Daily General Discussion and spitballin thread - May 10, 2021 Investing |
- Daily General Discussion and spitballin thread - May 10, 2021
- Daily Advice Thread - All basic help or advice questions must be posted here.
- Asset valuations - how are you protecting yourself?
- Why would someone invest in real estate today when stocks seem much accessible and better?
- what to do with a bunch of cash
- Buying a home. I need money for multi-million dollar house. While saving, should I stash cash on rental home?
- Where could you find investors if your business goes viral and gains traction and anticipation before an actual launch and you dont have enough inventory to bank in on the hype?
- Market valuations and investing allocations - indexes vs stock picking
- Why is it possible that an inflow into funds are a bearish sing?
- Seeking Long Horizon Investment Advice
- Investing Styles Part 2: Ray Dalio and Risk-Parity Investing
- Am heading towards stability - What is my next step?
- Retail Dragon Portfolio - Week 1.1
- Understanding the Supplementary Leverage Ratio (SLR)
- How do replicating ETF's handle stocks falling out of the index?
- The Small Arms Industry is Set to Grow Rapidly
- Barrons Article Down on $TSLA
- I'm a high schooler and I wanna start investing. I would like to avoid a 9-5 job when I'm out of college
| Daily General Discussion and spitballin thread - May 10, 2021 Posted: 10 May 2021 02:01 AM PDT Have a general question? Want to offer some commentary on markets? Maybe you would just like to throw out a neat fact that doesn't warrant a self post? Feel free to post here! This thread is for:
Keep in mind that this subreddit, and this thread, is not an appropriate venue for questions that should be directed towards your broker's customer support or google. If you would like to ask a question about your personal situation or if you are asking for advice please keep these posts in the daily advice thread as that thread is more well suited for those questions. Any posts that should be comments in this thread will likely be removed. [link] [comments]  |
| Daily Advice Thread - All basic help or advice questions must be posted here. Posted: 10 May 2021 02:00 AM PDT If your question is "I have $10,000, what do I do?" or other "advice for my personal situation" questions, you should include relevant information, such as the following:
Please consider consulting our FAQ first - https://www.reddit.com/r/investing/wiki/faq And our side bar also has useful resources. Be aware that these answers are just opinions of Redditors and should be used as a starting point for your research. You should strongly consider seeing a registered financial rep before making any financial decisions! [link] [comments]  |
| Asset valuations - how are you protecting yourself? Posted: 09 May 2021 09:00 AM PDT Just curious what everyone here is doing to protect themselves against the eventual correction in asset prices. A bit of context here: I'm a chartered accountant working in senior management at a real estate developer. I have experience in valuations across most asset classes (stocks / real estate / business valuations etc). This is the first time I have ever seen every single asset class so substantially inflated: stocks, real estate, crypto currency. Whatever it is, every asset class is at all time highs. We all know the reasons why this is the case: excessive money printing & all time low interest rates have created a yield hungry environment with inflated asset prices. I don't want to waste time talking about why this is the case, but I would like to know, what are you doing to protect yourself against the eventual correction in asset prices? Quite honestly, I'm not sure what to do here. You either hold money in cash and risk missing out on further price appreciation, or you are fully invested and exposed to asset price corrections. Thoughts? [link] [comments]  |
| Why would someone invest in real estate today when stocks seem much accessible and better? Posted: 09 May 2021 02:04 PM PDT Traditionally, real estate was always seen as one of the best kinds of investment, but imo that's largely because knowledge on stocks was much more rare, and it wasn't as easy back then, since there weren't many investing apps, higher fees, and it wasn't as easy to do. While there are of course still challenges and risks, there seems to be countless reasons today why stocks are now much easier and better, and barely any reasons to invest in real estate, given how expensive real estate has become right now, and this is coming from someone who's followed investing for several years now, seen multiple crashes, as well as bull markets as well. With stocks
I could see it being different before this era, when it was much cheaper, but it seems like today, stocks are significantly more accessible, liquid, much less work, and have a higher potential to make even more money from too, so is there really any point investing in real estate today, aside from the actual property you have to live in? [link] [comments]  |
