Need help to find a direction to invest $800k plus $900k

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HenrysPlan2
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Need help to find a direction to invest $800k plus $900k

Post by HenrysPlan2 » Wed Dec 07, 2016 3:09 pm

we are holding $800k for a while. I am starting to think I might be making a big mistake not investing. However it's super scary seeing the
Dow Jones market at 19,000 and all time high.

Do you think what is my best move now? continue to sit with cash and wait for market crash? I know that's a bad idea from what I have read on this forum, but it feel really risky now to invest and feels like we are at market top. I know the market will go up if I holding it for long time. I am thinking to buy in taxable account index fund right away all at once?
buy taxable index fund $50k per time for next a few years? We might be selling two other investment properties which might have additional
$900k cash back next year. We are maxed on company's 401k plans and age 39

PandaBear
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Re: Need help to find a direction to invest $800k plus $900k

Post by PandaBear » Wed Dec 07, 2016 3:25 pm

You could always keep 250k in an FDIC insured account then dump the rest into a 3 fund folio. At least that's what I'd do. I'd also go "balls to the walls" and do 90/10 equity/bonds. But if you're concerned you could always do 60/40 or even 50/50.

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David Jay
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Re: Need help to find a direction to invest $800k plus $900k

Post by David Jay » Wed Dec 07, 2016 3:26 pm

What is the purpose of this investment?

If it is a long term investment for retirement, I would take no longer than 12 months to fully invest it. That means about $65,000 a month.

[edit] there is a WIKI on Lump Sum versus DCA here: https://www.bogleheads.org/wiki/Dollar_cost_averaging
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

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jafcorrea
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Re: Need help to find a direction to invest $800k plus $900k

Post by jafcorrea » Wed Dec 07, 2016 3:45 pm

friend of my gave this,
maybe can help you until decision has been made

http://www.cdars.com/
Thanks JC

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HenrysPlan2
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Re: Need help to find a direction to invest $800k plus $900k

Post by HenrysPlan2 » Wed Dec 07, 2016 3:54 pm

We have $800k now and $900k more next year with sale of 2 investment properties out if 5. So need to invest $1.7m. I have a question would the bond ever lose money ? Or is bond with guaranteed return?

CoAndy
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Re: Need help to find a direction to invest $800k plus $900k

Post by CoAndy » Wed Dec 07, 2016 3:58 pm

I know this goes against conventional BH wisdom, but I would be very leery of throwing that money into the market right now. As another poster above mentioned, maybe deposit small amounts periodically over the next 12-18 months.

MathWizard
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Re: Need help to find a direction to invest $800k plus $900k

Post by MathWizard » Wed Dec 07, 2016 5:13 pm

HenrysPlan2 wrote:We have $800k now and $900k more next year with sale of 2 investment properties out if 5. So need to invest $1.7m. I have a question would the bond ever lose money ? Or is bond with guaranteed return?
Yes, bonds can lose money.

I don't think that the US will default, so in nominal terms, a US savings bond will not lose money, but could lose money to
inflation.

See http://www.investopedia.com/articles/bo ... -risks.asp for risks in bonds.

You also have risks of diversification if you only invest in actual bonds, not bond funds, but funds have their own risks.

On the other hand, you had investment properties. I would consider that very risky, so it does not seem like you are that
risk averse. Do you just feel more comfortable with actual property rather than numbers in a spreadsheet? That would be
understandable. Or do you just think that you won the game and want to wind down the risk?

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HenrysPlan2
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Re: Need help to find a direction to invest $800k plus $900k

Post by HenrysPlan2 » Wed Dec 07, 2016 7:52 pm

however invest in total bond would have less risk supposedly? I read that if interest rate rising bond will lose value, the interest rate is no on the rise. so means no buying bond?

Emily1980
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Re: Need help to find a direction to invest $800k plus $900k

Post by Emily1980 » Wed Dec 07, 2016 8:13 pm

Henry,

It sounds from your post that you have made most of your money in real estate. Is this correct? You say you have maxed out your 401k, but then ask if bonds can lose money. Every investment can lose money. Bonds can lose money to inflation, and bond funds can lose money right off the top if what you're worried about is seeing the nominal dollar amount of your account go down. Stocks can lose money. Even real estate can lose money. In a balanced portfolio of stock and bond funds, it's not unusual to see your investments fluctuate several percentage points in a week. Any stock or bond funds you invest in with the money you've acquired from selling your real estate will behave as the funds in your 401k behave.

