Assets going from 600K->15M, should I change my asset allocation?

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principlegeneration
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Assets going from 600K->15M, should I change my asset allocation?

Post by principlegeneration »

Hello all,

I am a committed passive investor, and due to an unanticipated financial transaction, my investable assets are going to go from approximately 600K to 15M.

I have some questions for you all given this news.

My previous investment strategy was:

Asset allocation:
- 45% VTI
- 45% VXUS
- 10% BND

I manually invest as much of my income as possible, and manually rebalance when I notice the allocation getting off.

My current salary is ~350K. I have been saving ~70% of my income (I don't track it exactly) by auto-transferring a portion of my paycheck biweekly, and then additionally transferring any funds above my emergency fund (~25K at all times) to Vanguard.

I additionally have approximately 300K in equity in real estate and no other significant assets. I am 27 years old and generally a believer of the FIRE philosophy (though my partner is not as much, and intends to keep working until a standard retirement).

The current situation is:

I was transferred approximately 15M in cash (after-tax). Otherwise, no other major life events have occurred. I do not currently have children but probably will in the future, which I imagine will affect my expenses significantly.

I am generally very conservative with finances and spending. There is some probability of another transaction in another ~n years, which would be even larger than the first one, but I don't want to assume that will occur.

With this sudden windfall, I have a few questions:
- What asset allocation would you recommend? Is 90% equity now too high?
- Should I use mutual funds instead of ETFs to get rebalancing and auto-investing?
- Should I be considering more complex investment vehicles?
- My partner keeps bugging me about tax loss harvesting... does it really matter?
- Is it worth considering CDs for my emergency fund (which will likely now be more like 200K in "cash")
- If we decide to scale back working (which we are considering), how should I think about annual disbursements for expenses? Do I just sell 2% of my portfolio every year or is there some more complicated strategy?

Finally, for anyone who has been in a similar situation: How do we ensure we don't make too abrupt of lifestyle changes? e.g. I could stop working, but am hesitant to do so without getting used to this new world first.

I'm very nervous about this new world and would love any and all advice.
RocketShipTech
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Re: Assets going from 600K->15M, should I change my asset allocation?

Post by RocketShipTech »

With $15M you can afford better advice than Bogleheads
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Re: Assets going from 600K->15M, should I change my asset allocation?

Post by Jack FFR1846 »

You can certainly stick with your asset allocation as it is now. It will continue to have the same risk and same low cost as it does now on a percentage basis. If you decide you want to change your AA, I would suggest that you write the reasons down and not make any changes for a year. If at that year point, you still want to make those changes, do it. You AA would work fine for $15MM or for $15B.

On the other hand, if you decided you wanted to give yourself a small reward, like maybe a Pagani Huayra BC, I think that would be absolutely fine. You won't starve even if you bought 2. If you don't want to wait, I do know where there are a couple low mileage Huayras for sale near me.
Bogle: Smart Beta is stupid
000
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Re: Assets going from 600K->15M, should I change my asset allocation?

Post by 000 »

Probably can afford paying for a consult from a non-AUM, fixed-fee, fee only advisor. Rick Ferri is one such person (not an endorsement since I've never worked with him before, but he has made many posts on this site, so you can see if his style may work for you).
7eight9
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Re: Assets going from 600K->15M, should I change my asset allocation?

Post by 7eight9 »

RocketShipTech wrote: Tue Aug 11, 2020 1:50 pm With $15M you can afford better advice than Bogleheads
This is likely the best advice you will receive on this thread. Don't be penny wise and pound foolish.
I guess it all could be much worse. | They could be warming up my hearse.
alfaspider
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Re: Assets going from 600K->15M, should I change my asset allocation?

Post by alfaspider »

RocketShipTech wrote: Tue Aug 11, 2020 1:50 pm With $15M you can afford better advice than Bogleheads
I'm not convinced you can. By all means, talk to lawyers and accountants to the extent you have questions. But the basic bogglehead portfolio scales to $15MM no problem.
illumination
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Re: Assets going from 600K->15M, should I change my asset allocation?

Post by illumination »

Definitely hire some professionals like an estate attorney, maybe look into setting up a trust for yourself. You mentioned a "partner" might want to look into how that individual plays a role into all of this and what you want walled off (or not) if the relationship goes south. If this isn't a spouse, I'd strongly consider a prenuptial if you do get married. I honestly think it would be financially reckless not to have all of those options in front of you, especially since this person seems involved in your finances already.

As far as asset allocation, I probably would be something like 80%+ in equities, but some people have the mantra "stop playing when you've won".
Last edited by illumination on Tue Aug 11, 2020 2:12 pm, edited 1 time in total.
flaccidsteele
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Re: Assets going from 600K->15M, should I change my asset allocation?

