Ultra HNW on this forum?

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
User avatar
TheTimeLord
Posts: 12130
Joined: Fri Jul 26, 2013 2:05 pm

Re: Ultra HNW on this forum?

Post by TheTimeLord »

HanSolo wrote: Fri Jan 07, 2022 8:12 pm
leehamster wrote: Fri Jan 07, 2022 7:54 pm But above-average returns exist, and we shouldn't be so self-satisfied as Bogleheads to deny half of the bell curve of returns.
I don't think it's a matter of being self-satisfied. The issue is that if the majority of those funds underperform the index, then many of us won't be interested. This is about numbers.

But, as I've said all along, there's nothing wrong with a well-informed person giving it a try, if they want to.
I'm not HNW but I enjoy a little experimentation from time to time.
IMHO, Investing should be about living the life you want, not avoiding the life you fear. | Run, You Clever Boy! [9085]
User avatar
BenfromToronto
Posts: 62
Joined: Sat Jun 03, 2017 11:43 am
Location: Toronto, Ontario, Canada

Re: Ultra HNW on this forum?

Post by BenfromToronto »

AlphaLess wrote: Fri Jan 07, 2022 4:35 pm
BenfromToronto wrote: Fri Jan 07, 2022 9:16 am
Sandtrap wrote: Thu Jan 06, 2022 7:20 am Given: IHNW = 10-20-30 mil plus .

Only my experiences: I have never heard or met or known anyone that was “self made” (no windfall) and of UHNW that did it only as an employee. All were business owners or very highly paid professionals who also had businesses.
Yes, you can be an employee, having invested in a Bogle-congruent way (i.e., diversified low-cost funds) for your whole life, and end up as a UHNW individual.

I live among professionals (physicians, lawyers, architects, accountants...) who are in their 60's.
They have worked all their life and are still working.
Their annual income is in the $200-400K range.
If they are married, their spouse typically works and contribute another $100-200K per year.

Some of them live the life of a "millionaire next door": 1/3 of their income for the government; 1/3 for spending (supporting a very nice lifestyle); 1/3 invested (in both taxable accounts and maxed-out tax-advantaged accounts).

By their early 60's, their invested assets are above $10M and their net worth (including paid home, second home, collectibles...) is around $20M.
When they will stop working (in their early 70s), their invested assets should have doubled and be around $20M (with still another $10 in non-productive assets).
In retirement, they will be able to live off SS plus less than half the dividends generated by their invested net worth (maintaining their very nice lifestyle).
When they die in their 80s, their estate should be in the $40-50M range, qualifying for the current definition of UHNW.

All this has been accomplished by buying (via DCA) and holding a small number of low-cost funds (e.g. Vanguard mutual funds in the 1990s and ETFs now) but not necessarily the rigid 3-fund asset allocations (e.g., they may have tilted towards small caps; they typically did not have any bonds while they were paying mortgages...).
No individual stocks, no hedge-funds, no cryptocurrencies.

These people are the living demonstration of the Bogle's philosophy (which they may have discovered through books published in the 80s like the "Wealthy Barber" or the "Millionaire Next Door").

Their peers who have similar income and lifestyle but have let Financial Advisors and Private Bankers "manage their money" will end up with about a quarter of their wealth (e.g., $10M vs. $40M).
In other words, they will have given 3/4 of their wealth to their advisors.
This is simple math: an IRR of 7% (10% minus 2-3% in management and trading costs) vs. an IRR of 10% over 50 years.
Great post but a bit too idealistic.

1. High producing occupations with annual incomes of $200-$400K start that way, but also have significant above-inflation growth. Even a 25% growth over inflation over 30 years doubles the pay. Also, there are promotions, etc, resulting in 30% one time growths,

So, it is likely that at the peak of the career (may not be at age 70, but at age 55), these folks are making a lot more than that,

2. They also need to be luck in multiple ways: no major health issues, no early death or disablement, no disabled kids. Those things can be extremely draining on time, energy, focus, and assets,

3. Also, need to be luck not to have a financial disaster, like a bad one-time investment.
This is not "idealistic".
I describe the lived experience of some of my cohort: getting very rich very slowly following the simple (but not easy) approach of Jack Bogle.

1. I used 2022 salaries of $200K-400K. Our salaries in the late 1980s, early 1990s were in the $50K-100K.
They have grown at the pace of inflation plus a little bit (i.e., doubling every 15-20 years).
A physician with 30-year experience does not get paid much more than a recent graduate to do the same medical procedures.

2. Yes, I describe the majority of people who have been "lucky" and have been spared from major personal tragedies or disasters.
You forgot one personal disaster that would almost always prevent somebody from becoming rich (slowly): divorce.

3. One of the merits of the Bogle's approach to investment is that there are no "bad one-time investments."
However, it does not protect against "financial disasters": over the past 35 years, my cohort had to survive the flash-crash of 1987 (-35% over 101 days), the bear market of 1990 (-20% over 87 days), the 2000-2002 dot-com crash (-48% over 929 days), the financial crisis crash of 2007-2009 (-57% over 517 days),the Q4 2018 correction (-20% over 95 days), and the COVID-19 crash of 2021 (-34% over 33 days), plus 15 corrections (drops of -10% to -20%) and 8 dips (drops of -5% to -10%).
Becoming rich slowly is simple --earn, save, invest following a Bogleheads philosophy-- but it is not easy.
jaqenhghar
Posts: 464
Joined: Sat Feb 22, 2020 2:24 pm

Re: Ultra HNW on this forum?

Post by jaqenhghar »

AlphaLess wrote: Fri Jan 07, 2022 4:43 pm
susan123 wrote: Fri Jan 07, 2022 4:39 pm I have a family member who's 9 digit NW, but he doesn't come to this forum (that I know of). He made his gold through founding tech companies (later either IPO or sold it). He still works full time and loves what he does. If you love what you do, you don't work a single day. :sharebeer
I used to be of this opinion. But there is one fundamental factor.

It depends WHO you work with.

You might love what you do, but if you work with A-h0les, that is not a good situation.
+ 100.
User avatar
JoMoney
Posts: 16260
Joined: Tue Jul 23, 2013 5:31 am

Re: Ultra HNW on this forum?

Post by JoMoney »

Ten years ago, Bill Gates was #2 on the Forbes Billionaires list @ $56B
https://web.archive.org/web/20120103153 ... llionaires

Currently Bill is #4 on the list @ $124B
https://www.forbes.com/billionaires/

If instead of doing whatever Bill Gates did, he had put that $56B in 2012 into the portfolio Buffett suggested for his bequest to his wife (90% S&P 500/10% Short-Term Treasury) , and took 4% inflation adjusted withdrawals (starting at $2,224,000,000 in 2012 withdrawals)
Bill would still be #1 on the list, or at least tied with current Jeff Bezos $177B

PortfolioVisualizer Simulation

:P :D
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham
User avatar
TheTimeLord
Posts: 12130
Joined: Fri Jul 26, 2013 2:05 pm

Re: Ultra HNW on this forum?

Post by TheTimeLord »

JoMoney wrote: Fri Jan 07, 2022 9:27 pm Ten years ago, Bill Gates was #2 on the Forbes Billionaires list @ $56B
https://web.archive.org/web/20120103153 ... llionaires

Currently Bill is #4 on the list @ $124B
https://www.forbes.com/billionaires/

If instead of doing whatever Bill Gates did, he had put that $56B in 2012 into the portfolio Buffett suggested for his bequest to his wife (90% S&P 500/10% Short-Term Treasury) , and took 4% inflation adjusted withdrawals (starting at $2,224,000,000 in 2012 withdrawals)
Bill would still be #1 on the list, or at least tied with current Jeff Bezos $177B

PortfolioVisualizer Simulation

:P :D
It should be noted Gates has donated roughly $50 billion to charity over the years, best I could tell $14 billion since 2018, while charity is a more recent endeavor for Bezos. Also, Elon Musk is the current world's richest man.

https://www.forbes.com/real-time-billio ... 63037f3d78
IMHO, Investing should be about living the life you want, not avoiding the life you fear. | Run, You Clever Boy! [9085]
Patzer
Posts: 701
Joined: Wed Jun 10, 2015 10:56 am

Re: Ultra HNW on this forum?

Post by Patzer »

I know one person with 9 figures. They made their money by founding a company and selling it for about 100M.
They hated retirement and bought another company a few years later.
They also bought a minor league sports team, which loses money, but they love.
The rest of their money is in a minority stake in a 10 figure real estate project that is under construction.

I know one mid-8 figure person and most of their wealth is in their company stock, which they still work for.

There is nothing to stop people UHNW people from investing like Bogleheads, but most of them probably beat the market to get as much money as they have, so they probably think about risk differently.
FlyingMoose
Posts: 630
Joined: Wed Mar 04, 2009 9:48 pm

Re: Ultra HNW on this forum?

