Author Topic: 3 million dollar question  (Read 7968 times)

Wordstew

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3 million dollar question
« on: February 10, 2016, 06:59:33 AM »
Close Buddy of mine just got a financial windfall of 3 million after taxes. He's asked a few people including myself for some advice.  Since I've been a long time lurker on the MMM site I told him "STOP RIGHT THERE, DON"T SPEND ONE PENNY OF IT"  get educated on finances and have yourself a plan.  His plan was to buy a new corvette (it's snowing here) and put the rest in the bank...Crazy right.

So now I plead to the collective wisdom here on MMM for some sage advice I may be able to pass on.  He's around 50 married with no mortgage has minimal in savings and or retirement. 

Thanks in advance for your contributions

Rosbif

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Re: 3 million dollar question
« Reply #1 on: February 10, 2016, 07:09:33 AM »
Someone will be along shortly to ask for more details, but I think the short answer is "stick it all in a low-cost mutual fund, spend the income this generates, don't touch the capital yet." Glad you got to him before the Corvette salesman ;)

Crazydude

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Re: 3 million dollar question
« Reply #2 on: February 10, 2016, 07:13:28 AM »
Well I think the first step is to put it somewhere it'll support him and his family by itself. Some dividend producing mutual funds perhaps? I mean $3 mil with a 3% dividend will return $90,000 a year!

But I think there are two important questions here. He's a close friend, so maybe you could answer them.

1. Is he disciplined enough to follow through with investing it and not blowing it?

2. Does he have a decent understanding of the power of investing? If not, would he understand it if you explained it to him.

Personally, I would buy many rental properties with it, but that's just me of course.

Wordstew

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Re: 3 million dollar question
« Reply #3 on: February 10, 2016, 07:41:44 AM »

This Guy is bright enough to understand the power of $$/time however he's never had this type of $$ and I sense every time I speak with him he is on the verge of an impulse buy IE:new corvette.  I pull him back to the real world with a couple of reality slaps.

I explained to him that you can't live the life a millionaire on 3 million however a very good life can be had with that kind of scratch. I suspect He already knows that much he was bright enough to pay off the mortgage on his condo long before he got this $$.   

Is there such a thing as a financial psychologist/therapist because I feel as though I am falling into that role.

FrugalFan

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Re: 3 million dollar question
« Reply #4 on: February 10, 2016, 07:47:57 AM »
I think the main thing he needs to understand, if he doesn't already, is that if he invests all of it (even quite conservatively) he can live off the income FOREVER. If his expenses aren't too high, he can quit his job and start doing that RIGHT NOW. If he starts spending it now, he will have to keep working.

nereo

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Re: 3 million dollar question
« Reply #5 on: February 10, 2016, 08:02:41 AM »
Curious what others will advise, but here's the two things I would stress to anyone who got such a large windfall
1) This can provide an annual income of $120,000/year for the rest of your life ($90k if you want to be very conservative).  That's based on the well vetted 4%-rule (though choosing to live off $90k/year would be a super-conservative 3%/year WR).  The 4% rule is indexed to inflation, so you will never loose purchasing power.

2) You have "won the game" - the only way you will loose is if you spend more than #1 and/or get involved in risky "investment opportuntiies".  It's frighteningly easy to loose the money you have chasing even more money you don't need. 

A boring old index fund or target retirement fund is a great place to put all this money.  Vanguard's target retirement date funds (e.g. VTHRX)  are one great example, or simply their total market index (VTSMX). To avoid temptation he could set up monthly deductions from this account into his checking account (up to $10,000k/mo!).  That's money that can be spent, but further withdraws risks him running out of money. If he is going to keep working for a few more years, now is the time to max out IRA contributions, max out his 401(k) and do a mega backdoor ROTH if it is available to him.  This will limit his earned income taxes as well as reduce taxes in the future, especially if changes are made on capitol gains in the future.

Finally, budgeting is still important.  It's easy to think "I'm a milioinaire, I can afford this!" but history and pop-culture are littered with examples of people who had far more money and spent it all and went broke.  Remember #2.

Some good reading for him (and you):
http://jlcollinsnh.com/stock-series/

Retire-Canada

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Re: 3 million dollar question
« Reply #6 on: February 10, 2016, 08:07:29 AM »
FWIW - I don't think there is anything wrong with him buying a Corvette if:

1. he has no debts
2. invests the rest of the $3M reasonably
3. a Corvette has always been his dream car that he very prudently avoided because he couldn't afford it
4. he doesn't inflate spending in many other areas of his life

NoStacheOhio

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Re: 3 million dollar question
« Reply #7 on: February 10, 2016, 08:19:17 AM »
FWIW - I don't think there is anything wrong with him buying a Corvette if:

1. he has no debts
2. invests the rest of the $3M reasonably
3. a Corvette has always been his dream car that he very prudently avoided because he couldn't afford it
4. he doesn't inflate spending in many other areas of his life

I lean toward this sentiment as well. As flashy cars go, Corvettes are on the inexpensive end. If that's his only splurge, and the rest gets invested reasonably, then I'd let that one go. It just can't snowball into a car collection, a truck to tow the cars to the track. Track days every weekend. And on and on.

