Help w/ a $55M portfolio?

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zephyrlodge
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Help w/ a $55M portfolio?

Post by zephyrlodge » Sat Apr 20, 2013 1:23 am

I've been lurking on these boards for a bit, and I've been impressed with the feedback the community has offered. Any chance you guys can throw some thoughts my way?

When I first had spare money in the bank, I didn't have the time or interest in getting involved in managing my money - I basically had an FA and did whatever he said. Over the last few years, however, I've found the Bogle religion. I set up a Vanguard account and have been tracking performance of Vanguard vs. the other 2 FA's I've worked with. I've also experimented with Wealthfront, but I'm not sure I think their 25 basis point fee is worth it.

Surprise - Vanguard's beating the pants off of my fancy financial advisors. But hey - they buy me nice lunches. ;)

Today, my Vanguard account represents about 10% of my assets, but I'm ready to move much more of it into Vanguard and away from my advisors. I'd love any feedback.

First, some facts:

- I am in my early 40's, live in northern CA; have wife and children
- I have a total net worth of approximately $65M; $55M liquid / $10M real estate (no debt)
- ~50% of my liquid net worth ($25M) is in a public company. Yes, I know I should diversify; trust me, it used to represent much more of my total and I continue to prudently diversify. I have about $30M that I currently manage, with more coming as I diversify. I'd say 3-4 years to completely move out from this position.
- My annual expenses are high - probably $700k / year.

At Vanguard, my current funds are (I'm rounding here, but you get the idea):

EQUITIES (32%)

9% Vanguard 500 (VFIAX)
2% Consumer Staples Index (VCSAX)
3% Extended Market Index (VEXAX)
5% Health Care Fund (VGHAX)
5% Total Stock Mkt (VTSAX)
8% Intl Stock Index (VTIAX)

FIXED (51%)

25% CA Intermediate Tax Exempt (VCADX)
11% TIPS (VAIPX)
15% Short Term Bond Index (VBTLX)

CASH (15%)

15% Money Market (VMMXX)

I'm sure I've forgotten some key parts of the story, but I'd love to hear feedback. Thanks in advance.

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LadyGeek
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Re: Help w/ a $55M portfolio?

Post by LadyGeek » Sat Apr 20, 2013 8:31 am

Welcome! I strongly encourage you to follow the advice given in this thread: Help me manage a $7 million portfolio., especially the discussions about having appropriate attorney advice.
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Re: Help w/ a $55M portfolio?

Post by NYBoglehead » Sat Apr 20, 2013 8:40 am

With that much money I'd want some serious allocation to tax-exempt bonds, given that you are in very high tax brackets at the federal and state level. I'll let others chime in on the estate law components as there are things that come with that high of a net worth that I am not qualified to comment on.

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Re: Help w/ a $55M portfolio?

Post by MN Finance » Sat Apr 20, 2013 8:55 am

I don't have specific feedback on your portfolio, but managing 500K, 5M or 50M are actually all pretty similar, so most of the advice you've read will apply to your case, though you have access to some alternative products smaller investors don't (of marginal value anyway). The primary differnce is not on the investment component side, but estate, insurance, etc. When hiring a true, high quality financial professional, what you actually pay for is money management, but what you actually benefit from are the auxilary discsusions about other topics.

I'll also mention that horse racing your portfolios against eachother is totally meaningless and chance driven. Over decades, a low cost self directed portfolio is likely to do better, but short term it's a flip of the coin.

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Re: Help w/ a $55M portfolio?

Post by livesoft » Sat Apr 20, 2013 9:07 am

Where is that thread started by the person with a 9-figure portfolio? I think that would be something to read as well.
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Re: Help w/ a $55M portfolio?

Post by dbr » Sat Apr 20, 2013 9:17 am

There have been a few threads from people with "very large" portfolios.

My suggestion is that the biggest difference between these situations and more modest portfolios is the question of what the investor's purpose for his investments is, and that should shape the discussion.

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Re: Help w/ a $55M portfolio?

