Deploying a $40m windfall in current market conditions

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perm
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Deploying a $40m windfall in current market conditions

Post by perm » Sun Jan 19, 2020 8:01 am

Hello everyone. I am wrapping up the sale of my business and will be receiving $40m in the coming weeks. Under (more) normal market conditions, I would simply deploy the cash using the three-fund approach, but I am feeling trigger shy at current pricing. In current conditions, my natural tendency is to slowly deploy the money into the market over the next few years, even though that may forego some near-term dividends and potential appreciation.

Does anyone have strong opinions for deploying it differently? Any thoughts appreciated!

As added background, I presently have no plans to use or live off this $40m since I have adequate income and capital from other sources. This $40m may end up being used exclusively for charitable causes in the longer-term. For now, I simply want to manage it prudently, and align it towards long-term appreciation.

-Perm

chevca
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Re: Deploying a $40m windfall in current market conditions

Post by chevca » Sun Jan 19, 2020 8:48 am

perm wrote:
Sun Jan 19, 2020 8:01 am
In current conditions, my natural tendency is to slowly deploy the money into the market over the next few years, even though that may forego some near-term dividends and potential appreciation.
That would be perfectly reasonable to do it that way.

Congrats on the windfall... and congrats on not even needing to use it. I'm willing to be a charitable cause for you. :happy

pivoprussia
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Re: Deploying a $40m windfall in current market conditions

Post by pivoprussia » Sun Jan 19, 2020 9:02 am

Consider putting a chunk in a donor advised fund now for tax purposes. You can then decide later how to "invest" it and distribute the gifts.

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Sandtrap
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Re: Deploying a $40m windfall in current market conditions

Post by Sandtrap » Sun Jan 19, 2020 9:23 am

Randome Thoughts.

1. Estate planning?
2. Trusts?
(consider funding these various trusts?)
3. DCA or Lump Sum to your existing 3 fund portfolio regardless of market conditions.
4. Consider diversifying: IE: R/E income property (tax advantages potentially), REIT Indexes, etc.
5. "Safe Accounts" for now. . . until you decide then proceed step by step. No rush. Wait.
(there's a mix of emotions and a transitional period that happens when selling a business and getting a windfall. Two Things. 1. You no longer have a business. 2. Windfall.) So, putting things on "pause" for as long as you need is also a good thing to do.
Do nothing for months, year, years, as needed.

j :happy
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livesoft
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Re: Deploying a $40m windfall in current market conditions

Post by livesoft » Sun Jan 19, 2020 9:26 am

It probably doesn't matter much what you do, but I would advocate putting 50% into your desired asset allocation right away and then put the rest in over the next 10 months say 5% per month and if the market starts dropping, then accelerate the DCA schedule by putting in another 5% in the same month. That is, don't do this over a few years. And certainly get the bond/fixed income side of things fully invested. I don't see any need for "cash" when Treasuries are gonna work for you anyways.

The reality is that you are gonna lose some money some time, so you might as well get it over with.

Otherwise, what are your goals for this money? If you don't need it to live, then what's the point of having it? Might as well give a lot away today, so that you can see the kind of good'n'evil that money can do in the world before you die.
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Topic Author
perm
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Re: Deploying a $40m windfall in current market conditions

Post by perm » Sun Jan 19, 2020 10:01 am

Thank you @chevca, @pivoprussia, @Sandtrap and @livesoft for the thoughtful feedback. Very help.

Great reminder to not rush by @Sandtrap. Need the fog to clear for sure!

I will begin the mobilize the obvious choices, like @livesoft suggests with getting the bond/fixed income side of things going.

And I will also spend more time researching donor-advised funds, per @pivoprussia.

Much appreciated.

wrongfunds
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Re: Deploying a $40m windfall in current market conditions

Post by wrongfunds » Sun Jan 19, 2020 11:45 am

Curious:- why did you decide to register and ask this question as asoon as you got this windfall? Was it because of the other topic where somebody asked about $20M windfall question that finally prompted you to come out here?

Mind you, I am NOT questioning your good fortune at all! It is more like a survey question which asks you "how did you hear about us" when you go to file in your warranty form etc.

ChrisBenn
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Re: Deploying a $40m windfall in current market conditions

Post by ChrisBenn » Sun Jan 19, 2020 12:02 pm

I've seen posts here where other people have re-framed this questions in a way that I find pretty apropos:

If you had 40m currently deployed in a three fund portfolio (in say, a tax sheltered account so no capital gains/losses), would you sell it all right now due to a high market and then slowly re-invest that cash back into the same asset allocation?

