

Ask HN: How would you invest $50,000? - alphabetaprune

I am in a financially secure position. I have no debt, I am single, no mortgage to pay, and no need to work (although I do it anyway because I enjoy it). I am not "super" wealthy either. Rather than having money sitting in the bank, I've decided to invest $250,000. $200,000 will go into vanilla/convserative investments. But with the remaining $50,000 I'd like to try something a bit more interesting. I have unlimited risk tolerance for the $50k, provided the investment has "home-run" type upside.<p>1. Excluding angel investing, what would you do?<p>2. Assume you have zero experience angel investing, but have a capable technical background. What do you do? How would you build an angel brand for yourself?
======
joshu
I imagine that becoming an angel is difficult.

1\. You need to be situationally positioned well to get decent dealflow.

2\. You need to invest in many deals; I have been told that profitable angels
do 10+ deals a year.

3\. Low-end slices are typically $25k and up. It's a lot of work for companies
to wrangle a large number of investors so minimizing that number is to their
advantage.

4\. It can take YEARS to return anything at all. I've invested in 24 startups
since 2007; one exited so far.

~~~
teej
I have a few friends that do angel investing in the 5k - 10k range regularly.
Unfortunately that's still only a handful of deals and might not be enough to
get a good reputation or good deal flow.

~~~
joshu
In what kind of companies? With what kind of success? In what region?

------
dlg
Be careful: If you're in the US, to do most angel investing, you must be an
accredited investor, per SEC regulations. To qualify, you must have a net
worth of at least $1M or have made >$200K in each of the last two years
(>$300k if married). Almost any company with a good lawyer will require that
you sign something certifying that you are accredited.

~~~
alphabetaprune
I do meet the SEC's accredited investor criteria

------
cjoh
1\. Excluding angel investing: If I were you, with 50,000 and unlimited risk
tolerance, I'd buy a foreclosure. If you take some time, do your homework, and
make the right investment then the payoff could be quite good.

2\. I understand your frustration. There's just nothing out there for the
beginning angel. As you can tell from most of the answers here-- there really
isn't a good answer. You're too rich to have the money sitting in a bond fund,
and too poor to be Paul Graham. You're stuck in the middle, and the
investments market (right now) doesn't have a home for you. You're also a
prime target for some get rich quick investment schemes, so you ought to be
careful.

------
ankeshk
Invest in a small tech firm from a country where labour is cheap. India.
Ukraine. Philippines.

$50,000 = annual salary of 3-4 employee team.

Get them to make iphone apps, android apps, facebook games.

If you go with a 4 people team, the division should be: 3 developers and 1
marketer. And one of them handles everything for a bit higher salary and a
very small equity stake.

If you had $100,000-$200,000 to invest, I would get the team to flip websites.
You buy the websites (with the remaining $50,000 to $150,000). They make it
better with new features / redesign etc and then increase traffic to it for
4-6 months. You then re-sell the websites.

In this instance, I would go with: 2 developers and 2 marketers.

------
jasonkester
Simple:

\- $40k into an Index Fund tracking the S&P 500

\- $10k into a Six Month Trip Around Southeast Asia

Chances are you're not going to hold onto that Single, No-Mortgage thing very
long. If you haven't done much traveling, it's probably best you get out there
now to see what you're missing.

You definitely have the right idea with getting your debt sorted and starting
the retirement investment stuff early. You're never going to be in a place
where excess money comes in so fast, and it's physically impossible to get
into a place where your investments have longer to compound.

But then you're also in a place where you can afford to squander a bit of that
advantage to go have some fun. Send us a postcard!

~~~
ramidarigaz
I went around most of Southeast Asia, plus Japan on $12k for exactly six
months. Three of those months were in Japan.

Totally worth it. I'd go back now, if I wasn't dead broke.

~~~
mcdowall
I go to Thailand in just over 4 weeks, after Indonesia last year ive got
exactly the same bug. Though I think my anti love of commercial epicentres was
further developed by the fact we spend 3 days in Dubai on the way back
home..seriously everything that is wrong with anything is there! Nasty...Rant
over.

------
benologist
Find a startup that interests you personally enough that you'd go on board as
a founder who conveniently has $$$.

