29 year old taking over my previously managed investments

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Topic Author
Pokerguy123
Posts: 6
Joined: Tue Feb 05, 2019 1:22 pm

29 year old taking over my previously managed investments

Post by Pokerguy123 » Tue Feb 05, 2019 8:28 pm

Hello Boggleheads forum! First post, I hope I get the formatting correct.

I am a 29 year old professional poker player. I have been doing that for 10 years now, minus the year that I took off to focus on cryptocurrency investing. I entered the world of cryptocurrency with $250,000~ that I had saved from poker over the years, and managed to leave with over $2,000,000. This was in mid 2018. Since it was more money than I was used to handling, I took it to financial advisers at Merrill, who I worked with for about 6 months. During that time, I researched as much as I could about traditional markets and investing, and finally decided to part ways with them and do it on my own. After setting aside money that I owe in taxes on my cryptocurrency gains, I have $1,240,000, most of which is in investments that Merrill made, which are now transferred to my self directed account.

I set $250,000 aside for poker and life expenses. This is probably a lot more than I need for the two things, but I decided to be conservative so that there is basically no chance that I need to dip into my investments barring a massive emergency.

That leaves $990,000. Merrill already invested a large chunk of that, but most of it is in investments that can be liquidated if that's the way that I should go. Their strategy seemed pretty conservative for someone my age and with my risk tolerance, but they seemed to not want to put all the money in play in this market. Since gaining control of the accounts, I have put about $100k of the cash that they were sitting on into US index funds, and $25k into gold.

I made a spreadsheet where I categorized the investments the best that I could. They have me in about 40 positions. We are looking at:
US index funds: 27% They had me in a bunch of sector specific funds based on how they expect the market to play out. I still hold those, though I assume that I will want to sell them and just put the money in a broad index fund. I also hold QQQ and SPY, which were the index funds that I added after they turned the accounts over to me. After doing further reading, I'm getting the feeling that these were maybe not the correct ones to have added. Maybe VT or VTI instead?
Private equity: 21% I'd like to leave this here unless there are strong opinions otherwise. They put $100k into two separate funds that both have gained about 3%, and even were slowly gaining while the market had trouble in December. It was nice to have some funds that weren't moving with the market.
Bonds: 14% They have me in a lot of different bond funds. I tried to categorize them based on my limited knowledge of bonds. Some are domestic, some international, some treasury, government, corporate, municipal, mortgage backed. They seemed to really diversify. he biggest positions are: MUB, BNDX, GOVT USIG. Those actually make up the large majority of the bond allocation.
Cash: 14%
Market linked investments: 10% They put $50k into an s&p500 linked investment with a starting sp500 value of 2727 with 2x upside but a cap of 16% gain, and 10% downside protection. Its current value is $49,500 and comes to term 5/29/2020. They put another $50k into an s&p500 linked investment with a starting sp500 value of 2467 with 2x upside but a cap of 21% gain, and 10% downside protection. Its current value is $51,500 and comes to term 12/31/2020. Since the sp500 is 2737 right now, it seems like selling either of these now would be a mistake given the price that they are trading at. I was told that the markets aren't very liquid for these either. My plan is currently to just hold these until expiration and but to make a plan for where the funds will go.
International index funds: 9% In order of size: IEFA, IEMG, VEA, VWO
Bitcoin: 3% When I left the cryptocurrency markets, I held on to a little bitcoin. Id like to continue to hold this 3%
Gold: 2% I added this when I took over my account. I could be talked out of it. I just felt like it was a good idea to hold a little gold as an insurance plan in case there is major turmoil.

Any other info that I can think of: I have no debt. I rent. I'm moving across country to California with my girlfriend when our lease ends at the end of August. Eventually when we get married, I'd like to buy a house, but that will probably not be for 3 years. These positions are held in taxable accounts. I should be modestly beating my life expenses through poker, and expect to add 0-$20,000 to my investment accounts annually, depending on my results for the year.

