What to do with money? Investment advice etc

12 months of living expenses in cash. No debt, no loans, no credit card bills, nothing. What do I do with the roughly $3,000 a month in extra cash flow I have?

I was thinking about buying rental property? (I don't live in NYC anymore) or should I just throw it all at Facebooks IPO?

Comments (79)

May 6, 2012

Facebook will trade 24x Sales. That is not overvalued to you? AAPL is looking cheap, rental property management is fairly cumbersome; what about a reit?

The difference between successful people and others is largely a habit - a controlled habit of doing every task better, faster and more efficiently.

May 6, 2012
May 6, 2012
Ultima-RDK:

Put it all on red. Do it.

http://www.metro.co.uk/games/809285-roulette-onlin...

This is effing crazy!! I felt a rush just reading about it.

I am doing this with one of my bonuses at least once in my lifetime.

May 7, 2012
Ultima-RDK:

Put it all on red. Do it.

http://www.metro.co.uk/games/809285-roulette-onlin...

Wow, that guy is either crazy, or has got giant balls.

May 6, 2012

You should be contributing at least your company's max matching % to a retirement account (if they offer one). That's a 100% return right there. Can't beat free money.

Wouldn't touch FB personally. Too many unknowns in the future for me to feel comfortable.

May 6, 2012

I was kidding about facebook guys....

May 6, 2012

Short EURUSD

May 6, 2012

SECfinance makes a good point--nothing beats saving when you're young. It's not at all sexy or gratifying (in the short-term), but equities will not give you consistent, inflation-beating returns until 10 to 20 years down the future.

SPDR S&P 500 (Ticker: SPY) and other ETFs are also good if you're dying to get into the game. For example, Ray Dalio's portfolio is 15-20% padded with these guys at any given time (Source: Absolute Return).

There are several types of real estate investing. You're talking about direct investment, which is very risky and uncertain given how opaque pricing is in that space. If you really want exposure, mhurricane is absolutely right. Real Estate Investment Trusts (REITs) are the way to go. They are congressionally-mandated to return 80-90% of taxable income to investors, and you do not have to worry about headache-inducing BS (such as maintenance of the property, administrative overhead, etc.). They have a risk-return profile that combines the best of equities and bonds, and are largely uncorrelated with the larger (corporate-driven) market. My Investments professor (former HF manager) loves Vanguard: https://personal.vanguard.com/us/funds/snapshot?Fu....
Good luck! Extra cash flow is always nice.

May 6, 2012

short treasuries

we are going to be downgraded in the next 8 months

May 6, 2012
blastoise:

short treasuries

we are going to be downgraded in the next 8 months

Haha, treasuries rallied the last time we were downgraded

May 6, 2012
blastoise:

short treasuries

we are going to be downgraded in the next 8 months

Remind me what happened to Treasuries the first time we were downgraded?

Oh, right...

May 6, 2012
nameback:
blastoise:

short treasuries

we are going to be downgraded in the next 8 months

Remind me what happened to Treasuries the first time we were downgraded?

Oh, right...

Can you list one country whose bonds rallied after a second

May 6, 2012

lol while looking up images for the post I came across the "bed bunker" http://craziestgadgets.com/2009/03/26/bed-bunker-i...

WSO's COO (Chief Operating Orangutan) | My Linkedin

May 6, 2012

Save your money in precious metals.

May 6, 2012

Rental property isn't a bad idea if you have the time to supervise. If you have the time and your job allows it, you can run a PA on the side. If not, just buy some ETFs.

May 6, 2012
jaschen27:

Rental property isn't a bad idea if you have the time to supervise. If you have the time and your job allows it, you can run a PA on the side. If not, just buy some ETFs.

My new job is now 9-6 and no weekends so I certainly have the time. What is a PA?

May 6, 2012
newfirstyear:
jaschen27:

Rental property isn't a bad idea if you have the time to supervise. If you have the time and your job allows it, you can run a PA on the side. If not, just buy some ETFs.

My new job is now 9-6 and no weekends so I certainly have the time. What is a PA?

PA = personal account

May 6, 2012

If you are at a BB, your company has a 401k retirement plan. Match your employer's contributions.

    • 1
May 6, 2012

Give regularly to a charitable cause that is close to you.

May 6, 2012

Short German bonds. Greece stopped listening to Germany and they are little spoiled brats (Greece) whose never going to go through the necessary austerity measures. Risky, but very profitable. Get in the CDS market though, make a side bet so you're not directly invested in it.