~~~
joshu
board experience is a super big plus.

------
NEPatriot
I would post on HN and ask for people to share with you what they're working
on but for the love provide some sort of template or format you want to be
pitched with. Whether you want to see wireframes, a demo, or a slide deck with
5 slides etc.

Pick what you like best and dive in - in whatever capacity you choose.

~~~
midnightmonster
I might respond to something like this.

------
mattblalock
I'd say come join my company.

We're operating in a $15 Billion industry with no real market leader (yes,
there are still a few of those around). We've made ourselves profitable in
less than 6 months with about 3,000 customers.

This is my ninth business, I'm tech and marketing oriented, and a fourth
generation entrepreneur.

I'd love to speak with you, get to know you, and hopefully help each other
make some money.

Send me an e-mail, lets talk.

blalock.matt AT gmail.com

~~~
jlgosse
While I'm not calling you a liar, why don't you either:

1\. Post your company name, or 2\. Post an email address that isn't AT
gmail.com

It just gives you a bit more reputability, which I think is important when
you're fishing for $50,000.

~~~
mattblalock
I've posted my contact information here several times. I really wouldn't call
myself fishing, but here's my contact information in full.

And I can understand how my post may have seen somewhat fishy (no pun
intended!).

Matt Blalock Tickle Industries, LLC <http://myticklespot.com>
mattblalock@myticklespot.com 336-231-3744

~~~
lsc
Out of curiosity, why 'women and couples'? I know guys don't like to talk
about that sort of thing, but speaking as a guy who has spent more time single
than I would perhaps like, I imagine the market for things like the fleshlight
is rather, um, large.

~~~
mattblalock
Ha, yes. That market is large, the gay male market is large, and the lesbian
market is large (not trying to stereotype, but each of those demographics
require different approaches in this sort of product).

We are developing sites under the same style and philosophies for each of
those markets (hope my competitors aren't hanging out here...) but we believe
a "one size" approach simply wouldn't work - the customers are simply too
different.

Women and couples was what we understood most, so we began there.

~~~
lsc
what do you need investment for? Are you doing manufacturing and not just
retail?

~~~
mattblalock
Investment would allow us to do more promotion, grow our catalog, bring a
designer onto the team and seek out another developer.

There are several things I want to do, but I get so caught up in day to day
things (answering the phone, responding to customer e-mails, etc.) less
development gets done.

Further, we write every description on our website, writing isn't cheap. We
have over 1,000 products now, but have about 5,000 in a database we want to
carry. Everything needs photos, often they need to be cleaned up,
photoshopped, the specs found and fact-checked. Basically, each product we add
costs us about $20. New products come out every week, so a lot of money goes
to that. The ability to increase our catalog quicker would be awesome.

Beyond the investment, the expertise the person has, the contacts, the outside
interest he/she could bring, would be far more beneficial for us than the
money.

To answer your question directly, we are not doing manufacturing, but we
could. And probably should. Not yet, anyway.

------
runT1ME
Err, the first question we should be asking you is "why don't you have a
mortgage".

Unless you were given a house and have a chest full of gold bars, you are
probably living off the income of interest, so you're still paying income
taxes.

Get a mortgage. Its a tax write-off, along with the fact that RE is a pretty
good overall investment, and very 'cheap' money. Hell, if you have to, HELOC
your place and put that money into a higher yield investment.

~~~
CWuestefeld
_Get a mortgage. Its a tax write-off_

Not so much, if you're in AMT-land (and it seems like the poster is).

But even so, I don't understand why people (you're far from the only one) say
this. For every dollar you save in taxes, you're paying two dollars to the
bank. How can that possibly be smart?