Post by KyleAAA » Sat Apr 20, 2013 9:34 am

I would get rid of all your sector stock funds and invest only in the total stock market and total international stock market funds. There's no point getting fancy. Other than that, your portfolio is reasonable and conservative and I would probably just continue with that. Your income needs are small relative to your wealth, so you don't need to do anything special there. I agree with the above posters. You probably need more estate planning advice than investing advice.

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Re: Help w/ a $55M portfolio?

Post by stan1 » Sat Apr 20, 2013 9:51 am

I agree the main thing to think about is how you plan to use the portion of the $55M you won't need to live on: starting a business (if you get bored), leave to family/charity in your estate, or a charitable foundation you manage during your lifetime. It doesn't have to be all or nothing, but you would want to set things up differently based on how you want to allocate between those.

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Re: Help w/ a $55M portfolio?

Post by Leesbro63 » Sat Apr 20, 2013 10:26 am

I think this is different that from even the affluent Boglehead. At that level, you have the advantage of being able to live off just a tiny percentage of your nest egg. And the disadvantage of higher-than-average-Boglehead taxation on any investment income/capital gains. I would contact any Bill Bernstein, Rick Ferri, or Larry Swedroe (in alphabetical order) for a serious consult. And I would AVOID banks/brokers/lawyers etc.

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Re: Help w/ a $55M portfolio?

Post by Retread » Sat Apr 20, 2013 10:35 am

Does anyone wonder why we seem to be having an epidemic of these very large situations lately? :?
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rec7
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Re: Help w/ a $55M portfolio?

Post by rec7 » Sat Apr 20, 2013 10:51 am

You are a very Blessed man. Your question is like my lotto investing ideas. With this kind of coin you don't have to take much risk if any. I thought about a simple three fund portfolio if I won the lotto. Something like
Vanguard Short-Term Tax-Exempt Fund Admiral Shares
Vanguard Total Stock Market Index Fund Admiral Shares
Vanguard Total International Stock Index Fund Admiral Shares

The percents you would have to set. I don't know if this would work best or not. It is just a idea I am am throwing up in the air. Your question is over my head but fun to think about. I have spent many hours on my lotto ideas.

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Re: Help w/ a $55M portfolio?

Post by Calm Man » Sat Apr 20, 2013 11:28 am

deleted.
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kybourbon
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Re: Help w/ a $55M portfolio?

Post by kybourbon » Sat Apr 20, 2013 11:59 am

First off, congratulations! Incredible net worth!

After doing a quick firecalc there is almost no way to fail at this if you stick to boglehead philosophy and don't get caught up in speculation. And really, why speculate or gamble? You have already won the game, what you need to focus on now is tax shelters, estate planning, staying married, and teaching your children how to cope with the exorbitant amounts of wealth that they will almost certainly inherit so this money continues to be a blessing to your family and not a curse. Stick to low expense ratios, tax exempt munis, and invest in a good estate attorney and then find something you love to do and focus your time and energy on that for the rest of your life. Start a family foundation and give back to causes that you care about.

Again, congratulations. I'm sure this came with a lot of hard work.
"Our favorite holding period is forever" (WB)

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Re: Help w/ a $55M portfolio?

Post by SpringMan » Sat Apr 20, 2013 2:58 pm

Do not feel qualified to give advice other than you have the wrong symbol for short term bond index. VBTLX is total bond index fund admiral. VBIRX is short term bond index fund admiral.
Best Wishes, SpringMan

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Re: Help w/ a $55M portfolio?

Post by Grt2bOutdoors » Sat Apr 20, 2013 3:12 pm

Correction - the financial advisors are not buying you lunch. Instead, they are using your money to buy themselves lunch and take you along in the hopes of getting you to deposit more money with them because they really want to go to Tahiti for vacation this year. :P

A portfolio that large ought to be able to obtain some insitutional level pricing, I would think.
Whether you have a 100k or 50 million, the concept of developing a portfolio is the same. You can use a 3 or 4 fund portfolio and call it a day. Ditch the sector funds - if you want to speculate, take a short plane ride to Vegas - there you can either play roulette,craps or one of those other card games.
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Re: Help w/ a $55M portfolio?