Post by FlyingMoose »

TheTimeLord wrote: Fri Jan 07, 2022 9:43 pm
JoMoney wrote: Fri Jan 07, 2022 9:27 pm Ten years ago, Bill Gates was #2 on the Forbes Billionaires list @ $56B
https://web.archive.org/web/20120103153 ... llionaires

Currently Bill is #4 on the list @ $124B
https://www.forbes.com/billionaires/

If instead of doing whatever Bill Gates did, he had put that $56B in 2012 into the portfolio Buffett suggested for his bequest to his wife (90% S&P 500/10% Short-Term Treasury) , and took 4% inflation adjusted withdrawals (starting at $2,224,000,000 in 2012 withdrawals)
Bill would still be #1 on the list, or at least tied with current Jeff Bezos $177B

PortfolioVisualizer Simulation

:P :D
It should be noted Gates has donated roughly $50 billion to charity over the years, best I could tell $14 billion since 2018, while charity is a more recent endeavor for Bezos. Also, Elon Musk is the current world's richest man.

https://www.forbes.com/real-time-billio ... 63037f3d78
Also most of his wealth is most likely in highly-appreciated Microsoft stock. If he sold it to move to S&P 500 he would have paid perhaps half of it in taxes.
CJD121213
Posts: 16
Joined: Sun Mar 26, 2017 9:12 am

Re: Ultra HNW on this forum?

Post by CJD121213 »

Patzer wrote: Fri Jan 07, 2022 10:56 pm I know one person with 9 figures. They made their money by founding a company and selling it for about 100M.
They hated retirement and bought another company a few years later.
They also bought a minor league sports team, which loses money, but they love.
The rest of their money is in a minority stake in a 10 figure real estate project that is under construction.

I know one mid-8 figure person and most of their wealth is in their company stock, which they still work for.

There is nothing to stop people UHNW people from investing like Bogleheads, but most of them probably beat the market to get as much money as they have, so they probably think about risk differently.
This reminds me of my father's situation. Serial entrepreneur for his entire career and still working 6 days a week. Was barely scraping by at 60 with next to nothing saved for retirement but company was trending in the right direction. Company is now worth well over 1 billion and he wouldn't sell it for twice that. Investing in himself paid off but he is now invested in all kinds of crazy things. I try to nudge my parent's into more traditional investments but they still gravitate to some odd things like country clubs and sports teams.
shess
Posts: 2164
Joined: Wed May 17, 2017 12:02 am

Re: Ultra HNW on this forum?

Post by shess »

CJD121213 wrote: Tue Jan 11, 2022 1:10 pm This reminds me of my father's situation. Serial entrepreneur for his entire career and still working 6 days a week. Was barely scraping by at 60 with next to nothing saved for retirement but company was trending in the right direction. Company is now worth well over 1 billion and he wouldn't sell it for twice that. Investing in himself paid off but he is now invested in all kinds of crazy things. I try to nudge my parent's into more traditional investments but they still gravitate to some odd things like country clubs and sports teams.
I have a couple associates, probably more towards the $100M range, who have always impressed me with their prudence. Like, they'll start a new company (or join at a high level), and do things like take no salary, and work their network to pull in like-minded people to help the company ... but they generally seem to limit themselves to a modest investment, like 10% of NW. I can't tell if this is managing risk, or if it is forcing the company to grow strong on its own (if you can't find investors, does that mean THEY are missing the point, or that YOU are missing the point?).
randomguy
Posts: 11295
Joined: Wed Sep 17, 2014 9:00 am

Re: Ultra HNW on this forum?

Post by randomguy »

FlyingMoose wrote: Sat Jan 08, 2022 12:47 am
TheTimeLord wrote: Fri Jan 07, 2022 9:43 pm
JoMoney wrote: Fri Jan 07, 2022 9:27 pm Ten years ago, Bill Gates was #2 on the Forbes Billionaires list @ $56B
https://web.archive.org/web/20120103153 ... llionaires

Currently Bill is #4 on the list @ $124B
https://www.forbes.com/billionaires/

If instead of doing whatever Bill Gates did, he had put that $56B in 2012 into the portfolio Buffett suggested for his bequest to his wife (90% S&P 500/10% Short-Term Treasury) , and took 4% inflation adjusted withdrawals (starting at $2,224,000,000 in 2012 withdrawals)
Bill would still be #1 on the list, or at least tied with current Jeff Bezos $177B

PortfolioVisualizer Simulation

:P :D
It should be noted Gates has donated roughly $50 billion to charity over the years, best I could tell $14 billion since 2018, while charity is a more recent endeavor for Bezos. Also, Elon Musk is the current world's richest man.

https://www.forbes.com/real-time-billio ... 63037f3d78
Also most of his wealth is most likely in highly-appreciated Microsoft stock. If he sold it to move to S&P 500 he would have paid perhaps half of it in taxes.
Ignoring taxes. Microsoft returned 30% over the past 10 years to the S&P 500s 15%.... My understanding though that Gates is supposedly down to like 20 billion in Microsoft with most of his money in Cascade Investment. Last numbers I saw had them beating the S&P by a couple of points.
User avatar
Wricha
Posts: 1014
Joined: Sun Mar 25, 2012 10:33 am

Re: Ultra HNW on this forum?

Post by Wricha »

FoolMeOnce wrote: Wed Jan 05, 2022 10:21 pm
moneyflowin wrote: Wed Jan 05, 2022 9:55 pm If UHNW is defined as "above $30MM", then I doubt any subscribe to and follow the BH way. It's far is too conservative to generate that much wealth. Getting to that level would require one to lever up repeatedly (eg, real estate) or to concentrate in a small number of home runs whether stock or private investments, or plow all your money into your small business and let it grow (which is a form of risky concentration).

Working a 9-5 job and stashing it into your 401k and brokerage accounts at 60/40, with only passive ETFs and no leverage, while paying off your 3% mortgage, won't gonna get you to $30MM.
Depends how much that 9-5 job pays. Save $250k/yr for 30 years at 8% growth will get you there. But if you're doing it that way, most people would retire before reaching that point.
Is it realistic that someone starting out in their career, is going to save $250k/yr? Those early years have the biggest impact on net worth late in life because of compounding interest. My guess someone who has $30M+ did something outside a 9-5 job. ( I am sure another janitor will pop up but look toward an extraordinary event in most cases).
BetaTracker
Posts: 257
Joined: Fri Sep 21, 2012 7:57 am

Re: Ultra HNW on this forum?

Post by BetaTracker »

A friend of mine who owns a small business told me about an advisor who has been talking to him about investing in hedge funds and alternatives. He's currently an investor at Vanguard, and he told the advisor that index funds were working well for him.
The advisor has responded by saying that once you have $10-15 million or more, it's not about saving for retirement -- it becomes a matter of leveraging your portfolio to make bigger (I.e., more significant) profits to grow your wealth.
At such levels of wealth, the advisor argues that it becomes increasingly important to make impactful investments. These can only be made, he claims, by directly investing in small businesses, private properties and other alternative investments.
The advisor is making a case that risk is different for a very wealthy investor than for a less wealthy one. In buying publicly traded stocks and bonds, he claims that hedging a portfolio against loss is critical. He told my friend that stock investing represents incremental portfolio growth for this type of investor, and the emphasis should be on preservation of wealth. A good hedge fund and alternatives manager might cost more, he argues, but higher fees is not as much of a factor if they're able to cushion against major downside risk while capturing much of the return of market upturns. In short, he's trying to tell my friend that building wealth for an ultra-net-worth investor is a different ballgame with different risk and reward parameters. So, low-cost index funds might be fine for "most" investors, but they're not going to be comprehensive enough in scope and design to be suitable for an investor with him at a more "advanced" stage in his investment horizon.
My friend is considering selling his business. He is thinking about talking more with this advisor, and possibly, moving his portfolio. We've had several discussions about what this advisor (from a big bank) is telling him. I'm trying to talk him out of it!
I'd rather be content than happy -- Lao Tzu.
Dave55
Posts: 2017
Joined: Tue Sep 03, 2013 2:51 pm

Re: Ultra HNW on this forum?

Post by Dave55 »

I know 2 HNW. One sold a company for close to $500M. He hired an advisor who he told to be conservative and don't lose money. She lost him money. He fired her. He ended up in many different private investments including land deals, large scale RE development, and funding some startups. He would muse he probably would have been better off in the S&P index. But he was always tempted to make 20-30% ROI and was willing to take the risks to do so. The market was never sexy enough for him, he likes sexy investments.

The 2nd gentleman has some in the S&P index but much more $$ in hedge funds and private equity RE deals. He is looking for higher return with lower risk than the S&P and feels hedge funds are the way.

Dave
"Reality always wins, your only job is to get in touch with it." Wilfred Bion
User avatar
abuss368
Posts: 27850
Joined: Mon Aug 03, 2009 2:33 pm
Location: Where the water is warm, the drinks are cold, and I don't know the names of the players!
Contact:

Re: Ultra HNW on this forum?

Post by abuss368 »

Dave55 wrote: Wed Jan 12, 2022 7:17 pm I know 2 HNW. One sold a company for close to $500M. He hired an advisor who he told to be conservative and don't lose money. She lost him money. He fired her. He ended up in many different private investments including land deals, large scale RE development, and funding some startups. He would muse he probably would have been better off in the S&P index. But he was always tempted to make 20-30% ROI and was willing to take the risks to do so. The market was never sexy enough for him, he likes sexy investments.