Assuming you aren't straining the liquidity of the underlying security contributing portions over time and selling / re-contributing over time are equivalent - yet no one would generally advocate for the latter.

dbr
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Re: Deploying a $40m windfall in current market conditions

Post by dbr » Sun Jan 19, 2020 12:06 pm

There is a Wiki article on windfalls: https://www.bogleheads.org/wiki/Managing_a_windfall

I am strongly convinced that this sort of question is never about when to invest ("current market conditions") but rather about what one's objectives are and what is the right risk to take in investing to support those objectives. Also primary issues will be tax management and estate planning.

Note the money is already invested somewhere, so the issue is changing the investments, not when to invest. I am actually curious where a person puts $40M just to even own that amount of money. It is not in a checking account at a bank, one assumes.

J295
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Re: Deploying a $40m windfall in current market conditions

Post by J295 » Sun Jan 19, 2020 12:28 pm

Retired lawyer. We had many clients in similar situations, principally from sales of businesses, inheritances, operations of highly successful businesses, etc., but also professional athletes and lottery winners.

Most benefited from experienced legal counsel, accountants, and (wait for it ....) good financial advisors.

Flashes1
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Re: Deploying a $40m windfall in current market conditions

Post by Flashes1 » Sun Jan 19, 2020 12:44 pm

With that kind of lump sum, I would not be shy to spend big money on estate lawyers and tax advisers; however, I would be leery about financial advisors that will try to steer you into certain exotic sounding investments that they will claim to shield you from taxes and beat the market.

Although there are some advisers who contacts into hedge funds and private equity that mere mortals don't have access to....and they beat the 500 index…..however, I don't know how to get into the good funds while avoiding the bad ones (but that's why I'm a small fry compared to those folks!).

I'd keep it simple and safe.

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DiscoBunny1979
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Re: Deploying a $40m windfall in current market conditions

Post by DiscoBunny1979 » Sun Jan 19, 2020 3:42 pm

I question why someone would even post to the Internet a question to unknown people how to 'invest' that sum of $$. But for what it's worth, the issue is about one's goals. When is having money enough money to have? What is the final goal here of that $40M? 80M? 160M? Or, is it just to retain its current value and live life. The reality is that most accounts have insurance to cover $$$ but really . . . for instance Vanguard states that "Vanguard Marketing Corporation is a member of the Securities Investor Protection Corporation (SIPC), which protects securities customers of its members up to $500,000 (including $250,000 for claims for cash). Explanatory brochure available upon request or at sipc.org External site. To offer greater protection and security, Vanguard Marketing Corporation has secured additional coverage from Syndicates at Lloyd's of London for our brokerage clients. This additional insurance has the same customer eligibility requirements as SIPC. This coverage has an aggregate limit of $250 million for all claims of securities and cash and incorporates a per client coverage limit of $49.5 million for securities and $1.9 million for cash."

So cash assets of 1.9 million. You can't just park 40M at Vanguard in cash and expect to have it all covered if something happens. You might need multiple accounts at different firms.

I would diversify into things that bogleheads don't find too appealing . . . like Gold and potentially Bitcoin. But I think the reason many wealthy folks own real estate is because it's much easier to park 5M or 10M into a piece of property, because one can enjoy that type of asset, but one can't really enjoy a stock or bond.

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MN-Investor
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Re: Deploying a $40m windfall in current market conditions

Post by MN-Investor » Sun Jan 19, 2020 3:47 pm

I assume the $40M is after setting aside a portion to pay the income taxes due from this sale?
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MoonOrb
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Re: Deploying a $40m windfall in current market conditions

Post by MoonOrb » Sun Jan 19, 2020 4:53 pm

if you don't need this money to live and the purpose is to use for long-term (?) plans or charitable giving, then stick whatever portion you don't plan using or giving away immediately into the market right now and don't worry about it.

There's no meaningful difference between this question and the dozens or hundreds of questions that have come up over the last few years that all go something like "sitting on a lot of cash but I don't want to put it into the market right now because valuations are high."

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Re: Deploying a $40m windfall in current market conditions

Post by Jack FFR1846 » Sun Jan 19, 2020 4:59 pm

Ask Schwab what kind of bonus they'll give you. Transfer the money there. I'd love to put a buy order for $40M of SCHB at a limit and hit "buy".