Post by arcticpineapplecorp. » Sat Apr 20, 2013 3:16 pm

"Surprise - Vanguard's beating the pants off of my fancy financial advisors. But hey - they buy me nice lunches. "

They aren't buying you the lunches...you are (through the fees you're paying them)! And I'll bet when you look at what you're paying them, these lunches suddenly become very "expensive" lunches.

Reminds me of that phrase...."there are no free lunches".

Agree with kybourbon's recommendations.

Edit--Grt2bOutdoors beat me to it!

P.S. Taylor's oft recommended three fund portfolio works regardless of size of investment.
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steve roy
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Re: Help w/ a $55M portfolio?

Post by steve roy » Sat Apr 20, 2013 3:42 pm

How about a Larry S. portfolio? 65 bonds/ 35 stocks. (50/50 U.S. - international.). Small cap value tilt. Purchase AAA munis in large clumps through a broker.

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Re: Help w/ a $55M portfolio?

Post by fishnskiguy » Sat Apr 20, 2013 3:48 pm

Although we have all our mutual funds at Vanguard and sleep well, at some portfolio size, and I think you are there, it would seem to make sense to put a sizable chunk of your portfolio into some of Fidelity's low cost index funds. It would cost you practically nothing and adds diversification. If a small asteroid were to hit Valley Forge PA, you might be glad you did. :shock:

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Re: Help w/ a $55M portfolio?

Post by livesoft » Sat Apr 20, 2013 3:51 pm

Here is the other thread I was trying to recall about a "High 8 figures" portfolio: http://www.bogleheads.org/forum/viewtop ... 1&t=106461

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Re: Help w/ a $55M portfolio?

Post by LadyGeek » Sat Apr 20, 2013 4:37 pm

fishnskiguy wrote:Although we have all our mutual funds at Vanguard and sleep well, at some portfolio size, and I think you are there, it would seem to make sense to put a sizable chunk of your portfolio into some of Fidelity's low cost index funds. It would cost you practically nothing and adds diversification. If a small asteroid were to hit Valley Forge PA, you might be glad you did. :shock:
Vanguard can handle a small asteroid hit: Vanguard safety
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Re: Help w/ a $55M portfolio?

Post by maxim81 » Sat Apr 20, 2013 5:30 pm

Dang.. can I have .01% of your portfolio to pay off my student loans? :D

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Re: Help w/ a $55M portfolio?

Post by rec7 » Sat Apr 20, 2013 5:34 pm

By the way what kind of things do you get for 700k a year? Your expenses are as interesting as your portfolio. If you started a thread on your expenses I think we could help on those too.

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Re: Help w/ a $55M portfolio?

Post by Nathan Drake » Sat Apr 20, 2013 6:56 pm

700K/year in expenses is absurd. Perhaps this isn't the proper forum you should be asking for advice, because it will likely not be what you want to hear.

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Re: Help w/ a $55M portfolio?

Post by Grt2bOutdoors » Sat Apr 20, 2013 7:04 pm

Nathan Drake wrote:700K/year in expenses is absurd. Perhaps this isn't the proper forum you should be asking for advice, because it will likely not be what you want to hear.
Perhaps. And perhaps the OP is also caring for family members outside of his immediate one.
Private school costs, private jets cost, a Bentley costs, as does a Ferrari, yacht, trips to exotic locales and it appears the OP is very fond of having nice lunches. So nice lunches and dinners times 7 days a week, likely full time housekeeping and butler service. Yes, indeed, I can easily see spending 700K a year, easily. :wink:
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Re: Help w/ a $55M portfolio?

