Good investment for a tech guy?
18 comments
If you don't want to lose the money, don't simply 'bet on one horse' and put it in a house / websites / whatever. It makes more sense to get a properly diversified portfolio of index-funds / ETFs.
I think the best investment you could make is to put that money away in a lifecycle fund. (E.g. Vanguard's 'Target Retirement 2040' fund https://personal.vanguard.com/us/funds/snapshot?FundId=0696&... ) I.m.h.o. the best thing about a lifecycle fund is that it's a set-and-forget investment. It's deviation will get less in time.
Of course, if you're a bit more of a control freak (like me) you could create your own (properly diversified) investment portfolio. In that case I would suggest you have a look at 'The smartest investment book you'll ever read'.
I think the best investment you could make is to put that money away in a lifecycle fund. (E.g. Vanguard's 'Target Retirement 2040' fund https://personal.vanguard.com/us/funds/snapshot?FundId=0696&... ) I.m.h.o. the best thing about a lifecycle fund is that it's a set-and-forget investment. It's deviation will get less in time.
Of course, if you're a bit more of a control freak (like me) you could create your own (properly diversified) investment portfolio. In that case I would suggest you have a look at 'The smartest investment book you'll ever read'.
Property managers usually get roughly 10% of the rental income and handle paperwork, screening renters, phone calls, minor repairs, etc. You still have to pay for major repairs (new fridge, AC, burst pipe), but depending on your situation, you may consider hiring a PM.
If you buy an apartement and rent it out, or acquire the websites, that is not only an investment, but also a (part-time) job you are buying. Whereas putting your money into an index-fund or a bank account are just investments.
Both can be nice --- but keep the additional work in mind, when you make comparisons.
(Disclosure: I just bought the index-fund with the lowest fees I could find.)
By the way, have you thought of buying stuff that will reduce your expenditures --- like a fuel efficient car, or buying an apartment for you to live in; or if you already have a house, putting proper insulation on it?
Both can be nice --- but keep the additional work in mind, when you make comparisons.
(Disclosure: I just bought the index-fund with the lowest fees I could find.)
By the way, have you thought of buying stuff that will reduce your expenditures --- like a fuel efficient car, or buying an apartment for you to live in; or if you already have a house, putting proper insulation on it?
Yes, I took that into account. I figured I would spend about 10 hours per year having to deal with apartment stuff (maybe more at first when I'm still clueless), and that it would be empty one month per year while I look for renters.
Apartment is also not that suitable for me, because I will very likely not live in one country that long, and couldn't really check on the apartment always. Of course there are companies that can handle this for you, but then you take a hit in the profit.
And on your second point, yes I am always looking for things to reduce expenses. But because I don't know where I will live after a year, I can't buy an apartment for myself to live in. Currently I am renting, and don't have a car. My biggest expenses right now are food ($450 / month), rent ($450) and my vice energy drinks ($270).
Apartment is also not that suitable for me, because I will very likely not live in one country that long, and couldn't really check on the apartment always. Of course there are companies that can handle this for you, but then you take a hit in the profit.
And on your second point, yes I am always looking for things to reduce expenses. But because I don't know where I will live after a year, I can't buy an apartment for myself to live in. Currently I am renting, and don't have a car. My biggest expenses right now are food ($450 / month), rent ($450) and my vice energy drinks ($270).
> Of course there are companies that can handle this for you, but then you take a hit in the profit.
I guess on average that should not be worse than stocks --- the public companies have managers, too.
I guess on average that should not be worse than stocks --- the public companies have managers, too.
Yes, it might be a good idea to get such a company to handle the details for me, I haven't really looked into how much it costs. I wonder how this is different from just buying the stock of some property holding company directly though.
Ten hours per year? You mean per week right?
Do you think 10 hours is naive? Maybe it is, I have no idea. I guess biggest risk is ending up with a renter that doesn't pay, and then having to go through courts to get them to move out.
My landlord is having an easy time though. He spent a few hours posting an ad in the paper, showing the apartment to potential renters and doing the rental agreement with me, and now he is just getting a nice monthly bank transfer. Hopefully I could enjoy a similar experience.
