How would you invest a lump sum of 3 million dollars in today's market?

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Topic Author
bodhipup
Posts: 1
Joined: Wed Jun 05, 2019 11:10 pm

How would you invest a lump sum of 3 million dollars in today's market?

Post by bodhipup » Thu Jun 06, 2019 12:22 am

Hey all, I'm pretty new to investing and recently acquired a little over 3 million dollars. I'm in my mid 30's, debt free, and currently all the money is sitting in a high interest savings account (2.25%). I would like a comfortable emergency fund, say $500k. But really I can think about long term investing the rest of the cash.

I don't have any money in stocks and index funds at the moment - so I'm starting from zero. I'm a little worried about the current state of the market as it looks like the bull market is coming to an end.

If you were to invest 2.5 million dollars or so in index funds, would you invest it all as a lump sum immediately (given the current market conditions). Or would you invest it gradually over the next year or two to take advantage of dollar cost averaging?

Or would you invest outside the stock market? Real estate? I have a pretty high risk tolerance and considering investing in REITs, etc.

Thanks a ton in advance!

ohai
Posts: 921
Joined: Wed Dec 27, 2017 2:10 pm

Re: How would you invest a lump sum of 3 million dollars in today's market?

Post by ohai » Thu Jun 06, 2019 1:31 am

Well, my money is basically all in US large cap, with the exception of some muni bond funds. So there is my honest answer.

Real estate might make sense in a cheap part of the country, but is unreasonable in coastal areas where I live(d). Also, it's a lot of work and I'm really too busy or lazy to deal with landlord stuff.

Don't bother with DCA. It's better to just invest now in whatever asset allocation you choose. Don't believe the bull market is ending. I've heard the same story for the past 9 years, just like how long term interest rates could never get lower.

Forget about $500k "emergency fund". Unless you really think you will lose 80% of your investment in something, you will have $500k no matter what. Segmenting some portion of your portfolio just distorts your ideal asset allocation.

REIT are basically the same risk/return as stocks or maybe a bit worse. What kills this option for me though, is the high tax rate on REIT coupons. In addition, stock indexes already have real estate in their market cap, so the diversification is false - you're really just overweighting one sub sector.

Most important question for you is what you intend to do with the money. If $3 million is enough for you and you are happy preserving that principal while earning interest, then buy more bond funds. If you have high risk tolerance and want that $3 million to become $10 million one day, then buy more risky things like stocks.

This is unholy to mention here, but consider consulting a financial advisor who has experience with your situation (inheritance, lottery, sale of business or whatever). Just don't pay them a fee as a percentage of AUM. You might have some tax or other situation that is special. Also, most people with such liquid capital grew it over time and got used to the amount slowly. With a sudden windfall, you might feel disoriented and could get some peace of mind from someone checking.

mchampse
Posts: 253
Joined: Mon Feb 26, 2007 1:45 am

Re: How would you invest a lump sum of 3 million dollars in today's market?

Post by mchampse » Thu Jun 06, 2019 2:03 am

The most important question is what are your life goals at this point? Are you currently working? Would you prefer retiring? Are you married? Have any desire to have children?

There’s a rule of thumb that if you took 3% of your assets to live off, you shouldn’t have to touch principal. That would be $90k per year which depending on where you live and what your lifestyle is could be enough to live off of.

In terms of your emergency fund, what emergency are you planning for? For most of us, it would be job loss which likely wouldn’t be an issue for you.

User avatar
Tyler Aspect
Posts: 1344
Joined: Mon Mar 20, 2017 10:27 pm
Location: California
Contact:

Re: How would you invest a lump sum of 3 million dollars in today's market?

Post by Tyler Aspect » Thu Jun 06, 2019 2:19 am

An investment of $3m does not need a large reserve of emergency cash, because the typical dividend yield of 2% will be able to throw off $60k dividend per year. You might want to invest this large sum conservatively just because preserving it could be just as important as obtaining gains from it.

A sample portfolio with Vanguard funds:

25% US Stock (ticker symbol VTI)
25% Global stock (ticker symbol VT)
25% intermediate term bond (ticker symbol BIV)
25% tax free bond (ticker symbol VTEAX)

All you need to do is to equalize the value of the funds two times per year. This keeps things simple.
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.

Grt2bOutdoors
Posts: 20976
Joined: Thu Apr 05, 2007 8:20 pm
Location: New York

Re: How would you invest a lump sum of 3 million dollars in today's market?

Post by Grt2bOutdoors » Thu Jun 06, 2019 4:31 am

20% intermediate term Bond index
40% US Large Cap Index
40% Small Cap Index or Extended Market Index (for the aggressive risky side).

As other person alluded - a 20% allocation to fixed income equates to $500k, if you only want to invest $2.5 million then, an 80/20 mix would be considered aggressive. Rebalance once per year.

If you’re not much of a risk taker:

50% intermediate term Treasury Index
50% Total Stock Market Index
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

User avatar
Wiggums
Posts: 1217
Joined: Thu Jan 31, 2019 8:02 am

Re: How would you invest a lump sum of 3 million dollars in today's market?

Post by Wiggums » Thu Jun 06, 2019 5:15 am

Tyler Aspect wrote:
Thu Jun 06, 2019 2:19 am
An investment of $3m does not need a large reserve of emergency cash, because the typical dividend yield of 2% will be able to throw off $60k dividend per year. You might want to invest this large sum conservatively just because preserving it could be just as important as obtaining gains from it.

A sample portfolio with Vanguard funds:

25% US Stock (ticker symbol VTI)
25% Global stock (ticker symbol VT)
25% intermediate term bond (ticker symbol BIV)
25% tax free bond (ticker symbol VTEAX)

All you need to do is to equalize the value of the funds two times per year. This keeps things simple.
+1

Good luck to you.

student
Posts: 3506
Joined: Fri Apr 03, 2015 6:58 am

Re: How would you invest a lump sum of 3 million dollars in today's market?