| what to do with a bunch of cash Posted: 09 May 2021 04:13 PM PDT Just got fired from my job and they paid me some cash. this money plus savings give me some modest 30.000 usd equivalent in local currency (not in the US) saved and basically 0 expenses (went back to live with my parents). I'm trying to decide what to do with my money but I have massive uncertainty about what to do with my savings, on one side it feels we are riding a bubble that about to explode, on the other hand I feel like there are a lot of signs that me economy might start recovering again. Basically i'm scared inflation might eat my savings but it feels like entering the market now is super risky. Anyone know where i might start reading to understand better where are we standing and what could be a sensible move away from almost 100% cash? [link] [comments]  |
| Posted: 09 May 2021 10:04 PM PDT So in my current living area, buying a house will be impossible. They are in the millions and I don't see when I will be able to save enough money to buy. Alternatively, I would like to invest either out of state or some place else. Is it wise to "stash" our money into a real estate elsewhere and use the equity to purchase a house where I am living? Or is it better to just stash the current cash I have in bank and wait? I have tried stocks but because I am new, I am not gaining the amount I want. [link] [comments]  |
| Posted: 09 May 2021 06:58 PM PDT Let's say someone markets something and it goes viral across the world months before you are even supposed to launch. Several influencers, blogs, websites, and social media users pick up the story which creates a lot of hype and anticipation due to fear of missing out and people just wanting to follow the hype due to their influencers and the websites they follow and frequent are speaking on and anticipating the hype and release before a launch even happens. But you can't truly bank in on the hype and anticipation because you don't have enough funds to purchase enough inventory. Where could someone find those investors quickly? [link] [comments]  |
| Market valuations and investing allocations - indexes vs stock picking Posted: 10 May 2021 02:38 AM PDT Hi. I want some input here, cause I simply can't make my mind up. I'm currently holding my PF, while adding a small amount of money in 5 different index funds monthly. In terms of money I'm saving about $ 700 in an world index fund every month as locked in pension savings, and another $ 700 in 5 different index funds for personal savings (E.M., Scandinavia, Europe, World and small cap - I'm considering wiping the Europe fund here, but I digress). So that's $ 1400 montly in indexes. I'm also stacking about $ 2000 in cash every month. This goes hopefully into the market in the future or as downpayment on my mortgage (depending on inflation and change in interest). Other than that I have a stock picking PF with a handful of companies. Now here's the kicker. I'm aware I can't time the market. I don't believe I can, but the question is whether I see a big upside in indexes from here on. And I'm not sure I do. The markets might keep growing a bit more, but I feel the risk reward is unfavourable atm, and I wonder if indexes isn't the right thing now. I honestly feel far more comfortable with doing value buys, and there's less risk of buying dividend blue chips who aren't in favour. A few months ago my last big buy happened and that was Bayer AG. After that I've kind of been on the sidelines as I haven't seen anything interesting. What's your opinion on investing right now? Would you stick to investing heavily in indexes or rotate into stock picking? If so, would you sell off index funds? Or ride it out? [link] [comments]  |
| Why is it possible that an inflow into funds are a bearish sing? Posted: 10 May 2021 01:24 AM PDT It says that it is a bearish sign that there has been a net of inflow of money to ETFs and other funds this year. I would assume that if they are getting cash, they would risk more into stocks, and not the other way around. It also said that in 2020 there was an outflow. I was kind of surprised with this as well. Could you explain whats the logic behind? [link] [comments]  |
| Seeking Long Horizon Investment Advice Posted: 09 May 2021 08:06 PM PDT I'm contemplating making some investment changes, but am concerned about a possible double dip correction in the near/semi-near future. I realize that this thinking flies in the face of the "time in the market, as opposed to timing the market" strategy. So, the bulk of my retirement is in a Vanguard Target Date Fund, which I contribute to monthly. I also have a legacy retirement account from a former employer, which earns 4 percent annually. I am considering rolling over those funds to my Target Date IRA though. Thoughts? I also have 6 figures sitting in a cash reserve account earning a paltry 45 basis points; wish I had been more aggressive in March 2020. Anyhow, my thinking is to invest a portion of those funds in the vehicles below now - taxable account - and leave some dry powder for potential corrections:
