Ask HN: what are your best (relatively) passive, non-stock-market investments?

https://news.ycombinator.com/item?id=4978282

by gregcohn • 14 years ago

54 88 14 years ago

news.ycombinator.com

jstanley4• 14 years ago

I expect bitcoins to become significantly more valuable in the coming years, so I own about 100BTC.

bluedevil2k2• 14 years ago

If you "expect" them to become "significantly more valuable", why do you own so little then?

jstanley4• 14 years ago

It depends on your definition of "little"; that's nearly £900 worth.

gregcohn15• 14 years ago

interesting. out of curiosity, what do you use for a trusted exchange and/or bank?

jstanley4• 14 years ago

Mt. Gox.

kitcar• 14 years ago

IMHO that's speculating and not investing, if you subscribe to the Benjamin Graham school of thought. If we classify investing as betting on anything that could go up in value in the future, my best investment ever was at the roulette table, made 36x my money in under 30 seconds :)

Maybe the original poster should clarify more what they're after, - i.e. something that returns dividends/returns of some sort other, or just a capital gain at the end of the tunnel, or both, etc... would enable the community to provide more focused answers.

gregcohn15• 14 years ago

OP here: I don't have a hard time horizon or criteria on outcomes, just some idle assets that I don't want to put all into the stock market.

I believe there are lots of ways to generate returns on assets in compounding ways, and I'm interested in ways people in the HN community are using their skills, knowledge, and analytical brains to do this.

I'm not so interested in pure speculation per se -- in fact, one of my reasons for looking for alternatives to the stock market is that many stocks themselves meet the characteristics of speculation to me. (Just because you wrap it in quantitative comparisons to related-industry multiples and so on doesn't mean the whole market isn't overvalued.)

Thus precious metals, bitcoins, etc. aren't very interesting to me either, though they're interesting enough suggestions (as alternatives to leaving assets in dollars, if nothing else) for the purposes of this discussion.

That all said, I'm willing to take lots of risk in small doses, if the return dynamics are there.

Angel investing meets a lot of the criteria for me (and I've done some), but I don't have enough capital to make many bets of typical angel investment size, ie to have a sufficiently diversified portfolio to get EV returns.

tnuc• 14 years ago

Bitcoins are a bit like a pyramid scheme.

It's like buying a bunch of some cheap useless company stock, telling everyone to buy them, then you sell when the price goes up.

rayiner• 14 years ago

Deflationary currencies are like a pyramid scheme. Whoever gets in first wins big, while every successive person fights for an ever shrinking piece of the pie.

faramarz• 14 years ago

Precious Metals. Gold and Silver Specifically.

edit: If you're in Canada, you can use ScotiaMocatta (division of ScotiaBank) as your broker Buy. online and they will deliver the metal right to your doorstep, or keep it with them in a safety box.

https://www.scotiamocatta-estore.scotiabank.com/stores/scoti...

proexploit• 14 years ago

Anyone have a US-based broker recommendation?

csense• 14 years ago

You can just invest in the GLD exchange-traded fund (ETF) [1].

[1] http://finance.yahoo.com/echarts?s=GLD

cynicalkane2• 14 years ago

That's a speculation. Investments are returns on real value. Speculations are bets on unrealized value. The OP asked about investments.

rexreed• 14 years ago

Does this make angel "investing" more like angel "speculation"? Or even more so, Venture Capital primarily speculation versus investment? A legitimate question.

scottkduncan• 14 years ago

I've had pretty good results with peer-to-peer lending. Prosper is the platform I use (Lending Club is the other big player in the U.S. but not available to investors where I live). It can be a bit high maintenance as an investor as you'll need to invest in 100+ loans to be diversified (and you'll have to reinvest proceeds over time), but I find it to be manageable. If you really want to get into it, both platforms allow you to download all past loan data so you can analyze past performance and come up with your own approach.

socialist_coder• 14 years ago

Seconded. I've been rocking 10% annual returns since I started with Lending Club almost 20 months ago.

The only bad thing about these sites is that your income counts as normal income and not capital gains.

justincormack2• 14 years ago

Well it is income. What would you expect?

thingylab3• 14 years ago

I like those platforms in principle, but I don't think investors reallly understand what's in it. The truth is, you're creating your own asset-backed security based on loans originated to refinance credit card loans or finance personal projects for what is (I assume) a pretty narrow slice of the population.