The 2nd gentleman has some in the S&P index but much more $$ in hedge funds and private equity RE deals. He is looking for higher return with lower risk than the S&P and feels hedge funds are the way.

Dave
Thanks Dave! Amazing how at $500M the markets, and a few index funds, are not good enough.

Everyday Jim and I try to get our hedge fund to $500 M. Once we achieve that, we are demanding a trip on the Gulfstream!😂✈️
Tony
John C. Bogle: “Simplicity is the master key to financial success."
Dave55
Posts: 2017
Joined: Tue Sep 03, 2013 2:51 pm

Re: Ultra HNW on this forum?

Post by Dave55 »

abuss368 wrote: Wed Jan 12, 2022 7:20 pm
Dave55 wrote: Wed Jan 12, 2022 7:17 pm I know 2 HNW. One sold a company for close to $500M. He hired an advisor who he told to be conservative and don't lose money. She lost him money. He fired her. He ended up in many different private investments including land deals, large scale RE development, and funding some startups. He would muse he probably would have been better off in the S&P index. But he was always tempted to make 20-30% ROI and was willing to take the risks to do so. The market was never sexy enough for him, he likes sexy investments.

The 2nd gentleman has some in the S&P index but much more $$ in hedge funds and private equity RE deals. He is looking for higher return with lower risk than the S&P and feels hedge funds are the way.

Dave
Thanks Dave! Amazing how at $500M the markets, and a few index funds, are not good enough.

Everyday Jim and I try to get our hedge fund to $500 M. Once we achieve that, we are demanding a trip on the Gulfstream!😂✈️
Tony
I traded the Gulfstream in for a Boeing 757.

Dave
"Reality always wins, your only job is to get in touch with it." Wilfred Bion
shess
Posts: 2164
Joined: Wed May 17, 2017 12:02 am

Re: Ultra HNW on this forum?

Post by shess »

BetaTracker wrote: Wed Jan 12, 2022 7:04 pm A friend of mine who owns a small business told me about an advisor who has been talking to him about investing in hedge funds and alternatives. He's currently an investor at Vanguard, and he told the advisor that index funds were working well for him.
The advisor has responded by saying that once you have $10-15 million or more, it's not about saving for retirement -- it becomes a matter of leveraging your portfolio to make bigger (I.e., more significant) profits to grow your wealth.
At such levels of wealth, the advisor argues that it becomes increasingly important to make impactful investments. These can only be made, he claims, by directly investing in small businesses, private properties and other alternative investments.
The advisor is making a case that risk is different for a very wealthy investor than for a less wealthy one. In buying publicly traded stocks and bonds, he claims that hedging a portfolio against loss is critical. He told my friend that stock investing represents incremental portfolio growth for this type of investor, and the emphasis should be on preservation of wealth. A good hedge fund and alternatives manager might cost more, he argues, but higher fees is not as much of a factor if they're able to cushion against major downside risk while capturing much of the return of market upturns. In short, he's trying to tell my friend that building wealth for an ultra-net-worth investor is a different ballgame with different risk and reward parameters. So, low-cost index funds might be fine for "most" investors, but they're not going to be comprehensive enough in scope and design to be suitable for an investor with him at a more "advanced" stage in his investment horizon.
My friend is considering selling his business. He is thinking about talking more with this advisor, and possibly, moving his portfolio. We've had several discussions about what this advisor (from a big bank) is telling him. I'm trying to talk him out of it!
I get why the advisor wants to touch his money, but ... why? Simply saying over and over that "Once you have $10M, it becomes increasingly important to protect against unicorn attacks" doesn't actually make it true! Someone with $1M arguably has a higher need for their portfolio to be reliable than someone with $10M does, the person with $10M to start with can MUCH more easily take hard hits and come through with positive outcomes. I'm not saying that a 70/30 three-fund portfolio is in any way scary, just that if it works at $1M, it works even better at $10M. The only change I'd make is to update your umbrella policy.

Don't get me wrong, I will fully grant that at $1M, your portfolio simply isn't big enough to accomodate high fees for someone to spend their time playing around with your money. At $10M, you can better afford those fees. But to my mind the most likely outcome of such a decision is probably to limit upside potential, without any compensating improvement to downside potential. For sure everything will be in illiquid positions that can't easily be compared to the public markets, and that would be entirely by design.

IMHO, $10M really isn't enough to properly get yourself involved in things outside the public markets, because you can't afford to diversify across the various options. If I had $100M and decided to go for it, probably my first step would be something like peeling off $10M to invest in a 70/30 portfolio as a backup plan... but I'll be honest, as time passes I find myself less and less interested in that kind of thing, so even at $100M I might just let it slide in a three-fund portfolio.
Brofessor
Posts: 89
Joined: Wed Oct 16, 2019 6:30 am

Re: Ultra HNW on this forum?

Post by Brofessor »

shess wrote: Wed Jan 12, 2022 7:40 pm
BetaTracker wrote: Wed Jan 12, 2022 7:04 pm A friend of mine who owns a small business told me about an advisor who has been talking to him about investing in hedge funds and alternatives. He's currently an investor at Vanguard, and he told the advisor that index funds were working well for him.
The advisor has responded by saying that once you have $10-15 million or more, it's not about saving for retirement -- it becomes a matter of leveraging your portfolio to make bigger (I.e., more significant) profits to grow your wealth.
At such levels of wealth, the advisor argues that it becomes increasingly important to make impactful investments. These can only be made, he claims, by directly investing in small businesses, private properties and other alternative investments.
The advisor is making a case that risk is different for a very wealthy investor than for a less wealthy one. In buying publicly traded stocks and bonds, he claims that hedging a portfolio against loss is critical. He told my friend that stock investing represents incremental portfolio growth for this type of investor, and the emphasis should be on preservation of wealth. A good hedge fund and alternatives manager might cost more, he argues, but higher fees is not as much of a factor if they're able to cushion against major downside risk while capturing much of the return of market upturns. In short, he's trying to tell my friend that building wealth for an ultra-net-worth investor is a different ballgame with different risk and reward parameters. So, low-cost index funds might be fine for "most" investors, but they're not going to be comprehensive enough in scope and design to be suitable for an investor with him at a more "advanced" stage in his investment horizon.
My friend is considering selling his business. He is thinking about talking more with this advisor, and possibly, moving his portfolio. We've had several discussions about what this advisor (from a big bank) is telling him. I'm trying to talk him out of it!
I get why the advisor wants to touch his money, but ... why? Simply saying over and over that "Once you have $10M, it becomes increasingly important to protect against unicorn attacks" doesn't actually make it true! Someone with $1M arguably has a higher need for their portfolio to be reliable than someone with $10M does, the person with $10M to start with can MUCH more easily take hard hits and come through with positive outcomes. I'm not saying that a 70/30 three-fund portfolio is in any way scary, just that if it works at $1M, it works even better at $10M. The only change I'd make is to update your umbrella policy.

Don't get me wrong, I will fully grant that at $1M, your portfolio simply isn't big enough to accomodate high fees for someone to spend their time playing around with your money. At $10M, you can better afford those fees. But to my mind the most likely outcome of such a decision is probably to limit upside potential, without any compensating improvement to downside potential. For sure everything will be in illiquid positions that can't easily be compared to the public markets, and that would be entirely by design.

IMHO, $10M really isn't enough to properly get yourself involved in things outside the public markets, because you can't afford to diversify across the various options. If I had $100M and decided to go for it, probably my first step would be something like peeling off $10M to invest in a 70/30 portfolio as a backup plan... but I'll be honest, as time passes I find myself less and less interested in that kind of thing, so even at $100M I might just let it slide in a three-fund portfolio.
Just to restate all this and add my two cents. At UHNW it seems one is afforded the "luxury of failure." This person can gamble with their funds if they so choose. They can afford some losers if they get a few big winners. They can define their fallback position and never dip into those funds if they have the discipline to stop "gambling."

The "luxury of failure" is never mentioned in speaking about the American Dream and the rugged individualist. Children and adults from wealthier families sometimes have the luxury of failure. They can keep failing until they succeed. UHNW individuals can leverage this for their investments.
afan
Posts: 8193
Joined: Sun Jul 25, 2010 4:01 pm

Re: Ultra HNW on this forum?

Post by afan »

The hedge fund approach is betting on being lucky.

If you buy a highly undiversified portfolio and leverage it, your returns can be far different than those of the market as a whole. Everyone who does this hopes that their deviations from the market will be positive. For some this will be true.

Hedge funds as an industry underperform the market. One is successful in hedge funds if successful in picking the ones that will do well. Performance does not persist, so using past returns will not get you there. All you can do is hope for luck.

You have to pay high hedge fund fees, and in this case, advisor fees to pick hedge fuds, to try to get lucky.

You can save the fees and hope for good luck by randomly buying low cost undiversified funds or individual stocks. Your odds of beating the market before fees are the same as with hedge funds. After expenses, your odds are better. If you don't use leverage your chances of a catastrophic loss are lower than with hedge funds.

If you really want leverage, use a margin loan from IB.

