$3.6 million at age 25 - need investment advice

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Topic Author
wolf85
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Joined: Fri Sep 22, 2017 3:16 pm

$3.6 million at age 25 - need investment advice

Post by wolf85 »

Hi everyone,

I was hoping I could get some long term investment advice given my situation:

Full time employed, $60k annual pre tax
401k 6% at 25% company match (garbage I know)

401k is all I'm in currently. The kicker here is I have recently cashed out $3.6M over the course of a year from my profits from investing and swing trading crypto currencies. Mostly sitting across multiple savings accounts while I figure out what to do. I know most of you probably are completely against bitcoin and other cryptos, but that's another debate to be had. It was extremely stressful and I'm looking to take what ive made and put it into index funds and safer investments so I can get my life back.

My question is - what would you all suggest in this scenario given my age? I'm setting up a vanguard and everything, but what else can I do with that amount of money? Appreciate any advice.
NightFall
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Re: $3.6 million at age 25 - need investment advice

Post by NightFall »

First suggestion: make sure you pay taxes on your gains.

With that much in taxable, I would suggest deferring as much income in tax sheltered accounts as possible. You need to learn about the tax code as well so that you make informed decisions about income. With that much money, the dividends alone will exceed your W2 income.
Topic Author
wolf85
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Re: $3.6 million at age 25 - need investment advice

Post by wolf85 »

Yes, well aware of the taxes unfortunately. A lot of it will utilize the long term capital gain rates though. Still going to be disgusting
Jags4186
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Re: $3.6 million at age 25 - need investment advice

Post by Jags4186 »

To have won at such a young age...

OP I’m super jelly
awval999
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Re: $3.6 million at age 25 - need investment advice

Post by awval999 »

I mean, you don't really need to ever work again.

The dividend yield of the S&P500 is greater than your current annual income.
You can live forever off of that.
Topic Author
wolf85
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Joined: Fri Sep 22, 2017 3:16 pm

Re: $3.6 million at age 25 - need investment advice

Post by wolf85 »

Jags - it was incredibly stressful and during some of the bear markets I wouldn't sleep properly for days. Took an insane amount of hours of research/skill, combined with luck. Definitely not a savant, luck is always involved.

awval - I still want to work though. Plan to keep going. If it was like 10 mil then I'd be done with it, but I don't want to waste my younger years [messing around --admin LadyGeek].
Last edited by wolf85 on Fri Sep 22, 2017 4:37 pm, edited 1 time in total.
ThriftyPhD
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Re: $3.6 million at age 25 - need investment advice

Post by ThriftyPhD »

Congrats!

Have you read Managing a Windfall?

Main things I would say are take your time, and don't tell anyone. I would treat this like winning the lottery. You could easily live quite comfortably with this money, but it could also be spent within a couple years if not managed correctly. Read the wiki, come up with an Investment Policy Statement. Ask lots of questions.
WhiteMaxima
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Re: $3.6 million at age 25 - need investment advice

Post by WhiteMaxima »

continue your trade until you pass b gates.
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vitaflo
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Re: $3.6 million at age 25 - need investment advice

Post by vitaflo »

First of all, kudos to "selling high". But you also got very lucky. You've basically already won the game, and you have a lot of options available to you, but financially, they're pretty boring.

Other than making sure you pay your taxes correctly, I would perhaps think more like someone who is closer to retirement than someone just starting their career. There's really no more reason for you to take risks, you already did that dealing in crypto-currency. If it was me I'd go with just a boring 3-fund 60/40 portfolio and call it a day.

But your biggest challenge isn't going to be monetary, it'll be psychological. People who make the money you did at a young age tend to think they can do it again and double up on their winnings. That's a trap. Like I said, you got lucky. You don't make that kind of money that fast without taking enormous risks. As long as you understand that you'll be fine, but if you don't, you could easily lose it all just as fast as you made it. Don't make that mistake.
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vitaflo
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Re: $3.6 million at age 25 - need investment advice

Post by vitaflo »

ThriftyPhD wrote: Fri Sep 22, 2017 4:37 pm don't tell anyone.
This. Those of us who became millionaires early learn this lesson fast. Nothing good ever comes of telling everyone how much money you have at a young age. Trust me.
KyleAAA
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Re: $3.6 million at age 25 - need investment advice

Post by KyleAAA »

Seems like the Lifestrategy Growth Fund would serve you well. Is it the most tax-efficient? No. Should you care? No, it's only 20% bonds. You're set for life so long as you don't withdrawal more than 3% per year.
Topic Author
wolf85
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Re: $3.6 million at age 25 - need investment advice

Post by wolf85 »

vitaflo - Agreed completely. I decided to end it after I caught myself almost putting in $100k into a relatively new ICO. Started to realize I was becoming a gambler more than a trader as I started to sway away from the fundamentals. Appreciate your advice, that will most likely be what I do. Go low risk, don't want to play it stupid.

