
Ask HN: How do you invest? - dsutoyo
We invest a lot of time in learning new skills and building new things. But what do hackers do for financial investments?<p>I know we all want our next product to make it big. How do we stay financially responsible in the long run?<p>Do you seek out a financial advisor? Stash cash in savings accounts? Buy GOOG and AMZN stocks? Save money for a house? Eat ramen?
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DerekH
Personally, I invest in individual stocks like Starbucks (companies you think
won't be going away anytime soon). I've tried to think like Warren Buffet. If
you're investing in a company like Gillette, you're asking yourself, "Are men
going to stop shaving?"

That being said, I also put money in more conservative investments like mutual
funds. You can usually set it and forget it. With the markets doing pretty
good the last two years, I think I was able to grow at 10-15%.

I also try not to spend too much of my time reading up on this myself. I pay
Motley Fool for investment advice and follow their thesis. They have a pretty
good track record and they've gained my trust.

It's also important to have no fear. I've known people who lost out on the
recent market gains because they were too scared to buy in at the low point.
Now, they put themselves in the market when it's booming.

I've also played around with Bitcoin, but that was more for fun and I
definitely wasn't planning for the long-term there.

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dsutoyo
Thank you for your insights. I also subscribe to Motley Fool as well and
benefited from it. I tried reading in the past, and you are absolutely
correct, it just either became too consuming and the financial jargons just
became less interesting.

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DerekH
No problem. It's important to take your time and build it up slowly. After
awhile, you'll realize you've put away good money and have made some
substantial gains. If you're lucky, you'll collect a few 10 baggers and maybe
even a 100 bagger in your lifetime. Couple that with a good product and/or a
good job and you'll be pretty secure.

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wikwocket
I believe in the 80% solution. Put your money to work rather than stuffing it
in a mattress, but favor the 80%-of-optimal solution that's easy to set and
forget, instead of the 100%-optimal solution that requires micromanagement,
expertise, and luck.

To that end, keep only a little in savings (emergency fund), and put the rest
in a 401k or IRA, invested in index funds. Index funds are a great 80%
approach, because:

\- They track an index (e.g. S&P 500) which is likely to go up and up in the
long term

\- They are very low cost since they are not actively managed

\- You can watch them every day, or forget about them for two years

\- Warren Buffet recommends them, and he seems to be doing okay

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schoash
what is a good amount for the emergency fund? Is it lie 4 times the monthly
income or even more?

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petervandijck
Depends on your situation. If you have kids and fixed costs, 6-12 times
monthly spend (not income). If you're alone and have more flexibility, 3 times
monthly spend.

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nicholas73
I actively traded stocks for a period. I can say that any gains you make
represent work like any other, except you can lose all your money. If you do
not want to focus on trading, do not trade. It can be a horrible way to live.

Warren Buffett's #1 rule is: Do not lose money. #2: Never forget rule number
one.

What you really learn is that the amount of risk you should take on actually
is a lot less than you think it is. Too much volatility will kill your returns
(Kelly Criterion).

Second is that you shouldn't make an investment unless you just about have
domain level knowledge. You need an edge. Over-trading increases volatility,
which is bad because you lose more than you gain just by laws of percentages.

If I could tell my younger self what to do, I'd tell him to just sit tight.
Hold the money and don't worry. You don't need to invest it all. At some point
there will be a market crash and it will be a no-brainer to buy. Buy then and
hold for long term. And you can hold because you have a cash cushion, and a
price that makes financial sense no matter what (like a good dividend or rent
percentage to invested capital).

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ffumarola
I would agree for the most part with the exception of "At some point there
will be a market crash and it will be a no-brainer to buy."