Post by stjoe56 » Sat Apr 20, 2013 7:16 pm

Nathan Drake wrote:700K/year in expenses is absurd. Perhaps this isn't the proper forum you should be asking for advice, because it will likely not be what you want to hear.
I am far removed from $55m, but on a proportionate level my expenses are the same. When I was much younger, my parents had 3+ acres of manicured lawn. When they finally moved into a condo, my parents just bought the shell and sent in their own crew to finish it off. My father always claimed what he saved in lawn care for one year paid for his condo.

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Re: Help w/ a $55M portfolio?

Post by staythecourse » Sat Apr 20, 2013 7:25 pm

At this level I think: Personl protecton, estate planning, tax planning, and consideration of what to do with your money after you pass.

On a philosophical note there is NO gaurantee in life you will get to live a longer life just because you have more AUM then the poor guy in a medicaid nursing home so my advice is to know when enough is enough. If I was you I would quit and spend more time with family and kids. As a wise man once said to me, "I have never seen anyone on their death bed wonder why I didn't make more money, but MAN that have regretted why I didn't spend more time with loved ones".

Good luck.
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Re: Help w/ a $55M portfolio?

Post by jasonv » Sat Apr 20, 2013 8:44 pm

Although I would find it difficult to spend $700k annually myself, in the context of the OP it is not unreasonable at all. At about 1.1% of net worth, it could easily be argued that this is a very conservative spending level even for someone who is no longer working.

Based on that relatively low spending level I would assume that the primary goal is for bequests (and possibly charity as well) rather than sustaining consumption at the current rate, which is easily achieved. A very long term investment horizon is appropriate then, which would ordinarily call for a higher percentage of stocks.

I have to admit that I would be tempted to do somewhat less "Bogleheadish" things if I found myself in the OP's situation such as overweight long-term or high yield CA state municipal bonds and investing some in Berkshire Hathaway (both for tax efficiency reasons).

As others have noted, it would be well worthwhile to pay for some fee-based investment advice focusing particularly on tax efficiency and estate planning. A lot in taxes can be saved by taxing steps to maximize tax shelters and minimize taxes on passive investment income.

One question I have for the OP is whether Vanguard allows you to invest in the institutional share class. As an example, the Vanguard Total International Stock Index Fund Institutional Shares (VTSNX) have an expense ratio 0.04% lower than the ETF and Admiral share class.

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Re: Help w/ a $55M portfolio?

Post by livesoft » Sat Apr 20, 2013 8:48 pm

Another poster had issues with tax-loss harvesting institutional shares.
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Re: Help w/ a $55M portfolio?

Post by fishnskiguy » Sat Apr 20, 2013 9:09 pm

LadyGeek wrote:
fishnskiguy wrote:Although we have all our mutual funds at Vanguard and sleep well, at some portfolio size, and I think you are there, it would seem to make sense to put a sizable chunk of your portfolio into some of Fidelity's low cost index funds. It would cost you practically nothing and adds diversification. If a small asteroid were to hit Valley Forge PA, you might be glad you did. :shock:
Vanguard can handle a small asteroid hit: Vanguard safety
Nice link, Lady Geek, but the small asteroid is not addressed. :happy

Seriously, diversification is never a bad thing if the cost is minimal.

If I came into $55 million, I'd have a third in Spartan something funds.

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Re: Help w/ a $55M portfolio?

Post by diddyp20 » Sat Apr 20, 2013 10:08 pm

Retread wrote:Does anyone wonder why we seem to be having an epidemic of these very large situations lately? :?
Bruce
I agree with you :shock:

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Re: Help w/ a $55M portfolio?

Post by kybourbon » Sat Apr 20, 2013 10:50 pm

Yearly expenses of $700,000 are really not that extreme if you break it down per day. It is essentially $2000/day. With 55 million in assets, it is not ridiculous to assume the OP doesn't currently work so he has 7 days per week to spend his money. Unlike me, who works 5 days/wk, I really only have 2 days to spend my money, the weekend. So if I spend 2000/day on my two weekend days it is about $200,000/yr. This is still higher than my current consumption, but it gets a lot closer.
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Re: Help w/ a $55M portfolio?

