Ask HN: I have 50k. How do I make it more without a startup?
The only way to make it grow is through investing it. The more risk you take on, the higher it has the chance to grow. However, at the same time you have an increased risk that you'll lose your investment.
A money market account is safe and leaves your liquid assets in a state where you can get them easily. The downside is a poor rate of return.
Tax-exempt bonds (local, state or federal) are an attractive option provided that the rate of inflation doesn't exceed your rate of return or reduce it to effectively nil.
Another sensible option would be to pay off any debts you have. Your income is your best way to grow wealth, and every dollar you pay in interest is a dollar taken away from your future earnings. Even though this isn't as exciting an option as putting your money in the stock market, this might be your best bet longer-term.
If you have no debt, then the $50k would go a long way towards a down payment on a home - that way you can stop paying rent, which is another source of wasted earnings.
I agree with the rest of the advice, but buying a home is not a good investment in all parts of the country/world, nor at all times. A home you own decreases your mobility and thus your employment options, especially if the labor or housing market in your area plummets in the future.
In other markets, home ownership and all its associated costs (including property taxes and maintenance) is more expensive in both the long and short term than renting.
For instance, for what I pay in rent in NYC (PLUS a down payment), I would have to commute at least 3 times as long to afford to buy an equivalent home. And also have to add the responsibility (in time and expense) for maintenance - from upgrading the plumbing to shoveling snow from the sidewalk.) Further, it'd be much more difficult to see friends, whom I'd no longer live near. That's all time that could instead be spent with friends and family, being healthier, or even making money on a side project or freelancing.
And if you get poor terms on your mortgage (think variable rate loans), you're just setting yourself up for pain.
"The more risk you take on, the higher it has the chance to grow."
Not true, and it's often opposite where higher risk means a higher overall worse performance. You can also do more homework than others, and/or have more patience than others.
The subreddit /r/personalfinance has a wiki article about "windfalls", the principles of which apply here (section "Get educated on saving and investing"):
I got 'talked into' moving a chunk of money out of a current account into a combination of investment ISAs and Personal Investment Plans with Scottish Widows. Over 5 years they have increased in value by about 35%, so average 7% per year. Here is one of the ones I used:
http://webfund6.financialexpress.net/clientsv21/scottishwido...
I went in knowing nothing, and wouldn't have done it if my bank hadn't pushed me in that direction (the department of the bank no longer exists) and I guess I got lucky, as it has worked out well for me.
PLEASE NOTE: investment ISAs/Personal Investment Plans with Scottish Widows can go up and down. Also bear in mind I an openly saying I know next to nothing about this, so please don't jump into anything without researching it carefully.
Get a job.
There's no way for you to reliably make even 20k in the next year off of an investment of 50k unless you are going to be personally involved in it. You will also almost certainly make at least 20k at your job in the next year, and can probably figure out a way to increase your salary by 20k.
Put 5k in NYSE:BND for your emergency fund, Fidelity/Vanguard/Etc work about the same. Then put 5500 in Roth IRA NYSE:VOO. Then do the same for your work 401k account if you have one. Put the rest in a brokerage account in NYSE:VOO, maybe save 5500 for 2018 IRA.
Try an index fund.
Same boat here. I'm really scared of a stock market crash.
You are right to worry about this, current stock market valuations are not sustainable .. Just avoid the risky bourse. IMHO it's too late for refuge assets too.
Long term assets could be something to be evaluated. solar energy, home refurbishing, ... https://www.forbes.com/sites/laurashin/2016/06/02/4-reasons-...
We are for sure in a bull market and bubble.
But no one knows when the time comes for it to pop.
But on the other side. Let's say you invest now. In three years the bubble pops. In five you should be way above on what you have invested. Say around 20% plus in eight years.
Me too. Low fee index funds always seem to be the generic answer but after reading many articles and a couple of books about it, I am still not convinced. It seems to me that the rate of return has a lot to do with when you enter/exit the market and it is well known that you can't time the market so how is this different than any other gamble?
There was also a popular article(NYT?), which I can't find the link to at the moment, that showed me that only if you invest in the market for around 30 years or more, can you get a decent return. To me that makes sense if you want to leave your kids a little something after you're gone but not for your own lifetime.
Can someone educate me on this? Does everyone reply "index funds" because it is fashionable to do so or am I missing something here?
> It seems to me that the rate of return has a lot to do with when you enter/exit the market
Most people "enter the market" continuously by depositing a percentage of their pay each month of their career and "exit the market" slowly and continuously during retirement 40 years later.
The booms and busts in between become irrelevant and you're left with a nice and high average rate of return.
In fact, even if you started investing in an S&P 500 index fund at the top of the market right before the big crash of 2007 (financial crisis), you'd still have a very decent return today.