Timing the market is incredibly difficult. I'd just suggest setting up an
automatic dollar cost averaging scheme into a fund mix of your choice and
ignoring it from that point on. As long as you have a decent enough time
horizon, you'll wind up well ahead.

~~~
nicholas73
I agree and disagree. I think legging into positions is a great way to ensure
lower volatility and is a good for psychological discipline. However market
timing works in the Buffett sense, when you make a purchase that immediately
makes sense no matter (almost) what the asset price does after that. If you
could hold forever, you'd simply make money off the dividends. Like buying a
house - you can't lose due to price fluctuation (barring a ghost town event)
if you planned to make money from rent. But if you bought hoping for capital
appreciation, you could get really hurt.

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jwheeler79
If you're interested in actively managing your own portfolio, for some reason
this isn't mentioned much places, but you need to have a deep understanding of
financial accounting. That will allow you to read and make sense of financial
statements. There is no other way, if you're an active, vs. passive, investor.
Then one easy strategy is to do what Charlie Munger calls, "sit on your ass
investing". That's where you wait for bargains in strong companies to come
along and you swing real big. Diversification is not as important if you know
what you're doing. And you don't have to sit around if the market is fairly
priced, just when it's high. During that time, when you're not doing much
investing, you should be reading, studying, and aspire to get into more
special situations (arbitrage) and look for Ben Graham style net nets with
micro to small cap companies that aren't as popular. Even OTC market value
investing with your own scuttlebutt. There aren't much of those so you have to
see what ratios people substitute for those nowadays. For example, you're not
going to find decent insurance companies selling at less than their working
capital minus total debt. Those used to exist after the Great Depression. Now
you have to find companies say, selling at some higher ratio than what would
have made a decent margin of safety in those days. It can take a long time and
a lot of watching the market, looking at different stats to know what you
should be looking for.

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booop
I was very interested in trading stocks for a while, and would read up a lot
about the markets. I then met a stock broker and he told me that it wouldn't
be very different from gambling if I were to invest based on the news without
much understanding of how the markets work.

One thing he told me really struck a chord: I spend 8 hours a day at work, and
read about the markets in the night or on weekends. But he lives/breathes/eats
the stock markets all day and it's been his full time job for the past several
years. So my money would be safer if he invested it for me instead of doing
myself (unless I had :
[http://en.wikipedia.org/wiki/Dunning%E2%80%93Kruger_effect](http://en.wikipedia.org/wiki/Dunning%E2%80%93Kruger_effect))

So now every month or so he calls me to recommend a stock and explains why I
should invest in it. This let's me use my spare time to develop my skills
(since I'm somewhat early in my career) and I've gotten good returns on my
investments in exchange for a small commission.

~~~
ffumarola
Overall, this is pretty bad advice IMO. Investing in individual stocks, even
at the recommendation of a "professional" is a fools game. You will be hard
pressed to find a "professional" who can routinely and repeatedly beat an
index fund.

Also, "professionals" charge high expense ratios when compared to funds
through Vanguard, Fidelity, etc. A lot of financial advisors stress the
importance of expense ratio as one of the most important facets of your
portfolio.

For the record, I invest in index funds through Vanguard with expense ratios
ranging from .05% to .22%.

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sparkpluglabs
I had tried few different ways to invest and found the "coffeehouse investor"
book to be pretty good guide on how to invest by spending really little time.

Book is really short. But you don't need to buy the book. The website lists
the index funds, the returns over last 20 years and portfolio %. I am mostly
invested in Vangaurd index funds and it has worked out well for me.

[http://www.coffeehouseinvestor.com/coffeehouse-
beans/coffeeh...](http://www.coffeehouseinvestor.com/coffeehouse-
beans/coffeehouse-returns/)

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boot
This is probably, like, a horrible way to do things. But I try to find a
company (1-10 billion market cap) that I personally believe in, but saw-tooths
a lot. I usually check-in once a day and watch it go up and down. I then guess
if I think it is sort of on a crest up or down, then buy or sell accordingly.
And never accept a loss on a trade. Instead just sit on the shares until they
are in the black. And example would be CAVM. I figure it's sort of like
gambling. I don't really know what I'm doing, but it works (so far).

~~~
dsutoyo
I did that before too! Honestly, it did feel like gambling a bit. It worked
until the company one day went bankrupt.

After that I started looking at newsletter service like Motley Fool, but
curious to see if there are other services that people recommend. I have
looked at Personal Capital (iPhone app), but haven't booked a session with
them yet.

Personally, I have been a turned off by financial advisors.

~~~
boot
Bankrupt, ouch.

Yeah, most people don't seem to think very much of this strategy (I'm even
down-voted?), and no one talks about it. But I'm not sure why. I hear about
the crappy 5% a year or whatever returns people get, which just never seems
very good to me. But, idk, maybe I'll lose all my money one day. That's a real
possibility as I spurn most advice I get.

Anyway, Good luck!

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blooberr
The bulk of my money is in index funds. Given my age, it's mostly in equities.

I started off with advice from this article by transferring a bit of my
savings weekly into a target date retirement fund.

[http://www.iwillteachyoutoberich.com/blog/asset-
allocation-i...](http://www.iwillteachyoutoberich.com/blog/asset-allocation-
investor-psychology/)

Today I have other index funds in other sectors, but the asset allocation is
pretty much the same ratio. Hope that helps!

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7402
1/3 in a domestic (U.S.) index fund, 1/3 in an international index fund, 1/3
in CDs, money market funds, savings bonds, or T-notes. Rebalance once a year.
Spend no additional time thinking about any of this.

~~~
ffumarola
This advice should be adjusted given your age / risk tolerance. 1/3 in cash
equivalents is a bit conservative for a 20 or 30 something, for example.

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creativeone
Buy rental properties across the nation, try to earn 10-15% annual return on
rents after expenses, plus appreciation in the long run.

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a3voices
The bulk of my money is in Bitcoin.

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meowface
In case you're not joking: This is a bad idea.

Though I admit it might work out well. If you're lucky.