Or put your $30M in a 3 fund portfolio and get on with your life.
We don't know how to beat the market on a risk-adjusted basis, and we don't know anyone that does know either | --Swedroe | We assume that markets are efficient, that prices are right | --Fama
McGowan
Posts: 77
Joined: Sat Jul 08, 2017 12:30 pm

Re: Ultra HNW on this forum?

Post by McGowan »

leehamster wrote: Fri Jan 07, 2022 7:54 pm
mikejuss wrote: Fri Jan 07, 2022 9:42 am
Leesbro63 wrote: Fri Jan 07, 2022 9:33 am
mikejuss wrote: Fri Jan 07, 2022 9:32 am I suppose we will never resolve the question of why high-net-worth individuals flirt with alternative investments, given what appears to be their largely inferior performance against index funds.
I actually think the answer is obvious in most cases. And it's the same reasons that Bogleheads/index fund investors are a minority (although an increasing percentage): They don't understand that less (complication) is more.
Boy, if that's really the answer to this question, it's a pretty bizarre answer.
There are outliers who provide market-beating returns in investments other than index funds. It's just hard to predict them, or to get into their funds once it's predictable. But the narratives are real enough that it can cause investors to chase them, and other funds to spring up to serve those investors.

I'm on these BH boards, and agree that less complications is more. I'm happy to have average returns with below average costs, and to stay in the markets through thick and thin to harvest the market returns that are available through index funds. But above-average returns exist, and we shouldn't be so self-satisfied as Bogleheads to deny half of the bell curve of returns.

A couple of examples:
Private Equity Valuations are highly subjective as they are giving an exit value to their existing portfolio. PE firms have a long history of selling their best performers early so that they can show investors stellar returns while raising their next fund. IRR is a function of time held and return. The underperforming companies in their portfolio are held the longest and provide the lowest or negative returns.

I am more than a little cynical/skeptical about these firms going public. It's more than a little about providing sustainable management fees to management. Buyer beware.
GP813
Posts: 1243
Joined: Wed Dec 11, 2019 9:11 am

Re: Ultra HNW on this forum?

Post by GP813 »

randomguy wrote: Tue Jan 11, 2022 2:04 pm
Ignoring taxes. Microsoft returned 30% over the past 10 years to the S&P 500s 15%.... My understanding though that Gates is supposedly down to like 20 billion in Microsoft with most of his money in Cascade Investment. Last numbers I saw had them beating the S&P by a couple of points.

Gates diversified his fortune and Microsoft holdings and hasn't been the largest individual shareholder of MSFT for many years. That honor belongs to his friend and former CEO Steve Ballmer who's networth has appreciated greatly as the price of Microsoft stock has risen.
JoMoney wrote: Fri Jan 07, 2022 9:27 pm Ten years ago, Bill Gates was #2 on the Forbes Billionaires list @ $56B
https://web.archive.org/web/20120103153 ... llionaires

Currently Bill is #4 on the list @ $124B
https://www.forbes.com/billionaires/

If instead of doing whatever Bill Gates did, he had put that $56B in 2012 into the portfolio Buffett suggested for his bequest to his wife (90% S&P 500/10% Short-Term Treasury) , and took 4% inflation adjusted withdrawals (starting at $2,224,000,000 in 2012 withdrawals)
Bill would still be #1 on the list, or at least tied with current Jeff Bezos $177B

PortfolioVisualizer Simulation

:P :D
Well in 1996 he held 24% of the company and now I believe it's under 2%. He would be the richest man in the world by far if he still held a large chunk of Microsoft shares.
User avatar
BrooklynInvest
Posts: 1183
Joined: Sun Jul 28, 2013 9:23 am

Re: Ultra HNW on this forum?

Post by BrooklynInvest »

mikejuss wrote: Thu Jan 06, 2022 8:56 am It's my understanding that an all-index portfolio scales just fine--whether your net worth is $1 million or $100 million. But perhaps others disagree...
Yeah, if I were that rich I'd have tax questions for my accountant and some questions for trust lawyers but I can't think my index-led approach would change.

There's no situation where I'd invest in a hedge fund or other esoteric vehicles, but that's me. My asset allocation might change.

At a certain scale it's possible that I could shave a few dollars off my expense ratio and tax loss harvest if I were to replicate my S&P index with individual stocks and still index, but I don't know at what point that becomes cost effective, and probably wouldn't want to take time off from sailing my yacht to figure it out.

Hey since we're dreaming I have a yacht. A BIG one...
shess
Posts: 2164
Joined: Wed May 17, 2017 12:02 am

Re: Ultra HNW on this forum?

Post by shess »

BrooklynInvest wrote: Thu Jan 13, 2022 2:31 pm At a certain scale it's possible that I could shave a few dollars off my expense ratio and tax loss harvest if I were to replicate my S&P index with individual stocks and still index, but I don't know at what point that becomes cost effective, and probably wouldn't want to take time off from sailing my yacht to figure it out.
A few years back in a similar discussion, I said "I dunno, maybe at like $100M, it would make sense to just replicate the index with individual stocks?"

Then someone asked for more info, so I did the math. The VOO ER is .03%. So at $100M, it would have to cost less than $30k/year to make sense just in terms of that cost. I'll be honest, I wouldn't trust an individual to manage $100M on an allowance of $30k/year, it's just not enough money to be sure they're doing a good job (I mean even if you believe they CAN do a good job, you still want to make sure they are able to cover costs without using sketchy revenue-generating options).

Of course, you can arm-wave about all sorts of other benefits. I'm just saying that with the current state of index ETFs, I can't really see circumstances where it makes sense to do it manually from a plain expense-ratio argument. In fact, you're probably going to be paying a fair bit over the ETF's ER to access those other benefits, so they had better be real!
GP813
Posts: 1243
Joined: Wed Dec 11, 2019 9:11 am

Re: Ultra HNW on this forum?

Post by GP813 »

I know enough very rich people to know they have huge FOMO when it comes to investments and information, more so than the average American. You would think it would be the opposite but it's not. My rich acquaintances are always talking about the latest thing or trying to navigate any changes in the tax or legal code.
JackoC
Posts: 4714
Joined: Sun Aug 12, 2018 11:14 am

Re: Ultra HNW on this forum?

Post by JackoC »

realfan wrote: Tue Jan 04, 2022 7:51 pm I always preach the Boglehead three fund portfolio to this crowd as a great way to start investing. I also have friends on the older side of the spectrum whom I suspect are worth north of $25M (multiple homes, no mortgages, invested in hedge funds, PE funds, stock market, commercial RE, etc.). I also discuss simplified investing with a couple of folks in this crowd and I swear they think I am a simpleton.
The simplicity vs. asset level debate obviously depends on preference, but also on what exactly people mean by 'simplified investing'. If they mean therefore not to do active estate planning (which might, for example, involve setting up separate accounts in the related trusts, etc) then yes 'simplicity' can become an objectively bad idea above a certain asset level. Extra taxes your family will pay if you refuse to give up on 'simplicity', overall, can be a lot more $'s than is at stake between index and actively managed stock funds.

But, one could also narrow it down and say 'simplified investing' only refers to what you invest in. It does not exclude separate tax and estate planning methods that complicate the overall picture. In that case I see no level of assets where simple index fund investing becomes an outright bad idea. But, while hedge funds and PE are common pinata's on this forum, those are things which can make sense IMO and are more likely to as asset level rises. Although, the level where those things would make *a lot* more sense would probably be >>$25mil, especially where you actually have the clout to negotiate on fees, or even employ your own people to carry out alternate investment strategies for you on a scale large enough for their pay to become an attractive %. Direct real estate investing OTOH is not IMO against any kind of rational investing principle at almost any asset level. If you understand the commitment and are able to make it, owning rental properties yourself can be a good diversifier far below $25mil.

Also, it isn't just asset level but kind of culture gap between high paid employee or independent professionals (the great majority here it would seem) vs. people who built a business (a lucrative private practice in medicine, law, etc. is a laudable achievement in return for effort and risk beyond being somebody else's employee in those fields, but still the 'product' is mainly directly that person's labor, different than true entrepreneurship). True entrepreneurs often wouldn't be within an order of magnitude of $25mil if they hadn't embraced complexity and undiversified risk as a way of life. It's hard to expect them to drop it after if pays off for them big time.
BJJ_GUY
Posts: 882
Joined: Wed Mar 13, 2019 7:45 am

Re: Ultra HNW on this forum?

Post by BJJ_GUY »

FinancialSnowboarder wrote: Thu Jan 06, 2022 2:58 am
AlohaJoe wrote: Thu Jan 06, 2022 2:26 am
BJJ_GUY wrote: Thu Jan 06, 2022 2:10 am A person with a $25mm investment portfolio doesn't really have anywhere near enough capital to be invested in hedge funds, PE funds, and real estate funds
I know several people under $25mm who are invested in hedge funds and PE. But it usually requires connections and investing via some kind of roll-up arrangement. For instance, they recently invested in Tiger Global's latest round. That had a $1M minimum investment for individuals and $5M for institutions. Maybe one of my friends put that much in on his own but I'm pretty sure none of the rest did. But they are involved with a group who represent 13 people/families -- basically the level below dedicated family office. And that group got involved with a much bigger family office (for a family that in the $2-3 billion net worth range) in a few deals. Now sometimes the smaller group gets invited in as a "friend" of the big group on bigger deals.

