Advice needed: early 30s, 7-fig sum to invest, aspiring BH

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Advice needed: early 30s, 7-fig sum to invest, aspiring BH

Post by quiet_morning » Sun Jul 03, 2011 6:33 pm

I am a newcomer to this forum; an aspiring Boglehead; and [very fortunate] recipient of a 7-figure sum after selling my company. I intend to invest these funds and manage them in Boglehead fashion. But, I don't know how best to get started.

About me: early 30s; married; 1 kid; modest lifestyle; good, but not ridiculous income; <$100k in tax-advantaged accounts; no house; no debt. I've read some Swenson, Bogle, & Bernstein, but little else. Pre-windfall AA is terrible.

Here is my "plan":
* I have not decided on a new AA yet, but generally feel comfortable with the kinds of AAs discussed in Bernstein's IAA book.
* I plan to ask for the advice of my Vanguard rep on the specific AA.
* I will tend toward a conservative AA because I don't really "need" to be aggressive.
* I will rebalance every 6 mo., but only if the deviation from my AA is over some threshold.
* I will "wade in" over 18 months because I would feel poorly about losing a substantial sum quickly and I fear it would discourage me from managing my investments myself.

I have a few concerns:
* Most of these funds will not be in tax advantaged accounts. It's unclear to me how that should affect my strategy.
* Honestly (market timing sin coming, please forgive me) I'm worried about the debt ceiling and dysfunction in DC.

I realize I am extremely fortunate and would appreciate some guidance from experience Bogleheads on how best to invest a sum of that size, including not just AA, but...well, anything that comes to mind I'd appreciate really.

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Post by pteam » Sun Jul 03, 2011 6:38 pm

If you have serious fears about the debt ceiling just wait a month of two til they resolve the situation. If the market drops significantly u can invest then at a discount.

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Post by livesoft » Sun Jul 03, 2011 6:39 pm

Seems OK to me.

Fill tax-advantaged up with bond funds. If you need more fixed income, then it has to go into taxable, but so what? You can use tax-exempt bond funds if you are in a high enough tax bracket or just use a regular bond fund. If your state has an income tax, consider moving or using US Treasury bond funds which are not state taxed.

Many folks use rebalancing bands, so no problem there.

It won't hurt you to wade into this slowly, so no problem there.

Good luck!
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Post by amdmaxx » Sun Jul 03, 2011 6:52 pm

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Post by retiredjg » Sun Jul 03, 2011 7:12 pm

quiet_morning, welcome to the forum!

Investing is not difficult, even with large amounts of money. You just need to do a few things right and avoid the stupid stuff. People here can help you.
But, I don't know how best to get started.

1) Set aside an emergency fund - 3 to 12 months of expenses invested in something safe like high yield savings, plain old savings, CDs, money market. Things that cannot lose value.

2) Do you want to segregate any of this money out for a short term goal - home down-payment, your next vehicle, 3 months in Europe, college for the kid? If so, take that money out of the mix.

3) The rest is money set aside for your retirement. Your first decision is your stock to bond ratio. Once that is decided, the rest is pretty much gravy. From the sounds of it, your tax-advantaged accounts will be filled with fixed income of some kind (bonds, etc.) and your taxable account will be whatever it needs to be (too soon to comment on that).

To decide your stock to bond ratio, see this link and be sure to check out the link to "Create An Investment Plan" at Vanguard.

The next thing to do would be to post your information here if you want a suggestion from people on this forum and/or gather pretty much the same information for the people at Vanguard to make a suggestion for you. You can do one or the other or both. Our suggestions are often similar, but usually not identical. You'll learn a lot just by gathering the information. See the link at the bottom of this message for what you need to post to get help.
* Most of these funds will not be in tax advantaged accounts. It's unclear to me how that should affect my strategy.
This is pretty straightforward. In your taxable accounts, you'll hold tax-efficient funds - probably mostly stock index funds. If you must hold some bonds in this bucket, whether they are taxable bonds or tax-exempt bonds will depend on your tax bracket. Whatever it is you hold there, you want it to be as tax-efficient as you can get it. Wiki article link: Principles of Tax-Efficient Fund Placement
* Honestly (market timing sin coming, please forgive me) I'm worried about the debt ceiling and dysfunction in DC.
Ignore it. If you follow the media, the sky is always falling about something. This too shall pass, and probably amount to little or nothing. And by the time you get to the buying stage, this "problem" will be a memory.

From what you have posted, it appears you are headed in the right direction. Good luck!

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