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The advice I give to people on here is generally upvoted, except when it comes to investing. If you're in the top 1% or 0.1% intellectually and you're active in

The advice I give to people on here is generally upvoted, except when it comes to investing. If you're in the top 1% or 0.1% intellectually and you're active in the tech community as a software developer or other highly technical skill you are very well situated to beat the market. Pick any decade where this wasn't true. In the 90s it was buying web domains or investing in personal computer companies. In the 2000s it was investing in platforms and social networks or even just building a company in the mobile space. In the 10s it was cryptocurrencies and AI. All of these things were obvious and even if you didn't get in at the very ground floor (buying sex.com or 50 bitcoins for a dollar) you still make hyper, hyper gains. 100000% returns? Totally possible. Now go on and take all that knowledge you hard fought for at MIT, Stanford, Harvard, or Waterloo (or even on your own!) and use it too... Invest in low fee ETFs. Great plan guys.

badestrand 9y ago
> The advice I give to people on here is generally upvoted, except when it comes to investing Maybe it is because your advice only goes to 0.0X% of all people, as you state yourself?
- hoschicz 9y ago
  Many of the people studying Stanford are the 1 % of people.
jeffwass 9y ago
You have great advice with the benefit of hindsight. So what's your suggestion for the "obvious" investment today?
- Spooky23 9y ago
  Look at sectors that benefit from the political environment. Things like pharmaceuticals with ok pipelines, good companies in shitty sectors (say a company like Costco in retail), health insurers and companies like McDonald's that do well when the rest of the world does not. Think about smaller players who benefit from net neutrality going away. You should have a running list of good companies and invest as you see corrections or downturns.
  - mdorazio 9y ago
    This is not at all like what the parent post implied. You're basically saying to pick sectors/companies that will net a slightly better than market rate of return on average. Which is great. However, this is very far from a 10000x return on true outliers, long shots, and market bubbles.
    - vostok 9y ago
      Not that it matters, but 100000% is 1000x. This isn't investment advice. I think the idea is that you'll have some investments that yield 1000x and some that yield 0x so you'll average out to something that's better than the market, but not 1000x.
      - mdorazio 9y ago
        I agree. However, the original question was more like, "if it's easy to see what will yield a huge return, what should I invest in today to get that return?" To me, it's pretty clear that investments yielding huge returns are only obvious in hindsight, and even an astute tech-savvy investor will, on average, only do slightly better than a normal diversified portfolio.
        Spooky23 9y ago
        Those two statements don’t jive. It’s not impossible to trade hours for a return significantly better than a normal diversified portfolio, but less than being an early bitcoin miner.
        mdorazio 9y ago
        No, but it is unlikely. Hence the "average" part. Also, if we're talking about trading hours we're effectively talking about working rather than investing. Of course you can make more than a market return if you spend your free time consulting on the side, for example, but that's not really comparable to spending 5 minutes buying bitcoin or Tesla stock in 2011.
- 3pt14159 9y ago
  I've been commenting on here for almost 10 years. I've been wrong sometimes, but I've called a lot right (from Tesla, Apple, Facebook, Bitcoin, AI). Next decade is going to be cyber security and a word that I doesn't exist yet that I think of as "personification" of the internet. Combination of webs of trust and machine learning to both shape tastes and politics and harden networks from their shaping. Also, I think there is a pretty good chance that biology takes off, starting with GATACA or something like it for dogs. People want old scratch to live forever and not get hip dysplasia, and once old doggo is doing fine with Gene Drive then we're not going to be far off. Also, people are much more comfortable thinking with graphs of data. Think about tying together graphs that we can use to make predictions and watch companies like meta.com (bought by Zuck, that guy is a genius) and researchgate.net. Also get ready for mass protests and "eat the rich" politics. Especially in America where the poor are poorly educated and the political system is corrupt enough to be evil enough to not support the poor, but not corrupt enough to collapse the private sector.
