

Ask HN: Where to put your money? - takrupp

Like a lot of entrepreneurs who are revenue positive, we have excess cash on hand.  Given the crazy markets, we don't really want to hold equities and probably not most debt either (treasuries or otherwise).  Where is everyone putting their money?  Anyone tried foreign currencies (like Canada's or Brazil's)?  How about gold?  And how do you even make such investments? I know there are a lot of scammy companies out there peddling gold and currencies and would like a recommendation on who's trustworthy.
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efalcao
As entrepreneurs, our big "risky" returns come from investing in our
businesses. In order to counterbalance that, my opinion is to be very
conservative with your cash.

Keep it liquid and safe- earning 4% safely seems fine to me these days. FOREX
and Gold are scary.

~~~
awa
how can I get 4% safely in current market?

~~~
iworkforthem
Do a bit of homework on Technical Analysis MACD, BB, SAR, Mov Avg, RSI, etc...
it is not difficult to get 4% return. getting the 20% return year after year
is the tough part.

~~~
_delirium
If direct use of a handful of simple statistics could get a risk-free 4%
return, wouldn't automated trading have arbitraged that out by now? My
impression is that the quants now have to rely on _much_ more complex models
than the traditional technical analysis statistics to get any sort of reliable
return.

~~~
iworkforthem
y complicate things... one parameter added to a model = much permutations, a
lot of risk is undertaken. if i can make a penny a millisecond with one
machine, over time the course of one year how much i make in one year with
just 5 machines, it really adds up.

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hop
Buy well priced stocks. I reinvest everything into our company now, but before
I tucked it away in solid or surely growing companies like Berkshire Hathaway
and Apple. Look for sub 15 P/E, preferably much lower and choose companies
that you can be sure will be around for a long time. If you can foresee their
profit doubling in the near term (like Apple in the past 5ish years) you its
still a good deal at a higher valuation.

Don't fuck with currencies or commodities unless you have a you have a
competitive advantage over everyone else (like if George Soros was managing
your macro currency bets).

Personally, I'd rather have a lot of cash on hand or in something very liquid
like stocks, as oppose to CD's or bonds, because not only do they pay almost
no interest right now, but investment opportunities can come in the blink of
an eye.

Edit: I would recommend staying away from tax free municipal bonds, there is
going to be a wave of defaults coming with all these over-leveraged cities and
local governments.

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mtholking
You could invest in a gold ETF <http://www.google.com/finance?q=gld>

~~~
lzw
It is debatable whether that ETF holds as much gold as they are supposed to,
as IOUs of gold from other institutions count as "gold" for their accounting
(as I understand it.)

This is the real problem we've seen in gold bull markets in the past, and
currently the derivatives trade far exceeds the global supply of gold. (And an
"IOU" is a derivative)

I'd recommend either holding physical yourself or holding allocated gold on
account with a trustworthy depository.

The ETF, however, is probably good if you want to try an option strategy.

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simon_
Keep it in cash! USD if you are in the US. In the bank or in T-Bills.

Any angel or VC would require you to do this. Basically all serious business
do this.

If you have a solid business with even a small chance of requiring additional
investment in the future, it is crazy to be screwing around in the markets.

~~~
cx01
I agree. The US is in a deflation and I don't think the Fed will be able to
stop it. So cash should gain in value. Just make sure to put it somewhere
safe, as banks may go bankrupt in a deflation and the FDIC will most likely
not be able to guarantee all deposits.

