
How Hard Is It to Generate a 10X Return on an Investment? - prostoalex
https://bettereveryday.vc/how-hard-is-it-to-generate-a-10x-return-on-an-investment-9c1656d6c3af
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moneytide1
People perform services or produce goods for their community, and they are
given resources in exchange for their efforts (aka "return").

Unfortunately, we are now tainted with a lust for more. And then we ask how to
get 10x more (aka "return") before we even think about what it is we are
providing.

We all just want to be "rich", and all we can think about is the end, not the
means. Then we must read articles like these - the likes of which do not
provide any practical insight on how one should live a fulfilling life.

It's all about just waiting for numbers get bigger.

~~~
Waterluvian
Money can be a tool or a high score.

I maxed out three years into my career, the amount of money I felt I needed to
make. All I've been doing now is trying to figure out how to work less and
maintain that income.

What I want is a 20% paycut and every Friday off in addition to the weekend.
But it's seemingly not compatible with this world.

~~~
moneytide1
" But it's seemingly not compatible with this world."

I was told by a ~50 year old yesterday that the Christmas holidays used to be
two weeks. That means that it was common for businesses to close for an entire
two weeks, instead of one day.

Now, it's all about the maximum grind.

[https://chriskresser.com/busyness-badge-of-honor-or-
cultural...](https://chriskresser.com/busyness-badge-of-honor-or-cultural-
disease/)

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mbesto
Just of out curiosity to the HN crowd - why is understanding the finance
behind venture capital so interesting to people? I regularly see posts like
this (including stuff I've written) and people are absolutely enamored by it.
VC's likely represent a small fraction of the people on here, and are
definitely a small fraction of the overall finance community, so why so much
interest from _non_ VC folks?

~~~
AznHisoka
I'm not interested in this.

I wished there was an article on "How Hard is it to generate a 10X return" for
normal, Average-Joe investments (ie stocks, bonds, real estate), and how a 10X
return is actually at most 6X return, because you need to take into account
taxes, costs, and inflation.

~~~
autokad
if you are \- a passive investor and dont want to spend much time thinking
about it \- want your money to earn a good return over inflation (5%+) \- dont
need the money for ~ 3 to 5 years (its ok not being liquid)

then an sp500 index fund is probably best. not the 10x return you are looking
for, otherwise you have to be a lot more speculative

~~~
AznHisoka
For a middle-aged person, what % of my money should be in that index fund?

~~~
dahdum
A good rule of thumb is 100 minus your age is your % of stocks to hold. Those
stocks should be diversified index funds, so if you're 40 years old 60% in
S&P500 ETF is pretty decent.

The exact index funds to hold is a constant matter of debate (including
whether to hold international). Doesn't matter as much as having that equity
exposure and keeping the fund fees low.

Lots of resources out there to do it yourself
([https://www.bogleheads.org/wiki/Three-
fund_portfolio](https://www.bogleheads.org/wiki/Three-fund_portfolio)) or you
could use Betterment/Wealthfront/Personal Capital for extra fees.

~~~
jmulho
I agree about equity exposure, low fees, and simple approaches like a three
fund portfolio. Here is a slightly more sophisticated way to think about the
percentage that should be in equities. One year from now, equities could be up
25% or down 50%. Twenty years from now, equities are likely to be up, likely
to have outpaced inflation, and likely to have outperformed "safer"
alternatives (money market funds, bond funds, etc.). If you have a $10,000
bill coming due in one year, and $10,000 in the bank, it would be risky to
invest any of it in equities. If you have money to invest that you won't be
forced to liquidate for 20 years (e.g. your 401k at age 40), then it is
probably fine to start with 100% of in equities. The percentage should be
based on when you might be forced to liquidate each available investment
dollar. In many cases this will agree with the rule of thumb.

By equities I mean low cost equity ETFs (or index funds) that invest in broad
indexes. I do not mean a portfolio of 10 to 30 stocks hand-picked by you or
any fund manager. The hand-picked portfolio could be down 100% in 20 years, or
in 1 year.

~~~
dahdum
We're on the same page mostly, but I think if forced liquidation is a real
risk you should lower your equity % at the start to compensate. 100% at age 40
is overly aggressive, pretty sure you'd have better risk adjusted returns by
including bonds in there from the start.

~~~
njarboe
With bonds at historic lows (negative interest rates have never seen since the
beginning of money in ~600BC), I would not be so sure about that. What bonds
would you invest in?

~~~
dahdum
We're also at record equity levels and low interest rates, but that can change
really quickly. I only put them in there because a lot of MPT models say it's
a good idea.

I have LQD, JNK, and BNDX.

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rudiger
As a cryptocurrency investor, I can confidently say it's hard not to generate
a 10X return.

~~~
tejinderss
Which one do u suggest to buy now ?

~~~
ReverseCold
If you're asking that question you've already lost.

~~~
alexbeloi
The difference between investing now and staying in now is a single
transaction fee.

~~~
klipt
You're forgetting capital gains tax.

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tstyle
People act under the assumption that the power law is some fundamental
property of the universe. But it seems the 10x effect exist partly due to
network-effects, and partly due to a minimum barrier requirement for
liquidity. It's economically infeasible to support mini-size IPOs because the
fixed overhead cost of regulation, auditing, legal work, and underwriting is
too high.

With all the stigma associated with ICOs, lower barrier to liquidity may be a
good thing overall. The power law phenomenon incentivize entrepreneurs to take
excessive risks and force VCs to adopt extreme portfolio management
strategies.

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tyingq
For comparison, the 11:1 payouts in roulette are a 7.89% chance.

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ninjakeyboard
whew it's not about crypto. Getting fatigued by the btc talk.

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debt
"The problem arises when multiples are inferred from incomplete data."

I heard the collective clacks of Command-W's at that line closing the tab from
every single Crypto investors laptops sighing relief saying "See yeah crypto
isn't overvalued it's just ya know people have incomplete information"

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ReverseCold
Answering the question in the title...

Easy.

Doing it consistently?

Hard.

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allworknoplay
Not hard at all, given a long enough timeline.

~~~
hughes
Just 34 years at 7%!

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stevenj
VC is a very tough business.

~~~
robotresearcher
Poor darlings.

~~~
hndamien
It just got tougher too :)

