How do you invest your disposable income as a tech worker? | Hacker News Reader

How do you invest your disposable income as a tech worker?

I've put 50% my money on amazon and netflix.

50% in us treasury bills.

Plus, 6 month expense kept as cash.

What about you?

I'm a Chartered Financial Analyst (CFA) and in my opinion that's a very concentrated portfolio. You're taking on a material amount of company specific risk. I would consider diversifying your stock investments.

Myself, I like investing in close-ended funds (CEF) or otherwise known as investment trusts. I can overlay some active management whilst having a fairly diversified portfolio. I tend to try and buy the CEF when their discounts are wider than usual i.e. a 5% discount widened to 15% to 20% of NAV. Then I sometimes sell when the discount narrows. I switch between different CEF in the same sector if I find one with a better discount i.e. US small cap.

There are a bunch of gotachs so be careful. Some have wide discounts because they are managed by bad managers or they have expensive debt or preferred equity in the capital structure. So do your own research.

If you're in the US, check out: https://www.cefconnect.com/closed-end-funds-screener

In the UK, I use: https://www.theaic.co.uk/aic/find-compare-investment-compani...

I would also say that this market can be inefficient. Investment advisers don't like it because it doesn't scale well.

I'm also a CFA and a closed-end fund investor and agree with this advice. People interested in CEFs should check out the Morningstar CEF forum https://socialize.morningstar.com/NewSocialize/forums/100000... .

That big a percentage in two stocks would freak me out a bit. My money is in indexes, roughly 90% stocks, 10% bonds. Boring, but it's worked well so far and it's more of a long-term thing.

Agreed on two stocks and such a large percentage. It's an easy way to lose money, quick. Same indexed fund strategy here. It's not sexy, but it consistently has a positive net.

I have kids so much of my disposable income goes to living in a decent school district. and food, lots and lots of food. I used to put a lot in 401k. It's sitting 50% in bonds and a 50% USD account in my 401k.

waiting for trade wars to blow up the economy. Maybe trump's a genuis, but probably not. Then, I will move the money probably to S&P 500. might put part of it in one of those double or triple leveraged indexes.

What are you referring to as "double or triple leveraged indexes"?

You are going to wait a long time. S&P is going to $300 this year.

I've put most of it into sound system equipment, burning man art projects, starting a makerspace, organizing festivals and dance parties, and that general sort of thing. Any delusions I might have once had about the possibility of accumulating enough money to retire ended after I got divorced, so I'm not particularly concerned about long term finances anymore. Might as well enjoy my life here and now, and use whatever surplus money comes my way for the benefit of my friends and my community.

Sorry to hear that buddy but sounds like you're having fun.

One of the best decisions a high-earner can make to secure their financial future is to never get married. Have a partner yes but never marry.

any delusions I had about retiring disappeared when I spent my 20's chasing women, drugs, booze & abusing credit.

I did the same but it's not too late. I can turn a $40K account into $100k easily.

how? tax advantaged accounts, individual stock picks or building a business ?

I just posted a thread, Ask HN. If you have any more questions.

Stock picks but options only.

https://news.ycombinator.com/item?id=17270396

Great set of long-term charts here:

http://www.crsp.com/resources/investments-illustrated-charts

Very powerful. Would be useful to see more explanation on some of them though. Exe what the heck does the last one mean?

Vanguard 2055 Target Date Fund (tax advantaged retirement accounts), VTSAX (Vanguard Total Stock Market Index Fund) and BND (Vanguard Total Bond Market Fund) in taxable accounts, real estate that I expect to appreciate or that cash flows well, and small businesses that aren’t asking for a large premium on ARR.

You're not very diversified... Why only two stocks?

My pension and stocks picks are 90% equity/bond split (between Vanguard FTSE Global All Cap and their Lifestyle 80% fund).

Arguably a tech worker should be underinvested in tech stocks, because if there is a tech bust, as in the early 2000s, both his income and his portfolio could plummet.

Economists would say that you should try to diversify your labor income with investments.

Maybe. But then again, technology is disrupting pretty much every industry. Do you want to be underinvested in that?

I always want to be overinvested in what the future brings. Unless valuations have gotten way out of hand.

The what? LOL

Some of us living and working in less "privileged" countries (I'm from Greece) don't have the luxury of having disposable income to invest, especially tech workers that are paid way less than tech managers.

I don't know exactly how things are in the first world countries, but the only disposable income goes as spare cash for emergencies, health problems and other similar activities.

Then why comment on this thread at all? This is like someone making a thread saying "How do I do X in Swift?" and I come in and say "I only know Python, so I have no idea LOL!".

Was the point of your comment to just complain about being a dev in Greece?

If someone wants to make a specific question it needs to find the correct place/forum to ask it.

Having someone asking general questions as this one on a big tech news site read by a lot of people, it’s expected to get many different (controversial) answers.

Does it mean that in order to comment/reply under a Tesla thread I need to own a Tesla?

Become better developer and work remotely for better wealthier countries. Probably cutting the middle tech manager.

If your wage as tech worker relatively sucks compared to local wages, whatever country you're in, you're probably doing it wrong.

