How to invest $2+ million?

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bengaltiger
Posts: 1
Joined: Tue Aug 21, 2018 7:53 am

How to invest $2+ million?

Post by bengaltiger » Fri Aug 24, 2018 11:12 am

So let me preface my question by stating that this is not a hoax or a what if question since I saw some speculation about similar questions on this forum! Our situation is 100% true and we really did achieve our American Dream individually as newly minted immigrants 25 yrs ago! We sold our businesses & all our properties in CA and retired at age 41 in Italy, 4 yrs ago. We are dual citizens so medical is not an issue with national health here.

$2 million cash in bank spread around in various MM accts to cover FDIC rules, from 1.75%-2% interest, letting it rollover.

$500,000 in both our Vanguard Roth Ira's distributed over 4 Index funds: VGELX, VTSAX, VEUSX, VEMAX Includes $75,000 in Vanguard cash acct. Never had a financial advisor, figured this out on my own through trial and error! Please suggest changes if needed. Most of it is in Energy and Total Stock.

We have been married for 20 yrs. We have zero debt, no kids, no mortgages. We own 4 apartments outright in major cities in Italy. We live in one and the other 3 are on Airbnb that brings us around $100,000 taxable rental income annually, which is quite adequate for our needs.

So the question is about the $2m cash in MM accts and the $75,000 cash in our Roth IRA accounts.

Where to invest the $2m without risking the principle and generating income, if not right away but down the line? Have never invested in Bonds if that's the way to go! Would appreciate specific information about which Bonds? I heard about tax free bonds? I just came across the term CD Ladder yesterday, so would that be the way to go? We probably don't need to touch any of this money for a few more years.

And the $75,000 sitting at Vanguard Roth IRA in cash? ETF's? Which ones? Prefer Indexes so what's the diff between the Vanguard's VTSMX and an Index ETF? Have a small acct at Schwab so could choose something from them to spread the Roth IRA around? Which one?

Thanks in advance for your suggestions! So glad I found this forum! So many brilliant and kind people!

chicagoan23
Posts: 337
Joined: Thu Jan 29, 2015 4:34 pm

Re: How to invest $2+ million?

Post by chicagoan23 » Fri Aug 24, 2018 11:40 am

Before getting any investment advice, you need to make sure you are getting proper tax advice in both the US and in Italy. You have a complicated financial picture with multiple streams of income, and as dual citizens you may have reporting obligations that can result in significant penalties if not followed, even if you don't owe more tax.

bloom2708
Posts: 6228
Joined: Wed Apr 02, 2014 2:08 pm
Location: Fargo, ND

Re: How to invest $2+ million?

Post by bloom2708 » Fri Aug 24, 2018 11:45 am

Welcome.

Where to invest the $2m without risking the principle and generating income, if not right away but down the line?

You are already doing this. Money market, high yield savings, CD, FDIC insured products.

Bonds risk principle. Not nearly as much as stocks, but there is risk.

Your risk is inflation risk. Your $2 million is shrinking every year even though it still shows $2 million.

Go through the videos, Getting Started, read threads, there is no reward without risk. A conservative asset allocation (mix of stocks and bonds) of 40 to 50% stocks would be better over a long investment horizon. Yes, there will be ups and downs, dips and valleys, but that is part of investing.

Hopefully others add their thoughts. I would stay the course with your no risk assets until you understand the mindset required.
"We are not here to agree with you; we are here to provoke thoughtfulness." Unknown Boglehead

PhilosophyAndrew
Posts: 475
Joined: Sat Aug 13, 2016 10:06 am

Re: How to invest $2+ million?

Post by PhilosophyAndrew » Fri Aug 24, 2018 11:58 am

OP, it isn’t reasonable to expect to generate significantly more income without assuming some short-term risk to the value of your investments.

If you wish to have the entire $2M available for spending, don’t do anything — but also realize that inflation has been and will continue to erode the purchasing power of your savings. So, your status quo is far from risk feee due to inflation risk.

Otherwise, you need to take the time to make a principled decision about whether safety of principal or earned income matters more to you.

Your investment horizon for the $2M may be a decisive factor because and ecades-long investment can flourish despite confronting significant volatility.

What is your investing time horizon for this money?

Andy.

hafjell
Posts: 170
Joined: Tue Nov 10, 2015 8:49 am

Re: How to invest $2+ million?

Post by hafjell » Fri Aug 24, 2018 12:42 pm

You need accountants in both countries who are experienced with US-Italian dual citizens. Keep us posted, please.

ivk5
Posts: 686
Joined: Thu Sep 22, 2016 9:05 am

Re: How to invest $2+ million?

Post by ivk5 » Fri Aug 24, 2018 1:37 pm

Check with your commercialista but I think you’ll find that interest on US municipal bonds, while not taxed by the US, will be taxed by Italy and therefore will increase your global tax liability.

In addition to comments above about the advisability of taking on greater market risk to offset your inflation risk, you might give some thought to your currency risk. Sounds like majority of your liquid assets are in USD while your current/future expenses are in EUR. If/when you get comfortable with greater equities allocation, consider slight tilt to Europe relative to global market cap weighting, assuming you plan to stay in Italy indefinitely.

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