How would you adjust this portfolio? If I should reduce the bonds, how would you chose which to sell? Or would you just sell a percentage of each? Should I hold any cash in this account, looking for a good spot to deploy it, or just invest it now? How should I adjust the index funds? Should I keep the gold?

Thank you in advance for any help

97trophy
Posts: 17
Joined: Tue Nov 21, 2017 9:57 pm

Re: 29 year old taking over my previously managed investments

Post by 97trophy » Tue Feb 05, 2019 11:03 pm

What's wrong with the Boglehead 3 fund approach?

https://www.bogleheads.org/wiki/Three-fund_portfolio

I would suggest you read The Little Book of Common Sense Investing. I suspect Merril are charging you high fees.

klaus14
Posts: 43
Joined: Sun Nov 25, 2018 7:43 pm

Re: 29 year old taking over my previously managed investments

Post by klaus14 » Tue Feb 05, 2019 11:35 pm

You don't need this level of complication. 3 fund portfolio is much better.
Or even a 2 fund portfolio (VT + BND).

It's ok to keep 2% gold. I hold 5%. If all fiat currencies loose value, gold should hold up.

Can you give more details on the Private equity funds? What are their expense ratios etc.

If you want to buy a house in 3 years. You may want to have house downpayment money in short term bonds (something like VFSUX)

Topic Author
Pokerguy123
Posts: 6
Joined: Tue Feb 05, 2019 1:22 pm

Re: 29 year old taking over my previously managed investments

Post by Pokerguy123 » Tue Feb 05, 2019 11:52 pm

klaus14 wrote:
Tue Feb 05, 2019 11:35 pm
You don't need this level of complication. 3 fund portfolio is much better.
Or even a 2 fund portfolio (VT + BND).

It's ok to keep 2% gold. I hold 5%. If all fiat currencies loose value, gold should hold up.

Can you give more details on the Private equity funds? What are their expense ratios etc.

If you want to buy a house in 3 years. You may want to have house downpayment money in short term bonds (something like VFSUX)
Wow, I just read the wiki page for the 3 fund portfolio. I wish I had done that before typing up such a long post. I will definitely go that way with the stock+bonds+cash. And I’m going to find the details of the private equity tomorrow morning.

sambb
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Re: 29 year old taking over my previously managed investments

Post by sambb » Tue Feb 05, 2019 11:56 pm

wow, you are being fleeced to some degree by the advisor

Rhino01
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Re: 29 year old taking over my previously managed investments

Post by Rhino01 » Tue Feb 05, 2019 11:58 pm

Pokerguy123 wrote:
Tue Feb 05, 2019 11:52 pm

Wow, I just read the wiki page for the 3 fund portfolio. I wish I had done that before typing up such a long post. I will definitely go that way with the stock+bonds+cash. And I’m going to find the details of the private equity tomorrow morning.
Fastest turnaround I've ever seen on this forum.

MotoTrojan
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Re: 29 year old taking over my previously managed investments

Post by MotoTrojan » Wed Feb 06, 2019 12:02 am

Rhino01 wrote:
Tue Feb 05, 2019 11:58 pm
Pokerguy123 wrote:
Tue Feb 05, 2019 11:52 pm

Wow, I just read the wiki page for the 3 fund portfolio. I wish I had done that before typing up such a long post. I will definitely go that way with the stock+bonds+cash. And I’m going to find the details of the private equity tomorrow morning.
Fastest turnaround I've ever seen on this forum.
Agreed, I am almost concerned at how quickly the OP has turned around. Keep taxes in mind moving forward but I agree, get out of all these crazy market tools and into a basic 3-fund or mild tilt situation. Whatever you get into though, make sure you can truly stick with it for the long-haul. There is a reason the average investor does SO much poorly than the broad market and it is these sorts of sudden about-faces.

JackedUpEspresso
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Re: 29 year old taking over my previously managed investments

Post by JackedUpEspresso » Wed Feb 06, 2019 1:28 am

OP,

As someone who has spent over a decade in the poker world and around crypto fans myself, I'm impressed you were able to take a step back and put away a significant amount of gains. That's not an easy thing to do.

