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Ask HN: How do you invest your money? Is it too late for small time investors?
26 points by akudha 6 days ago | hide | past | favorite | 36 comments
Especially for small time investors (not those making millions or even multiple 6 figures a year), is it too late to get into stocks? It feels as if all stocks are overvalued, some (like Tesla) insanely so.

Keeping money in the bank (especially in the US) is just dumb. What does one do then?

No, stocks aren't overvalued on the timeline of your retirement. There will probably be at least one contraction before you retire, and there may be more than one. It might be tomorrow; it might not be for another ten years. If you stay out of the market, you never get those years back.


Invest in low-cost, broad-market index funds like VT (== VTWAX) or a low-cost, appropriate timeline target-date fund.

I'm investing in myself. Healthy food, gym membership, great experiences and memories, courses etc. Basically everything that makes my life easier and more enjoyable.

That’s great! One could invest both in funds and in oneself, there’s no contradiction there really :)

I agree with this the most. What's the point of having millions upon retirement if you had to live like a pauper with sad memories while you did it?

I messed up a lot of my post high school years. Now I'm trying to revitalize it since I'm financially behind by a lot compared to others portfolios my age. But I figure having a more interesting life will garner me a more positive outlook throughout the bad times.

Right now, many US stocks are overvalued and are at high risk for a correction within the next few years. Using historical averages for the last 20 years, the CAPE ratio for the US market is projecting returns to be only -3% to +3% for the next decade. Interest rates at are an all time low though, which may push expected returns up a bit from those numbers, but interest rates probably won't stay low forever. US index funds are a risky play right now.

Not all stocks are overvalued though. Look into buying value stocks that pay large dividends. Unsexy REITs, tobacco, bank stocks might be worth looking into again, as well as international or emerging market ETFs.

Bitcoin looks over-sold right now, but gold is relatively cheap as a hedge against inflation. The Fed pumping huge amounts of money into the economy will eventually lead to inflation. It might take a while though, since people need to be able to spend that money for inflation to happen. Various lock downs around the world are preventing this from happening, currently. If you're patient, I think gold and other commodities (Uranium possibly) are going to do well over the next few years. I think there are a lot of people buying Bitcoin as speculation and as soon as you have numbers go red, there might be a mass sell-off and switch to gold. The last Bitcoin halving event was just this past May which usually leads to surge in price as mining becomes more affordable, but as with other cycles, miners may start selling (since you can't yet pay bills with it) and prices will go down again until the next halving cycle.

To put things into perspective though: Aside from owning property, I'm about 5% REIT, 5% Gold, 20% Canadian index ETF (Canadian here), 30% international index ETFs, 10% US value stocks, 20% bonds, 10% cash.

I am not a financial advisor, please do your own DD.

> Bitcoin looks over-sold right now

Loads of talk for crypto for years now. They yet unproven, and it seems its more about speculation than use at the moment with very little high street economic use.

Im mixed as it seems the future....because tech, but also consider governments use localised currency to profit + control economies.

And currency by nation actually adds a really good buffer to shifting world economies, monetary policy, debt payment etc and could cause serious issues if bitcoin became the global trade currency. There is a reason we dont all use USD, and you see how failing nations actively fight their economies from using USD or another nations currency.

Why would the world governments then allow bitcoin or other? Maybe cause it gets too big and cant be stopped without annoying voters? Maybe there is some failed state event with major nations and people rush to it? But assuming the world continues along within reasonable ups/downs, why would people you move to bitcoin as day-to-day from a practical sense and why would governments not strongly resist this?

Apologies if overdone topic but curious why people believe in the fundamental of use vs speculative price growth.

You can move value between two parties without a third party allowing you to do it. That's the proof. Whether you value that or not is not important.

> US index funds are a risky play right now.


Because of the historical high cyclically-adjusted price to earnings ratio (CAPE) of the US market [1]. I agree that historically low interest rates counter part of this argument, but overall, I still think there will be a reversion to the mean. Nobody knows if it'll be a sharp correction, or if prices will stagnate until earnings catch up.

Maybe I shouldn't have said risky. You're right that if retirement is a while away, you can continue not timing the market and you'll be okay. However, if you want to be more aggressive, it might be smart to sell some of the gains you've made in the US market thus far and allocate more to emerging market ETFs with more upside.

