Where to park 2-3million temporarily?

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Peaceandpizza
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Where to park 2-3million temporarily?

Post by Peaceandpizza »

Hi all,

I'm coming into 2-3 million (before taxes) in the coming days due to the sale of a business I'm a shareholder of. I need to park the money somewhere safe while I determine longer term investing strategies and financial planning. This is all new to me -- as I came from a lower-middle class upbringing and know noone who has any sort of significant wealth to ask for advise.

Where is a good place to temporarily park money while I sort out my plans? Looking for something safe, accessible & easy with as much of a return as possible for the short term. Any specific advice/ accounts/ banks? I need to set it up by Monday....
checkyourmath
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Re: Where to park 2-3million temporarily?

Post by checkyourmath »

About a year ago I would have said park it in a money market and just ride out the learning curve. The hunt for yield is just slightly nasty right now. If someone gave me 10 million dollars tomorrow I would have no idea what to do. We are going to see short term inflation with another couple rounds of stimulus then eventually a deflationary environment. The only I can say is don't hire a financial advisor. You can do it!
mhalley
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Re: Where to park 2-3million temporarily?

Post by mhalley »

How long are you going to keep it there? If a very short time, then put it in a money market account at your favorite brokerage. You could go ahead and put it there for now while you look for other options. If you are going to keep it there for several months, then you would go to bankrate.com and search for the highest yielding savings accounts and put it in multiple accounts so that you stay under the FIDC limit at each one. If for a year or so you might look at cds.
You might review the managing a windfall post at the wiki.
https://www.bogleheads.org/wiki/Managing_a_windfall
123
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Re: Where to park 2-3million temporarily?

Post by 123 »

Put it in an account at your favorite discount brokerage (hopefully Schwab or Fidelity). Since you are concerned about safety buy new 4 week (T-bills) treasuries at auction (offered weekly). You won't get hardly any yield but your money will be safe and you will have time to think.
The closest helping hand is at the end of your own arm.
skjoldur
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Re: Where to park 2-3million temporarily?

Post by skjoldur »

Congrats on your success! That is a great accomplishment.

I would open an account at Fidelity or Vanguard and put the money there.

I personally would not worry about return in the short term, i.e. the next few months while you come up with a plan. Just put it in a money market. In case you don't know what a money market fund is, it's often the default investment where your money is held at a brokerage and it has the purpose of simply retaining the value of $1 per share. (https://www.bogleheads.org/wiki/Money_markets).

I have used both Fidelity and Vanguard. In my experience, Fidelity is generally quite helpful on the phone and online, especially when you have a few million dollars in the account. This can be useful when you are figuring out how to move money around, wire transfer it to/from Fidelity, etc. It's nice to be able to talk to someone if you are just trying to figure things out. Although, beware, they may also try to get you to talk to sales oriented advisors to advise on your investments -- I would try very hard to ignore those calls and figure out what you want to do by reading/studying yourself. Bogleheads is a great place to start.

The Fidelity website, in my opinion is also a bit better, but Vanguard's is fine.

Vanguard has the big advantage of lower fees on mutual funds of the kinds that are quite popular here (e.g. the 'three fund portfolio'). Fees are important to long term portfolio returns.

Either place will serve your immediate purpose.

Good luck
AQ
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Re: Where to park 2-3million temporarily?

Post by AQ »

I'm also interested in this question. Presume everyone who has an investment account with Fidelity already has a settlement fund account. How does it practically work to move fund for OP to Fidelity? Does Fidelity have a route number and an account number to ACH to like a traditional bank account?
mhalley
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Re: Where to park 2-3million temporarily?

Post by mhalley »

Yes, a Fidelity account has a routing number and account number. Its a little complicated to figure out as it is a little different for account types. This routing # is the same, this page tells how to figure out your account number.
https://www.fidelity.com/cash-managemen ... %20methods.
Routing and Account Numbers
The Fidelity routing number (also known as the ABA number) is 101205681.
Your Fidelity account number format is determined via one of the following methods. (see above link)
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camillus
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Re: Where to park 2-3million temporarily?

Post by camillus »

I believe Fidelity's Cash Management Account has some FDIC protection. Looks like $1.25m
AlohaJoe
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Re: Where to park 2-3million temporarily?