So the people I know invest in the shared-family-group which then gets rolled up into the friendly "real" family office which then invests in Tiger Global's latest round.
I agree with AlohaJoe. I know dozens of people under $25M who are invested in hedge funds, PE, and Real Estate funds. Many funds only require you to be an accredited investor ($1M net worth), with some requiring you to be a Qualified Purchaser ($5M net worth). Some funds have a limited number of spots for friends & family, so net worth is not relevant in that case.

There are also SPVs that aggregate investors to hit the minimum investment to invest into a fund. For example, an SPV can have 50 investors to meet a $5M minimum investment.
I think you are misunderstanding the point I was making. Of course someone with $25mm can legally invest in a hedge fund (or other private capital vehicles). My point was that being a small time investor, and not being a known industry investor, and not having connections and established relationships will make it very hard to access the top funds on a regular basis, broadly speaking. So practically, you face a high hurdle as far as executing in practice.

Further, if half of the $25mm is in traditional equity and bonds, now you have $12.5mm to somehow build a diversified hedge fund portfolio... but also diversified PE/VC, and diversified real assets etc... You just dont have enough capital to invest in a diversified way when minimums are often $5mm or more -- but even if the minimums were $1mm you are going to be challenged to spread your investments properly.

Also, SPVs are not typically used as an access point to invest in the commingled fund. SPVs are more typically used to make co-investments where you are investing in a particular trade/position, so this is very different from a flagship fund investment.
BJJ_GUY
Posts: 882
Joined: Wed Mar 13, 2019 7:45 am

Re: Ultra HNW on this forum?

Post by BJJ_GUY »

McGowan wrote: Thu Jan 13, 2022 10:56 am Private Equity Valuations are highly subjective as they are giving an exit value to their existing portfolio. PE firms have a long history of selling their best performers early so that they can show investors stellar returns while raising their next fund. IRR is a function of time held and return. The underperforming companies in their portfolio are held the longest and provide the lowest or negative returns.

I am more than a little cynical/skeptical about these firms going public. It's more than a little about providing sustainable management fees to management. Buyer beware.
I agree that private equity returns can be manipulated, and are often not informative until the later years of the term, and obviously at the conclusion of the fund's life.

Not that this changes all that much from your point, but worth noting that PE valuations aren't so much subjective, but often based on the implied valuation of the most recent fundraise for each underlying portfolio company. Interestingly, a trend that many funds are doing to juice these mark-to-market returns isn't selling the top performers early, but they are actually holding them longer -- and keeping them private for extended periods of time. The average duration of time from funding to exit (monetization) is historically extended.

When you say you are cynical about the firms going public because it's all about management fees for management, this is a bit confusing. Are you talking about the companies going public, or the PE firms? Also, PE managers have potential to make far more money from an incentive fee than from an addition few years of management fees, and artificially extending the time period to monetization reduces the IRR which means less money for the PE manager.
BJJ_GUY
Posts: 882
Joined: Wed Mar 13, 2019 7:45 am

Re: Ultra HNW on this forum?

Post by BJJ_GUY »

DarkMatter731 wrote: Thu Jan 06, 2022 6:11 pm Which ignores the purpose of hedgefunds and private equity firms completely.

If I'm an institutional investor, I want uncorrelated returns and firms that generate alpha. A firm that returns 10% a year with a volatility of 5% is much more preferred than a firm that returns 12% with a volatility of 12% a year. Private equity and hedgefunds exist for a reason - institutional investors aren't dumb, they also understand how index funds work. But putting it in an index fund won't generate alpha nor will it be uncorrelated with the market.
Agreed, and well put.

The problem with debating these topics in this forum is that we often talk past each other because many folks simply don't understand the role hedge funds play in a portfolio. The fact that it's still common to point out that hedge funds didn't beat the SPX over some short time period, and think this is proof that they aren't a good investment is very telling.

This fundamental misunderstanding of the role of certain strategies in a portfolio, and the lack of understanding regarding institutional mandates (for example, reducing short-term volatility so the annual spend from an endowment doesn't permanently hurt the long term value if they must distribute capital during the bottom of a drawdown etc.).

This means we will keep talking past each other
Sharpie90
Posts: 2
Joined: Thu Jan 20, 2022 11:25 pm

Re: Ultra HNW on this forum?

Post by Sharpie90 »

My spouse & I are newly minted UHNW due to the sale of our business, with NW at $70m.

For now, we're just trying to follow the boglehead philosophy, talk to a by-the-hour financial planner, etc.

We did talk to several wealth advisors who charge 30-50 basis points AUM, but ultimately, we were swayed by the greater control of investing on our own and following the bogleheads.

FWIW...
Jimsad
Posts: 937
Joined: Mon Mar 20, 2017 5:54 pm

Re: Ultra HNW on this forum?

Post by Jimsad »

Sharpie90 wrote: Thu Jan 27, 2022 7:56 pm My spouse & I are newly minted UHNW due to the sale of our business, with NW at $70m.

For now, we're just trying to follow the boglehead philosophy, talk to a by-the-hour financial planner, etc.

We did talk to several wealth advisors who charge 30-50 basis points AUM, but ultimately, we were swayed by the greater control of investing on our own and following the bogleheads.

FWIW...
If I had that much networth , I would be looking at hedge funds , PE/VC etc .
TheDoctor91
Posts: 158
Joined: Thu Feb 25, 2021 11:43 am

Re: Ultra HNW on this forum?

Post by TheDoctor91 »

leehamster wrote: Fri Jan 07, 2022 7:54 pm
mikejuss wrote: Fri Jan 07, 2022 9:42 am
Leesbro63 wrote: Fri Jan 07, 2022 9:33 am
mikejuss wrote: Fri Jan 07, 2022 9:32 am I suppose we will never resolve the question of why high-net-worth individuals flirt with alternative investments, given what appears to be their largely inferior performance against index funds.
I actually think the answer is obvious in most cases. And it's the same reasons that Bogleheads/index fund investors are a minority (although an increasing percentage): They don't understand that less (complication) is more.
Boy, if that's really the answer to this question, it's a pretty bizarre answer.
There are outliers who provide market-beating returns in investments other than index funds. It's just hard to predict them, or to get into their funds once it's predictable. But the narratives are real enough that it can cause investors to chase them, and other funds to spring up to serve those investors.

I'm on these BH boards, and agree that less complications is more. I'm happy to have average returns with below average costs, and to stay in the markets through thick and thin to harvest the market returns that are available through index funds. But above-average returns exist, and we shouldn't be so self-satisfied as Bogleheads to deny half of the bell curve of returns.

A couple of examples:
A 50% levered portfolio of SCV has done exceptionally well this year too.
Firemenot
Posts: 1497
Joined: Wed Apr 01, 2020 8:48 pm

Re: Ultra HNW on this forum?

Post by Firemenot »

Jimsad wrote: Thu Jan 27, 2022 8:13 pm
Sharpie90 wrote: Thu Jan 27, 2022 7:56 pm My spouse & I are newly minted UHNW due to the sale of our business, with NW at $70m.

For now, we're just trying to follow the boglehead philosophy, talk to a by-the-hour financial planner, etc.

We did talk to several wealth advisors who charge 30-50 basis points AUM, but ultimately, we were swayed by the greater control of investing on our own and following the bogleheads.

FWIW...
If I had that much networth , I would be looking at hedge funds , PE/VC etc .
I disagree with above comment. You might want to look into direct indexing. I’m sure a good financial advisor can lay out the potential benefits and help think through whether it’s worth the effort.
User avatar
fetch5482
Posts: 1722
Joined: Fri Aug 15, 2014 4:55 pm

Re: Ultra HNW on this forum?

Post by fetch5482 »

I just bought the winning Mega Millions ticket for tomorrow's draw, so I'll soon be contributing to this thread😛

Lol on a note serious note, I still think there is hit a huge difference in bogleheads approach to hnw vs uhnw individuals.
(AGE minus 23%) Bonds | 5% REITs | Balance 80% US (75/25 TSM/SCV) + 20% International (80/20 Developed/Emerging)
User avatar
fetch5482
Posts: 1722
Joined: Fri Aug 15, 2014 4:55 pm

Re: Ultra HNW on this forum?

Post by fetch5482 »

Firemenot wrote: Thu Jan 27, 2022 10:58 pm
Jimsad wrote: Thu Jan 27, 2022 8:13 pm
Sharpie90 wrote: Thu Jan 27, 2022 7:56 pm My spouse & I are newly minted UHNW due to the sale of our business, with NW at $70m.

For now, we're just trying to follow the boglehead philosophy, talk to a by-the-hour financial planner, etc.

We did talk to several wealth advisors who charge 30-50 basis points AUM, but ultimately, we were swayed by the greater control of investing on our own and following the bogleheads.

