask HN: What's the best way to get 5% on a million dollars?
What do you think is the best way to get the lowest risk, 5% annual return on a million dollars?
I'm also interested in how you could get 8% or 10%, though I know that would likely include more risk.
85 comments
[ 2.8 ms ] story [ 153 ms ] threadIf you're looking for a guaranteed 5%, it doesn't exist right now, and it won't be back unless inflation spikes close to 5%.
I'd keep a little aside for investing where you have an unfair advantage versus Wall St. That might be getting into a tech stock early, or investing in an early stage company through friends. For the latter don't expect to get your money back soon, if ever.
http://www.bloomberg.com/news/2013-11-20/at-t-said-to-plan-o...
I'd not call the NPV of any tech stock predictable.
https://prodigyfinance.com/investor_home
Is this true?
If not, please explain why not?
I'd be curious to see a random sampling of S&P 500 in autumn vs. spring. That would give a better idea of if it works.
So it's possible to edit tweets or change their timestamps?
https://twitter.com/DogsOfTheSeason
I don't know about the timestamps, but I guess it's possible to write several stock recommendations and delete the ones that do not make profits. Also, it is possible to build dozens of sites like DOTS and promote only those who consistently earn money.
I can assure you that I don't do any manipulations with my performance. I don't do almost any marketing for DOTS. The number of my subscribers is very small and if it starts to grow significantly, I'll limit the maximum number of subscribers or raise the subscription price.
I guess there are sites that do manipulate with the performance, so you have to decide for yourself whether you're going to believe me or not.
I noticed that links on my page http://dogsoftheseason.com/subscribe (actual emails) were not working due to a missing script. Now this is fixed.
In Canada, there's pretty much zero competition in the banking industry because of how it's regulated. The risk is generally minimal (not factoring macro economic risks) and the returns somewhat steady.
These stocks typically will return a 3% dividend plus some minimal growth. Add it all up and it's fairly easy to get a 5% return if you diversify a bit. I personally own BMO and RY. It has worked well.
http://www.google.com/finance?q=bmo&ei=FjDOUqiwMZGQqwHDJQ http://www.google.com/finance?q=ry&ei=GzDOUtiwAoGEqgHvUA
Plus 3.77% and 4.34% yield, it's not a bad deal at all!
1. http://www.treasury.gov/resource-center/data-chart-center/in... 2. http://research.stlouisfed.org/fred2/series/AAA
Is that not necessarily the case? Why aren't more people buying good high dividend stocks and pushing the yields down?
Take $10,000 (1%), and accept it as money worth spending. Network well, contact friends, family and ideally successful professionals and discover a financial advisor you can trust. Get empirical proof of this, as many may just be out to fleece clients - and worse, think they're actually doing a good job.
In terms of getting good advice, accept that money will have to be on the table. People have to make a living, and if there's nothing to gain, then why should a good professional waste their time? My hunch is that a good financial advisor will be happy to take a lump sum consultancy fee, rather than a percentage management fee, just to give you general advice - especially one that knows their clients are your friends and will react to any stupidity the financial advisor says.
With that money set aside and taken as ceded to the task of figuring out how to manage your money, take some time out and learn enough to make reasoned decisions. Research, study, understand the basics and importantly - understand the absolutely stupid and worst options, and the worst that sound like the best. It won't get you that much time, but it gets you more than nothing.
Given you're making 5% minimum, a 1% loss can be fixed in a year and regain you access to any of the funds that you fell below the minimum for. But the time and effort spent now is better than finding out in ten years that the risk-free 5% growth option was actually highly risky indeed....
Perhaps if OP consults a sworn fiduciary? I've not much experience with either of these, but theoretically a fiduciary is supposed to legally act in your benefit at all times where as a financial advisor isn't really.
I have no idea, though. I don't have much money. This is something I read somewhere.
My personal investment in this profile is about 10k per position [equity] and up to 15k per position [option risk] - where a position is defined by the total risk as affected by the underlying stock - you still could end up with 100 positions with a 1mm portfolio, but usually by 20-30, you find ones that you understand well and have reason to believe are undervalued -- those are when you break the 1% rule, and you do it a couple of times. Some will become worth less than 1%, some more than 10%. Re-balance judiciously, hold if it produces income greater than its risk, and sell anything not nailed down when someone offers you a gold-laying goose for it -- you can always by short-term risk with options if you're that confident, and cash is infinantly more exchangeable to immediate needs than paper stocks held at the DTC are to your grocer.
