8 ms·

I obviously don't want to give financial advice, but every time I've traded cash for stock in comp it's worked out for me in spades in the long run. This doesn'

I obviously don't want to give financial advice, but every time I've traded cash for stock in comp it's worked out for me in spades in the long run. This doesn't happen for everyone, it might not happen for you, but it's been very good to me on three separate occasions. Just remember that it's terribly illiquid and you're going to doubt your decision, potentially up to a decade later.

dboreham 4y ago
Do you mean "traded cash for stock"?
- deleted 4y ago
  [deleted]
- mmastrac 4y ago
  Yeah, fixed it in my comment - thanks!
- Nifty3929 4y ago
  I guess it's a bit ambiguous which direction you mean, either way. Maybe "gave up stock in exchange for cash" or vice versa?
bushbaba 4y ago
This is the same as statistically from loading a 401k out performs DCA throughout the year. Sure this year sucks, but if only 1-2 years out of 8 perform worse, BUT 6-7 years you perform better. Then holistically you’re still better off. When you invest look at the long term not short term.
- bumby 4y ago
  Isn't this dependent on timing and isn't part of the point of DCA to mitigate timing risks? E.g., If I loaded my 401k just before the bottom fell out of the market, you need a much higher proportion of good years to dig out from that hole. With DCA, you would have a shallower hole to climb out of. (Possible I misinterpreting what you meant, or that I am just not financially saavy enough to chime in)
  - UncleMeat 4y ago
    But on average the market goes up. You can lose with lump sum investment as early as possible. But you will be more likely to lose by waiting and only slowly purchasing in. The value of DCA is in emotional regulation since it softens swings at the cost of reduced expected value.
    - bumby 4y ago
      Doesn’t this ignore the asymmetry in risk? The colloquialism is that a bull climbs the stairs and a bear jumps out the window. Implying there’s much more downside risk to bad timing than upside potential. Is there work on a risk-based comparison between the two?
time_to_smile 4y ago
> it's terribly illiquid I'm amazed at how many people that get a significant portion of their comp as RSUs hang on to their shares after vesting. During this insane bull market it's happened to work out, but having your income and a major portion (for most tech workers) of your assets perfectly correlated is absolutely a bad investment idea, not to mention the fact that you can only trade during approved windows and are not allowed to do any hedging (such as buying protective puts). Even if you're wildly bullish on your company, at the very least diversify a bit with highly correlated stocks (for example if you're a GOOG during the last decade at least split it up among other FAANG). This way you can at least protect yourself in the event that your particular company gets hit hard. It's incredible how far away the dotcom burst is in people's minds (or even 2008). Cheap money has led to an insane period of growth in tech, but investing as though that were the norm is very risky (without even optimizing your reward for that risk).
- rahimnathwani 4y ago
  Endowment effect.
  - jacques_chester 4y ago
    Or simulation heuristic: https://en.wikipedia.org/wiki/Simulation_heuristic https://en.wikipedia.org/wiki/Simulation_heuristic
    - rahimnathwani 4y ago
      Yeah. I didn't know the name for this, but have seen it.
- ghaff 4y ago
  I was working for a major tech company—definitely not a startup during dot-comb. I had some amount of vested shares which seemed a lot at the time. I spent some but held onto a few tens of K$. Stock went down from over $100 at peak to about $4. By years later had recovered to about $25–and then Dell acquired for a premium.
nyokodo 4y ago
> it's been very good to me on three separate occasions. Were those occasions during the mass retirement of the boomer generation leading to accelerating liquidation of stock market positions while the replacement generations are inadequate in number to replace the retirees during the collapse of globalization likely causing drops in worker productivity? Or were they during the longest stock market bull run in history?
shabbatt 4y ago
When they were printing money endlessly and rates were low, your strategy is sound. However, the house of cards is now crumbling and there is no end in sight to rate rises. My hedge fund manager friend for a private family office is saying we will see double digit rates by end of 2023. If you believe this then you know what to do. If not, you should at least think what such macro conditions would do to liquidity.
- its_bbq 4y ago
  ELI Financially Illiterate. What do high Fed interest rates mean in this case?
  - Sebguer 4y ago
    People invest more in companies when interest rates are low, because shoving it into lower risk vehicles becomes less profitable / likely to beat inflation. As interest rates rise, the value of safer places to put your money, such as bonds, increases. This is the super simple version.
    - JAlexoid 4y ago
      Also money market returns are significantly higher.
  - baq 4y ago
    it'd mean your savings account would beat the S&P500 (after it finds a bottom obviously; this year having cash in a 0% savings account has been amazing!).
  - helge9210 4y ago
    Stock price is calculated as a sum of future cash flows (dividends D, for example) discounted by time value of money (risk free rate r, for example): sum(P_n), where P_n = D / (1 + r) ^ n and n is a year. When rate r is up P automatically down.
  - rchaud 4y ago
boringg 4y ago
If you did this at any time in the last 10 years you were probably rewarded handsomely. However the macro environment has significantly changed and I don't think your past behavior would be predictive of future performance.
- mjr00 4y ago
  For the tech sector it's really been more like the last 22 years. There hasn't been an extended downturn in US tech stock since the original dot-com bubble. The 2008 recession ended up being a 1-2 year blip. The COVID contraction was extremely brief. By comparison, if you invested in the NASDAQ in 1999/2000, you'd need to wait 12-14 years to break even. I don't have a crystal ball, of course, but to me things are looking a lot closer to 2000 than 2008.
  - deleted 4y ago
    [deleted]
  - zibby8 4y ago
    But did the bubble already burst in tech? Valuations are very low right now. I don't think we're necessarily at the bottom yet, but I think the worst has already come to pass.
    - kgwgk 4y ago
      > Valuations are very low right now. Very low compared to what?
      - deleted 4y ago
        [deleted]
      - pessimizer 4y ago
        In the specific case of Shopify, stock value is 20% of what it was a year ago, and 80% of what it was a month ago. Isn't that what's relevant?
jacques_chester 4y ago
"Every time I've traded cash for winning lotto tickets it's worked out for me in spades in the long run."
- wikfwikf 4y ago
  https://xkcd.com/1827/ https://xkcd.com/1827/
neon_electro 4y ago
My data point is the opposite, the one time I accepted equity in the form of options, stayed 4 years to vest it all, and got lucky where the company was acquired, the payout before taxes was worth less than if I had simply negotiated an additional $10k before taxes on my salary. I’m not optimistic for future employers offering me equity actually worth more than cash over the 4 years it takes to vest.
cortesoft 4y ago
It depends on what stage your company is, but the vast majority of start ups fail… so for most people at startups, cash is going to be much more reliable. I worked at two startups prior to my current job that both went out of business. I had a few opportunities to take more equity or cash, and I’m glad I took cash every time. I would have gotten zero if I took the equity.