My landlord is having an easy time though. He spent a few hours posting an ad in the paper, showing the apartment to potential renters and doing the rental agreement with me, and now he is just getting a nice monthly bank transfer. Hopefully I could enjoy a similar experience.
You will spend much more than 10 hours per year unless things go spectacularly well.
I was a landlord for a few years: I rented out a single family house in a nice suburb and I had great tenants and positive cashflow from day one! Even so, you still want to go by the place periodically to make sure it's still standing (you can write off the gas/expenses for this since it's business-related travel!). You have to collect rent and make sure the checks don't bounce. I like money in hand, so I don't want checks mailed to me. You need to file paperwork in some cities for annual rental property registration, need to keep records for taxes, there may be some repairs needed. At the very least you'll need to make sure the repairs are done right.
Easily way more than 10 hours/year. I had a friend who both worked for a property management co and who rented out houses for years. His feeling was that unless you had multiple properties, paying the company wasn't worth the lost revenue.
The biggest risk is having a renter who not only doesn't pay, but trashes the place on his way out and has no assets you can get in a lawsuit. It happens, but you can minimize your exposure. In any event, renting property is not something to be entered in to lightly. Don't do it if you heart isn't in it.
I was a landlord for a few years: I rented out a single family house in a nice suburb and I had great tenants and positive cashflow from day one! Even so, you still want to go by the place periodically to make sure it's still standing (you can write off the gas/expenses for this since it's business-related travel!). You have to collect rent and make sure the checks don't bounce. I like money in hand, so I don't want checks mailed to me. You need to file paperwork in some cities for annual rental property registration, need to keep records for taxes, there may be some repairs needed. At the very least you'll need to make sure the repairs are done right.
Easily way more than 10 hours/year. I had a friend who both worked for a property management co and who rented out houses for years. His feeling was that unless you had multiple properties, paying the company wasn't worth the lost revenue.
The biggest risk is having a renter who not only doesn't pay, but trashes the place on his way out and has no assets you can get in a lawsuit. It happens, but you can minimize your exposure. In any event, renting property is not something to be entered in to lightly. Don't do it if you heart isn't in it.
There is no point buying-to-rent if you already rent unless you either live in a city where it's arguably cheaper to rent than buy (SF is an example) or u don't want to settle.
Buying to live in is always the best return because you have no renters to deal with and what used to go on rent now partly goes on capital.
If u don't want to buy a place, a portfolio of managed funds, perhaps some individual stocks and also bonds/commodities would be a good mix.
But $200k is a lot of money and its what financial advisers are for. You would gain a lot from going to see an independent financial advisor and paying him $500-$1000 to create a long term plan for you -- which might include tax efficient schemes like putting some of this into a 401(k) etc.
On the issue of investing in website: as tech people it's something we all know and it's therefore attractive. However it's unlikely u'd get attractive terms investing in a proven business and going down the venture/angel route is very risky and usually pursued by people with a much bigger personal wealth. Its also easy to get sucked into spending more time than u intended on these investments because its your profession - which then reduces your return because you are essentially "working".
Buying to live in is always the best return because you have no renters to deal with and what used to go on rent now partly goes on capital.
If u don't want to buy a place, a portfolio of managed funds, perhaps some individual stocks and also bonds/commodities would be a good mix.
But $200k is a lot of money and its what financial advisers are for. You would gain a lot from going to see an independent financial advisor and paying him $500-$1000 to create a long term plan for you -- which might include tax efficient schemes like putting some of this into a 401(k) etc.
On the issue of investing in website: as tech people it's something we all know and it's therefore attractive. However it's unlikely u'd get attractive terms investing in a proven business and going down the venture/angel route is very risky and usually pursued by people with a much bigger personal wealth. Its also easy to get sucked into spending more time than u intended on these investments because its your profession - which then reduces your return because you are essentially "working".
Since you later say that you travel/live out of the country, stay FAR away from rental real estate. No way on earth that an individual piece of rental real estate is less risky than a basket of stocks in my mind.
