1.1M in cash, soon to be 1.5M - how do I get this working for me?

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Topic Author
delta5
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Joined: Mon Dec 28, 2015 10:18 pm

1.1M in cash, soon to be 1.5M - how do I get this working for me?

Post by delta5 »

My wife and I have been doing well in the past few years. The business we are building is profitable, and throwing off cash. We have maxed retirement accounts for a long time. I am very, very heavy in cash. Between selling to rebalance in early 2020, moving some old 401ks, previous lack of action, and taking cash out of the business, we've built a significant reserve.

While I understand investing and have desires to engage more actively, I basically don't have the time - running my business is more profitable and a necessary part of growing it, when compared to spending much time actively investing.

We live in a VHCOL area. 3 kids, ages 4, 7, 9. High income couple - she makes about $60k in two jobs, I'm salaried at $235k + the pass through from the business - expecting in excess of $600k from that this year, probably $450k is a round number to use in coming years. Edit: the two jobs are 1 working for our company, and a half-time job keeping her networks open and perhaps her sanity intact.

We definitely don't live frugally. Expensive area, and we are enjoying [some] of our success. I do want to plan for a long retirement, and not work past 55. My youngest would be 18 and entering college.

I'm reaching out to this community which I have found so very helpful over the years to gain perspective, hear advice, and receive feedback.
Right now, my plan is to have around $1.5M a bogleheads approach to stocks. I'm using VTI, SPY, and VTIAX to accomplish that, depending on what is actually available to me in a given account. I expect to be earning and running the business profitably for a another decade, and therefore I am more tolerant to the asset allocation of all stocks. I see bonds as a damping function on the performance of the stock ETFs. I'm expecting to split more incoming cash in future years about 60/40 - 60 towards the bogleheads equity approach of VTI / VTIAX. 40 towards alternate investments.

The other $1M or so I plan to divide across a few other things. That includes stocks I want to own for a very long time- AAPL is represented heavily (I recently stopped buying when I realized it was ~5% of our portfolio). This tranche also includes dividend paying stocks. Another tranche is being kept available for accredited investor type things (if you're familiar with the 506c board or private placement money). I also plan on using this pool for other investments - think rental real estate.

My direct question would be:
Given the $1.1M in cash, and another $500k-ish in the next few months, I have been trying to DCA my way into VTI and VTS with about $20k / week. Looking at the cash coming in, I'll really need to move more like $30-35k to DCA in over a year. What timeframes should I be considering DCA'ing this cash into the market? Would you buy more on a down day? Not buy on an up day? Realistically, I will be buying the whole weekly value in a single shot - I'm not buying 1/5 of the weekly value every day.


Emergency funds: I keep about $200k in checking. not included in the other mentions of cash below

Debt:
House - $750k, 29 yrs left, 2.875%, house worth $1.4M
Boat - ~$90k, $670/mo pmt, 18yrs left
Car1 - ~$10k, $400/mo pmt, 2 yrs left
Truck (owned by business)

Tax Filing Status: Married Jointly

Tax Rate: 37% Federal, 5.75% State

State of Residence: VA

Age: Him 41, Her 40

Desired Asset allocation: 100% (of the $1.5M) stocks
Desired International allocation: 20%

Total portfolio - $2.2M. By years end, I expect to pull another $400-$600k out of the business. Another $120k of that will go to estimated taxes in 2021

Taxable
Joint taxable
Cash - $390k
VTI - $82k

Advantaged
Him IRA #1
Cash $382k
VSTCX $35k
AAPL $45k
MSFT $$47k
Another $92k across some stocks I continue to want to hold

Him ROTH IRA
Cash $21k

His 401k
VTIAX $199k
VTSAX $250k
I max, put about $55k / yr in this. Since I can get VTIAX here, not a bad place to load on the international fund

Her IRA
Cash $92k

Her 401k #1(Self Directed)
Cash $219k
VTSAX $24k
AAPL $57k

Her 401k #1
SPY $311k

Her 401k #2
VTIAX $56k

New annual Contributions
$55k in his 401k
$55k in her 401k
$24k/ yr in kids 529s
Last edited by delta5 on Tue Sep 21, 2021 7:58 pm, edited 2 times in total.
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David Jay
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Re: 1.1M in cash, soon to be 1.5M - how do I get this working for me?

Post by David Jay »

delta5 wrote: Mon Sep 20, 2021 10:04 pmWhile I understand investing and have desires to engage more actively, I basically don't have the time - running my business is more profitable and a necessary part of growing it, when compared to spending much time actively investing.

...

Given the $1.1M in cash, and another $500k-ish in the next few months, I have been trying to DCA my way into VTI and VTS with about $20k / week. Looking at the cash coming in, I'll really need to move more like $30-35k to DCA in over a year. What timeframes should I be considering DCA'ing this cash into the market? Would you buy more on a down day? Not buy on an up day? Realistically, I will be buying the whole weekly value in a single shot - I'm not buying 1/5 of the weekly value every day.
These two paragraphs are pretty much in conflict with each other. Running your business is more profitable but you want to make week-by-week decisions about the amount of money to DCA into VTI?