Finally, any suggestions on lump sum investments in the above (others) now or dollar cost averaging over time? Big thanks in advance! [link] [comments]  |
| Investing Styles Part 2: Ray Dalio and Risk-Parity Investing Posted: 09 May 2021 09:21 AM PDT Ray Dalio, the master of the LinkedIn essay and co-CIO of a minor hedge fund, is the subject of the next installment of investing styles. Ray's All-Weather Fund is a risk-parity approach to investing, an approach that aims to diversify equal risk amongst a set of assets that have minimal or negative correlation in the event of rising or falling growth and inflation across the world economy. The set of assets in Ray's approach is wider than most individual investors consider: Emerging Market Credit, Corporate Credit, and Commodities, in addition to equities and bonds. Ray's selection of assets in his risk-parity fund was driven by his belief that there are 2 core environmental drivers of markets - growth and inflation. Different assets in the portfolio perform under the 4 possible combinations of rising or falling growth and rising or falling inflation. Rather than allocating solely to assets that perform well over a falling inflation/falling growth regime, he spread the allocation over assets that perform under each of the four possible regimes. Helpful grid of the assets that perform in each regime here: https://imgur.com/HnQ3Qp0. Since the market is forward-looking, what matters for classifying the regime is not just the direction of growth and inflation, but whether or not the direction is already expected, and thus priced into the market. You want to have assets that are durable when inflation or growth surprises to the upside/downside. Now for the controversial element of risk-parity: leverage. Rather than allocating an equal dollar amount to each of the assets outlined above, the allocation strategy is to employ leverage on lower volatility assets to achieve higher mean return at the cost of higher volatility and of the interest rate of the borrowed dollars used to lever. For example, if you have an asset with a 2% historical mean return and 5% historical volatility then you could achieve a higher expected mean return by leveraging the asset 2x to increase the expected mean return to 4% while expected volatility is now 10%. Additionally, you should expect to pay some interest rate on the margin used to implement the leverage. The decision of how much to lever is usually set by targeting a total portfolio volatility and then giving each asset in the portfolio an equal volatility budget. If it's a lower volatility asset, for example TIPS or investment grade corporate bonds, then the leverage ratio is higher. But for a volatile asset like equities there may be no leverage at all since the existing asset volatility already meets the volatility budget. It isn't intuitive how in theory applying leverage in this way can actually decrease portfolio volatility over time so it's helpful to compare a 60/40 equities bond portfolio against the risk-parity allocation to equities and bonds. In the 60/40 portfolio the total portfolio volatility is dominated by the equity component. In the risk-parity portfolio the same mean-return as the 60/40 portfolio could be achieved with lower volatility by allocating less to equities and more to bonds and applying leverage. If you are a nerd and interested in more theory about portfolio allocation strategies under risk parity I recommend this AQR overview: https://www.aqr.com/Insights/Research/White-Papers/Understanding-Risk-Parity So how does Ray think the average Joe should invest using this risk-parity theory jumbo? Well, he did an interview with Tony Robbins in 2015 suggesting a 55% allocation to US bonds but every recent interview is about cash being trash, US bonds being dumb and investing in Asia. If you happened to have a couple billion dollars you could directly invest in his hedge fund but for us poors we're stuck with mutual funds and ETFs. The central idea of risk-parity can be applied in your own portfolio by diversifying among assets that will perform well in different regimes. If your portfolio doesn't have any assets that perform well under a rising inflation/rising growth regime then consider looking into commodity ETFs and inflation-linked bonds. The choice to use leverage as a retail investor is harder to recommend than the ideas around diversification. The theory of leveraging lower volatility assets in order to achieve higher return makes sense but there are downsides. One is that retail investors will pay higher costs to use leverage, either in