Short but sweet, if you had a disposable $20,000 USD, how you go about generating more capital? Securities, RealEstate, Entrepreneurship etc. with a timetable of <5 years.
The idea of a Coffee Can is simple: You try to find the best stocks you can and let them sit for years. You incur no costs with such a portfolio, and it is simple to manage.
Btw, I noticed you used to work at Opera. As you might have seen on the sheet, I recently invested in them. I'd welcome the opportunity to hear your perspectives on the company. Would you be open to a brief chat about the company?
I guess the question you should be asking, how much capital are you trying to generate and how much risk are you willing to take?
You talk about a 5 year timeline, do you want a nice 5% return annually for 5 years? End up with 25k. Then you're looking at safer investments into index funds or maybe even high yield bonds.
Do you want it to be 100k or a mil? Then you're looking at trying to pick horses in investments. What will give you 5x return in 5 years, probably picking a single or handful of assets that could see major return. Could be stocks or something crypto. You could certainly yolo it wallstreetbets style and buy GME/AMC/whatever you think is the next meme stock that will pop. Could potentially get that return tomorrow, especially if you bought options and get lucky. I sold a covered call last month, whomever bought it could have potentially made 66x in 2 weeks. Had that been you and your risk tolerance is insanely high, you could have been a millionaire from that 20k (yes, I sold a AMC call, covered of course).
Use Warren Buffet's famous quote: "Be fearful when others are greedy, and greedy when others are fearful." If you're reading an article about why XXX stock is great, it's already too late to get in (meme stocks might be an exception).
If it feels like you have to buy XXX stock NOW or the price will go up, it's already too late. Take a few days to mull it over. Never FOMO.
When to sell:
Set stop losses. I set a stop loss at -10%. Diamond hands is a tactic people tell others to use when they themselves want to sell.
If you are at the point where your gains are good enough that you want to take a screenshot and send it to your friend--this is a good time to sell.
EDIT: Because I realize I answered the question "How would you invest 20k in the stock market?" and not "How would you invest 20k?": I would absolutely run from real estate right now. Prices are sky high due to inflation / lumber shortage / supply. You would be buying at peak.
If I had a spare 20k I would use maybe 1k to attend a conference and learn a skill which would help me earn more money in the future. I would put 15k into the stock market using above method, or crypto. And I would use the remaining money to fund a passive income online business.
> I would absolutely run from real estate right now. Prices are sky high due to inflation / lumber shortage / supply. You would be buying at peak.
While things are crazy, real-estate is good if more serious inflation hits. Charlie Monger talks about investing for inflation periods by focusing on assets where the money to create the return is spent. That way as prices rise your cost base doesn't. He gives railways as an example. Property is the same if it exists, while to your point a property builder isn't because crazy costs.
Also I agree property is overvalued at the moment, but what isn't? Its going to come down to interest rates, inflation and unemployment.
No-one really knows but my guess is inflation in the short/medium terms as global economies try to avoid the pain followed by higher interest and unemployment. Even if that prediction was correct, imagine trying to time it... its not a simple investment market! So are we back to regular ETF contributions and ride the dips?
Scientifically speaking, <5 years is not enough time to savely invest even into an index fund. If you have about 10 years, you get into ranges, where you cannot find any examples of losing money. Picking stocks on the other hand means being outperformed by the market (again, scientifically speaking).
Since you asked us what we would do personally: I would probably use some of it for something like an extra vacation and would put the rest on top of my current assets, divided up exactly like my assets are already allocated.
If you do not have any assets invested, you should probably first follow some very conservative advice about how to handle money in general. In the US I know of Dave Ramsey. This depends highly on where you are located because of social systems, retirement funds, taxation etc. To me it's strange, that the question even comes up. You should either be paying off debt or already have your asset allocation figured out.
If you want your capital to "generating", you should look for some that gives some money back to your capital invested, but more the money is "generated", more is the risk of loosing your capital. If it where a my disposable i'll bet all on red.
Save it. It is not enough money to offer enough return on your time managing it. The only way it will return a meaningful amount of absolute dollars is dumb luck. Or years of hard work.
By which I mean as working capital it might be enough to buy a lawn mower, some shovels, and a trailer and put you in the landscape business. But only dumb luck is going to turn $20k into $50k in five years without a lot of your time.
In real-estate or the stock market and finance in general, $20k is the short stack gone all in. It’s dumb money at the table.
So save it. Stay liquid. And maybe you will see some luck there to grab at some point.
Suppose you want your investment portfolio to return 7% a year.
If it has $2,000,000 you have enough cash on cash return to live off. Enough cash on cash return that you might make maintaining your portfolio a full time job.
It's just as much work to get 7% returns on a penny (or $20k) but the cash on cash returns are not enough to make it worth working as a full time job.
Now suppose you $200,000,000. You can buy profitable businesses. You can pay someone else to run them from the cash on cash returns.
With $20,000,000,000 you can pay a team with cash on cash rounding error to figure out how to engineer the system so that small investors usually lose. So that they only win via statistical unlikelihood...aka "dumb luck."
Big money doesn't invest in the same way. Ted Turner had enough money to buy a TV station with the Atlanta Braves thrown in to sweeten the pot. $20k is not that kind of money.
I don’t quite see it that I way. I think it is much harder to find 200,000,000 dollars worth of mispriced assets than it is to find 20k. The crumbs that would be a rounding error on 200 mil would be a huge return on 20k
Finding mispriced assets requires dumb luck. With $200,000,000 you can look for someone taking their returns or liquidating a position.
