Using a throwaway account, I've been on HN for a loooong time.
For stocks, an index fund is a fine choice, but I would invest progressively to avoid getting screwed up by wrong timing.
Another idea is to allocate a small part of your portfolio for a fund that has similar ideas to Universa Investments & Taleb, i.e. buys you insurance for tail events.
You can also take a look at https://www.eurekahedge.com/Indices/IndexView/Eurekahedge/64...
Almost destroyed me credit paying off a house when it was the only credit line I had at the time.
At the moment, you could do extremely low-risk things like buy US treasury bonds and come out well in front of where you would be by paying off a home loan early.
Versus money in the bank is money in the bank.
PS: For god's sake don't pay off your primary mortgage if you have a low rate fixed loan.
The first time I came into some unexpected wealth (from selling stock options) I put it aside to pay for my kids college. In terms of frames of reference, I recognized that "lack of debt" is a big help for new graduates even back then. I had gone through school on a combination of scholarships, grants, and student loans but it cost less back then and when my wife and I got married she had actually saved enough to pay of my remaining student debt (which was < $10K as I recall).
Because we didn't have debt, both working as engineers without kids let us save enough and have a good enough debt/income ratio to buy a house in California. And that was what allowed us to stay in California when she wanted to stay home and raise the kids. So looking back, it was a good call.
An exercise that I often gave my kids and engineers I've mentored is to "project your expenses forward" to get an understanding of your "burn rate" over time, then invest / save to ensure you're above the power curve (not incurring debt to pay a projected cost). Three areas I look at are < 1yr, < 5yrs, and > 5yrs. For the latter I put stuff in equities mostly, for < 5yrs it is a mix of equities and fixed income notes (bonds, CDs, etc) and < 1yr usually CD's. For example estimated tax payments (income and property) in CD's that are 3 month, 6 month, and 9 month maturities, depending on when the money will be required.
My parents put $100K of an inheritance my Dad got into a managed "growth" account, and each year if it had grown > $10K they would take out 10K for a vacation that year. That worked well for them being on fixed incomes.
Another friend of mine invested about $500K in a property in the Sacremento area and rents it out which gives them a steady income. It is more work however.
Personally I prefer to avoid index funds because I don't know how the general market will go, but I did know how some specific companies would go. But I felt much more clarity about that last year. I don't want my returns to hinge on Federal Reserve policy, so each position I hold right now, IMO, is something that will do well regardless of Fed decision-making.
Could one buy fractional shares of berkshire hathaway on fidelity?
I don't like the idea of paying the Berkshire premium myself (as it's priced greater than the sum of its assets) but I'd rather hold it than SPY.
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</html>The point of this is maybe you're intending to retire in 5 years. If that were the case, I wouldn't suggest dumping into the S&P500 necessarily.
Another is: what other assets do you have? Do you own your own home? What do you have in retirement savings? What other assets?
If you have children, live in the US and intend to for the foreseeable future, you may want to divert some funds into Roth IRAs for your children. This could be instead of or in addition to 529 savings plans.
If you come from somewhere else and intend to return to taht country then buying property in that country might make sense.
I would generally say own the house you live in. I don't mean outright. If you have a low interest rate locked in for 30 years there's zero point in repaying it early.
The default option would be to dump it in VTSAX but so much depends on individual circumstances and goals.
- Make sure you have enough saved for taxes and hire a good accountant to help you optimize taxes. Lot's of options here, start a LLC, open a SEP retirement account, backdoor ROTH, etc.
- Max out a high yield savings ($250k) into something like Goldman Sachs Marcus (currently earns 3.3% risk free). Here is my referral promo if interested, we each get a interest rate boost https://www.marcus.com/share/JUS-TMY-6QYS
- Split up the remaining into investments. This is your choice, but I'd recommend the majority be an index fund ($SPY) or if you like tech and willing to accept higher risk ($QQQ). The rest you can speculate on individual stocks or cryptocurrencies.
A couple of years ago I set out to do this, mostly by calling accountants and asking if they offered tax optimisation services. Most weren’t accepting new clients. The few that were had no idea on what I meant by tax optimisation, and just wanted to file a 1040 for me.
I was willing to do anything legal in a way that would save me money, including pay an accountant. In the end I just filed my own taxes and gave up on any other optimisation strategies.
The biggest tax savings I benefited from is starting a company (LLC taxed as S corp). Lots of doors open up then. Though, the LLC has annual fees, taxes as well such as payroll tax, self employed tax, state income taxes (if you live in such a place), franchise and excise taxes. It's a lot to manage and overhead having a LLC, recommend you pay somebody to manage it all.