high-fees for leveraged ETFs or in higher margin fees than institutions. The other, perhaps more relevant, risk for retail is failure to manage the risk of leveraged assets well. There must be rebalancing between assets to maintain the risk budgets of each asset and if the correlations of assets within the portfolio change then the fundamental assumption of assets performing under different regimes can be violated and leverage ratios should be managed accordingly. Another option is to trust a mutual fund or robo-advisor to manage this risk-parity approach for you, but as noted above the implementation matters and the fee drag of expensive risk-parity products should be considered. Hopefully you can take some ideas about allocating risk across your portfolio, considering other asset classes, and the performance of your portfolio under different market regimes into your own investing style. Next time, I will cover Christopher Cole's long term investing style which aims to protect against the tail events that even risk-parity funds do not handle well. Ray Dalio 2021 LinkedIn Essay: https://www.linkedin.com/pulse/why-world-would-you-own-bonds-when-ray-dalio [link] [comments]  |
| Am heading towards stability - What is my next step? Posted: 10 May 2021 12:38 AM PDT EU here - not from the US. I have recently bought my own appartment - debt js almost already cleared up(Have 50k left only - should be paid in the next 5 years) I have set aside 10k to furnish the place And then I have 5K left to my name. Im saving around 80% of my paycheck per month - but once I actually move out it will drop to around 40% I am hoping to save up another 5k before that happens So entering a new house with 10k to my name - what should be my next step? I had a lot of bonds and fixed bank investments to my name, but I liquidated everything slowly to buy the place. Id like to get back into safe investing for some passive income(I had 6% around 8 years ago but I know thats not possible now) I am severely out of date/out of touch - What are the safest options right now for low budget investing? - Esp in the EU. Should I even invest at all? [link] [comments]  |
| Retail Dragon Portfolio - Week 1.1 Posted: 09 May 2021 11:55 AM PDT This is the first week of the Retail Dragon Portfolio restart. The new allocations are described in my last post. Here is the latest screenshot of the portfolio performance. The more astute among you may notice the straddle is shorter term than I intended. I will fix this Monday at the open. Overall the portfolio was up 3.27%. Most of this was due to Commodity Trend and Gold, but equities and treasuries produced positive returns as well. It seems the reflation narrative is still humming along. Comparatively, the SPY was up 0.6% and TLT was up 0.3%. Another week of beating the 60/40 portfolio. As always, happy to discuss more below. [link] [comments]  |
| Understanding the Supplementary Leverage Ratio (SLR) Posted: 09 May 2021 07:48 AM PDT So I was reading up about how the Fed can attempt to influence credit availability and long term interest rates by controlling what is used to calculate the SLR (as they did last year 1st April). My understanding that the SLR requirements are put in place to ensure banks have enough capital with respect to their risky assets such that if they lose the assets (eg people defaulting on loans and mortgages as they did in 2007/8), they have sufficient capital to cover those potential losses such that they will not go under. However, I have trouble understanding why certain things are included in the calculation, and some not. My google search has mostly been futile as the same findings are repeated about what is the SLR, what goes into its calculations. I want to understand why it is the case. So to start off, the definition of the SLR = Tier 1 Capital / Total Leverage Exposure .
For 1, my main trouble is understanding "Common Equity Tier 1", which investopedia says it "comprises a bank's core capital and includes common shares, stock surpluses resulting from the issue of common shares, retained earnings, common shares issued by subsidiaries and held by third parties, and accumulated other comprehensive income (AOCI)."
Now, for 2, the Fed introduced a temporary change on 1st April 2020 (and which has since expired) where "the change would exclude U.S. Treasury securities and deposits at Federal Reserve Banks from the calculation of the rule ". This effectively lowers the denominator for the banks, increasing their SLR and giving them more leeway to lend out their capital (cash), providing credit for the economy, and also allows them to park more of their (non-productive) cash into US treasury bonds (which give interest), thus lowering bond yields, helping the Fed control long term interest rates. These two outcomes, as per my understanding, was why the Fed allowed this change in light of the Covid shock to markets and the economy.