Post by flaccidsteele »

RocketShipTech wrote: Tue Aug 11, 2020 1:50 pm With $15M you can afford better advice than Bogleheads
Maybe not “better”, but definitely more expensive advice
The US market always recovers. It’s never different this time. Retired in my 40s. Investing is a simple game of rinse and repeat
hnd
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Re: Assets going from 600K->15M, should I change my asset allocation?

Post by hnd »

RocketShipTech wrote: Tue Aug 11, 2020 1:50 pm With $15M you can afford better advice than Bogleheads
i literally just spit coffee out all over.
livesoft
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Re: Assets going from 600K->15M, should I change my asset allocation?

Post by livesoft »

I have less that $15M and I do not have an asset allocation of 90/10. I recommend you not continue with 90/10. :)
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oldfort
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Re: Assets going from 600K->15M, should I change my asset allocation?

Post by oldfort »

Start with the big picture. How much do you want to increase your spending? Let's suppose you get a 0% real return and live another 75 years. You could spend $200k/year for the rest of your life and never work another day in your life. If you keep your total spending below ($200k+whatever your spouse earns), your asset allocation is almost a meaningless decision. You could be 90/10 or 10/90, and your spending rate is so low, you won't run out of money either way. Some people feel no need to take risk after they've already won the game. Others want to create dynastic wealth so their kids and grandkids have the option to FIRE at 27 and live off their trust funds. Some of the rich want to donate a lot to charity, and get a hospital wing named after them. After thinking through the big picture question of what you want to accomplish with your wealth, $15M is more than enough to consult with CPAs and lawyers for appropriate tax and legal advice.
Last edited by oldfort on Tue Aug 11, 2020 2:22 pm, edited 1 time in total.
oscarsonthepond
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Re: Assets going from 600K->15M, should I change my asset allocation?

Post by oscarsonthepond »

First, congratulations - you did it!! :sharebeer

I personally know several people who have been in your exact shoes before, and my best advice would be:

1) Don't quit your job yet....wait at least 6-12 months for the euphoria/shock to wear off and then reassess. You've been working toward that financial independence goal for awhile now, and it will be a weird feeling not having that dream to chase in the same way. Take time to adjust to that feeling before you decide conclusively that work is no longer worth your time. I personally know a dozen or more people who've received $10m-$500m at once due to a big transaction, and I've been shocked at the >>50% number who have chosen to continue working years later.

2) Do treat yourself to some fun stuff now....a $100k car, a trip to Bora Bora or the Maldives, whatever floats your boat.

3) As others have mentioned, at your level it's well worth paying an excellent financial adviser who (a) is aligned with you on investment philosophy, (b) works regularly with high net worth individuals such as yourself, and (c) works on a fee-only basis. Not only will they help you with finances, but they can help or connect you with people to assist in estate planning, asset protection, taxes, etc. Make this decision carefully. Here are some possibilities: https://www.whitecoatinvestor.com/financial-advisors/.

4) To answer your other specific questions - I would ramp up my bond % given that you have less need for huge growth and more need to protect what you have, assuming that is what your excellent adviser says (see 3 above). Mutual funds vs. ETFs doesn't really matter. I don't think tax loss harvesting will matter all that much for you due to you investing in only a few funds and the low limits on harvesting relative to your net worth, but ask your adviser as it could be worth it if there was a big drop in your funds. CDs/disbursements - ask your advisor.

Good luck, and well done!!
random_walker_77
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Re: Assets going from 600K->15M, should I change my asset allocation?

Post by random_walker_77 »

principlegeneration wrote: Tue Aug 11, 2020 1:41 pm My current salary is ~350K. I have been saving ~70% of my income (I don't track it exactly) by auto-transferring a portion of my paycheck biweekly, and then additionally transferring any funds above my emergency fund (~25K at all times) to Vanguard.
So, if you're only spending 30% of after-tax income, you're living on < $80K/yr? Even taking into account taxes and healthcare, you're at more than 100x spending, so you're definitely FI, and ok to retire if you so desire (but some might disagree)

Personally, I'd want to take some off the table and double your bonds to at least 20% if not 30%. Mutual funds vs ETFs probably doesn't matter much. I'd go w/ mutual funds for convenience and the certainty that there's no risk of screwing up a limit order on a high six-figure transaction.

For withdrawals, you're going to get at least 1.6-1.8% just from dividends and distributions. If you need more, you sell a little bit while maintaining your asset allocation.

I'm curious to see what people say about more complex investment vehicles for the high net worth investor. Some here seem to really go for it, but I've not seen anything that indicates it's worth the complexity, and risk, not including the risk that you'll get suckered into something that's not in your best interests. A fee-only consult w/ a respected advisor (not salesman) as mentioned earlier is probably a good idea.