As cold as the above comment may sound - I concur, there's always a way to earn more.

Perhaps you would need to find remote work or learn another language. Or simply work hard(er). Whatever it takes.

Not harder, smarter.

It's interesting to compare savings rates in the US to Greece:

https://data.oecd.org/chart/5cbS

No doubt there are some savers in Greece although if I was one of them I'd probably keep my savings in a German bank account.

You can move to Berlin or Krakow. If you are a good developer, you'll be handsomely paid.

Also, it's trivial to move there for you since you are a EU citizen.

If things are so bad, why not move? (Not being patronizing, genuinely curious as to why you don't.)

You can use the stock market to save the emergency cash. Just invest it wisely.

Over the past year I've decided to do something with my savings, rather than have it sit in a Dutch bank, getting far less than inflation in the country I live in now.

I've sprinkled the majority in a selection of Vanguard's ETFs 80/20 stock/bonds, heavy on tech stocks and the rest in a 70/20/10 split on large-cap, mid-cap, small-cap.

A little (more than) play money is in crypto. I've been successfully algo trading crypto for fun, largely through triangular arbitrage, and investing in some of the projects that I think will have an impact. The "investment" part is in a basket of 20 or so coins weighted by what I expect their chances are to succeed in their sector within the next 2 years, rebalanced monthly. I built the strategy with a tool I've been working on with friends in our spare time: https://nazcabot.io

My savings rate is 74.95%. Yes, I am that anal about it.

I'm keeping a fair bit in cash right now (ready for the next crash). In terms of "stash" I guess overall I'm about 40% gilts and bonds, 30% equities, 30% cash. Not too spicy, but I sleep well. They reckon should should hold you age in bonds and gilts (55% for me). Total stash is equivalent to about 33.33 years of expenses.

Then there's property which I don't include in stash.

I would think seriously about the fact you have very little diversification in your portfolio.

You also are holding the typical amount in cash that is recommended for an emergency fund. I'm slightly more contrarian on that issue - I like to keep one to three years of expenses as cash - it varies depending on various issues.

Of course everyone has their own thoughts on investment and there is no "one size fits all".

All the best!

What are "gilts"?

Gilt-edged securities. Basically UK government bonds. Equivalent of US treasury bonds.

I have used pretty much all investing apps out there but I've recently settled on M1 Finance.

I created my own portfolio which consists primarily of stocks and index funds I picked. I have at least 20 different securities because, you know, diversification. What I like about it so far is the amount of time I don't have to spend on the platform, plus the fact they're free (they used to charge a fee but they got rid of it a while ago). Fractional shares is nice as well.

I scheduled a recurring deposit and they will invest it for me in the stocks I want without having to do it myself. If you don't want to pick your own stocks you can use one of their professional made portfolios.

I still own an account in Robinhood because trading can be fun from time to time.

Mataya, thanks for mentioning M1. I haven't heard of it before. What's your referral code?

You're welcome! https://mbsy.co/lHSCs

For long term: I put $500/week into a total international stock fund (VTIAX.) I put another $500/week into a growth index fund (VIGAX.)

For short term, I have about 30 stocks I play around with... I'm up about 20% so far this year.

Stocks returns are low, look into options if you have risk tolerance.

Any strategies you recommend? I'm open to putting a small percentage towards riskier stuff.

I just re-read your message and thought of something with regards to the 30 stocks you are playing with.

Suppose you have $10,000 in AAPL for 52 shares.

You can buy AAPL Jan 2019 195.000 call for $1170 for 1 contract.

Now suppose you plug this option in here, http://www.optionsprofitcalculator.com/calculator/long-call.... and you will see if AAPL goes to $200 for July 28th you would be 30% in profits whereas your shares would only return $8/$192. You can also buy puts when you think it's too high instead of selling the contracts so this way you can arbitrage.

This might work for you as well, http://www.theoptionsguide.com/long-straddle.aspx

Edit:

You can also sell puts every week for the shares you hold and just collect premiums instead of holding dividend paying stocks.

Cool! Thanks! I will look into this more. I know there is big $$$ in options but it has always struck me as risky... I know, risk vs reward...

I just posted a thread, maybe you have some insight, not sure if this is allowed on here:

https://news.ycombinator.com/item?id=17270396

There seems to be a trend lately with many tech employees asking what to do.

I was really thinking of creating a service to tell you when to buy and maybe sell, or when I sell.

I use volume patterns, chart patterns to get in and out. The big thing is time. Being able to get in and out of options requires time and being at the screen. Hard to do when you are not there.

One thing I have noticed, chasing dips is hard, look for breakouts it's easier.

A thousand dollars a week?!

Yeah. I have a lot of disposable income. I've been doing this for years. I started off at like $300/week about 10 years ago, and gradually moved it up over time.

I keep maybe 2 months cash and the rest 50/50 in VTI and SCHF, a very diversified low cost us and international etc, respectively. I'm early 30s so I don't anticipate needing it for a long time.

I would comment that for me 6 months sitting in a savings account is unnecessary as long as I have enough in a liquid wtf after maybe a 20% haircut. Selling the etf, settling and transferring would take only ~3 days so it's not so much having that money not doing anything but having it liquid.

