[Highest return investment for play money?]

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vtraining
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[Highest return investment for play money?]

Post by vtraining »

Lets say I am all set for life and I have $1 Million to invest. Think of it as play money and you want to get highest return in 20 years.
I could just put all in VTI or SPY and let it ride. How about putting it all in FANNG stocks?
What would you recommend?

[Title clarified by moderator Kendall.]
livesoft
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Re: Non-bogle type question

Post by livesoft »

What percentage of VTI is already in FANNG stocks?
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Normchad
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Re: Non-bogle type question

Post by Normchad »

If you’re set for life and don’t need the money, it’s time for options!

You’ll probably lose it all. But you might score huge too. Either way you don’t the need the money, so it’s fine.
Motostash
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Re: Non-bogle type question

Post by Motostash »

livesoft wrote: Sun Feb 11, 2024 7:08 am What percentage of VTI is already in FANNG stocks?
VTI's top 10 stocks comprise roughly 1/4 of its total holdings.
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RickBoglehead
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Re: Non-bogle type question

Post by RickBoglehead »

You don't have $1m to invest, you $1m to gamble. Highest return means highest risk. That's gambling.
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Wiggums
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Re: Non-bogle type question

Post by Wiggums »

A higher concentration of a handful of growth stocks is higher risk and the potential for higher reward. I don’t know anyone that has one million in play money.
Last edited by Wiggums on Sun Feb 11, 2024 7:25 am, edited 1 time in total.
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veggivet
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Re: Non-bogle type question

Post by veggivet »

Go all in on crypto. Pretty soon you won't have that mil to worry about.
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TimeIsYourFriend
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Re: Non-bogle type question

Post by TimeIsYourFriend »

vtraining wrote: Sun Feb 11, 2024 7:07 am Lets say I am all set for life and I have $1 Million to invest. Think of it as play money and you want to get highest return in 20 years.
I could just put all in VTI or SPY and let it ride. How about putting it all in FANNG stocks?
What would you recommend?
The highest return will be picking the next Tesla or such. $1 million in TSLA at inception would be $105 million today. Of course it could have also gone to $0. Picking stocks after they have the largest market caps of the world is not a “play money” kind of bet. The S&P 500 isn’t either and may have a negative return over 10 years but won’t be worth zero.
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Motostash
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Re: Non-bogle type question

Post by Motostash »

vtraining wrote: Sun Feb 11, 2024 7:07 am I could just put all in VTI or SPY and let it ride. How about putting it all in FANNG stocks?
What would you recommend?
The results would be different. Advantage of VTI is its self cleaning feature. If you want to bet that Meta will have similar market share in 20 years, then go for it. Otherwise you would need to become your own index and make regular portfolio adjustments as the market changes to maybe come close to slightly beating VTI's returns. Doesn't seem worth the effort to me, but I'm just some dingleberry on the internet.
InNameOnly
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Re: Non-bogle type question

Post by InNameOnly »

veggivet wrote: Sun Feb 11, 2024 7:24 am Go all in on crypto. Pretty soon you won't have that mil to worry about.
+1
The best way to make a small fortune is to "invest" a large fortune in crypto. :D
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vxdx
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Re: Non-bogle type question

Post by vxdx »

FAANG stocks are already falling out of favor. Betting that top stocks of the last 20 years will continue to have higher than average returns for the next 20 seems foolish.
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nisiprius
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Re: Non-bogle type question

Post by nisiprius »

It's meaningless to discuss "return" without "probability" and "risk."

"Play money" means you care about the maximum potential return and you don't care at all about how likely you are to get it or how likely you are to lose your money.

Given that utility function--a million dollars and I don't care at all if I lose it--I would wait for a billion dollar Powerball jackpot, buy once ticket, and donate the rest to charity, because that offers me a potential for a billion dollar return, and 1000X a million dollars is more than I think I could make by stock investing.

Oh, you say the probability of winning the Powerball, about 1/292,000,000 is too low? Very well, buy 500,000 Powerball tickets with the million. (I checked, there's no limit). You still can multiply your million a thousand times over, but now your chance of doing it is 500,000 times as high. About 0.17%. What, still not high enough? Then you are not telling the truth about it being play money and only caring about the highest return.

So probability of achievement matters. And you care about balancing risk and return.

For any stock example you also need to analyze not only the possible return but the distribution of outcomes. The higher the potential return, the more risk you will be taking, and the lower your probability of actually achieving it. If you want the highest possible return that is "almost a fairly sure thing" VTI or SPY might actually be a pretty good choice, but everything depends on how sure "almost fairly sure" is, and on how reliably you can predict the twenty-year outcome of investments.

But before digging into it, what kind of "return" do you mean? Do you mean dollars times probability, linear-weighted "expected return," which is the strategy Sam Bankman-Fried followed? Or do you mean compound average annual return, the number by which return is customarily measured and published for mutual funds and ETFs?

Because it turns out, surprisingly, that that makes a huge difference, and what the writings about the Kelly Criterion tell us is that the strategies that maximize expected return are terrible at maximizing CAGR.
Last edited by nisiprius on Sun Feb 11, 2024 7:50 am, edited 1 time in total.
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gips
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Re: Non-bogle type question

Post by gips »

:arrow:
vtraining wrote: Sun Feb 11, 2024 7:07 am Lets say I am all set for life and I have $1 Million to invest. Think of it as play money and you want to get highest return in 20 years.
I could just put all in VTI or SPY and let it ride. How about putting it all in FANNG stocks?
What would you recommend?
Personally, I’d let it roll in vti but fanng would be a lot of fun. Did u give any thought to faang? Like why fanng instead of faang? How about some sort of leveraged fund? Or wouldn’t options give you the chance for the highest return?
Target2019
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Re: Non-bogle type question

Post by Target2019 »

vtraining wrote: Sun Feb 11, 2024 7:07 am Lets say I am all set for life and I have $1 Million to invest. Think of it as play money and you want to get highest return in 20 years.
I could just put all in VTI or SPY and let it ride. How about putting it all in FANNG stocks?
What would you recommend?
I wouldn't do that as it would require some continuous work to monitor and make changes from time to time.