And yes, that's exactly what I'd do.
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dbr
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Re: Deploying a $40m windfall in current market conditions

Post by dbr » Sun Jan 19, 2020 5:07 pm

Jack FFR1846 wrote:
Sun Jan 19, 2020 4:59 pm
Ask Schwab what kind of bonus they'll give you. Transfer the money there. I'd love to put a buy order for $40M of SCHB at a limit and hit "buy".

And yes, that's exactly what I'd do.
I wonder, if they make only 1% on the vigorish they still net $400,000/year on this.

But seriously, I have no idea what sort of leverage an investor has with that amount of money. I suspect it rises well beyond the concept of earning a bonus. Unfortunately what they also offer the investor is an opportunity to give the broker money, a lot of it.

And I am still curious, where does one even put $40M to start with.

I am sorry not to be more helpful but I really don't think $40M is just casually the same thing as $4M or $400k.

wrongfunds
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Re: Deploying a $40m windfall in current market conditions

Post by wrongfunds » Sun Jan 19, 2020 5:15 pm

The OP should PM few of the UHNW folks from this forum although I don't know if they will be willing to talk to OP who only has $40M. I think OP needs another digit but it never hurts to ask. Personally, if I had $100M, I would still talk to somebody who only has $40M. I am generous with my time and expertise but not everybody is.

Hope this helps.

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Re: Deploying a $40m windfall in current market conditions

Post by shess » Sun Jan 19, 2020 5:17 pm

perm wrote:
Sun Jan 19, 2020 8:01 am
Hello everyone. I am wrapping up the sale of my business and will be receiving $40m in the coming weeks. Under (more) normal market conditions, I would simply deploy the cash using the three-fund approach, but I am feeling trigger shy at current pricing. In current conditions, my natural tendency is to slowly deploy the money into the market over the next few years, even though that may forego some near-term dividends and potential appreciation.
WRT donor-advised funds (or, for this amount, charitable foundations might be in order), you need to find someone to provide tax advice on this soon. There are limitations on deductibility of contributions, generally based on income, so your contributions may work better in the same tax year as you realize the sale, whereas in future years your contributions may be limited. You mention using this for charitable causes, doing this right may allow you to apply a higher net amount to those causes.

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tc101
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Re: Deploying a $40m windfall in current market conditions

Post by tc101 » Sun Jan 19, 2020 5:41 pm

If you are going to be making major donations to charity, first read the book "Doing Good Better". Lots of charitable money is wasted but some does great good. That book really helped me understand how to do maximum good with the money I give.

Here is link to the book on amazon.

https://www.amazon.com/Doing-Good-Bette ... B00OYXWL4W
. | The most important thing you should know about me is that I am not an expert.

goldendad
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Re: Deploying a $40m windfall in current market conditions

Post by goldendad » Sun Jan 19, 2020 5:49 pm

Don’t forget you need to be able to sleep at night! I would feed it in all asset classes (US stocks/bonds/foreign stocks) over the next 2 to 3 years.

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fredflinstone
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Re: Deploying a $40m windfall in current market conditions

Post by fredflinstone » Sun Jan 19, 2020 6:01 pm

goldendad wrote:
Sun Jan 19, 2020 5:49 pm
Don’t forget you need to be able to sleep at night! I would feed it in all asset classes (US stocks/bonds/foreign stocks) over the next 2 to 3 years.
You left at least one asset class out, GOLDendad.
Stocks 28 / Gold 23 / Long-term US treasuries 19 / Cash 22 / TIPS 8

reln
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Re: Deploying a $40m windfall in current market conditions

Post by reln » Sun Jan 19, 2020 6:04 pm

perm wrote:
Sun Jan 19, 2020 8:01 am
Hello everyone. I am wrapping up the sale of my business and will be receiving $40m in the coming weeks. Under (more) normal market conditions, I would simply deploy the cash using the three-fund approach, but I am feeling trigger shy at current pricing. In current conditions, my natural tendency is to slowly deploy the money into the market over the next few years, even though that may forego some near-term dividends and potential appreciation.

Does anyone have strong opinions for deploying it differently? Any thoughts appreciated!

As added background, I presently have no plans to use or live off this $40m since I have adequate income and capital from other sources. This $40m may end up being used exclusively for charitable causes in the longer-term. For now, I simply want to manage it prudently, and align it towards long-term appreciation.