As one can see from my myriad of questions, I'm definitely no banker or accountant or whatever, in fact just a barely 20 y/o kid trying to learn more about the financial world. My understanding towards the SLR is probably ridden with misunderstanding and would really appreciate if people, or actual bankers over here, can help me clear it up. [link] [comments]  |
| How do replicating ETF's handle stocks falling out of the index? Posted: 09 May 2021 10:31 AM PDT Hey guys, I've been wondering how ETF's deal with badly performing stocks. Let's say my ETF is investing in a tech stock X within the S&P 500. Over a certain timespan, e.g. a month, this specific stock is doing very poor now, and it keeps on declining, and falls out of my index now. How would this ETF now handle this situation? At which point does the ETF sell the stock? As soon as it drop out of the index? I have yet to understand this properly. Usually when we talk about ETF's, it's usually about how their value increases over time as whole, but I never really understood the mechanics of what happens when a stock doesn't keep up with this trend. Thanks in advance! [link] [comments]  |
| The Small Arms Industry is Set to Grow Rapidly Posted: 09 May 2021 04:04 PM PDT I may do a much longer and well-sourced post on this when I have more time, but here's a rundown of why the small arms industry, in my opinion, is an excellent long term investment, not even looking at how the Biden administration will play into the cyclical nature of gun stocks. The Youth in Existing Gun Markets Support Liberalization Something like 60% of youth support gun rights; this is a big indicator that government policy will not do anything to harm the industry to a large extent. Firearm Popularity is Rising Worldwide Markets like Brazil under Bolsonaro or the Phillipines under Duterte have increased firearm purchased through liberalization or idolization, providing a future for gunmakers outside of the US and Russia. I also see Africa and the rest of SE Asia liberalizing gun laws in the next few decades. The rise of hyperpolarization and populism Uncertain or polarized political circumstances means more people hostile toward one another. This was at the fore during riots last year and the Capitol Insurrection. Partially as a result, gun sales were at record highs last year. I see this polarization, due to the spread of social media, rising across the globe and thus, long term gun sales. Long Term Industry Consolidation is Likely As with many other industries, consolidation is very likely in the firearms industry as they inevitably face scaling and uncertain political climates. Investors will benefit most from this consolidation provided you choose a company not going bankrupt. There's just a lot of room to grow Gunmaker's supply chain is ridiculously overcomplex with lots of simplification that could happen (Glock rates higher in this but they're private :( ). The merchandising chain also leaves lots of profit on the table (suppliers, coordinators, retailers, etc.). Models could also be optimized, tech better integrated, etc. There's just a lot of cash to grow into. All in all, the gun industry presents an interesting opportunity for growth, beyond their current trading dynamic, something I will be tracking in earnest. Just wish Sig and Glock were public lol. My Picks:
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| Posted: 09 May 2021 01:31 PM PDT I don't agree. For those Tesla investors who don't subscribe to Barrons, they ran a story today:
The author's argument is that Tesla lacks a big catalyst to drive shares higher. He doesn't mention new factories under construction, or the push into cryptocurrencies, or changing opinions toward electric vehicles. The bottom line, he argues, is that TSLA isn't going straight up.
The author's point is valid, but also irrelevant. Unless your investment horizon is right now, this isn't a problem. The same point could have been made about Amazon 10 years ago. Or Netflix. Or Apple. Or Shopify. Or Bitcoin. No investment goes straight up forever. That's ok. If you're in a hurry to make money fast, then maybe Tesla isn't the right investment. Most of the people who made serious money investing in MSFT, AAPL, or GOOG, or AMZN, or NFLX, or FB, or SHOP, held on for a longer time horizon. If you bail because there are no short term catalysts (that you know of), or because the stock goes down short term, you may kick yourself later. Even Bitcoin dropped 80% 2 years ago (from its then all time high of $20k). People who bailed then missed a great opportunity. It's still early innings for TSLA. This story is not over. [link] [comments]  |
| Posted: 09 May 2021 10:14 PM PDT I own a joint account with my parents on Vanguard for investing in stocks and all of them are long-term stocks with like a few hundred dollars in there. Those stocks are kind of just building up over time. I would like to start making bigger investments and try to get into entrepreneurship and try my best to avoid working a 9-5 job. I don't really wanna work to make someone else richer. What investments or businesses can I start now? I have a few thousand dollars that I could invest with and I'm willing to do hard work. [link] [comments]  |
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