Whether to invest in Real Estate is an entirely separate question. And one
that I also think is a poor choice in this age. I base that on the current
price of homes relative to their historic levels. They're still expensive.

~~~
shpxnvz
_But even so, I don't understand why people (you're far from the only one) say
this. For every dollar you save in taxes, you're paying two dollars to the
bank. How can that possibly be smart?_

That plan is to take the money you have invested in your personal dwelling,
and leverage a government subsidized low-interest loan (mortgage with
deductible interest) to re-invest for a higher return. Obviously it doesn't
make sense for everyone - it requires that you have a low enough paper income
that you aren't in AMT territory (and can thus deduct your interest) and that
you are comfortable investing that money in something higher-return and
presumably higher-risk, though the last few years have shown that your
personal dwelling isn't necessarily a low-risk investment either.

The short answer is that for every two dollars you pay to the bank in
interest, you should be making more than two dollars in return on your
subsequent investment.

------
FreeRadical
I would make a list of lesser known sites that I am impressed with, then
sequentially contact them for an x% stake. If all say no, I would try and join
the angel list on venture hacks. If they didn't let me in, I'd go to the angel
investment network.

------
djm
Have you considered becomming a creditor? You can lend via sites like
lendingclub.com. Annual returns are approaching what you'd expect to get on
the stock market in the long term.

I haven't tried this investment myself yet (insufficient funds) but I'd be
interested if I had the money spare.

Warning: I'm not sure about how this works in the US, but here in the UK I'd
have to obtain a consumer credit act license for lending more than 25k.

------
gamble
I was/am in a similar situation. The rule of thumb financial advisors tend to
use (and you should take any advice from them with a few grains of salt...) is
to put around 10% of your portfolio into high-risk investments.

The 'typical' route you'll be steered toward are real estate investments.
There's a whole world of exotic financial instruments I had never heard of
before coming into money, but real estate is probably the most popular, since
it seems so familiar to most people. This is what we did. In 2007. Yeah... =)
It paid off in the end, surprisingly, but it was a close thing.

The best advice I can give you is to invest in things you understand. If you
have enough experience with startups to judge them critically, angel investing
may be your best option. Putting your money into something you don't
understand is little better than gambling.

------
maigret
Invest in green tech - but I'm not speaking stocks. Install solar panels on
your home, or maybe a vertical wind turbine. Insulate your home better,
research if it's financially worth it. After doing that, you can even reuse
your experience for others - for charity or profit, as you like.

------
switch007
Invest it in something that will directly and non-financially benefit at least
one other person, not including yourself. I guarantee that it will give you
the greatest ROI. You already sound much better off that 99% of the
population. Good luck with your investment!

------
lsc
Invest in something you know. For me, that meant becoming an ISP, buying
servers, virtualizing them and renting 'em out.

Knowing what you invest in is a huge advantage, one that you will certainly
need if you only have $50K to invest.

~~~
nailer
How is you investment working out for you?

~~~
lsc
pretty good. I'm probably not quite in the black if you take all the money I
spent before I figured out what I was doing into account, but it's supporting
me and paying for two new servers a month, so I'm happy enough to call it a
success. But yeah, there were, ah, a few years of failure to slog through
before I got to this point.

Note, I didn't have a big wad of cash going in; I've paid for it renting
myself out as a contractor. (But then, OP only is spending $50K, and, uh, by
the time the project was able to support me, that was maybe 4-5 months of
contracting. $50K is not a big wad of cash by "I want to start a business"
standards. )

~~~
nailer
Good to hear, thanks for replying.

------
alphabetaprune
Thanks for the responses. I appreciate the feedback. The discussion here gave
me a few ideas.

Perhaps if anyone is interested, I'll do a blog post within the next few
months explaining what opportunities I chose to pursue and why.

------
JabavuAdams
Invest in New-Space, or "Space 2.0". There's a private space travel revolution
happening in Mojave, and Texas.

Look up:

XCOR Aerospace

Scaled Composites

Armadillo Aerospace

Masten Space Systems

Unreasonable Rocket

Blue Origin

SpaceX

Check out the arocket-list mailing list for detailed engineering discussions
on amateur rocketry, including comments by some of the people involved in the
companies I mentioned.

It's not clear who the winners will be here, but some of them will be billion
dollar companies.

------
ivankirigin
<http://www.secondmarket.com> for private company stock that you expect to go
public within a year or two. I haven't tried it.