That article convinced me otherwise. I wish I could find it now because I'd love to get some input on the numbers that, I'm assuming, I'm reading correctly.
I can't check without the article, but some mistakes I've seen - ignoring reinvested dividends (~2%/yr,) and unrealistic tax figures
on the other side, you've got people who ignore inflation and assume 10% a year returns promising ridiculous growth
"There was also a popular article(NYT?), which I can't find the link to at the moment, that showed me that only if you invest in the market for around 30 years or more, can you get a decent return. To me that makes sense if you want to leave your kids a little something after you're gone but not for your own lifetime."
What about investing for your own retirement? If you start investing when you begin your first job (usually in your 20s), and you expect to retire in your 60s and live into your 80s, that'll certainly give you at least a 30-year investment horizon.
I'm already in my early 30s and my circumstances did not allow me to start investing in my 20s even if I had the knowledge. I won't get into it now but it wasn't possible then. So that means I can only start investing now. Assuming that you do follow the expected timeline, what does retirement mean? Spending money for when you're no longer able to work? That assumes that you actually own your own home and only need spending money + medical expenses. And how can you unless you've invested in your 20s plus have you seen the current real estate market(Australia)?
I'm not sure I have a specific point except to say that the math stops working unless you follow the exact path expected.
Consider the alternatives to the index fund: 1. Pick individual stocks and directly buy those. (A lot less diversification and a lot more hands-on management required.) 2. Hire a stock broker to invest for you. This is like #1 except now you are at the mercy of someone else whose interests you cannot be guaranteed to align with you. 3. Managed investment fund. Funds are diversified based on the discretion of the funds manager. Big fees are required for the privilege of having one pick stocks to buy and sell for the portfolio. 4. Real estate. Good investment but exceedingly high initial capital requirements. 5. Commodities - gold, silver, oil, pork bellies, etc. Less diversity of investment and specialist knowledge of the commodity are required.
Index funds are low cost to run, have a low capital requirement, require little to no active management, are highly-diversified, and get a fairly good rate of return. As a default option of 'do nothing and some money comes in', that's hard to compete with.
Oh I agree. They're a good deal considering the alternatives but they also carry a lot of risk. Less risk than individual stocks of even specialized baskets but a lot of people throw the term around as if its magic. Several source I've read also assume that you'll constantly be putting money into the market and never withdrawing it to actually buy that house you start this whole thing for. Withdrawing the money means your rate of return depends on which cycle the market is in when you do it and to get the best rate, you need to withdraw when its peaking. That's timing the market. That's misleading...
But overall, I agree with your analysis. It's a great vehicle for people who either lack the time or knowledge required for investing. If you decide that stock investment is the best way forward for you...
So if your time horizon is short buy bond index funds instead. The context of recommending index funds is almost always when saving for your retirement. Don't invest 100% in equities unless you're very young and can stomach the volatility. Your asset allocation should tilt more towards less volatile assets like bonds and cash as to get older. You slowly enter the stock market as you save up, and slowly exit it into other assets as you age.
Yep, I'm aware of the recommendation to use your age as a rough percentage to how much you need to have invested in more secure vehicles. Solid advice I guess.
I still haven't looked at the numbers to see if it's worth it. In Australia, we're expecting a market correction to happen initiated by the real estate bubble finally busting. Which means that bonds would gain while the market loses. Of course people have been expecting that for many years now and statistically speaking it will have to happen at some time... Knowing this, I am still not sure whether to just invest and deal with the consequences if and when they happen or keep my money in my sock drawer.
Don't forget the opportunity costs! Money sitting in a sock drawer is losing value to inflation. That's years of dividends and growth you could be missing while you try to time the market. If you are really conservative, try 60/40 bonds/equities. Or invest outside of Australia. I'm Canadian, and Vanguard has "all world, excluding Canada" funds, I'm sure they have something similar for Australia. That way you can hedge against risks in your local market.
I have a 6.5% interest rate savings account I still have back home so I guess you can call that some form of investment. Definitely one that beats a 4% inflation rate. Our currency is also fixed against the US dollar. But I don't believe this is sustainable.
I also don't believe this is going to last more than a few more months until the bank has attracted as much cash as it needs. Of course that's also a third world middle eastern country and so lots can go wrong there which I have no control over. Thus my interest in moving it here. Vanguard is looking more interesting by the day. And yes, they do have a similar option.
The credit managers at one of the Big Four Australian banks are waiting for the real estate market to burst before they swoop in and buy investment properties. It would be better to wait on any sort of real estate based investments or other stocks that move with real estate.
I am starting to think the best investment possible is in your own business/company. That way there is a direct correlation between what you can control and what you put in to what you earn back out. Obviously you can't predict what the future will hold, but you at least can manage your endeavor prudently so as to better minimise damage in the face of bad circumstances.