-Perm
Invest lump sum.

gtrplayer
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Re: Deploying a $40m windfall in current market conditions

Post by gtrplayer » Sun Jan 19, 2020 6:14 pm

John Bogle’s advice seemed aimed at the average investor slowly building wealth over a long period of time. I guess there’s no exact reason why the same advice wouldn’t work for the ultra wealthy but it feels like Bogle wasn’t trying to reach those people. He was trying to get the average worker their share of the market’s gains.

If you have 40 million in excess money, you’ve won Jack’s game already and then some. Is the same approach appropriate? I don’t know the answer but it feels like it may not be.

Wanderingwheelz
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Re: Deploying a $40m windfall in current market conditions

Post by Wanderingwheelz » Sun Jan 19, 2020 6:35 pm

If you have $40MM, and then some, you can do whatever YOU (and your loved ones) want to do.

stan1
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Re: Deploying a $40m windfall in current market conditions

Post by stan1 » Sun Jan 19, 2020 6:43 pm

Agree on estate planning and tax advice (before you get the money in fact).

Consider paying Rick Ferri for a few hours of his time to look at your situation.

You do not have a typical situation. I would not pretend for a minute that $40M is the same as $400K just 100x more.

Wrktolive
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Re: Deploying a $40m windfall in current market conditions

Post by Wrktolive » Sun Jan 19, 2020 8:05 pm

Any money you decide to not invest now should be only parked in the only 100% truly safe place until you decide in how to deploy it. Short term T Bill's with treasury direct. Backed by the full faith of the USA, it's where major corporations and individuals park very large sums of cash.

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Re: Deploying a $40m windfall in current market conditions

Post by KyleAAA » Sun Jan 19, 2020 8:56 pm

With $40mm to deploy it literally does not matter what you do.

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perm
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Re: Deploying a $40m windfall in current market conditions

Post by perm » Sun Jan 19, 2020 10:46 pm

wrongfunds wrote:
Sun Jan 19, 2020 11:45 am
Curious:- why did you decide to register and ask this question as asoon as you got this windfall? Was it because of the other topic where somebody asked about $20M windfall question that finally prompted you to come out here?

Mind you, I am NOT questioning your good fortune at all! It is more like a survey question which asks you "how did you hear about us" when you go to file in your warranty form etc.
Totally a fair question. To the extent it helps, I've been a Vanguard client for over 20 years and appreciate this community's perspectives and experience, especially since many folks share a similar ethos as it relates to financial responsibility, etc.

The timing is purely coincidence with the other topic.

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perm
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Re: Deploying a $40m windfall in current market conditions

Post by perm » Sun Jan 19, 2020 10:55 pm

MN-Investor wrote:
Sun Jan 19, 2020 3:47 pm
I assume the $40M is after setting aside a portion to pay the income taxes due from this sale?
Absolutely. Tax payments already factored in.

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perm
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Re: Deploying a $40m windfall in current market conditions

Post by perm » Sun Jan 19, 2020 11:00 pm

tc101 wrote:
Sun Jan 19, 2020 5:41 pm
If you are going to be making major donations to charity, first read the book "Doing Good Better". Lots of charitable money is wasted but some does great good. That book really helped me understand how to do maximum good with the money I give.

Here is link to the book on amazon.

https://www.amazon.com/Doing-Good-Bette ... B00OYXWL4W
Thank you for the recommendation.

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perm
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Re: Deploying a $40m windfall in current market conditions

Post by perm » Sun Jan 19, 2020 11:02 pm

Wrktolive wrote:
Sun Jan 19, 2020 8:05 pm
Any money you decide to not invest now should be only parked in the only 100% truly safe place until you decide in how to deploy it. Short term T Bill's with treasury direct. Backed by the full faith of the USA, it's where major corporations and individuals park very large sums of cash.
Thank you. I will research this area further, as I had only been considering ownership via funds.

kcxie
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Re: Deploying a $40m windfall in current market conditions

Post by kcxie » Sun Jan 19, 2020 11:09 pm

Perm:
congratulation for your success!
no body wants to be specific, then I will try.

Just do this for now:
20m in VTSAX
20m in VWIUX

Park/invest here for as long as you want and then decide to change later any time you wants

wish you the best!

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perm
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Re: Deploying a $40m windfall in current market conditions

Post by perm » Sun Jan 19, 2020 11:10 pm

Thank you ChrisBenn, dbr, j295, Flashes1, DiscoBunny1979, MoonOrb, wrongfunds, shess, goldendad, fredflinstone, reln, gtrplayer, Wanderingwheelz, stan1, and KyleAAA for taking time to share your thoughts. Very helpful.