The same amount every month (not week), regardless of market movements. Automate the process. Many brokerage houses have automated transfers. Set up an automated purchase of purchase of $140,000 of VTI once a month for 12 months.
It's not an engineering problem - Hersh Shefrin | To get the "risk premium", you really do have to take the risk - nisiprius
dbr
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Re: 1.1M in cash, soon to be 1.5M - how do I get this working for me?

Post by dbr »

What causes you to think you should DCA your cash into stocks.?

This is serious question. The topic is discussed repeatedly on the forum but it seems to be very difficult to find what motivates the idea in the first place.

My response, of course, is that if you have an asset allocation you want to be in then not being in that asset allocation now makes no sense. Otherwise the practice seems to be closet market timing. Market timing is not generally successful.
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ApeAttack
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Re: 1.1M in cash, soon to be 1.5M - how do I get this working for me?

Post by ApeAttack »

Why "actively" invest? The BH philosophy is buy and hold. As David Jay said, if you want to DCA, automate the process by buying the same thing every month until you have invested as much as you are comfy with. It takes a negligible amount of time each month.
May all your index funds gain +0.5% today.
Marseille07
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Re: 1.1M in cash, soon to be 1.5M - how do I get this working for me?

Post by Marseille07 »

delta5 wrote: Mon Sep 20, 2021 10:04 pm My direct question would be:
Given the $1.1M in cash, and another $500k-ish in the next few months, I have been trying to DCA my way into VTI and VTS with about $20k / week. Looking at the cash coming in, I'll really need to move more like $30-35k to DCA in over a year. What timeframes should I be considering DCA'ing this cash into the market? Would you buy more on a down day? Not buy on an up day? Realistically, I will be buying the whole weekly value in a single shot - I'm not buying 1/5 of the weekly value every day.
A similar situation here. Imo you want to make it automatic; daily/weekly/monthly, whichever is fine. The key is to determine some rule and stick with it.

Personally I'm using simple technical analysis, but I'm very consistent about following the TA.
Katietsu
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Re: 1.1M in cash, soon to be 1.5M - how do I get this working for me?

Post by Katietsu »

I was exhausted just reading your post. Given your lack of time which understandably led to a cash accumulation, why do you want to invest in individual stocks and look for other less mainstream investments right now? Does your wife want to work both jobs? Do you really need to DCA weekly instead of monthly? Why hang onto a car payment regardless of presumably a low interest rate? In other words, simplify and free up time and/or mental energy.

When I needed to get more in to equities a couple of years ago, I did put in a buy order with a limit which was 10% below the value of my most recent regularly scheduled DCA purchase. So, if there was a drop during that month, I would be accelerating the purchases a bit. Honestly, I knew that it was not going to move the needle, and that it could end up working for or against me. But it was easy and I found some pleasure in doing it this way.

Congratulations on your business.
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BL
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Re: 1.1M in cash, soon to be 1.5M - how do I get this working for me?

Post by BL »

Katietsu wrote: Tue Sep 21, 2021 12:32 am I was exhausted just reading your post. Given your lack of time which understandably led to a cash accumulation, why do you want to invest in individual stocks and look for other less mainstream investments right now? Does your wife want to work both jobs? Do you really need to DCA weekly instead of monthly? Why hang onto a car payment regardless of presumably a low interest rate? In other words, simplify and free up time and/or mental energy.
............
+1
Agree to pay off the cars, both for simplifying and because the money you have in cash is paying less that your mortgage. Then you can take the car payment amounts and invest in equities. Maybe check to see if you can get a lower rate on house with a shorter time period.
tashnewbie
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Re: 1.1M in cash, soon to be 1.5M - how do I get this working for me?

Post by tashnewbie »

delta5 wrote: Mon Sep 20, 2021 10:04 pm I expect to be earning and running the business profitably for a another decade, and therefore I am more tolerant to the asset allocation of all stocks. I see bonds as a damping function on the performance of the stock ETFs. I'm expecting to split more incoming cash in future years about 60/40 - 60 towards VTI / VTS

Given the $1.1M in cash, and another $500k-ish in the next few months, I have been trying to DCA my way into VTI and VTS with about $20k / week.

Debt:
House - $750k, 29 yrs left, 2.875%, house worth $1.4M
Boat - ~$90k, $670/mo pmt, 18yrs left
Car1 - ~$10k, $400/mo pmt, 2 yrs left
I didn't quite understand what your plan is with respect to VTI and VTS (is that the correct ticker? I couldn't find it.). You say don't want any bonds now but in the future you want to split cash contributions 60/40 to VTI/VTS; therefore, I assumed VTS was some sort of bond/fixed income fund. But then you say you want to DCA into VTI and VTS now. Which is it?

I agree with others...forget DCA. Just go ahead now and invest all of the cash across all of these accounts into whatever funds you want to hold for the long haul. Since you say you're busy and don't want to actively invest, it makes sense to select passive index funds.