I prefer not to consider myself as one of those young and dumb types who won the lottery and proceed to blow it. Whether or not you think trading takes skill, it was definitely something I worked extremely hard at. Have the hairloss to prove it.

kyleAAA - Will look into it, thanks
Grt2bOutdoors
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Re: $3.6 million at age 25 - need investment advice

Post by Grt2bOutdoors »

Dude!!!! :moneybag - Congrats man!
Now, let's talk about how you get to keep it.
1. And it bears repeating - don't tell anyone, i mean it - not your girlfriend or boyfriend, not your siblings or relatives, not your buddies, not your co-workers. Loose lips will sink your ship or put you in treacherous waters.
2. If you don't have a significant other and are in the market, don't advertise your good fortune, because the fastest way to attract the flies or diggers is to display your honey or gold.
3. Drive a car? - time to revise or review your liability limits. Perhaps obtain a cheap umbrella insurance policy. You don't want to be involved in an accident, get sued, have the plaintiffs attorney discover your cash and get visions of grandeour. Let the insurance company worry about it, umbrella for 2 million on top of auto liability ought to be plenty. Might cost say $300-$500 a year, cheap protection to cover the gold.
4. 56% Vanguard Total Stock Market
24% Vanguard Total International Stock
20% Vanguard Intermediate Tax Exempt or your local FDIC insured savings account. Reinvest your dividends or use part of it to pay the taxes. - Aggressive

42% Total Stock
18% Total International
40% Intermediate Tax Exempt or FDIC insured saving/cds. - Moderate

5. Read some books, enjoy your life.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions
livesoft
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Re: $3.6 million at age 25 - need investment advice

Post by livesoft »

If you want to invest in index funds, then a good start is the so-called 3-fund portfolio because it is tax-efficient and worry-free. I don't think you will mind reading up about it:
https://www.bogleheads.org/wiki/Three-fund_portfolio

You won't be locked into it and can easily change things. For instance, one can use tax-exempt bond fund in a taxable account. I would recommend you use Vanguard products: either their index mutual funds or their index ETFs.

It would be pretty easy to go from 3 funds to 4 funds or 5 funds later.

It is quite interesting to me that you did the crypto thing and find that you need help from bogleheads.org with something way less complicated. Did you also use social media to help you with the crypto trading?
Wiki This signature message sponsored by sscritic: Learn to fish.
aristotelian
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Re: $3.6 million at age 25 - need investment advice

Post by aristotelian »

He is going to lose about 50% of this windfall in taxes. He is going to end up with a little less than $2M to last him 40 years until SS kicks in. He has a very nice windfall but I think it is hasty to suggest he has already "won the game".

OP: you seem like you have a good attitude about this. It would be very tempting to quit your job and go live in Thailand. If you were smart enough to get into Bitcoin and cash out at the right time, it is likely you will be fine to manage a simple portfolio of index funds. You might want to speak with a CPA to get a handle on the taxes and shelter every cent that you can. It should go without saying that you should max your 401k.

PS Keep a low profile and do not tell anyone about your windfall.
Topic Author
wolf85
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Re: $3.6 million at age 25 - need investment advice

Post by wolf85 »

Didn't think about the car liability.

Taxes are the worst thing. I'm expecting $2m liquid though, maybe a little more depending on how the taxes are done.

Thanks all
WanderingDoc
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Re: $3.6 million at age 25 - need investment advice

Post by WanderingDoc »

vitaflo wrote: Fri Sep 22, 2017 4:42 pm First of all, kudos to "selling high". But you also got very lucky. You've basically already won the game, and you have a lot of options available to you, but financially, they're pretty boring.

Other than making sure you pay your taxes correctly, I would perhaps think more like someone who is closer to retirement than someone just starting their career. There's really no more reason for you to take risks, you already did that dealing in crypto-currency. If it was me I'd go with just a boring 3-fund 60/40 portfolio and call it a day.