Post by student » Thu Jun 06, 2019 5:23 am

Personally I would do a 40% total stock market, 20% total international, 40% fixed income. Moreover I would use ETF and I would call up Fidelity/Schwab/TD Ameritrade/Merrill Edge/Etrade to see what transfer bonus they would offer. I would likely use two brokerage firms. (There were discussions in older threads whether one should consolidate to one firm. Either way is fine.) For fixed income, I would do a combination of total bond, inflation linked bond and cash, for example, 20% total bond and 20% inflation linked bond, or 35% total bond and 5% cash. For psychological reason, I would dollar cost averaging over a period of time say 12 months even though historical data show that lump sum investment is better.

Silk McCue
Posts: 2631
Joined: Thu Feb 25, 2016 7:11 pm

Re: How would you invest a lump sum of 3 million dollars in today's market?

Post by Silk McCue » Thu Jun 06, 2019 6:28 am

Please take time to review the Boglehead's Wiki on Managing A Windfall. Solid advice from those that have been there.

Managing a Windfall

Cheers

Nowizard
Posts: 2169
Joined: Tue Oct 23, 2007 5:33 pm

Re: How would you invest a lump sum of 3 million dollars in today's market?

Post by Nowizard » Thu Jun 06, 2019 7:16 am

Once you define your future goals, at least as much as possible from today's perspective, the choice of funds and percentages will become clear. The primary "problem" is psychological at the moment with the sudden, wonderful windfall that could have come with other emotional issues (For example, if an inheritance from a beloved relative). As for the question of DCA vs. lump sum investing, the issue there is also psychological since much research supports lump sum, but that is, again, likely to be a challenge for a new investor. Take your time since you are earning a decent interest rate. You can consider whether you would benefit from a CPA consult regarding taxes or a one-time consultation with a financial professional, including Vanguard, among others. You are off to a good start by coming here, and can continue it by reading the various Wiki's other have suggested.

Tim

smalliebigs
Posts: 73
Joined: Wed Jan 04, 2017 10:48 am

Re: How would you invest a lump sum of 3 million dollars in today's market?

Post by smalliebigs » Thu Jun 06, 2019 7:44 am

Congratulations for having this particular problem. It would be good to read through the windfall wiki linked above.

If it were me, I'd take 500k and put it in a US treasury as a form of insurance from yourself. It's your safety factor. For the rest, I'd weigh my risk tolerance, and just split it in a total US market fund, and a total bond fund. That's it.

If you want to make it even more simple, put it in a target date retirement fund and it will be on autopilot.

Keep a bit ready in cash for taxes and so on. Keep away from anyone that comes to you with a GREAT investment idea.

All the best!

CnC
Posts: 748
Joined: Thu May 11, 2017 12:41 pm

Re: How would you invest a lump sum of 3 million dollars in today's market?

Post by CnC » Thu Jun 06, 2019 8:01 am

Do not listen to anyone who tells you lump sum invest it all. That is a terrible idea.

Not because it doesn't typically out perform dca investing it actually does in a vacuum when performed by unemotional robots.

But in real life someone investing $3,000,000 all at one time with no prior market exposure is a recipe for certain failure.

Dca 200k a month for the next 15 months. If we ever have a dip of 5 percent since your last purchase buy 400k the next day. Take the 400k off the end.



I would personally hold 70-30 or 80-20 with a 500k emergency fund in a rotating 4 year bond ladder 125k due each year.

This 500k would be part of your fixed income holdings.

Jack FFR1846
Posts: 9742
Joined: Tue Dec 31, 2013 7:05 am

Re: How would you invest a lump sum of 3 million dollars in today's market?

Post by Jack FFR1846 » Thu Jun 06, 2019 8:05 am

What *I* would do? I'd peruse the brokerage bonuses for bringing in new funds. I'd then bring the entire amount in lump sum and buy 50% Total Market-like ETF (VTI, SCHB, ITOT) and 50% bond ETF. After maybe 18 months, I'd look for the next place who gives a good bonus to move money in, give the existing place a chance to keep me by matching the bonus and then proceed with whoever does the most for me.
Bogle: Smart Beta is stupid

FoolMeOnce
Posts: 629
Joined: Mon Apr 24, 2017 11:16 am

Re: How would you invest a lump sum of 3 million dollars in today's market?

Post by FoolMeOnce » Thu Jun 06, 2019 8:22 am

CnC wrote:
Thu Jun 06, 2019 8:01 am
Do not listen to anyone who tells you lump sum invest it all. That is a terrible idea.

Not because it doesn't typically out perform dca investing it actually does in a vacuum when performed by unemotional robots.

But in real life someone investing $3,000,000 all at one time with no prior market exposure is a recipe for certain failure.

Dca 200k a month for the next 15 months. If we ever have a dip of 5 percent since your last purchase buy 400k the next day. Take the 400k off the end.



I would personally hold 70-30 or 80-20 with a 500k emergency fund in a rotating 4 year bond ladder 125k due each year.

This 500k would be part of your fixed income holdings.
I like this advice. Lump sum gives you the best probabilistic outcome, but you don't get all the probabilities, you just have one shot at this. It might be hard to stomach if your lump sum end up on the bad side of possible outcomes. And with the amount you have, you can afford to miss on some upside (similar considerations go into choosing your asset allocation).

onourway
Posts: 1999
Joined: Thu Dec 08, 2016 3:39 pm

Re: How would you invest a lump sum of 3 million dollars in today's market?

Post by onourway » Thu Jun 06, 2019 8:26 am

You really need to define your goals for this money before any meaningful advice can be given.

It would also be helpful to know a bit more about your overall situation - what tax-advantaged space you have available, and so on.