May 6, 2012
madmoney15:

Short German bonds. Greece stopped listening to Germany and they are little spoiled brats (Greece) whose never going to go through the necessary austerity measures. Risky, but very profitable. Get in the CDS market though, make a side bet so you're not directly invested in it.

WAT

Germany is the only place money in the EU is going at the moment. And after FRA and NL both look like shit due to their recent government switch-a-roo, Ger still looks decently stable, at least until elections next year.

As for CDS in itself, unless youre packing $1mm+ or using the dealer's firm as a PB, no dealer will give retail the time of day because you "want to buy some CDS". I'm assuming you meant they should invest in a CDS ETF no doubt.

May 6, 2012
zeropower:
madmoney15:

Short German bonds. Greece stopped listening to Germany and they are little spoiled brats (Greece) whose never going to go through the necessary austerity measures. Risky, but very profitable. Get in the CDS market though, make a side bet so you're not directly invested in it.

WAT

Germany is the only place money in the EU is going at the moment. And after FRA and NL both look like shit due to their recent government switch-a-roo, Ger still looks decently stable, at least until elections next year.

As for CDS in itself, unless youre packing $1mm+ or using the dealer's firm as a PB, no dealer will give retail the time of day because you "want to buy some CDS". I'm assuming you meant they should invest in a CDS ETF no doubt.

Agreed on the second point, but the first is debatable, with wide periphery spreads over bunds. Germany is so heavily reliant on exporting to other EU nations that austerity measures will be a significant drag on their output. I don't disagree with you, but I just don't think it's black and white in either direction

May 6, 2012
zeropower:
madmoney15:

Short German bonds. Greece stopped listening to Germany and they are little spoiled brats (Greece) whose never going to go through the necessary austerity measures. Risky, but very profitable. Get in the CDS market though, make a side bet so you're not directly invested in it.

WAT

Germany is the only place money in the EU is going at the moment. And after FRA and NL both look like shit due to their recent government switch-a-roo, Ger still looks decently stable, at least until elections next year.

As for CDS in itself, unless youre packing $1mm+ or using the dealer's firm as a PB, no dealer will give retail the time of day because you "want to buy some CDS". I'm assuming you meant they should invest in a CDS ETF no doubt.

First, imagine you are walking up a mountain and you're chained together with twenty other people and 3-4 people can't hold their own weight and are willing to quit and lay on the ground. How much farther do you think they are going to go up the hill? Germany can't pull the weight of the entire monetary union. I think you're looking at the situation wrong. Yes, yields are very low now, but that safety can't sustain for much longer.

  1. Yes, you're right but there are easy ways to find exposure without being directly related in the CDS market/or bonds. Any exposure shorting those bonds is going to be clutch. I see the explosion of the euro within a couple years.
Jun 20, 2012
zeropower:
madmoney15:

Short German bonds. Greece stopped listening to Germany and they are little spoiled brats (Greece) whose never going to go through the necessary austerity measures. Risky, but very profitable. Get in the CDS market though, make a side bet so you're not directly invested in it.

WAT

Germany is the only place money in the EU is going at the moment. And after FRA and NL both look like shit due to their recent government switch-a-roo, Ger still looks decently stable, at least until elections next year.

1 and a half months later look where smart money is going.

http://www.

May 6, 2012

The obvious is to stash money in your 401(k), at least until your employer's match. After that you can choose whatever you're comfortable with as long as you believe in it long term. I know people who have:

  • Actively traded a PA
  • Used a PA purely to buy equities and sell covered calls
  • Used PA to buy ETFs only
  • Used PA to buy dividend stocks only
  • Bought rental properties
  • Bought LOTS of gold
  • Bought other collectible assets

If you're going to buy rental property you need to be willing to actively manage that property for years (with a property manager it's unlikely that you'll make much/any $). Also, overestimate your expenses - insurance, repairs, vacancy, etc.... If after you consider all the variables rental property is something you want to do - go for it, but just know you will get a call at midnight about an issue sometime in the next 5 years.

Although, I kind of think Tim Ferriss comes off as a D-bag sometimes I really wish I had done more with my money when I was younger and not committed, specifically something like this:
http://www.fourhourworkweek.com/blog/2010/06/28/mba/

twitter: @CorpFin_Guy

May 6, 2012

Depending on what city you are in, I would buy some multi family right now.

In LA, for example, you will be able to get a turn key multi family property with a 6-8% CAP in a decent west LA neighborhood. You are looking at a safe investment, as a city like LA will always need apartments, especially in West LA. You will also get some nice appreciation in the future years. Interest rates are so low right now for multi family at around 3.5%... though this has caused cap rates to get pretty fucking low and multi family is a hot buy. You could save your cash another 2 years and wait for interest rates to increase as this will help cap rates come up... though if you finance you got the interest rate increase as well... but thats up to you.