But your biggest challenge isn't going to be monetary, it'll be psychological. People who make the money you did at a young age tend to think they can do it again and double up on their winnings. That's a trap. Like I said, you got lucky. You don't make that kind of money that fast without taking enormous risks. As long as you understand that you'll be fine, but if you don't, you could easily lose it all just as fast as you made it. Don't make that mistake.
Classic mentality of BH... good job but you got lucky, and won't do it again.. How do you think deca-millionaires and billionaires get that way? They take tremendous amounts of risk. Just because you can't take that amount of risk, and don't have the skill and talent, then don't put down the youngster hustler. Luck is about putting yourself into the position to get lucky. Not everyone wants a boring life of working for 20-30 years, and having $2M in index funds at retirement, withdrawing 4%. It actually makes me depressed to think about :?
I'm not looking to get rich quick (stocks), I'm not looking to get rich slow (indexing), I'm looking to get rich, for sure (real estate) | Don't wait to buy real estate. Buy real estate.. and wait.
Topic Author
wolf85
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Re: $3.6 million at age 25 - need investment advice

Post by wolf85 »

WanderingDoc wrote: Fri Sep 22, 2017 5:21 pm
vitaflo wrote: Fri Sep 22, 2017 4:42 pm First of all, kudos to "selling high". But you also got very lucky. You've basically already won the game, and you have a lot of options available to you, but financially, they're pretty boring.

Other than making sure you pay your taxes correctly, I would perhaps think more like someone who is closer to retirement than someone just starting their career. There's really no more reason for you to take risks, you already did that dealing in crypto-currency. If it was me I'd go with just a boring 3-fund 60/40 portfolio and call it a day.

But your biggest challenge isn't going to be monetary, it'll be psychological. People who make the money you did at a young age tend to think they can do it again and double up on their winnings. That's a trap. Like I said, you got lucky. You don't make that kind of money that fast without taking enormous risks. As long as you understand that you'll be fine, but if you don't, you could easily lose it all just as fast as you made it. Don't make that mistake.
Classic mentality of BH... good job but you got lucky, and won't do it again.. How do you think deca-millionaires and billionaires get that way? They take tremendous amounts of risk. Just because you can't take that amount of risk, and don't have the skill and talent, then don't put down the youngster hustler. Luck is about putting yourself into the position to get lucky. Not everyone wants a boring life of working for 20-30 years, and having $2M in index funds at retirement, withdrawing 4%. It actually makes me depressed to think about :?
Well, I don't deny that I got lucky. There's other people in crypto who have done well but are cocky and think they're geniuses. Though it seems like some people think I just bought bitcoin and sat in it for 5 years... Far from the truth. I invested solely in bitcoin in 2016 to get something going, and then as things started ramping up in early 2017, that is when I began swing trading those profits making real money with altcoins. The investing part was mostly luck, swing trading was mostly skill because you've not only heavily researched the coin, but you also have to CONSTANTLY be up to date on news and rumors so you can time the sell properly as this is a 24/7 market. It took over my life and was very stressful. Would watch charts at 2am when I had work the next day and bs like that.

I respect the guys on this board though. They're very knowledgeable overall. I do not blame many of the older guys for lack of awareness on crypto, it does require a lot of research and trust in a new disruptive technology, which has big risks. History would say to cash out while you're ahead. Will I ever be a deca millionaire doing that? Probably not. But it isn't worth the risk of losing it all.
sambb
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Re: $3.6 million at age 25 - need investment advice

Post by sambb »

You have done well.
Let me make this very simple for you.
Put all of it into vanguard tax managed balanced fund (after paying all your taxes)
Wait 5-10 years, and then start thinking about this, but do not touch the money/
You will be offered all sorts of other advice, but this is an appropriate strategy, and you will be ok for life.
Last edited by sambb on Fri Sep 22, 2017 6:37 pm, edited 1 time in total.
mac808
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Re: $3.6 million at age 25 - need investment advice

Post by mac808 »

Echoing what others have said: pay your taxes and get the accounting done right. My understanding is that transfers from one digital currency to another are considered a taxable event, so if you traded Bitcoin for Litecoin, for example, you'd need to record that as a sale of Bitcoin and a purchase of Litecoin, for tax purposes. It might take awhile to go back through the records and figure it out all, but you'll be very happy you got it settled now versus it causing problems in the future.
AllenSmith
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Re: $3.6 million at age 25 - need investment advice

Post by AllenSmith »

Wait - are you done with crypto? no position?
DrGoogle2017
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Re: $3.6 million at age 25 - need investment advice

Post by DrGoogle2017 »

We need advice from you, not the other way around.
Grt2bOutdoors
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Re: $3.6 million at age 25 - need investment advice

Post by Grt2bOutdoors »

WanderingDoc wrote: Fri Sep 22, 2017 5:21 pm
vitaflo wrote: Fri Sep 22, 2017 4:42 pm First of all, kudos to "selling high". But you also got very lucky. You've basically already won the game, and you have a lot of options available to you, but financially, they're pretty boring.