dboreham 4y ago

Do you mean "traded cash for stock"?

deleted 4y ago
[deleted]
mmastrac 4y ago
Yeah, fixed it in my comment - thanks!
Nifty3929 4y ago
I guess it's a bit ambiguous which direction you mean, either way. Maybe "gave up stock in exchange for cash" or vice versa?

bushbaba 4y ago

This is the same as statistically from loading a 401k out performs DCA throughout the year. Sure this year sucks, but if only 1-2 years out of 8 perform worse, BUT 6-7 years you perform better. Then holistically you’re still better off. When you invest look at the long term not short term.

bumby 4y ago
Isn't this dependent on timing and isn't part of the point of DCA to mitigate timing risks? E.g., If I loaded my 401k just before the bottom fell out of the market, you need a much higher proportion of good years to dig out from that hole. With DCA, you would have a shallower hole to climb out of. (Possible I misinterpreting what you meant, or that I am just not financially saavy enough to chime in)
- UncleMeat 4y ago
  But on average the market goes up. You can lose with lump sum investment as early as possible. But you will be more likely to lose by waiting and only slowly purchasing in. The value of DCA is in emotional regulation since it softens swings at the cost of reduced expected value.
  - bumby 4y ago
    Doesn’t this ignore the asymmetry in risk? The colloquialism is that a bull climbs the stairs and a bear jumps out the window. Implying there’s much more downside risk to bad timing than upside potential. Is there work on a risk-based comparison between the two?

time_to_smile 4y ago

> it's terribly illiquid I'm amazed at how many people that get a significant portion of their comp as RSUs hang on to their shares after vesting. During this insane bull market it's happened to work out, but having your income and a major portion (for most tech workers) of your assets perfectly correlated is absolutely a bad investment idea, not to mention the fact that you can only trade during approved windows and are not allowed to do any hedging (such as buying protective puts). Even if you're wildly bullish on your company, at the very least diversify a bit with highly correlated stocks (for example if you're a GOOG during the last decade at least split it up among other FAANG). This way you can at least protect yourself in the event that your particular company gets hit hard. It's incredible how far away the dotcom burst is in people's minds (or even 2008). Cheap money has led to an insane period of growth in tech, but investing as though that were the norm is very risky (without even optimizing your reward for that risk).