If the money is for long term investments, I would invest it in roughly the same allocation you have in your 401k. Since you sound very, very skittish about market movements, I would advise slowly adding it over the course of the next few years... for no other reason than panicking and selling after a market crash, should one occur after you dump it all in at once, would be catastrophic in comparison to a few percentage points of missed returns from dollar cost averaging into the market. Based on your statement, "bonds go down when interest rates go up, so no bonds then," it seems as though you have had far more of your portfolio in real estate than in your 401k up to this point. Take a breath, and take some time to read about how stock and bond funds' behavior compliment one another. Then decide on a reasonable asset allocation. And, finally, set about investing your money in an orderly fashion at whatever pace allows you to feel comfortable.

johnubc
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Re: Need help to find a direction to invest $800k plus $900k

Post by johnubc » Wed Dec 07, 2016 8:17 pm

You could wait until the market hits 20,000 if that would make you feel better.

Seriously - put half of it in now. And re-evaluate in 6 months, or add 100k a month.

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Re: Need help to find a direction to invest $800k plus $900k

Post by Grt2bOutdoors » Wed Dec 07, 2016 8:39 pm

Use equities for money you can afford to lose, monies you can not afford to lose should be placed in FDIC insured cd's, held to maturity US treasury securities in the 1-5 year maturity range. Do not use a bond fund if a fluctuating net asset value is going to make you lose sleep.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

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HenrysPlan2
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Re: Need help to find a direction to invest $800k plus $900k

Post by HenrysPlan2 » Wed Dec 07, 2016 9:58 pm

Thank you for all the good advise. Probably I am not brave enough after seeing the Dow Jone dropped to around 6500 and it's now 19000. I was wishing I put part of the money on the market at that time. I am now confused and it seem too much money to buy in the market top

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HenrysPlan2
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Re: Need help to find a direction to invest $800k plus $900k

Post by HenrysPlan2 » Wed Dec 07, 2016 10:04 pm

I have a regular job earning about $230k per year, so I don't need the fund and can invest for long term. We live below our mean, I would say $1.5m can be invested until we retire. However the money will be invest in taxable account

bmelikia
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Re: Need help to find a direction to invest $800k plus $900k

Post by bmelikia » Wed Dec 07, 2016 10:06 pm

HenrysPlan2 wrote:Thank you for all the good advise. Probably I am not brave enough after seeing the Dow Jone dropped to around 6500 and it's now 19000. I was wishing I put part of the money on the market at that time. I am now confused and it seem too much money to buy in the market top
I would say at the very minimum - you can invest 1/3 of it and then set up automatic investments that will slowly invest the remainder of the money over the next 2 years.

That would be very conservative in my opinion
"I would rather die with money, than live without it...." - Bogleheads member Ron | | "The greatest enemy of a good plan, is the dream of a perfect plan." | -Bogle

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HenrysPlan2
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Re: Need help to find a direction to invest $800k plus $900k

Post by HenrysPlan2 » Thu Dec 08, 2016 5:45 pm

If I fully invested $1.7m on taxable accounts on index funds, would I need to pay tax each year for the dividends income? How does it work?

Topic Author
HenrysPlan2
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Re: Need help to find a direction to invest $800k plus $900k

Post by HenrysPlan2 » Thu Dec 08, 2016 6:05 pm

Also, would the dividend income tax as regular tax rate as W2 income?

Topic Author
HenrysPlan2
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Re: Need help to find a direction to invest $800k plus $900k

Post by HenrysPlan2 » Sun Dec 11, 2016 10:20 pm

Anyone please?

davidsorensen32
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Re: Need help to find a direction to invest $800k plus $900k

Post by davidsorensen32 » Sun Dec 11, 2016 10:26 pm

Invest in the 3 fund portfolio. Search on this forum, there are plenty of posts. Its a no-brainer. Invest first and thank us later. I followed the BG maxims and am very thankful I did.
HenrysPlan2 wrote:Anyone please?

itstoomuch
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Re: Need help to find a direction to invest $800k plus $900k

Post by itstoomuch » Sun Dec 11, 2016 10:40 pm

HenrysPlan2 wrote:Anyone please?
IIRC
Depending on Income level from all sources, tax on dividends are 0%, 15%, 20% tax. There is/may be a ACA tax for high income earners. Taxes are less on dividends than on wages at all marginal tax brackets.
Consult your tax people.
YDivMV :beer
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snowblinded
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Re: Need help to find a direction to invest $800k plus $900k

Post by snowblinded » Sun Dec 11, 2016 11:33 pm

If you have the discipline, average in over whatever timeframe you think will get you through any hypothetical crash...and stick to it!

