Where to park my fat stacks [money]?

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
Dudley
Posts: 91
Joined: Tue May 09, 2017 5:34 am

Where to park my fat stacks [money]?

Post by Dudley » Tue May 09, 2017 5:53 am

I've been lurking in this forum and should mention you guys are pretty level headed and wise.
I'm 51 and earn >$150k and would like to retire in a couple of years (wife does not work). I view myself as fairly level headed and educated.
I fortunately cleared (post tax) about 8-9 million a few months ago (via company stock). The money is currently sitting in Tbill/short term notes. I don't have interest in "investment advisors" and believe in a passive portfolio and want to leave it alone and go walking. I don't see the need for greed and to gamble and would be more than comfortable with >2% return post inflation. I don't have a big stomach for 2008 repeat. I want to sleep.
How much do you guys think I should put in stocks ? I was thinking 20-30 percent total with it split equally between a Vanguard Total US and Total ex-US index fund.
The bulk I was thinking of ladder of 5 year (maybe 7 year) treasury notes held to maturity; maybe some in a Vanguard tax-free muni fund of ~5 year duration.
Lastly, also was thinking about a slice 5-10% gold. Please don't go down rabbit hole about gold doesn't yield etc etc. I know, I don't believe in the "collapse/apocalypse" either, just view gold as a potential portfolio stabilizer being an uncorrelated asset or simply alternative currency.
Also any other asset classes to consider or words of wisdom ? Emerging market bonds ?

User avatar
TomatoTomahto
Posts: 7367
Joined: Mon Apr 11, 2011 1:48 pm

Re: Where to park my fat stacks [money]?

Post by TomatoTomahto » Tue May 09, 2017 6:28 am

Welcome to the forum, Dudley.

I recently decided that having $2M in Total Bond Market would be sufficient. There's the odd I bond floating around also. Since most of the bond funds are in tax deferred, with some intermediate term tax free in taxable, I think a bit more than $2M is called for.

We hold enough cash for a few months' expenses, and DW still brings in a substantial cash flow.

The remainder of our (vested) assets are in equities: Total Stock Market and some EM and Developed Markets indexed funds. The invested assets are in employer RSUs.

No gold, REITs, or commodities for us. YMMV.

Sidney
Posts: 6686
Joined: Thu Mar 08, 2007 6:06 pm

Re: Where to park my fat stacks [money]?

Post by Sidney » Tue May 09, 2017 7:23 am

Taxable bonds in taxable account may not make sense for you.
I always wanted to be a procrastinator.

aristotelian
Posts: 4231
Joined: Wed Jan 11, 2017 8:05 pm

Re: Where to park my fat stacks [money]?

Post by aristotelian » Tue May 09, 2017 8:19 am

Congratulations on winning the game.

I might suggest something like:

<1% - I-Bonds at Treasury Direct - $10K per person per year limit, guaranteed to match inflation, tax deferred until you cash in.

10% - Ladder of 5 year CD's

10% - Vanguard Inflation Protected Securities (VIPSX) -10% - not tax efficient, but worth holding another chunk to correlate with inflation

20% - Vanguard Short Term Investment Grade (VFSTX) - very stable, better return than short term Treasury

20% - Vanguard Intermediate Government (VGIT) - not tax efficient, but useful for bond diversification

20% - Vanguard Tax Exempt (VTEB)

10% Vanguard Total Stock Market (VTI)

10% Vanguard Total International Stock Market (VXUS)

Consider starting a Donor Advised Fund.

aristotelian
Posts: 4231
Joined: Wed Jan 11, 2017 8:05 pm

Re: Where to park my fat stacks [money]?

Post by aristotelian » Tue May 09, 2017 8:20 am

Sidney wrote:Taxable bonds in taxable account may not make sense for you.
He did say he would put part of the portfolio in munis. I would still diversify in case there is a muni bond market black swan event in the future. He can afford to pay taxes. Capital preservation is of the utmost importance.

rkhusky
Posts: 5230
Joined: Thu Aug 18, 2011 8:09 pm

Re: Where to park my fat stacks [money]?

Post by rkhusky » Tue May 09, 2017 8:26 am

How about Vanguard Target Retirement Income? It is 30/70 and Vanguard handles all the rebalancing. Or Vanguard Tax-Managed Balanced? It is 50/50 US Stocks and Tax Exempt Bonds. Or a mixture of the two?

Do you have any tax-advantaged accounts to hold taxable bonds?

Grt2bOutdoors
Posts: 18611
Joined: Thu Apr 05, 2007 8:20 pm
Location: New York

Re: Where to park my fat stacks [money]?