I would pay off the boat and car today, regardless of the interest rates. Two fewer things that are on your balance sheet and 2 fewer payments you have to make. And the interest rate is probably higher than what you're receiving on the cash. You can take some of your cash and pay those off today.
Topic Author
delta5
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Joined: Mon Dec 28, 2015 10:18 pm

Re: 1.1M in cash, soon to be 1.5M - how do I get this working for me?

Post by delta5 »

David Jay wrote: Mon Sep 20, 2021 10:46 pm
delta5 wrote: Mon Sep 20, 2021 10:04 pmWhile I understand investing and have desires to engage more actively, I basically don't have the time - running my business is more profitable and a necessary part of growing it, when compared to spending much time actively investing.

...

Given the $1.1M in cash, and another $500k-ish in the next few months, I have been trying to DCA my way into VTI and VTS with about $20k / week. Looking at the cash coming in, I'll really need to move more like $30-35k to DCA in over a year. What timeframes should I be considering DCA'ing this cash into the market? Would you buy more on a down day? Not buy on an up day? Realistically, I will be buying the whole weekly value in a single shot - I'm not buying 1/5 of the weekly value every day.
These two paragraphs are pretty much in conflict with each other. Running your business is more profitable but you want to make week-by-week decisions about the amount of money to DCA into VTI?

The same amount every month (not week), regardless of market movements. Automate the process. Many brokerage houses have automated transfers. Set up an automated purchase of purchase of $140,000 of VTI once a month for 12 months.
In conflict, yes, sort of.

Automated monthly is interesting. I might consider that, or automating weekly. I would have to see how to do that at Schwab and Fidelity. I want to avoid making these decisions versus actions - buy on the first red day, or buy on Friday if no down days. I guess hands off and automating would be the most thought / decision free approach.
Topic Author
delta5
Posts: 18
Joined: Mon Dec 28, 2015 10:18 pm

Re: 1.1M in cash, soon to be 1.5M - how do I get this working for me?

Post by delta5 »

dbr wrote: Mon Sep 20, 2021 11:01 pm What causes you to think you should DCA your cash into stocks.?

This is serious question. The topic is discussed repeatedly on the forum but it seems to be very difficult to find what motivates the idea in the first place.

My response, of course, is that if you have an asset allocation you want to be in then not being in that asset allocation now makes no sense. Otherwise the practice seems to be closet market timing. Market timing is not generally successful.
DCA mostly because I don’t want to take a potential correction in the shorts the day after I buy $1M of etfs.
I haven’t seen (or really looked) modeling over different market conditions for DCA. I have seen the worlds worst market timer article.
My DCA thoughts are rooted in thoughts of a potential correction coming soon.
JordanIB
Posts: 360
Joined: Mon Sep 29, 2008 3:25 pm

Re: 1.1M in cash, soon to be 1.5M - how do I get this working for me?

Post by JordanIB »

dbr wrote: Mon Sep 20, 2021 11:01 pm What causes you to think you should DCA your cash into stocks.?

This is serious question. The topic is discussed repeatedly on the forum but it seems to be very difficult to find what motivates the idea in the first place.
Really? Regardless of data and arguments for or against DCA, I find it very easy to understand what motivates the idea. The psychology of money and not wanting to incur a large "loss" shortly after investing funds.
Money_Badger
Posts: 465
Joined: Thu Jul 02, 2020 11:05 pm
Location: Raleigh NC

Re: 1.1M in cash, soon to be 1.5M - how do I get this working for me?

Post by Money_Badger »

tashnewbie wrote: Tue Sep 21, 2021 7:49 am
delta5 wrote: Mon Sep 20, 2021 10:04 pm I expect to be earning and running the business profitably for a another decade, and therefore I am more tolerant to the asset allocation of all stocks. I see bonds as a damping function on the performance of the stock ETFs. I'm expecting to split more incoming cash in future years about 60/40 - 60 towards VTI / VTS

Given the $1.1M in cash, and another $500k-ish in the next few months, I have been trying to DCA my way into VTI and VTS with about $20k / week.

Debt:
House - $750k, 29 yrs left, 2.875%, house worth $1.4M
Boat - ~$90k, $670/mo pmt, 18yrs left
Car1 - ~$10k, $400/mo pmt, 2 yrs left
I didn't quite understand what your plan is with respect to VTI and VTS (is that the correct ticker? I couldn't find it.). You say don't want any bonds now but in the future you want to split cash contributions 60/40 to VTI/VTS; therefore, I assumed VTS was some sort of bond/fixed income fund. But then you say you want to DCA into VTI and VTS now. Which is it?

I agree with others...forget DCA. Just go ahead now and invest all of the cash across all of these accounts into whatever funds you want to hold for the long haul. Since you say you're busy and don't want to actively invest, it makes sense to select passive index funds.