Post by obgraham » Sat Apr 20, 2013 11:28 pm

It's often been said that one's expenses expand to use the available cash (or more!). I don't think OP is spending outrageously at all.

For instance: I like to travel. If I were in that bracket, though, I'd travel with NetJets and skip all the airport lines, etc. That would chew up a significant chunk of change. Wasteful? Maybe so, but if I could.....

What's the point of the portfolio if you can't spend some of it and/or use it for good purposes?

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Re: Help w/ a $55M portfolio?

Post by zephyrlodge » Sun Apr 21, 2013 1:16 am

Hey all -

Thanks for the advice. Some answers and some questions:

1) some of you are curious how I can have $700k/year in expenses. it may sound a bit high, but property taxes, private school and a housekeeper represent a big chunk. i lead a nice life, to be sure, but it's not as exotic as you think. no porsches or ferraris, sorry to disappoint. the only area i tend to splurge on is travel, and even that isn't super-crazy (no private jets, folks - biz class maybe).

2) sounds like most of you are happy with my allocation? i thought it might be a bit conservative (51% fixed). one thing i haven't reconciled is whether having this amount of wealth should make me more or less risk-averse. on the one hand, no one wants to lose what they have, but on the other, i have a fairly large cushion to tolerate market swings. any thoughts?

3) i've gotten a fair bit of feedback from finance people i respect that bonds could be in for a very rough ride as inflation rises over the next 5-10 years, and that a bond portfolio might actually be riskier than equities?

4) can someone give me a tangible example of what an expert can do re: tax efficiency? i have 529 plans for kids, i understand tax loss harvesting, and I understand the advantages of tax-exempt bonds, but what else is there? i tend to shy away from anything that involves complexity or potential trouble with the IRS.

appreciate the continued feedback, and i'm also reading the links you offered.

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Re: Help w/ a $55M portfolio?

Post by ge1 » Sun Apr 21, 2013 5:44 am

Trust me, if I had a 60m portfolio I would spend 700k per year.
:happy

A few thoughts (probably not very Boglehead like):
- I would diversify much more internationally. I would aim for a 50/50 split and I would put a good portion of international in emerging markets (people such a Grantham are forecasting that emerging markets will outperform US significantly over the next years, I know market timing ....)
- I would get exposure to gold, maybe 2-3%
- would simplify US portion, no need for sector funds

And obviously do estate planning, assume you should have all your assets in a living trust.

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Re: Help w/ a $55M portfolio?

Post by ge1 » Sun Apr 21, 2013 5:48 am

And yes, I think you have too much in fixed income / cash. I would aim for 60/40 stocks / bonds and cash.

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Re: Help w/ a $55M portfolio?

Post by rmelvey » Sun Apr 21, 2013 11:25 am

I wonder if OP could benefit from a separately managed account that held a sampling of the stock index, but aggressively tax loss harvested within the equity portion (as opposed to simply swapping total market funds). I have no idea about the costs, but strategies like this could make sense if the ER was low enough:
http://www.parametricportfolio.com/prod ... naged-core

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Re: Help w/ a $55M portfolio?

Post by bsteiner » Sun Apr 21, 2013 12:13 pm

zephyrlodge wrote:... can someone give me a tangible example of what an expert can do re: tax efficiency? i have 529 plans for kids....
The 529 plan works better for upper middle class people than it does for wealthier people. Wealthier people can pay for their children's education and also give their children annual gifts.

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Re: Help w/ a $55M portfolio?

