5 ms·

Do you want to invest, or to gamble? At your level of available funds, investing in startups is gambling, because you can’t spread your bets widely enough to h

by gshdg 7y ago

Do you want to invest, or to gamble? At your level of available funds, investing in startups is gambling, because you can’t spread your bets widely enough to hedge them and increase the likelihood that gains on one will make up for the losses or break-even on the rest. If you want to invest, I recommend index funds.

s_Hogg 7y ago
Yes 1) never take a position that can wipe you out, and 2) shut up and wait Steady accumulation will achieve most things for most people if you can handle the fact it's not exciting and you won't get to feel like an important investor guy. If so, there's your best bet.
dehrmann 7y ago
> If you want to invest, I recommend index funds. This. I've gotten this question from family, and the answer's just pair VTI and BND at some ratio you're happy with (or buy a target date fund) and wait.
- o-__-o 7y ago
  Very weird time we are in right now. US Markets at all time high, stronk us economy, faltering global outlook, plus tariffs. Market may go to the moon, or it may collapse. That ratio needs to be tweaked at least monthly maybe bimonthly through the rest of this year (lots of uncertainty coming up)
  - dehrmann 7y ago
    Caveat: if you're a long-term investor, pay no attention to this or my comment. I completely agree that we're in a weird time. A few weeks ago, there was a bad economic report and the market rallied because it assumed that made it more likely the Fed would cut rates. I get it, but it's also absurd, and by reductio ad absurdum, the Fed alone can't power the economy. There have been rumblings that volatility is probably underpriced (options almost always imply less downside risk than there really is, anyway), especially in the political climate with Iran and Brexit and the economic climate of a US trade war with China and--now--France. On the other hand, money is cheap, you gotta put it somewhere, and Vision Fund II looks like a sucker's bet.
  - darkteflon 7y ago
    The times are always weird. You’ll be perpetually waiting if you’re waiting for stuff to get “normal”. Absorbing the essential truth of this is part of the zen of indexing. Nobody knows what outcome you’ll get, but indexing is a solid process. That’s all you can do - maximise the quality of your process. Anything else is noise.
    - o-__-o 7y ago
      We’re at all time highs, is the market going up or down? You have an increased risk here because the wrong decision can be decimating (short the market and it continues to rally, or buy the market and we’ve hit the top). Nope I would wait for a confirmation signal and act on that. Even long term investing, you should have an edge never invest and withdraw blindly.
      - darkteflon 7y ago
        Unless you are a PhD in finance working at one of a handful of the world’s top money managers, I guarantee that what you confidently refer to as your “edge” is gonna end up poking you in the eye. Age and experience will teach you that if you let it.
        o-__-o 7y ago
        Or maybe age and experience has seen this before and went balls deep in ITM calls after the market washed out 100+ points. I mean if you reread what I said, it’s spot on to what happened over the last few days But keep thinking a paper giving you a title with some mixed case letters makes you a top money manager and that no one could have possibly avoided a 40% loss during 2008 Also an edge can simply be moving averages which has a proven backtest but there are a lot more analytical tools that exist today
- tedmiston 7y ago
  Yes, but there are some subtle advantages [1][2][3] to buying the VTSAX fund over the VTI ETF if you can meet the minimum. The analogous fund for BND is VBTLX. There are some big caveats to watch out for with target date funds like increased expense ratio vs holding the underlying funds directly and the glide path. I avoid them personally, but they're not all bad. [1]: https://www.bogleheads.org/forum/viewtopic.php?t=116581 https://www.bogleheads.org/forum/viewtopic.php?t=116581 [2]: https://forum.mrmoneymustache.com/investor-alley/vanguard's-vtsax-vs-vtsmx-vs-vti/ https://forum.mrmoneymustache.com/investor-alley/vanguard's-... [3]: https://www.bogleheads.org/wiki/ETFs_vs_mutual_funds https://www.bogleheads.org/wiki/ETFs_vs_mutual_funds
  - dehrmann 7y ago
    If we're looking for subtle advantages, I really like VTCLX (for US investors). Except for the fact that its top 5 holdings are in tech, and I work in tech.
    - tedmiston 7y ago
      VTCLX looks interesting. It looks like the top 10 holdings match VTSAX but comprising 20% of VTCLX vs 18.8% of VTSAX. https://investor.vanguard.com/mutual-funds/profile/VTCLX https://investor.vanguard.com/mutual-funds/profile/VTCLX https://investor.vanguard.com/mutual-funds/profile/VTSAX https://investor.vanguard.com/mutual-funds/profile/VTSAX
badfrog 7y ago
> you can’t spread your bets widely enough to hedge them What does hedging mean in startup investing? I'm used to the meaning in securities where you take an inverse position to limit losses.
- gshdg 7y ago
  I probably should have said “diversify” instead.
- o-__-o 7y ago
  Put money in Uber. Hedge with money in Lyft. Uber goes hockey stick, you’re golden. Lyft goes parabolic while Uber is still trying and now losing? Hedge. Taxi industry may fail entirely? Sell puts on car max because market will soon be flooded with depreciating assets (cars) from drivers who no longer taxi. Hedge. Hedging is not an inverse, it is protection on your original investment. A lot of the times this is simply an opposite investment such as calls to puts or puts to calls. But nothing saying you can’t protect your FB (Libra) Or JPMorgan bets by buying bitcons, etc. Hedge.
  - badfrog 7y ago
    > Taxi industry may fail entirely? Sell puts on car max because market will soon be flooded with depreciating assets Why would you do that? When you sell puts, your upside is limited to the premium and the downside is close to unlimited (the full value of all the shares at strike price). Whereas if you were to buy calls, your downside is limited and upside is unbounded. And FWIW, speaking in layman's terms, I would consider two long positions with opposite prospects to be inverse.
    - o-__-o 7y ago
      I don’t follow, are you saying two longs could be a hedge? Because you are corrext

by gshdg 7y ago

s_Hogg 7y ago

Yes 1) never take a position that can wipe you out, and 2) shut up and wait Steady accumulation will achieve most things for most people if you can handle the fact it's not exciting and you won't get to feel like an important investor guy. If so, there's your best bet.