Just like banks and other players (ahem rating agencies) before the financial crisis assumed ABS were safe because they were diversified ("the housing market cannot collapse uniformly accros the country"), they can actually become very correlated in a very short amount of time.

So even though peer-to-peer lending is an interesting proposition, it is important to understand that it can potentially become ugly and sticky...

gregcohn15• 14 years ago

Yes. After a quick look at this (very interesting) suggestion, my intuitive reaction is that a lot of the borrowers are likely to repay based on their credit histories and the desire to protect them.

My #1 question, however, is what makes people turn to a source like this?

TamDenholm3• 14 years ago

I bought myself a "lifestyle business". Its a cleaning business that already had a number of long term clients and revenue as well as staff. I've rearranged the staff, automated the administration side of it and while i did the cleaning myself (with the existing staff) for the first 2 weeks of takeover, that now goes on without my involvement too.

I've only had it a month, i spent about £6k to buy it, i spent a further £2k buying a van and other one off supplies and my monthly profit after staff wages and other recourring expenses is around £800 a month. So if i left it at that i'd see a 100% ROI in 10 months.

However I intend to spend around £10k on advertising and marketing in the next 3-4 months to expand the business, i expect a conservative £25k a year revenue for that £10k.

Of course being a geek has helped immensely, especially with automating things like invoicing, payments, accounting and building the website, phone system, business cards, designs etc.

I urge all geeks here to think about applying your high tech skills to low tech businesses, you'll often find massive opportunity, especially if the space is typically occupied by non-tech literate people.

Also, as a side note, this is now my new strategy for my consulting too, instead of being a PHP Developer doing boring but well paid jobs like facebook apps and wordpress sites, i'm now positioning myself to be a business consultant that makes businesses money by applying technology where its severely lacking, and i already have my first client, a taxi company.

If anyone wants to ask me questions, feel free to reply here if you dont mind if being public or email me: contact@[myHNusername].com

gregcohn15• 14 years ago

this is great. how did you identify and qualify this opportunity?

TamDenholm3• 14 years ago

This sounds a bit crazy, but I saw the opportunity on Gumtree, a guy wanted to sell this part of his business. I went over his historical figures, did as much due diligence as i could and considered the figures to see if it was worth it. I have kind of a rule, if i can get a 100% ROI in 1 year, its worth doing, I initially thought i'd get a 100% RIO in 8 months, i figured i'd miss something (which i did) but i thought there was enough room for a little bit of error and decided to go for it.

neovive• 14 years ago

This is a great approach. Many of the best in tech are outside of tech. You have to just think about your day-to-day activities and observe ways to improve things. That is where you usually find great opportunities.

vnorby5• 14 years ago

Domains - have my portfolio at hackernames.com. It's a good way to exercise your hacker knowledge and you can always use them yourself if you aren't able to find a buyer.

gregcohn15• 14 years ago

Can you elaborate more on how you make money from them? I have some interesting domains I've had for years -- selling or otherwise trying to monetize them seems interesting.

vnorby5• 14 years ago

I sell through domain marketplaces like sedo/afternic/flippa/dnforum. I also reach out to startups directly that correlate to domains I own, it's a very effective way to sell domains. You can also develop them into SEO/amazon referral sites for product-related domains. I know a lot of people that make thousands per month off of pure referral sites, mostly auto-generated.

peeters3• 14 years ago

Forgive my bluntness, but my impression of domain sitting is essentially the same as patent trolling. It's not contributing anything to the economy or society, it just seems like legalized extortion of companies who just want to do business.

Is there something I'm missing about this?

charleshaanel4• 14 years ago

This couldn't be further from the truth. Have you read Edward Bernay's book called "Propaganda"? Do check it out. Your impression of things is no doubt a result of a good spin job.

Domain investments are a proper alternative asset class and many people (some of whom have gone to the best schools in the world) are active players.

charleshaanel4• 14 years ago

Shhhh - you're breaking the code (of silence)!