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iterationx
You sound like you need some Peter Schiff. His idea is dividend paying foreign
investments. You want the return on your money to be paid in a foreign
currency, because the dollar will continue to lose value.
<http://www.europac.net/>

~~~
cx01
I would be skeptical of Schiff's investment advice. Look here for a rebuttal
of his claims: [http://globaleconomicanalysis.blogspot.com/2009/01/peter-
sch...](http://globaleconomicanalysis.blogspot.com/2009/01/peter-schiff-was-
wrong.html)

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mcgraw
Well it sounds like you're extremely risk adverse so your best bet is to find
a bank with the absolute best APR and just hold your cash there while you wait
until you feel market conditions are a bit better.

Something to think about: Diversify your holdings. A good 80% of what you have
can milk a high rate from a savings account (domestic or foreign). 10% could
be put in a couple of low-moderate risk ETFs/Mutual Funds (formed by companies
that really arn't going anywhere, like healthcare), 5% into CDs or Bonds, and
the remaining % in minerals (gold, silver).

When you start hearing good news (job market improving, ipos, companies
returning healthy profits), you can start re-aligning your portfolio.

Best bet is to get in touch with a financial adviser.

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iworkforthem
It is a risk and reward game and the best part is it varies from one another.
What works for me, might now work for you. Someone like me who enjoy huge
rewards, is quite comfortable to long USD, buy citi shares, etc. but for
someone else the bonds market seems just about right for them.

You really have to find what suit you best. \- currency \- bonds \- options \-
futures \- warranty \- etf ... ..

For someone who do not have the time to invest I would say think Vanguard,
think Bond, think ETF. Alternatively, I would invest in startups that Kevin R
or Gary V invests in, or startups that Google or Oracle might one day
acquired.

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awa
The question is what the purpose, do you want to preserve the capital against
currency risk than you can look to convert some money into other currencies or
look at commodities like gold, silver (ETFs) ...

If you just want to preserve capital with some appreciation short term bonds
(look at Vanguard or Pimco offerings) or money market accounts can be a good
idea.

Even a high yield saving or a CD ladder (both FDI insured) could be nice
depending on how much cash you have and what kind of liquidity you want
(between 1-2% return for 1-2 yr CDs and 1-1.5% return on high yield savings)

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tocomment
Short term bonds?

~~~
lzw
If you look at the treasury auctions very closely you'll notice that over the
last 9 months the buyers of the bonds have been (unreported and obscured) the
federal reserve. Which means that the bond auctions are a direct monetization
scheme.

This is keeping bond yields low (and below inflation anyway).

When it comes to light or has to stop, or the remaining foreign buyers all
quit (Because yields are low and the market says they should be higher) then
yields will have to rise.

When this happens previous bonds that have low yields will have their values
drop....

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chopsueyar
Au

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lzw
Too broad a question for me to give a succinct answer, so this is going to be
a bit all over the place. But I've been investing for myself for about 2
decades, have participated in just about every type of investment, ending up
preferring complex options strategies. But I also am a fan of buy-n-hold, and
commodities.

The best, first investment you can make is in money and time to get enough
understanding and perspective to be able to sense the value of any investment.
All advice is static, but perspective is a dynamic benefit.

I strongly recommend reading "Buffetology" by Mary Buffet and "How to invest
like warren buffett" by (I think) Timothy Vick.

Then spend time learning economics. Economics in one lesson is available free
online, and the Mises institute has regular articles on the state of the
economy: <http://mises.org>

It was from an article on the Mises institute in 2001 that I learned about the
housing bubble. Yes, that is two thousand and one. I was well placed to profit
when the bubble burst.

Here are some basics though: Buy things that are correctly valued where you
have good reason to know they will appreciate. Do not follow the pack. The
pack is wrong. The conventional advice is, generally bad advice.

The US economic situation is in dire straights and to keep things going the
fed is printing money like never before. This is why people are talking about
buying gold. This is pretty much a no-brainer. Inflation is around %20, so by
putting cash into gold you have a %20 return on purchasing power. The reason
people get confused is that they think that the dollar is a constant, but
inflation erods purchasing power and even if it doesn't happen immediately and
everywhere it does happen. Gold, and other precious metals are a good hedge
against inflation.

I've had good experiences in the past buying REIT type assets, in particular,
you can buy Canadian Trusts that pay out a royalty based on the exploitation
of mineral or oil or natural gas leases and wells. A good one of these would
be one that is growing reserves while still paying a good royalty. Back when I
was doing this, I was getting %5-%10 return, on top of stock price
appreciation on top of a %5-%10 annualized growth in value due to the dollar
slipping against the canadian dollar.

