Windfall of 1.5 millions

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amitjadhav
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Windfall of 1.5 millions

Post by amitjadhav » Sun Dec 10, 2017 12:34 am

I am in the early 30s and I received around 1.5 million after-tax through IPO. I stay in SV. I do not have any debt. I am yet to decide what i will do with this money.

I might return to my home country in a year but mostly I will get residency here and stay. It will be clear in a year what I will be doing in future. For next one year, I need to invest money somewhere or keep it in the bank. My plan is as below.

I am planning to invest 300k in stocks and keep it as it is for 20 to 30 years. Remaining 1.2 mil I am planning to keep ins savings account with 1% interest. I am wondering if there is a better option that savings account for the one-year duration? I am wondering what people here on this forum think about my options.

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rmelvey
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Re: Windfall of 1.5 millions

Post by rmelvey » Sun Dec 10, 2017 12:07 pm

Your returns will probably not beat inflation. 20% stocks and 80% bonds is a still a very low volatility portfolio that will probably outperform your plan over the long run. You could get a robo advisor to rebalance for you or use one of the vanguard lifestyle funds (or rebalance yourself for best tax efficiency).

Dottie57
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Re: Windfall of 1.5 millions

Post by Dottie57 » Sun Dec 10, 2017 12:13 pm

I consider myself self conservative in investing. I am at 50/50 asset allocation. Room for safety and growth.

I use intermediate bond funds, cash, and if I had more money, I would purchase 10k ibonds each year.

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JDCarpenter
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Re: Windfall of 1.5 millions

Post by JDCarpenter » Sun Dec 10, 2017 12:22 pm

amitjadhav wrote:
Sun Dec 10, 2017 12:34 am
I am in the early 30s and I received around 1.5 million after-tax through IPO. I stay in SV. I do not have any debt. I am yet to decide what i will do with this money.

I might return to my home country in a year but mostly I will get residency here and stay. It will be clear in a year what I will be doing in future. For next one year, I need to invest money somewhere or keep it in the bank. My plan is as below.

I am planning to invest 300k in stocks and keep it as it is for 20 to 30 years. Remaining 1.2 mil I am planning to keep ins savings account with 1% interest. I am wondering if there is a better option that savings account for the one-year duration? I am wondering what people here on this forum think about my options.
When you say, you don't know what you will do with the money, are you referring to "in the next year," or "at any point"? What do you think you'll be wanting to use the money far in one year or so--whether you stay in Silicon Valley, or return home? That is the key factor. I'll take a guess that you anticipate reasonable chance of buying a silicon valley house in a year or so, and that you either want to pay cash, or have insufficient credit history in USA to make getting a loan easy....

If that is the case, keeping the money/principal safe is a good idea. If you would need/want $1.2 million in cash to buy a home, you don't want to risk it, even in a 50/50 portfolio. Putting the 300K (which I'm guessing is money you don't think you'd need/want to buy a house?) into an equity/stock index fund is good for the long term.

IF you aren't planning to use it for a home purchase soon after your plans finalize in a year, I would go beyond Dottie57 and recommend a greater equity position than 50%. (Unless you think you might need the funds for another startup, of course....)
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eye.surgeon
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Re: Windfall of 1.5 millions

Post by eye.surgeon » Sun Dec 10, 2017 12:30 pm

Same advice we'd give to anyone with their yearly income.

Start with an emergency fund, enough for 6 months of expenses ( I'd use an ally 1.6 % no-penalty CD), pay off any debt besides a mortgage, fund a backdoor roth, max any work-offered 401k or other tax advantaged option you have, the rest goes in a taxable investment account. Pick an asset allocation you're comfortable with (if you're new to investing pick a target date fund).

Make sure you reserve sufficient funds for taxes. Don't increase your spending. Get to work and make sure you have a steady income every year. You had a great year but this is by no means a ticket to a life of leisure.
"I would rather be certain of a good return than hopeful of a great one" | Warren Buffett

staythecourse
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Re: Windfall of 1.5 millions

Post by staythecourse » Sun Dec 10, 2017 12:58 pm

amitjadhav wrote:
Sun Dec 10, 2017 12:34 am
I am in the early 30s and I received around 1.5 million after-tax through IPO. I stay in SV. I do not have any debt. I am yet to decide what i will do with this money.

I might return to my home country in a year but mostly I will get residency here and stay. It will be clear in a year what I will be doing in future. For next one year, I need to invest money somewhere or keep it in the bank. My plan is as below.