Other than making sure you pay your taxes correctly, I would perhaps think more like someone who is closer to retirement than someone just starting their career. There's really no more reason for you to take risks, you already did that dealing in crypto-currency. If it was me I'd go with just a boring 3-fund 60/40 portfolio and call it a day.

But your biggest challenge isn't going to be monetary, it'll be psychological. People who make the money you did at a young age tend to think they can do it again and double up on their winnings. That's a trap. Like I said, you got lucky. You don't make that kind of money that fast without taking enormous risks. As long as you understand that you'll be fine, but if you don't, you could easily lose it all just as fast as you made it. Don't make that mistake.
Classic mentality of BH... good job but you got lucky, and won't do it again.. How do you think deca-millionaires and billionaires get that way? They take tremendous amounts of risk. Just because you can't take that amount of risk, and don't have the skill and talent, then don't put down the youngster hustler. Luck is about putting yourself into the position to get lucky. Not everyone wants a boring life of working for 20-30 years, and having $2M in index funds at retirement, withdrawing 4%. It actually makes me depressed to think about :?
They take tremendous amounts of risk - that's right, they risk Other People's Money through the use of leverage. However, live by the sword, die by the sword - the road is littered with multi millionaires and billionaires who got completely wiped out because they levered up too much. You have to know when to hold them and know when to fold them. Some folks don't know when to stop, this OP sounds like he knows......
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions
Grt2bOutdoors
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Re: $3.6 million at age 25 - need investment advice

Post by Grt2bOutdoors »

wolf85 wrote: Fri Sep 22, 2017 5:20 pm Didn't think about the car liability.

Taxes are the worst thing. I'm expecting $2m liquid though, maybe a little more depending on how the taxes are done.

Thanks all
Are they? Let me put it to you this way:
Gov't: Make a donation and feel good about it.
OP: How?
Gov't: Donate 40 cents of every dollar you made this year, we will use it to pay for your grandmother's doctor visit, send food to the needy, pave your local highways, give kids in school books to read so they can grow up and be as intelligent as you are. :wink:
OP: Wow, sounds great, I like helping people!
Gov't: Best of all, you still will have over half of your money jingling in your pocket after this transaction. Take good care of it and it will take good care of you one day.
OP: Great! Well, I'm off to the Bogleheads wiki to learn how it can take care of me.
:D
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions
JBTX
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Re: $3.6 million at age 25 - need investment advice

Post by JBTX »

WanderingDoc wrote: Fri Sep 22, 2017 5:21 pm
vitaflo wrote: Fri Sep 22, 2017 4:42 pm First of all, kudos to "selling high". But you also got very lucky. You've basically already won the game, and you have a lot of options available to you, but financially, they're pretty boring.

Other than making sure you pay your taxes correctly, I would perhaps think more like someone who is closer to retirement than someone just starting their career. There's really no more reason for you to take risks, you already did that dealing in crypto-currency. If it was me I'd go with just a boring 3-fund 60/40 portfolio and call it a day.

But your biggest challenge isn't going to be monetary, it'll be psychological. People who make the money you did at a young age tend to think they can do it again and double up on their winnings. That's a trap. Like I said, you got lucky. You don't make that kind of money that fast without taking enormous risks. As long as you understand that you'll be fine, but if you don't, you could easily lose it all just as fast as you made it. Don't make that mistake.
Classic mentality of BH... good job but you got lucky, and won't do it again.. How do you think deca-millionaires and billionaires get that way? They take tremendous amounts of risk. Just because you can't take that amount of risk, and don't have the skill and talent, then don't put down the youngster hustler. Luck is about putting yourself into the position to get lucky. Not everyone wants a boring life of working for 20-30 years, and having $2M in index funds at retirement, withdrawing 4%. It actually makes me depressed to think about :?
If you find the plodding deliberateness of the Boglehead approach so disgusting, why do participate in the forum?. You find the level of condecension on the board irritating yet in a single sentence you attempt to minimize and trivialize the core values of most of the participants of the forum.
inbox788
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Re: $3.6 million at age 25 - need investment advice

Post by inbox788 »

aristotelian wrote: Fri Sep 22, 2017 5:13 pm He is going to lose about 50% of this windfall in taxes. He is going to end up with a little less than $2M to last him 40 years until SS kicks in. He has a very nice windfall but I think it is hasty to suggest he has already "won the game".