There is a sticky post at the top of this section that lays out the format that should be used for portfolio questions.

The very short answer is that many of us here have substantially similar amounts that we choose to keep invested every day. We could cash these out at any time, so the end result is exactly the same as you investing everything today.

Nowizard
Posts: 2169
Joined: Tue Oct 23, 2007 5:33 pm

Re: How would you invest a lump sum of 3 million dollars in today's market?

Post by Nowizard » Thu Jun 06, 2019 8:28 am

Even worse than the decision related to lump sum vs. DCA would be to invest at all until having a sustainable plan. Given the currently available information, suggestions are likely to be more reflective of generally accepted considerations and personal preferences rather than a decision by the OP. The thread can provide considerable fodder for thought, but more research by the OP appears to be ideal before moving from what is a reasonable amount of interest being received now. Just as slow and steady is an excellent market approach, it is also a good axiom to follow before entering the market.
+1 Onourway
Tim

Tamalak
Posts: 606
Joined: Fri May 06, 2016 2:29 pm

Re: How would you invest a lump sum of 3 million dollars in today's market?

Post by Tamalak » Thu Jun 06, 2019 8:34 am

VTI, VT, BND. Ratio's totally your choice. Anything except more than 75% BND is just fine.

Invest immediately, lump sum. If the market drops 10%, you lose 10% whether you've been invested 10 seconds or 10 years. Might as well dive all the way in now.
Last edited by Tamalak on Thu Jun 06, 2019 8:48 am, edited 1 time in total.

User avatar
Watty
Posts: 16866
Joined: Wed Oct 10, 2007 3:55 pm

Re: How would you invest a lump sum of 3 million dollars in today's market?

Post by Watty » Thu Jun 06, 2019 8:39 am

Silk McCue wrote:
Thu Jun 06, 2019 6:28 am
Please take time to review the Boglehead's Wiki on Managing A Windfall. Solid advice from those that have been there.

Managing a Windfall

Cheers
+1

The best thing to do is to keep the money in something ultrasafe for at least six months to a year while you come up with a long term plan and get used to having the money.

One thing to check on is if you have all the money in one account then would be above the FDIC account insurance limits so you may want to spread the money around or put the month into some sort of short term bond fund or treasury bonds.

Be sure to understand that 99% of financial advisors are really salespeople that can legally put you into terrible investments just to make commission off of you. They heavenly lobby the government so they are virtually unregulated. The commissions and high fees(often hidden) will really add up over the years so it is often a lot worse than it sounds. The math gets funky but paying a 1% Asset Under Management(AUM) fee for 33 years would be like a third of your money and there are almost always additional hidden fees. Ask if you do not fully understand how risky financial advisors are. An exception to that Vanguard will provide good advisory services for just 0.3% a year and they will not put you in bad investments. You can also use them for a few years then take over managing the money yourself once the investments are pretty much on auto-pilot.

The prior suggestions are well intended but we really don't know a lot about the rest of your situation and what the goals for the money are. Someone who is disabled and needs the money to last the rest of their lives would invest it a lot differently than some high paid entrepreneur. You will get better suggestions if you post more about your situation using this suggested format as a guideline, but it does not need to follow it exactly.

viewtopic.php?f=1&t=6212

A few things I suggest though when people have posts like this;

1) If you don't already have it you should also get ample car insurance and an umbrella policy since you are more likely to be sued now that you have more assets.

2) Make sure that you are maxing out all your tax advantaged accounts.

3) It would be good to also consider if you have relatively safe cars. It is just me but one of my pet peeves is when people post about having a lot of money but they drive an old beater that doesn't even have ESC or side airbags. I'm not saying that you should buy an expensive car with all the latest safety bells and whistles but they have improved the safety features a lot, especially over the last five years so you should consider if your current cars should be replaced with safer models.

You also need to be careful about feeling too rich and over spending the money. A splurge or two is no problem but many people like highly paid athletes or lottery winners have had a lot more than that but find themself broke in ten or twenty years. There are all sorts of assumptions and qualifications but academic studies have looked into what a "safe withdrawal rate" would be and in your 30's it would 2 to 2.5% which means that if you wanted to stop working and have that money last you the rest of your life you might need to live on about $60,000 a year which could provide a comfortable lifestyle in a low cost of living area but that is hardly a "millionaire" lifestyle.
Last edited by Watty on Thu Jun 06, 2019 8:43 am, edited 2 times in total.

User avatar
Stinky
Posts: 1480
Joined: Mon Jun 12, 2017 11:38 am
Location: Sweet Home Alabama

Re: How would you invest a lump sum of 3 million dollars in today's market?

Post by Stinky » Thu Jun 06, 2019 8:40 am

Silk McCue wrote:
Thu Jun 06, 2019 6:28 am
Please take time to review the Boglehead's Wiki on Managing A Windfall. Solid advice from those that have been there.

Managing a Windfall

Cheers
+1

This is absolutely excellent advice. Note the primary sections of the referenced Wiki:
Take Your Time
Determine Your Tax Situation
Formulate a Plan

Most everyone on this Forum would encourage you to have some significant portion of long-term savings invested in low-cost equity index mutual funds, with some bonds thrown in. But if you act before you "formulate a plan", you're likely to make decisions that you'll regret in the future.

Welcome to the Forum! And please keep posting and asking questions as you move through your process. There are many folks here who are happy to give you their advice, and the collective advice from the folks on this Forum is excellent.
It's a GREAT day to be alive - Travis Tritt

retiredjg
Posts: 37173
Joined: Thu Jan 10, 2008 12:56 pm

Re: How would you invest a lump sum of 3 million dollars in today's market?

Post by retiredjg » Thu Jun 06, 2019 9:09 am

How would you invest a lump sum of 3 million dollars in today's market?
You are asking the wrong question because what I would do may not be relevant to your situation. In fact, what is right for one investor can be all wrong for another investor.