If I were you, I'd stay away from any store of value that is dollar denominated (other than perhaps TIPS), as I believe that the US will have to devalue the dollar to pay its debt. That means oil/metals/commodities, or perhaps easier/safer, profitable companies whose profits are not predominantly made in US dollars. (It's fine or even good if they are repatriated into weakening US dollars.) Ideal would be a company with revenues in foreign currencies and expenses in US dollars.
If you were staying put, I'd agree with the buy real estate to live in as a anti-dollar hedge and if you wanted to live in the 2-4 unit type of housing, that would be even better. But leaving the country for long periods of time: forget about it.
If I were you, I'd stay away from any store of value that is dollar denominated (other than perhaps TIPS), as I believe that the US will have to devalue the dollar to pay its debt. That means oil/metals/commodities, or perhaps easier/safer, profitable companies whose profits are not predominantly made in US dollars. (It's fine or even good if they are repatriated into weakening US dollars.) Ideal would be a company with revenues in foreign currencies and expenses in US dollars.
If you were staying put, I'd agree with the buy real estate to live in as a anti-dollar hedge and if you wanted to live in the 2-4 unit type of housing, that would be even better. But leaving the country for long periods of time: forget about it.
This is my take on investing.
Fact 1: Most professional investors do not beat the market.
Fact 2: The market has returned on average 12% for large cap stocks, 18% for small cap stocks year-to-year (#s are not adjusted for last recession, but discount 4-5% if you want)
Fact 3: You are not a professional investor.
With those facts in mind, I have found that the best expected value for an investment return is simply to dump all the money into a mix-bag of ETFs that leverage the market (they pretend to borrow money so you gain double or lose double the market rate)
DDM, QLD, MVV, etc.
To balance that out (hedge) with the weakening US dollar and shift in world powers, I would probably also throw some money into an emerging markets ETF and/or China/India funds.
But, as a caveat, I am personally invested in nothing b/c the startup life is the riskiest investment anyone can take (generalized), and my hedge against that is to keep the rest of my money safe in CDs and online savings accounts.
Fact 1: Most professional investors do not beat the market.
Fact 2: The market has returned on average 12% for large cap stocks, 18% for small cap stocks year-to-year (#s are not adjusted for last recession, but discount 4-5% if you want)
Fact 3: You are not a professional investor.
With those facts in mind, I have found that the best expected value for an investment return is simply to dump all the money into a mix-bag of ETFs that leverage the market (they pretend to borrow money so you gain double or lose double the market rate)
DDM, QLD, MVV, etc.
To balance that out (hedge) with the weakening US dollar and shift in world powers, I would probably also throw some money into an emerging markets ETF and/or China/India funds.
But, as a caveat, I am personally invested in nothing b/c the startup life is the riskiest investment anyone can take (generalized), and my hedge against that is to keep the rest of my money safe in CDs and online savings accounts.
Keep in mind there is always overhead. There's no such thing as a cash machine that requires no maintenance.
I'd look at high dividend yield stock that pays out monthly (6% yield or more). This will give you monthly income with minor hassles, since the companies are large. Unless you are a fantastic investor, don't look for capital gains (making money off stock price increases) because there's lots of speculation: http://simoniqe.wordpress.com/2009/10/25/how-to-not-lose-mon...
Domestic oil pipeline companies are a good bet because they pay high dividends and are stable in price since they get paid no matter what. Investing in oil is an ethical dilemma but there are domestic oil companies that are better. PIF.UN is an example of a domestic Canadian one that pays about 10% monthly dividends with no hassles, but if in the US you must never trade in other currencies. Preferred stock also provides a stable price and in this economy you can easily get 10% or more monthly div's. Investigate DDR.PR.G or other Real Estate Investment Trusts (REITs) if you like the real estate angel. Be careful if the yield is above 12% because it could be that the stock's price is falling, which inflates the yield %. I AM NOT A CERTIFIED INVESTOR. I AM A STUPID PROGRAMMER WHO FOUND THESE STOCKS IN IDLE TIME. DO YOUR OWN RESEARCH BEFORE BUYING!