Using the CAPE ratio to project estimated returns has shown to be fairly accurate from 1995 to now [2]. There's no guarantee it'll continue to be true, but I think there's more upside to international equities for the next decade right now.

[1] https://www.starcapital.de/en/research/stock-market-valuatio...

[2] https://www.advisorperspectives.com/articles/2020/07/20/the-...

For me the recipe is simple: Buy index funds every month. Keep doing that for decades. It doesn’t need to be harder than that.

(If you live in the US, you probably want ETFs from Vanguard.)

Any particular fund that you can recommend? (I am googling, of course)

This site is probably a good starting point: https://www.bogleheads.org/

But it also depends on your locale. I live in Sweden so the particular funds I buy are probably not available in your market.

The funds I personally buy follows ”MSCI World (Net Total Return)” and ”SIX30 Return Index”. The latter has no currency risk for me since my currency is SEK.


https://old.reddit.com/r/personalfinance/ is probably worth looking into as well.

Best of luck!

Vti, vtsax

This comment is not trading advise.

There are some opportunities out there. While many industries have recovered close to pre-Covid levels, some have not. For example British aviation companies which have been hit by the double-whammy of Covid and Brexit might be good investments.

On the other hand, you can make money when markets go down. Although this is a bit riskier / harder to time, it is still possible.


* This comment of mine intrigued me to perform some more research ... and so I spent the last couple of hours researching Rolls Royce and BAE Systems.

* I'm more bullish on Rolls Royce, and here's why: https://srirangan.net/2021-02-rolls-royce-stock-analysis.htm...

The general consensus even from airline companies is that airlines will never recover because business travel has changed forever.

Maybe. But freight and unmanned flight will boom. And, this is not even considering military usage.

Let's take some examples, BAE Systems or Rolls Royce. They make engines, flight components and are OEMs in the commercial and military supply chain. Their stock prices are at historical lows, and I am bullish on them not in the near term, but say 3-5 years time, it will be interesting.

Short term things get interesting because of the low stock price. They can be acquisition targets, especially for countries that are seeking this tech.

For me, attempting to time the market has never felt even slightly interesting. (YMMV.) I just buy index funds. I have considered buying some AAPL – not because I believe the timing is good or bad, I simply believe in their business.

Look into target mutual funds. They meet the retirement investment needs of many people who don't have the time or inclination to do a lot of research or active trading.


>>> Keeping money in the bank (especially in the US) is just dumb

I don't think holding cash is dumb. You get the freedom of timing when opportunity presents itself.

The question with cash is: How to get significant yield (>4%) for your savings risk free? DeFi carries risks that simply aren't present in traditional asset classes. Popular "annuity" products providing downside insurance typically have onerous conditions. Physical Gold is subject to cultural shifts (as well as theft). Real estate is a full time responsibility. My bias is to raw acreage. Passing it down generation to generation ad infinitum.

There is no magic bullet. But I think the idea of an energy-backed currency is the future. Think: Wyoming ranchers leasing to wind harvesters.

I hope it doesn't turn you off, but you need to study a lot before you start investing in my opinion. I mean, you can do it, but you will likely lose money.

Buy a good investment book where you learn at least the different kinds of asset classes. The importance about diversification and basic accounting so you can at least listen to a results call and comprehend what is going on.

The US stocks are "expensive" because people are bullish in the future of those companies, much of it is based on growth.

There are a lot of neglected US stocks, out of all of those stocks you have a few tech stocks, Tesla etc that the market is definitely pricing it high because they have high expectations of it.

There are also other countries markets which I believe you can invest from the US, usually third world countries have the best opportunities, but if you aren't willing to study much about the country, political landscape etc, you will lose money.

Investing is a lot like an information game, where you need to study a lot to get a good picture of it, and might make mistakes nevertheless, because you didn't know something important.

If you don't want to do all of this, I'd advise you either pay somebody to do it for you, like in a mutual fund, or buy the index. But know it can be bad as well. Maybe having some money in the bank doesn't look too bad after all :-)

I started investing and saving for retirement in mid 2015, and the most I’ve made was just over 60k/yr.

Got about 50% total return since then (121k purchase & 61k return 183ish total). Mostly in VTSAX but the thing is, in late March 2020 I was negative returns, the market really does fluctuate and it is important to not act irrationally. Now it’s 50ish percent return since then.