CDs are a pretty good alternative to money markets right now. Just keep it under 250K per bank

At this level, unless you greatly increase your lifestyle, you're at the point where the marginal utility of additional money is pretty low. Be mindful of your health, and keep in mind that any working tradeoffs that pit your health against money probably aren't worth it. A little stress might be a good thing, but high stress probably isn't worth it
TropikThunder
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Re: Assets going from 600K->15M, should I change my asset allocation?

Post by TropikThunder »

livesoft wrote: Tue Aug 11, 2020 2:16 pm I have less that $15M and I do not have an asset allocation of 90/10. I recommend you not continue with 90/10. :)
It’s good enough for Warren Buffet’s wife. 😃 Not a lot of “need to take risk” there though.
retired@50
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Re: Assets going from 600K->15M, should I change my asset allocation?

Post by retired@50 »

principlegeneration wrote: Tue Aug 11, 2020 1:41 pm
With this sudden windfall, I have a few questions:
- What asset allocation would you recommend? Is 90% equity now too high?
- Should I use mutual funds instead of ETFs to get rebalancing and auto-investing?
- Should I be considering more complex investment vehicles?
- My partner keeps bugging me about tax loss harvesting... does it really matter?
- Is it worth considering CDs for my emergency fund (which will likely now be more like 200K in "cash")
- If we decide to scale back working (which we are considering), how should I think about annual disbursements for expenses? Do I just sell 2% of my portfolio every year or is there some more complicated strategy?

Finally, for anyone who has been in a similar situation: How do we ensure we don't make too abrupt of lifestyle changes? e.g. I could stop working, but am hesitant to do so without getting used to this new world first.

I'm very nervous about this new world and would love any and all advice.
Welcome to the forum.

I'd probably use a 50/50 allocation to stocks/bonds.
I'd use mutual funds, simply for the convenience.
More complex? NO. This can lead to unwanted trouble and attention.
Tax-loss harvesting can help, but ignoring it isn't the biggest mistake either.
CDs - for emergency fund, sure. Any place that can earn some amount of interest is helpful.
I don't know what your annual expenses are, but 2% might be somewhat high for a withdrawal rate. That's $300k each year. I would get the money invested and then see if you could just live comfortably off the inevitable dividends, interest, etc. In fact, you might need only a portion of the dividends, interest, etc. You could re-invest some and spend some.

Regards,
This is one person's opinion. Nothing more.
Seasonal
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Re: Assets going from 600K->15M, should I change my asset allocation?

Post by Seasonal »

Read the Wiki on managing a windfall: https://www.bogleheads.org/wiki/Managing_a_windfall

When you get the funds, invest in something very safe, such a short term treasuries. Leave the money there until you educate yourself and figure out what you want to do.

Consult with a good CPA regarding tax planning and a good trusts and estates attorney.

90/10 is most likely too aggressive. Consider munis for the bond portion. There's nothing wrong with a simple three fund portfolio.

There are many who market themselves as high net worth or ultra high net worth advisors. The vast majority of them will look out for themselves rather than you.

I've used Rick Ferri. It's certainly worth a few hundred dollars to talk to him.
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Kenkat
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Re: Assets going from 600K->15M, should I change my asset allocation?

Post by Kenkat »

I would think of this money in two buckets.

The first step is to figure the size of each bucket.

Bucket 1 is targeted towards safety of principal - maybe a 30/70 allocation. You will have to determine the size of this bucket. Do you think you will keep working? Do you think you will retire now and live off the portfolio? Or something in between? At the bottom end, you could say I want to be sure I have at least enough in a safe place that I could fund $100k of income for a long time. So that number might be $3-5 million. Or maybe you say I want to be sure I can replace my $350k of income for the foreseeable future. then that number is larger - $7 million or more. Whatever the number, so portion is invested relatively safely.

What remains is the second bucket. You can grow this money as it is unlikely you will need it. It can be invested more aggressively. 90/10 is aggressive but could be ok if you can stomach it; 80/20 or 70/30 would be other options.

You could blend it to manage it as a single portfolio - so it could be 40/60 overall or 60/40 overall - but the above is how I would approach it.
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Re: Assets going from 600K->15M, should I change my asset allocation?

Post by arf30 »

Usually at a certain point it becomes cheaper and more tax efficient to do direct indexing (owning individual stocks to approximate an index), so you may want to talk to a professional about that. From what I've heard though, you are not at that level yet to offset the management fees.

Asset allocation is a personal decision independent of net worth - it sounds like you probably want to lean more conservative.
khart23
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Re: Assets going from 600K->15M, should I change my asset allocation?

Post by khart23 »

First, congratulations & welcome.