Here is a suggestion for you to consider. Since you are a novice investor, consider investing it all right now at a very conservative stock to bond ratio - something like 50/50 or 60% stocks and 40% bonds. After some time to figure things out - and some experience seeing your money grow and shrink as the market will do - decide if that allocation is right for you or if you want to go to something more aggressive. Or you may decide to go to something more conservative.


If you simply cannot put $3 million into the market all at once, put $100k (or whatever) a month into stocks (stock index funds such as a Total Stock Market Index and a Total International Stock Index). Do this every month no matter WHAT the stock market is doing.

Consider your high interest account to be your "bonds". Obviously, you will be starting at 1% stock and 99% bonds and building up the stock allocation each month. You will reach about 50% stocks in about 15 months. By then you may have some idea of how you feel about market volatility.

In the long run, you would put the remainder of your portfolio into intermediate term bond funds - a tax-exempt bond fund if you are in a high tax bracket - rather than leaving it in the high interest savings.

For the immediate future, I'm concerned about the FDIC limits on your savings account. Or do you have the money spread out over several? If not, that may be an issue to fix. Other than that, there is no rush to act before you take some time to think about all this.


If you decide you want some portfolio management assistance, consider Vanguard's Personal Advisor Service. Their costs are very low and you can trust them not to sell you stuff you don't need. This is not the case for advisor services that make money off your investments.

Valuethinker
Posts: 38418
Joined: Fri May 11, 2007 11:07 am

Re: How would you invest a lump sum of 3 million dollars in today's market?

Post by Valuethinker » Thu Jun 06, 2019 9:19 am

bodhipup wrote:
Thu Jun 06, 2019 12:22 am
Hey all, I'm pretty new to investing and recently acquired a little over 3 million dollars. I'm in my mid 30's, debt free, and currently all the money is sitting in a high interest savings account (2.25%). I would like a comfortable emergency fund, say $500k. But really I can think about long term investing the rest of the cash.
In one Financial Institution, you have credit risk -- consider 2008. You should spread it between a number of financial institutions, taking advantage of FDIC insurance limits. Beyond that, it should be held in US T Bills or Treasury Bonds - no credit risk.

I don't have any money in stocks and index funds at the moment - so I'm starting from zero. I'm a little worried about the current state of the market as it looks like the bull market is coming to an end.

If you were to invest 2.5 million dollars or so in index funds, would you invest it all as a lump sum immediately (given the current market conditions). Or would you invest it gradually over the next year or two to take advantage of dollar cost averaging?

Or would you invest outside the stock market? Real estate? I have a pretty high risk tolerance and considering investing in REITs, etc.

Thanks a ton in advance!

We don't know your whole picture which has bearing on this.

Something like $250k of cash held in FDIC insured accounts or term deposits. Then split the rest.

Roughly though, as per other posters:

- 50% in dead safe assets - high quality municipal bonds (depending upon your tax position) and US Treasury Bond fund

- 50% in equities - I would argue for something like 60% USA 40% international. Or 65/ 35. Depends a lot upon your other goals, income etc. For example if you work in the tech industry, I could make a case for 50%-50% - the US index has a big tech weighting compared to other stock markets.

The big unknown is whether you want to buy a primary residence. $3m does not go that far in some parts of the USA (primarily SF Bay area, Socal, great NYC area, I believe).

User avatar
ruralavalon
Posts: 16157
Joined: Sat Feb 02, 2008 10:29 am
Location: Illinois

Re: How would you invest a lump sum of 3 million dollars in today's market?

Post by ruralavalon » Thu Jun 06, 2019 9:25 am

Welcome to the forum :) .
bodhipup wrote:
Thu Jun 06, 2019 12:22 am
Hey all, I'm pretty new to investing and recently acquired a little over 3 million dollars. I'm in my mid 30's, debt free, and currently all the money is sitting in a high interest savings account (2.25%). I would like a comfortable emergency fund, say $500k. But really I can think about long term investing the rest of the cash.

I don't have any money in stocks and index funds at the moment - so I'm starting from zero. I'm a little worried about the current state of the market as it looks like the bull market is coming to an end.

If you were to invest 2.5 million dollars or so in index funds, would you invest it all as a lump sum immediately (given the current market conditions). Or would you invest it gradually over the next year or two to take advantage of dollar cost averaging?

Or would you invest outside the stock market? Real estate? I have a pretty high risk tolerance and considering investing in REITs, etc.

Thanks a ton in advance!
Here is some more general advice on dealing with a windfall.
1) take your time, there is no rush;
2) educate yourself first. Here is a wiki article you could read to start educating yourself: "Bogleheads® investment philosophy. For a quick overview of investing basics for the new person read Dr. Bernstein's short book, "If You Can". I suggest reading one or two books on general investing. Wiki article, "Books: recommendations and reviews";
3) beware of anyone (family, friend, neighbor, co-worker, broker, banker, anyone at all) trying to sell anything (real estate, stocks, bonds, insurance, annuity, CDs, mutual fund, ETF, anything at all); and
4) make a plan first, then act.
Please see the wiki article, "Managing a Windfall".

. . . . .

What would I do? I don't know, I have never been in the situation of investing a lump sum $3,000,000, or anything of that order of magnitude.

Perhaps use the compromise solution which is to invest part in a lump sum now, and the rest in stages. For example invest 50% in a lump sum now, and invest the other 50% in stages (like an additional 10% on a predetermined date each month for the next 5 months, or 5% per month for the next 10 months). Don't needlessly agonize over when the best time may be to invest.

. . . . .