FWIW...
If I had that much networth , I would be looking at hedge funds , PE/VC etc .
I disagree with above comment. You might want to look into direct indexing. I’m sure a good financial advisor can lay out the potential benefits and help think through whether it’s worth the effort.
Direct investing makes sense if you are able to get it done cheaply, say 20 basis points or so. I've not found anyone though who charges below 50 basis points, at which point the tax advantages of direct investing starts to outweigh the cost. And direct investing is definitely something we cannot DIY.
(AGE minus 23%) Bonds | 5% REITs | Balance 80% US (75/25 TSM/SCV) + 20% International (80/20 Developed/Emerging)
shess
Posts: 2164
Joined: Wed May 17, 2017 12:02 am

Re: Ultra HNW on this forum?

Post by shess »

gas_balloon wrote: Thu Jan 27, 2022 11:06 pm
Firemenot wrote: Thu Jan 27, 2022 10:58 pm
Jimsad wrote: Thu Jan 27, 2022 8:13 pm
Sharpie90 wrote: Thu Jan 27, 2022 7:56 pm My spouse & I are newly minted UHNW due to the sale of our business, with NW at $70m.

For now, we're just trying to follow the boglehead philosophy, talk to a by-the-hour financial planner, etc.

We did talk to several wealth advisors who charge 30-50 basis points AUM, but ultimately, we were swayed by the greater control of investing on our own and following the bogleheads.

FWIW...
If I had that much networth , I would be looking at hedge funds , PE/VC etc .
I disagree with above comment. You might want to look into direct indexing. I’m sure a good financial advisor can lay out the potential benefits and help think through whether it’s worth the effort.
Direct investing makes sense if you are able to get it done cheaply, say 20 basis points or so. I've not found anyone though who charges below 50 basis points, at which point the tax advantages of direct investing starts to outweigh the cost. And direct investing is definitely something we cannot DIY.
I think it is important to keep in mind that a 3-fund portfolio works just as well at $70M as as $7M. 15 years ago, I really was infatuated with the idea of direct indexing with Parametric or Aperio - I'm glad I took a pass on it, because I no longer think the TLH opportunities are all that compelling, nor am I interested in signing up for the forever complexity (once you have 1,000 positions, you can ACAT that wherever you want, but you can't pack that back into a 3-fund ETF without realizing the gains). Likewise for hedge funds and MLPs and venture capital, just because you can get good access to them with that much money doesn't mean you need to, nor does it mean that you'll actually see that much benefit from it.

So I applaud Sharpie90 for sticking to simplicity, and I hope to join you someday...
Jimsad
Posts: 937
Joined: Mon Mar 20, 2017 5:54 pm

Re: Ultra HNW on this forum?

Post by Jimsad »

shess wrote: Fri Jan 28, 2022 12:38 am
gas_balloon wrote: Thu Jan 27, 2022 11:06 pm
Firemenot wrote: Thu Jan 27, 2022 10:58 pm
Jimsad wrote: Thu Jan 27, 2022 8:13 pm
Sharpie90 wrote: Thu Jan 27, 2022 7:56 pm My spouse & I are newly minted UHNW due to the sale of our business, with NW at $70m.

For now, we're just trying to follow the boglehead philosophy, talk to a by-the-hour financial planner, etc.

We did talk to several wealth advisors who charge 30-50 basis points AUM, but ultimately, we were swayed by the greater control of investing on our own and following the bogleheads.

FWIW...
If I had that much networth , I would be looking at hedge funds , PE/VC etc .
I disagree with above comment. You might want to look into direct indexing. I’m sure a good financial advisor can lay out the potential benefits and help think through whether it’s worth the effort.
Direct investing makes sense if you are able to get it done cheaply, say 20 basis points or so. I've not found anyone though who charges below 50 basis points, at which point the tax advantages of direct investing starts to outweigh the cost. And direct investing is definitely something we cannot DIY.
I think it is important to keep in mind that a 3-fund portfolio works just as well at $70M as as $7M. 15 years ago, I really was infatuated with the idea of direct indexing with Parametric or Aperio - I'm glad I took a pass on it, because I no longer think the TLH opportunities are all that compelling, nor am I interested in signing up for the forever complexity (once you have 1,000 positions, you can ACAT that wherever you want, but you can't pack that back into a 3-fund ETF without realizing the gains). Likewise for hedge funds and MLPs and venture capital, just because you can get good access to them with that much money doesn't mean you need to, nor does it mean that you'll actually see that much benefit from it.

So I applaud Sharpie90 for sticking to simplicity, and I hope to join you someday...
What is the point of having all that money if you cannot take some risk and try out those that I suggested with May be 10% of your portfolio ? Rather than keep sticking to the boring 3 fund portfolio?
Jimsad
Posts: 937
Joined: Mon Mar 20, 2017 5:54 pm

Re: Ultra HNW on this forum?

Post by Jimsad »

shess wrote: Fri Jan 28, 2022 12:38 am
gas_balloon wrote: Thu Jan 27, 2022 11:06 pm
Firemenot wrote: Thu Jan 27, 2022 10:58 pm
Jimsad wrote: Thu Jan 27, 2022 8:13 pm
Sharpie90 wrote: Thu Jan 27, 2022 7:56 pm My spouse & I are newly minted UHNW due to the sale of our business, with NW at $70m.

For now, we're just trying to follow the boglehead philosophy, talk to a by-the-hour financial planner, etc.

We did talk to several wealth advisors who charge 30-50 basis points AUM, but ultimately, we were swayed by the greater control of investing on our own and following the bogleheads.

FWIW...
If I had that much networth , I would be looking at hedge funds , PE/VC etc .
I disagree with above comment. You might want to look into direct indexing. I’m sure a good financial advisor can lay out the potential benefits and help think through whether it’s worth the effort.
Direct investing makes sense if you are able to get it done cheaply, say 20 basis points or so. I've not found anyone though who charges below 50 basis points, at which point the tax advantages of direct investing starts to outweigh the cost. And direct investing is definitely something we cannot DIY.
I think it is important to keep in mind that a 3-fund portfolio works just as well at $70M as as $7M. 15 years ago, I really was infatuated with the idea of direct indexing with Parametric or Aperio - I'm glad I took a pass on it, because I no longer think the TLH opportunities are all that compelling, nor am I interested in signing up for the forever complexity (once you have 1,000 positions, you can ACAT that wherever you want, but you can't pack that back into a 3-fund ETF without realizing the gains). Likewise for hedge funds and MLPs and venture capital, just because you can get good access to them with that much money doesn't mean you need to, nor does it mean that you'll actually see that much benefit from it.

So I applaud Sharpie90 for sticking to simplicity, and I hope to join you someday...
What is the point of having all that money if you cannot take some risk and try out those that I suggested with May be 10% of your portfolio ? Rather than keep sticking to the boring 3 fund portfolio?
User avatar
TomatoTomahto
Posts: 17158
Joined: Mon Apr 11, 2011 1:48 pm

Re: Ultra HNW on this forum?

Post by TomatoTomahto »

Jimsad wrote: Fri Jan 28, 2022 6:54 am
shess wrote: Fri Jan 28, 2022 12:38 am
gas_balloon wrote: Thu Jan 27, 2022 11:06 pm
Firemenot wrote: Thu Jan 27, 2022 10:58 pm
Jimsad wrote: Thu Jan 27, 2022 8:13 pm
If I had that much networth , I would be looking at hedge funds , PE/VC etc .
I disagree with above comment. You might want to look into direct indexing. I’m sure a good financial advisor can lay out the potential benefits and help think through whether it’s worth the effort.
Direct investing makes sense if you are able to get it done cheaply, say 20 basis points or so. I've not found anyone though who charges below 50 basis points, at which point the tax advantages of direct investing starts to outweigh the cost. And direct investing is definitely something we cannot DIY.
I think it is important to keep in mind that a 3-fund portfolio works just as well at $70M as as $7M. 15 years ago, I really was infatuated with the idea of direct indexing with Parametric or Aperio - I'm glad I took a pass on it, because I no longer think the TLH opportunities are all that compelling, nor am I interested in signing up for the forever complexity (once you have 1,000 positions, you can ACAT that wherever you want, but you can't pack that back into a 3-fund ETF without realizing the gains). Likewise for hedge funds and MLPs and venture capital, just because you can get good access to them with that much money doesn't mean you need to, nor does it mean that you'll actually see that much benefit from it.

So I applaud Sharpie90 for sticking to simplicity, and I hope to join you someday...
What is the point of having all that money if you cannot take some risk and try out those that I suggested with May be 10% of your portfolio ? Rather than keep sticking to the boring 3 fund portfolio?
I’m “alternative industry adjacent.” There is only one of the alternatives that I’d be interested in investing in, and they don’t want my money. Feh on the others.

A boring financial life is okay as long as your daily life isn’t boring.
I get the FI part but not the RE part of FIRE.
Wings5
Posts: 331
Joined: Sun Nov 16, 2014 4:17 pm

Re: Ultra HNW on this forum?

Post by Wings5 »

Just got some running water to brush my teeth, then flipped a switch to increase warmth in my dwelling. We’ve got it better than kings of old.