Post by Grt2bOutdoors » Tue May 09, 2017 8:27 am

aristotelian wrote:
Sidney wrote:Taxable bonds in taxable account may not make sense for you.
He did say he would put part of the portfolio in munis. I would still diversify in case there is a muni bond market black swan event in the future. He can afford to pay taxes. Capital preservation is of the utmost importance.
Hold highly rated minus reduce risk of black swan. Look at Baird institutional intermediate municipal fund, holds more A/AA rated securities than Vanguard like fund. Of course yield may be lower, but liqudiry should be better in a black swan type event. Best fund though is treasury only fund.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

jebmke
Posts: 8034
Joined: Thu Apr 05, 2007 2:44 pm

Re: Where to park my fat stacks [money]?

Post by jebmke » Tue May 09, 2017 8:30 am

Dudley wrote: >2% return post inflation.
The real yield on fixed income (in the durations you are focusing on) are probably in the 0-.5%

Assuming .5% real for fixed, 25% equity would need to get 6.5% real (if I did my arithmetic right) to get you to 2% real average. Probably a stretch but not impossible.
When you discover that you are riding a dead horse, the best strategy is to dismount.

Dudley
Posts: 91
Joined: Tue May 09, 2017 5:34 am

Re: Where to park my fat stacks [money]?

Post by Dudley » Tue May 09, 2017 10:08 am

Thank you guys. Some of you have some useful advice.
Aristotelian : which asset in your suggested list would your prioritize holding in tax-free ? TIPS ?

aristotelian
Posts: 4231
Joined: Wed Jan 11, 2017 8:05 pm

Re: Where to park my fat stacks [money]?

Post by aristotelian » Tue May 09, 2017 10:58 am

Dudley wrote:Thank you guys. Some of you have some useful advice.
Aristotelian : which asset in your suggested list would your prioritize holding in tax-free ? TIPS ?
Yes. TIPS could cause a problem some years when inflation is high. At least with VGIT and VFSTX you will pretty much know what kind of yield to expect from year to year.

With so much of your portfolio in fixed income, you might read a good book on bond classes and allocation. I found Swedroe's Only Winning Bond Strategy to be very good and would recommend it to anyone.

cjcerny
Posts: 209
Joined: Sat Sep 15, 2007 12:47 pm

Re: Where to park my fat stacks [money]?

Post by cjcerny » Tue May 09, 2017 11:13 am

Short term and intermediate term treasuries are a great portfolio stabilizer. You really don't need anything else other than a Total Stock Market fund.

Lou354
Posts: 549
Joined: Sun Apr 03, 2016 10:51 pm

Re: Where to park my fat stacks [money]?

Post by Lou354 » Tue May 09, 2017 11:14 am

I'm with you on not wanting to deal with investment advisers. But consulting with a tax expert (attorney or accountant?) and an estate attorney on an hourly basis about your investment plans could save you from making some costly mistakes.

chicagobear
Posts: 547
Joined: Sun Dec 16, 2007 10:12 pm

Re: Where to park my fat stacks [money]?

Post by chicagobear » Tue May 09, 2017 11:19 am

You could read up on the late Harry Browne's Permanent Portfolio. It is 25% equities, 25% long term treasuries, 25% short term treasuries, and 25% gold.

I'd read William J. Bernstein's Deep Risk as well. It has good insights on how to allocate assets for the long term.

I'd probably put 40% in the Vanguard Total World ETF (VT), 40% in US Treasury Floating Rate Notes (2 year treasuries with rates that float with Tbills), and 20% in the gold ETF (GLD).

KyleAAA
Posts: 6566
Joined: Wed Jul 01, 2009 5:35 pm
Contact:

Re: Where to park my fat stacks [money]?

Post by KyleAAA » Tue May 09, 2017 12:08 pm

To get 2% real I think you need at least 40% in equities with today's low interest rates. That said, $150k is less than 2% of 8 million so from a safe withdrawal rate perspective, it almost doesn't matter what you invest in. You could invest 100% in equities and only spend the dividends and be just fine. Keeping 5% in gold or commodities would be fine.

robertmcd
Posts: 144
Joined: Tue Aug 09, 2016 9:06 am

Re: Where to park my fat stacks [money]?

Post by robertmcd » Tue May 09, 2017 12:09 pm

I would definitely consider using vanguard for their excellent fixed income offerings in addition to tax efficient mutual funds.

I would go with:

30% Total Stock Market and Total International split up at market weight (to rebalance I just glance at what % US the VT Vanguard total world stock currently says cause that is close enough) in taxable

10-15% Vanguard Inflation Protected Securities in tax-advantaged

The other 55-60% I would use a combo of:

5 to 7 yr brokered CD's (250k each) in tax advantaged or taxable depending on space and yield (These will give you a significant yield premium over treasuries and you wont pay an expense ratio). The liquidity of these is the only issue, but with your time frame and amount of money that won't be an issue.

Vanguard intermediate term municipal bond fund in taxable

Vanguard short term corporate bond index or vanguard short term investment grade in taxable (if you want to own corporates I would keep them less than 5 years and investment grade)

I am not a fan of short term treasuries. I can just go longer duration on my bond funds and offset the longer duration by holding money in a high yield savings account with a duration of 0 that earns more than a short term treasury fund with a duration of 2.2 years.