  - beambot 9y ago
    So... Which investments specifically?
  - blahshaw 9y ago
    I think cyber security is going to be huge too, but not sure how to make a play on it, don't see any obvious winners in the security space. What approach do you take?
    - 3pt14159 9y ago
      If you're not in the position to angel invest I don't have anything top of mind to share. I think most of the stock market is overpriced, but Facebook is still probably a reasonable bet. If I knew the next Bitcoin I'd definitely have typed it out. Sometimes the answer is to just wait and see and let your thoughts kinda work through things. What I know for sure is that there are a lot of powerful people that found out how important cyber security is in the past couple years. Snowden, Clinton, Paradise Papers. The market will do its best to try to meet this need.
- whataretensors 9y ago
  Invest in self driving startups. Oh wait you can't, thanks SEC.
Spooky23 9y ago
Don't take it to heart -- people are intimidated by finance. Engineers like a scope-defined problem set and finance doesn't work with them. IMO, do the boglehead thing for 80-90% and play with 10-20%. If you spend some time on it and educate yourself, that play portfolio will often beat the Vanguard strategy. If you lose, you're not dead.
icedchai 9y ago
This is only "obvious" in hindsight. To make those gains, you need to time things very well. I do both. I put the majority of my funds into low fee ETFs. I keep another 20% for higher risk investments.
- marvin 9y ago
  What do you do if a high-risk investment suddenly balloons to become much more than 20% of your total investments? When do you choose to jump off the potential 10000x return and rebalance, if this has ever happened to you? (And the next time you make a 20% bet, is it 20% of the new total, or 20% of your traditional portfolio?)
  - icedchai 9y ago
    I've had this happen with Bitcoin. It is a tough decision to make. I have decided that I don't want any single high risk investment to consist of more than 10% of my networth, so I sell some to compensate. Is that the right number? I don't know...
    - marvin 9y ago
      If it was me, I would sell enough to have received a gain of 2-3x my cost basis even if the rest becomes worthless, and then just leave the rest alone unless there is a compelling reason to sell. If you aren't open to _receiving_ the truly outrageous returns that black swan-type events might cause, there is no sense in making bets for black swans. You do need to be a good sleeper to do this though. The other criterion I'd use is that if one of my risky bets has returned enough money that I could likely retire from it (i.e. >25x annual expenses), I would sell enough to be capable of doing that. That's such a monumental quality of living change that it's not worth it to keep the same level of risk.
      - Procrastes 9y ago
        This. That's pretty much exactly what I did, although it was more like 800x because bitcoin. It gave me quite a bit of peace of mind to know that even if I was wrong, I was wrong in a very reasonable way and not completely out of the game.
lmm 9y ago
I'm a smart guy with a good degree. I still wouldn't represent myself in a court, or diagnose my own medical ailments, or file my own accounts. Why would I think I could pick stocks better than a professional?
- mwexler 9y ago
  Because if you can pick an index fund with low fees, you are already beating most professional stock pickers. Yes, you may find the one or a few active investors who are amazing, but unlike law or medicine, there is a fallback option that is consistently successful in both short and long term compared to most stock picking, even professional. Note that you may all lose if the market goes against you, even active stock folks with lots of "hedges against the downside" and whatnot.
  - BHSPitMonkey 9y ago
    I don't think index funds are what the parent meant by "picking stocks". Going with a fund, even an index fund, is still a form of delegating the low-level work to financial professionals.
  - emodendroket 9y ago
    Isn't that the point? Professionals can't do it but for engineers it's supposed to be a cakewalk?
- hiram112 9y ago
  Because professional is a somewhat nebulous term when it comes to finance. I do think that there are some firms, who cater to mostly very wealthy clients, who can consistently beat the market, or at least have a good chance of finding some niche or anomaly every few years for a huge jackpot such that their overall average is higher than the indexes. The problem is that most of us won't have access to these people. Instead, our professional is going to be the typical financial planner who has far less of an understanding of math than even the typical CS / engineer grad, and is basically a commissioned sales person who will take 5% off the top, plus another 2% a year - all for basically investing it in the same index funds you can now buy yourself with a Schwab or Vanguard account.