Post by archbish99 » Sun Apr 21, 2013 12:19 pm

zephyrlodge wrote:2) sounds like most of you are happy with my allocation? i thought it might be a bit conservative (51% fixed). one thing i haven't reconciled is whether having this amount of wealth should make me more or less risk-averse. on the one hand, no one wants to lose what they have, but on the other, i have a fairly large cushion to tolerate market swings. any thoughts?
You invest based on your need and ability to take risk. The paradox is that those with the greatest ability (enough wealth to weather bad markets) are those with the least need (if you just keep pace with inflation, if that, you're still set for life). That's a balance you have to decide. Some would go very low equity because they don't need the risk; others would go very high, because they can afford it.
zephyrlodge wrote:3) i've gotten a fair bit of feedback from finance people i respect that bonds could be in for a very rough ride as inflation rises over the next 5-10 years, and that a bond portfolio might actually be riskier than equities?
Bonds are predictable over the long run. They'll give you interest and change in price due to interest rates. Yes, when interest rates rise, as they eventually must (but who knows when?), the fund will take a hit in NAV. If you can afford to hold on, though, the increased interest will make up the difference after a couple years.

As to tax management, start with the wiki article on tax-efficient fund placement for some basic principles. There have also been some threads recently on how much advantage Vanguard:s tax-managed funds give you -- that might be worth looking into as well.
I'm not a financial advisor, I just play one on the Internet.

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Re: Help w/ a $55M portfolio?

Post by Jebediah » Sun Apr 21, 2013 2:16 pm

zephyrlodge wrote:Hey all -

2) sounds like most of you are happy with my allocation? i thought it might be a bit conservative (51% fixed). one thing i haven't reconciled is whether having this amount of wealth should make me more or less risk-averse. on the one hand, no one wants to lose what they have, but on the other, i have a fairly large cushion to tolerate market swings. any thoughts?
My thought is that you have zero need to take risk and grow your portfolio. 100% CDs would cover your living expenses. I'm not saying that's exactly what your allocation should be but it would seem that capital preservation is the idea here. A standard allocation like 60/40 is IMO a terrible idea.

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Re: Help w/ a $55M portfolio?

Post by dbr » Sun Apr 21, 2013 3:04 pm

zephyrlodge wrote:Hey all -

Thanks for the advice. Some answers and some questions:

1) some of you are curious how I can have $700k/year in expenses. it may sound a bit high, but property taxes, private school and a housekeeper represent a big chunk. i lead a nice life, to be sure, but it's not as exotic as you think. no porsches or ferraris, sorry to disappoint. the only area i tend to splurge on is travel, and even that isn't super-crazy (no private jets, folks - biz class maybe).

2) sounds like most of you are happy with my allocation? i thought it might be a bit conservative (51% fixed). one thing i haven't reconciled is whether having this amount of wealth should make me more or less risk-averse. on the one hand, no one wants to lose what they have, but on the other, i have a fairly large cushion to tolerate market swings. any thoughts?

You have more than enough money to sustain your lifestyle which means you can take as much or as little risk as you like. As I commented previously, you have to decide what you want to do with this money and how you feel about what might happen to it. Just as I would not comment one way or another on your $700,000 annual expenditure, I would not comment on what you might do with these assets.

3) i've gotten a fair bit of feedback from finance people i respect that bonds could be in for a very rough ride as inflation rises over the next 5-10 years, and that a bond portfolio might actually be riskier than equities?

The risk in bonds is that bond returns may not be very high. A person needing all the income they can get from a portfolio would find that relying on bonds could be dangerous indeed. That is not you. If your objective is to achieve a highly certain but not very large growth by depending on bonds, then that objective might be at risk, but I don't see that being your objective. In short, bonds are not risky for you pending your ability to formulate an outcome that investing in bonds does not match very well.

4) can someone give me a tangible example of what an expert can do re: tax efficiency? i have 529 plans for kids, i understand tax loss harvesting, and I understand the advantages of tax-exempt bonds, but what else is there? i tend to shy away from anything that involves complexity or potential trouble with the IRS.

I have no insight into the any special circumstances here other than that your assets are liable to a huge gift and estate tax bite when you die and everything goes to your heirs. This would be the typical concern for anyone with this much wealth and would need professional advice. This is again a question of objectives concerning where you want your wealth to go.

appreciate the continued feedback, and i'm also reading the links you offered.

dodonnell
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Re: Help w/ a $55M portfolio?