------
samd
Find somebody who wants to start a company in the hardware business. They
don't have the luxury of building something for free and $50k might be enough
to get a prototype.

------
HockeyPlayer
For #1, are you looking for a 1 in 10 chance of a 5x return, or a 1 in 100
chance of a 50x return?

For #2, if you don't want to spend the serious time and money (because you
will lose some money while learning) becoming a angel investor, consider
investing in a fund that does angel size investing. David Cohen of TechStars
runs a small fund that does seed stage investing, and I'm sure you can find
others as that is a hot area.

~~~
Retric
For #1 You can beat those odds by going to Vagas. It's not hard to get a 1 in
10 chance of 9.5x return or a 1 in 100 chance of a 95x return. What you want
is a 1 in 3 chance of a 30x return within 5 years.

PS: This is also why most VC funds make so little money _for the investors._

~~~
HockeyPlayer
> It's not hard to get a 1 in 10 chance of 9.5x return or a 1 in 100 chance of
> a 95x return Does 2x on $100 leave me a total of $200 or $300.

> What you want is a 1 in 3 chance of a 30x return within 5 years Obviously,
> that will be hard to find. If you did 100 of those, you'd be getting a 10x
> return in 5 years.

My original question to the poster stands. Are you looking for a real long
shot, or something with a decent chance of paying off?

~~~
alphabetaprune
To answer your question. My original thinking in setting aside $50k was to
expose myself to "positive black swans." I'm looking to place a series of
improbable bets such that if one pays off in a major way...

I do like the idea of investing in an angel fund to get my feet wet. I'll
consider that.

------
dfranke
Here's something you can do even with small dollars and without being an
accredited investor: find some public firms with lots of "toxic assets" on
their books, e.g. mortgage REITs. See if you can find some that most people
are afraid to touch, yet you think they'll pull through. Buy their stock.

I have a lot more research to do before I pull the trigger, but I'm planning
to throw a couple grand in this direction myself.

~~~
uptown
Sounds like somebody was watching 60 Minutes last night.

Here's a full article about one of the guys they profiled:
[http://www.vanityfair.com/business/features/2010/04/wall-
str...](http://www.vanityfair.com/business/features/2010/04/wall-street-
excerpt-201004?printable=true&currentPage=1)

~~~
dfranke
Nope, coincidence. Been looking at this for a few weeks. Thanks for telling
me, though: I'll take into consideration anything that looks like a spike from
the media attention.

~~~
adrianwaj
See if you can implement an improved information system if they have a really
bad one. Their cause of failure: bad information. On the other hand maybe they
have some good information that can be useful.

------
mortenjorck
Think about how you can differentiate yourself in the angel market. What do
you believe in the potential of that you don't think is shared by a lot of
more established names? What do you think everyone else is missing? I bet
there's something.

Track down the most talented people you can find working on that unfairly
underserved idea and make it your cause.

------
Keyframe
All on black.

~~~
poppysan
Or 8 or 6 on the craps table... Heck even the pass line...

------
DilipJ
I would advise against anything like angel investing. You're not in a position
where liquidity concerns wouldn't pop up, so having access to your money
(should you need it) is important. Angel investing means tying down your cash
for years...

I personally suggest you follow Nassim Taleb's advice (he of Black Swan fame),
which you seem to be doing by keeping the majority in conservative,safe
investments and looking to score big with the remaining. If you're looking for
home-runs, I suggest options trading. There's a lot of volatility in the
market, and if you time things right you should be able to generate a handsome
return.

Good luck!

~~~
alphabetaprune
I'm a fan of Taleb's philosophy. I've actually dabbled in options trading with
straddles.

~~~
DilipJ
Hmmm, very interesting. Are you doing it based on arbitrage, for mergers or
when earnings come out? Which sectors do you dabble in? I'm curious to how
your strategy has worked out so far!

------
nessence
Don't ever buy a variable annuity.

1\. Some forms of oil and real estate investments, in some states, can be a
significant tax deduction. Otherwise consider saving this money for future tax
benefits or new opportunities.

2\. Get involved in the community where you want to work with angels. It looks
like you've already started. People make angels, not a brand.

Go to YC demo days <http://ycombinator.com/dday.html>

If the $50k is more than 1% of your liquid assets you should consider short-
term investments until you're in a position where angel opportunities find
you.