Another route with real estate I like is a Full Service NNN bond backed anchor tenant property. For example, I would find a safe 10+ year lease Walgreens, Target, Fast Food joint with a 4-7% cap rate. You will not have to touch the property. You collect a monthly paycheck and all expenses are covered by the tenant, i mean literally everything.. if a car ran through the building then the tenant would pay for it. If you go this route then try to make sure you aren't paying arm and a leg for the price per SF of the building compared to the other buildings in the area.

May 6, 2012

Holy shit Apple does not look cheap. Read the intelligent investor by ben graham you will know what to do after.

May 6, 2012

http://seekingalpha.com/article/502991-spain-in-cr...
Not to mention, France just elected a socialist, not the best candidate for a balanced budget. You can add one more whose going to lay down while walking up the hill.

May 6, 2012

niki 4 life

RIGHT SWAGGON?!!?

May 7, 2012

One of the questions my ex-firm (ER) asked potential hires is what they do (would do) with their bonus.

We tried to find two things:
1. How responsible you are (not that relevant)
2. Your lifestyle (not that relevant)
3. How interested you are in markets/investing (VERY relevant)

Candidates who can pitch good/original ideas on certain stocks/sectors score well. Answer that scores zilcho is "i dont know" or "Ill think about it when I get there". Lifestyle and responsiility may be more inportant to AM/PWM. My friends in AM have a similar question that tries to suss out lifestyle

May 7, 2012

buy FB 9:30am opening day, sell by lunch time. Assuming your buy order gets filled it should be easy $$

Jun 20, 2012

^ Moot point. You could have shorted the 10year at just under 1.50% if you are such a clairvoyant as well. Woulda made 10bps or so.

Did you? I would bet not.

Jun 20, 2012

Lol, so because I didn't short treasuries, makes it a moot point on german bonds? I have no idea how you put that together.

Jun 20, 2012

Food for thought: useful diversification for someone in IB would be a position short the market in general. Remember that your bonus is tied to the Street's fortunes.

Jun 20, 2012

ya ok dumbass

Jun 20, 2012

I brought a few dry cleaners in various sections of Houston from a guy that ran out of capital.

Jun 20, 2012

banklove, you're not cut out for finance if you think the advice I gave is not absolutely correct in the very definition of diversification. Same reason people shouldn't own a lot of stock in the company they work for, regardless of performance incentives or whatever - if the company goes in the toilet, not only do you lose your job, you also lose your investment. Every asset you own and every incoming cash flow can be and is a source of financial risk, the point is to play them off of each other. Plus you'd be thanking your lucky stars if you poured a little bit of your first year bonus (paid July-ish) into a supershort fund and the market tanked a thousand points or so a month later. It is easy to be right in hindsight, of course.

Now, I'm not saying that it's not a losing bet by itself, because the market has trended up over the course of history and will probably continue to do so. But that doesn't mean it won't hedge your risk.

I'll agree that perhaps shorting the market is not extremely palatable, but a significant cash position would also reduce your exposure to the market risk in your bonus. Debt might not be a bad bet if you think the market has overreacted and you want to take advantage of high yields and low prices on some of the weaker paper.

Take it with a grain of salt, I'm extremely risk-averse by nature. Don't attack me for proffering an idea, if you've got none better.

Jun 20, 2012

ballyho makes sense. i was skeptical at first but hes not saying to short the entire market hes saying to hold some short positions as part of a diversified portfolio, particularly in financials (though i believe now would not be a good time to short financials as they potentially may be at a low. but if i wanted to short financials id buy the leveraged proshares etf SKF) i wouldnt keep a significant amount of my portfolio in this short position as its very risky to hold a short position for a significant amount time... maybe 5-7% should be allocated to holding shorts

Jun 20, 2012

ballyho makes sense. i was skeptical at first but hes not saying to short the entire market hes saying to hold some short positions as part of a diversified portfolio, particularly in financials (though i believe now would not be a good time to short financials as they potentially may be at a low. but if i wanted to short financials id buy the leveraged proshares etf SKF) i wouldnt keep a significant amount of my portfolio in this short position as its very risky to hold a short position for a significant amount time... maybe 5-7% should be allocated to holding shorts.

but i think options strategies would be a better idea to use for protection rather than holding a short position. i dont have the different spreads memorized but i know there a lot of possibilities out there

Jun 20, 2012

Ballyho is absolutely technically correct. I suspect the reason that most don't do this is because working in the industry gives you knowledge (maybe not technically inside, but very close - let's call it an advantage) of some investments. Also, with owning company stock, you do have inside knowledge so you'd be crazy not to own/sell it if you knew more than others (within the legal framework).