adamsea 9y ago
> If you're in the top 1% or 0.1% intellectually How are you measuring this? Are you equating being at an elite institution or have a (currently) rare and valuable skillset with intellect? And/or are you reducing 'intellect' in this post to only mean logical/mathematical prowess?
- marvin 9y ago
  A relatively high proportion of students at elite schools will be in the top 1% of the IQ distribution (and the same is probably true of HN contributors), but I don't think you have to interpret this literally for GP's post to be clear. Intellect, like driving skill, can be measured along enough axes that more than 1% can be in the top 1%.
wefarrell 9y ago
All of the examples that you cite are speculative in nature and to be a successful speculator you need to know when to exit. For example, personal computer companies were a great bet in the mid 90s but a terrible bet in the 2000s. So my question to you is how will you know when it's time to sell cryptocurrencies? Is there a particular methodology that you're using?
- 3pt14159 9y ago
  Well the answer is that I underperform what could have been optimal. That means I sold most of my bitcoins between $200 and $1000 USD. Sure it hurts, but I still have some. I got out of the stock market in 2006 because I thought it was overpriced too. I'm the type of person that looks at fundamentals / physics and I get in and out early. Bitcoin might be going to $50k a coin, but I bought at $3 USD and I still have a small amount. I still think the governments are going to ban it, but having a bit of exposure is averaging the risk.
  - marvin 9y ago
    Getting out of the stock market in 2006 is not bad as far as market timing goes.
    - secabeen 9y ago
      True, but staying out as the market continued to rise into 2007 was probably really hard.
  - sp527 9y ago
    Why do you think it’ll make it as far as governments banning it? I suppose it depends on whether it’s a reaction to laundering or tax losses, with the former meriting attention a lot sooner than the latter.
  - czbond 9y ago
    I believe your assessment of "government ban" is a good bet. People forget that governments always want to control the money; I believe they'll let bitcoin go for a while to gain national acceptance - and then outlaw it in favor of a self created currency. Then, since having all money be digital and tracked is useful to a govt, they'll introduce a country wide one.
clay_to_n 9y ago
> Now go on and take all that knowledge you hard fought for at MIT, Stanford, Harvard, or Waterloo (or even on your own!) and use it too... Invest in low fee ETFs. I disagree with your mocking of this. Your emergency fund or retirement savings are not buckets where you throw every last dollar you have. They only cover your emergency fund (typically 3 - 6 months of expenses) and your retirement (10% - 20% of your annual income per year). For people working a full-time tech job before starting their own venture, I think eschewing those to "invest in yourself" is probably a stupid idea. Not having an emergency fund is a stupid thing to do if you have the financial situation to fund it. It's a little different for college dropout or straight-out-of-college entrepreneurship. But in that case, pushing off retirement savings until you have a stable job is reasonable, and try your hardest to build up your emergency fund. Cover your bases. If you're in a high-risk high-reward lifestyle (like tech entrepreneurship), investing 10% - 20% of your income in standard low-fee ETF's is a GREAT point of diversification.
- 3pt14159 9y ago
  Look I don't think you are wrong in the sense that your advice would be bad for the people taking it, I just think you are wrong in terms of the actual numbers you suggest. 15% of your money in something technically promising but risky isn't really worth the time you'd have to put into the research for it. Put in 50% at the very least. You'll make money if you are right and if you're bad at investing it will be safe enough for you to survive retirement.
  - clay_to_n 9y ago
    Sorry, maybe I'm just tired, but I'm confused by your post. > 15% of your money in something technically promising but risky isn't really worth the time you'd have to put into the research for it. Put in 50% at the very least. You'll make money if you are right and if you're bad at investing it will be safe enough for you to survive retirement. Are you talking about investing in one's own venture (where you're looking for high return), or investing for retirement (in a diversified portfolio w/ low-fee ETF's, where an 8%-per-year return is great)?