OP: you seem like you have a good attitude about this. It would be very tempting to quit your job and go live in Thailand. If you were smart enough to get into Bitcoin and cash out at the right time, it is likely you will be fine to manage a simple portfolio of index funds. You might want to speak with a CPA to get a handle on the taxes and shelter every cent that you can. It should go without saying that you should max your 401k.

PS Keep a low profile and do not tell anyone about your windfall.
Sounds like much of the gains are realized and cashed out into a savings account, which is good from a safety standpoint, but bad from a tax standpoint. Be sure to pay the taxes that are due. Depending on how much is still unrealized, and the complex rules regarding bitcoin and other digital currencies, which I think are treated as property, you might look for ways to defer or avoid taxes (not evade).
https://www.forbes.com/sites/greatspecu ... c1d61fe3d8

Facebook co-founder Saverin moved to Singapore, believed in part due to taxation reasons. I think he had dual citizenship and gave up US for tax benefit. He took some flak in the press for it, but if your plan is to live abroad, it's smart to plan accordingly.
https://en.wikipedia.org/wiki/Eduardo_S ... itizenship

You can afford to hire a good tax accountant/attorney to advise you.
chikabeast
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Re: $3.6 million at age 25 - need investment advice

Post by chikabeast »

If I had that kind of weath at age 25 I would go back to college and study finance so as to (1) have something to do and (2) better look after my incredible nest egg.
MiddleOfTheRoad
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Re: $3.6 million at age 25 - need investment advice

Post by MiddleOfTheRoad »

Grt2bOutdoors wrote: Fri Sep 22, 2017 7:05 pm
WanderingDoc wrote: Fri Sep 22, 2017 5:21 pm
vitaflo wrote: Fri Sep 22, 2017 4:42 pm First of all, kudos to "selling high". But you also got very lucky. You've basically already won the game, and you have a lot of options available to you, but financially, they're pretty boring.

Other than making sure you pay your taxes correctly, I would perhaps think more like someone who is closer to retirement than someone just starting their career. There's really no more reason for you to take risks, you already did that dealing in crypto-currency. If it was me I'd go with just a boring 3-fund 60/40 portfolio and call it a day.

But your biggest challenge isn't going to be monetary, it'll be psychological. People who make the money you did at a young age tend to think they can do it again and double up on their winnings. That's a trap. Like I said, you got lucky. You don't make that kind of money that fast without taking enormous risks. As long as you understand that you'll be fine, but if you don't, you could easily lose it all just as fast as you made it. Don't make that mistake.
Classic mentality of BH... good job but you got lucky, and won't do it again.. How do you think deca-millionaires and billionaires get that way? They take tremendous amounts of risk. Just because you can't take that amount of risk, and don't have the skill and talent, then don't put down the youngster hustler. Luck is about putting yourself into the position to get lucky. Not everyone wants a boring life of working for 20-30 years, and having $2M in index funds at retirement, withdrawing 4%. It actually makes me depressed to think about :?
They take tremendous amounts of risk - that's right, they risk Other People's Money through the use of leverage. However, live by the sword, die by the sword - the road is littered with multi millionaires and billionaires who got completely wiped out because they levered up too much. You have to know when to hold them and know when to fold them. Some folks don't know when to stop, this OP sounds like he knows......
Ha, I was going to post this. Many deca-millionaire play with other people’s money and take “tremendous risk”. Only suckers keep up leveraging their own capital. There is a time to lock in the gain and bring outside money in.

For the OP, you now have many options and you are only 25. Invest the money safely as this is your insurance for any future endeavors. Invest in your own education whether through school or work experience you would not otherwise try if you don’t have this money. Leverage that to earn more, and live the good life.
Topic Author
wolf85
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Re: $3.6 million at age 25 - need investment advice

Post by wolf85 »

Yes, I did not margin trade / use leverage. The exchanges can be glitchy with margin trading and I've seen people get liquidated by computer error when they were shorting.