Invest at a low cost provider like Vanguard, Fidelity or Schwab. Invest in very diversified, very low expense mutual funds or Exchange Traded Funds (ETFs) such as:
1) Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) or the ETF (VTI);
2) Vanguard Total International Stock Index Fund Admiral Shares (VTIAX) or the ETF (VXUS); and
3) a tax-exempt bond fund like Vanguard Intermediate-Term Tax-Exempt Fund Admiral Shares (VWIUX). There may be a tax-exempt bond fund for your specific state.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

Jordan4FI
Posts: 190
Joined: Mon May 28, 2018 11:00 am
Location: Honduras

Re: How would you invest a lump sum of 3 million dollars in today's market?

Post by Jordan4FI » Thu Jun 06, 2019 9:35 am

I could put that in MM accounts and only earn 2% over all and I would quit my job. 2% is still 3X what I will need to live abroad.

But if i was ever this lucky, I would probably put it into Vanguard Life Income fund.

smectym
Posts: 441
Joined: Thu May 26, 2011 5:07 pm

Re: How would you invest a lump sum of 3 million dollars in today's market?

Post by smectym » Thu Jun 06, 2019 10:05 am

Financial independence is something the vast majority only dream of. It’s actually a big deal, don’t think (or invest like) it’s not. When FI is actually (and in your case suddenly) within grasp, a good idea is to prioritize protecting that independence and not letting it slip through your fingers. Once that is your priority, that logically leads to a conservative tilt to the investing strategy.

MotoTrojan
Posts: 5510
Joined: Wed Feb 01, 2017 8:39 pm

Re: How would you invest a lump sum of 3 million dollars in today's market?

Post by MotoTrojan » Thu Jun 06, 2019 10:08 am

Tyler Aspect wrote:
Thu Jun 06, 2019 2:19 am
An investment of $3m does not need a large reserve of emergency cash, because the typical dividend yield of 2% will be able to throw off $60k dividend per year. You might want to invest this large sum conservatively just because preserving it could be just as important as obtaining gains from it.

A sample portfolio with Vanguard funds:

25% US Stock (ticker symbol VTI)
25% Global stock (ticker symbol VT)
25% intermediate term bond (ticker symbol BIV)
25% tax free bond (ticker symbol VTEAX)

All you need to do is to equalize the value of the funds two times per year. This keeps things simple.
Mixing VTI and VT on purpose? VT is roughly 1/2 VTI. VXUS would make more sense.

User avatar
beyou
Posts: 2705
Joined: Sat Feb 27, 2010 3:57 pm
Location: Northeastern US

Re: How would you invest a lump sum of 3 million dollars in today's market?

Post by beyou » Thu Jun 06, 2019 10:18 am

Vt and vti were suggested to both be owned. They
have huge overlap, you would not want both. VT can be your only stock portfolio.

Personally I would consider a target date fund to keep it simple. Year based in when you really intend to start living off this pool of cash (your planned “retirement” from whatever you may do between now and then). If you dont plan to work at all, maybe just pick a balanced fund (balanced index, tax managed balanced to reduce income tax) to have a consistent AA.

User avatar
catalina355
Posts: 232
Joined: Sun Jun 10, 2018 6:46 pm

Re: How would you invest a lump sum of 3 million dollars in today's market?

Post by catalina355 » Thu Jun 06, 2019 10:23 am

smectym wrote:
Thu Jun 06, 2019 10:05 am
Financial independence is something the vast majority only dream of. It’s actually a big deal, don’t think (or invest like) it’s not. When FI is actually (and in your case suddenly) within grasp, a good idea is to prioritize protecting that independence and not letting it slip through your fingers. Once that is your priority, that logically leads to a conservative tilt to the investing strategy.
What asset allocation would you suggest to the OP?

Tamalak
Posts: 606
Joined: Fri May 06, 2016 2:29 pm

Re: How would you invest a lump sum of 3 million dollars in today's market?

Post by Tamalak » Thu Jun 06, 2019 10:25 am

MotoTrojan wrote:
Thu Jun 06, 2019 10:08 am
Tyler Aspect wrote:
Thu Jun 06, 2019 2:19 am
An investment of $3m does not need a large reserve of emergency cash, because the typical dividend yield of 2% will be able to throw off $60k dividend per year. You might want to invest this large sum conservatively just because preserving it could be just as important as obtaining gains from it.

A sample portfolio with Vanguard funds:

25% US Stock (ticker symbol VTI)
25% Global stock (ticker symbol VT)
25% intermediate term bond (ticker symbol BIV)
25% tax free bond (ticker symbol VTEAX)

All you need to do is to equalize the value of the funds two times per year. This keeps things simple.
Mixing VTI and VT on purpose? VT is roughly 1/2 VTI. VXUS would make more sense.
VT won't always be 1/2 VTI. It will change based on market changes. To have half VTI and half VT (or some other ratio) keeps your home bias consistent regardless of how market weights change in the future.

bgf
Posts: 969
Joined: Fri Nov 10, 2017 9:35 am

Re: How would you invest a lump sum of 3 million dollars in today's market?

Post by bgf » Thu Jun 06, 2019 10:28 am

I'd pay off my house and invest the remainder in VT. it would be pretty cool to enter an order for that many shares :D
“TE OCCIDERE POSSUNT SED TE EDERE NON POSSUNT NEFAS EST"

User avatar
Sandtrap
Posts: 8028
Joined: Sat Nov 26, 2016 6:32 pm
Location: Hawaii No Ka Oi , N. Arizona

Re: How would you invest a lump sum of 3 million dollars in today's market?

Post by Sandtrap » Thu Jun 06, 2019 10:33 am

OP
Lots of great input including from “Watty” and “dbr” “retiredjg “ “ruralavalon”.

A Big Suggestion:

Without more feedback and data input from you regarding your existing financial status pre and post windfall as well as data normally listed as a “portfolio review” (format), we can only assume a lot of things and give a broad view of what could be done to be helpful, “but it won’t be specific to ‘you’.