You are not at all alone on the feelings/concerns you have from the change, I've had quite a few of these from various means of receiving the money and most had the same types of sentiment. With that said, this change does bring different considerations, obstacles and views to your situation than what you had been accustomed to/what the average approach would entail. You do need to be more cognizant of tax loss harvesting & tax-efficient vehicles with these funds- as an example, you would want to favor ETFs over mutual funds because you control the capital gains tax there whereas the mutual funds by law must distribute the cap-gains distribution even if you are a buy and hold investor. That would mean those holdings would be creating a tax debt year over year that you should look at the same way fees are viewed: these are a drag against your portfolios ability to stay efficient & ultimately add up to a considerable sum over time. The other things besides internally considering how it could impact your lifestyle within your home it also can impact how the world outside of your home should be considered (e.g. you become a larger target for frivolous litigation or lawsuits aimed at compensation). It is very worth your time to sit with a fiduciary, explore your values first and foremost and than apply a strategy that focuses on efficiency, protection and adherence to your core values/goals. This will be the roadmap for every part of your journey: how does it serve the values that are most important to you - if that connection can't be articulated sufficiently it means that you may need to do more digging.

Also, things don't need to be over-complicated just simply due to the sum. There will be additional considerations but you certainly don't need to be sold on instruments that have wild complexities and limited understanding by you. Best of luck!
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hornet96
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Re: Assets going from 600K->15M, should I change my asset allocation?

Post by hornet96 »

principlegeneration wrote: Tue Aug 11, 2020 1:41 pm
I was transferred approximately 15M in cash (after-tax).
.........
Finally, for anyone who has been in a similar situation: How do we ensure we don't make too abrupt of lifestyle changes? e.g. I could stop working, but am hesitant to do so without getting used to this new world first.
It's hard to answer this question without knowing a little more about how you were "transferred" approximately $15M in cash. For example, the answer may differ depending on whether the "transfer" was the result of the sale of your business, and you're a serial entrepreneur type who wants to keep creating/working on the next big project and will not be able to relax after an early retirement. Conversely, if the "transfer" was due to an inheritance, winning the lottery, or settlement of a lawsuit, etc., then you would need to consider whether and how much you tie your identity to your profession, and whether you'd be comfortable not "working" for potentially the next 60-70 years and instead devote your time and attention to charitable causes/personal development/new hobbies/etc.

This is more of a behavioral finance question that somewhat depends on the circumstances surrounding the windfall. The $15M itself should be more than sufficient to fund a quite comfortable and luxurious lifestyle for the rest of your lives, in any event. As long as you don't go out tomorrow and blow it all on a rare classic car or something https://www.classic-car-auctions.info/r ... 0in%202016.
fyre4ce
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Re: Assets going from 600K->15M, should I change my asset allocation?

Post by fyre4ce »

I second the recommendation to read the entire Managing a Windfall wiki page. There's a lot of good advice in there that will apply to your situation, and not just limited to investments (giving, career and life plans, etc.).

I disagree that you should necessarily hire a financial planner. In my opinion, you can learn enough from the BH wiki and forum to manage your own investments. Most of the principles are the same at $15M as they are at $600k. You definitely should hire a good estate planning attorney though, to set up a revocable living trust and other estate planning documents. It should cost you $5,000 at most. If you do think you need investment help, hire someone per-hour and with a CFA or CFP. With your level of assets, you're going to over-pay on an Asset Under Management fee schedule.

I think a 90/10 asset allocation is fine, if you want it. You have to be OK waking up one morning and finding your stock values have dropped by half (which is about a $7M loss). If you can stomach this level of volatility, then sure, grow your assets and either increase your spending, charitable giving, or the size of your estate. Even if you lose half your investment you can still live a prosperous life on $8M without ever working again. Then again, you presumably don't need to take on this level of risk to meet your goals, so feel free to cut back your AA basically as much as you want. I personally wouldn't go 100% bonds in your situation, but there's nothing wrong with it.

You're in a great position that you can (within reason) do anything you want with your life. Most people don't have this kind of opportunity, so make the most of it! Best wishes!
Last edited by fyre4ce on Tue Aug 11, 2020 3:23 pm, edited 2 times in total.
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anon_investor
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Re: Assets going from 600K->15M, should I change my asset allocation?

Post by anon_investor »

livesoft wrote: Tue Aug 11, 2020 2:16 pm I have less that $15M and I do not have an asset allocation of 90/10. I recommend you not continue with 90/10. :)
But with $15M, the OP can afford to have an AA of 90/10 :twisted: .
hightower
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Re: Assets going from 600K->15M, should I change my asset allocation?