On currencies, generally countries with strong commodities based economies
will do well, and countries with economies based on Keynesian "stimulus"
spending will do bad. So, if you do hold cash, try to hold it in currencies
like the Canadian dollar.

Here's a quick economic lesson: Any government "Stimulus" will do more damage
than benefit the economy. The reason for this is the government spends money
poorly, but even if they spent it well, the act of spending does damage
because they are taking the money out of the economy at the place where it
would do the most good for economic growth. Government spending all comes from
taxes and inflation. The tax money is taken out of corporate and individual
profits-- off of the bottom line-- leaving less money for reinvestment and
demand creation, exactly at the point where the demand and jobs are created.
Inflation hurts the same way by driving up ongoing expenses reducing profits
and causing people to have less money to allocate to expansion. Meanwhile the
spending goes to boondoggles that are politically desired and benefit specific
politicians and don't generally have a net positive economic return (They
talked a lot about roads, but only a tiny fraction went to roads and a lot of
that was lost in graft anyway.)

You can buy steady companies that are well run and which trade for less than
their net values-- Aflac and Berkeshire Hathaway are two good examples of
this. I never bought Apple because, while I am an Apple fan it was outside my
area of expertise. I'm an engineer, but I can't predict the fotunes of the
tech industry well enough!

IF someone else is going to manage your money, make it be Warren Buffett, not
some fund manager on wallstreet. (probably the worse deal in the world is a
mutual fund, and this includes index funds that take a percentage of your net
worth for "management" that involves just buying stocks that appear on a list.
You can buy stocks off of a shopping list yourself.)

It is important to recognize that there is a lot of nonsense out there, a lot
of conventional wisdom that has been passed down the generations that started
out as stock brokers sales pitches. Much of the industry is aligned around
choices that are designed to make the people who peddle stocks, etc wealthy.

BTW, bonds are toast, will be killed by inflation and then when yields have to
go up the low yielding bonds we're getting now due to "quantitative easing"
are going to crater.

Oh, and read the Letters to Shareholders in the annual Berkshire Hathaway
reports. Good advice from the best investor in the country. Buffett wont'
advise you to buy commodities, he calls his purchase of silver "a great
mistake"-- which it was only because he sold too soon. But he is good for
general wisdom, and if you do decide to pick stocks, best to understand as
much as you can how he does it.

------
lzw
(This was going to be a response to someone else but figured that it might be
useful as a stand alone comment on the safety of gold vs the safety of cash or
money markets)

Inflation is more than %4, so you're not actually earning anything. Gold, is
pretty steady, so you can dollar cost average in if you think it is at a local
maxima. It benefits from being immune to inflation, plus it is entering into
the bull market phase.

The way I know gold is just beginning its bull market is that your percpetion
that it is "scary" is very common. (and understandable) It will be scary for a
long time before it becomes "a can't lose proposition that everyone has got to
get into!" We are at the "Awareness" phase where it is not uncommon to hear
that you should buy gold.... but it is not a mainstream investment yet.

When it becomes one, and then enters a strong bull market, people who bought
now will benefit greatly from not only the inflation protection, but this
additional demand.

Unfortunately, that mainstreaming and additional demand will cause prices to
go very high, resulting in people advocating it from a momentum basis, which
will cause momentum to accelerate and gold will lift off and become a bubble.

Since we've all just lived thru the housing bubble we should be able to
identify it. That's when you get out (and no need to try and call the top,
getting out early in a bubble is fine... so long as you've identified a
fundamentally undervalued sector to move into.)

~~~
yalurker
I would think the exact opposite of this. Gold, from my perspective, is at
absolute peak hype. You have Glen Beck and a thousand infomercials selling
gold to the most absolute novice of investors at this point. Everybody and
their mom has heard about gold's rise in value recently and "safety" from
every imaginable financial disaster.

Maybe I'm seeing things from a skewed view point, but from where I sit, gold
is the absolute ultra-hyped fad investment right now.

~~~
JoachimSchipper
While I'm by no means an expert, the parent is talking about people actually
buying it (e.g. houses up until very recently), not talking about buying it
(as, he argues, is now the case with gold).