You can buy a profitable business for its future cash flow at market rate. It with adequate capital becomes a matter of not experiencing bad luck versus getting lucky.
At $20k the rate of return for money is swamped by the rate of return for time. There are better uses of time than seeking high return rate investments.
Saving the money means if you stumble upon one, the money is there available quickly. It is also an acknowledgment that you are relying on dumb luck not beating the market.
The coolest thing about 20k is that if you can find a way to save 2k, you've increased what you've got by 10%.
There's nothing wrong with investing an amount like 20k for a learning experience but from a returns perspective, just working is almost certainly going to be a better avenue to increase your net wealth in that range.
Investing becomes a lot more useful the further the amount you have saved becomes more removed from your earning / saving potential.
i would take $1k to invest on some good stock options trading course[1] and use the remaining $19k on swing trading, while i keep my day job, until i am proficient enough to make my living from it ( my current plan, actually )
If 20 k is a substantial amount to you, that probably means you don't have a very high salary. The good thing about that is that this probably means that your spending is also very low, so you could probably stop working for 4 months or so and learn programming. Work hard and you'll be earning 100 k a year in less than 5 years.
Quit job, write an app, make money off it. I might need another job while waiting for it to grow, but by the end of 5 years, it'll likely be way more than $20k in the bank.
There are plenty of problems that haven't been solved. It's just that most of these are million dollar ideas and not billion dollar ones - VCs won't cover them. They're too risky to do as a team, but too big to do as a side project for one person.
There's space for converting reference books to reference tools for example, like a city council once asked me for something to make building valuations easier, but we never closed that deal. Android is missing a dumb cloud note taking tool that just works, and yet there are a trillion note apps for iOS. Heck both platforms are lacking things that just charge once, no subscription, no gacha model.
Also AI opens up a lot of previously uncovered fields, and a lot of it is just API connections.
Historical price action of ETH suggests that it can reach the levels of >$4000 which is the all time high prices just like it did with its previous ATH of >$1000 prices in 2017. The same can be also said for Cardano (ADA).
It is clear that all other cryptos have reached or rose past their ATH prices of 2017 and most of them have maintained this price for months. But to get in now would not be wise to as you can see that from the ATH prices, which is why I warned to avoid jumping in at >$60K for BTC [0]. Now it has lost nearly half its value and has gone back to the prices since late January.
I expect another further pull back soon and we will be in the same cycle of people yelling 'cryptocurrency is dead xyz' and later in the months or years to come having repeated grumbling about how they missed out on the lows like they did in March 2020 and are celebrating that they have FOMO'd into February 2021's crypto euphoria.
Accumulation in the lows when the hype is over and taking profits in times of euphoria is the idea here.
As for stock (which is something completely different) to get into, probably $COIN or $ABNB.
The huge movements of various cryptos look like large financial institutions are also in that space. BTC losing half its value in a matter of a few months is not likely to be because of individual investors. The technical bits are decentralized but if there are major players involved with billions of dollars, smaller holders are subject to those movements much more.
I'll throw this item I've been following for a while. There is a supply/demand problem with a certain stock that had a massive rise in Jan in the video gaming industry. It could be short term and you may see it as risky but there is a lot of research being done by folks over in reddit that point to large Wall Street firms having naked shorted the stock for months, possibly much longer. Bankruptcy isn't an option anymore (which was the bet these firms made at start of pandemic on several retailers) since the company paid off long term debt and is winding down brick-n-mortar while ramping up ecommerce.
People are estimating 2x-4x of the issued shares exist out there for this security and the large Wall St firms are losing runway where they can play bookkeeping games with failing to deliver shares, etc. Look for the "House of Cards" posts on reddit by a user named atobitt for a lot more detail.
Anyhow, the annual shareholder meeting is this Wednesday. Many retail investors have been encouraging proxy voting their shares because then the company will know that when say 200 million votes come in and only 73 million shares were ever issued that there is a significant problem. Setting aside fundamentals of the company and "valuation", if this situation is going on to the magnitude people claim, it is a massive short squeeze where the price could skyrocket.
I'll admit the research on reddit seems very tin-foil hatty but they have been interviewing trusted professionals that know about these things - lawyer, journalist and former DTCC employee and digging up as much data as they can to the point of FOIA requests to the SEC. Interview are up on youtube.
If nothing like that happens, there is a strong fundamentals case building where it could be the amazon of video gaming in a few years. Another option would be finding an entire stock market index fund as a solid fire and forget investment that will average decently over the long term.
Ah down voters that probably think "meme stock, stupid suggestion".
GME will release its 8k SEC filing within a week and it will likely contain vote counts. Votes equate to shares and there is a high probability the vote counts will be higher than the number of shares ever issued. The Naked Short Selling loophole has led to this, for reference: https://en.wikipedia.org/wiki/Naked_short_selling and an interview on Fox Business https://www.youtube.com/watch?v=VRVBbNYfAOM describing the problem.
This is a simple supply/demand problem that should correct itself in the market.
The idea of a Coffee Can is simple: You try to find the best stocks you can and let them sit for years. You incur no costs with such a portfolio, and it is simple to manage.
I share mine here: https://docs.google.com/spreadsheets/d/1tBrZEMFK9XNWxiqOxE8o...