You can edit your original post (pencil icon) to list things like general age, income, expenses, long and short term goals, etc per portfolio review format as best you can.
If your data is in the first post then it will be seen by more.

You’ve come to a good place.
J🌺
Wiki Bogleheads Wiki: Everything You Need to Know

Thegame14
Posts: 1123
Joined: Mon May 07, 2018 11:53 am

Re: How would you invest a lump sum of 3 million dollars in today's market?

Post by Thegame14 » Thu Jun 06, 2019 10:44 am

not enough information. Do you rent, own a house? What part of the country are you in? $3M in SF doesn't get you much but $3M in rural texas and you can probably retire now.

Do you want to buy a house, get married, have kids? do you work? how much do you make, do you have any other assets, 401K? what do you want to do with the rest of your life, when do you want to retire? Do you want to go back to school?

I'd prob stick with it in money market for now until you can answer a lot of these questions, keep working, Id use this bankroll, to max 401K each year, I'D help out parents if they have any debts, they would be gone.

User avatar
ruralavalon
Posts: 16157
Joined: Sat Feb 02, 2008 10:29 am
Location: Illinois

Re: How would you invest a lump sum of 3 million dollars in today's market?

Post by ruralavalon » Thu Jun 06, 2019 10:55 am

bodhipup wrote:
Thu Jun 06, 2019 12:22 am
Hey all, I'm pretty new to investing and recently acquired a little over 3 million dollars. I'm in my mid 30's, debt free, and currently all the money is sitting in a high interest savings account (2.25%). I would like a comfortable emergency fund, say $500k. But really I can think about long term investing the rest of the cash.

I don't have any money in stocks and index funds at the moment - so I'm starting from zero. I'm a little worried about the current state of the market as it looks like the bull market is coming to an end.

If you were to invest 2.5 million dollars or so in index funds, would you invest it all as a lump sum immediately (given the current market conditions). Or would you invest it gradually over the next year or two to take advantage of dollar cost averaging?

Or would you invest outside the stock market? Real estate? I have a pretty high risk tolerance and considering investing in REITs, etc.

Thanks a ton in advance!
Others suggested a need for more information.

If you wish you can simply add more information to your original post using the edit button (the pencil icon near the upper right corner of your post), it helps a lot of all of your information is in one place.

Please see: "Asking Portfolio Questions".
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

User avatar
DanMahowny
Posts: 922
Joined: Sun Aug 06, 2017 8:25 pm

Re: How would you invest a lump sum of 3 million dollars in today's market?

Post by DanMahowny » Thu Jun 06, 2019 11:42 am

$3 million? This is what I would do:
50% TIPS
25% short-term treasuries
25% intermediate-term treasuries
Funding secured

sf_tech_saver
Posts: 193
Joined: Sat Sep 08, 2018 9:03 pm

Re: How would you invest a lump sum of 3 million dollars in today's market?

Post by sf_tech_saver » Thu Jun 06, 2019 11:47 am

Was in roughly this exact after-tax situation last November.

The result was roughly 1.2M into each:

-VTI
-Municipal bonds half 5 year and half 7 year duration
-SF CA Condo down payment of 1.2M.

I absolutely love the ambivalent investment strategy of 50/50 when you are a rookie with a big lump sum and I went further and kept it ultra passive by putting another 1/3rd into a condo.

You can critique my approach by saying its overly conservative but if you don't have to have the growth to reach your retirement goals why sweat the volatility.
VTI is a modern marvel

User avatar
willthrill81
Posts: 11892
Joined: Thu Jan 26, 2017 3:17 pm
Location: USA

Re: How would you invest a lump sum of 3 million dollars in today's market?

Post by willthrill81 » Thu Jun 06, 2019 11:53 am

The historic odds favor lump sum investing over dollar cost averaging at a rate of about 2 to 1.

If I received that amount, it would be enough to enable me to retire, which I would. As such, I would likely stick with my current trend following strategy with regard to stocks but might put as much as 30% into fixed income, mostly CDs.
Last edited by willthrill81 on Thu Jun 06, 2019 11:54 am, edited 1 time in total.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

HawkeyePierce
Posts: 538
Joined: Tue Mar 05, 2019 10:29 pm
Location: Colorado

Re: How would you invest a lump sum of 3 million dollars in today's market?

Post by HawkeyePierce » Thu Jun 06, 2019 11:54 am

I'm surprised nobody has mentioned Vanguard's LifeStrategy funds. These would allow OP to avoid picking and choosing funds for now. Just choose your risk level and dump it all in.

https://investor.vanguard.com/mutual-fu ... estrategy/

Meanwhile OP can take his time to learn about the market and figure out his financial goals. Perhaps A Random Walk Down Wallstreet would be a good place to start. No need to rush.

Hanksmoney
Posts: 77
Joined: Fri Feb 24, 2017 10:04 am

Re: How would you invest a lump sum of 3 million dollars in today's market?

Post by Hanksmoney » Thu Jun 06, 2019 11:59 am

Read the Windfall wiki at another said. The best piece of advice in there is don't touch it for a few months. Just let it sit while you get used to it and make a proper plan.. Once you start spending big - you'll be in debt before you know it.

CascadiaSoonish
Posts: 147
Joined: Tue Feb 13, 2018 11:44 am

Re: How would you invest a lump sum of 3 million dollars in today's market?

Post by CascadiaSoonish » Thu Jun 06, 2019 12:14 pm

Lots of smart thinking from previous posters. I'll just add a personal observation: congratulations, you've won the game. Don't beat yourself up about optimizing by a percentage point or two; it all evens out in the end.

We were hanging out this past weekend with a family friend who did very, very well over time with commercial real estate and business investments while putting very little in the markets. It wasn't always easy for them (the Great Recession was really tough) but it all worked out eventually. Conventional wisdom around here is that they didn't do it right, but it worked fine for them.

