Now that it's bonus time for many people, I figured it would be a good time to ask an investment question. Since the stock pick question has already been taken, I wanted to throw out best Asset Class or Sector.
As I enter my thirties, I am starting to have more money than ideas. Besides that, asset valuations are pretty darned high, at least in US equities-- we are no longer in the dark ages of 2009 when dinosaurs roamed the earth, analysts walked uphill both ways to work, and equity was trading at 12x earnings. The S&P 500 is at about 26 x earnings today, and small cap value isn't much cheaper than that. Treasury yields are up modestly since the election, but 2.4% on the 10-year still isn't anything to get excited about. A lot of stuff looks expensive, but there are probably still some great investments out there.
To help structure this, don't pick a specific security, but feel free to specify an asset class, a business opportunity, a commodity, a sector, a country, a currency, or a strategy (value, low vol, etc.) Try to explain the rationale behind your pick.
Non-traditional investments are particularly welcome, but we have to make this relevant for the typical Wall Street analyst or associate. So try to pick something with a minimum investment at or below $100K. That said, anything from buying a condo to a food truck to refinancing to a shorter term mortgage to putting money into an alternative investments fund is welcome.
Now to fully disclose, I'm in my final year at university studying Physics and am due to start a PM internship at a >£300Bn AUM AM this summer. But here are my two cents:
As you mention non-traditional investments I would suggest a few options: - Crowd funded start ups (Specifically - Challenger Banks) - P2P Lending (Mortgages, personal loans, SME)- P2P Lending (Mortgages, personal loans, SME) - Microbreweries - Indonesian food (it will be all the rage this year! especially in NYC/West Coast US)
Challenger banks are growing and fast - in the UK alone the PRA has granted 13 new Banking licenses since 2013 and whilst this currently won't affect the large high-street banks a huge deal - it will in the future. Especially if high street banks products and customer service as well as lending ability remain poor. Challenger banks such as Monzo and Atom are providing a superior personal banking product - the high street banks seem to not have a response. Additionally most challenger banks intend to start lending to SME/Personal once they are at the right point in their business cycle. I personally believe there is a great opportunity to generate high returns, especially because if the company (especially fintech) is crowdfunding they tend to be backed by PE. Full disclosure: I was lucky to be one of the 1000 people that invested in Monzo last year (a small amount but as a student did my best!) - I'd say this is my high-risk high-return option.
I wrote this as a break from revising for my finals, but I will come back and complete it if there is interest :)!
I think the end of government gridlock in Washington bodes well for Keynesian stimulus, which bodes well for resource demand. So I'm also betting on resources. To be sure, this doesn't necessarily have to mean oil. Some of the wind or solar yieldcos might work just as well.
Real estate by the new 96th street Q subway stop on the Upper East side of Manhattan. It is a relatively cheap/underdeveloped area and with the new Subway, I would be shocked if the area didn't pick up drastically in the next few years. Wish I had the capital, it's a slam dunk
That's a really good idea although I wonder how much the real estate market already reflects this.
I'm also a little concerned about how much foreign capital has bid up the NYC condo market-- and what will happen if China lets the Yuan float.
It's probably worth looking into.
IP, this is more than $100k minimum at most places, but look into private debt (not lending club, I described it in my thread here: alternative lenders...). if you're not worth a couple mil, you could always buy shares of BDCs after doing the due dili. they're very volatile but the story is the same.
disagree on managed futures. the best ones you can't get access to at $100k or less, and I have my doubts about how those will work in the 40 act space. I like them, but not for a large allocation.
couple themes I think will play out over the next several years:
how to play:
look at high active share in global value, you don't want to just buy FEZ, HEDJ, or EFA. there will be large dispersion between winners and losers in europe.
look at small and mid cap, and stick to quality. think of yourself as a private equity investor, maybe looking at a company that has stellar numbers but just can't seem to take it to the next level. one of two things will happen (assuming no big US recession): they'll get acquired, or they'll get financing and grow meaningfully. again, don't just buy the index here, you need to be selective. people rushed into the indices last year on the notion that Trump will be bad for multinationals and since smid stocks export less, they'll benefit more. the trouble is, I believe we're near the end of a credit cycle, and when that happens, you'll see bankruptcies, defaults, higher debt service ratios start coming into play, and the indices don't screen out the crap in small and mid cap, so you'll be left holding the bag if you aren't selective.
two other things I'm playing are the big tech transformation and infrastructure. nearly every big tech company has their cash cow and other bets, and they're all in competition with each other. for example, you could say ORCL, IBM, AMZN, and MSFT are all in the cloud space. well I have no idea who's going to win, but I know that some will win, and some will lose. I like big tech right now, they'll be big beneficiaries of tax reform (cash parked overseas), they have the ability to buy the next unicorn, and if their moonshot bet fails, they have a cash cow to pay you a dividend while you wait.
infrastructure can be played a number of ways, but particularly I like C corp pipelines. lower yield but can retain more earnings and aren't as interest rate sensitive (speaking to my pessimism on bonds).
on emerging markets, I think again this is a case where you have to go active. I hate venezuela, but love india. china is growing slower, but what's to stop indonesia from massive growth? valuation is down, and there's more bad press than good, and the contrarian in me thinks EM is ripe for a turnaround, despite all the noise with trump.
addressing trump & EM, my thinking is the jobs that are "brought back" are small in number, big in publicity. most jobs have been lost due to automation and tech advances. I have to believe that the dealmaker in trump doesn't want to see rampant inflation that would happen if we started making everything in America. I also have faith that he realizes that a trade war is bad, and that trade will continue to happen, if only structured differently. EM will be good, but not if you buy EEM/VWO, you have to go active.
wanted to create a separate post for this, addressing "other ideas." I'm not well versed on real estate, but my experience has been this. if you want to make money on rentals, a few things need to happen:
otherwise, it ends up being a relatively low return compared with other asset classes that don't require nearly the work/attention.
land is a crapshoot, I'd stay far away
very odd idea but I know it works well: beach rentals. I grew up by a beach and went to school by one, beach rentals are a great business. you can rent chairs, umbrellas, kayaks, bikes, surfboards, paddleboards etc., and absolutely clean up. I'd recommend kayaks, surfboards, paddleboards, and lounge chairs first, umbrellas and bikes tend to get the most wear and tear. if you can work out a deal with a local shop, maybe it's worthwhile. no idea how it works up north, but in the southeast it's a good gig. all you need is to pony up the cash and hire some high school or college kid to work it during the day for you.
stay away from restaurants, terrible margins
craft beer is too saturated, stay away
could look into franchising, but I'd buy something already established, like a boutique gym, nail salon, hair salon, stuff like that. you want turnkey, and the best thing about those types of places is they already have established clientele but may just need some capital.
Nobody throwing out long bitcoin yet? The best performing asset class of 2016. No central bank to interfere, limited supply by design. Big banks investing in cryptocurrncy infrastructure. Volatile though
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