Tips for investing $1,000,000

[hotwired]

Here's a great hypothetical question for you investors.

In the interest of maximum return, investment wise, how would you invest ONE MILLION dollars to generate the most assurred maximum return? This assumes that you will not need the money for 10 years, then you will live off the proceeds at the end of ten years and you will want to leave your children (or someone) a substantial "old money" legacy regardless of how long you live.

What I'm curious about is if the answer to this question is the same as the answer to "what would you do with 200k, 300k, 500k or .... 5k". Are there or are there not "options" available to someone with 1,000,000 nest egg that aren't available to the smaller investor. Please feel free to comment on those differences, if you have any special knowlege (or strong opinions!)

Thanks all

[Doku]

The only thing that really changes from 100k to 1M is that you can diversify more. And at about 2M, you can get into hedge funds a lot more easily.

One of the often missed investment things, however, is investing in foreign markets. Example: want to invest in a bio-tech mutual fund? Don't invest in a US based one, invest in a foreign county one... Do this IF you believe that their economy is strengthening, and ours is tanking.

Example: Let's say that Japan's yen has been gaining on the us dollar very quickly. (fake numbers here) let's say that in Jan 07, the dollar was worth 100 yen, and today it's worth 50. If you invested 100 bucks in a Japanese tech firm (100*100 = 10k yen), and today it is still worth 10k yen. it gained or lost ZERO. End result? If you sold today, you would get (10k / 50 = 200) 200 bucks. Now, the numbers are NOT that dramatic, but it is interesting.

You can also get hammered that way... if the yen fell and a buck was worth 200 yen in the example above, and the stock's value did not change.... you now had 50 bucks even though the stock itsself didn't change!

[1000feet]

Doku, if you believe that biotech is doing well and the Yen will get stronger you should invest in those ideas separately... doing so with one investment will just drag down the potential of both and as such probably makes for much worse diversification than making individual investments.

[Doku]

Originally Posted by 1000feet

Doku, if you believe that biotech is doing well and the Yen will get stronger you should invest in those ideas separately... doing so with one investment will just drag down the potential of both and as such probably makes for much worse diversification than making individual investments.

You could be right. My investments made 38% gains overall. How did your portfolio do?

[seanner689]

Yeah, I never really understand those FOREX systems where you just buy and sell currency ... I mean, at least with stocks, the trend seems to go up as far as absolute value goes, but with FOREX, it's a zero-sum game. I think if you're going to bet on a currency going one way or another, it's actually more risky to just trade money around. Seems to me that if I wanted to invest in the yen or whatever, getting a balanced japanese fund or something similar would be the best, or short term t-bills or something similar. I really hate those forex commercials ....

[1000feet]

Originally Posted by Doku

You could be right. My investments made 38% gains overall. How did your portfolio do?

Let's see... do the multiplication... 137,740% annualized.

Actually I'm estimating that on the low side - it could be more.

[Doku]

Originally Posted by 1000feet

Let's see... do the multiplication... 137,740% annualized.

Actually I'm estimating that on the low side - it could be more.

*nod* My 38 was last years gains... and I researched and messed with my allocations for a total of about a half hour. 137,740? I'm going to assume that that is the gains in a specific one hour window, and annualized over a year, not the average for your past year's investments. If it was your past year's, then you definately have a future with Goldman Sachs or one of the other investment firms that will pay you a salary of 8 figures+.


But back to the original question, and original answer, I still stand by my answer that hedge funds are really the only thing that is available at 7 figures that is not really available at 6.

[Dan.Linehan]

Why not invest in your own business?

[Dan.Linehan]

You know, like an organic farm?

[hotwired]

Thanks folks. I suppose there are a couple of things like SMS's (separately managed accounts) at high end financial "wealth" management companies which aren't available for lower amounts.

[Enlightenment]

Put capital up for a big budget independent film. I'm not kidding. It has high returns and is a safer bet than any stock out there.

[tbc32]

If you put one million into a down payment on an apartment building (20% down on a 5 million dollar one) you'd get 2-8%/yr back in appreciation, and 33% (for 10 years) in equity. Assuming your renters pay just enough to match the mortgage payments you'd see...

5% appreciation on 5 million would grow to $8,144,473. (gain of 3,144,473)
Equity will bring you an additional $1,650,000
Total return = $4,794,473. Pretty good, eh?

[Freelancer]

Go go measuring dicks doku 1000feet.

I'm from a poker background and from that I took away that anything (ANYTHING) short term is just a load of ♥♥♥♥♥♥♥♥♥.
So I'm just curious, if you take the total time you've been into investing what kind of annual return are we looking at? (or monthly whatever)

[Doku]

Originally Posted by Freelancer

Go go measuring dicks doku 1000feet.

I'm from a poker background and from that I took away that anything (ANYTHING) short term is just a load of ♥♥♥♥♥♥♥♥♥.
So I'm just curious, if you take the total time you've been into investing what kind of annual return are we looking at? (or monthly whatever)

My average yearly is just over 20... but I only started doing the foreign investing the in the last year... and I have only been investing for about 5 years. My first year results were around 7%, because I didn't have a clue what I was doing.