~~~
ct
What's wrong with a variable annuity? Just curious b/c I don't know anything
about annuities but they sound good for the future.

------
epi0Bauqu
1) I wouldn't, but you could do real estate, franchising or futures/options
trading.

2) If you want to consider angel investing alongside me, email me.

~~~
jasonkester
Angel Investment? Seriously? For a guy with $50k in the bank??? Surely you
must know how Angel investing works, right?

You might as well advise him to take his money to the dog track. It's better
odds and more fun.

~~~
epi0Bauqu
He's the one talking about it. I'm just offering a way to think about it in a
more focused manner.

~~~
jasonkester
Ah, in which case your answer should have been "No. Angel investing only works
if you invest in dozens of companies, since chances are any one of them will
go under."

Or better still, "No. You should take it all out in twenty dollar bills, box
it up and send it UPS to that Expat Software guy." I'd back you up on that
one.

------
shin_lao
Enter in contact with other angel investors, sometimes they group together in
a fund and they will be happy to help you invest the $ 50,000.

------
eliot_sykes
Not so much an investment...Come up with some crazy idea to do with the money,
do it, then write a book on it.

Anyone remember the guy who sold everything he owned, went to Vegas and put
all the cash he had on black, then wrote a book. Might have been a documentary
too.

Then there was KLF who burned a million quid but I don't see how they made
their money back.

------
chsonnu
I would invest half of it in low risk mutual funds and then take the other
half over to my friend Asadulah who works in securities...

------
jorkos
1) bootstrap a company....get products out the door.....try to find
product/market fit

2) best starting point is to go through the cycle yourself....if you haven't,
refer to response to 1)....this investment in building a company will pay off
down the road when you want to invest in other startups (and have accredited
investor status, etc.)

------
thinkbohemian
There was an idea floating around the blogosphere a few weeks ago about
investing in individual rather than an specific company. Where you would pull
in a percentage of that persons net income for the rest of your life...could
be interesting.

~~~
joshd
That sounds like slavery.

~~~
dpatru
No, slavery would be _forcing_ someone to work for you (rather like what the
government does when it forces people to pay an income tax.) Contracting with
someone for a percentage of their income is rather like investing in their
startup with the agreement that they will work for the startup for a long
time.

~~~
kls
No dude it is slavery, it is called indentured servitude (classified as a form
of slavery) and it is illegal. The reason being that if allowed it is easy for
the rich to drive down the market until you sign up for service or you starve.
If allowed, the vast majority on this board would be indentured in less than
15 years. The worst part is that it never becomes enough, fathers have to
enlist there sons, before they can consciously accept or reject just to be
competitive. If they ever legalized this in America, I would revolt the day it
was passed, it may be a revolution of one, but it would be a revolution.

------
oomkiller
You could loan it out over Kiva, or at least a part of it. Just be sure
whatever you choose, for any of your investments, that they at least beat the
rate of inflation, else you are better of spending it.

~~~
DanielStraight
Kiva does not even pay interest, so I don't see how this fits the description
of a potentially high-risk investment with the possibility for a large payout.

~~~
m0th87
That's not true; Kiva often charges extraordinarily high interest rates. See:
[http://en.wikipedia.org/wiki/Kiva_(organization)#Interest_ra...](http://en.wikipedia.org/wiki/Kiva_\(organization\)#Interest_rates_2)

~~~
apowell
It charges interest to borrowers, but it doesn't pay interest to donor-
investors.

~~~
clistctrl
Am I the only one who sees a problem with this?

~~~
apowell
I lend on Kiva, and I don't have a problem with it. There's a lot that has to
happen between my Paypal transfer to Kiva and the money being distributed to
the local entrepreneur...and even more that has to happen to collect the
payments.

I'm happy to set aside a small amount of money as a catalyst for progress, and
thankful that others are doing the heavy lifting.

(Apologies for continuing this off-topic line of conversation.)

------
Kilimanjaro
Buy 50 servers and start leasing VPS for $19 a month. 1000 clients will leave
20k a month enough to pay a sysadmin and pocket some cash while you monitor
everything from hawaii.