I would pay off the boat and car today, regardless of the interest rates. Two fewer things that are on your balance sheet and 2 fewer payments you have to make. And the interest rate is probably higher than what you're receiving on the cash. You can take some of your cash and pay those off today.
Pay off the boat and the car. See if you can get a decent rate to refinance the house. Check out the Mega Refinancing thread here: viewtopic.php?f=2&t=289559

The thread seems intimidating, but just start back 80-90 posts and you should get a feel for how to approach the refi.

If you prefer DCA, that's fine, just automate it as someone else mentioned.
Money_Badger
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Location: Raleigh NC

Re: 1.1M in cash, soon to be 1.5M - how do I get this working for me?

Post by Money_Badger »

JordanIB wrote: Tue Sep 21, 2021 9:00 am
dbr wrote: Mon Sep 20, 2021 11:01 pm What causes you to think you should DCA your cash into stocks.?

This is serious question. The topic is discussed repeatedly on the forum but it seems to be very difficult to find what motivates the idea in the first place.
Really? Regardless of data and arguments for or against DCA, I find it very easy to understand what motivates the idea. The psychology of money and not wanting to incur a large "loss" shortly after investing funds.
Agree. DCA does mitigate the risk to some degree.
dbr
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Re: 1.1M in cash, soon to be 1.5M - how do I get this working for me?

Post by dbr »

delta5 wrote: Tue Sep 21, 2021 8:55 am
dbr wrote: Mon Sep 20, 2021 11:01 pm What causes you to think you should DCA your cash into stocks.?

This is serious question. The topic is discussed repeatedly on the forum but it seems to be very difficult to find what motivates the idea in the first place.

My response, of course, is that if you have an asset allocation you want to be in then not being in that asset allocation now makes no sense. Otherwise the practice seems to be closet market timing. Market timing is not generally successful.
DCA mostly because I don’t want to take a potential correction in the shorts the day after I buy $1M of etfs.
I haven’t seen (or really looked) modeling over different market conditions for DCA. I have seen the worlds worst market timer article.
My DCA thoughts are rooted in thoughts of a potential correction coming soon.
Thanks I appreciate the answer.
retiringwhen
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Re: 1.1M in cash, soon to be 1.5M - how do I get this working for me?

Post by retiringwhen »

My advice,

Step 1. - pay off all your loans, that debt is not doing you any good on any day you have equivalent cash sitting around. Unless you lump sum the entire cash balance into the market tomorrow, you have no reason to hold those loans. One caveat, if loans are a behavioral barrier to you buying more toys, then hold the loans. I think you know what I mean 8-) Since your business is throwing off lots of cash, this condition is almost always true, so just get rid of the loans!

Step 2. - take a dart, throw it at a dart board. use the score to pick a day of the month to buy your desired purchases of VTSAX or VTIAX as necessary. Don't think about it, don't fret. BTW, you also need to decide how fast you want to DCA, I suggest no more than 6 mos.*

*Why do I suggest 6 mos. max? Because you sound like the kind of guy who will fiddle (me too). The longer it takes, the more likely it will be that you fiddle yourself into a worse place. How do I know this? Because I had the same challenge and fell into the same traps. After I realized this problem, I Just broke the cash in two parts and lumped them about 30 days apart. I slept much better after that.

BTW, the market took a 20% dive a few months later, it did not matter in the long run, plus Tax Loss Harvesting is a beautiful consolation prize :sharebeer

As a final caveat, your mild concentrations in MSFT and AAPL represent higher risk in my eyes than any risk due to DCA vs. Lump sum considerations. I would trade them for VTSAX tomorrow without question since they all exist in tax advantaged accounts.
dbr
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Re: 1.1M in cash, soon to be 1.5M - how do I get this working for me?

Post by dbr »

A comment about DCA is that it is always less risk and less possible return than investing in a risky asset all at once for the reason that time exposed to risk is less. This difference fades away as the length of time after becoming fully invested goes on.

As far as regret it is a cross matrix of two factors: did or did not DCA and the market went up or the market went down (ok a third is the market did not move.) Typically there is more psychological pain with did not DCA and the market went down than with DCA and the market went up. In theory psychological pain is not supposed to be a component of investment decision making.
z3r0c00l
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Re: 1.1M in cash, soon to be 1.5M - how do I get this working for me?

Post by z3r0c00l »

delta5 wrote: Mon Sep 20, 2021 10:04 pm
While I understand investing and have desires to engage more actively, I basically don't have the time - running my business is more profitable and a necessary part of growing it, when compared to spending much time actively investing.
About 30 minutes work to get 500,000 cash into stocks in spring 2020 would have made you close to another 500,000 profit by now. What business can offer that?
70% Global Stocks / 30% Bonds
Marseille07
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Joined: Fri Nov 06, 2020 12:41 pm

Re: 1.1M in cash, soon to be 1.5M - how do I get this working for me?

Post by Marseille07 »

dbr wrote: Tue Sep 21, 2021 9:27 am In theory psychological pain is not supposed to be a component of investment decision making.
It is not supposed to be but it is.