After a few jaunts with the military I realized that worldwide, I’m UHNW and right here, on Bogleheads :D :sharebeer
Last edited by Wings5 on Fri Jan 28, 2022 2:08 pm, edited 1 time in total.
“Spending money to show people how much money you have is the fastest way to have less money.” - Morgan Housel
deltaneutral83
Posts: 2455
Joined: Tue Mar 07, 2017 3:25 pm

Re: Ultra HNW on this forum?

Post by deltaneutral83 »

Talking about Bezos, Gates, and Musk in terms of "they have the majority of their net worth in a single stock" is a bit out of context when you factor in that they held 51% or more until they got filthy rich or were wealthy beforehand (Musk/Tesla). Musk was actually wealthy (maybe not filthy) long before Tesla. It's not that most advise against single stocks, it's that they advise against single stocks you don't have majority decision making in and then when you get filthy rich. And most companies never make it anyhow, regardless of ownership.

It is interesting to see the partnership debates and how many are weary, even some of the greatest minds on the planet like Gates and Allen couldn't keep egos in check for very many years, of course they were filthy rich when this happened but it does justify the stance many have in business.
shess
Posts: 2164
Joined: Wed May 17, 2017 12:02 am

Re: Ultra HNW on this forum?

Post by shess »

Jimsad wrote: Fri Jan 28, 2022 6:54 am
shess wrote: Fri Jan 28, 2022 12:38 am
gas_balloon wrote: Thu Jan 27, 2022 11:06 pm
Firemenot wrote: Thu Jan 27, 2022 10:58 pm
Jimsad wrote: Thu Jan 27, 2022 8:13 pm
If I had that much networth , I would be looking at hedge funds , PE/VC etc .
I disagree with above comment. You might want to look into direct indexing. I’m sure a good financial advisor can lay out the potential benefits and help think through whether it’s worth the effort.
Direct investing makes sense if you are able to get it done cheaply, say 20 basis points or so. I've not found anyone though who charges below 50 basis points, at which point the tax advantages of direct investing starts to outweigh the cost. And direct investing is definitely something we cannot DIY.
I think it is important to keep in mind that a 3-fund portfolio works just as well at $70M as as $7M. 15 years ago, I really was infatuated with the idea of direct indexing with Parametric or Aperio - I'm glad I took a pass on it, because I no longer think the TLH opportunities are all that compelling, nor am I interested in signing up for the forever complexity (once you have 1,000 positions, you can ACAT that wherever you want, but you can't pack that back into a 3-fund ETF without realizing the gains). Likewise for hedge funds and MLPs and venture capital, just because you can get good access to them with that much money doesn't mean you need to, nor does it mean that you'll actually see that much benefit from it.

So I applaud Sharpie90 for sticking to simplicity, and I hope to join you someday...
What is the point of having all that money if you cannot take some risk and try out those that I suggested with May be 10% of your portfolio ? Rather than keep sticking to the boring 3 fund portfolio?
Apologies, but I honestly can't tell if you're trolling me or if you're serious. At least in my case, my portfolio is a tool for implementing a lifestyle. I could care less whether people it's boring, as long as it does its job. IMHO, being interesting is not a selling point for a portfolio, even though it is a selling point for financial media.

I grant that some people feel the need to be in there playing with their money. And that's fine, go for it. You don't have to, though. Just because you can afford a Bentley doesn't mean that a Civic is not completely adequate to the task.
sc9182
Posts: 2179
Joined: Wed Aug 17, 2016 7:43 pm

Re: Ultra HNW on this forum?

Post by sc9182 »

shess wrote: Fri Jan 28, 2022 10:45 am
Jimsad wrote: Fri Jan 28, 2022 6:54 am
shess wrote: Fri Jan 28, 2022 12:38 am
gas_balloon wrote: Thu Jan 27, 2022 11:06 pm
Firemenot wrote: Thu Jan 27, 2022 10:58 pm

I disagree with above comment. You might want to look into direct indexing. I’m sure a good financial advisor can lay out the potential benefits and help think through whether it’s worth the effort.
Direct investing makes sense if you are able to get it done cheaply, say 20 basis points or so. I've not found anyone though who charges below 50 basis points, at which point the tax advantages of direct investing starts to outweigh the cost. And direct investing is definitely something we cannot DIY.
I think it is important to keep in mind that a 3-fund portfolio works just as well at $70M as as $7M. 15 years ago, I really was infatuated with the idea of direct indexing with Parametric or Aperio - I'm glad I took a pass on it, because I no longer think the TLH opportunities are all that compelling, nor am I interested in signing up for the forever complexity (once you have 1,000 positions, you can ACAT that wherever you want, but you can't pack that back into a 3-fund ETF without realizing the gains). Likewise for hedge funds and MLPs and venture capital, just because you can get good access to them with that much money doesn't mean you need to, nor does it mean that you'll actually see that much benefit from it.

So I applaud Sharpie90 for sticking to simplicity, and I hope to join you someday...
What is the point of having all that money if you cannot take some risk and try out those that I suggested with May be 10% of your portfolio ? Rather than keep sticking to the boring 3 fund portfolio?
Apologies, but I honestly can't tell if you're trolling me or if you're serious. At least in my case, my portfolio is a tool for implementing a lifestyle. I could care less whether people it's boring, as long as it does its job. IMHO, being interesting is not a selling point for a portfolio, even though it is a selling point for financial media.

I grant that some people feel the need to be in there playing with their money. And that's fine, go for it. You don't have to, though. Just because you can afford a Bentley doesn't mean that a Civic is not completely adequate to the task.
Heh - even though Civic could mostly do what Bentley could do.

With sufficient dough you can float your own boat (Yachts), instead of a cruise.

You can go to space (a few minutes of fun), and/or fly Private - rather than simply flying your own drone.

There are things money (including power/influence) buys - one, simply can’t make-do with mere frugal ways.

At the end of the day - what is the value of amassing large sums - you can’t take it with you ..
Last edited by sc9182 on Fri Jan 28, 2022 11:24 am, edited 1 time in total.
Californiastate
Posts: 1516
Joined: Thu Feb 04, 2021 10:52 am

Re: Ultra HNW on this forum?

Post by Californiastate »

Jimsad wrote: Fri Jan 28, 2022 6:54 am
shess wrote: Fri Jan 28, 2022 12:38 am
gas_balloon wrote: Thu Jan 27, 2022 11:06 pm
Firemenot wrote: Thu Jan 27, 2022 10:58 pm
Jimsad wrote: Thu Jan 27, 2022 8:13 pm
If I had that much networth , I would be looking at hedge funds , PE/VC etc .
I disagree with above comment. You might want to look into direct indexing. I’m sure a good financial advisor can lay out the potential benefits and help think through whether it’s worth the effort.
Direct investing makes sense if you are able to get it done cheaply, say 20 basis points or so. I've not found anyone though who charges below 50 basis points, at which point the tax advantages of direct investing starts to outweigh the cost. And direct investing is definitely something we cannot DIY.
I think it is important to keep in mind that a 3-fund portfolio works just as well at $70M as as $7M. 15 years ago, I really was infatuated with the idea of direct indexing with Parametric or Aperio - I'm glad I took a pass on it, because I no longer think the TLH opportunities are all that compelling, nor am I interested in signing up for the forever complexity (once you have 1,000 positions, you can ACAT that wherever you want, but you can't pack that back into a 3-fund ETF without realizing the gains). Likewise for hedge funds and MLPs and venture capital, just because you can get good access to them with that much money doesn't mean you need to, nor does it mean that you'll actually see that much benefit from it.

So I applaud Sharpie90 for sticking to simplicity, and I hope to join you someday...
What is the point of having all that money if you cannot take some risk and try out those that I suggested with May be 10% of your portfolio ? Rather than keep sticking to the boring 3 fund portfolio?
People have their own ideas of what they would do with generational money. The list of past lottery winners is flush with those who were greedy and thought they were JP Morgan. It's the same thing with pro athletes.
MiddleOfTheRoad
Posts: 393
Joined: Fri Jul 21, 2017 11:19 am

Re: Ultra HNW on this forum?

Post by MiddleOfTheRoad »

Wings5 wrote: Fri Jan 28, 2022 8:51 am Just got some running water to brush my teeth, then flipped a switch to increase warmth in my dwelling. We’ve got it better than kings of old.

After a few jaunts with the military I realized that worldwide, I’m UHNW and right here, on Bogleheads :D :sharebeer
Ha, this is what I keep telling my kids. That we live 100x better than Royalties as recent as last century. 8-)
Jimsad
Posts: 937
Joined: Mon Mar 20, 2017 5:54 pm

Re: Ultra HNW on this forum?

Post by Jimsad »

sc9182 wrote: Fri Jan 28, 2022 10:52 am
shess wrote: Fri Jan 28, 2022 10:45 am
Jimsad wrote: Fri Jan 28, 2022 6:54 am
shess wrote: Fri Jan 28, 2022 12:38 am
gas_balloon wrote: Thu Jan 27, 2022 11:06 pm
Direct investing makes sense if you are able to get it done cheaply, say 20 basis points or so. I've not found anyone though who charges below 50 basis points, at which point the tax advantages of direct investing starts to outweigh the cost. And direct investing is definitely something we cannot DIY.
I think it is important to keep in mind that a 3-fund portfolio works just as well at $70M as as $7M. 15 years ago, I really was infatuated with the idea of direct indexing with Parametric or Aperio - I'm glad I took a pass on it, because I no longer think the TLH opportunities are all that compelling, nor am I interested in signing up for the forever complexity (once you have 1,000 positions, you can ACAT that wherever you want, but you can't pack that back into a 3-fund ETF without realizing the gains). Likewise for hedge funds and MLPs and venture capital, just because you can get good access to them with that much money doesn't mean you need to, nor does it mean that you'll actually see that much benefit from it.