Post by AlohaJoe »

Peaceandpizza wrote: Sat Nov 21, 2020 9:17 pm Where is a good place to temporarily park money while I sort out my plans? Looking for something safe, accessible & easy with as much of a return as possible for the short term. Any specific advice/ accounts/ banks? I need to set it up by Monday....
You can type "where to park" in the search box and find lots of discussion on this. This question gets asked almost every day on Bogleheads, so there are a lot of good answers out there already. Just this week we've seen people ask about parking $200,000, $1,000,000, $520,000, and more. You can find lots of good advice and concrete suggestions in those threads!
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mokaThought
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Re: Where to park 2-3million temporarily?

Post by mokaThought »

camillus wrote: Sat Nov 21, 2020 11:24 pm I believe Fidelity's Cash Management Account has some FDIC protection. Looks like $1.25m
My mind was going here, too.

Fidelity has an arrangement where the money is split among several banks at a reasonable cutoff below the “normal” FDIC limit. Perhaps you could split between two Fidelity brokerage accounts if that doubles the FDIC coverage and if that matters to you.
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Firemenot
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Re: Where to park 2-3million temporarily?

Post by Firemenot »

Peaceandpizza wrote: Sat Nov 21, 2020 9:17 pm Hi all,

I'm coming into 2-3 million (before taxes) in the coming days due to the sale of a business I'm a shareholder of. I need to park the money somewhere safe while I determine longer term investing strategies and financial planning. This is all new to me -- as I came from a lower-middle class upbringing and know noone who has any sort of significant wealth to ask for advise.

Where is a good place to temporarily park money while I sort out my plans? Looking for something safe, accessible & easy with as much of a return as possible for the short term. Any specific advice/ accounts/ banks? I need to set it up by Monday....
i asked a similar question to my business bank. They facilitate distributing large cash chunks around multiple banks so the full amount is FDIC protected. I assume this must be a somewhat standard practice.
rkhusky
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Re: Where to park 2-3million temporarily?

Post by rkhusky »

mokaThought wrote: Sun Nov 22, 2020 2:08 am Perhaps you could split between two Fidelity brokerage accounts if that doubles the FDIC coverage and if that matters to you.
The accounts would have to be titled differently - spouse or joint.

Money market account at Fidelity, Schwab or Vanguard or a savings account at a bank would be the easiest.
Last edited by rkhusky on Sun Nov 22, 2020 8:07 am, edited 1 time in total.
Blue456
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Re: Where to park 2-3million temporarily?

Post by Blue456 »

Peaceandpizza wrote: Sat Nov 21, 2020 9:17 pm Hi all,

I'm coming into 2-3 million (before taxes) in the coming days due to the sale of a business I'm a shareholder of. I need to park the money somewhere safe while I determine longer term investing strategies and financial planning. This is all new to me -- as I came from a lower-middle class upbringing and know noone who has any sort of significant wealth to ask for advise.

Where is a good place to temporarily park money while I sort out my plans? Looking for something safe, accessible & easy with as much of a return as possible for the short term. Any specific advice/ accounts/ banks? I need to set it up by Monday....
I would place the money in Vanguard and buy CDs/Tbills if I wanted 100% safety.
Firemenot
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Re: Where to park 2-3million temporarily?

Post by Firemenot »

Counter thought. Just lump sum into index funds and let her ride!
livesoft
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Re: Where to park 2-3million temporarily?

Post by livesoft »

There is no need for government insurance like FDIC if one is invested in government T-bills. Generally, I think amounts like this are wired and not ACH transferred nor carried around in bags.

If one walks into a local Fidelity, Schwab, TDAmeritrade office or even a local bank, then there would be many folks there salivating to help you. Presumably, you already have accounts at a bank or two that can help you. I suppose your job is to avoid the leeches and non-low fees. Or perhaps your job is to just recognize the leeches and fees in the first place.
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unclescrooge
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Re: Where to park 2-3million temporarily?

Post by unclescrooge »

Cantor Fitzgerald has a cash management account where they split up your cash on the back end and deposit it at dozens of banks.

This increases the FDIC insurance limit to $10 million, without the headache of going to multiple banks it having several accounts.

I think you also get 0.3% yield on the money too.
MikeG62
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Re: Where to park 2-3million temporarily?

Post by MikeG62 »

Short-term Treasuries or Treasury only MMF if temporary.
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AQ
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Re: Where to park 2-3million temporarily?