So if you need that $500K in cash for peace of mind, I personally think that's a worthwhile use of the money, even if the math says there's potentially a more optimal use for that slice of the $3M. Don't Worry Be Happy and all that.
Last edited by CascadiaSoonish on Thu Jun 06, 2019 12:19 pm, edited 1 time in total.

RayLopez
Posts: 25
Joined: Wed May 29, 2019 1:09 pm

Re: How would you invest a lump sum of 3 million dollars in today's market?

Post by RayLopez » Thu Jun 06, 2019 12:15 pm

Excellent question by the OP. What I've found is that anybody can invest say $100k in anything, but when you are talking about $3M, lump sum, things change.

I recommend that a novice investor with $3M to invest do nothing but Jumbo CDs for the first five years. Bankrate.com. Then in the meantime, when and if the market crashes, you can go to a 60/40 stock/bond fund, depending on your risk profile, maybe more, maybe less. I like VWIAX (Vanguard 60/40 or 40/60 balanced fund).

Why? Because according to several sources, namely Jack Bogle himself, John Hussman the fund manager, Tyler Cowen the economist, and other realists, we are in a 'stagnation' phase in the modern economy where innovation has been slowing down. What this means is going forward, stocks will no longer yield 6.6% a year historical average nominal (Siegel's constant), but, said Jack, around 4%/yr (from memory, Bogleheads can correct me). Hussman says based on today's CAPE index of near 30, stocks will yield a CAGR somewhere between -3% to 8%/yr, with an average around 2.5% (see his Hussman Margin Adjusted CAPE, which he reproduces in nearly all his blog posts). That's not that great. If however you don't mind seeing a 60% drop in your initial investment in the next few years (Hussman's words, not mine, though I agree) then by all means invest your lump sum all in stocks now (which historically is superior to buying the dips). I personally would keep my powder dry for when the market crashes in the next few years (speaking as somebody who still has money in the stock market, in fact, my family, including their retirement funds, have about 20% of their over $10M net worth in the stock market, but we got in a lot earlier than now).

Finally, the Tyler Cowen (and Robert J. Gordon) argument of the Great Stagnation (See: https://en.wikipedia.org/wiki/The_Great_Stagnation) seems relevant to me, a retired tech guy. If you believe, as I do, that the USA has reached a stagnation in tech (due to, among other things, a poor patent system that does not reward inventors directly, but I digress, see also Cowen's book), then going forward the stock market should reflect this lowered US dynamism. The prices for stocks have been bid up to assume the USA is still very dynamic, tech wise (which drives the economy,, Google the Solow Equation, which implicitly assumes this), but that's not the case. A simple analogy: there's a reason Google (an advert search company), Facebook (social media), Amazon (buy low, sell high, squeeze the middleman) and Apple (consumer design) are world leaders while Intel, IBM, even, dare I say it ExxonMobil stagnate (nobody save China is building or consuming that much more energy anymore). Twitter or a cure for cancer? Sadly, society is fixed right now on Twitter. Great Stagnation = lower stock market expectations.

User avatar
FreeAtLast
Posts: 667
Joined: Tue Nov 04, 2014 9:08 pm

Re: How would you invest a lump sum of 3 million dollars in today's market?

Post by FreeAtLast » Thu Jun 06, 2019 1:01 pm

OP -

Take six months and educate yourself by reading the Wiki and also old threads on this forum on a variety of topics. Then post the details of your total financial situation so that all of us can give you better educated opinions as to what you should do next.

FWIW - My asset allocation for you would be different from what many have already suggested. You have won the game. 40/60 or 30/70 stocks to bonds should be fine.
Illegitimi non carborundum.

hudson
Posts: 1839
Joined: Fri Apr 06, 2007 9:15 am

Re: How would you invest a lump sum of 3 million dollars in today's market?

Post by hudson » Thu Jun 06, 2019 1:27 pm

I see lots of good advice. I like the idea of going slow.
If I was in your shoes, I would read several Boglehead Books maybe by Swedroe, Ferri, and Bernstein...until you get a good feel for investing.
I would personally go with only safe investments like Vanguard Intermediate Munis and CDs. I don't like equities.
It depends a lot on your situation...that's why the books and asking questions on this forum are important.

MotoTrojan
Posts: 5510
Joined: Wed Feb 01, 2017 8:39 pm

Re: How would you invest a lump sum of 3 million dollars in today's market?

Post by MotoTrojan » Thu Jun 06, 2019 1:59 pm

Tamalak wrote:
Thu Jun 06, 2019 10:25 am
MotoTrojan wrote:
Thu Jun 06, 2019 10:08 am
Tyler Aspect wrote:
Thu Jun 06, 2019 2:19 am
An investment of $3m does not need a large reserve of emergency cash, because the typical dividend yield of 2% will be able to throw off $60k dividend per year. You might want to invest this large sum conservatively just because preserving it could be just as important as obtaining gains from it.

A sample portfolio with Vanguard funds:

25% US Stock (ticker symbol VTI)
25% Global stock (ticker symbol VT)
25% intermediate term bond (ticker symbol BIV)
25% tax free bond (ticker symbol VTEAX)

All you need to do is to equalize the value of the funds two times per year. This keeps things simple.
Mixing VTI and VT on purpose? VT is roughly 1/2 VTI. VXUS would make more sense.
VT won't always be 1/2 VTI. It will change based on market changes. To have half VTI and half VT (or some other ratio) keeps your home bias consistent regardless of how market weights change in the future.
Interesting approach. It’s more consistent but your tilt grows larger on a percentage basis as US declines relative, and vice versa).

NotTooDeepLearning
Posts: 75
Joined: Wed Oct 24, 2018 2:04 pm

Re: How would you invest a lump sum of 3 million dollars in today's market?