Might have been stupid to cash it out slowly but at the same time, the volatility is so high in crypto that I wanted to lock it in before another big correction.

Grt2bOutdoors - I just love the government. They certainly know how to handle my money better than I do. :wink: Instead of donating to non profits, I'll give to them instead!
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randomizer
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Re: $3.6 million at age 25 - need investment advice

Post by randomizer »

Two words: Three Fund Portfolio.

Ok, three words.

In your situation, the AA doesn't even matter but 75:25 has a nice ring to it.
87.5:12.5, EM tilt — HODL the course!
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LadyGeek
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Re: $3.6 million at age 25 - need investment advice

Post by LadyGeek »

^^^ The wiki has some background info: Three-fund portfolio

wolf85, Welcome! Let's get this party started. As randomizer says, the first thing you need to do is pick an Asset allocation.

First, take take a look at Risk tolerance and decide on the percentage of stocks / bonds you want in your new portfolio. If you're not sure, a 75% stock / 25% bond would be appropriate for someone 26 years old (your age in bonds for the bond portion).

What do you have now? Please post your info in this thread using the Asking Portfolio Questions format. It will make you think about the "big picture" while giving us the info we need to point you in the right direction.
Wiki To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.
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VictoriaF
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Re: $3.6 million at age 25 - need investment advice

Post by VictoriaF »

Is your $60,000 job what you really want to do?

If not, after you figure out investments and taxes, consider going to school to pursue your passion. May be you want to become a physician to treat people while not worrying about insurance, billing, and other things doctors are complaining about these days?

May be you want to study computer science at MIT or CalTech with the best of the best?

Or study philosophy at Cambridge, UK?

May be you want to become a filmmaker?

My point is that you've got an opportunity to design your future life to your liking. Consider your money an enabler rather than the goal.

Victoria
Inventor of the Bogleheads Secret Handshake | Winner of the 2015 Boglehead Contest. | Every joke has a bit of a joke. ... The rest is the truth. (Marat F)
GuineaPig
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Re: $3.6 million at age 25 - need investment advice

Post by GuineaPig »

VictoriaF wrote: Fri Sep 22, 2017 9:51 pm Is your $60,000 job what you really want to do?

If not, after you figure out investments and taxes, consider going to school to pursue your passion. May be you want to become a physician to treat people while not worrying about insurance, billing, and other things doctors are complaining about these days?

May be you want to study computer science at MIT or CalTech with the best of the best?

Or study philosophy at Cambridge, UK?

May be you want to become a filmmaker?

My point is that you've got an opportunity to design your future life to your liking. Consider your money an enabler rather than the goal.

Victoria
I agree with this. If I had that amount of money, I'd look for something I loved -- or I'd work part-time.

One thing I don't see mentioned above is that combined with the above advice on setting your portfolio, the big thing is to control your lifestyle. Don't let the money get to you -- live a middle-class lifestyle and don't flaunt your wealth, and your money will go a long way. If you start spending like a rich person, you're going to run out of money sooner or later.
vested1
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Re: $3.6 million at age 25 - need investment advice

Post by vested1 »

Your humility is refreshing. I would take the advice of several members and invest your after tax proceeds in index funds. At age 25 you don't need any bonds in my opinion. I would then pretend that those investments don't exist for the next 20 years. Consider writing a book, "How I Made 3.6 Million Investing in Crypto Currencies (Then Kept it by Cashing Out)".
deltaneutral83
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Re: $3.6 million at age 25 - need investment advice

Post by deltaneutral83 »

See a CPA and get all that straight, and do that ASAP. Going to your day job without the burden of the stress of the Bitcoin may be refreshing. Live off that $60k at the day job for a year or two and see how that goes. I'd have the $2M in 75/25 VTI/VXUS. I say that because I doubt you'll care about bonds if you traded krytpos and quite frankly, and this is where personal risk tolerance comes in (which you've proven you have plenty) and a lot of 25 year olds are 100% equities anyhow. In fact, a lot of 45 year olds are 100% equities. That's a choice you have to think about but engaging in kryptos leads me to believe you can skip the risk tolerance questionnaire at your new brokerage.
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Re: $3.6 million at age 25 - need investment advice

Post by jb1 »

Hoping to make it with ethereum bitcoin and litecoin. Will check back in 5 years.
Just_For_Jenna
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Re: $3.6 million at age 25 - need investment advice

Post by Just_For_Jenna »

Congrats OP. Especially if you can stay out of crypto and take the advice in here. I agree 3 fund portfolio but I wouldn't be so conservative as some have said - I'd go 80/20. You're young. Speaking of young. If this were me, I'd take a year and travel the world. You don't need to spent a ton too. I traveled a lot when I was younger but always had to do it in 2-3 week increments because of jobs and budget, or over summers while in college. I've always wanted to just hit the road for 6 months to a year. I'm 34 with a 12 year career, wife and two kids 1 and 3, so it is not happening for a while.

