Comment by thorawy44447 | Hacker News Reader

Comment by thorawy44447 | Hacker News Reader

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Hi,

Some tips from me:

- Take a nice holiday - Don't rush into investing. Take some time to think about what you want to do. - If you invest in stocks, do it in a staged plan. Resist the urge to sell when it's going down, and the urge to buy when it's going up. (I could not resist buying when it went up beginning January this year). Start with small amounts first. Be there for the long run (don't sell/buy all the time). Be prepared that you can go up/down a lot in one day. - Rather invest in index funds then specific stocks - Don't invest everything in one type. Don't just use 1 broker. Stay away from leveraged, turbos, bitcoins, etc... - Be careful about tax impacts on your decisions, depending on where you live - Be careful about private investments. Only invest into something which you understand and have knowledge of and can help and make it possible. Only take market risk, and not the execution risk. (I for instance have not yet done any investments so far) - I put some of my money in hedge funds (Millenium, etc..) through a private bank (additional yearly fee + performance fee).

And: - Think about what you would like to do. For me that's starting a new company (since I already did that before and succeeded). If you like your job, then stay.

Honestly this is mostly bad advice. The guy should just sit on his hands for a year or two while he processes the idea of having money. Telling somebody who has never made a big financial decisions to start buying millions of dollars worth of financial assets is terrible advice. Unless by "start small" you mean invest a non-material amount, which still leaves the question: what to do with the remaining 99% of the money. My answer: nothing. Checking/savings account is fine.

When you have a large amount of money the most important thing is not to make any huge mistakes. The best way not to make a huge mistake is to just sit on your hands and do nothing. This is advice that anybody can follow, as opposed to your advice which is vague and absolutely not without risk (there is nothing conservative about buying index funds 10 years into a bull market).

You should NOT have 8 million in a checking account.

Because FDIC only insures $250K? SIPC only covers $500K somewhere like Schwab[1] - or do you mean because you think it's terrible not be earning something on the $8M? Presumably that's enough for anyone to live out the rest of their life on comfortably...

1: https://www.schwabmoneywise.com/public/moneywise/essentials/...

I mostly meant for safety. You want it split up for many reasons... so you can have the FDIC or SIPC insurance, so you don't have to worry about losing access to the account via fraud, etc.

It would be ok for a short term to keep it in checking or savings accounts, but don't put it all in one.

FDIC is not just a dollar limit, but also per bank. Someone can have CDs from multiple banks, all in one account. Millions of FDIC insured money is easy these days.

No, checking/savings account is not fine. They are covered for $100,000 (IIRC) by FDIC if the bank fails. [Edit: $250K.] That is, if the bank goes under when you have $10 million in it, you get back... $259,000.

I mean, it can be OK if you have 40 different accounts in different banks. But that's tedious.

Dump $100K into a bank account (one that does not have a debit card attached to it). As others have said, set aside one year's expenses; I'm going to assume that $100K is in the neighborhood of that. Put the rest into, say, a Vanguard S&P 500 index fund, a Fidelity high-quality corporate bond fund, and somebody else's Treasury fund.

when you have $8mm, sitting on your hands for a year costs you ~$250,000.

If you make rash decisions based on your perception of opportunity costs at that kind of sum, it's a good first step for losing it all. I'm also surprised by the attitude of 5% gain is easy and guaranteed. It's not. Neither treasurey funds nor real estate yield anywhere near 5% and we are many years in a bull market. Expecting 5% yearly ROI in the market over the next decade is optimistic.

> we are many years in a bull market

I agree. Having most of his capital in the stock market or real estate is a great opportunity to lose money in the next 5-10 years. Holding cash and investing it when the market is down is a good idea. Buffet currently does that because Berkshire thinks [1] that most of the stocks are overvalued (he waits for the next crash to buy them when they're cheap).

Other assets which are stable in value (e.g. gold, inelastic resources) are also a good idea.

[1]: https://www.businessinsider.de/warren-buffett-berkshire-hath...

OT: I would get myself a New Zealand citizenship/permanent residency and buy real estate there ($500k-1m NZD). Many millionaires are currently heading to Australia and NZ because they expect that the inequality will get to the point where society will turn aggressive. A little bit paranoid, but they try to be better safe than sorry. Plus New Zealand is a wonderful place to live and the real estate price will rise in the next years because of growing fear. [2]

[2]: https://www.bloomberg.com/features/2018-rich-new-zealand-doo...

$SPY has lots of room to go. This bull market is just starting to simmer until the market tells us otherwise. Further to that, for many, me excluded, time in the market is better than time in the market. If you can afford to just leave all your money in the market, overtime, statistically, it has been proven to get better returns when we recover. Suppose OP drops $8M into the market and it dips to $150, it will likely recover in time and it won't be spent if you just leave it. You can also do the 4% withdrawal that many financial blogs suggest.

Leaving cash on the side will eat you alive especially when inflation goes higher. However, if inflation goes up significantly over the next decade, think 15-20% inflation per year, having money on the side to buy assets will give OP the ability to become an asset owner, as inflation provides the ability for the largest transfer of wealth, assuming items can be paid off and investments are made in assets which gain value, i.e. houses, not cars.

Most people lack the emotional capability to hold stocks that are losing value.

If inflation goes up he can use his money to allocate the most valuable asset. I just don't think it's generally a good idea to invest while the market is deep into a bull market. It's better to put 1/5th or 1/4th into this bullish market and wait on the sidelines for the market correction (crash). If you buy after a crash, it's definitely a better bargain. Finding other options for your cash (e.g. houses that are expected to rise in value) to avoid losing 2% to inflation is certainly a good idea. I would also consider the risk that OP had no contact with the stock market before and that the emotional toll you get when you see that -15% in your portfolio can be overwhelming. Most people lose their money because they realize their losses in the wrong moment (and vice versa - some people lose their money because they don't cut their losses early enough). Definitely no hassle-free money in the stock market.

I think you meant time in the market is better than timing the market. However your advice rings true.

Yeah oops. For most, time in the market is better than timing the market.

not opportunity cost, real dollar loss to inflation. the opportunity cost is even greater.

also I don't know why you are talking to me about 5%. $250k is not 5% of $8mm.

Yea you're right. I dunno why I added the 5% part here, it's something I saw across other comments.

What would it have cost you if you dumped your windfall into an index fund in July 2018? Answer — you would have lost money and get the shaft when you’re forced to sell to lay taxes, etc.

Prudence and dollar cost averaging are your friends. People who stay rich are conservative with cash.

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