[1000feet]

Originally Posted by Doku

My average yearly is just over 20... but I only started doing the foreign investing the in the last year... and I have only been investing for about 5 years. My first year results were around 7%, because I didn't have a clue what I was doing.

That's still short-term given that 1) stock markets in the US have been doing well for about 5 years since the bottom of the last recession and 2) I don't know about other currencies but if you invested in Canada the exchange rates would be changing to your advantage over the whole time period. Since a lot of my income is in US dollars I've seen the value go down by up to 30% in the last year - you got the opposite end but it can change.

Which comes back to my original point... buying into a bad bio-tech fund just because the exchange rate might prop up its returns (and if that's how you make your choices odds are against getting a good one) isn't really a wise move. That's without even mentioning that most people aren't market-beating currency speculators. It's the same thing as tax incentives - some investments get very good tax treatment, but that's not much help if they still lose money.

If you think bio-tech is a growing market then chances are it will do well even in a recession. And if you think the Yen will do well you're better off investing in a broad index of stocks or bonds, or regular cash, rather than limiting yourself to one sector that could be decimated by a new law making another country more favorable for that type of business. It might sound good to combine two positives, but you're also combining the downsides of those things.

This is a bit off-topic thought, since it applies to $1000 as well as $1M.

[Freelancer]

Originally Posted by 1000feet

That's still short-term given that 1) stock markets in the US have been doing well for about 5 years since the bottom of the last recession and 2) I don't know about other currencies but if you invested in Canada the exchange rates would be changing to your advantage over the whole time period. Since a lot of my income is in US dollars I've seen the value go down by up to 30% in the last year - you got the opposite end but it can change.

Which comes back to my original point... buying into a bad bio-tech fund just because the exchange rate might prop up its returns (and if that's how you make your choices odds are against getting a good one) isn't really a wise move. That's without even mentioning that most people aren't market-beating currency speculators. It's the same thing as tax incentives - some investments get very good tax treatment, but that's not much help if they still lose money.

If you think bio-tech is a growing market then chances are it will do well even in a recession. And if you think the Yen will do well you're better off investing in a broad index of stocks or bonds, or regular cash, rather than limiting yourself to one sector that could be decimated by a new law making another country more favorable for that type of business. It might sound good to combine two positives, but you're also combining the downsides of those things.

This is a bit off-topic thought, since it applies to $1000 as well as $1M.

Don't worry to much about off-topic, you won't hear me object.

Sounds like you've got quite a experience in investing, also your so right about short term 5 years. Again what people think is long term and what it really means are usually two very different things.

My average yearly is just over 20... but I only started doing the foreign investing the in the last year... and I have only been investing for about 5 years. My first year results were around 7%, because I didn't have a clue what I was doing.

Not to say that this isn't a great accomplishment.
Making money instead of losing it is always a good starting point.



Edit: 1000feet just checking out your blog now, it looks sexy.

[rsinghal2000]

I only skimmed the previous posts, so I apologize for any repetitiveness.

For 1MM, 10 years and zero management...I'd say go with a nice sampling of commodity etfs: namely, GLD, SLV, DBA, USO. This covers gold, silver, grains and oil.

A professional money manager in US equities is going to be hard pressed to make returns comparable to those mentioned above in the next 10 years...after 8-10 years, the reverse will be true.

You can do the same with only 5k, although the transaction cost for diversity increases relative to your investment size.

If you're willing to learn how to trade and spend 20 minutes a day, then you could go into the currency markets. You can also do proper position sizing with 5k (which is probably the minimum anyone should be using), as well as, 1MM.

<shameless plug>
I started a new blog called Million Millionaires to help anyone interested in learning how to trade their way to at least 1 million dollars.

The approach is set yourself up to succeed, regardless how long it takes, by first developing your mental edge and progressing from there into market principles, and then developing your trading edge (trade ideas).
</ end shameless plug>

Best of luck!

Rahul

[tbc32]

I just stumbled across this awesome site: updown.com. Here's their ad...
--------------------------------------------------------------

UpDown.com is a social network for virtual investing where you can

* Trade stocks in a simulated environment. Use $1,000,000 in virtual money to create a stock portfolio and see how your stock picking skills compare to those of other members.
* Be one of thousands to earn real money if you can beat the market or write insightful stock analyses. (The site is still 100% free)
* View and rate the analyses of other members and see which investors are giving the best investing advice
* Create or manage a formal or an informal investment club.

To explore the site, visit: Click here

To become a member now, visit: Click here

If clicking a link above does not work, copy and paste it into the address bar of your browser.

Sincerely,
UpDown.com Team

[1000feet]

Originally Posted by rsinghal2000

For 1MM, 10 years and zero management...I'd say go with a nice sampling of commodity etfs: namely, GLD, SLV, DBA, USO. This covers gold, silver, grains and oil.

A professional money manager in US equities is going to be hard pressed to make returns comparable to those mentioned above in the next 10 years...after 8-10 years, the reverse will be true.

Rahul, I agree completely that equity investments are a lot more useful over longer time periods. It's hard to see how something like grain or oil can be a stable short-term investment though. If you invest in those aren't you betting that demand for them will increase or there will be a shortage somewhere? With everyone chasing gold now and the run-up in oil prices over the last 5 years those two might have a less room to grow without hurting the demand (and lowering prices again).