I just might put it all into a growth fund, like Schwab's SCHG (250 companies from the largest 500).

But being me, I'd look at possible tax implications in my lifetime.
livesoft
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Re: Non-bogle type question

Post by livesoft »

Motostash wrote: Sun Feb 11, 2024 7:22 am
livesoft wrote: Sun Feb 11, 2024 7:08 am What percentage of VTI is already in FANNG stocks?
VTI's top 10 stocks comprise roughly 1/4 of its total holdings.
So I guess like many Bogleheads around here, I probably already have a million dollars in FANNG stocks.
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Kendall
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Re: [Highest return investment for play money?]

Post by Kendall »

This topic is now in the Investing - Theory, News & General subforum.
gips
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Re: Non-bogle type question

Post by gips »

nisiprius wrote: Sun Feb 11, 2024 7:47 am It's meaningless to discuss "return" without "probability" and "risk."

"Play money" means you care about the maximum potential return and you don't care at all about how likely you are to get it or how likely you are to lose your money.

Given that utility function--a million dollars and I don't care at all if I lose it--I would wait for a billion dollar Powerball jackpot, buy once ticket, and donate the rest to charity, because that offers me a potential for a billion dollar return, and 1000X a million dollars is more than I think I could make by stock investing.

Oh, you say the probability of winning the Powerball, about 1/292,000,000 is too low? Very well, buy 500,000 Powerball tickets with the million. (I checked, there's no limit). You still can multiply your million a thousand times over, but now your chance of doing it is 500,000 times as high. About 0.17%. What, still not high enough? Then you are not telling the truth about it being play money and only caring about the highest return.

So probability of achievement matters. And you care about balancing risk and return.

For any stock example you also need to analyze not only the possible return but the distribution of outcomes. The higher the potential return, the more risk you will be taking, and the lower your probability of actually achieving it. If you want the highest possible return that is "almost a fairly sure thing" VTI or SPY might actually be a pretty good choice, but everything depends on how sure "almost fairly sure" is, and on how reliably you can predict the twenty-year outcome of investments.

But before digging into it, what kind of "return" do you mean? Do you mean dollars times probability, linear-weighted "expected return," which is the strategy Sam Bankman-Fried followed? Or do you mean compound average annual return, the number by which return is customarily measured and published for mutual funds and ETFs?

Because it turns out, surprisingly, that that makes a huge difference, and what the writings about the Kelly Criterion tell us is that the strategies that maximize expected return are terrible at maximizing CAGR.
The problem with your analysis is that you are projecting your desire of a 1000x return on to the op’s post. He asked about fanng which says to me his expectation is not 1000x and the risk he’s willing to take is less than a set of powerball tickets. It’s been an awful long time since high school debate but I think you’ve provided an example of the strawman fallacy.
Chili Powder
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Re: [Highest return investment for play money?]

Post by Chili Powder »

The boglehead style of investing is the best style of investing, so that would be where you want to put your money.

Some people erroneously think boglehead style is worse than other styles for whatever reason, like boglehead investors are giving up return just because. I don't know why this line of thinking is so persistent, but it is too bad. It is probably a relic of marketing by financial 'experts' and 'gurus' and such. You want to keep in mind these people can't see the future, and the 'advice' they give is no better than what you would get from a fortune teller or bone reader.
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Re: Non-bogle type question

Post by mmcmonster »

Wiggums wrote: Sun Feb 11, 2024 7:24 am A higher concentration of a handful of growth stocks is higher risk and the potential for higher reward. I don’t know anyone that has one million in play money.
Personally, I think it's reasonable to put a fixed (fairly small) percentage of your investments towards gambling. Maybe 5%.

So I guess if OP has $20M in liquid assets he can gamble with $1M. That being said, I would consider it a one-time thing. If/when you lose that $1M, you don't to play with another 5% of the remaining $19M.

Considering the top 1% net worth in the US is $16.7M, there are certainly some people that can make this play.
H-Town
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Re: [Highest return investment for play money?]

Post by H-Town »

vtraining wrote: Sun Feb 11, 2024 7:07 am Lets say I am all set for life and I have $1 Million to invest. Think of it as play money and you want to get highest return in 20 years.
I could just put all in VTI or SPY and let it ride. How about putting it all in FANNG stocks?
What would you recommend?

[Title clarified by moderator Kendall.]
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Elysium
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Re: [Highest return investment for play money?]

Post by Elysium »

vtraining wrote: Sun Feb 11, 2024 7:07 am Lets say I am all set for life and I have $1 Million to invest. Think of it as play money and you want to get highest return in 20 years.
I could just put all in VTI or SPY and let it ride. How about putting it all in FANNG stocks?
What would you recommend?

[Title clarified by moderator Kendall.]
If you are smart enough to make $1mil in play money that you care not to keep or lose then you are also smart enough to figure out what to do with it. You don't need to ask strangers on internet for advice, especially Bogleheads who do the opposite of undeterred risk plays.
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