As for tech and finance specific exposure, I definitely try to remove exposure since my personal career is already correlated with that segment.

6 months expenses in a “high yield” savings account.

Maximal 401k contribution in a Vanguard Target Date fund.

A slow trickle towards taxable investment in VTI while aggressively paying off my car.

25% in each: gold/stocks(index fund)/30 year US bonds/cash

Its called the Permanent Portfolio and it has a great long term track record: https://portfoliocharts.com/portfolio/permanent-portfolio/

This is going to sound harsh, but that bad investment advice for most people. US Bonds and Cash appreciate less than inflation, so you're actually losing money. The same is true for gold, which has historically underperformed vs. S&P500 (for example) by thousands of percent (http://www.longtermtrends.net/stocks-vs-gold-comparison/). Meanwhile the stock market has more than doubled in the past 10 years. 25% is almost definitely not enough equity exposure unless you are in your golden years. If you're investing for the long term (which you should be), it is much better to use a simple index funds or Robo-manager which will buy a variety of index funds with broad exposure according to modern portfolio theory.

Meanwhile the stock market has more than doubled in the past 10 years.

After plummeting due to the financial crisis and a long period of quantitive easing.

No, you are wrong.

If you put all of your money into the S&P500 only at the absolute, single worst possible day (the market top on May 16th, 2008 at $1,425) you would still be up about 100% today, 10 years later at $2,779 (So about 2X, just checked).

If you put money in "after the plummet," as you suggest, which is the best case scenario, (buying at the low of $735 in January of 2009) would put you up approximately 300% (4X).

The average investor would get somewhere between these two just by ignoring the market and investing biweekly.

I'm not even advising to go 100% for the S&P500 Index Funds. However that's an infinitely better idea than a portfolio that is 75% of Gold (Dumb), T Bills + Cash (Losing money everyday), and Bonds (Which are paying at near-historic lows). It's just bad advice.

No, you are wrong.

Do you think the quantitive easing had no affect then?

Quite a non-sequitor

Read the original post, you will see the word 'and' in it.

I'm quite aware.

How does that have anything to do with my comments about portfolio selection and results?

I'm partly lazy, partly uninterested, and the rest completely uninformed about what I ought to do — most people I know either don't have any money to spare, or work for the public sector where the salary is lower but the eventual pension very good.

So the result is I have far too much money as cash in the bank.

Unlike a generation ago, there are now plenty of options for smart investment without a ton of knowledge.

If you don't want to learn a ton or spend a lot of effort, the easiest thing to do is open an account at Wealthfront or Betterment and drop in everything except your emergency fund. (An hour or two of effort.)

The next level of complexity would be to open an account somewhere like Schwab and put your money (minus emergency fund) in a Vanguard target retirement index fund for your estimated year of retirement. (Less than a day of effort.)

The next level of complexity would be to open an IRA, contribute to it annually (to get the tax benefits), and invest that in Vanguard target funds.

Look into a high interest savings account at the minimum or ladder GIC's for better rates.

Seems to be a lot of indexers here. I am always curious if/how people plan for the volatility risk (and implied personal financial risk when vol spikes) from being purely indexed in their portfolios...

If you bought the S&P with 50% and held the rest of your money in assets that don't fluctuate alongside the market or hedged, you can buy the S&P at the low and it always recovers.

Others keep their portfolio completely hedged so when there is a dip they can buy the swing.

I agree with the sentiment but you have to be careful about just assuming assets that are uncorrelated will remain uncorrelated in a black swan event. Additionally, you have to assume that your hedge is liquid enough that it can be rolled off in times of need.

I am not a mathematician or I would be able to do this better. Basically you can buy calls and puts to simplify it. This way a shift upwards/downwards will cause your options to shift inversely. You end up being liquid in that event and can continue to switch your position to the short side or long side.

I however only buy options based on my sentiment of the market, bear or bull. Currently it's a bull market, S&P going to $300.

Edit: Fixed buy calls and puts.

It's called dollar-cost averaging. A lot of people invest in indexes because they put on the research and learned how to invest. When it comes to your own money, don't listen to the crowd... always put on the work and do the research.

dollar cost averaging does not in reality mitigate the volatility risk...

Consider the scenario where you are invested in 100% indexes and get hit by some black swan event resulting in >70% drawdown. Odds are that you will lose your job during such an event and therefore could not feasibly continue investing at the same pace (there goes DCA as risk-neutralizing strategy). The more likely occurrence in this scenario is that you actually NEED your invested cash to stay in illiquid assets (i.e. house, college tuition etc) and are forced to draw out money at the bottom of the market.

Index investing without any hedging for fat tails doesn't seem that smart.

Assuming you don’t have any passive income, you have a mortgage and maybe other loans, as well as no savings/cash. I would indeed not recommend anyone to put 100% of their money in index funds :)

I buy options. Way better returns than anything else.

100% options.

AKAO Sep 21 2018 12.50 Calls

The rest are shorter term.

Wealthsimple. Done.

vtsax 15.1% yoy

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