Post by hightower »

principlegeneration wrote: Tue Aug 11, 2020 1:41 pm Hello all,

I am a committed passive investor, and due to an unanticipated financial transaction, my investable assets are going to go from approximately 600K to 15M.

I have some questions for you all given this news.

My previous investment strategy was:

Asset allocation:
- 45% VTI
- 45% VXUS
- 10% BND

I manually invest as much of my income as possible, and manually rebalance when I notice the allocation getting off.

My current salary is ~350K. I have been saving ~70% of my income (I don't track it exactly) by auto-transferring a portion of my paycheck biweekly, and then additionally transferring any funds above my emergency fund (~25K at all times) to Vanguard.

I additionally have approximately 300K in equity in real estate and no other significant assets. I am 27 years old and generally a believer of the FIRE philosophy (though my partner is not as much, and intends to keep working until a standard retirement).

The current situation is:

I was transferred approximately 15M in cash (after-tax). Otherwise, no other major life events have occurred. I do not currently have children but probably will in the future, which I imagine will affect my expenses significantly.

I am generally very conservative with finances and spending. There is some probability of another transaction in another ~n years, which would be even larger than the first one, but I don't want to assume that will occur.

With this sudden windfall, I have a few questions:
- What asset allocation would you recommend? Is 90% equity now too high?
- Should I use mutual funds instead of ETFs to get rebalancing and auto-investing?
- Should I be considering more complex investment vehicles?
- My partner keeps bugging me about tax loss harvesting... does it really matter?
- Is it worth considering CDs for my emergency fund (which will likely now be more like 200K in "cash")
- If we decide to scale back working (which we are considering), how should I think about annual disbursements for expenses? Do I just sell 2% of my portfolio every year or is there some more complicated strategy?

Finally, for anyone who has been in a similar situation: How do we ensure we don't make too abrupt of lifestyle changes? e.g. I could stop working, but am hesitant to do so without getting used to this new world first.

I'm very nervous about this new world and would love any and all advice.
How does one go about getting one of these 15 million dollar after tax unanticipated transactions? I want one please. Thank you.

No but seriously...are we talking lottery winnings, inheritance, or selling a business? Those are the only ways I can imagine this happening unexpectedly.
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hornet96
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Re: Assets going from 600K->15M, should I change my asset allocation?

Post by hornet96 »

anon_investor wrote: Tue Aug 11, 2020 3:19 pm
livesoft wrote: Tue Aug 11, 2020 2:16 pm I have less that $15M and I do not have an asset allocation of 90/10. I recommend you not continue with 90/10. :)
But with $15M, the OP can afford to have an AA of 90/10 :twisted: .
True, but this only addresses the "ability" side of the equation:

Need to take risk: None
Ability to take risk: High
Willingness to take risk: ?????
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anon_investor
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Re: Assets going from 600K->15M, should I change my asset allocation?

Post by anon_investor »

hornet96 wrote: Tue Aug 11, 2020 3:25 pm
anon_investor wrote: Tue Aug 11, 2020 3:19 pm
livesoft wrote: Tue Aug 11, 2020 2:16 pm I have less that $15M and I do not have an asset allocation of 90/10. I recommend you not continue with 90/10. :)
But with $15M, the OP can afford to have an AA of 90/10 :twisted: .
True, but this only addresses the "ability" side of the equation:

Need to take risk: None
Ability to take risk: High
Willingness to take risk: ?????
Well, I think only the OP can answer whether there is a need to take risk. For some people $15 million is not enough...
JSPECO9
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Re: Assets going from 600K->15M, should I change my asset allocation?

Post by JSPECO9 »

I wouldn't change it. But even if I did, would simply move the bonds portion up to 30%. Either keep it as is, or make it 35% VTI, 35% VXUS, 30% BND. I wouldn't change the holdings part of your strategy. And I disagree with the first poster about you deserve better advice than Bogleheads. You're going to waste money on financial advisors who's advice will be worth less than free Bogleheads advice, IMO.
Dave55
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Re: Assets going from 600K->15M, should I change my asset allocation?

Post by Dave55 »

Agree on having an hour or 2 conversation with Rick Ferri. I would not be more aggressive than 50/50 allocation.

Dave
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Kenkat
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Re: Assets going from 600K->15M, should I change my asset allocation?

Post by Kenkat »

anon_investor wrote: Tue Aug 11, 2020 3:19 pm
livesoft wrote: Tue Aug 11, 2020 2:16 pm I have less that $15M and I do not have an asset allocation of 90/10. I recommend you not continue with 90/10. :)
But with $15M, the OP can afford to have an AA of 90/10 :twisted: .
He can also afford not to... :happy
000
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Re: Assets going from 600K->15M, should I change my asset allocation?

Post by 000 »

If I were a decamillionaire, an annuity for a small portion of my assets would start to look a lot more attractive to me.
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Re: Assets going from 600K->15M, should I change my asset allocation?