A great resource is Stock Chase: http://www.stockchase.com/ It's like a Twitter but only from professional investors.
Both real estate and web acquisitions have little daily work but are very interruptive. You have leaks, storms, tenants causing problems and for the web, downtime events or security updates that often the need attention of an owner at 3 AM at night.
"I could imagine for example buying existing web sites that have proven ad revenue" I've gotten burned bad on small website acquisitions. There is full time work involved for many months in terms of at least ensuring the acquisition is worthwhile, and often without dedicating workers full time to deal with it, things go south. Owners claim they do little work to maintain it and this is generally false.
I'd look at high dividend yield stock that pays out monthly (6% yield or more). This will give you monthly income with minor hassles, since the companies are large. Unless you are a fantastic investor, don't look for capital gains (making money off stock price increases) because there's lots of speculation: http://simoniqe.wordpress.com/2009/10/25/how-to-not-lose-mon...
Domestic oil pipeline companies are a good bet because they pay high dividends and are stable in price since they get paid no matter what. Investing in oil is an ethical dilemma but there are domestic oil companies that are better. PIF.UN is an example of a domestic Canadian one that pays about 10% monthly dividends with no hassles, but if in the US you must never trade in other currencies. Preferred stock also provides a stable price and in this economy you can easily get 10% or more monthly div's. Investigate DDR.PR.G or other Real Estate Investment Trusts (REITs) if you like the real estate angel. Be careful if the yield is above 12% because it could be that the stock's price is falling, which inflates the yield %. I AM NOT A CERTIFIED INVESTOR. I AM A STUPID PROGRAMMER WHO FOUND THESE STOCKS IN IDLE TIME. DO YOUR OWN RESEARCH BEFORE BUYING!
A great resource is Stock Chase: http://www.stockchase.com/ It's like a Twitter but only from professional investors.
Both real estate and web acquisitions have little daily work but are very interruptive. You have leaks, storms, tenants causing problems and for the web, downtime events or security updates that often the need attention of an owner at 3 AM at night.
"I could imagine for example buying existing web sites that have proven ad revenue" I've gotten burned bad on small website acquisitions. There is full time work involved for many months in terms of at least ensuring the acquisition is worthwhile, and often without dedicating workers full time to deal with it, things go south. Owners claim they do little work to maintain it and this is generally false.
Real estate and business investments are illiquid, often hard to value, and require constant work. Consider the stock market instead. I like ETFs:
spy dia qqqq uso dba ung tlt jnk slv gld ewa adre fxi
$200k of JNK provides >$2000/mo interest income.
Of course, you should diversify. Follow macro trends, use multi-week or multi-month investments, don't daytrade or try to pick individual companies. Aim for long term capital gains.
Use tight risk control (trailing stops etc). I highly recommend automated trading as it reduces human emotional errors. Run a model real-time (rather than backtesting) before using it on real money. etc.
spy dia qqqq uso dba ung tlt jnk slv gld ewa adre fxi
$200k of JNK provides >$2000/mo interest income.
Of course, you should diversify. Follow macro trends, use multi-week or multi-month investments, don't daytrade or try to pick individual companies. Aim for long term capital gains.
Use tight risk control (trailing stops etc). I highly recommend automated trading as it reduces human emotional errors. Run a model real-time (rather than backtesting) before using it on real money. etc.
"I am a developer, isn't there some sort of investment more suitable for me"
You've answered you're own question, you're a developer. Invest in what you love doing. Invest in the area of your skills and knowledge.
If you dont' know a lot about real estate, and don't have much desire to learn, then investments in real estate are likely to go south for you.
I second the recommendation to invest in yourself, that's the one investment anyone can make that will always give a good return.
You've answered you're own question, you're a developer. Invest in what you love doing. Invest in the area of your skills and knowledge.
If you dont' know a lot about real estate, and don't have much desire to learn, then investments in real estate are likely to go south for you.
I second the recommendation to invest in yourself, that's the one investment anyone can make that will always give a good return.
