Taking a gamble?

[Manhattan]

General advice to investing is take on more risk while you're young and less as you get close to retirement. Reasoning being you can earn back what you lose while you're young and there's more to gain on growth investments.

How's this for a strategy - early in your career invest everything you own (let's say 200K) into a growth stock and hope for the best. If it works out then you're likely a millionaire and can afford to live a baller and carefree lifestyle for a few years at least without being tied down to a job. If it doesn't, sucks to lose everything but you have the rest of your life to build up wealth again. Worth the gamble?

[max_boost]

You are better off investing in what you know vs something highly speculative.

[mazdavirgin]

Originally posted by Manhattan
How's this for a strategy - early in your career invest everything you own (let's say 200K) into a growth stock and hope for the best. If it works out then you're likely a millionaire and can afford to live a baller and carefree lifestyle for a few years at least without being tied down to a job. If it doesn't, sucks to lose everything but you have the rest of your life to build up wealth again. Worth the gamble?

No... You might as well just go into a casino and put it on black. Single stock investing is extremely risky. Pick the right one you win. Pick the wrong one you lose it all. Or pick one that doesn't grow and it does nothing.

[Manhattan]

Originally posted by mazdavirgin


No... You might as well just go into a casino and put it on black. Single stock investing is extremely risky. Pick the right one you win. Pick the wrong one you lose it all. Or pick one that doesn't grow and it does nothing.

Casinos have max bet limits so this wouldn't work. :rofl:

[max_boost]

Not in Vegas they don't. Well at least $200k shouldn't be a problem.

[Manhattan]

Non-resident withholding tax would be an issue.

[supe]

I would say way too risky. I second the advice above, invest in what you know.

You also need to consider your goals and really think about whether you need to hit a jackpot which is really what you're asking for. If you have decent earnings why risk so much.

[Sugarphreak]

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[AudiPWR]

Invest it all into Peyto.

[max_boost]

Originally posted by Sugarphreak
Stock market is fun... but it is fickle and you need to be comfortable to lose whatever you put into it.

You are way better off taking that 200K and sticking it into a place to live first with some leveraging for a mortgage

Here is my reasoning;

If you were to take your 200K, then take a 150K mortgage… you would be able to afford a nice apartment that would typically rent for about 2500$ (well, minimum)

So every year, you are offsetting 30,000$... which is like a 15% risk free return. Then, with cheap mortgage rates coupled with moderate market growth and an aggressive payment w/ lump sum payments against it… you could be mortgage free fairly quickly (5 years to pay 150K is not unreasonable if you are making decent cash and being frugal). In 5 years you would have saved yourself 150,000$ in rent, earned around 50K in growth, and then be able to pay off a mortgage to net yourself a 400K asset. That is a 100% return on your initial investment.

Then sell it all and put it on black in Vegas

That was very erchrry like. lol

[Sugarphreak]

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[Feruk]

Originally posted by Manhattan
Non-resident withholding tax would be an issue.
More likely not being able to claim a loss would be the issue. :rofl:

[ExtraSlow]

We had a very similar discussion in some other thread recently, but here's my thoughts:
When you are just starting out, before you have your house, decent car etc , your losses really hurt you. For that reason, I suggest a more conservative strategy for people until around age 30. Then you can take on more risk for ten years or so, and slowly taper back to more conservative investments as you near retirement.

Every person is in a unique situation. But when i was 25, I needed every dime I earned. I was buying a house, a car, and just about to start having kids. If I would have lost ten grand in the markets, I would have been very bad hurt by that.

[Neil4Speed]

Originally posted by AudiPWR
Invest it all into Peyto.

lol, I was big into peyto when NG prices were 3 bucks, it was trading at the ~10 mark.

[ercchry]

Originally posted by max_boost


That was very erchrry like. lol

nooo... i like bigger returns :poosie:

MAX LEVERAGE! :bigpimp:

[Sugarphreak]

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[ercchry]

Originally posted by Sugarphreak
I know... haha, I totally avoided the cost of utilities, property tax, realtor fees, borrowing costs, maintenance costs, condo fees, lawyer fees, etc etc etc.... Eric would be proud!

utilities, property taxes, and insurance are factored into everything i calculate. i hate condos so those fees dont count, borrowing cost is inadvertently worked in but really doesnt make a difference at 3%... realtor is only worked in IF you sell... and lawyer fees are fuck all :dunno:

with $200k... i'd flip two homes at once. buy in the winter when there is less demand, reno interiors over winter, exteriors once the weather is cooperating, then sell. secure financing with 5% down, use the rest for reno's and carrying costs.

less risk than blackjack... or a single stock, and also a built in escape route in the form of renting them out

[Sugarphreak]

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[ercchry]

Originally posted by Sugarphreak
Sure sure, and Arash really went to medical school :rofl:

:checks beyond stock contest: yup...

[max_boost]

Originally posted by ercchry


nooo... i like bigger returns :poosie:

MAX LEVERAGE! :bigpimp: You and TypeS1 lol:bigpimp:

[themack89]

If you wish to know the optimal amount to bet on a gamble, here:

http://en.wikipedia.org/wiki/Kelly_criterion

If too lazy to click link:


In probability theory and intertemporal portfolio choice, the Kelly criterion, Kelly strategy, Kelly formula, or Kelly bet, is a formula used to determine the optimal size of a series of bets. In most gambling scenarios, and some investing scenarios under some simplifying assumptions, the Kelly strategy will do better than any essentially different strategy in the long run (that is, over a span of time in which the observed fraction of bets that are successful equals the probability that any given bet will be successful).



For simple bets with two outcomes, one involving losing the entire amount bet, and the other involving winning the bet amount multiplied by the payoff odds, the Kelly bet is:

http://upload.wikimedia.org/math/9/5/6/9563314847f2d9ccaf6e4dff6cf6672a.png

where:
f* is the fraction of the current bankroll to wager;
b is the net odds received on the wager ("b to 1"); that is, you could win $b (and get a return of your $1 wagered) for a $1 bet
p is the probability of winning;
q is the probability of losing, which is 1 − p.