Personal finance is personal. It's much better to DCA and maintain the AA than lump sum & later panic sell during a correction.
Wanderingwheelz
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Re: 1.1M in cash, soon to be 1.5M - how do I get this working for me?

Post by Wanderingwheelz »

My wife and I had the exact same thing happen with us when our businesses went crazy at around your age. What you have to do, in my opinion, is just invest the money aggressively until it’s all put to work. If you don’t lump sum it, shoot to have it done in 6 months. You’re going to have more and more money coming in and some point down the line you’ll look back and what’s happening now won’t seem like much of a big deal.

When it happened to us at least cash was paying something. Today you’re getting killed.
Being wrong compounds forever.
Topic Author
delta5
Posts: 18
Joined: Mon Dec 28, 2015 10:18 pm

Re: 1.1M in cash, soon to be 1.5M - how do I get this working for me?

Post by delta5 »

dbr wrote: Mon Sep 20, 2021 11:01 pm What causes you to think you should DCA your cash into stocks.?

This is serious question. The topic is discussed repeatedly on the forum but it seems to be very difficult to find what motivates the idea in the first place.

My response, of course, is that if you have an asset allocation you want to be in then not being in that asset allocation now makes no sense. Otherwise the practice seems to be closet market timing. Market timing is not generally successful.
See JordanIBs answer. Concerns about the downsides of buying $1M on a single day.
dbr
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Re: 1.1M in cash, soon to be 1.5M - how do I get this working for me?

Post by dbr »

delta5 wrote: Tue Sep 21, 2021 11:39 am
dbr wrote: Mon Sep 20, 2021 11:01 pm What causes you to think you should DCA your cash into stocks.?

This is serious question. The topic is discussed repeatedly on the forum but it seems to be very difficult to find what motivates the idea in the first place.

My response, of course, is that if you have an asset allocation you want to be in then not being in that asset allocation now makes no sense. Otherwise the practice seems to be closet market timing. Market timing is not generally successful.
See JordanIBs answer. Concerns about the downsides of buying $1M on a single day.
I'm curious how one can explain how this is different from what happens on every single day in the future after the funds are invested. They will be constantly exposed to loss every day.

But this is not just a quip. It appears that part of the psychology is the nexus between having a choice and the perception that the choice might be painful. Once the funds are invested there does not seem to be that nexus. Just having the money in the market does not seem to have the content of being a choice. Yet the chances of something really bad happening once invested are much greater than something bad happening during the DCA period.

This reasoning has always led be to ask whether the real question is whether or not the asset allocation is the right one. A person confident of their asset allocation would not be asking if the market might take a sharp decline right away because they assume that such a thing will happen sooner or later and are invested accordingly.
JD
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Location: TN

Re: 1.1M in cash, soon to be 1.5M - how do I get this working for me?

Post by JD »

Congrats on your success!
What will I do personally:
1. Pay off car 1
2. Pay off boat
3. Pay of the house mortgage (all of it)
4. Stay away from individual stocks
5. Sell all the individual stocks that you have
6. Formulate an investment plan using index funds (for both equity & bonds); one index fund and one or two bond funds are probably all you need.

Good luck,
Think
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Joined: Mon Feb 19, 2018 7:11 am

Re: 1.1M in cash, soon to be 1.5M - how do I get this working for me?

Post by Think »

Sorry, I read all these CFA + type articles and they all tend to blend into fairly obvious underpinnings (back door Roths, HSA for investment with high cat health plan, pe, etc). I have a tip that will probably do more for the big picture than all the technical intra-generational strategies other folks on this site typical ramble on about (as an aside...I was doing accredited investments 30 years ago. I work for a large bank and have done many structured deals that would make a retail investors head spin...not typical credit card securitization). Ok, back on point. I also sit next to the private bankers and I can tell you the "new new" thing is generating inter-generational wealth and philanthropy, So, odd as it sounds, building up wealth just for your lifetime is so old school logic. Ok, so here is the tip. BUILD WEALTH FOR YOUR CHILDREN AND LEGACY / FOUNDATION (foundation is the UHNWI term now for philanthropy). I live in CT (Darien), and I I'm glad you think you are making good income...but, to a good slug of folks in this town, they would equate your all in with a ho hum....you can't compete with folks with big trust funds...even if your an orthopedic surgeon or biz owner....if you go to work, in the trust fund cohort, you are a little person. So build wealth for your kids and a good cause. For your kids, have them work as early as possible, then you fund (up to $15k / under gift) the full match and maybe some extra for a investable account. Not that it matters much, but I make more than you (my wife has not worked since the 1st kid was born) and I live much smaller. I have zero debt and have funded my kids Roth IRA for multiple years (the kids have to have the earned income). I will - easily- have $20m by retirenment..unless the world falls apart. I have to be honest, once you accumulate $4-5 mil, it's just planning for inter-generational wealth transfer and FOUNDATION. Yes, you will get tons of other advice on simplified investment portfolios, etc (I saved this - I have an MBA and am a CFA Charterholder....neither designation helped me nearly as much as working for a boutique broker dealer, and then some bulge brackets. I spot utter B.S. from loser fin folks all the time. Ignore the herd I guess Fairholme dudes got that right.
Topic Author
delta5
Posts: 18
Joined: Mon Dec 28, 2015 10:18 pm

Re: 1.1M in cash, soon to be 1.5M - how do I get this working for me?

