financial pondering, or "how can i profit from this?"

[rmd]

so, we're heading into some credit-related panic, financially. the question is, depending on how things go, HOW TO PROFIT FROM THIS. or, you know, HOW TO PROFIT IN GENERAL RIGHT NOW.

more specifically, i've got a few thousand dollars to throw into experimental investments, so i'm pondering what to do to with it.

i'd rather not toss it into my 401(k) to max it out as i'd like to keep it accessible, although it doesn't have to be cash-levels of liquid. i figure i'll end up doing something ranging from "buy a single share of BRK.B" thru "buy more shares of index funds" to "buy gold, silver, and ammo to stash in my secret bunker in the REDACTED wilderness", but i was curious what my friendslist had in the way of suggestions.

i'm okay with some risk, but only finite risk.

thoughts? suggestions?

thanks!

Comments

[laurenpburka.livejournal.com]

There are web sites (sorry, don't remember names) that allow you to loan money to people. Loans are broken up according to risk and spread out so your money isn't in all one loan. Kind of a cool idea, really. I've thought about it a bit.

[rmd.livejournal.com]

yeah, i actually set up an account on prosper.com and loaned out a few hundred bucks, all told. one of them defaulted and went to collection, the others are on time so far. (it's, like, $50 per loan.)

an interesting experiment, but i don't think it's actually a solid way to make money yet.

[wotw]

If you're looking for thrills, I can't advise you. But if you're looking
for the largest possible return associated with any given level of risk,
don't even think about anything but bank CDs (or T-bills) and index funds.

[lil-brown-bat.livejournal.com]

Is it all about making dollars, or is it about how to profit? Because each question has a different answer, as far as I'm concerned.

[rmd.livejournal.com]

it's true! they are different things. they can be related, however.

ideally, i'd like to find something to do well and do good. :-)

i've been looking around at "socially responsible" funds, for instance, but i haven't got any favorites yet.

[rmd.livejournal.com]

that's the sort of thing i'm doing with the bulk of my liquid funds. and i'll probably end up just branching out into different funds with this money, but i figured i'd throw it open for random suggestions in case something sounded interesting that i hadn't been looking into yet.

i know some folks who have a much higher tolerance for risk in investing than i do, but they also spend a lot more time working on that stuff than i am willing or able to do.

[wotw]

High risk tolerance is not a good reason to look for offbeat investments.
It is instead a good reason to invest in index funds with borrowed money.

Unless you have some real inside information, investing in index funds with
borrowed money will get you (on average) higher returns than any other
equally risky strategy.

[prock.livejournal.com]

read my last post

[klingonlandlady.livejournal.com]

If real estate plummets and you have cash, buy real estate

[rmd.livejournal.com]

that would be either a really really bad plummet, or a whole lot more cash than i have at the moment. :-)

[rmd.livejournal.com]

actually, your springtime for bears post is one of the things that made me think to post this to lj.

[deguspice.livejournal.com]

I was thinking of suggesting looking for a stable and under valued commercial mortgage company. If you're willing to be patient, it should pay off in the long term.

I've been considering
Anthracite Capital (http://finance.google.com/finance?q=AHR) (they're controlled by Blackrock), but it already may be too late to make a profit from the crisis with them. Yesterday they opened nearly a dollar higher (~10%) than they closed the day before.

[chhotii.livejournal.com]

I'm thinking about this myself at the moment-- of course, question #3 is "how is the rental market doing"? Because real estate should really earn its keep monthly. Any insights on that question?

[rmd.livejournal.com]

the rental market around here was getting pretty sluggish, with rents dropping a bit and definitely lagging behind market value for buying a place. but as the home sales market has been cooling off, it looks like the rental market is finally starting to perk up a bit.

[rmd.livejournal.com]

i've been looking around at some of the funds listed at http://www.socialinvest.org, for example. they've got a breakdown of what a fund does and does not intentionally invest in (so if i'm really uptight about, say, tobacco but don't care about animal testing, i can invest accordingly)

[i-leonardo.livejournal.com]

steal underpants.

