Hi,
I recently inherited a sum of money from my aunt, just started studying for CFA but have no idea what I’m doing. I’m 21 and have $1700 in a credit union, delivering pizzas and uber, finished with college but interested in flight school. Average monthly expenses are $1000 plus or minus $400. TIA!
wtf is this? why are you taking the cfa if you are interested in flight school? why are you posting a comment here that is much more suited for reddits personal finance section.
its not like youre going to collect much interest on 46k frankly (3% yield on 10yr would bring a whopping 1400 annually pretax)
just throw it in VOO and dont touch it.
Stocks are too risky now, better off putting it all in bitcoin.
Agree – and I think most other charterholders would concur.
Do you have any debt? Pay that first. There’s no point investing if you’re paying 9% on student debt and 20% on credit card debt. Since you have no idea what you’re doing, focus on improving your financial literacy. Read books on personal finance (rich dad poor dad, and fool and his money), follow personal finance pages on reddit/quora. Passing level 1 will definitely help. As for investing, don’t do dumb things like buying bitcoin or taking a “stock tip” from a broke brother-in-law. Educate yourself, and then make a decision for yourself on what to do with your money.
He meant VXX
Buy SSO or UPRO and leave it there until you’re 30. You can obviously tolerate some risk, but keep in mind that you have only $45k, and it’s not going to be like $1 million any time soon; if you are aiming for those kinds of gains, you’re probably taking too much risk.
Thanks for all the advice so far! SSO and UPRO are down a lot more than VOO or VXX today. Should that be a red flag?
One thing is that is a factor is that we need to get out of my mom’s bf’s house since he’s abusive to her. Like, not physically, but emotionally. She can take from her retirement plan for a down payment, but is it better to leverage the inheritance? Prob only need like 25 thousand for a mortgage to 200 thousand or so, but it cannot be a moveable home. Don’t want us to be house poor though. So, I want to invest for gains, but have this consideration as well. TIA!
You couldn’t even last a week away from this place, Turd?
+1 to that! I was thinking the same thing.
Agree on paying your debt first. Anything above 6 percent is bad. In terms of investing. Everything is expensive. Stocks real estate bonds. You should prolly get an etf cuz 50k is nothing. 50k is also just enough for a down payment on a 250k house.
My recommendation is for you to get a better paying job before buying a place. Renting is prolly a better idea while you up your income and wait for a crash. Mortgage rates are like 5 percent now so leverage is less of a good idea.
“SSO and UPRO are down a lot more than VOO or VXX today. Should that be a red flag?”
Yes, both of these will have lost more value than VOO (Vanguard 500), or VXX (which should be up by some amount). However, you care more about long term returns than one day returns.
The conventional argument is that leveraged ETFs shouldn’t be held for the long term because they are designed for daily trading. Many people recite this belief without testing it on historical data.
However, the fact of the matter is that every study I’ve seen with historical data shows that the leveraged participation to positive returns outweighs higher costs and volatility drag for these ETFs over the long term. Leverage becomes detrimental at some point, due to high drawdowns. However, there is some optimal daily leverage - about 2x, based on the article below:
http://ddnum.com/articles/leveragedETFs.php
Here are some other writings by people who have actually done historical analysis:
https://seekingalpha.com/article/4119259-simulating-historical-returns-leveraged-etfs
Obviously, you’d want to avoid assets like these if you were older, but you are a young person with a long investment period to average out the returns.
Other stuff people said is correct. If you have debt, pay that first. Don’t buy a house until you are in a stable situation in terms of income and general finances.
lol interesting ohai.
anyways here is a bomb ass article. drawdowns are savage!
Yes, the drawdowns in leveraged products are obviously quite severe. However, it’s worth noting a couple of things from your article.
First, UPRO has recovered from all drawdowns in the studied period and has outperformed its unleveraged counterpart over its life.
Second, 3x leverage is not optimal, based on long term SPX historical data. If you held that much leverage through severe downturns, like in 2008, you still would have made money, but you would have underperformed SPX. However, if you had more modest leverage, like 2x, you would have beat SPX by a significant margin, even with the higher expenses of the leveraged product.
The article I posted above demonstrates this second result, along with the general insight that long term returns are not strictly decreasing or increasing with leverage, i.e. that there is an optimal point. Why did the author of your article focus on a 3x leveraged product and not a 2x leveraged product, i.e. SSO? It’s most likely because the returns would have blown out SPX and weakened his argument.
I also thought it was silly how he assumed people would create more and more leveraged products, even up to 20x. This would just be too volatile and expensive to run, and would be far from the optimal amount.
The final thing I would mention is that it’s possible to achieve partial leverage, for instance 1.5x, by proportioning your portfolio to something like 50% TLT or LQD and 50% UPRO. For someone with 20 years or more to invest, there is a very strong chance that this portfolio will outperform the normal market portfolio.
ETNs are the ish
SPLX + TLT
it takes ballz to keep that portfolio going all these years, you do that ohai?
dont buy bitcoin. buy ripple on leverage 100x. You can make 1m easy within 1 month.
I started putting money in SSO in early 2017. However, 90% of my capital is still in unleveraged assets. This is because I would have to pay significant capital gains taxes if I sold these now. If I had seen the research and had thought about leverage earlier, I would have put more money in leveraged funds.
I’ve read the research too and was using margin loans for the leverage. Is this better? These etfs use more leverage than the optimal margin loan, probably due to margin calls.
Margin loans are better if you get a good rate. I asked my brokerage, and they were at like 6%, which clearly would not have worked. You could also use futures, where you’d borrow implicitly at equity funding (libor + 20bp ish now) plus cost of carry of your margin. I’m still thinking about it, to be honest, but this approach will need a lot of maintenance with respect to rebalancing the position.
interesting bible verse to reference. When enrolled in flight school do you plan to learn to land?