Another reminder for me to start an S-corp, it's been something I've been putting off for the paperwork.
One unexpected benefit is if you have >$500k invested, it opens up some additional services that I had no idea 'rich' people had available. For example - I can borrow against my investments anytime at the libor rate w/out cashing them out. It's not <1% anymore, but still super attractive should you need some of the money in the future.
I also took this opportunity to fully fund 529s. I think it was easier to write off that money the day I got it than mentally earmark it.
I would split the $700K and put half in savings, the other half, as the OP says, in an index fund (Vanguard Admiral shares require $3000 initial purchase).
If you have kids, you can put it in Utah's 529, and save on taxes when you need it for college.
> The Fund employs an indexing investment approach designed to track the performance of the S&P 500 Index, a widely recognized benchmark of U.S. stock market performance that is dominated by the stocks of large U.S. companies.
Another option, while not passive: buying property and long term renting it. You should aim to have it pay back the initial investment and provide passive income in retirement. Easier said than done but entirely possible
That’s basically equivalent to betting on options (but wrapped up in a way that looks simple). Always remember XIV.
I'd say DCAing into TQQQ is not equivalent to "betting on options" in terms of risk. Obviously "options" is a general term and you can in fact construct options positions to be more or less the same as holding the underlying stock, but when you say "betting" I think it implies a high chance of unrecoverable loss that typically comes from expiring options.
I’ve been planning on doing exactly this with TQQQ and SOXL myself once they drop another ~40-50%. Though it should be noted I only have a small amount of capital to use compared to the OP (around 1% of the OP).
With this thesis in mind, it's clear that (T)QQQ and semiconductor companies are gonna be huge winners in this new augmented intelligence era. One just needs the conviction to hold thru the emotional rollercoaster that leveraged ETFs are.
Then, I'll sail it around the world, and you can come and visit whenever I reach a resort location!!
Image a couple weeks a year in Fiji, Easter Island, Mata Nue!
Open an IRA, and get as much as you can into the IRA.
It’ll generate a couple thousand a month. It’s low risk, generates income, easily transferable to heirs.
I would personally recommend 50% $VTI, 20% $VXUS, 30% $BND. bogleheads.org for the reasoning why.
Flatly ignore anyone recommending 3x leverage HFEA gambling addict nonsense. Listening to them, your portfolio would be down 62% to $260k this year, worse than 09 great recession.
Use the 2030 for low risk, use the 2060 for higher risk.
https://investor.vanguard.com/investment-products/mutual-fun...
Get a Vanguard advisor.
Pay your taxes.
REITs or maybe go for a income generating rental property or two.
Oh also make sure you pay your taxes.
Or he's been given a shit ton of money by that same relative already.
10% to charity, attend maybe another 10% if you feel like it, save the remainder.
For saving, make sure you have a good emergency fund of 4-6 months of expenses. Then start paying off debts, ending with your mortgage. Whatever you have left, put into a balanced set of mutual funds that have risk according to you tolerance for it. Pretty standard Dave Ramsey advice.
2H 2023: Vanguard high dividend etf (value stocks)
(If you're going to be actively involved, the equation changes. You might say you're better at programming than anyone you know, and at talking to users, and at selling to large companies. Great! You should start a software company and it will no doubt do better than companies that are made up of people that are only average at those things. The market has a way of cutting down your ego, though.
As for farms, there are lots of people that inherit farms and were born and raised on the farm, but they ain't billionaires. You can hedge against inflation all you want, but all it takes is a swarm of locusts to erase all of your gains on one hot summer day. There is a lot of equipment you need to buy, and hard manual labor you need to do to make the farm more than a park in the middle of nowhere. Everyone knows that people need food, and food grows on farms, and they are there to take a % of your profits. We'll give you a loan on that combine for 8% interest. We'll sell you the best seeds money can buy, for a price. We'll pick up your harvest and drop it off at the market, for a % cut. We'll give you insurance against a freak tornado for a low monthly fee. We'll pay workers compensation when one of your employees decides to dig a hole with a stick of dynamite and blows their hands off. Before you know it, your inflation hedge was siphoned off by products and services. Just sayin', why be the farmer when you can loan someone the farm equipment for a monthly fee?)
And you’re asking random users for investment advice?
That said I think https://old.reddit.com/r/personalfinance/ is usually more relevant and they have a wiki for various investment ranges.