Comment by ChuckMcM | Hacker News Reader

Comment by ChuckMcM | Hacker News Reader

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An interesting dilemma is it not? As you're young and inexperienced you are not unlike the 3 or 4 folks who become millionaires under the California lottery each year.

So good news and bad news, good news is you have choices, bad news is commercial real estate is (by some estimates) the next thing to go into the crapper).

Lets say you had $5M clear to work with. Yes, the 2 - 4% "return" is currently 'safe' money (which is to say treasury bill equivalents) so take $2M and buy a treasury bill 'ladder', these things are sold by the government quarterly and you can buy them at all maturities, so you split $2M equally into 40 parts, buy 10 year T-bills with their 3.5% return and you end up with about $70,000 a year (in the US at least) which is tax free. (So that is like having a salary of $110K/year before taxes.)You buy a place to live and if you want, you create another income stream to cover the taxes for that place.

At that point you've insured you're not going to go homeless or hungry and you are left with between 1.5 - 2 million to be a bit more speculative with. Putting .5 - .75M into equities is a reasonable way to capture that growth and it gives you a way to augment some of your return. If you want to just "participate" then buying index funds on the S&P 500 can do that with minimal hassle.

If you go the Angel route you can invite people to tell you how they are going to change the world and sponsor some of them. I suspect you will learn a lot doing this, but I would not expect it to be particularly profitable.

You can find another niche, create a company to fill that niche, build it up and sell it too.

Oh and I don't think you want a 'broker' what you want is a Financial Advisor (There is a separate certification for them, they don't trade stocks directly so they generally have less conflict of interest when it comes to fees).

Sounds like a nice problem to have, hope you do better than the Californians (the Lottery here has depressing statistics about how some very large percentage of lottery winners have lost it all in 18 months, sad really).

I have problems with your advice. 1. Treasuries are not tax free. 2. Technically the 10 year is a T-note.

3. This is not a risk free strategy. Interest rate risk is your biggest problem here. Although the Ladder will work in the current environment (interest rate anticipation), their is a good risk of higher inflation that could happen rather quickly. You will be screwed if your in fixed payment securities. The Bullet may be a better strategy here.

To the OP. I would never listen to investment advice on the internet. Finance is complicated and easy to mess up. That said, I would invest in some options in your position, if you choose to play the markets. Don't do this unless you know what your doing however. Also be careful with financial advisors. Some, but not all are the chiropractors of the finance world. The CFA designation is viable here.

You will probably be able to find better returns outside of financial markets, but it all depends.

Solid Advice, I was looking up T-Bills, and I think the return is 1.5% (http://www.bankofcanada.ca/en/rates/tbill.html)

Any advice on which firm to talk to about the financial advisor?

Hmm I used this page: http://www.treasury.gov/Pages/default.aspx and went to the 10yr note and looked at its return. So to be clear, I'm talking about US Treasury Bills and not Canadian Treasury Bills. If you have a relationship with a financial institution you can buy them 'directly' (which is to say you own t-bills as opposed to buy into a fund which invests in t-bills) at $10,000 each. (insert caveat about 'Goldman Sachs' which handles sales of t-bills to individual investors and takes a cut, grrrr)

I don't have a magic bullet for finding a good financial advisor, mine cold called me in 1988 when I was at Sun and convinced me to by some California Municipal bonds. Now going on 23 years later I still consult her for financial advice. I think its more of a style thing in terms of being able to talk with someone about what makes sense and what doesn't with investing.

To give you an example, I was waaaaaaaaaaay over invested in tech in the 90's. My advisor told me I was, but didn't push me to do something different. 2000 may not have had a y2k bug disaster but it was financially painful for me.

Some folks might blame their advisor for not being forceful enough and getting me out of tech, but I don't roll that way. I heard what she had to say, we talked about the pros and cons, and I went with 'let it ride for one more roll' (a reference to the game of craps).

I was less forgiving of a recommendation for a fund manager who turned out to be a total turd. But I'm a big believer in Iacocca's comment that if more than half your decisions are good then you are ahead of the game. So advice for looking for an advisor:

1) Interview them, ask them the 'hard' questions, like "did you suggest to anyone to invest in Madoff's schemes?" (note either 'no' or 'yes' has good follow up questions, "No? It was such a great return why not?", "Yes? Even when the returns were out of line with other investments?")

2) Know that the wider the diversification the closer to the mean you will get. If the S&P 500 has a return of X% and someone tells you they can guarantee you > 1.5X% return, then you know they are not being truthful :-) Doing about 50% better than the S&P 500 occasionally has sort of emerged for me as a good razor for becoming suspicious. (note that 'banks' make there boatloads of cash on volume, not because they beat the S&P by 50% but because they beat it by a small amount but on a lot of other peoples money, and FedRsrv money but that is a whole different rant)

3) Check for compatibility. Everyone is different in how they interact with each other, and money, like sex, is one of those things that often has some really strong notions that were burned into ones brain at an impressionable age which color the way you look at everything. Risk averse? Risk seeking? Money as a tool? Money as a game score? Do they define themselves by how much money they manage? Do you? Its perhaps the hardest thing to get right.

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