Lottery into SPY

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airahcaz
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Lottery into SPY

Post by airahcaz »

Win $1B in lottery. Net $400M.

Can a market order to purchase $500M of SPY be realistically filled at a price close to market, or would that 'move the markets? How would one best get the full $400M invested in SPY?

Secondly, would the portfolio need to be spread across several brokerage houses to reduce liquidity and solvency risk of those individual brokerages?
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blueblock
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Re: Lottery into SPY

Post by blueblock »

https://www.reddit.com/r/powerball/

Quick summary:
Tell no one; you have a year to claim your prize
Find a good tax lawyer
Find a Family Office accepting new clients
Find an investment banker specializing in family fortunes and trusts/foundations
Kiss your old life good-bye
JZinCO
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Re: Lottery into SPY

Post by JZinCO »

SPY holds 163.09 billion. You would be buying about 0.2%. I suppose that would move it though, you wouldn't be able to see your 'bump' in daily price movements.
As a practical matter, you would be able to handle payments on dividends without selling shares?
SIPC only covers 500,000. You'd have to spread across 800 firms to reduce solvency risk. Though I'm sure you could self-insure :)
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nisiprius
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Re: Lottery into SPY

Post by nisiprius »

JZinCO wrote:SPY holds 163.09 billion. You would be buying about 0.2%. I suppose that would move it though, you wouldn't be able to see your 'bump' in daily price movements.
As a practical matter, you would be able to handle payments on dividends without selling shares?
SIPC only covers 500,000. You'd have to spread across 800 firms to reduce solvency risk. Though I'm sure you could self-insure :)
Isn't there some way you can hold it directly? Like holding a stock certificate instead of holding it "in street name?"

If not, then it might be a good reason to buy Vanguard 500 Index Fund. VFINX, wait I mean VFIAX, I mean Institutional shares, I mean Institutional Plus shares. ER 0.02%.

Just don't let them "upgrade" your mutual fund account to a VBS brokerage account.

Of course if the value falls below $200 million you might get demoted to Institutional.

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Hodor
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Re: Lottery into SPY

Post by Hodor »

That's a good one Nisiprius, but if we're going for sheer unnecessary wordiness, why not go for the Vanguard Institutional Total Stock Market Index Fund Institutional Plus Shares (VITPX).
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airahcaz
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Re: Lottery into SPY

Post by airahcaz »

JZinCO wrote:SPY holds 163.09 billion. You would be buying about 0.2%. I suppose that would move it though, you wouldn't be able to see your 'bump' in daily price movements.
As a practical matter, you would be able to handle payments on dividends without selling shares?
SIPC only covers 500,000. You'd have to spread across 800 firms to reduce solvency risk. Though I'm sure you could self-insure :)
You mean living off at least $4M in dividends a year? Yes I think so.
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. (Plagiarized, but worth stealing)
ogrehead
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Re: Lottery into SPY

Post by ogrehead »

JZinCO wrote:SPY holds 163.09 billion. You would be buying about 0.2%. I suppose that would move it though, you wouldn't be able to see your 'bump' in daily price movements.
AUM isn't what matters so much as liquidity and market depth though obviously there is a relation. If you were dumb enough to place a market order for 2,500,000 shares of SPY all at once I'm sure it would execute immediately but there would be really nasty slippage.
lee1026
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Re: Lottery into SPY

Post by lee1026 »

The S&P 500 market should have enough liquidity to absorb $400 million with ease. You will probably want to break it up a bit, but it should go though in one day without much trouble. Volume on SPY is 172 million shares by day. You would be dealing with 2% of that. Drop in the bucket....

If I were doing this, I would just put in a giant deposit into a mutual fund, and make it the fund manager's problem to actually buy and sell. The big S&P 500 funds are big enough that $400 million won't mean much to them.
alex_686
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Re: Lottery into SPY

Post by alex_686 »

A amount that large that was dumped into the market as a market order would move the market. Spread over a day or 3 you might even be able to buy that amount of SPY with passive limit orders. Maybe.

That being said, there are probably more efficient ways of doing it. For example, buying enough of the 500 companies, then swamping them for creation units. There is nothing like that smell of ETFs right off the press.

Actually, since we are talking about a taxable account, it probably would be more efficient just to hold the individual 500 positions than to buy the ETF.
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jhfenton
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Re: Lottery into SPY

Post by jhfenton »

With a purchase that large, you would probably be best served by arranging with a market maker to buy some new 50,000 share creation units.