That said, it's probably just overconfidence by another name.

Jun 20, 2012

In a raging bull market, just randomly punt. In a crashing bear market, just randomly short. No knowledge needed. No skills needed. Market is irrational.

Jun 20, 2012

... what? the only part of that statement that made any sense were the last three words. yeah theres a bull market but oil inventories spike 3x expectations, i wouldnt want to "randomly punt" into an oil company stock.

and rarely is there ever a "raging bull" or "crashing bear" market, evn during the recent subprime disaster there were days when the market was up, i made money during that fiasco by buying on the bad days and selling on the good days, even if it wast he very next day. the markets are marked by high volatility in times of panic, rarely a straight plummet

Jun 20, 2012

here's the problem with being short. lets say you own rydex or something else that has 2 for 1 exposure short the market. the market rises 10%, then falls back to 0%. are you flat on your position?

Jun 20, 2012

I wont go as far as to call ballyho a dumbass but trampledmonkey, maybe. The market is comprised of a variety of companies with global exposure and . the fate of Wall Street is not always directly correlated to the state of the market (and vice versa). I think your concept of diversification is slightly skewed and regardless of Wall Street affiliation time/studies have demonstrated that market positions have consistently outperformed other assets classes on a risk adjusted basis (and thus should be held in a diversified portfolio).

Trampled, thanks for explaining the market it all seems so simple now.

Jun 20, 2012
junkbondswap:

I wont go as far as to call ballyho a dumbass but trampledmonkey, maybe....

Trampled, thanks for explaining the market it all seems so simple now.

I never realised the market was so complicated. Anyway, good luck with your SA interviews.

Jun 20, 2012

All my cash is in BEER and HOS, so no need to worry about diversi-ma-fication here.

Note: Above is a joke.

Jun 20, 2012

anybody invest in CDs?

Jun 20, 2012

CDs/Treasury Bills/Government bonds are supposed to be an essential part of any solid diversified portfolio, but honestly i dont mess around with that, if im holding onto anything for 6-12 months its an etf that tracks the S&P or large caps or something, im young and dont have a family to feed i can handle the risk

Jun 20, 2012

HSBC online savings. no time to manage a portfolio.

Jun 20, 2012

I might be the idiot in the room, but why go both long and short the same market? That's not really diversifcation. It's not really hedging either, unless your goal is make zero.

Diversification means you invest in something uncorrelated, not inversely correlated. Exposed to stocks? Buy real estate. Don't short stocks.

Did I just completely miss something?

Jun 20, 2012
Restructure This:

I might be the idiot in the room, but why go both long and short the same market? That's not really diversifcation. It's not really hedging either, unless your goal is make zero.

Diversification means you invest in something uncorrelated, not inversely correlated. Exposed to stocks? Buy real estate. Don't short stocks.

Did I just completely miss something?

If you use puts and calls, you're hedging against extreme volatility.

Jun 20, 2012

and no one said youre just as long as your are short. if 50% of your portfolio was long 5 stocks and 50% was short the same 5 then yeah obviously thats not diversification. but we're saying to leave a small amount of short positions, possibly in different industries. thats exactly what hedging is, holding long and short positions for protection.

Jun 20, 2012

The richest men in the world didn't get there by diversifying. They concentrated their holdings.

Warren Buffett: "Diversification is a protection against ignorance. It makes very little sense for those who know what they're doing."

Jun 20, 2012
yung_gekko:

The richest men in the world didn't get there by diversifying. They concentrated their holdings.

Warren Buffett: "Diversification is a protection against ignorance. It makes very little sense for those who know what they're doing."

Hubris is a wonderful thing, especially in first year analysts who have just collected their bonuses.

Jun 20, 2012
h4zin:

and no one said youre just as long as your are short. if 50% of your portfolio was long 5 stocks and 50% was short the same 5 then yeah obviously thats not diversification. but we're saying to leave a small amount of short positions, possibly in different industries. thats exactly what hedging is, holding long and short positions for protection.

Fair enough, however, if you decide that being in investment banking is too much exposure to the stock market, shorting the general stock market (or shorting financial stocks) doesn't seem right. Then you're making a different bet -- that your firm will outperform the market. If it doesn't, you lose even in an up market - or at least you give away your upside. Again, this is not really diversification, although it is sort of a hedge, but not a very good one.

I think the point was to give yourself some "career insurance" but this bet just exposes you more greatly to your own firm's performance.