Just a suggestion.
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CyclingDuo
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Re: $3.6 million at age 25 - need investment advice

Post by CyclingDuo »

wolf85 wrote: Fri Sep 22, 2017 3:29 pm Hi everyone,

I was hoping I could get some long term investment advice given my situation:

Full time employed, $60k annual pre tax
401k 6% at 25% company match (garbage I know)

401k is all I'm in currently. The kicker here is I have recently cashed out $3.6M over the course of a year from my profits from investing and swing trading crypto currencies. Mostly sitting across multiple savings accounts while I figure out what to do. I know most of you probably are completely against bitcoin and other cryptos, but that's another debate to be had. It was extremely stressful and I'm looking to take what ive made and put it into index funds and safer investments so I can get my life back.

My question is - what would you all suggest in this scenario given my age? I'm setting up a vanguard and everything, but what else can I do with that amount of money? Appreciate any advice.
You've won the game! The temptation to gamble it all away based on your prior success to this point is the demon you are going to have to fight and win.

How to set aside a chunk of it that you won't touch to be used for retirement is going to be an issue. Obviously, max out your 401K each year, and max out a ROTH IRA as well with your salary. You are also going to have a large taxable account which will up your taxes each year, so utilizing a strategy to mitigate that will be key with your taxable investments.

What about setting some of it aside for retirement that is out of reach so it can grow and work for you in the market?

Vanguard and Fidelity both have the two lowest cost variable annuities where you could park some for retirement and not be able to withdraw until you are 59 1/2 without penalty. It would grow tax free, and once you hit age 70 there are no RMD's required which makes that option a nice "set it aside and forget about it" pot of money to use in retirement. ER fees are a bit higher than you will find in a taxable, but the tax deferred savings would more than make up for the difference in basis points.

Fidelity's S&P Index fund has an ER fee of .10%, and the normal administrative fee is .25% on balances below $1M, and only .10% for accounts with balances $1M and above. So you could park some money for retirement tax deferred in the Fidelity Personal Retirement Annuity for a combined ER fee of only .20% if you used their S&P Index Fund. They have 55+ other funds as well, but their ER fees are higher than the index fund, but you could build the equivalent of a Three Fund Portfolio and still be lower on ER fees than many 401K plans offer. US Bond Fund has a .45% ER fee.

https://www.fidelity.com/annuities/FPRA ... y/overview

Here are all the funds and their ER fees

http://fundresearch.fidelity.com/annuit ... refann=005

Vanguard's Variable Annuity for Retirement has both portfolios as well as the typical Vanguard Total Stock Market Index Fund (ER .45%), Total Bond Fund (ER .44%), Total International (ER .40%) so you could build the Three Fund Portfolio easily at Vanguard. Those ER fees do include the annual administrative fee, so again - a bit higher ER fees than if you held these funds in taxable - but the tax deferred status of using this investment vehicle would more than make up for it over the decades with the slight difference in basis points.

https://personal.vanguard.com/us/funds/ ... ble/bytype

Both of these products from Fidelity and Vanguard are the industry low-cost choices and receive awards year in and year out because of it. They remain relatively unknown here at BH, but we post about them as we first learned of them from our CPA in 1994-1995 as we were looking for a place to stash extra retirement money.

This investment vehicle in your particular situation may, or may not interest you to set aside a good chunk for your retirement from your fortunate investment gains. I just thought it was worth mentioning after reading of your situation and how you are going to be able to mitigate taxes over the next 40+ years.

That would take care of one chunk of your winnings and guarantee a lasting financial future. Another chunk could be used at the moment for developing a CD ladder of various durations to allow yourself time to figure out what to do with everything. And of course, the next two chunks could include one portion going into a taxable brokerage account at Vanguard (or Fidelity or Schwab) for use building investments, and the latter portion could currently remain in cash while you figure it all out and keep enough to cover your taxes and immediate needs.