Post by dodonnell » Sun Apr 21, 2013 3:50 pm

fishnskiguy wrote:
LadyGeek wrote:
fishnskiguy wrote:Although we have all our mutual funds at Vanguard and sleep well, at some portfolio size, and I think you are there, it would seem to make sense to put a sizable chunk of your portfolio into some of Fidelity's low cost index funds. It would cost you practically nothing and adds diversification. If a small asteroid were to hit Valley Forge PA, you might be glad you did. :shock:
Vanguard can handle a small asteroid hit: Vanguard safety
Nice link, Lady Geek, but the small asteroid is not addressed. :happy

Seriously, diversification is never a bad thing if the cost is minimal.

If I came into $55 million, I'd have a third in Spartan something funds.

chris
Chris,
If an investor with a 55M net worth needs to diversify custodial risk away from Vanguard, why doesn't a Boglehead investor, with let's say a $2M net worth, need to diversify his custodial risk (to Fidelity) also?
Assuming, of course, they both intend to custody 100% of their assets at Vanguard ?
thanx
dan

ps. Vanguard custodial assets under management is 40,000 times the Original Poster's 55M, and 1,000,000 times this hypothetical Boglehead investor.

lostInFinance
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Re: Help w/ a $55M portfolio?

Post by lostInFinance » Sun Apr 21, 2013 4:09 pm

MN Finance wrote:I don't have specific feedback on your portfolio, but managing 500K, 5M or 50M are actually all pretty similar, so most of the advice you've read will apply to your case, though you have access to some alternative products smaller investors don't (of marginal value anyway).
I think there is a big investment difference in a 500k v. 50M portfolio in that most people with a self-accumulated 500k portfolio will have nearly all of it in tax advantaged accounts while the person with the 50M portfolio has almost all their investments in taxable accounts. TIPS that yield say 0.75% real with 4% inflation in a roth, provide a real, after tax return of -1.1% for someone in the top income bracket. I think a lot of the Bodie - TIPS only - investment strategy breaks down once you're in mostly taxable accounts and in the highest tax bracket.

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InvestorNewb
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Re: Help w/ a $55M portfolio?

Post by InvestorNewb » Sun Apr 21, 2013 5:10 pm

Personally I would only hold one of either funds:

Vanguard 500 (VFIAX) OR
Total Stock Mkt (VTSAX)

... not both.

The returns are identical. The Total Stock Mkt fund is more popular on here.
My Portfolio: VTI [US], VXUS [Int'l], VNQ [REIT], VCN [Canada] (largest to smallest)

treypar
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Re: Help w/ a $55M portfolio?

Post by treypar » Sun Apr 21, 2013 5:38 pm

If I had $55 m I would invest as follows:
35% Limited Tax Exempt
35% Intermediate Tax Exempt
30% Total Stock Market

central nj
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Re: Help w/ a $55M portfolio?

Post by central nj » Sun Apr 21, 2013 7:43 pm

25 million will disappear into thin air if you die today (depending on spouse, location etc). You can't possibly be worried about the minutia of investing with that hanging over your head.

KyleAAA
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Re: Help w/ a $55M portfolio?

Post by KyleAAA » Sun Apr 21, 2013 7:52 pm

central nj wrote:25 million will disappear into thin air if you die today (depending on spouse, location etc). You can't possibly be worried about the minutia of investing with that hanging over your head.
Why not? By the time you're dead, you won't care about the money anymore. Seems much more profitable for the OP to worry about the minutia of investing now than what will happen to it after they're gone.

lostInFinance
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Re: Help w/ a $55M portfolio?

Post by lostInFinance » Sun Apr 21, 2013 8:09 pm

KyleAAA wrote:
central nj wrote:25 million will disappear into thin air if you die today (depending on spouse, location etc). You can't possibly be worried about the minutia of investing with that hanging over your head.
Why not? By the time you're dead, you won't care about the money anymore. Seems much more profitable for the OP to worry about the minutia of investing now than what will happen to it after they're gone.
The OP has already won the game. Even if the OP lives like royalty, he has to be very creative to spend $55 million in his lifetime. The OP's main problem isn't securing his own retirement, but maximizing the wealth he leaves behind for his children and grandchildren.