Depending on your age, if you have little to no investment experience, i'd check out the professional lists at fool.com (rule your retirement, etc) - those are the profiles I put my family in. If you're bored and looking to day-trade, there are similar lists for options, but those are for play money or experienced readers, not retirement money.
http://www.londonpropertywatch.co.uk/average_rental_yield.ht...
Who cares if you are pricing someone else out of a place to live in London? Seemingly nobody cares. The government love it that there is rampant house price inflation. The ride should be good for a while. Wherever you put your money it will not be immune to the next big crisis of capitalism, in London property you will be well insulated.
As well as the return in rental, you will also have a property that will appreciate in value over time. Sure you might have to sit things out when the property market is depressed, but I would be surprised if your $1M flat is worth less than that in 5+ years time even if the whole housing market goes 2008-style again.
Are other investments you can look into. A mix of some blue chips that pay out dividends in combination with some ETFs which trade in commodities or specific growth markets might be a good idea. Balance out that risk with bonds or other instruments.
Now we just hired our second coach, and will be learning paper asset strategies for cash flow and for capital generation to continue purchasing real estate.
FWIW: I think that we are successful so far because we believe in ourselves and put in the hours and sweat.
Pretty risky, though. Over 70% stocks.
Thus, they can do some pretty interesting things that Betterment can't. Such as, if your assets are more than 500k, they replace the S&P 500 index with all 500 stocks, which increases the amount of tax loss harvesting.
LendingClub can yield 10%+. You have to be pretty engaged, since you'll need to loan a small amount to a lot of people. At $1M, probably $2,500 to each of 400 people so the risk of default (there will be defaults) is diversified. You'll have to actively re-invest the principle/interest. But it pays back monthly and is kind of like paying yourself a salary in some respects.
The key metric for LendingClub is the predicted default rate. If they are accurate, you can have good predictability of results and good returns. If not, then it's a long term problem for them. One might assume that their algorithm should improve as they get more data, and I'd love to hear from their modeling statisticians how that works, though it seems pretty close to their core IP. So I am taking it on faith a bit that they will get that part right.
My experiment was to lend $25 to 100 people. I loaned to the same rated borrowers so I did not have to deal with too much tracking. All pay 17.6% and there was a 5% predicted default rate and about 0.65% fees. Net yeild to me was predicted to be 11.95%. Fees are only paid on what is actually paid back to me.
At this time, 8 months in, I have 99 current 3 more than 31 days late 0 defaulted 0 charged off 2 repaid in full 11 sold at full price
The reason there are 115 total is that I loaned to more borrowers as payments came in.
I also put 15 up for sale on LendingClub's sister site to see how one might exit. 11 sold in a couple of days. The other 4 are still offered. Not sure why they have not sold yet, I put them up for sale last Friday.
The actual 'Net Annualized Return' as calculated by LendingCLub on my notes is 18.07%. That is expected to drop each time there is a charge-off.
I do expect some of the >31 day late to fall into charge off, but you can review the contact history between LendingClub and the borrower when LendingClub is trying to collect late payments. Checking one right now, I see that a payment is processing, so it looks like they are back on track.
and it returned a 5% p.a. term deposit with RaboDirect for a 5 year term on amounts from $1000 to $2,000,000.
http://www.infochoice.com.au/banking/term-deposits/rabodirec...
Interestingly, if I had $1m to invest and split it with my wife, with Australia's tax cutting in at 19c for each $1 over $18,200 up to $37,000, we would pay $2584. Since we have children, we qualify for a tax break called the family tax benefit [1], which would pay $13,773 per year. Total post-tax return would be $61,189. A yield of 6.12%, risk free! Now where did I put my million dollars?
[1] http://www.humanservices.gov.au/customer/enablers/online-est...
edit: it has now. I rest my case.
I'm thoroughly convinced 90% of stock gains are made through inside information. I thought the Internet would level out the playing field, but it seems like the wealthy "connected" types are always in a bull market? (This year was an exception--everyone seemed to make money if they bought stocks?)
As to leveling out the winners in the stock market; I hope some young dude makes an app--a app that would help investors who don't have wealthy friends. And Stocktwits in not that app.
(I see a lot of posters advising on making money off renters. Personally, I couldn't live with myself making a huge profit on Renters. A nice family moves in and can just afford the rent, and the Landlord continually raises the rent. It's not moral. Sorry, but a place to stay, especially if the family has kids, is more than just a Revenue Stream. )