Why California? Will you be playing live games there? Is it worth paying high state taxes?

What's your level of education? Have you considered what you want to do years from now? Poker is difficult to walk away but have you considered if you want to be a real life Joey Knish? How are your current poker skills after your layoff and what are you doing to maintain them or improve?

40 Positions is silly. I'm glad you've fired the Merrill advisors.

I've been where you are. Reading a bunch (I'm studying financial planning now) and I know the feeling of wanting to hit the reset button. While I fully support DIY, you may also want to consider hiring a Certified Financial Planner (CFP) who works for an hourly or fee for a plan/project to help you unwind. Plenty of good ones out there who don't require you to sign on for ongoing asset management if you don't want that. Vanguard PAS is great but definitely not an ideal platform for handling alternatives (they will be required to liquidate down to their target immediately, and they cannot manage outside assets).

Either way, get yourself an Investor Policy Statement you have high conviction in.

The portfolio stuff matters but I want to reemphasize those earlier life questions. I look around at old, long time professional poker players, and I wouldn't want to be any of them. Not. A. Single. One. Even the most successful of the bunch. You may feel differently, but you're plenty young enough to start a new path and still keep poker as a hobby.

Topic Author
Pokerguy123
Posts: 6
Joined: Tue Feb 05, 2019 1:22 pm

Re: 29 year old taking over my previously managed investments

Post by Pokerguy123 » Wed Feb 06, 2019 8:33 am

I think that I may have done a poor job explaining things in my OP. I'm no longer paying any investment fees or working with the financial advisers. I was paying .75% on my total assets under management. When I mentioned that on the finance section of a poker forum, I got a few suggestions to get rid of the money managers and check out a simple indexing strategy, and also to try the Bogleheads forum.

Now I've taken over the accounts, with all of their positions in it, and I'm trying to make sense of the best way to move to that type of strategy. Before posting here, my solution was to buy the SPY and QQQ because those were the index funds that I knew. So the 3 fund advice was really exactly what I was looking for when I posted.

Topic Author
Pokerguy123
Posts: 6
Joined: Tue Feb 05, 2019 1:22 pm

Re: 29 year old taking over my previously managed investments

Post by Pokerguy123 » Wed Feb 06, 2019 9:04 am

JackedUpEspresso wrote:
Wed Feb 06, 2019 1:28 am
OP,

As someone who has spent over a decade in the poker world and around crypto fans myself, I'm impressed you were able to take a step back and put away a significant amount of gains. That's not an easy thing to do.

Why California? Will you be playing live games there? Is it worth paying high state taxes?

What's your level of education? Have you considered what you want to do years from now? Poker is difficult to walk away but have you considered if you want to be a real life Joey Knish? How are your current poker skills after your layoff and what are you doing to maintain them or improve?

40 Positions is silly. I'm glad you've fired the Merrill advisors.

I've been where you are. Reading a bunch (I'm studying financial planning now) and I know the feeling of wanting to hit the reset button. While I fully support DIY, you may also want to consider hiring a Certified Financial Planner (CFP) who works for an hourly or fee for a plan/project to help you unwind. Plenty of good ones out there who don't require you to sign on for ongoing asset management if you don't want that. Vanguard PAS is great but definitely not an ideal platform for handling alternatives (they will be required to liquidate down to their target immediately, and they cannot manage outside assets).

Either way, get yourself an Investor Policy Statement you have high conviction in.

The portfolio stuff matters but I want to reemphasize those earlier life questions. I look around at old, long time professional poker players, and I wouldn't want to be any of them. Not. A. Single. One. Even the most successful of the bunch. You may feel differently, but you're plenty young enough to start a new path and still keep poker as a hobby.
Crypto was exciting and I'm really lucky to have made that money there. I think a reason that I was able to walk away from it was that I never believed in it, besides bitcoin which I use to deposit and withdraw from poker sites. Not that I'm a bitcoin nut, I just see that it has a working function. So when it all was falling apart, it was easy for me to say "ok, time to leave this", rather than hang on. Not that I left anywhere near the peak of the market.

