Author Topic: Who has what they consider to be the highest risk / highest reward investment?  (Read 13853 times)

Jamese20

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Even though the average UK mortgage is GBP 750, it is possible to have a below average mortgage, by buying a smaller place, buying in a cheaper area, or renting a room (reduces net payment to mortgage). That doesn't mean that Jamese20 can do better without compromise, only that some people can.

When people are feeling sorry for UK earners do consider that we don't pay for healthcare, we also tend to work shorter hours than in the US, and our property taxes are more stable and generally lower.

I'm comfortable putting more in emerging markets because they are somewhat unloved, but I'd be more inclined to look for a global small cap index than the FTSE 250. If you like the FTSE 250 then go for it.

If there was a way of getting a guaranteed high return over 10 years, everyone would do it.

Yup, also as we both know a cheaper area than 750 per month is a huge sacrifice in the country once you start getting to that level you are talking about some of the poorest parts of the country that's if you are starting out like I have on the property ownership.

I Have a family now so renting a room out to someone is out the question and that would also be a sacrifice and reduce quality of life

As I say there comes a limit to where these changes reduce your overall happiness and quality of life

The reason I suggest the ftse is because our is alot weaker now so buying international shares is alot more costly than staying in the UK and this could be the case easily for the next decade with brexit maybe even longer 

Playing with Fire UK

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Yes, a 750 mortgage for a family is more difficult to reduce than a 750 mortgage for an individual.

The FTSE makes more sense (IMO) for someone earning and spending in GBP (I wasn't sure where you were based when I first replied). I also feel that international stocks are expensive (in GBP) following the currency crash. I have some home bias, not because I think the UK will necessarily do better than elsewhere, but because if the UK does well then my spending is going to get more expensive (and possibly after I've stopped earning).

The FTSE 250 probably tracks the cost of living in the UK better than the FTSE 100, all the oil and big banks have a trickle down effect, but unless you live in Aberdeen or London the relationship is more tenuous.

Would you consider relocating or downsizing when you reach FIRE or your child(ren) leave? IMO there are some lovely more affordable places in the UK where property is cheap because they are remote or far from employment centres. Again, it won't be suitable for everyone, but it gives you the chance to cash out on some of those mortgage payments.

The highest impact changes I've made (that could have gone wrong) were moving to a new job that was a stretch for my skills and in a shit location, and buying houses that needed work and doing them up.

JackReacher

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A few weeks ago I took a flyer on a small amount of etherium (ETH) - a bitcoin alternative with some promising characteristics. So far, so good, but it's not a short term play. The idea is to take a look in 10 years and see if it's worth nothing or a whole lot more. (Note that I laid out about 0.35% of my portfolio and about 0.2% of my NW, so it's really not likely to be a game changer either way).

I would agree that this is very Risky , but I would also think that in you can stay put for 10 years - you'll make quite a bit on this!

shanghaiMMM

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A few weeks ago I took a flyer on a small amount of etherium (ETH) - a bitcoin alternative with some promising characteristics. So far, so good, but it's not a short term play. The idea is to take a look in 10 years and see if it's worth nothing or a whole lot more. (Note that I laid out about 0.35% of my portfolio and about 0.2% of my NW, so it's really not likely to be a game changer either way).

I would agree that this is very Risky , but I would also think that in you can stay put for 10 years - you'll make quite a bit on this!

I bought a grand total of one ETH coin a week or so ago. It's certainly more interesting to check than my index funds!

gp_

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I bought a grand total of one ETH coin a week or so ago. It's certainly more interesting to check than my index funds!

doesn't matter, your 1 ETH will likely appreciate 3x by the end of the year :) bitcoin just broke $3,000 today, but slid back a bit.

2017 is the beginning of mainstream crypto adoption.

talltexan

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Why does the appreciation of crypto currency imply the success of crypto currency?

maizefolk

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Why does the appreciation of crypto currency imply the success of crypto currency?

I don't think it does, but I would also argue that the converse of that statement is likely true: the success of crypto currency would (likely) imply the appreciation of crypto currency.

Appreciation could come from speculation, independent of the adoption of the currency (success).

Widespread adoption will require a lot greater volume of transactions be conducted per day, which will, assuming a constant velocity of money and a largely fixed money supply, mean the price of the currency would have to appreciate substantially.

*For a benchmark of what widespread adoption of bitcoin or another cryptocurrency would look like in terms of increased transaction volumne: right now bitcoin has about $800M in transaction volume a day. Visa has ~$20B. UnionPay (the chinese alternative to Visa/Mastercard/AmEx) does a bit more than Visa, and there are a bunch of other payment processing companies out there.

talltexan

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I agree that transaction volume = success.