As I advance matters on my side, I'll be sure to report back to share the thought process around my eventual decisions and the associated experience.

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ofcmetz
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Re: Deploying a $40m windfall in current market conditions

Post by ofcmetz » Sun Jan 19, 2020 11:10 pm

If I sold a successful business for $40 million I would:

1. Call my lawyer and accountant teams and make sure all on the legal side is in order. (Insurance, estate planning, taxes, etc.).
2. Do a little dance while screaming.
3. Take a nice vacation.
4. Evaluate my asset allocation to see if I want to take less or more risk.
5. Invest the money according to my decided on asset allocation.

Investing $40,000,000 with a major brokerage isn't any different than investing $400,000 besides the attention the larger amount may get you from them.(At least I imagine it to be that way). :D

OP, the biggest question is are you going to DIY investor or are you going get an advisor.

Best of luck and enjoy.
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averagedude
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Re: Deploying a $40m windfall in current market conditions

Post by averagedude » Sun Jan 19, 2020 11:11 pm

40M and you don't need the money with a three fund philosophy? Since you could easily live off of dividends, why not go 100% stocks. This would help you with taxes. Since you have plenty, why not lower country risk and aim for 40% in International stocks. Valuations are not stretched so lump sum in this area. This will leave you with 60% to put in total US. Im a believer in lump sum investing due to the odds in your favor, but if this makes you uneasy, you could deploy 30% lump sum and then dollar cost average the last 30% over the next 6 months. This seems simple to me, dividends guarantee you a great level of comfort for your lifestyle, you minimize your taxes, and you have a high likelihood to contribute more money to your choice of charity's in your lifetime.

manusnd1
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Re: Deploying a $40m windfall in current market conditions

Post by manusnd1 » Sun Jan 19, 2020 11:52 pm

Dollar cost averaging into the market loses to lump sum 2/3 of the time, but that said, this is not about maximizing return, but feeling secure about your plan. Get a large brokerage that is too big to fail i.e. JP, CITI, Goldman, BOA. 100% Tbills and treasury notes. Slowly deploy into the market over the next 2 years. VTSAX or VTWAX. Lots of people will try and advise for 0.5-1% per year, but this is easy to do on your own for free. Many would argue that your risk tolerance is higher and that you should be 100% stocks from day one because if the market has a large decline, you you will still be left with 10-20 million. Vanguard balanced fund or a combination of 50/50 VTSAX/VBMFX would be low cost and would historically protect from market volatility But most important is to do what will make you comfortable to sleep at night.
Last edited by manusnd1 on Wed Apr 01, 2020 11:38 pm, edited 2 times in total.

EfficientInvestor
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Re: Deploying a $40m windfall in current market conditions

Post by EfficientInvestor » Mon Jan 20, 2020 8:19 am

I've said this on several other threads recently, but you could consider a risk parity approach. This would allow you to go ahead and get a decent amount of exposure to the markets without taking on too much risk. Perhaps something like what is shown below in Portfolio 1 (P1). This has shown to provide almost the same return as 60/40 but with much less risk. If you find that you have less risk tolerance than what is shown in P1, you can move some $ out of this allocation and into cash or ultra-short duration bond funds like JPST. If you have more risk tolerance than what is shown, you can ramp up your exposure to P1 through the use of leverage (e.g. futures contracts).

Image

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WhiteMaxima
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Re: Deploying a $40m windfall in current market conditions

Post by WhiteMaxima » Mon Jan 20, 2020 2:10 pm

Start another business and sell it for another $40 mil. You are already a very successful businessman. 8-) 8-) 8-)
Last edited by WhiteMaxima on Mon Jan 20, 2020 2:31 pm, edited 1 time in total.

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White Coat Investor
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Re: Deploying a $40m windfall in current market conditions

Post by White Coat Investor » Mon Jan 20, 2020 2:25 pm

Sandtrap wrote:
Sun Jan 19, 2020 9:23 am
Randome Thoughts.