~~~
imp
I don't think shared hosting has the "home-run" type upside that he's looking
for.

~~~
lsc
the difference between a 'vps' and 'the cloud' is little more than an API
layer. Many people seem to think there is much upside in the cloud.

(that said, I'm not saying you are wrong; owning infrastructure and renting it
out usually has a reasonable and predictable (and not huge) upside.)

------
known
Invest in India via <http://money.rediff.com/mutual-funds/high-risk>

------
simon_
I'm in a very similar situation - I don't have any great advice, but I'd love
to discuss "offline" and hear whatever conclusions you come to.

------
donna
I'd ask myself how much time I'd want to spend in growing the $50K. An angel
requires time to help cultivate an idea. Do you have time?

------
mostly_harmless
I would say: get your pilot's license. It seems that you pretty well set, it
should be pretty fun to fly. Also a cool conversation point

------
jrw89
Nothing beats Greyhounds: <http://www.thedogs.co.uk/Ownership.aspx>.

------
faramarz
What's your definition of a home-run.

1x return a success or multiples? and in what time frame?

Invest in me :)

------
petervandijck
Though one. Are you willing to spend significant time on those angel
investments?

------
kimfuh
Give it to charity. Sounds like you have more than enough.

------
clistctrl
I'm a programmer I typically make ~72k a year. But for 50k, I'll work for you
for 1 year. The catch, is you have to let me work on whatever I want (provided
you agree it has profit potential) we can discuss further details if you're
interested.

hey its worth a shot :)

------
marshallp
Buy/get a dataset, such as images or audio or biological data, and spend the
money on computing time to do machine learning/genetic programming to create a
classifier from it. Sell/rent out the classifier for big bucks.

For example, label smiling/unsmiling faces on 10,000 images using mechanical
turk, run an algorithm (neural net,svm,genetic programming) on it using your
own computer cluster or amazon ec2. Once you have the classifier, allow people
to use for a small payment each time.

There are almost infinite number things to do in this way, some examples

accent identification in audio ; telling the gender/race of person from photo
; labeling person attractive/not attractive

~~~
Tichy
I'd be really interested in working in machine learning, so if you know an
easy way to make money from it, I would be interested to learn more. You think
such a classifier would be an easy sell?

~~~
marshallp
It's use is already sold (rather expensively) in inspection/robot systems in
factories and in automatic license plate recognition.

I imagine it would be easy to sell. Create a classifier that rates a user's
attractiveness and many dating sites or individial users might interested in
paying for it.

Call centers might be interested in paying for accent identification, they can
route a call based on accent to a employee with similar accent.

Microsoft will release project natal later this year and probably make
billions from it.

As far i can see the opportunity is absolutely huge (trillions and trillions
of dollars) since it is so commercially useful (unlike the web industry which
has been based around selling eyeballs).

------
shareme
Right now you don't have funds to be an Angel, usually it requires $250,000 or
higher in income and proof of yearly investments. That means you barely made
the minimum requirements.

However, you could join an Angle VC investment club where they pool resources
including doing fact checking on deals.

An alternative option might be do the startup yourself rather than attempt to
become Angel as you already are at zero debt and security/retirement taken
care of..in which case a mobile app might be ideal as a startup

Non Angel wise..municipal bonds

------
ckeeler
lottery tickets

~~~
antidaily
50,000 $1 scratch-offs.

------
johnl
I just wrote a program to trade stocks. The testing makes around 30% annually.
I don't believe it since I know myself too well but can't see where the error
is. Put your money in an account, let me trade for 6 months live and see what
happens. I can send you "testing proof" except the code for review. Would
automate it if it does work. One last thing, taxes on this might be the killer
but compounding after a few years might make it worth it..

~~~
Aron
You just wrote a program that loses money.

