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Show HN: Making passive investing safer and better for everyone (altsat.net)
5 points by SirLJ on May 23, 2023 | hide | past | favorite | 31 comments
Dear Friends, my name is LJ and I am the Master of the Universe at Alternative Systems and Really Wild Technologies. We are changing the world by making Passive Investing Safer and Better for all everyone!

It all began with my poor investment choices like diversified portfolio of mutual funds, pretty much investing equally in the 5 mutual funds available through my employer and the life and science fund did great for a bit before the dot com crash :-)

Not long after, I changed jobs and had to sell the funds, because in kind transfer was not possible with the new employer and lost most of the money.

It was scarring experience, so I stayed in money market funds and missed the market upside.

Few years latter, another job, another pension plan and this time I was determined not to make the same mistakes.

Everyone is saying Passive Investing is the best for the average investor, but they never tell you what index fund to buy and more importantly when exactly.

Just holding an index fund for the long term can be actually a mistake and if you’re in the wrong index at the wrong time, it can take you 5, 10, or even 15 years just to break even…

In last 20 years or so, we had 2 major black swan events resulting in two 50% drawdowns and this is very important to avoid, because the market might remain under water for very long period of time.

It gets even worse at the bottom of a recession, people lose jobs and needs the funds to survive and if down already 50% and take half of the rest to live off until the next job, there is no coming back: if you are down 75%, you will need 300% gain to break even, 80% loss will need 400% gain, etc…

You can check the Research tab on the website [1], but basically the model delivers the same returns compared with Buy and Hold, but cutting the drawdown by half: worst draw down 23.83% vs 56.48% for the buy and hold model, which means you need less than 33% gain to break even vs more than 122% gain needed to break even with the Buy and Hold Model

Not long ago while speaking with friends and co-workers about the way I invest, it actually donned on me that this can be an actual company, as I have the backend already up and running for years, I just put together this simple website and I am applying to YC and hopping to create a company that can truly change the way people are investing for the long run.

How it works is the systems sends an email advising every Friday after the market close advising to be either in Cash or invested in any low cost S&P tracking 500 ETF / mutual fund / employer provided fund.

I know long term and passive investing is boring and in this model the average portfolio change happens once a year, so from the Startup School, I got the idea on how to get people more engaged – with the “Make Money with Us” feature, basically you get 50% referral commission every month on every user you bring along. This way you can spread the word to all your friends and show them how it invest better and also offset the subscription costs: you get 2 users to sign and the subscription is free and if 10 users, you can generate $1200 per year real passive income to help you start investing if you do not have the spare cash to do so…

Please take a look and let me know what do you think, what do you like, don’t like, and please share any feedback, ideas, recommendations, etc , it will be greatly appreciated, so we can make the product batter and more useful for everyone. I have applied to YC and plan to reapply if not selected, but what other accelerators should I apply to? PearX, Afore Capital, etc, what else? I am also looking for a growth/marketing/sales co-founder, so any idea where I can find one?

Please note, this is the short version, because of the characters limit, the original is here [2]

Special Thanks to dang for his time, great advice and all help with this!

Thank you, LJ

[1] https://www.altsat.net/research

[2] https://www.altsat.net/about




This is either a grift, or obscenely naive.

First, the 50% referral commission isn't "passive income". You're going to have to constantly hustle to find new subscribers as your existing subscribers cancel their income. It also feels somewhat predatory in a pyramid-schemey way, in that you end up juicing your social network for some quick cash. I get that people throw around the "passive income" buzzword a lot, so you might just be trying to draft off that, but this is a _stretch_.

Second, if OP could reliably determine if the market is going to do well or poorly over the weekend, they could just buy a bunch of near-expiry options every Friday, and then retire with a hideous amount of wealth in, like, a year. If they could do this for, like, a bigger time horizon? With very little creativity OP could become incredibly rich, no need to sell $20 newsletter subscriptions.

Finally, reading through the site, it just _reads_ like a grift. Poor grammar aside, it just seems like it's full of a bunch of empty assurances, scary stories about market crashes, and generic cliches.

Honestly, the biggest indication this isn't a grift and is instead just really naive is the fact that it's a terrible model for a grift - subscribers will figure out that the suggestions aren't valuable and cancel their subscription before shelling out much money.

This stuff rubs me the wrong way. People (I would call them victims) will take this advice and screw stuff up - potentially missing big upswings only to buy in before a downswing - and OP won't share any of their pain.


Hello and thank you for coming to the conclusion that is not a grift as this is not my intention.

I am going through Startup School as well as listening to the podcast, so the idea for the referrals came from some of some of the lectures and examples there...

Please note, I am not trying to determine where the market will go over one weekend, the idea of getting the email on Friday is that if you have to change something (again changes happen once per year on average), so sill have the whole weekend to make the change and honestly even if you make the change one week later it won’t mater much in the grand scheme of things...

Yes, maybe I am naive, and yes, the website was hastily put together following the advice to launch something, and since this is my first startup idea, any advice or suggestion will be welcome.


> I am the Master of the Universe at Alternative Systems and Really Wild Technologies

One person's perspective - you're talking about financial investment, but I can't really take you seriously. Those two things don't go very well together.