Does appreciation imply that when merchants receive payment in Bitcoin, they opt to maintain the funds in Bitcoin rather than converting them back to their home currency? That also sounds like success to me.

What does not sound like success is speculation. I think of Bitcoin as a "country" in which certain goods/services can be purchased, like Switzerland. The Swiss franc has appreciated substantially because many people have opted to convert some Euro to hedge against currency collapse. This has been quite hard on Switzerland's many export industries (population of Switzerland is about 8.3 million, about 10% of neighbor Germany)

Bitcoin merchants aren't nervous about Bitcoin's appreciation because they adjust their "bitcoin" prices to keep the effective dollar price constant. When this changes, it will be a major victory for bitcoin (or whatever crypto-currency can achieve it).

maizefolk

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I agree that transaction volume = success.

Does appreciation imply that when merchants receive payment in Bitcoin, they opt to maintain the funds in Bitcoin rather than converting them back to their home currency? That also sounds like success to me.

Well I think in part the problem is that bitcoin (or whatever crypto-currency) could become different kinds of successes. Let's call these Paypal success (using them to make payments but not to store wealth), Gold success (making them to store wealth but not really to make payments), and Dollar success (both).  One wouldn't say "paypal will really be a success once merchants stop pulling the money they receive in credit card payments back out into their bank accounts." Of the three, I think paypal success is the lowest hanging fruit. But cryptos may go nowhere. They could first achieve paypal or gold success on their way to dollar success, or they could achieve either paypal and gold success but not go further than that.

The advantage cryptos have relative to mastercard/western union/paypal/etc is that the cost of processing payments is faster, transactions settle much faster, and merchants don't have to secure the payment information of all their customers or face liability. Sellers also don't have to deal with fraud and chargebacks, although this is offset by the concern for consumers that if someone steals your private key, you cannot close your account and dispute the charges.

Until bitcoin values are equal or less volatile than the value of the dollar, or merchants are paying the bulk of their suppliers or employees in bitcoins, I imagine they will continue to convert any payments they receive right into dollars. The people who run retail businesses and the people who have the interest, resources, and risk tolerance to speculate on currency markets are largely non-overlapping groups.

RangerOne

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Pretty sure most would consider starting a business to be the highest risk/reward investment.

Obliviously in rare cases it can lead to tremendous wealth. Nearly all of the richest people in the world own a business or have in the past. It requires a massive upfront investment of time and or money upfront.

I've watched a friend on and off working on starting a new business and it looks incredibly back breaking and stressful. Not to mention that he and part of his family have put up $100's of thousands of dollars into to pay for piece to built and higher contractors to get things going.

And at the end of the day you have zero guarantee of long term return and stand a good chance to go belly up at some point and get nothing.

powskier

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Geron (GERN), or any pre FDA approval biotech.

Drifterrider

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I have shares of Fanny Mae (FNMA).

The current value is more than double what I paid.  If the lawsuits filed by hedge fund managers to force the government to relinquish dividends back to the share holders are successful, the value will skyrocket.  If not, it will continue to pay no dividends and be worthless.

Big risk, potential big reward.

P.S., I don't have ALL my eggs in that basket, just some.

k-vette

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As an update to this thread...  I have an account with a mix of SPY and some 3X leveraged funds.   Over the past 12 months I'm up 150% +.   High risk, but nothing compared to the reward!

Retire-Canada

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10yrs is still a long time. Index the heck out of it. Keep looking at ways to save on the spending end and pound every bonus into the market. People keep saying future returns will be below average and we keep crushing the shit out of it. Just get as much money into the market as you can and you may find your goal is easily met in 10yrs.

I would rather do that than try something really risky and be the 70yr old at the pub shit faced and with a sad sad sad story to tell about how they were almost rich and almost retired early.
« Last Edit: November 06, 2017, 06:16:34 AM by Retire-Canada »

Playing with Fire UK

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k-vette, have you read this bogleheads thread it nicely highlights the downside of high risk / high reward.

dreams_and_discoveries

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i dont know how anyone gets to save 75% of their income unless you are literally spending nothing, so most i assume are relying on market returns to FIRE?

I think this is a problem that can be tackled many ways. You could invest high risk, and gamble your way to FI.

But, if you can't envision saving 75% of income, you either have a spending problem, an income challenge or no desire to compromise on location/job/hours etc.

For what it's worth, I'm very pro EM lately, I think the world is changing and there is certainly a middle class of consumers to emerge in Asia and Africa - the days of the UK dominating are long over, and as for the US influence, only time will tell.



talltexan

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75% is commendable. I cannot get all the way there.