1. Estate planning?
2. Trusts?
(consider funding these various trusts?)
3. DCA or Lump Sum to your existing 3 fund portfolio regardless of market conditions.
4. Consider diversifying: IE: R/E income property (tax advantages potentially), REIT Indexes, etc.
5. "Safe Accounts" for now. . . until you decide then proceed step by step. No rush. Wait.
(there's a mix of emotions and a transitional period that happens when selling a business and getting a windfall. Two Things. 1. You no longer have a business. 2. Windfall.) So, putting things on "pause" for as long as you need is also a good thing to do.
Do nothing for months, year, years, as needed.

j :happy
Agreed. There are much bigger issues than just how to invest it. That's actually pretty easy. And yes, it's totally reasonable to just plop it all into some form of a three fund portfolio. Or a two fund portfolio. Or a four fund portfolio. You may want to be more conservative than 1/3, 1/3, 1/3 since you have little need to take risk. Or you may wish to be less conservative since you have great ability to take risk. Your call.
1) Invest you must 2) Time is your friend 3) Impulse is your enemy | 4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course

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Sandtrap
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Re: Deploying a $40m windfall in current market conditions

Post by Sandtrap » Mon Jan 20, 2020 4:56 pm

Also add:
"Avoid the sharks".
Everyone and everyone, from "helpful uncle joe or grandpa joe", to your friendly neighborhood banker, financial advisor, wealth manager, estate professional, consultant of all things, etc, is going to want to help ease your burden of having to deal with this large a sum.

j :D
Wiki Bogleheads Wiki: Everything You Need to Know

aristotelian
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Re: Deploying a $40m windfall in current market conditions

Post by aristotelian » Mon Jan 20, 2020 4:59 pm

Say the 40M was from money you had invested 10 years ago and has doubled. Would you be selling or would you stay invested?

inbox788
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Re: Deploying a $40m windfall in current market conditions

Post by inbox788 » Mon Jan 20, 2020 5:21 pm

The main principle of AA is usually dominated by the higher percentage in equities and higher historic and expected returns in equities, so what most folks do with bonds don't matter all that much, but at these levels and relatively more conservative AA, there is significant optimization on the bond side that carries less risk. Figure out your cash needs in the short and mid term, and don't be afraid to tie up some of the unneeded cash in longer term or illiquid secure bond investments.

Other than bonds, another low risk area of optimization is in taxes, so find a good tax accountant and/or learn about it yourself.

https://www.bogleheads.org/wiki/Asking_bond_questions
https://www.bogleheads.org/wiki/Bonds:_advanced_topics
https://www.bogleheads.org/wiki/Individ ... _bond_fund
https://www.bogleheads.org/wiki/Video:_ ... h_bonds%3F

https://www.bogleheads.org/wiki/Outline ... _investors

On the other hand, if the goal is far in the future and the end point is all for charity, then a more aggressive AA is called for. And in this case, the simplest strategy might just be to DCA over 1 (monthly) to 3 years (quarterly). That could still be $2-3M per traunch!

I'm not familiar with the area, but I assume it's time to look into using a public charity or private family foundation.

501(c)(3) Public-Charity or a Private Foundation?
viewtopic.php?t=232821

Charitable Family Foundation - Best way forward
viewtopic.php?t=254493

toast0
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Location: Puget Sound

Re: Deploying a $40m windfall in current market conditions

Post by toast0 » Mon Jan 20, 2020 6:52 pm

KyleAAA wrote:
Sun Jan 19, 2020 8:56 pm
With $40mm to deploy it literally does not matter what you do.
I would phrase that a bit more strictly; any reasonable strategy will do, but it is absolutely possible to blow $40M, so some care is advised. Three fund probably works fine up until you're above 1% of the fund size; after that, it probably starts getting tricky to transact. Vanguard posts it's large transaction limits here: https://advisors.vanguard.com/VGApp/iip ... ments/ltqt --- many of those are pretty big relative to normal accounts, but some aren't that big relative to a $40M account.

shess
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Re: Deploying a $40m windfall in current market conditions

Post by shess » Mon Jan 20, 2020 7:35 pm

toast0 wrote:
Mon Jan 20, 2020 6:52 pm
KyleAAA wrote:
Sun Jan 19, 2020 8:56 pm
With $40mm to deploy it literally does not matter what you do.
I would phrase that a bit more strictly; any reasonable strategy will do, but it is absolutely possible to blow $40M, so some care is advised. Three fund probably works fine up until you're above 1% of the fund size; after that, it probably starts getting tricky to transact. Vanguard posts it's large transaction limits here: https://advisors.vanguard.com/VGApp/iip ... ments/ltqt --- many of those are pretty big relative to normal accounts, but some aren't that big relative to a $40M account.
Wow! I did not know about this! Not that it's a huge issue for me, but it certainly is an interesting peek behind the curtain.