Post by delta5 »

Katietsu wrote: Tue Sep 21, 2021 12:32 am I was exhausted just reading your post. Given your lack of time which understandably led to a cash accumulation, why do you want to invest in individual stocks and look for other less mainstream investments right now? Does your wife want to work both jobs? Do you really need to DCA weekly instead of monthly? Why hang onto a car payment regardless of presumably a low interest rate? In other words, simplify and free up time and/or mental energy.

When I needed to get more in to equities a couple of years ago, I did put in a buy order with a limit which was 10% below the value of my most recent regularly scheduled DCA purchase. So, if there was a drop during that month, I would be accelerating the purchases a bit. Honestly, I knew that it was not going to move the needle, and that it could end up working for or against me. But it was easy and I found some pleasure in doing it this way.

Congratulations on your business.
Some good questions. I'm exhausted by living my post, lol. I updated the two jobs for my wife - one is she is an important part of running the company, the other is half-time job that keeps her own professional networks and accomplishments alive. I'd like her to leave the other job, but she highly values her own professional achievements.

Good point about not spending time on 'other than mainstream investments'. I'm taking this under consideration. My main thought about it is creating a diversification outside of the market, and potentially alternate streams of income.

Good point on paying off the car, I could stroke that check and free up some mental energy. The boat is a at a pretty low rate, and that's a much bigger check to write.

Thanks, not many people appreciate what it takes to build and run a business.
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delta5
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Re: 1.1M in cash, soon to be 1.5M - how do I get this working for me?

Post by delta5 »

tashnewbie wrote: Tue Sep 21, 2021 7:49 am
delta5 wrote: Mon Sep 20, 2021 10:04 pm I expect to be earning and running the business profitably for a another decade, and therefore I am more tolerant to the asset allocation of all stocks. I see bonds as a damping function on the performance of the stock ETFs. I'm expecting to split more incoming cash in future years about 60/40 - 60 towards VTI / VTS

Given the $1.1M in cash, and another $500k-ish in the next few months, I have been trying to DCA my way into VTI and VTS with about $20k / week.

Debt:
House - $750k, 29 yrs left, 2.875%, house worth $1.4M
Boat - ~$90k, $670/mo pmt, 18yrs left
Car1 - ~$10k, $400/mo pmt, 2 yrs left
I didn't quite understand what your plan is with respect to VTI and VTS (is that the correct ticker? I couldn't find it.). You say don't want any bonds now but in the future you want to split cash contributions 60/40 to VTI/VTS; therefore, I assumed VTS was some sort of bond/fixed income fund. But then you say you want to DCA into VTI and VTS now. Which is it?

I agree with others...forget DCA. Just go ahead now and invest all of the cash across all of these accounts into whatever funds you want to hold for the long haul. Since you say you're busy and don't want to actively invest, it makes sense to select passive index funds.

I would pay off the boat and car today, regardless of the interest rates. Two fewer things that are on your balance sheet and 2 fewer payments you have to make. And the interest rate is probably higher than what you're receiving on the cash. You can take some of your cash and pay those off today.
Sorry for the confusion. I fixed the OP.

I'll pay the car off, it's worth the mental relief. The boat is an interesting calculation - am I better paying it off now, or buying $90k of VTI today, and continuing to pay the note on schedule?
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delta5
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Re: 1.1M in cash, soon to be 1.5M - how do I get this working for me?

Post by delta5 »

Wanderingwheelz wrote: Tue Sep 21, 2021 10:02 am My wife and I had the exact same thing happen with us when our businesses went crazy at around your age. What you have to do, in my opinion, is just invest the money aggressively until it’s all put to work. If you don’t lump sum it, shoot to have it done in 6 months. You’re going to have more and more money coming in and some point down the line you’ll look back and what’s happening now won’t seem like much of a big deal.

When it happened to us at least cash was paying something. Today you’re getting killed.
Good point about cash paying nothing.
And I'm thinking of reducing that time frame from 1 year to 6 months - seems to be a recurring suggestion.
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delta5
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Re: 1.1M in cash, soon to be 1.5M - how do I get this working for me?

Post by delta5 »

dbr wrote: Tue Sep 21, 2021 12:24 pm
delta5 wrote: Tue Sep 21, 2021 11:39 am
dbr wrote: Mon Sep 20, 2021 11:01 pm What causes you to think you should DCA your cash into stocks.?

This is serious question. The topic is discussed repeatedly on the forum but it seems to be very difficult to find what motivates the idea in the first place.

My response, of course, is that if you have an asset allocation you want to be in then not being in that asset allocation now makes no sense. Otherwise the practice seems to be closet market timing. Market timing is not generally successful.
See JordanIBs answer. Concerns about the downsides of buying $1M on a single day.
I'm curious how one can explain how this is different from what happens on every single day in the future after the funds are invested. They will be constantly exposed to loss every day.