CyclingDuo
Last edited by CyclingDuo on Sat Sep 23, 2017 11:32 am, edited 1 time in total.
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Lafder
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Re: $3.6 million at age 25 - need investment advice

Post by Lafder »

+1 to a three fund portfolio

Figure out what amount of cash you need in an emergency fund and keep that in a simple bank account. There are recs for 3-6 months of expenses though some folks go higher. Invest the rest.

Do you have a will?

Max your retirement accounts at work. Even if it means no or almost no take home pay. Might as well make the most of tax advantaged space. Consider Roths as you are able since they are never taxed again. (Use your savings for living expenses if needed if you max retirement at work contributions)

On the one hand, you can have a simple 80/20 three fund portfolio and let it ride. (I was at 80/20 at your age) But if you will feel awful with big drops you can go much more conservative on the bond %.

Vanguard Life Strategy funds are an invest and forget fund of a three fund portfolio plus International bonds at different ratios for aggressiveness. The down side, is that with a taxable account, those funds are controlling the rebalancing for you. That is a plus if you never want to have to rebalance yourself over the years. But it could result in more taxes each year than some funds . I would prefer holding the individual funds myself so I had more control of whether I was making taxable sales or tax loss harvesting sales each year.

Note that Vanguard has "Tax managed" funds which are mutual funds that purposely make sales at losses to cancel gains to minimize taxes due. That is a consideration for a taxable account to minimize the taxes you pay each year.

If there are terms that don't make sense keep reading and make sense of them :)

Congrats. My husband thinks he has old bitcoins on an old hard drive, but has been unable to find them. If found, I can retire :)

Keep a certain amount that is your "play money" for future risky investing. But make a wall between that and your long term savings. You have enough at your age to not have to work much if you can really let this amount grow for the future :)

lafder
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wolf85
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Re: $3.6 million at age 25 - need investment advice

Post by wolf85 »

Thanks again everyone. Looking into all of your suggestions. Having a will didn't even cross my mind lol. I could be delusional, but I don't think this is even that much money. Some of the whales in crypto swing trade with hundreds of thousands at a time like it's nothing.

I think I'm trying to get away from the huge volatility of crypto, but wouldn't mind still being in stocks or something with a little risk. I am immune to market drops at this point. I've lost hundreds of thousands in a day and then got it all back the next (see recent panic sell off due to China). 60/40 seems safe, but might why not follow 80/20 like a lot would at my age?
truenorth418
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Re: $3.6 million at age 25 - need investment advice

Post by truenorth418 »

WanderingDoc wrote: Fri Sep 22, 2017 5:21 pmNot everyone wants a boring life of working for 20-30 years, and having $2M in index funds at retirement, withdrawing 4%. It actually makes me depressed to think about :?
Fair enough. But for those of us who have COMPLETED the 20-30 years and are sitting comfortably with $2M in index funds..well let me tell you that is a FANTASTIC feeling. :D
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whodidntante
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Re: $3.6 million at age 25 - need investment advice

Post by whodidntante »

WanderingDoc wrote: Fri Sep 22, 2017 5:21 pm How do you think deca-millionaires and billionaires get that way? They take tremendous amounts of risk.
In my opinion enormous incomes are earned by taking on uncertainty, not risk. The ability to take on risk is usually bounded by practical considerations, such as limitations of leverage.
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whodidntante
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Re: $3.6 million at age 25 - need investment advice

Post by whodidntante »

wolf85 wrote: Sat Sep 23, 2017 4:35 pm 60/40 seems safe, but might why not follow 80/20 like a lot would at my age?
You are thinking about it correctly, in my opinion. You don't want to bet against your own longevity and you've demonstrated high risk tolerance.
WanderingDoc
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Re: $3.6 million at age 25 - need investment advice

Post by WanderingDoc »

whodidntante wrote: Sat Sep 23, 2017 5:56 pm
WanderingDoc wrote: Fri Sep 22, 2017 5:21 pm How do you think deca-millionaires and billionaires get that way? They take tremendous amounts of risk.
In my opinion enormous incomes are earned by taking on uncertainty, not risk. The ability to take on risk is usually bounded by practical considerations, such as limitations of leverage.
That's what I was insinuating. You stated it better.
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TxAg
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Re: $3.6 million at age 25 - need investment advice

Post by TxAg »

The good stuff has been covered.

All I've got is Congratulations!!
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