Thanks Jason, point taken, should dial down the jokes or even remove them all together...


Definitely remove them altogether.

Or you can always add crypto and keep the gravy train (and the “lulz”) rolling.


Yes, will take out the jokes and the The Hitchhiker's Guide to the Galaxy references from the website. All jokes aside this model might work for Crypto as well, the only problem is that Crypto has been around only for the last market cycle and I don't know how it will work during a 50% market downturn and I always want to test during at least few major calamities to know what is happening...


The advice for which index fund is pretty consistent. It used to be S&P500 index fund but it is now all-market fund or even all-international-market fund. But they are all fine with minimal differences.

The answer to when is always. Avoiding downturns is timing the market, it can't be done reliably. It is worse to mistime the market than to stay in. That is basic principle of passive investing.

Trading between cash or mutual fund is not passive investing but active. My feeling is that investing emails will be low cost to send out but will be high support. If you have better strategy, make your own mutual fund.


I will agree to disagree on this one with you, as I think the passive investing is an active decision by itself... Mutual fund is actually a good idea to be created maybe down the line when/if the company grows big enough... Thank you for taking the time and commenting!


> Everyone is saying Passive Investing is the best for the average investor, but they never tell you what index fund to buy and more importantly when exactly.

Yes they do. A Random Walk down Wall street is 50 years old. The answer is the broadest lowest expense fund. For most of us that's the S&P Total Market or S&P 500 (typically vanguard for expenses because it's a mutually owned company)


In my opinion, this will work only, if you have enough money so you don't have to get money out of the investment at the bottom of the downturn...


Well, yeah, you're not supposed to invest money you expect to need in the short term.


Agreed, but life happens, jobs lost, family emergencies, etc..


Are you sure about your numbers or did you only back-test your assumptions?

Scaling a trading strategy is quite difficult even with ETFs. If you trade futures which have a huge daily liability then it gets so much worse and options even worse. (Regarding back testing assumption to be filled and scaling).

If you can scale your strategy reliably then you wouldn't ask others to buy in. Any margin account is enough, except if you must outsource risks.

With IVRank and ImpliedVolatility% (I just use black sholes but compare it to your model) being at low bottom and a huge expected change of rho (interest free rate) which me and the markets seem to be unable to price.... what vehicles would you even use to monetize these events (Futures and options don't need to consider rho changes too much if traded in the vicinity if the VIX indicator how can you promise more)?


To clarify I am asking in all honesty and positive reflection because I feel quite lost in this market.


Hello and thank you for taking the time.

This particular model I have been using exclusively since 2016 and earlier version since about 2009, everything is back tested as well back to 1928.

My experience with margin accounts is a bit different, using Interactive brokers, when the market goes down, they will sell part of your holdings (SPY for example) to maintain their Margin requirements, so I stay away from margin, worst is to get part of your portfolio liquidated close to the bottom… The other option is taking a credit, but with the interest rates today, also not a great option, also those 2 options are not available when investing with employer provided investing options…

I agree that the current interest rates are making Buy and Hold not very attractive, but still, I have to invest somewhere and my model is not about beating the market, but making it safer by moving in cash before the bottom and reducing the drown downs by 50%


> Everyone is saying Passive Investing is the best for the average investor, but they never tell you what index fund to buy and more importantly when exactly.

https://www.bogleheads.org/wiki/Getting_started

EDIT: Bogle's main problem with ETFs is that they allow people to get in and out of the market during the day, lending more towards speculation/day trading than long-term investing. With mutual funds, you can only buy at the end-of-day prices instead of the many prices available during the day.

TLDR Less trading is better. You dollar cost average into broad low expense ratio funds, and you will (very likely) end up wealthier in the future.


The irony is that Jack Bogle was against ETFs in general and against the exact idea I am proposing here...


Because your idea makes no sense, to be frank. The tax inefficiency alone would be absurd.


can you please elaboration the tax inefficiency, if possible?


If you don’t see how this strategy is tax inefficient then you have no business doing this.


Still, if you please take a moment to share how a strategy with one change per year is tax inefficient and how it can be made better, I and I would assume everyone else here would like to hear it... Thank you.


> Not long after, I changed jobs and had to sell the funds, because in kind transfer was not possible with the new employer and lost most of the money.

This doesn't compute, all of the funds should have cash settled and been transferrable to a new account.


Sorry, rereading this I think I didn't explain properly: if there was in kind transfer, maybe I would have transferred and hang to the investments, but the option was to cash out and I just took the money and did not reinvest it. The loss is that I did cash out near the bottom and lost most of the investments. Hope this helps and makes it clear...


Naive question, but if you are switching every friday between hold and money, assuming you are already holding, why not switching between leveraged puts/calls then?


Hello and please note, you are getting the email weekly, but the actual switch happens on average once a year with maximum of 4 switches in 2010. Some years there was no switching at all... Thanks a lot for the question and sorry, I guess I did not explain this more clearly...


Well, if the model is 51% correct, and your client matches "extreme risk" profile... would you recommend leveraged put/calls? Hypothetically.