Post by bertilak »

RocketShipTech wrote: Tue Aug 11, 2020 1:50 pm With $15M you can afford better advice than Bogleheads
I agree with this. That big a portfolio needs a lot more consideration than the asset allocation (AA).

Find yourself an estate attorney.
May neither drought nor rain nor blizzard disturb the joy juice in your gizzard. -- Squire Omar Barker (aka S.O.B.), the Cowboy Poet
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Re: Assets going from 600K->15M, should I change my asset allocation?

Post by bertilak »

principlegeneration wrote: Tue Aug 11, 2020 1:41 pm I was transferred approximately 15M in cash (after-tax).
Nigerian prince? Better wait for the check to clear!
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Northster
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Re: Assets going from 600K->15M, should I change my asset allocation?

Post by Northster »

Unless you envision getting into exotic investment vehicles I would not bother with a paid advisor. As for AA percentages, I faced a similar choice when I retired, though at a much lower total than you have. On the one hand you have so much that it would be hard to mess up, so why not go for 90%? On the other hand you've made it so why take risk? I chose a more conservative approach, but I think it's just a personal choice.
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Re: Assets going from 600K->15M, should I change my asset allocation?

Post by Jags4186 »

hnd wrote: Tue Aug 11, 2020 2:12 pm
RocketShipTech wrote: Tue Aug 11, 2020 1:50 pm With $15M you can afford better advice than Bogleheads
i literally just spit coffee out all over.
With $15mm the OP needs investment advice with an eye towards tax minimization/avoidance. These are issues that come with having $15mm. That is beyond the scope of typical advice given on Bogleheads.
Osterix
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Re: Assets going from 600K->15M, should I change my asset allocation?

Post by Osterix »

principlegeneration wrote: Tue Aug 11, 2020 1:41 pm Hello all,

I am a committed passive investor, and due to an unanticipated financial transaction, my investable assets are going to go from approximately 600K to 15M.

I have some questions for you all given this news.

My previous investment strategy was:

Asset allocation:
- 45% VTI
- 45% VXUS
- 10% BND

I manually invest as much of my income as possible, and manually rebalance when I notice the allocation getting off.

My current salary is ~350K. I have been saving ~70% of my income (I don't track it exactly) by auto-transferring a portion of my paycheck biweekly, and then additionally transferring any funds above my emergency fund (~25K at all times) to Vanguard.

I additionally have approximately 300K in equity in real estate and no other significant assets. I am 27 years old and generally a believer of the FIRE philosophy (though my partner is not as much, and intends to keep working until a standard retirement).

The current situation is:

I was transferred approximately 15M in cash (after-tax). Otherwise, no other major life events have occurred. I do not currently have children but probably will in the future, which I imagine will affect my expenses significantly.

I am generally very conservative with finances and spending. There is some probability of another transaction in another ~n years, which would be even larger than the first one, but I don't want to assume that will occur.

With this sudden windfall, I have a few questions:
- What asset allocation would you recommend? Is 90% equity now too high?
- Should I use mutual funds instead of ETFs to get rebalancing and auto-investing?
- Should I be considering more complex investment vehicles?
- My partner keeps bugging me about tax loss harvesting... does it really matter?
- Is it worth considering CDs for my emergency fund (which will likely now be more like 200K in "cash")
- If we decide to scale back working (which we are considering), how should I think about annual disbursements for expenses? Do I just sell 2% of my portfolio every year or is there some more complicated strategy?

Finally, for anyone who has been in a similar situation: How do we ensure we don't make too abrupt of lifestyle changes? e.g. I could stop working, but am hesitant to do so without getting used to this new world first.

I'm very nervous about this new world and would love any and all advice.
First piece of advice that comes to my mind is DO NOT TELL ANYONE (family or friends). You mention wanting kids but don't mention if married or not so be mindful of things like a prenup, etc. Look at the data regarding how many lotto winners and superstar athletes become broke.

I think it is wise to get a consultation from an accountant/fiduciary financial planner that deals in high net worth individuals/estate planning attorney. Congrats! I hope this allows you to pursue what you love and make a difference in this world.
av111
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Re: Assets going from 600K->15M, should I change my asset allocation?

Post by av111 »

principlegeneration wrote: Tue Aug 11, 2020 1:41 pm
I was transferred approximately 15M in cash (after-tax).
Shoot. Nigerian prince sent the money to you? He was talking to me but I wanted proof. So he became cold and wouldn't answer and I thought I lost. Now I know!

j/k - Re investments, stay the course. Money is used to buy "things". No other use for it. Decide what "things" make sense to you and go buy. Read the thread about "what to do when you have won the game"
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anon_investor
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Re: Assets going from 600K->15M, should I change my asset allocation?