But this is not just a quip. It appears that part of the psychology is the nexus between having a choice and the perception that the choice might be painful. Once the funds are invested there does not seem to be that nexus. Just having the money in the market does not seem to have the content of being a choice. Yet the chances of something really bad happening once invested are much greater than something bad happening during the DCA period.

This reasoning has always led be to ask whether the real question is whether or not the asset allocation is the right one. A person confident of their asset allocation would not be asking if the market might take a sharp decline right away because they assume that such a thing will happen sooner or later and are invested accordingly.
Maybe it all just psychological. It's rooted in the possibility of a correction, and ties to the discussed concept of psychological pain. If I am DCA'ing my way in, and the market goes down 10%, I'm more likely to bulk buy a 5, 10, or 20x of my weekly planned DCA. The perception would be I got a deal or purchased at a discount. I might hurt less on the inside if it rose 10%. And if my retirement horizon is 10 years, does either matter much? I'm not sure. That's why I asked the question.

Mathematically, I'm going to guess on the terms of any random investment period, the chances are greater of a bad market than during the DCA period of 6-12 months. However, I'm looking at a variety of issues and the crash-rise of the past 18 months as an indicator that a correction may be on the way. So I wouldn't be shocked if the market had a correction, and I like the idea of having some cash ready to buy during and around the correction.
dbr
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Re: 1.1M in cash, soon to be 1.5M - how do I get this working for me?

Post by dbr »

delta5 wrote: Tue Sep 21, 2021 10:02 pm
Maybe it all just psychological. It's rooted in the possibility of a correction, and ties to the discussed concept of psychological pain. If I am DCA'ing my way in, and the market goes down 10%, I'm more likely to bulk buy a 5, 10, or 20x of my weekly planned DCA. The perception would be I got a deal or purchased at a discount. I might hurt less on the inside if it rose 10%. And if my retirement horizon is 10 years, does either matter much? I'm not sure. That's why I asked the question.

Mathematically, I'm going to guess on the terms of any random investment period, the chances are greater of a bad market than during the DCA period of 6-12 months. However, I'm looking at a variety of issues and the crash-rise of the past 18 months as an indicator that a correction may be on the way. So I wouldn't be shocked if the market had a correction, and I like the idea of having some cash ready to buy during and around the correction.
I think this is an example of something we could name anecdotal thinking (is that a thing?). What I mean is that one fetches on a scenario and then imagines how in that scenario it would be a really good thing if one did this or that. The problem is that there are lots of scenarios and one does not know what the relative likelihood of all of them as a set really is. But if you don't know the whole picture it is hard to make an objective rather than a fanciful decision. That is one reason in support of the opposite extreme, which is that we don't know anything and the random estimate of what will happen is that the longer we take more risk the more opportunity for return we have at a cost in uncertainty and the longer we take less risk the more certainty we will have at the cost of opportunity for return.

Your second presumption amounts to thinking your perceive a definite possibility that the market will do something you can partially predict in the near term. If that is true, then certainly person should invest accordingly. Experience tends to prove that these things don't often work out.

However, the cost in lost possible return is not large. It might be that the summary statement on lump sum vs DCA is that it doesn't matter.
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delta5
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Re: 1.1M in cash, soon to be 1.5M - how do I get this working for me?

Post by delta5 »

JD wrote: Tue Sep 21, 2021 6:33 pm Congrats on your success!
What will I do personally:
1. Pay off car 1
2. Pay off boat
3. Pay of the house mortgage (all of it)
4. Stay away from individual stocks
5. Sell all the individual stocks that you have
6. Formulate an investment plan using index funds (for both equity & bonds); one index fund and one or two bond funds are probably all you need.

Good luck,
Why pay off the house? Im interested in your perspective since in the long term, BH theory says I'll make much more in the market than the cost of the interest (let's call it 10%).
It's at a very low interest rate, and I read somewhere that a mortgage is like a reverse bond. As inflation occurs over the next 29 years, I'll be paying the note with 2020 dollars.
I'm also not positioned well to stroke that check - it would clear out [nearly] all of my taxable brokerage funds to do that. You did get me looking at what $100k towards the note would do - skip me about 6 years. The next $100k in 2022 would do about the same.
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delta5
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Re: 1.1M in cash, soon to be 1.5M - how do I get this working for me?

Post by delta5 »

dbr wrote: Tue Sep 21, 2021 10:14 pm
delta5 wrote: Tue Sep 21, 2021 10:02 pm
Maybe it all just psychological. It's rooted in the possibility of a correction, and ties to the discussed concept of psychological pain. If I am DCA'ing my way in, and the market goes down 10%, I'm more likely to bulk buy a 5, 10, or 20x of my weekly planned DCA. The perception would be I got a deal or purchased at a discount. I might hurt less on the inside if it rose 10%. And if my retirement horizon is 10 years, does either matter much? I'm not sure. That's why I asked the question.