Renting quality generics is a good way to go these days as well. Frank Schilling's portfolio collectively pulls more traffic per month than Twitter but he's still managed to largely stay under the radar screen....

gabemart3• 14 years ago

How does domain renting work? My first thought would be as soon as the party paying the rent achieved some measure of success, the party receiving the rent could essentially extort them.

gabemart3• 14 years ago

Interesting!

How often do you make a sale?

What kind of process do you use for the exchange? Do you have some kind of escrow, and if so who do you use for that?

vnorby5• 14 years ago

Sales - depends on how many domains you own and how good they are. I make 5-10x returns on every sale though. For the exchange, I usually transfer within registry and only after receiving payment. I've used escrow.com twice for high value domains.

hiddenstage• 14 years ago

Poker. A good player has a pretty huge advantage over average players given a decent sample size.

gregcohn15• 14 years ago

Do you have a way to make money from poker that isn't a linear function of the hours you spend at a poker table?

zeidrich• 14 years ago

Open a casino?

gabemart3• 14 years ago

I would say that poker is one of the least passive "investments" one could make, unless you spend your time training a bot.

frozenport2• 14 years ago

Don't average players not play for money? Also where do you find people to make money from, you can get a few K out of your friends but is it worth it?

wallawe2• 14 years ago

There are plenty of people who play for money that are horrible players. I am going later today to play at a live spot in Ebro, Florida. The demographic is largely working class folks playing for the thrill and they're not the best players in the world. You can make 50 to 100 an hour there if you play your game right. As they say in Rounders, win one big hand an hour.

jimboyoungblood• 14 years ago

do you play live or online? and at what stakes?

syedkarim4• 14 years ago

I swing trade, which is just stock speculation (aka gambling with equities). I think I made about 30 trades all year. I've been averaging over 40% annual returns over the last four years.

As much as I hate to admit this, I am a much better trader than an entrepreneur.

gregcohn15• 14 years ago

That's an interesting number of trades -- less than one a week. Can you elaborate on your methods for identifying, holding/monitoring, and exiting trades? How many hours a week are you spending on this?

syedkarim4• 14 years ago

This year was low (number of trades) because I was patient on a trade that went south. It eventually turned around, but locked up all my capital until it did.

Basically, I refuse all conventional stock investing advice. I never diversify; at most my portfolio has two positions at a time. And I invest upwards of 90% of my cash on most trades. I do not trade on margin (well, technically I do because I don't wait for trades to clear before taking my next position)--but I don't buy stock than cash I have in the account. I only buy heavily traded equities; trading volume over a million shares and over a billion dollar market cap. And I focus on stocks with more or less sound fundamentals that are showing recent swings in price. Apple is a good example.

But as for a being highly methodical and data driven--I'm not. I have a few simple rules and am patient. I generally exit positions after 1-3%. And then I have a few that I let ride. It doesn't take much to hit 40% that way.

I spend less than an hour a week doing research and monitoring my position. I don't have any magic edge. But I'm making money, so continue chug along. A bull market definitely helps, but I've also done ok in a bear.

frozenport2• 14 years ago

Buy a house and live in it.

TamDenholm3• 14 years ago

Personally i think a house you live in is a liability rather than an asset, it costs money, ties up a hell of a lot of capital and these days is a gamble on whether you'll get your initial investment back again.

thingylab3• 14 years ago

I would tend to agree with that.

This being said, investing in real estate is the only way for a regular person to achieve a high leverage ratio, which is probably why people see it as such a good investment.

cmatthias• 14 years ago

Not really an investment. See: http://thezikomoletter.com/2012/12/10/you-are-naturally-shor...

cfinke3• 14 years ago

If you purchase farmland, at least in the upper Midwest, you'll earn a 5-8% yearly dividend by renting it out, and there is little to no maintenance that you need to do yourself (depending on your rental contract).

gregcohn15• 14 years ago

This is an unlikely avenue for me given my geography, but out of curiosity and for the purposes of the discussion, are you basing the return on equity invested or on total value of the land?

cfinke3• 14 years ago

Total value. Rental price per acre per year in my area of Minnesota is about 7% of the sale price per acre.