Post by anon_investor »

Jags4186 wrote: Tue Aug 11, 2020 5:01 pm
hnd wrote: Tue Aug 11, 2020 2:12 pm
RocketShipTech wrote: Tue Aug 11, 2020 1:50 pm With $15M you can afford better advice than Bogleheads
i literally just spit coffee out all over.
With $15mm the OP needs investment advice with an eye towards tax minimization/avoidance. These are issues that come with having $15mm. That is beyond the scope of typical advice given on Bogleheads.
I think there are some very wealthy BHs who will have good advice. But I agree with such a large taxable portfolio, taxes will be a big concern. It may make sense to protect some of that money in a trust, the OP will need a good attorney to set that up.
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Re: Assets going from 600K->15M, should I change my asset allocation?

Post by Helo80 »

Jags4186 wrote: Tue Aug 11, 2020 5:01 pm
hnd wrote: Tue Aug 11, 2020 2:12 pm
RocketShipTech wrote: Tue Aug 11, 2020 1:50 pm With $15M you can afford better advice than Bogleheads
i literally just spit coffee out all over.
With $15mm the OP needs investment advice with an eye towards tax minimization/avoidance. These are issues that come with having $15mm. That is beyond the scope of typical advice given on Bogleheads.

I 100% agree that OP needs professional, legal, and tax help that this forum cannot provide. At age 27, he's looking at 60+ years potentially of managing this... if not more. This is well beyond coming up with a comfortable 2/3/4-fund portfolio and comfortable AA and withdrawal strategy.
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Re: Assets going from 600K->15M, should I change my asset allocation?

Post by Helo80 »

principlegeneration wrote: Tue Aug 11, 2020 1:41 pm I additionally have approximately 300K in equity in real estate and no other significant assets. I am 27 years old and generally a believer of the FIRE philosophy (though my partner is not as much, and intends to keep working until a standard retirement).

It's easy to say that now before new found fortune reality has settled in. You mention FIRE.... when graduates first enter the workforce, they're on fire and usually passionate for their job. Then, reality sets in. The whole FIRE movement is basically save maximally, spend minimally, and try to enjoy one's free time as much as possible to do what they really want to do.

Be careful though with your partner.... if they're less frugal than you are, many people can wipe their SO clean with little to no remorse.
Old Guy
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Re: Assets going from 600K->15M, should I change my asset allocation?

Post by Old Guy »

Spent some of it on yourself and significant other and enjoy your good fortune.
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Re: Assets going from 600K->15M, should I change my asset allocation?

Post by AerialWombat »

Helo80 wrote: Tue Aug 11, 2020 6:09 pm This is well beyond coming up with a comfortable 2/3/4-fund portfolio and comfortable AA and withdrawal strategy.
It doesn’t have to be complicated. Putting 20%-30% of it into VTSAX and the rest into VWITX (Intermediate Term Tax Exempt) would be a perfectly reasonable option if this were my windfall. OP could quadruple his lifestyle cost just from the monthly yield, and never touch the principal.
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Re: Assets going from 600K->15M, should I change my asset allocation?

Post by BFR »

Curious what this could be: "unanticipated financial transaction"
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Re: Assets going from 600K->15M, should I change my asset allocation?

Post by Sweetbriar »

000 wrote: Tue Aug 11, 2020 1:58 pm Probably can afford paying for a consult from a non-AUM, fixed-fee, fee only advisor. Rick Ferri is one such person (not an endorsement since I've never worked with him before, but he has made many posts on this site, so you can see if his style may work for you).
I strongly recommend Rick Ferri. rickferri.com
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Re: Assets going from 600K->15M, should I change my asset allocation?

Post by Bobby206 »

000 wrote: Tue Aug 11, 2020 4:28 pm If I were a decamillionaire, an annuity for a small portion of my assets would start to look a lot more attractive to me.
I agree. Plus, diversified between a few companies for more security.
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Re: Assets going from 600K->15M, should I change my asset allocation?

Post by TimeTheMarket »

RocketShipTech wrote: Tue Aug 11, 2020 1:50 pm With $15M you can afford better advice than Bogleheads
Just read this to my wife. Well said, sir. Although I think it is probably still fine to bounce any ideas from a paid advisor against a forum of well-intentioned people.
Username is not serious :)
jarjarM
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Re: Assets going from 600K->15M, should I change my asset allocation?

Post by jarjarM »

Seen it firsthand several times in the valley, I agree with some of the recommendations above: sleep on it, don't change a thing for a few months, and get professional advice (at least with taxes, opportunity zone for capital gain reduction, private equity potentials and initial asset allocation setup).