Post by AQ »

livesoft wrote: Sun Nov 22, 2020 8:19 am Generally, I think amounts like this are wired and not ACH transferred nor carried around in bags.
The above statement appears suggesting if an amount exceeds a limit, one shouldn't use ACH, but wire? What is such a limit, and what is the reason behind such a rule? Is it because wire is safer than ACH but more costly since wire typically charges a fee?
Roslo
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Re: Where to park 2-3million temporarily?

Post by Roslo »

Firemenot wrote: Sun Nov 22, 2020 8:13 am Counter thought. Just lump sum into index funds and let her ride!
OP mentions these funds are pre-tax. It would be unwise to expose the funds to market risk before taxes are paid.

I'll join the choir and suggest a money market fund at Fidelity or Vanguard. That's where I regularly keep large (500k+) pre-tax balances.
Firemenot
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Re: Where to park 2-3million temporarily?

Post by Firemenot »

Roslo wrote: Mon Nov 23, 2020 7:14 am
Firemenot wrote: Sun Nov 22, 2020 8:13 am Counter thought. Just lump sum into index funds and let her ride!
OP mentions these funds are pre-tax. It would be unwise to expose the funds to market risk before taxes are paid.

I'll join the choir and suggest a money market fund at Fidelity or Vanguard. That's where I regularly keep large (500k+) pre-tax balances.
Missed the pre-tax part.
mvilleguy9
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Re: Where to park 2-3million temporarily?

Post by mvilleguy9 »

I'll hide it for you. Trust me :D :D :P :P
AlohaJoe
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Re: Where to park 2-3million temporarily?

Post by AlohaJoe »

AQ wrote: Sun Nov 22, 2020 11:49 pm
livesoft wrote: Sun Nov 22, 2020 8:19 am Generally, I think amounts like this are wired and not ACH transferred nor carried around in bags.
The above statement appears suggesting if an amount exceeds a limit, one shouldn't use ACH, but wire? What is such a limit, and what is the reason behind such a rule? Is it because wire is safer than ACH but more costly since wire typically charges a fee?
Has nothing to do with safety. It is about ACH transfer limits. The most you can transfer in a single transfer is $100,000. Nobody is going do 20-30 ACH transfers instead of a single wire transfer.
J295
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Re: Where to park 2-3million temporarily?

Post by J295 »

If you want to use a bank, they can accomplish it with 100% FDIC coverage for you assuming they participate in the CDARS program. You can Google it.

If you go to Fidelity or similar, you could use a government money market fund.

When our family had a similar situation we were comfortable with the money market.

Congrats on the sale.
Flashes1
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Re: Where to park 2-3million temporarily?

Post by Flashes1 »

I would deposit it with one of the Big 5 banks. They are "too big to fail."
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William Million
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Re: Where to park 2-3million temporarily?

Post by William Million »

Honestly, it really depends how long you need to park it. If 1 year, then multiple FDIC accounts. If 1 month, then a single money market account paying .7% is fine.
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White Coat Investor
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Re: Where to park 2-3million temporarily?

Post by White Coat Investor »

Peaceandpizza wrote: Sat Nov 21, 2020 9:17 pm Hi all,

I'm coming into 2-3 million (before taxes) in the coming days due to the sale of a business I'm a shareholder of. I need to park the money somewhere safe while I determine longer term investing strategies and financial planning. This is all new to me -- as I came from a lower-middle class upbringing and know noone who has any sort of significant wealth to ask for advise.

Where is a good place to temporarily park money while I sort out my plans? Looking for something safe, accessible & easy with as much of a return as possible for the short term. Any specific advice/ accounts/ banks? I need to set it up by Monday....
FDIC insured bank accounts are a good option right now. For example, if you were married you could open an account for Bob and Jane, one for Bob, and one for Jane and get $500K, $250K, and $250K respectively of FDIC insured deposits. Yield is currently 0.60% at Ally Bank. You'd need at least a couple more banks for $3 Million. A MMF is nearly zero but is another safe option.
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strafe
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Re: Where to park 2-3million temporarily?

Post by strafe »

mhalley wrote: Sat Nov 21, 2020 11:06 pm Yes, a Fidelity account has a routing number and account number. Its a little complicated to figure out as it is a little different for account types. This routing # is the same, this page tells how to figure out your account number.
https://www.fidelity.com/cash-managemen ... %20methods.
Routing and Account Numbers
The Fidelity routing number (also known as the ABA number) is 101205681.
Your Fidelity account number format is determined via one of the following methods. (see above link)
For a $2mm transfer, I would obtain positive confirmation rather than try to figure out from an online FAQ.
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