rahimnathwani 4y ago
Endowment effect.
- jacques_chester 4y ago
  Or simulation heuristic: https://en.wikipedia.org/wiki/Simulation_heuristic https://en.wikipedia.org/wiki/Simulation_heuristic
  - rahimnathwani 4y ago
    Yeah. I didn't know the name for this, but have seen it.
ghaff 4y ago
I was working for a major tech company—definitely not a startup during dot-comb. I had some amount of vested shares which seemed a lot at the time. I spent some but held onto a few tens of K$. Stock went down from over $100 at peak to about $4. By years later had recovered to about $25–and then Dell acquired for a premium.

nyokodo 4y ago

> it's been very good to me on three separate occasions. Were those occasions during the mass retirement of the boomer generation leading to accelerating liquidation of stock market positions while the replacement generations are inadequate in number to replace the retirees during the collapse of globalization likely causing drops in worker productivity? Or were they during the longest stock market bull run in history?

shabbatt 4y ago

When they were printing money endlessly and rates were low, your strategy is sound. However, the house of cards is now crumbling and there is no end in sight to rate rises. My hedge fund manager friend for a private family office is saying we will see double digit rates by end of 2023. If you believe this then you know what to do. If not, you should at least think what such macro conditions would do to liquidity.

its_bbq 4y ago
ELI Financially Illiterate. What do high Fed interest rates mean in this case?
- Sebguer 4y ago
  People invest more in companies when interest rates are low, because shoving it into lower risk vehicles becomes less profitable / likely to beat inflation. As interest rates rise, the value of safer places to put your money, such as bonds, increases. This is the super simple version.
  - JAlexoid 4y ago
    Also money market returns are significantly higher.
- baq 4y ago
  it'd mean your savings account would beat the S&P500 (after it finds a bottom obviously; this year having cash in a 0% savings account has been amazing!).
- helge9210 4y ago
  Stock price is calculated as a sum of future cash flows (dividends D, for example) discounted by time value of money (risk free rate r, for example): sum(P_n), where P_n = D / (1 + r) ^ n and n is a year. When rate r is up P automatically down.
- rchaud 4y ago

boringg 4y ago

If you did this at any time in the last 10 years you were probably rewarded handsomely. However the macro environment has significantly changed and I don't think your past behavior would be predictive of future performance.

mjr00 4y ago
For the tech sector it's really been more like the last 22 years. There hasn't been an extended downturn in US tech stock since the original dot-com bubble. The 2008 recession ended up being a 1-2 year blip. The COVID contraction was extremely brief. By comparison, if you invested in the NASDAQ in 1999/2000, you'd need to wait 12-14 years to break even. I don't have a crystal ball, of course, but to me things are looking a lot closer to 2000 than 2008.
- deleted 4y ago
  [deleted]
- zibby8 4y ago
  But did the bubble already burst in tech? Valuations are very low right now. I don't think we're necessarily at the bottom yet, but I think the worst has already come to pass.
  - kgwgk 4y ago
    > Valuations are very low right now. Very low compared to what?
    - deleted 4y ago
      [deleted]
    - pessimizer 4y ago
      In the specific case of Shopify, stock value is 20% of what it was a year ago, and 80% of what it was a month ago. Isn't that what's relevant?

jacques_chester 4y ago

"Every time I've traded cash for winning lotto tickets it's worked out for me in spades in the long run."

wikfwikf 4y ago
https://xkcd.com/1827/ https://xkcd.com/1827/

neon_electro 4y ago

My data point is the opposite, the one time I accepted equity in the form of options, stayed 4 years to vest it all, and got lucky where the company was acquired, the payout before taxes was worth less than if I had simply negotiated an additional $10k before taxes on my salary. I’m not optimistic for future employers offering me equity actually worth more than cash over the 4 years it takes to vest.

cortesoft 4y ago

It depends on what stage your company is, but the vast majority of start ups fail… so for most people at startups, cash is going to be much more reliable. I worked at two startups prior to my current job that both went out of business. I had a few opportunities to take more equity or cash, and I’m glad I took cash every time. I would have gotten zero if I took the equity.