badestrand 9y ago

> The advice I give to people on here is generally upvoted, except when it comes to investing Maybe it is because your advice only goes to 0.0X% of all people, as you state yourself?

hoschicz 9y ago
Many of the people studying Stanford are the 1 % of people.

jeffwass 9y ago

You have great advice with the benefit of hindsight. So what's your suggestion for the "obvious" investment today?

Spooky23 9y ago
Look at sectors that benefit from the political environment. Things like pharmaceuticals with ok pipelines, good companies in shitty sectors (say a company like Costco in retail), health insurers and companies like McDonald's that do well when the rest of the world does not. Think about smaller players who benefit from net neutrality going away. You should have a running list of good companies and invest as you see corrections or downturns.
- mdorazio 9y ago
  This is not at all like what the parent post implied. You're basically saying to pick sectors/companies that will net a slightly better than market rate of return on average. Which is great. However, this is very far from a 10000x return on true outliers, long shots, and market bubbles.
  - vostok 9y ago
    Not that it matters, but 100000% is 1000x. This isn't investment advice. I think the idea is that you'll have some investments that yield 1000x and some that yield 0x so you'll average out to something that's better than the market, but not 1000x.
    - mdorazio 9y ago
      I agree. However, the original question was more like, "if it's easy to see what will yield a huge return, what should I invest in today to get that return?" To me, it's pretty clear that investments yielding huge returns are only obvious in hindsight, and even an astute tech-savvy investor will, on average, only do slightly better than a normal diversified portfolio.
      - Spooky23 9y ago
        Those two statements don’t jive. It’s not impossible to trade hours for a return significantly better than a normal diversified portfolio, but less than being an early bitcoin miner.
        mdorazio 9y ago
        No, but it is unlikely. Hence the "average" part. Also, if we're talking about trading hours we're effectively talking about working rather than investing. Of course you can make more than a market return if you spend your free time consulting on the side, for example, but that's not really comparable to spending 5 minutes buying bitcoin or Tesla stock in 2011.
3pt14159 9y ago
I've been commenting on here for almost 10 years. I've been wrong sometimes, but I've called a lot right (from Tesla, Apple, Facebook, Bitcoin, AI). Next decade is going to be cyber security and a word that I doesn't exist yet that I think of as "personification" of the internet. Combination of webs of trust and machine learning to both shape tastes and politics and harden networks from their shaping. Also, I think there is a pretty good chance that biology takes off, starting with GATACA or something like it for dogs. People want old scratch to live forever and not get hip dysplasia, and once old doggo is doing fine with Gene Drive then we're not going to be far off. Also, people are much more comfortable thinking with graphs of data. Think about tying together graphs that we can use to make predictions and watch companies like meta.com (bought by Zuck, that guy is a genius) and researchgate.net. Also get ready for mass protests and "eat the rich" politics. Especially in America where the poor are poorly educated and the political system is corrupt enough to be evil enough to not support the poor, but not corrupt enough to collapse the private sector.
- beambot 9y ago
  So... Which investments specifically?
- blahshaw 9y ago
  I think cyber security is going to be huge too, but not sure how to make a play on it, don't see any obvious winners in the security space. What approach do you take?
  - 3pt14159 9y ago
    If you're not in the position to angel invest I don't have anything top of mind to share. I think most of the stock market is overpriced, but Facebook is still probably a reasonable bet. If I knew the next Bitcoin I'd definitely have typed it out. Sometimes the answer is to just wait and see and let your thoughts kinda work through things. What I know for sure is that there are a lot of powerful people that found out how important cyber security is in the past couple years. Snowden, Clinton, Paradise Papers. The market will do its best to try to meet this need.
whataretensors 9y ago
Invest in self driving startups. Oh wait you can't, thanks SEC.

Spooky23 9y ago

Don't take it to heart -- people are intimidated by finance. Engineers like a scope-defined problem set and finance doesn't work with them. IMO, do the boglehead thing for 80-90% and play with 10-20%. If you spend some time on it and educate yourself, that play portfolio will often beat the Vanguard strategy. If you lose, you're not dead.

icedchai 9y ago

This is only "obvious" in hindsight. To make those gains, you need to time things very well. I do both. I put the majority of my funds into low fee ETFs. I keep another 20% for higher risk investments.

marvin 9y ago
What do you do if a high-risk investment suddenly balloons to become much more than 20% of your total investments? When do you choose to jump off the potential 10000x return and rebalance, if this has ever happened to you? (And the next time you make a 20% bet, is it 20% of the new total, or 20% of your traditional portfolio?)
- icedchai 9y ago
  I've had this happen with Bitcoin. It is a tough decision to make. I have decided that I don't want any single high risk investment to consist of more than 10% of my networth, so I sell some to compensate. Is that the right number? I don't know...
  - marvin 9y ago
    If it was me, I would sell enough to have received a gain of 2-3x my cost basis even if the rest becomes worthless, and then just leave the rest alone unless there is a compelling reason to sell. If you aren't open to _receiving_ the truly outrageous returns that black swan-type events might cause, there is no sense in making bets for black swans. You do need to be a good sleeper to do this though. The other criterion I'd use is that if one of my risky bets has returned enough money that I could likely retire from it (i.e. >25x annual expenses), I would sell enough to be capable of doing that. That's such a monumental quality of living change that it's not worth it to keep the same level of risk.
    - Procrastes 9y ago
      This. That's pretty much exactly what I did, although it was more like 800x because bitcoin. It gave me quite a bit of peace of mind to know that even if I was wrong, I was wrong in a very reasonable way and not completely out of the game.

lmm 9y ago

I'm a smart guy with a good degree. I still wouldn't represent myself in a court, or diagnose my own medical ailments, or file my own accounts. Why would I think I could pick stocks better than a professional?