So I applaud Sharpie90 for sticking to simplicity, and I hope to join you someday...
What is the point of having all that money if you cannot take some risk and try out those that I suggested with May be 10% of your portfolio ? Rather than keep sticking to the boring 3 fund portfolio?
Apologies, but I honestly can't tell if you're trolling me or if you're serious. At least in my case, my portfolio is a tool for implementing a lifestyle. I could care less whether people it's boring, as long as it does its job. IMHO, being interesting is not a selling point for a portfolio, even though it is a selling point for financial media.

I grant that some people feel the need to be in there playing with their money. And that's fine, go for it. You don't have to, though. Just because you can afford a Bentley doesn't mean that a Civic is not completely adequate to the task.
Heh - even though Civic could mostly do what Bentley could do.

With sufficient you can float your own boat (Yachts), instead of a cruise.

You can go to space (a few minutes of fun), and/or fly Private - rather than simply flying your own drone.

There are things money (including power/influence) buys - one, simply can’t make-do with mere frugal ways.

At the end of the day - what is the.l value of amassing large sums - you can’t take it with you ..
+1
I just do not see the point of being frugal at 70 million
shess
Posts: 2164
Joined: Wed May 17, 2017 12:02 am

Re: Ultra HNW on this forum?

Post by shess »

Jimsad wrote: Fri Jan 28, 2022 11:15 am
sc9182 wrote: Fri Jan 28, 2022 10:52 am
shess wrote: Fri Jan 28, 2022 10:45 am I grant that some people feel the need to be in there playing with their money. And that's fine, go for it. You don't have to, though. Just because you can afford a Bentley doesn't mean that a Civic is not completely adequate to the task.
Heh - even though Civic could mostly do what Bentley could do.

With sufficient you can float your own boat (Yachts), instead of a cruise.

You can go to space (a few minutes of fun), and/or fly Private - rather than simply flying your own drone.

There are things money (including power/influence) buys - one, simply can’t make-do with mere frugal ways.

At the end of the day - what is the.l value of amassing large sums - you can’t take it with you ..
+1
I just do not see the point of being frugal at 70 million
IMHO, frugal is not the right word, because the opposite of frugal is extravagant. To me, the goal is to be able to push financial considerations into the background. I might buy a more expensive item than I would have 20 years ago, but I do it because it meets my needs and I can afford to buy it, the mere fact that it is more expensive is not generally a functional attribute for me.

Tying it back to the thread, my point up a few posts was that just because you have $70M doesn't mean that a three-fund portfolio stops meeting your needs. If you want to participate in a round at a VC because that's personally exciting to you, go for it! Just don't claim that the money is making you do it. Meanwhile, if you'd rather go hang out by the lake reading, or travel the world to visit coffee shops, a three-fund portfolio will leave you plenty of time and resources to do that.
Firemenot
Posts: 1497
Joined: Wed Apr 01, 2020 8:48 pm

Re: Ultra HNW on this forum?

Post by Firemenot »

sc9182 wrote: Fri Jan 28, 2022 10:52 am
shess wrote: Fri Jan 28, 2022 10:45 am
Jimsad wrote: Fri Jan 28, 2022 6:54 am
shess wrote: Fri Jan 28, 2022 12:38 am
gas_balloon wrote: Thu Jan 27, 2022 11:06 pm
Direct investing makes sense if you are able to get it done cheaply, say 20 basis points or so. I've not found anyone though who charges below 50 basis points, at which point the tax advantages of direct investing starts to outweigh the cost. And direct investing is definitely something we cannot DIY.
I think it is important to keep in mind that a 3-fund portfolio works just as well at $70M as as $7M. 15 years ago, I really was infatuated with the idea of direct indexing with Parametric or Aperio - I'm glad I took a pass on it, because I no longer think the TLH opportunities are all that compelling, nor am I interested in signing up for the forever complexity (once you have 1,000 positions, you can ACAT that wherever you want, but you can't pack that back into a 3-fund ETF without realizing the gains). Likewise for hedge funds and MLPs and venture capital, just because you can get good access to them with that much money doesn't mean you need to, nor does it mean that you'll actually see that much benefit from it.

So I applaud Sharpie90 for sticking to simplicity, and I hope to join you someday...
What is the point of having all that money if you cannot take some risk and try out those that I suggested with May be 10% of your portfolio ? Rather than keep sticking to the boring 3 fund portfolio?
Apologies, but I honestly can't tell if you're trolling me or if you're serious. At least in my case, my portfolio is a tool for implementing a lifestyle. I could care less whether people it's boring, as long as it does its job. IMHO, being interesting is not a selling point for a portfolio, even though it is a selling point for financial media.

I grant that some people feel the need to be in there playing with their money. And that's fine, go for it. You don't have to, though. Just because you can afford a Bentley doesn't mean that a Civic is not completely adequate to the task.
Heh - even though Civic could mostly do what Bentley could do.

With sufficient dough you can float your own boat (Yachts), instead of a cruise.

You can go to space (a few minutes of fun), and/or fly Private - rather than simply flying your own drone.

There are things money (including power/influence) buys - one, simply can’t make-do with mere frugal ways.

At the end of the day - what is the value of amassing large sums - you can’t take it with you ..
I’m making some assumptions about the poster that sold his/her business. Let’s assume they built most of the value of the sold business. Or perhaps it was a multi-generational family business that was sold. Either way, I would think there’s a certain sense of legacy to be a good steward towards.
psteinx
Posts: 5801
Joined: Tue Mar 13, 2007 2:24 pm

Re: Ultra HNW on this forum?

Post by psteinx »

shess wrote: Fri Jan 28, 2022 12:38 am I think it is important to keep in mind that a 3-fund portfolio works just as well at $70M as as $7M. 15 years ago, I really was infatuated with the idea of direct indexing with Parametric or Aperio - I'm glad I took a pass on it, because I no longer think the TLH opportunities are all that compelling, nor am I interested in signing up for the forever complexity (once you have 1,000 positions, you can ACAT that wherever you want, but you can't pack that back into a 3-fund ETF without realizing the gains). Likewise for hedge funds and MLPs and venture capital, just because you can get good access to them with that much money doesn't mean you need to, nor does it mean that you'll actually see that much benefit from it.

So I applaud Sharpie90 for sticking to simplicity, and I hope to join you someday...
You can get many of the benefits of direct investing by buying a small (10-25) portfolio of diversified stocks on your own, as a portion of your overall portfolio.

The Dow Jones is only 30 stocks, with a weird weighting system that reduces the effective diversification to even less than 30 stocks, yet it mostly stays in line with the S&P 500. Obviously, this wouldn't hold if the DJIA were only 30 energy stocks, or 30 utilities, or whatever.
psteinx
Posts: 5801
Joined: Tue Mar 13, 2007 2:24 pm

Re: Ultra HNW on this forum?

Post by psteinx »

Dave55 wrote: Wed Jan 12, 2022 7:17 pm I know 2 HNW. One sold a company for close to $500M. He hired an advisor who he told to be conservative and don't lose money. She lost him money. He fired her. He ended up in many different private investments including land deals, large scale RE development, and funding some startups. He would muse he probably would have been better off in the S&P index. But he was always tempted to make 20-30% ROI and was willing to take the risks to do so. The market was never sexy enough for him, he likes sexy investments.

The 2nd gentleman has some in the S&P index but much more $$ in hedge funds and private equity RE deals. He is looking for higher return with lower risk than the S&P and feels hedge funds are the way.

Dave
The first 2 bolded statements don't jive with the 3rd.

(Unless maybe you live in a 20%+ inflation country, which I doubt was the case here.)
psteinx
Posts: 5801
Joined: Tue Mar 13, 2007 2:24 pm

Re: Ultra HNW on this forum?

Post by psteinx »

TomatoTomahto wrote: Fri Jan 28, 2022 7:56 amI’m “alternative industry adjacent.” There is only one of the alternatives that I’d be interested in investing in, and they don’t want my money. Feh on the others.
Renaissance told you no?

:)
toast0
Posts: 337
Joined: Fri Dec 12, 2014 12:41 am
Location: Puget Sound

Re: Ultra HNW on this forum?

Post by toast0 »

Jimsad wrote: Fri Jan 28, 2022 6:54 am What is the point of having all that money if you cannot take some risk and try out those that I suggested with May be 10% of your portfolio ? Rather than keep sticking to the boring 3 fund portfolio?
What's the point of taking risk, when you have all that money and a boring portfolio? Assuming you double your money with the 10%, that gets you an extra $7M; I don't have $70M, but if I did, I can't imagine what an extra $7M would get me.
Post Reply