I left sophomore year of college to pursue poker full time so that's the extent of my education. Poker works for now. I've really explored changing career paths a lot but I always end on continuing poker. I play + study about 30 hours per week, all from home. I'm very detached from the poker world. I just load up my computer and treat it like any other job. I really appreciate the flexibility it gives me and I take advantage of all the free time. If there was another non-traditional route that popped up, I'd definitely entertain it, but for now, no complaints.

Poker was tough to get back to because people are constantly improving. I had to hire a private coach, and spend a lot of time with my simulator (Pio Solver). I feel pretty much up to speed, and seem to have a similar edge to when I left the games.

We chose California just because San Diego is beautiful. I'm sure it's not the most economical, but I've wanted to move out there for about 5 years. My girlfriend is from LA and she wants to move closer to home, so it works for her. I'm in Boston now, so I don't think it will be any more expensive.

Thanks for all the questions and direction

JackedUpEspresso
Posts: 4
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Re: 29 year old taking over my previously managed investments

Post by JackedUpEspresso » Thu Feb 07, 2019 6:35 pm

I'm curious what career paths you explored? I also left college early and recently went back to complete my degree online. Finishing my undergrad online was not an option at my college when I left a decade ago, but now it is. I had so much fun in the program I decided to follow-up with a MS. I'm a much better student now, especially considering I actually give a damn.

I get it. Poker can be great. The autonomy and flexibility are tough to beat, especially when games are good. I would still strongly advise a long-term exit strategy.

Back to the allocation. I am highly skeptical of the PE funds (at least the ones who would need or want my money). Since you seem open to opinions on rather or not to keep it here's a quote from Unconventional Success by David Swenson:

"In fact, only top-quartile or top-decile funds produce returns sufficient to compensate for private equity’s greater illiquidity and higher risk. In the absence of truly superior fund selection skills (or extraordinary luck), investors should stay far, far away from private equity investments."
Swensen, David F.. Unconventional Success: A Fundamental Approach to Personal Investment (p. 134). Free Press. Kindle Edition.

I have no idea what the market linked investments are. Do those realize longterm cap gains when they expire? Do the dividends flow through to you? Are they liquid?

I think poker is a great background for investing - at least I like to think it has been for me. But again, if I were in your situation I would get a plan from a CFP, or have them help me move to the allocation I desire before self-managing. There's lots of other things to consider. Are you contributing to an IRA? Do you have an HSA? How's your credit? Getting a mortgage can be tricky as a pro gambler, you will have a tougher time if income is declining and you may have to support it with your asset base. You'll probably want to allocate cash to the goal for the future home purchase and start your research early. A CFP will also advise you on setting up estate planning documents and things.

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BL
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Re: 29 year old taking over my previously managed investments

Post by BL » Fri Feb 08, 2019 2:21 am

Here is a great pdf by recommended author, Dr. William Bernstein, for you:
https://www.etf.com/docs/IfYouCan.pdf
It is listed in the Wiki along with recommended books. It suggests the 3-fund portfolio.

bluquark
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Re: 29 year old taking over my previously managed investments

Post by bluquark » Fri Feb 08, 2019 2:56 am

You also don't need that much cash and bonds at your age. With your life story you sound like you have a high risk tolerance and would not be fazed at all by a market crash. I would go take advantage of that by going heavily into stocks except for the house downpayment. Like 90/10 is probably a good AA for you.

Another note: although you may not be fazed by risk, you might fall into the trap of being overconfident in your ability to time the market given that you're used to being the smartest guy in the poker room and the Bitcoin forums. Wall Street is full of the real sharks and you cannot beat them, only match them. Stick to buy and hold and don't touch in this world.

minimalistmarc
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Re: 29 year old taking over my previously managed investments

Post by minimalistmarc » Fri Feb 08, 2019 6:21 am

Pokerguy123 wrote:
Tue Feb 05, 2019 8:28 pm
Hello Boggleheads forum! First post, I hope I get the formatting correct.