GrowthSeeker
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Re: Deploying a $40m windfall in current market conditions

Post by GrowthSeeker » Mon Jan 20, 2020 7:51 pm

If there is a possibility that you might want to re-deploy a large portion into some other business in the near future, then keep that amount in something where the principal would not be at risk, like short term Treasuries.

A thought: It is possible that Vanguard (and other brokerages) might have options available at higher levels that most of us are not aware of, so add that to your list of questions when you call them. Just as an example, Prime Money Market has admiral shares with 0.06% lower E.R. and equally higher SEC yield, but with a $5M minimum. While this would likely not be a significant benefit to you, there might be other little known options available to you which are significant.

An observation: if you went 100% VTI, the annual qualified dividends would be about $700K.

A specific: personally, I like the idea mentioned above of just going 50% VTI (or VTSAX) and 50% VTIAX.

Timing: I would put about a third in right away, another third soon (within a few months) and a third within a year. For chunks that are not "in" yet, park in Treasuries or Money Market.

How many brokerages: tough to answer. It's a trade off between not putting all the eggs in one basket vs simplicity. Thinking about it as a hedge against an account getting hacked, identity theft, a major brokerage having a major security breach. The 'right away' chunk could all be in one place giving you time to think about it for the other chunks.
Just because you're paranoid doesn't mean they're NOT out to get you.

smectym
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Re: Deploying a $40m windfall in current market conditions

Post by smectym » Mon Jan 20, 2020 7:57 pm

(A) I would treat the money as if I were acting in a fiduciary capacity for someone else, to whom I'd be accountable were untoward losses to occur in the corpus.
(B) Then, with that in mind, I'd put the money in short-term treasury securities for a cooling-off period. For individuals, Treasury Direct has a $5M limit per auction, but over several auctions you could certainly deploy your entire windfall on Treasury Direct and earn a competitive rate.
(C) For purposes of convenient liquidity, allocate a portion to Vanguard Treasury Money Market. They may have a maximum investment; sometimes that can be waived by a phone call.
(D) Even though you are a sophisticated investor who is used to managing money, using the cooling-off period while the money is in cash isn't such a bad idea. You can research ideas, kick around whether you need to hire an advisor, decide how much to put in a donor-advised fund: much to consider.
(E) Some bogleheads are against Dollar Cost Averaging and they make valid points; however--not to rehash the debate here--there are also points to be made on the other side of the question. When acting with large sums of money, erring on the side of caution is the usually the right approach. Gradual allocation to equities and bonds is a responsible way to do it.
(F) I see no reason to adopt other than a conservative allocation, favoring intermediate treasuries and higher-quality corporates on the bond side, and maintaining a substantial slug of cash.

Good luck!

TheDDC
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Joined: Mon Jan 08, 2018 11:11 am

Re: Deploying a $40m windfall in current market conditions

Post by TheDDC » Mon Jan 20, 2020 8:03 pm

10% cash, 90% VTSAX (perhaps some in a DAF if you desire and need the tax benefits).

Your future self will thank you.

-TheDDC
Rules to wealth building: 90-100% VTSAX piled high and deep, 0-10% VIGAX tilt, 0% given away to banks, minimize amount given to medical-industrial complex

MotoTrojan
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Re: Deploying a $40m windfall in current market conditions

Post by MotoTrojan » Mon Jan 20, 2020 8:06 pm

DCA just makes no sense logically, but if it helps you emotionally, I like livesoft’s 50% now and rest over 10 months suggestion. Have a tax-loss harvest plan ready; maybe use mutual funds to make that more seamless.

Congrats.

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galving
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Location: US Gulf Coast

Re: Deploying a $40m windfall in current market conditions

Post by galving » Tue Jan 21, 2020 7:42 am

Just clarifying the $40m = $40,000,000. . . versus $40,000

dbr
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Re: Deploying a $40m windfall in current market conditions

Post by dbr » Tue Jan 21, 2020 9:00 am

galving wrote:
Tue Jan 21, 2020 7:42 am
Just clarifying the $40m = $40,000,000. . . versus $40,000
Yes, indeed. Sometimes the issue is confused. A convention when there is one is that $M means thousands and $MM means millions. Sometimes M now means millions and k or K is used for thousands, at least on this forum. I'm not sure m is much used, but why not.

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