For $900K , do $50K per month for the next 18 months into the target allocation. Or $100K over the next 9 months. Or $100K every 45 days for the next year and a half.

The key psychological difficulty is sticking with it if the market drops, if you can't automate it.

I had a hard time doing this in 2011, 2012, etc., and I've paid for it, sitting on that cash...

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HenrysPlan2
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Re: Need help to find a direction to invest $800k plus $900k

Post by HenrysPlan2 » Sun Dec 11, 2016 11:41 pm

We have acually $1.7m (Selling two rental homes with additional $900k). Thinking to pay off my primary home mortgage $400k, and a rental home $130k first before investing. Do I just open a traditional IRA to invest all those money?

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BL
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Re: Need help to find a direction to invest $800k plus $900k

Post by BL » Sun Dec 11, 2016 11:52 pm

The unknown is usually more scary than the known. I might be terrified to have all that invested in real estate, but not so much in mostly mutual funds as I have been watching it for a while.

The 3-fund portfolio is certainly a good option. For bonds, municipal bonds if you are in a high tax bracket makes sense. Or you can use CDs or equivalent in credit unions, or even high interest savings accounts for 1+% rates. Check the CDARS link above to see how you could put above the guaranteed amount in one location. I-Bonds at 10k/person/year, as well as one for a trust would guaranteed the principal would never drop below 0 and would tend to follow inflation.

If you have bonds in a taxable account, there would be 0% for dividends in muni bonds. Dividends in stock funds would be either qualified (taxed at Capital Gains rate) and the rest would be ordinary, which would be taxed at your regular rate. If you have taxable bonds, CDs, savings accounts, these gains would be taxed at your ordinary income tax rate. The best way to see the results would be to use a Taxcaster or a tax program to play "what-if's). Some things depend on AGI or MAGI which would be different with muni bonds.

Traditional IRAs or Roth IRAs depend on income from work and are limited to 5500/person/year (+ 1000 each if over age 50). So I don't see much possibility of investing much if any in this. You could do this if you follow income limits. Also check Wiki for "backdoor Roth". Paying off mortgage sounds like a reasonable decision, especially when you don't feel comfortable investing. You could invest that money regularly that you would have paid in mortgage payments.

Take your time and make a plan, then do it, over time if you prefer. Putting some in CDs or savings accounts could be done immediately as these could be withdrawn relatively soon if desired.

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HenrysPlan2
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Re: Need help to find a direction to invest $800k plus $900k

Post by HenrysPlan2 » Mon Dec 12, 2016 12:11 am

Thank you for the responds. I am earning about $230k w2 income and my finance(living together, financially together) with $45k w2 income. She maximized her 401k and Roth IRA thus year and I maxed out the 401k. We are thinking to have her invest in traditional IRA and I will just not investing more due to my income and tax on dividends. Instead I will pay off my primary home mortgage $400k and about $130k on one investment home both with interest rate 4%? Also I wonder is it a good idea or too much for her to invest $1m only traditional IRA? What other good options we have?

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HenrysPlan2
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Re: Need help to find a direction to invest $800k plus $900k

Post by HenrysPlan2 » Mon Dec 12, 2016 12:18 am

We have 6 homes (I own one primary and 2 rentals, my financed owns three investment homes). I see a lot of people Hsve the courage invest in stocks even know the market is all time high, it's crazy for SF Bay Area real estate and it's risky as well, so selling two investment homes(might not have much gain due to she bought them high)

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HenrysPlan2
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Re: Need help to find a direction to invest $800k plus $900k

Post by HenrysPlan2 » Mon Dec 12, 2016 12:28 am

Also should we hold most of the bonds on our 401k plans for tax purposes?

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