Post by NotTooDeepLearning » Thu Jun 06, 2019 6:23 pm

I like the CD's until you're comfortable you know what you're doing idea. Investing is complicated and humans are prone to many behavioral mistakes. Take your time--even if it's a couple years--to learn about stocks and bonds and indexing. Read a couple good books. Read the boglehead wiki. Ask lots of questions.

schwank
Posts: 36
Joined: Sat Jul 18, 2015 1:14 pm

Re: How would you invest a lump sum of 3 million dollars in today's market?

Post by schwank » Thu Jun 06, 2019 8:10 pm

CnC wrote:
Thu Jun 06, 2019 8:01 am
I would personally hold 70-30 or 80-20 with a 500k emergency fund in a rotating 4 year bond ladder 125k due each year.

This 500k would be part of your fixed income holdings.
You saved me the typing... I would basically do this as well.

nix4me
Posts: 273
Joined: Sat Oct 13, 2018 9:32 am

Re: How would you invest a lump sum of 3 million dollars in today's market?

Post by nix4me » Thu Jun 06, 2019 9:23 pm

95% VTI
5% prime money market

User avatar
StormShadow
Posts: 725
Joined: Thu Feb 09, 2012 6:20 pm

Re: How would you invest a lump sum of 3 million dollars in today's market?

Post by StormShadow » Thu Jun 06, 2019 10:56 pm

bodhipup wrote:
Thu Jun 06, 2019 12:22 am
Hey all, I'm pretty new to investing and recently acquired a little over 3 million dollars. I'm in my mid 30's, debt free, and currently all the money is sitting in a high interest savings account (2.25%). I would like a comfortable emergency fund, say $500k. But really I can think about long term investing the rest of the cash.

I don't have any money in stocks and index funds at the moment - so I'm starting from zero. I'm a little worried about the current state of the market as it looks like the bull market is coming to an end.

If you were to invest 2.5 million dollars or so in index funds, would you invest it all as a lump sum immediately (given the current market conditions). Or would you invest it gradually over the next year or two to take advantage of dollar cost averaging?

Or would you invest outside the stock market? Real estate? I have a pretty high risk tolerance and considering investing in REITs, etc.

Thanks a ton in advance!
$500k for an emergency fund is kind of ridiculous, if you ask me. Do you spend that much in 6 months?

If you are worried about investing now, frankly... it’s ALWAYS going to feel that way.

What I’d do... save 6 monthsworth for an emergency fund. Figure out your asset allocation based on your risk tolerance (judging by your post, I’m going to guess your tolerance is low). Then lump sum immediately.

helloeveryone
Posts: 326
Joined: Sun Sep 04, 2016 5:16 pm

Re: How would you invest a lump sum of 3 million dollars in today's market?

Post by helloeveryone » Thu Jun 06, 2019 11:06 pm

Silk McCue wrote:
Thu Jun 06, 2019 6:28 am
Please take time to review the Boglehead's Wiki on Managing A Windfall. Solid advice from those that have been there.

Managing a Windfall

Cheers
This 100%. Read, re read, then make decision. don’t rush the decision.

What would I do right this second in my current lifestage?
Pay off house
Pay off mini van
Get 529s up to 100k each
Make my emergency fund 12 months instead of 6 months of expenses
Allocate the rest as a lump sum based on our existing asset allocation
Set retirement age closer to 50. (right now it’s 55-60)

Lee_WSP
Posts: 626
Joined: Fri Apr 19, 2019 5:15 pm
Location: Arizona

Re: How would you invest a lump sum of 3 million dollars in today's market?

Post by Lee_WSP » Thu Jun 06, 2019 11:55 pm

Invest it all now, but invest it conservatively until you've figured out your actual risk tolerance. Ie only invest what you absolutely will not need and will not touch into equities, the rest into bonds. Once you've truly figured out your risk tolerance, rebalance. That's what I recommend anyway.

smectym
Posts: 441
Joined: Thu May 26, 2011 5:07 pm

Re: How would you invest a lump sum of 3 million dollars in today's market?

Post by smectym » Fri Jun 07, 2019 12:48 am

catalina355 wrote:
Thu Jun 06, 2019 10:23 am
smectym wrote:
Thu Jun 06, 2019 10:05 am
Financial independence is something the vast majority only dream of. It’s actually a big deal, don’t think (or invest like) it’s not. When FI is actually (and in your case suddenly) within grasp, a good idea is to prioritize protecting that independence and not letting it slip through your fingers. Once that is your priority, that logically leads to a conservative tilt to the investing strategy.
What asset allocation would you suggest to the OP?
I’d suggest looking long and hard at VWIAX or similar

kcxie
Posts: 36
Joined: Thu Dec 18, 2008 10:24 pm

Re: How would you invest a lump sum of 3 million dollars in today's market?

Post by kcxie » Fri Jun 07, 2019 1:00 am

This is what I am going to do with 3M :
50% VTSAX
50% VWIUX or total bond.
Th n forget about it

strongboy2005
Posts: 57
Joined: Fri Aug 28, 2015 9:11 pm

Re: How would you invest a lump sum of 3 million dollars in today's market?

Post by strongboy2005 » Fri Jun 07, 2019 2:09 am

Imagine for a moment a typical day in the stock market. There is some random bad news and the market is down 2%. Your portfolio just dropped $60,000. How does this make you feel?

This is what it would be like to have it all invested 100% in stocks.

Your need to take risk has decreased substantially, so there is no need for the stress of an aggressive allocation when you inherit $3 million.

I would invest it like this:
50% VT (Vanguard Total World Stock ETF)
50% BND (Vanguard Total Bond ETF)

In January of each year, I would withdraw 3% for spending and rebalance as needed.

You wouldn’t really even need to look at this portfolio more than once a year.

Simple, easy, and safe.

Post Reply