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Riprap
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Re: Help w/ a $55M portfolio?

Post by Riprap » Sun Apr 21, 2013 9:34 pm

A similar question has been asked on Long Term Returns. The author has an interesting answer.

http://www.longtermreturns.com/2013/04/ ... folio.html

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Re: Help w/ a $55M portfolio?

Post by KyleAAA » Sun Apr 21, 2013 11:05 pm

lostInFinance wrote:
KyleAAA wrote:
central nj wrote:25 million will disappear into thin air if you die today (depending on spouse, location etc). You can't possibly be worried about the minutia of investing with that hanging over your head.
Why not? By the time you're dead, you won't care about the money anymore. Seems much more profitable for the OP to worry about the minutia of investing now than what will happen to it after they're gone.
The OP has already won the game. Even if the OP lives like royalty, he has to be very creative to spend $55 million in his lifetime. The OP's main problem isn't securing his own retirement, but maximizing the wealth he leaves behind for his children and grandchildren.
We don't know that. OP hasn't told us what his goals are. For all we know he plans to spend it all to build an intergalactic spaceship and attempt to colonize another planet.

longview
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Re: Help w/ a $55M portfolio?

Post by longview » Mon Apr 22, 2013 12:39 am

zephyrlodge wrote:Hey all -

Thanks for the advice. Some answers and some questions:
3) i've gotten a fair bit of feedback from finance people i respect that bonds could be in for a very rough ride as inflation rises over the next 5-10 years, and that a bond portfolio might actually be riskier than equities?
Nah -- not that kind of risk. There is a risk that bonds will not gain wealth in real terms for a prolonged period. There is not a risk they will have a 90% real drop in value (like equity risk). The point of your bond allocation is to prevent your "risk of ruin" (in gambling terms) -- ie, you get unlucky in that the worst time for equities happens to be the day after you start investing... so now all your math changes because you're drawing down on 10% of what you have today (damn! :oops: ). The bond allocation is so that, worst case, you're going down 50% and will be in fine shape to recover over the long haul. In short, it reduces your standard deviation so you don't get unlucky and swing too low.
zephyrlodge wrote: 4) can someone give me a tangible example of what an expert can do re: tax efficiency? i have 529 plans for kids, i understand tax loss harvesting, and I understand the advantages of tax-exempt bonds, but what else is there? i tend to shy away from anything that involves complexity or potential trouble with the IRS.
The big thing is to get a good trust together (good law firm). I think that fixes most of the post-death issues people are talking about.

I'd also recommend the book Wealth (available on kindle). It's by one of the kids from the Carnation family, who is in finance -- and I found it a very interesting/rare take from someone involved in intergenerational wealth. I wouldn't follow all the finance advice, and would read other books to temper it, but it's rare to get into the head of rich families like this (in my experience anyway). I could paraphrase them here, but it's better presented in the book (setting up a family office, giving your adult kids favorable loans rather than money, loading up kids roths/IRAs instead of just giving them money, renting things to each other, etc). Basically I found the tips on ways to help your children without making them spoiled trust fund babies very unique.

As to the portfolio. I think 50/50 Stocks/Bonds is solid (maybe 5% reserved for ventures if you have that leaning). 60/40 or 70/30 US/International. And as to how to make money in the current fixed income market -- there is a huge debate on that right now (so don't feel bad that it seems like there is no right answer).

I will say deflation is a possibility, which everyone seems to discount right now. So super low interest rates, very low bond rates, still would prove the winner in a deflationary environment (which is bad for stocks). And even if rates increase and NAV goes down, rates would be increasing -- which is fundamentally good for bonds.
:beer
(To color my comments: my situation is ER trying to make a large portfolio that is 99% taxable last 45 years)

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