[lil-brown-bat.livejournal.com]

Okay, well, that's still about dollars, though. My thought was that you might want to consider investing the money in yourself. Rita Mae Brown said through several of her characters, "If I put my money in my head, no one can take it from me." Acquiring new knowledge, skills or experiences can enrich you in both the literal and the figurative sense -- for example, a lot of people I know spend a lot of money eating out or buying prepared foods because they don't have decent cooking skills. That's a pretty simple and pragmatic investment; there are obviously many others that might have less of a monetary return, but more of a return in terms of enriching your quality of life.

Might as well keep you money in a mattress ...

[paradoox.livejournal.com]

IMHO bank CDs are just about worse than keeping your money in a mattress. At least in a mattress you have ready access to the money. If you want to be conservative, I'd suggest ING Direct or one of funds from the like of Dreyfus, Fidelity, or TRPrice.

[rmd.livejournal.com]

aha! interesting. this is also a fine way to profit.

i think at the moment i want to focus on making time to do things i want to do rather than learning new stuff to do. (i'm on call at the moment so i need to stay close to home. one of the things on my list of stuff i want to do today is finally getting around to hemming some pants i've had for months -- i've just been folding up the cuffs when i wear them. also, i think it's time to start crocheting the border for a baby blanket i'm making. otherwise, i'd probably have listed going walking around somewhere with less pavement and more trees, since it's been perfect "meander in nature" weather for much of the weekend.)

there are some self-investment things i've been working on and plotting, but none that need much money immediately.

[rmd.livejournal.com]

STEP THREE: PROFIT!

[miss-chance.livejournal.com]

I like this way of thinking a lot. Now, of course, I am notoriously stupid about money, but investing in happiness, I'm not so bad about.

So, having read through your other comments, about wanting some time to do this thing or that, I wonder whether the money you have could be spent on time. IE, could you approach your employer with a plan for a four-day week for six months. Or take some unpaid leave that would be equivalent in salary lost to the amount of money you were thinking of investing?

If the answer to the above is "no" then could you look at the amount of money you have to invest over a period of time (you have $x every $n months) and look for a different job that paid you less, but had more slack time (maybe no on-call, or maybe more vacation time in exchange for the lower pay)?

Just some thoughts riffing on the above comment. Like I said: pretty ignorant about money, pretty good at happiness.

[keren-s.livejournal.com]

Mike has made some SOLID money actually. And fairly quickly. Write him for the site hes using and his lending strategy (he is not on LJ).

Re: Might as well keep you money in a mattress ...

[frotz.livejournal.com]

I used to think thus, but then I looked at the modern-day CD terms offered by a local bank (Cambridge Savings) with some decent rates posted. I can cash out any or all of it early, and I'm out only the last month's worth of interest on only the portion I withdraw.

Terms undoutedly vary, but I find it an advantageous way to keep some ready capital.

Re: Might as well keep you money in a mattress ...

[sethg]

A financial-planner friend of mine told me that banks will offer Roth IRA accounts where the underlying security is a CD instead of a mutual fund. This is a good place to put your "in case of unemployment break glass" fund, because if you never need to use it, then the interest will keep accumulating tax-free; if you do need to cash in the CDs, then you can get the principal back tax-free; and even if the market goes completely kablooey, you are protected by the FDIC.

[sethg]

I have some of my IRA money in the Vanguard REIT Index Fund. A REIT is a Real Estate Investment Trust, a company that invests in commercial real estate. Commercial real estate isn't exposed to the same risks as home mortgages, but rising interest rates and general market anxiety are still going to take a bite out of this fund.

In general, the minimum investment on a Vanguard IRA is $3,000. If you already have money vested in a 401k account, you can roll it over into an IRA, although the fund management may not exactly be forthcoming about how you can ask it to let go of your money.