mwexler 9y ago
Because if you can pick an index fund with low fees, you are already beating most professional stock pickers. Yes, you may find the one or a few active investors who are amazing, but unlike law or medicine, there is a fallback option that is consistently successful in both short and long term compared to most stock picking, even professional. Note that you may all lose if the market goes against you, even active stock folks with lots of "hedges against the downside" and whatnot.
- BHSPitMonkey 9y ago
  I don't think index funds are what the parent meant by "picking stocks". Going with a fund, even an index fund, is still a form of delegating the low-level work to financial professionals.
- emodendroket 9y ago
  Isn't that the point? Professionals can't do it but for engineers it's supposed to be a cakewalk?
hiram112 9y ago
Because professional is a somewhat nebulous term when it comes to finance. I do think that there are some firms, who cater to mostly very wealthy clients, who can consistently beat the market, or at least have a good chance of finding some niche or anomaly every few years for a huge jackpot such that their overall average is higher than the indexes. The problem is that most of us won't have access to these people. Instead, our professional is going to be the typical financial planner who has far less of an understanding of math than even the typical CS / engineer grad, and is basically a commissioned sales person who will take 5% off the top, plus another 2% a year - all for basically investing it in the same index funds you can now buy yourself with a Schwab or Vanguard account.

adamsea 9y ago

> If you're in the top 1% or 0.1% intellectually How are you measuring this? Are you equating being at an elite institution or have a (currently) rare and valuable skillset with intellect? And/or are you reducing 'intellect' in this post to only mean logical/mathematical prowess?

marvin 9y ago
A relatively high proportion of students at elite schools will be in the top 1% of the IQ distribution (and the same is probably true of HN contributors), but I don't think you have to interpret this literally for GP's post to be clear. Intellect, like driving skill, can be measured along enough axes that more than 1% can be in the top 1%.

wefarrell 9y ago

All of the examples that you cite are speculative in nature and to be a successful speculator you need to know when to exit. For example, personal computer companies were a great bet in the mid 90s but a terrible bet in the 2000s. So my question to you is how will you know when it's time to sell cryptocurrencies? Is there a particular methodology that you're using?

3pt14159 9y ago
Well the answer is that I underperform what could have been optimal. That means I sold most of my bitcoins between $200 and $1000 USD. Sure it hurts, but I still have some. I got out of the stock market in 2006 because I thought it was overpriced too. I'm the type of person that looks at fundamentals / physics and I get in and out early. Bitcoin might be going to $50k a coin, but I bought at $3 USD and I still have a small amount. I still think the governments are going to ban it, but having a bit of exposure is averaging the risk.
- marvin 9y ago
  Getting out of the stock market in 2006 is not bad as far as market timing goes.
  - secabeen 9y ago
    True, but staying out as the market continued to rise into 2007 was probably really hard.
- sp527 9y ago
  Why do you think it’ll make it as far as governments banning it? I suppose it depends on whether it’s a reaction to laundering or tax losses, with the former meriting attention a lot sooner than the latter.
- czbond 9y ago
  I believe your assessment of "government ban" is a good bet. People forget that governments always want to control the money; I believe they'll let bitcoin go for a while to gain national acceptance - and then outlaw it in favor of a self created currency. Then, since having all money be digital and tracked is useful to a govt, they'll introduce a country wide one.

clay_to_n 9y ago

> Now go on and take all that knowledge you hard fought for at MIT, Stanford, Harvard, or Waterloo (or even on your own!) and use it too... Invest in low fee ETFs. I disagree with your mocking of this. Your emergency fund or retirement savings are not buckets where you throw every last dollar you have. They only cover your emergency fund (typically 3 - 6 months of expenses) and your retirement (10% - 20% of your annual income per year). For people working a full-time tech job before starting their own venture, I think eschewing those to "invest in yourself" is probably a stupid idea. Not having an emergency fund is a stupid thing to do if you have the financial situation to fund it. It's a little different for college dropout or straight-out-of-college entrepreneurship. But in that case, pushing off retirement savings until you have a stable job is reasonable, and try your hardest to build up your emergency fund. Cover your bases. If you're in a high-risk high-reward lifestyle (like tech entrepreneurship), investing 10% - 20% of your income in standard low-fee ETF's is a GREAT point of diversification.

3pt14159 9y ago
Look I don't think you are wrong in the sense that your advice would be bad for the people taking it, I just think you are wrong in terms of the actual numbers you suggest. 15% of your money in something technically promising but risky isn't really worth the time you'd have to put into the research for it. Put in 50% at the very least. You'll make money if you are right and if you're bad at investing it will be safe enough for you to survive retirement.
- clay_to_n 9y ago
  Sorry, maybe I'm just tired, but I'm confused by your post. > 15% of your money in something technically promising but risky isn't really worth the time you'd have to put into the research for it. Put in 50% at the very least. You'll make money if you are right and if you're bad at investing it will be safe enough for you to survive retirement. Are you talking about investing in one's own venture (where you're looking for high return), or investing for retirement (in a diversified portfolio w/ low-fee ETF's, where an 8%-per-year return is great)?