I have not tested this, so I cannot recommend it one way or another, but I am taking notes and will test it in the future... Thanks a lot for the interest and the idea.


With all due respect, you are barking up the wrong tree.

Fundamentally, anything exposed to the stock market is no longer a real investment. Here is why, there are mechanics using options contracts to facilitate the market-maker manipulating the security price either up or down just to prevent a loss. It has to do with how double legged contracts are handled at the market-maker level. Its different than at the individual level (market makers can make synthetic shares).

This allows attacks on companies regardless of their actual fundamentals, where the market-maker takes up the risk as part of its normal operations, and then when a well timed media package is dropped, the market maker ends up holding the bag which usually involves them no longer delta-hedging and having to buy at the market price and it swinging up, or writing and rolling out contracts further out in time (and getting preferential treatment by OCC during clearing of companies placed in receivership). A combination of this mechanic, well timed news package, and shorting allows more shares to be sold than are actually in existence.

The market mechanics say there is only one direction you can go when there are more sellers than buyers. These mechanics ensure there can always be more sellers than buyers simply by purchasing a large number of options contracts. The buying of the contracts is one step removed, but it forces the market maker all the same when its a sufficiently large number of orders.

There are also loopholes in financial reporting that materially misreport the actual financial state of companies, which you never find out until you are out the money. For example bond ETFs don't have to report changes in value related to the underlying asset if they intend to hold it to maturity. Its up to them to decide whether you need this information for you.

No amount of due dilligence will prepare you against these counterparty-risk outcomes that inevitably lose your life savings. It hasn't happened to me, but it has happened to family members who now no longer have retirements to fall back on.

Index funds for passive investing are also at the mercy of the index's rules. For example, look at what happened with Gamestop, Tesla, and a few others whose price managed to hold steady long enough for the weighted indexes to rebalance (S&P 500, Russel, etc).

Gamestop fundamentally does not have solid fundamentals to warrant their stock price, and who is subsidizing that? The index fund holders whose rules say they need to rebalance to a weighted amount every term based on price.

Anything with stock market exposure presents un-mitigatable counterparty risk. If a bank can go under (FRC) without any policing action taken, anything is fair game.

The private market (stock market) now is just a slot machine, and the Casino house always wins. Why should you trust your life savings to crooks?

If the market structure were going to change for the better, it would have happened by now, and instead we are seeing repeats of designed and structured events that result in loss to the general public in a plausible way. The stock market is risky after all, but how many financial advisors do you know actually warn their clients specifically about these shortcoming?

None that I know, that makes the vast majority of people in this space crooks. Its their job to know and educate their clients about specific risks, and they don't because if they did they'd be out of a job. Moral hazard.

I'm not a financial advisor, but I am a savvy investor who has done reasonably well considering, I have seen nothing that addresses these issues.

Make no mistake, participating in the market in the first place is ethically tainting even if you don't know about this stuff. Ignorance is not a defense.

All in all, the market is nothing more than a clever way to steal money, and that's about it. No real price discovery happens.

Incidentally, you can also artificially control pricing using the same mechanics.

If you think that isn't the case, you may want to examine counter-party risk for a non-independently audited COMEX, who disclaims responsibility for reported (eligible) contracts that get exchanged between the major players in a net-0 delta hedge, which spot prices may be based off.

Standard Disclaimer: This isn't financial advice, this has been my experience.


This is interesting viewpoint and thanks for taking the time and sharing... what would you suggest someone do with some extra money? Maybe I can build and run a model on that idea as I always look for new investment ideas...


While nothing is without risks, generally speaking investing in private business that produce actual goods where the supply chain is stable, or real estate so long as it continues to enjoy its advantageous tax loopholes. Those are the only comparable things that currently have a rate of return on inflation that I've found that come to mind with manageable risk assuming proper due dilligence.

Real estate requires a certain level of income to take advantage of those tax loopholes in the first place. Its also still at the height of the market, so opportunities will be coming available as that bubble deflates but you generally don't want to catch a falling knife. I'm personally expecting about a 15% correction, factoring in a minimum of 12% inflation over the next several years based on the 1983 methodology for calculating inflation.

Business risk due to inflation is going to become problematic if you can't control input cost. The operating budgets for many businesses also typically are funded on a variable interest rate loan which will stress many businesses which may present some opportunities in the near future.

Most budgets I've seen have not been factoring in the rate of inflation, but with two years of excessively high inflation and more expected in the future, anyone that knows what they are doing will be factoring this into their prices moving forward for the near term.

Edit: Regarding computational models (AI) and investing, they really aren't a good fit for a lot of things, primarily because there is no determinism properties (system's theory). Any time you have inputs with multiple potential outcomes, this property breaks; and Automata & CS Computation theory say computers will never be able to solve these fundamentally due to the halting or decidability problems. Anywhere human psychology plays a significant role in the outcome, you often have these issues which may not be immediately visible.

Approximations can be made, but there is no guarantee they will be accurate. You also can run into synchronization issues when you have many interconnecting systems (i.e. Dragon King Events).

Standard Disclaimer, not financial advice or accounting advice.


yep, those ideas will be hard to model indeed...




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