Dudley
Posts: 91
Joined: Tue May 09, 2017 5:34 am

Re: Where to park my fat stacks [money]?

Post by Dudley » Tue May 09, 2017 1:00 pm

Lou354 wrote:I'm with you on not wanting to deal with investment advisers. But consulting with a tax expert (attorney or accountant?) and an estate attorney on an hourly basis about your investment plans could save you from making some costly mistakes.
Thanks, I agree. I have tax guy and estate planning person. At least they honest and do job they paid for. A financial advisor after 30 seconds of interview pulls glossy pamphlet out his draw with active asset allocation plan packed with dozen of his own company's funds...but you guys know that ! He thinks I'm more stupid than he is. (not Vanguard btw; I happen to have account at Vanguard and like their funds)
Last edited by Dudley on Tue May 09, 2017 1:17 pm, edited 1 time in total.

Dudley
Posts: 91
Joined: Tue May 09, 2017 5:34 am

Re: Where to park my fat stacks [money]?

Post by Dudley » Tue May 09, 2017 1:04 pm

chicagobear wrote:You could read up on the late Harry Browne's Permanent Portfolio. It is 25% equities, 25% long term treasuries, 25% short term treasuries, and 25% gold.

I'd read William J. Bernstein's Deep Risk as well. It has good insights on how to allocate assets for the long term.

I'd probably put 40% in the Vanguard Total World ETF (VT), 40% in US Treasury Floating Rate Notes (2 year treasuries with rates that float with Tbills), and 20% in the gold ETF (GLD).
Thanks. I've heard the book Bernstein book mentioned. I should buy it. If I recall he heavily advocated treasuries ?
I'm not familiar with Floating Rate Notes. My homework to read up on them. Why are they better than intermediate treasury fund or say 5yr ladder ?

I'm familiar with Permanent Portfolio. The gold allocation is a bit much for my stomach though. I think that has an historical bias (70s). I don't have the stomach for 25% long bonds. I would rather combine them and cash to make it intermediate.

itstoomuch
Posts: 5343
Joined: Mon Dec 15, 2014 12:17 pm
Location: midValley OR

Re: Where to park my fat stacks [money]?

Post by itstoomuch » Tue May 09, 2017 1:10 pm

We chose a LMP, in a deep risk situation of 2008. We chose deferred annuities. You could chose other laddered CD's, or bonds, RE, stocks, MF, or even a deep stack of cash, as long as the choice meets your future liability and risk profile. Discretionary is holding 70% cash, down from 85% April 28.
YMMV :moneybag
Rev012718; 4 Incm stream buckets: SS+pension; dfr'd GLWB VA & FI anntys, by time & $$ laddered; Discretionary; Rentals. LTCi. Own, not asset. Tax TBT%. Early SS. FundRatio (FR) >1.1 67/70yo

Dudley
Posts: 91
Joined: Tue May 09, 2017 5:34 am

Re: Where to park my fat stacks [money]?

Post by Dudley » Tue May 09, 2017 1:16 pm

cjcerny wrote:Short term and intermediate term treasuries are a great portfolio stabilizer. You really don't need anything else other than a Total Stock Market fund.
Thanks cjcerny.
For simplicity, if one were to stick with just stock index (entire world) and US treasuries, what does you gut feel say the correct (ballpark) % stock slice and treasury duration is for a long term safe withdraw ?

bigred77
Posts: 1994
Joined: Sat Jun 11, 2011 4:53 pm

Re: Where to park my fat stacks [money]?

Post by bigred77 » Tue May 09, 2017 1:20 pm

25% in a Intermediate Muni Bond Fund
25% in Total Bond Index Fund
25% in US Total Stock Market
25% in Total International Stock Market

Being that your still in your early 50s, I would suggest a 50/50 equity to fixed income split. Beyond that, I would just keep it as simple as possible.

What are your total expenses in retirement going to be? Anything under 250k per year and you can just go ahead and quit this Friday :mrgreen:

chicagobear
Posts: 547
Joined: Sun Dec 16, 2007 10:12 pm

Re: Where to park my fat stacks [money]?

Post by chicagobear » Tue May 09, 2017 1:28 pm

Dudley wrote:
Thanks. I've heard the book Bernstein book mentioned. I should buy it. If I recall he heavily advocated treasuries ?
I'm not familiar with Floating Rate Notes. My homework to read up on them. Why are they better than intermediate treasury fund or say 5yr ladder ?

I'm familiar with Permanent Portfolio. The gold allocation is a bit much for my stomach though. I think that has an historical bias (70s). I don't have the stomach for 25% long bonds. I would rather combine them and cash to make it intermediate.
FRNs are better than intermediate bonds in a rising rate environment since they adjust to Tbill rates (with a slight premium). I don't believe in locking in long term interest rates as a creditor at current levels, although that's been the wrong bet so far, but things change.

Post Reply