Now the long game here is that based on my age I only had to put money into retirement for like 5-6years (employer match 401k + Roth contributions) now this will just be left until retirement in 30-40 years assuming the current approximate interest rate of 7-8%year inflation adjusted.

So yeah, just buy as much VTSAX and let it sit for decades. If that doesn’t work the economy of the United States is broken and you have bigger problems to worry about.

You're trying to time the market. Using a long term investment horizon this is generally a bad thing to do.

If you are investing on the short term, your instinct is correct that stocks are overvalued right now. For the S&P, the all-time historical CAPE mean (a ratio of price to inflation-adjusted earnings average) is 16.78, and we closed last week at an estimated 35.58. This is the second highest CAPE in stock market history. In other words, the market can be said to be 2x overvalued compared to what we would expect it to be based on earnings. To return to the mean, earnings need to double or prices need to halve.

If you're investing for a decades-away retirement, it's always fine to jump in at any time. My allocation is simple: 100% total international stock (I used to be 50/50 US/international but I'm accounting for US CAPE right now). I only plan to diversify out of stocks in the far future. I am diversifying across time.

- Invest majority of saving in low cost ETF/Index fund following dollar cost averaging - Keep a small part for bets on companies you like and believe in their business - Don't act emotionally, buy and hold.

Follow : https://twitter.com/BrianFeroldi and read "The Psychology of Money" book.

This is a subjective question, but I'll summarize what I know.

-no one can give you this advice, you have to listen and learn to discern the best decisions for yourself.

-investing is a full time job, 99% of investors will be better off not investing the time in valuing and picking stocks.

-less is more - the serious equity investors have 10-20 stock picks, and confidence in their analysis

-if it's in the media, it's being hyped, and often you're buying the uptick

-investing in yourself (certifications, your business) will have the greatest return on investment.

-don't time the market, compounding interest requires your stay in the market (I can't stop this myself, and missed the 2020 asset price bull/inflation? run)

-the easiest strategy and what I plan to move to myself is monthly dollar cost averaging of an index stock purchase, buy & hold (idea being - your time is the most valueable commodity you have)

-if you want some excitement on top of that boring strategy have 5-10% of your investments in stock picks you think are in the money long term.

-learn about the concept of "Mr. Market": the price you see is the perceived value, or the actual value +/- perceived future cash flows.

-buy a stock because you like the business and its prospects, not because you think you'll be able to sell it for more later and you'll pick better stocks. Businesses produce cash flows, and that's what you want to buy into.

-have a margin of safety.

-think for yourself, write down your stock thesis, and revisit it later - if you don't - you'll never improve without the feedback

-currency speculation is just that: speculation. Bitcoin & anything without an actual cash flow is controversial right now but it's a mix of a virtual land grab and currency speculation.

a couple resources: The Intelligent Investor -Ben Graham (Buffett's Bible)

The Little Book that beats the Market -Greenblatt

intangibles regarding wealth: The Algebra of Wealth -Galloway https://www.youtube.com/watch?v=uNrjrDV9-YQ

Oh and investopedia has a neat stock simulator if you want to speculate

Read a lot of books, start with Intelligent Investor, but also learn active trading ideas. Remember most people are selling snake oil when it comes to trading courses. Just stick with cheap books with a lot of reviews/sales. Hopefully, after a lot of reading, you will have more confidence in investing and/or trading.

I just put everything in SPY and ARKK.

It was a great time to buy in March/April, literally anything. What did you do then?

I’d analyze that first before anything else!

His math and sentiment is correct. In real life, if he tells Bob to invest all his investment saving in an index fund with less than 5 years before retirement (all his investment at this point will be 100% allocated to stocks), Ben should lose whatever license he holds.

Read the article again.

"Second, he allowed his investments to compound through the decades by never selling out of the market over his 40+ years of investing. He gave himself a really long runway."

I don't think you get my point, but that's OK. Ben's example is wrong because he's suggesting someone to hold 100% equity all the way up to the end, which is wrong in most cases.

"Obviously, this story was for illustrative purposes and I wouldn’t recommend a portfolio consisting of 100% in stocks of a single market in the S&P 500 unless you have an extremely high risk tolerance. Even then a more balanced portfolio in different global markets with a sound rebalancing policy makes much more sense."

I think you are being argumentative at this point.

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