I am a 29 year old professional poker player. I have been doing that for 10 years now, minus the year that I took off to focus on cryptocurrency investing. I entered the world of cryptocurrency with $250,000~ that I had saved from poker over the years, and managed to leave with over $2,000,000. This was in mid 2018. Since it was more money than I was used to handling, I took it to financial advisers at Merrill, who I worked with for about 6 months. During that time, I researched as much as I could about traditional markets and investing, and finally decided to part ways with them and do it on my own. After setting aside money that I owe in taxes on my cryptocurrency gains, I have $1,240,000, most of which is in investments that Merrill made, which are now transferred to my self directed account.

I set $250,000 aside for poker and life expenses. This is probably a lot more than I need for the two things, but I decided to be conservative so that there is basically no chance that I need to dip into my investments barring a massive emergency.
I just wanted to say congratulations on your success. Have a high five!

Are you planning on retiring from pro poker?

Topic Author
Pokerguy123
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Joined: Tue Feb 05, 2019 1:22 pm

Re: 29 year old taking over my previously managed investments

Post by Pokerguy123 » Sun Feb 10, 2019 3:58 pm

Hey all, sorry it's taken me a couple days to respond. I've started moving towards a strategy that is being recommended here. Responding to the last 4 comments here:

I sold all of the equity and bond positions that they had me in. I Invested half of that proceeds from that into VT. I'm still deciding on what bond/stock ratio I would like, but the majority of this will also go into VT, and probably some into BND. I really liked the 3 fund portfolio, and it looks like with VT, I can do a 2 fund portfolio (including BND).

The market linked investments are garbage, they are linked to the sp500 and locked in for 2 years. They provide 10% downside protection, but don't receive the dividends which would be about 2% each year. I will put this money into VT/BND once these are done.

I'm trying to find the fees in the private equity investments and one is very high - 3.5% load fee, 2.2% annually + 12.5% of annual profits with a 5% annual hurdle. Plus, if I remove the money within a year of entering the fund, 5% penalty. The other one doesn't even list the fees in a digestible way, but it does also have a 5% fee for removing it within a year of entering the fund.

I wish I had read into the finer details of the market linked investments and private equity before, but now my plan is to just wind them down, and move the money to the VT/BND portfolio.

Topic Author
Pokerguy123
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Joined: Tue Feb 05, 2019 1:22 pm

Re: 29 year old taking over my previously managed investments

Post by Pokerguy123 » Sun Feb 10, 2019 4:12 pm

Regarding poker questions: I know that I should start working on another career. It's a little intimidating with only one year of college under my belt, and my last employment as a bus boy over 10 years ago. I've looked into a few careers, and it seems like the ones that really interest me would take tons of schooling.

It may be unrealistic but ideally Id be able to keep my expenses low, save as much as I could, and then be able to do some sort of investing that I could live off, like buying and managing real estate, or buying an existing business. Though I know nothing about either.

bluquark
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Re: 29 year old taking over my previously managed investments

Post by bluquark » Sun Feb 10, 2019 4:35 pm

29 isn’t too old to go to school. And it’s a good use of your money, you can go to a top school without taking any student loans. Investment in your human capital is one of the best investments out there (very lucrative and less risky than your own business or real estate).

JackedUpEspresso
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Re: 29 year old taking over my previously managed investments

Post by JackedUpEspresso » Tue Feb 12, 2019 11:13 pm

OP,

What bluquark said. Managing a small business or RE seems realistic, but not without education or hard-work to acquire the skills. If you mentioned that because you imagine it being easy and 'passive' then you might want to interview folks in those businesses.

Figure out what you want life to look like. I think it's reasonable to live off a well diversified portfolio, provided you keep expenses low and remain flexible (2% is probably a good bench). Avoid leverage and alcohol. https://www.youtube.com/watch?v=rJjKP8vYjpQ

I don't expect poker to be there forever, but if you keep putting money away, I understand the difficulty of transitioning. Good luck!

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