Oh it will crash 100% there is nothing to be scared about
yeah - crashes are an investors best friend when you are buying stock
is it a good idea if I don't have any experience on that field?
Index funds don't require you to manage your investment. Basically, there is a simple rule set the fund follows to diversify your portfolio and grow your money. Unlike managed funds, there aren't fees to the fund manager to eat into the profit/growth rate.
'more' in terms of value? Then, take a break and roam the world. You can sustain for 2-3 years and do a RTW at a slow-n-steady pace and also make some money in the interim :)
Buy Bitcoin for 50k and sit on it. Not even kidding. :)
Only if you have the calm and patience to sit through a major dip. Or wait until then to buy.
Bitcoin as an "investment" is a lot more volatile than most other options. But, as of now, also a lot more profitable.
and/or diversify BTC with Monero
Given that you are in Australia, I suggest that you look at Forager Funds Management. I think they provide a reasonable way to enter the stock market.
I concur.
Shill - check the post history
If you take a few months off to live on that money and learn something new, would it be enough to increase your earnings by $100k total over the next 5-10 years? That's also an investment, and one that's got a decent chance of doubling your money in a reasonable timeframe.
Index fund, real estate. Personally I like real estate because I find the principles of it intuitive.
I would recommend reading the book "Your money or your life"
An unusual recommendation perhaps but recently I've been thinking of starting a small online business. Investing in that seems to offer the better risk to reward ratio. It also doesn't require a large capital to start. Consider that perhaps?
I don't have time to start a business, otherwise I wouldn't ask (see the title). I just look for ways to make it more with doing one time jobs (like investing, buying selling etc.) which I don't have to do the thing on a regular basis but one time and make it 51k after some time, for example.
When I say small online business, I was thinking more along the lines of drop shipping or novelty items from china which you can resell. There's a big difference between the effort required for a startup and populating a shopify account...
If you're after no effort at all, then investment is probably the best advise you would get. But that does carry some risk. As always, the risk/reward ratio...
Dear Sir, SEEKING YOUR IMMEDIATE ASSISTANCE. Please permit me to make your acquaintance in so informal a manner. This is necessitated by my urgent need to reach a dependable and trust wordy foreign partner. This request may seem strange and unsolicited but I will crave your indulgence and pray that you view it seriously. My name is. DAN PATRICK of the Democratic Republic of Congo and One of the close aides to the former President of the Democratic Republic of Congo LAURENT KABILA of blessed memory, may his soul rest in peace. Due to the military campaign of LAURENT KABILA to force out the rebels in my country, I and some of my colleagues were instructed by Late President Kabila to go abroad to purchase arms and ammunition worth of Twenty Million, Five Hundred Thousand United States Dollars only (US$20,500,000.00) to fight the rebel group. But when President Kabila was killed in a bloody shoot-out by one of his aide a day before we were schedule to travel out of Congo, We immediately decided to divert the fund into a private security company here in Congo for safe keeping. The security of the said amount is presently being threatened here following the arrest and seizure of properties of Col.Rasheidi Karesava (One of the aides to Laurent Kabila) a tribesman, and some other Military Personnel from our same tribe, by the new President of the Democratic Republic of Congo, the son of late President Laurent Kabila, Joseph Kabila. In view of this, we need a reliable and trustworthy foreign partner who can assist us to move this money out of my country as the beneficiary. WE have sufficient ''CONTACTS'' to move the fund under Diplomatic Cover to a security company in the Europe in your name. This is to ensure that the Diplomatic Baggage is marked ''CONFIDENTIAL'' and it will not pass through normal custom/airport screening and clearance. Our inability to move this money out of Congo all This while lies on our lack of trust on our supposed good friends (western countries) who suddenly became hostile to those of us who worked with the late President Kabila, immediately after his son took office. Though we have neither seen nor met each other, the information we gathered from an associate who has worked in your country has encouraged and convinced us that with your sincere assistance, this transaction will be properly handled with modesty and honesty to a huge success within two weeks. The said money is a state fund and therefore requires a total confidentiality. Thus, if you are willing to assist us move this fund out of Congo, you can contact me through my email address above with your telephone, fax number and personal information to enable us discuss the modalities and what will be your share (percentage) for assisting us. I must use this opportunity and medium to implore You to exercise the utmost indulgence to keep this Matter extraordinarily confidential, Whatever your Decision, while I await your prompt response. NOTE: FOR CONFIDENTIALITY, I WILL ADVISE YOU REPLY ME ON MY ALTERNATIVE EMAIL BOX ...Thank you and God Bless. Best Regards, MR DAN PATRICK.
Copy pasta from your spam folder?
What happened to downvotes?
Downvoting worked for me