Is anyone here actually buying S&P puts or shorting banking stocks to hedge against their career, or is this thread just a hypothetical exercise?

No hubris intended -- Obviously, I'm not an asset manager, or a hedge fund guy, but those of you who have better trading chops, feel free to set me straight.

Jun 20, 2012

It always cracks me up that banking analysts usually don't know sh!t about asset management before and after their analyst stints....

Jun 20, 2012
sternfox:

It always cracks me up that banking analysts usually don't know sh!t about asset management before and after their analyst stints....

Dude, its not that hard- Buy low, sell high

Jun 20, 2012

Whoever agrees with ballyhoe is a dumbass. I can't believe I have to explain myself, so I'm not.

Jun 20, 2012
banklove:

Whoever agrees with ballyhoe is a dumbass. I can't believe I have to explain myself, so I'm not.

Agreed. Ballyhoe's strategy will pretty much allow you to lose the most amount of money possible...

Jun 20, 2012
dklurfield:

Mutual Funds, ind. stocks/fixed income, derivatives.. alternative investment vehicles....?

I saw BEER and HOs and raise to Models and bottles.

Seriously, I like liquidity.

ING, Citi e-savings, HSBC all have good interest paying savings accounts.

I'm not keen on trying to time market downturns with puts.

dklurfield:

through ur company?

Yes. When I have a question I can look up staff in internal directory and bypasss 1-800 #s.

Jun 20, 2012

Mutual funds and exchange traded funds for me

Jun 20, 2012

I split it up this way, in order of fund flow (ie - max out 401k, then max Roth, etc depending on how much you are saving):

401k Contribution - Enough to receive the full employer match, no more (every paycheck)
Roth IRA - the maximum $5,000 contribution per year (one $416.66 each month - until you phase out above the income cap)
ING Savings Account - $5,000 emergency liquidity for a rainy day
Checking Account - Topped up to consistent $5,000 balance for every day expenses, ATM use, purchases, etc
Brokerage Account - Any additional liquidity is swept into my brokerage account for investing

Note that I have all of the above setup to flow automatically, so I spend very little time managing my liquidity - the money just ends up in the right places via payroll deductions and automatic recurring transfers.

Obviously the brokerage account ends up with a fair amount of cash in it. I invest about 25% in index funds, another 25% in sector specific ETFs (tech and agriculture for me), 25% in specific names that I have a long term thesis for, and reserve 25% for opportunistic investing (merger arb, event driven trades, investments in private securities, etc).

Jun 20, 2012
CaptK:

ING Savings Account - $5,000 emergency liquidity for a rainy day
Checking Account - Topped up to consistent $5,000 balance for every day expenses, ATM use, purchases, etc

These 2 are KEY, especially the emergency account which you do NOT under any circumstances touch. Good call having it in ING btw, which offers the best rate ive seen (online should be around 1%..)

I also keep some funds invested in PMs as, expecting inflation, those should take off even more than they already have in the past few months - just look at silver since QE2.

Jun 20, 2012

Pretty much what CaptK said for me.

Jun 20, 2012
  • Max out 401k to the match (every paycheck)
  • Rest goes into cash - I'd love to trade some single-stock names, but being in banking it's really damn hard (especially because we can't trade our coverage space - had an idea back in November that, if actionable, would have returned nearly 70%)
    Might start putting some money in ETFs though...
Jun 20, 2012

Best savings account rate I've seen online from a major institution without tons of strings is at AMEX - http://personalsavings.americanexpress.com - 1.3%

Jun 20, 2012

If you can I'd bump up the rainy day fund. One of my friends had $10k in the bank for his rainy day fund. He had to hire an attorney, cost every penny he had saved up (he eventually got it back from the govt), but the attorney he had just ripped apart the "case" against him. Of course, it helped that he was actually innocent of the crime.

Jun 20, 2012
Denver Monkeyannabe:

If you can I'd bump up the rainy day fund. One of my friends had $10k in the bank for his rainy day fund. He had to hire an attorney, cost every penny he had saved up (he eventually got it back from the govt), but the attorney he had just ripped apart the "case" against him. Of course, it helped that he was actually innocent of the crime.

If I had a major event like that, I could obviously liquidate my investments if I needed to in order to pay for a lawyer, medical expenses, etc. The idea of the rainy day fund at $5,000 is that I could absorb a relatively significant expense ($5k in checking plus $5k in buffer) before I had to sell my stocks. We could debate how big that rainy day buffer should be ad nauseum, but for my risk tolerance, $5k is the number.

Jun 20, 2012
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I'd rather die than be average and chances are I might