[sethg]

Invest in canned food, diesel fuel, and ammo.

Just kidding.

I'm a big fan of A Random Walk Down Wall Street, which advises to not even try to time the market; amateurs (and even pros) who try to do this have a nasty tendency to sell at the bottom of the market and buy at the top. So the most important thing is to keep a well-diversified portfolio where the balance of high- and low-risk investments matches how soon you expect to cash in, and to concentrate on index funds with low fees. (The rule of thumb I heard is to take your age and tack on a percentage sign; that's the proportion of your portfolio that should be invested in something other than stocks. For this purpose, REITs--see upthread--count as stocks.)

I'm also a big fan of Vanguard, because, well, they have index funds with low fees. In general, any mutual fund that's charging you more than 0.5% per year is shafting you.

[charleshaynes.livejournal.com]

I agree with WoTW. In theory you can get any point on the efficient frontier by a mixture of risk free investment (T-Bills e.g.) and leveraged risky investments. Unmanaged index funds are (IMO, and in theory) the most efficient way to get a particular flavor of risk profile.

Unless you're talking >US$1M I'd just put some in into a total market index fund and some into a money market acct. If you want to diversify I'd look at adding a foreign index fund.

I personally would not invest in US real estate at this time. (And in fact I have sold all of mine.)

[babasyzygy.livejournal.com]

Me, I'm giving very serious thought to buying a share in a liquor store.

[rmd.livejournal.com]

I personally would not invest in US real estate at this time.

yeah, i don't want more real estate at the moment. not only is it risky, but i've got a whole lot of equity tied up in that already and don't really need more of the same.

[rmd.livejournal.com]

there's always VICEX, the vice fund (http://finance.google.com/finance?q=VICEX), although it includes tobacco-related businesses.

[lil-brown-bat.livejournal.com]

Then, as miss_chance suggested, think about ways of turning money into time. Or here's another thought, think about investing by supporting institutions and services that you use, or that you expect to use down the road. For example, I support my local VFD, they being the ones that will put out the fire if my house ever decides to burn, and when I've got some money to spare I often kick it in the direction of Hospice, which is something I hope will be around for me when the time comes.

[srakkt.livejournal.com]

What about some of those sexy International Mutual Recovery funds? I think both Franklin and Dodge and Cox offer them.

[klingonlandlady.livejournal.com]

It's not guaranteed, and rather based on the desirability of your area, but generally as people can't afford to buy there will be more renters per unit, meaning rents should be pretty stable and maybe go up.

[babasyzygy.livejournal.com]

Well, large funds like that have a rather pathetic rate of return compared with a well-functioning small business. Small businesses have a higher risk, of course, but I have a very high degree of confidence in the person who'd be managing it (the same person who managed my family's ALF - she's found that she hates managing larger facilities for a large corporation).

One store I'm looking at is listed at $275k (including liquor license and 2 weeks' training, but not including inventory - that's a separate negotiation), and reportedly nets $4+k per moth. The devil's in the details of course, but that's not an unusual ROI for the liquor store listings I'm looking at and seems to have a lot of room to grow - it's in a newly developing area of Tampa.

(I hope I'll be able to do some wine tourism as tourism, too - I really want to import some New Zealand Rieslings, I have fallen in love with them and they're hard to find in the US.)

If I do go for this, I'll be getting all of my non-IRA retirement money out of the market - ie, selling AAPL after buying it 6 years ago. It seems like a decent time, more or less ... it's time to turn that virtual money into an income stream before Jobs gets hit by a bus.

I haven't followed much conventional wisdom as regards investing, but it's worked for me. Whenever I have followed it, I've regretted it bitterly.

Anyway, it's possible that I'll be looking for other people to buy into it - assuming everything pans out to my satisfaction, I haven't decided yet about how I want to raise the entire amount, bank loans can be a complete circus.