P.S. Bogleheads alway comes on strong with 8 figure folks :twisted: :beer
Last edited by jarjarM on Tue Aug 11, 2020 9:11 pm, edited 1 time in total.
Seasonal
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Re: Assets going from 600K->15M, should I change my asset allocation?

Post by Seasonal »

TimeTheMarket wrote: Tue Aug 11, 2020 8:18 pm
RocketShipTech wrote: Tue Aug 11, 2020 1:50 pm With $15M you can afford better advice than Bogleheads
Just read this to my wife. Well said, sir. Although I think it is probably still fine to bounce any ideas from a paid advisor against a forum of well-intentioned people.
Having seen what many such paid advisors recommend, I'd take this forum any day of the week for advice regarding asset allocation.
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Re: Assets going from 600K->15M, should I change my asset allocation?

Post by helloeveryone »

RocketShipTech wrote: Tue Aug 11, 2020 1:50 pm With $15M you can afford better advice than Bogleheads
I feel like if BH advice is good enough for the $40k salary household, $500k salary household, multimillion dollar about to retire household - it probably is good enough too for the $15million windfall.

I would read the wiki on how to manage windfall and do that. Don’t make any abrupt moves w the money until you learn as much as you can on BH.

Be wise about it but definitely don’t paralize yourself to the point you can’t make a decision because of the absolute dollar amount.
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Re: Assets going from 600K->15M, should I change my asset allocation?

Post by Sandtrap »

Consult:
CPA = feasibility of R/E Income property IE: Apartment Building, etc. in an area of dependable high appreciative value and purchased wisely for a tax shelter, etc.
(High estate valuations with few deductions need tax sheltering of various types.)

Legal Counsel = estate and trust structure planning, liability umbrella insurance, etc.

Read: “Ages of the Investor” by Bernstein.

Research “Liability Matching Portfolio” (search forum)
(Why? Because you have more to lose than to gain with incorrect investment strategies)

Research forum archives for: “Financial Advisor” “Edward Jones” “Wealth Manager” etc
(Why? Because right now your a pretty big fish that financial professionals, friendly bankers, new friends, etc, would love to land and fillet.)

Allocation: Consider between 50/50 to 30/70 .....
(Why? How would you feel if with that 90/10 allocation, the value of your portfolio dropped 45% or more for years?)

Note: At age 27, the odds are high that your wealth will develop large and small and unseen leaks. Because the value is so high relative to seemingly small leaks, they will be overlooked.
Strongly recommend reading all that you can on protecting wealth because as much as you are focused on growing this over time and properly managing it, security against borrowing, loaning, gifting, redirection of funds, and unwise investing, will generate losses far exceeding the gains from wise investing.

At this point, the hardest and fastest and most unpleasant habit you need to develop is to communicate a Hard and Absolute “No”.

j🌺
Wiki Bogleheads Wiki: Everything You Need to Know
Robert20
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Re: Assets going from 600K->15M, should I change my asset allocation?

Post by Robert20 »

How did you move from 600K to 15M?.. Vow.. thats a big jump!!
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Re: Assets going from 600K->15M, should I change my asset allocation?

Post by chicagoan23 »

principlegeneration wrote: Tue Aug 11, 2020 1:41 pm
I am 27 years old and generally a believer of the FIRE philosophy (though my partner is not as much, and intends to keep working until a standard retirement).

Otherwise, no other major life events have occurred. I do not currently have children but probably will in the future, which I imagine will affect my expenses significantly.

- My partner keeps bugging me about tax loss harvesting... does it really matter?

- If we decide to scale back working (which we are considering), how should I think about annual disbursements for expenses? Do I just sell 2% of my portfolio every year or is there some more complicated strategy?

Finally, for anyone who has been in a similar situation: How do we ensure we don't make too abrupt of lifestyle changes? e.g. I could stop working, but am hesitant to do so without getting used to this new world first.
Quick tip/suggestion....please use legal relationship titles if you have them. What is a "partner"? The tax code defines it one way, and I don't think it is the way you are using it. Is this a domestic partner? Civil union partner? Spouse? Fiance? Potential future spouse? Boyfriend/Girlfriend? Actual partner as in "a member in a partnership" as defined in Code Section 761(b)?

I get it that outdated and/or gendered relationship titles are strictly forbidden, but until we get a full societal collapse due to the backwards thinking of the past (at least by today's standards), we still need to use actual legal titles. The advice is much different depending on whether you will be supporting this person and a potential future family using this windfall alone, vs. you having an interest on the "partner's" assets and future earnings as well, vs. estate planning for a spouse compared to a domestic partner, etc.
"The Basic Choices for Investors and the One We Strongly Prefer" | | https://www.berkshirehathaway.com/letters/2011ltr.pdf
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