Renting out a house is a lot of work and a lot of risk. I have rented out a house to some free loaders and they destroyed my house causing more in damage than they ever paid in rent and causing me a lot of work and hassle. I do not believe renting a house is less risk. It's also a lot of work because you have to find renters, repair the house or find a management agency, etc. Consider that option very carefully.
Being a landlord is a serious responsibility. Don't take it lightly: you're responsible for people's housing.
If I had 200k lying around, I'd start looking at franchise opportunities. Most McDonald's restaurants make more than most software startups (ducks!).
If I had 200k lying around, I'd start looking at franchise opportunities. Most McDonald's restaurants make more than most software startups (ducks!).
1. Max out investment in yourself first of all - better food, accomodation, time saving stuff...
2. Keep away from anything stock-market related - there are 2 types of people there - those who earn for living there and who feed them.. you are not the former 100%...
3. Get mortgage ( don't pay in cash everything ) apartment and rent it out - pay the reminder with cash and in 20 years you will have it for half price for your children.
4. Put the rest of your money in 2 different banks - hassle free, some %, liquidity when you will need it when you done with #5...
5. Start to learn about investing ( google passive income ) - you are really abnormal person if you got it to 200K and don't know what to do next.
2. Keep away from anything stock-market related - there are 2 types of people there - those who earn for living there and who feed them.. you are not the former 100%...
3. Get mortgage ( don't pay in cash everything ) apartment and rent it out - pay the reminder with cash and in 20 years you will have it for half price for your children.
4. Put the rest of your money in 2 different banks - hassle free, some %, liquidity when you will need it when you done with #5...
5. Start to learn about investing ( google passive income ) - you are really abnormal person if you got it to 200K and don't know what to do next.
Collectible plates from the Franklin Mint. They're not guaranteed to go up in value, but all the other ones have.
Invest in Electric Battery Maker and distributor (Battery for Car)...over the next 5 to 10 year....10 fold
1) pay off your debt
2) buy a 2 - 4 unit apt. live in 1 unit. rent out the rest.
3) invest in your self (certification/training/mba/etc)
Thanks for yours and all the other advice given here.
I guess I should have clarified that I am not currently living in the US. I don't have debt and education is free in my country, but unfortunately I'm more into creating web stuff than studying, although I am (very very) slowly getting my masters. Buying a place for my own use doesn't really apply, because it is very likely I will move to another country soon.
I noticed there are some nice companies out there holding properties and paying dividends every quarter, for example ADC, GTY and PEI. Can't think of any reason why I would buy an apartment to rent out instead of just buying stock in these companies, considering they seem to be getting better bang for buck for their real estate than I could. Would be nice to find something like this not tied to USD though.
I guess I should have clarified that I am not currently living in the US. I don't have debt and education is free in my country, but unfortunately I'm more into creating web stuff than studying, although I am (very very) slowly getting my masters. Buying a place for my own use doesn't really apply, because it is very likely I will move to another country soon.
I noticed there are some nice companies out there holding properties and paying dividends every quarter, for example ADC, GTY and PEI. Can't think of any reason why I would buy an apartment to rent out instead of just buying stock in these companies, considering they seem to be getting better bang for buck for their real estate than I could. Would be nice to find something like this not tied to USD though.
Found non-US real-estate companies. In Nordic stocks, I found Wihlborgs, Klövern and Citycon that each have yield of over 6%. I now feel I will invest in a mix of these instead of buying a single property myself.
It's still a lot safer to diversify and not just buy stocks in real estate in your country. Better to diversify it at least a bit by splitting the money e.g.
50% Nordic Real estate
25% European Real estate index
25% US Real estate index (E.g. Vanguards' REIT Index VGSIX)
Ps. I am not living in the US either.
Ps. I am not living in the US either.
I've been thinking about buying an apartment to rent out, since it would be less risk than stocks, but better than a bank account (seems you could conceivably make around 4% per year on one). But it seems a bit silly, I would have to deal with renters and issues with the apartment, which is not my core skill. I am a developer, isn't there some sort of investment more suitable for me?
I could imagine for example buying existing web sites that have proven ad revenue, assuming there are some owners that are risk-averse enough to sell. Or, what other options are there?