I am planning to invest 300k in stocks and keep it as it is for 20 to 30 years. Remaining 1.2 mil I am planning to keep ins savings account with 1% interest. I am wondering if there is a better option that savings account for the one-year duration? I am wondering what people here on this forum think about my options.
MANY questions need to be answered before giving any advice...

Are you married? Do you want to be married in future? Do you have kids? If you don't do you want kids? Do you want to keep working now? Do you want to take some time off then get back to work? Do you never want to work again? What are your current expenses per month? When do you see yourself need that wad of money, i.e. now as i don't want to work or 30 years from now when most retire? What are your materialistic wants, i.e. cars, house, travel, etc...? Do you have a emergency fund? What is your investment acumen?

Without specific answers I would keep at least 1 year in emergency fund in cash then invest the rest according to your: Willingness, ability, and need to take risk (Read the couple of pages that discuss this from MR. Swedroe's "The only guide to investing strategy".

Good luck.
"The stock market [fluctuation], therefore, is noise. A giant distraction from the business of investing.” | -Jack Bogle

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Tyler Aspect
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Re: Windfall of 1.5 millions

Post by Tyler Aspect » Sun Dec 10, 2017 1:10 pm

A sample portfolio of 50% stock / 50% bond for long term investment:

25% US Stock index (VTI)
25% Global stock index (VT)
25% Intermediate Term Government Bond Index (VGIT)
25% Intermediate Term Corporate Bond Index (VCIT)

For short term savings you can use Vanguard Short Term Bond Index (VBIRX).
Past result does not predict future performance. Mentioned investments may lose money. Contents are presented "AS IS" and any implied suitability for a particular purpose are disclaimed.

TedSwippet
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Re: Windfall of 1.5 millions

Post by TedSwippet » Sun Dec 10, 2017 1:10 pm

amitjadhav wrote:
Sun Dec 10, 2017 12:34 am
I might return to my home country in a year but mostly I will get residency here and stay. It will be clear in a year what I will be doing in future.
As part of your planning, you should ensure that you fully understand how the US's nasty and spiteful exit tax works for departing long-term permanent residents.

From what you wrote it sounds like you would not currently be affected by this -- that is, you do not hold a green card, right? But you will want to be sure that whatever you do in future does not put you in the firing line of this tax. From the linked article:
When considering expatriation, the first line of defense against the exit tax is to avoid becoming an expatriate. This is impossible for citizens, but for green card holders, the strategy is to avoid becoming a long-term resident. Leave the United States and abandon the green card visa before the eighth year of holding that visa status.
You can also sidestep it, at least for now, if you avoid taking out a green card in the first place, or at the least for as long as is practical and then no longer than eight years. On the other hand, taking out US citizenship could potentially be a bad move if you do not intend to remain in the US permanently.

Momus
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Re: Windfall of 1.5 millions

Post by Momus » Sun Dec 10, 2017 1:51 pm

If you live in silicon Valley, $1.5M doesn't go far. Start looking at houses there, maybe you want to stay longer there without paying rent.

If you decide to invest it with less risk, 50/50 is appropriate. 1% savings account just doesn't cut it nowadays.

You can open up multiple of 250k 5 yrs CD at 2.35% interest each just to maintain purchasing power but I wouldn't do this if I were you...

OldSport
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Re: Windfall of 1.5 millions

Post by OldSport » Sun Dec 10, 2017 3:54 pm

amitjadhav wrote:
Sun Dec 10, 2017 12:34 am
I am in the early 30s and I received around 1.5 million after-tax through IPO. I stay in SV. I do not have any debt. I am yet to decide what i will do with this money.

I might return to my home country in a year but mostly I will get residency here and stay. It will be clear in a year what I will be doing in future. For next one year, I need to invest money somewhere or keep it in the bank. My plan is as below.

I am planning to invest 300k in stocks and keep it as it is for 20 to 30 years. Remaining 1.2 mil I am planning to keep ins savings account with 1% interest. I am wondering if there is a better option that savings account for the one-year duration? I am wondering what people here on this forum think about my options.
Congratulations!! One of my dreams is to be a 'millionaire' by the time I'm 40. Congrats on getting it younger in one swoop!

Given your risk tolerance, I'm wondering if the new Vanguard Global Wellesley might be a good option? Not the most tax efficient, but it looks to be a solid conservatively balanced fund.

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Sandtrap
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Re: Windfall of 1.5 millions

Post by Sandtrap » Sun Dec 10, 2017 7:23 pm

Wiki Bogleheads Wiki: Everything You Need to Know

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