Mathematically, I'm going to guess on the terms of any random investment period, the chances are greater of a bad market than during the DCA period of 6-12 months. However, I'm looking at a variety of issues and the crash-rise of the past 18 months as an indicator that a correction may be on the way. So I wouldn't be shocked if the market had a correction, and I like the idea of having some cash ready to buy during and around the correction.
I think this is an example of something we could name anecdotal thinking (is that a thing?). What I mean is that one fetches on a scenario and then imagines how in that scenario it would be a really good thing if one did this or that. The problem is that there are lots of scenarios and one does not know what the relative likelihood of all of them as a set really is. But if you don't know the whole picture it is hard to make an objective rather than a fanciful decision. That is one reason in support of the opposite extreme, which is that we don't know anything and the random estimate of what will happen is that the longer we take more risk the more opportunity for return we have at a cost in uncertainty and the longer we take less risk the more certainty we will have at the cost of opportunity for return.

Your second presumption amounts to thinking your perceive a definite possibility that the market will do something you can partially predict in the near term. If that is true, then certainly person should invest accordingly. Experience tends to prove that these things don't often work out.

However, the cost in lost possible return is not large. It might be that the summary statement on lump sum vs DCA is that it doesn't matter.

I'm laughing out loud. You've convinced me both ways - it doesn't matter. Honestly, if we built some excel models over DCA'ing in over the next 6 months, year, or lumping it all today against 3 market conditions (correction, level, or gains during the DCA period), and planned on holding it for a 10 year period, I'm guessing that total return is more likely influenced much more by the following 9 years than what happened in the DCA period. And assuming I continue to invest by over that period, the total return difference of each strategy would be diluted even more.

And with all my guesstimates at math that probably aren't off the wall, I still want to DCA in just in case there is a correction in the next 6 months. Feelings vs. Facts (modeling?).
MattB
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Re: 1.1M in cash, soon to be 1.5M - how do I get this working for me?

Post by MattB »

delta5 wrote: Tue Sep 21, 2021 9:09 pm I'll pay the car off, it's worth the mental relief. The boat is an interesting calculation - am I better paying it off now, or buying $90k of VTI today, and continuing to pay the note on schedule?
I suggest you do both. Pay off the boat and buy $90k of VTI today.

Neither of these decisions will be significant in the long term, given their size relative to your income. But paying off the boat now takes one more thing off the list of things that you have to care about. And buying $90k of VTI saves you, in some ways, from having to care too much about what would have happened if you had invested $90k in VTI instead of paying off your boat.

The bottom line takeaway is that these decisions will have little impact on your future financial wellbeing, certainly far less than decision you make running your business. So, any steps you can take to avoid having to think about them are positive steps.
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Wiggums
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Re: 1.1M in cash, soon to be 1.5M - how do I get this working for me?

Post by Wiggums »

Here is what I do. I setup automated weekly transfers and then I ignore the market. The bad part about weekly transfers is that you get many more lots. I have been investing more money when the market drops significantly.
"I started with nothing and I still have most of it left."
tashnewbie
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Re: 1.1M in cash, soon to be 1.5M - how do I get this working for me?

Post by tashnewbie »

delta5 wrote: Tue Sep 21, 2021 9:09 pm I'll pay the car off, it's worth the mental relief. The boat is an interesting calculation - am I better paying it off now, or buying $90k of VTI today, and continuing to pay the note on schedule?
Is the boat's interest rate higher than the rate you're getting on cash?

As another user said, you could do both -- pay off the boat and buy VTI.

Even if you paid off the boat and car, you'd still have almost $300k cash in taxable.

Cash in taxable: I would pay off car and boat today. I would invest the rest according to my overall investing plan (set aside whatever amount you may want to hold as cash reserves).

I would invest cash that's in tax-advantaged accounts today. Why is that money uninvested? What was the plan for the money when you added it to those accounts? If you had one, why didn't you follow it?
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delta5
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Re: 1.1M in cash, soon to be 1.5M - how do I get this working for me?

Post by delta5 »

tashnewbie wrote: Wed Sep 22, 2021 8:57 am
delta5 wrote: Tue Sep 21, 2021 9:09 pm I'll pay the car off, it's worth the mental relief. The boat is an interesting calculation - am I better paying it off now, or buying $90k of VTI today, and continuing to pay the note on schedule?
Is the boat's interest rate higher than the rate you're getting on cash?

As another user said, you could do both -- pay off the boat and buy VTI.

Even if you paid off the boat and car, you'd still have almost $300k cash in taxable.

Cash in taxable: I would pay off car and boat today. I would invest the rest according to my overall investing plan (set aside whatever amount you may want to hold as cash reserves).

I would invest cash that's in tax-advantaged accounts today. Why is that money uninvested? What was the plan for the money when you added it to those accounts? If you had one, why didn't you follow it?
You’re among the trend of saying pay off the loans. And invest the cash.
There wasn’t enough of a plan to drive action.
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