dehrmann 7y ago

> If you want to invest, I recommend index funds. This. I've gotten this question from family, and the answer's just pair VTI and BND at some ratio you're happy with (or buy a target date fund) and wait.

o-__-o 7y ago
Very weird time we are in right now. US Markets at all time high, stronk us economy, faltering global outlook, plus tariffs. Market may go to the moon, or it may collapse. That ratio needs to be tweaked at least monthly maybe bimonthly through the rest of this year (lots of uncertainty coming up)
- dehrmann 7y ago
  Caveat: if you're a long-term investor, pay no attention to this or my comment. I completely agree that we're in a weird time. A few weeks ago, there was a bad economic report and the market rallied because it assumed that made it more likely the Fed would cut rates. I get it, but it's also absurd, and by reductio ad absurdum, the Fed alone can't power the economy. There have been rumblings that volatility is probably underpriced (options almost always imply less downside risk than there really is, anyway), especially in the political climate with Iran and Brexit and the economic climate of a US trade war with China and--now--France. On the other hand, money is cheap, you gotta put it somewhere, and Vision Fund II looks like a sucker's bet.
- darkteflon 7y ago
  The times are always weird. You’ll be perpetually waiting if you’re waiting for stuff to get “normal”. Absorbing the essential truth of this is part of the zen of indexing. Nobody knows what outcome you’ll get, but indexing is a solid process. That’s all you can do - maximise the quality of your process. Anything else is noise.
  - o-__-o 7y ago
    We’re at all time highs, is the market going up or down? You have an increased risk here because the wrong decision can be decimating (short the market and it continues to rally, or buy the market and we’ve hit the top). Nope I would wait for a confirmation signal and act on that. Even long term investing, you should have an edge never invest and withdraw blindly.
    - darkteflon 7y ago
      Unless you are a PhD in finance working at one of a handful of the world’s top money managers, I guarantee that what you confidently refer to as your “edge” is gonna end up poking you in the eye. Age and experience will teach you that if you let it.
      - o-__-o 7y ago
        Or maybe age and experience has seen this before and went balls deep in ITM calls after the market washed out 100+ points. I mean if you reread what I said, it’s spot on to what happened over the last few days But keep thinking a paper giving you a title with some mixed case letters makes you a top money manager and that no one could have possibly avoided a 40% loss during 2008 Also an edge can simply be moving averages which has a proven backtest but there are a lot more analytical tools that exist today
tedmiston 7y ago
Yes, but there are some subtle advantages [1][2][3] to buying the VTSAX fund over the VTI ETF if you can meet the minimum. The analogous fund for BND is VBTLX. There are some big caveats to watch out for with target date funds like increased expense ratio vs holding the underlying funds directly and the glide path. I avoid them personally, but they're not all bad. [1]: https://www.bogleheads.org/forum/viewtopic.php?t=116581 https://www.bogleheads.org/forum/viewtopic.php?t=116581 [2]: https://forum.mrmoneymustache.com/investor-alley/vanguard's-vtsax-vs-vtsmx-vs-vti/ https://forum.mrmoneymustache.com/investor-alley/vanguard's-... [3]: https://www.bogleheads.org/wiki/ETFs_vs_mutual_funds https://www.bogleheads.org/wiki/ETFs_vs_mutual_funds
- dehrmann 7y ago
  If we're looking for subtle advantages, I really like VTCLX (for US investors). Except for the fact that its top 5 holdings are in tech, and I work in tech.
  - tedmiston 7y ago
    VTCLX looks interesting. It looks like the top 10 holdings match VTSAX but comprising 20% of VTCLX vs 18.8% of VTSAX. https://investor.vanguard.com/mutual-funds/profile/VTCLX https://investor.vanguard.com/mutual-funds/profile/VTCLX https://investor.vanguard.com/mutual-funds/profile/VTSAX https://investor.vanguard.com/mutual-funds/profile/VTSAX

badfrog 7y ago

> you can’t spread your bets widely enough to hedge them What does hedging mean in startup investing? I'm used to the meaning in securities where you take an inverse position to limit losses.

gshdg 7y ago
I probably should have said “diversify” instead.
o-__-o 7y ago
Put money in Uber. Hedge with money in Lyft. Uber goes hockey stick, you’re golden. Lyft goes parabolic while Uber is still trying and now losing? Hedge. Taxi industry may fail entirely? Sell puts on car max because market will soon be flooded with depreciating assets (cars) from drivers who no longer taxi. Hedge. Hedging is not an inverse, it is protection on your original investment. A lot of the times this is simply an opposite investment such as calls to puts or puts to calls. But nothing saying you can’t protect your FB (Libra) Or JPMorgan bets by buying bitcons, etc. Hedge.
- badfrog 7y ago
  > Taxi industry may fail entirely? Sell puts on car max because market will soon be flooded with depreciating assets Why would you do that? When you sell puts, your upside is limited to the premium and the downside is close to unlimited (the full value of all the shares at strike price). Whereas if you were to buy calls, your downside is limited and upside is unbounded. And FWIW, speaking in layman's terms, I would consider two long positions with opposite prospects to be inverse.
  - o-__-o 7y ago
    I don’t follow, are you saying two longs could be a hedge? Because you are corrext