Edit: I should have refreshed, alex_686 beat me to it.
JZinCO
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Re: Lottery into SPY

Post by JZinCO »

alex_686 wrote: Actually, since we are talking about a taxable account, it probably would be more efficient just to hold the individual 500 positions than to buy the ETF.
Yes of course.
Or take over as majority shareholder in a few companies :)
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Re: Lottery into SPY

Post by JZinCO »

airahcaz wrote:
JZinCO wrote:SPY holds 163.09 billion. You would be buying about 0.2%. I suppose that would move it though, you wouldn't be able to see your 'bump' in daily price movements.
As a practical matter, you would be able to handle payments on dividends without selling shares?
SIPC only covers 500,000. You'd have to spread across 800 firms to reduce solvency risk. Though I'm sure you could self-insure :)
You mean living off at least $4M in dividends a year? Yes I think so.
Sorry, I mean, to maintain your "oomph" in the market (cost basis+growth) as in the OP scenario, you'd have to either not reinvest some dividends or sell shares to pay taxes.
But of course it would be no problem to move to a country like Brazil where dividends aren't taxed.
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airahcaz
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Re: Lottery into SPY

Post by airahcaz »

JZinCO wrote:
airahcaz wrote:
JZinCO wrote:SPY holds 163.09 billion. You would be buying about 0.2%. I suppose that would move it though, you wouldn't be able to see your 'bump' in daily price movements.
As a practical matter, you would be able to handle payments on dividends without selling shares?
SIPC only covers 500,000. You'd have to spread across 800 firms to reduce solvency risk. Though I'm sure you could self-insure :)
You mean living off at least $4M in dividends a year? Yes I think so.
Sorry, I mean, to maintain your "oomph" in the market (cost basis+growth) as in the OP scenario, you'd have to either not reinvest some dividends or sell shares to pay taxes.
But of course it would be no problem to move to a country like Brazil where dividends aren't taxed.
I'd go the "not reinvesting ALL dividends" route
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. (Plagiarized, but worth stealing)
DSInvestor
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Re: Lottery into SPY

Post by DSInvestor »

SPY er=0.0945%. Institutional Plus shares of Vanguard 500 index and Total Stock Market er=0.02% with $200MM minimum initial investment. May be easier to use the mutual fund instead. Lower expenses. IMO, Mutual fund TLH is easier than with ETF. However, I wonder how Vanguard would handle exchange all shares of 500 Index Institutional Plus for Total Stock Market Institutional Plus if you wanted to TLH 10 months after your lump sum purchase.
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airahcaz
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Re: Lottery into SPY

Post by airahcaz »

DSInvestor wrote:SPY er=0.0945%. Institutional Plus shares of Vanguard 500 index and Total Stock Market er=0.02% with $200MM minimum initial investment. May be easier to use the mutual fund instead. Lower expenses. IMO, Mutual fund TLH is easier than with ETF. However, I wonder how Vanguard would handle exchange all shares of 500 Index Institutional Plus for Total Stock Market Institutional Plus if you wanted to TLH 10 months after your lump sum purchase.
Ok let's shoot for placing the $200MM into the mutual fund, with a buy order across several days since the purchases are made only once a day?
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JoMoney
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Re: Lottery into SPY

Post by JoMoney »

As others alluded to, a transaction of that size probably shouldn't go through normal broker bid/ask channels... I'm sure there would be some special block-trade arrangement made by brokers specializing in large transactions between other large institutional clients wishing to transact or with an investment bank that would make the 'creation units' of that ETF.
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Re: Lottery into SPY

Post by DSInvestor »

airahcaz wrote:
DSInvestor wrote:SPY er=0.0945%. Institutional Plus shares of Vanguard 500 index and Total Stock Market er=0.02% with $200MM minimum initial investment. May be easier to use the mutual fund instead. Lower expenses. IMO, Mutual fund TLH is easier than with ETF. However, I wonder how Vanguard would handle exchange all shares of 500 Index Institutional Plus for Total Stock Market Institutional Plus if you wanted to TLH 10 months after your lump sum purchase.
Ok let's shoot for placing the $200MM into the mutual fund, with a buy order across several days since the purchases are made only once a day?
If you wanted institutional Plus shares (er=0.02%) right from the start, your first order must meet the minimum initial investment of $200MM. If you want to spread it out with a series of smaller investments, you can go with Institutional shares (er=0.04%) which has a smaller minimum initial investment of $5MM. Once your fund position exceeds $200MM, Vanguard will likely promote your institutional shares to Institutional Plus shares.
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Epsilon Delta
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Re: Lottery into SPY

Post by Epsilon Delta »

DSInvestor wrote:
If you wanted institutional Plus shares (er=0.02%) right from the start, your first order must meet the minimum initial investment of $200MM. If you want to spread it out with a series of smaller investments, you can go with Institutional shares (er=0.04%) which has a smaller minimum initial investment of $5MM. Once your fund position exceeds $200MM, Vanguard will likely promote your institutional shares to Institutional Plus shares.
I suspect this is something you'd negotiate with the fund managers I don't think you're going to able to initiate that transaction on the web site.
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