What would you do?

[Wolfpack92]

Hi All! Long time reader and lurker and first time poster.

Me and my wife finally sold our first home and had roughly 215k in proceeds from it, we already have maxed out our children's 529s (prior to this amount). We're in our early 30s and net worth around 2.5mm, most all invested in some form via individual brokerages / retirement.

Basically this is the most amount of cash we've had on hand for quite some time, I setup a wealthfront account to move the funds over to from ally 4% vs 3.6% for the time being and may use their investment vehicles to slowly deploy it, but obviously don't want to dump everything in at once.

What would you do in this scenario, we want it to continue to grow and both make decent money 315k ish combined annual income so it's not hopefully going to be needed in the near future.

Thank You!

[Telecaster]

The usual advice is to deploy it in the market (in accordance with your personal investment statement) all at once.  There are a number of reasons for this, but it boils down to the fact that you will ultimately be all in the market anyway, and time in the market beats timing the market.   Given your age and net worth, I'd say you want to be in about 95% index funds.   

However, doing this all at once might seem daunting, so what many people do is make a fixed monthly investment and deploy the money over say, a the course of a year.  That's a good way to go if it helps you sleep better at night.

As far as I can tell, Wealthfront provides no value, so personally I would skip it.   

[ChpBstrd]

I would retire on $100k per year.

But you've indicated a wish to continue working for those crazy high salaries and to grow your nest egg even bigger. That's fine, but understand that you are selling years of your lives in your early 30s, at the youngest, most energetic, and healthiest you'll ever be, in exchange for more luxury goods and/or the benefits of living in a HCOL area. It's not the choice I would make, but it's OK to have different priorities in life.

Your question is what to do with the $215k proceeds from the house sale. I presume you already have a new place to live and don't need to redeploy this cash for shelter.

Luckily, you have arrived at this point in a time when you can earn a solid real return on bonds while you DCA into stocks. So given your objectives and preference not to just drop the lump sum into the market, I would do something similar to what you're doing. I'd first max out any IRA I could contribute toward, and then buy BIL (4.76% yield, almost no duration risk, 1-3mo treasuries). Then I'd move 10-15% of the house proceeds per month from BIL into VTI.

Now if you've recently signed up for a mortgage in the 6.5% to 7% range, I'd be very, very tempted to just dump all the house proceeds into reducing that debt, "earning" a much higher risk-free rate than the market can provide.

[MustacheAndaHalf]

Wealthfront charges 0.25% of your assets per year, while Schwab, Fidelity and Vanguard charge $0.  I've seen the pitch enough times to know they will probably cite tax efficiency, or selling at a loss for tax purposes.  Two problems with that: the S&P 500 doubles roughly every 7 years, while rarely taking a -50% loss.  Once your money has grown for about 7 years, all the opportunity for realized losses is gone.  They can't do anything with that, but they still charge the same 0.25% fee.  Second, you'll hear about any major stock market drop on the news.  The great financial crisis and dot-com crash were major headlines.  Nobody needed an advisor to tell them about those events.

The most useful investing introduction I received was from "A Random Walk Down Wall Street", which I read decades ago.  It uses historical data to make its points, and was still correct after publication.  That combination is very rare, and probably explains why it has been in print 50 years over 14 or so editions.  If you want to save money, and don't mind less historical data, every library I've checked has an older copy.

[AuspiciousEight]

Depends on when you plan on retiring or spending the money.

If less than one year, I would put it into savings.

If 1-3 years CD.

3-10 years bond funds such as BLV, REITs such as realty income

10+ years stock index funds such as VTI or VXUS

[waltworks]

In your scenario, $215k is peanuts. Just dump it into whatever normal asset allocation you do and forget about it.

And yeah, like @ChpBstrd said, I'd be long done if I were you. Kids don't stay young forever.

-W