Harkins• 14 years ago

Any suggestions for more info on this? Books, how-to's, longer "this is what I did stories"? I could just start calling rural real estate lawyers and asking nosy questions, but maybe there's a quicker way. :)

cfinke3• 14 years ago

I fell into it when my wife and I had the opportunity to buy a parcel of her grandmother's farm that was already being rented, so I don't have much more information than that.

kingkool682• 14 years ago

My personal blog http://www.russellheimlich.com/blog/

I run 2 Google Adsense ads on individual post pages and it more than pays for the cost of my shared hosting account. I haven't blogged in over a year after a pretty good run.

I also run http://dummyimage.com with a single ad which covers the increased monthly VPS cost to keep it running.

StavrosK• 14 years ago

Shared hosting is $50/yr, tops. I made more than that while reading your comment. That doesn't sound like much of an investment :P

kingkool682• 14 years ago

I invested the time getting it set-up, writing content, yadda yadda... In the past 12 months it has earned me ~$300. It's enough to fund other side projects.

kylered2• 14 years ago

I invested in a CrossFit gym three years ago with 2 partners and we've done about 40x our original investment in dividends over the last three years. It was a lot of work the first 18 months, but now it's a solid business with good recurring revenue and a staff that runs it very well.

gregcohn15• 14 years ago

Are you opening additional locations? Was it a full-time job for the first 18 months?

kylered2• 14 years ago

No, for a variety of reasons. Mainly we always wanted it as a lifestyle business, but also due to location factors and not wanting to put in that much time again.

I'd say about 15 to 20 hours a week for the first 9 months, then declining to about half that after 18 months.

ruswick• 14 years ago

In my opinion, passive investing rarely has the capacity to earn someone a substantial amount of money. Large, stable returns occur in only two situations: 1) You invested a huge amount of initial money, so even a low yield returns a lot of money. (This is, from my understanding, how a lot of super-wealthy people do it. Stored wealth perpetually generates income. If one has a massive amount of stored wealth, they earn a massive amount of passive income.) or 2) You invest over long periods of time.

Making large amount of money in short periods of time through investing necessitates either making a very active, labor-intensive investment (like buying a small company or flipping houses), or resorting to speculation. Obviously, this is not passive.

The market is self-correcting. It's absurd to believe that one can earn prodigious amounts of money quickly, predictably, and effortlessly.

However, you should take this with a huge grain of salt. I am not an experienced investor. (In fact, I'm fairly sure that the law prohibits someone my age from investing. Even if it didn't, I wouldn't be in a financial position to invest anyway.)

gregcohn15• 14 years ago

Yes but there's such a thing as leverage on labor. E.g., you could start a coffee cart & hire someone to manage it; be primarily a financial partner in purchasing a small business or house-flip; etc.

gmays2• 14 years ago

Real estate. My wife and I own five homes (live in one of them). One is in South Carolina near Hilton Head (I bought it when I was single) and the other four are condos around San Diego, CA.

We bought in when the housing market was at its low. The credit markets were crap so we had to buy all of them cash except the one we live in now which was a bit more expensive. After expenses (HOA and property management) our average returns are about $900/mo. ($10,800/yr.) for every $100,000 invested. That's not too bad considering housing prices and rental rates will continue to climb over time (or that's the plan at least). We're fortunate enough to live frugally and just happened to have the money lying around when the housing market sucked so we bought a couple homes a year over the past few years.

For the house in South Carolina we're losing about $200/mo., but it's a 15yr mortgage. We'd be making a bit if it were a 30yr. I bought that one when I saw 21 so I didn't know anything about anything. Some would say I still don't.

The real estate is nice because the extent of my involvement is manually paying real estate taxes on the homes without mortgages, answering a couple emails a year about high dollar ($200+) repairs or signing new lease agreements.

As one of the other posters mentioned, we also invest in Lending Club. Our investment was more just play money to see how things worked, but returns so far have been surprisingly good, around 14% annually. I like it because it's so diversified with only $25/loan. You can maximize returns by picking better loans.

The passive income is nice because it'll allow me to quit my job next year and work on my startup full-time. I want to apply to Y Combinator and even if I don't get accepted I'd be able to bootstrap my startup indefinitely with our passive income. Hopefully it doesn't come to that, but if it does maybe I'll pivot around year 25 (year 50 at the latest).

Ask HN: what are your best (relatively) passive, non-stock-market investments?

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