I would maybe try to have a conversation about what he really wants to do now day to day. This could be a good way to start your own business, even taking a risk on yourself with $500,000 of startup money wouldn't jeopardize his future. A $2.5 million nest egg still means you could live without a "real job."

nereo

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Re: 3 million dollar question
« Reply #8 on: February 10, 2016, 08:20:03 AM »
FWIW - I don't think there is anything wrong with him buying a Corvette if:

1. he has no debts
2. invests the rest of the $3M reasonably
3. a Corvette has always been his dream car that he very prudently avoided because he couldn't afford it
4. he doesn't inflate spending in many other areas of his life
Agreed.  He should realize that he can spend up to $120k/year in addition to whatever his net pay is.  If he wants to spend $85,000 on a car one year, more power to him; he'll have $35k from investments left for that year.  The critical bottom line though is if he spends more than this he risks running out of money.  If he spends less then he risks dying with a huge portfolio.

Wordstew

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Re: 3 million dollar question
« Reply #9 on: February 10, 2016, 08:39:04 AM »
So let's say for analysis purposes that he puts it all in index funds and conservatively withdraws 3-4% yearly.  With no kids and no interest in leaving the money to anyone or anything should he at some time in the future consider a spend down of the principal and if so starting at what age 70, 75, 80???  Also should he take social security early? early and invest it? or wait?

FrugalFan

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Re: 3 million dollar question
« Reply #10 on: February 10, 2016, 08:44:25 AM »
If he has no interest (or need) in leaving the money to anyone, he could use the Variable Percentage Withdrawal method.

https://www.bogleheads.org/wiki/Variable_percentage_withdrawal

Depending on age and asset allocation, it starts out a bit lower but then increases over time. The withdrawal amounts are adjusted each year based on market returns so you never run out of money (you have to predict when you will no longer need money, but you can just be conservative on this number, or even withdraw just a bit less than the recommended value each year).

nereo

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Re: 3 million dollar question
« Reply #11 on: February 10, 2016, 08:54:34 AM »
So let's say for analysis purposes that he puts it all in index funds and conservatively withdraws 3-4% yearly.  With no kids and no interest in leaving the money to anyone or anything should he at some time in the future consider a spend down of the principal and if so starting at what age 70, 75, 80???  Also should he take social security early? early and invest it? or wait?

Without knowing your friend's history, it's concievable that he might live another 40+ years since he is currently 50 years old.  Given that time frame, he certainly shouldn't try to deplete his principle anytime soon; personally I'd wait until he is in the last ~decade of life before doing that.  As Travelling Biologist mentioned, a VPW is one strategy for doing this.

As for SS, assuming he won't need that income and that he isn't in poor health he should delay taking distributions for as long as possible. It will be a better safety need just in case he spends through that $3MM somehow.

terran

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Re: 3 million dollar question
« Reply #12 on: February 10, 2016, 09:11:54 AM »

RedmondStash

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Re: 3 million dollar question
« Reply #13 on: February 10, 2016, 09:25:24 AM »
FWIW - I don't think there is anything wrong with him buying a Corvette if:

1. he has no debts
2. invests the rest of the $3M reasonably
3. a Corvette has always been his dream car that he very prudently avoided because he couldn't afford it
4. he doesn't inflate spending in many other areas of his life

Yes. This. Maybe he could set aside a chunk, like $100,000 or less, that he could blow on fun, like a Corvette. But he only gets to do that *after* he has everything else invested.

You could say, "Having 3 million must be great, huh? Imagine how much better it will feel to have 4 million, 5 million, etc. You can do that if you let it grow in index-fund investments. Here, read these posts by MMM and jcollins."

MustacheAndaHalf

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Re: 3 million dollar question
« Reply #14 on: February 10, 2016, 09:52:58 AM »
Before the money arrived, would he take a pay cut permanently to afford a nice car?
That's the new way he has to approach money - it's not spending money, it's job replacement money.  If he just puts it in a regular bank account, his money could be earning $10,000 / year (0.33%).  Even an online savings account only brings that to 1%, or $30,000 / year.  He needs this money to do a job - replace his job - and cutting into it will be like taking a permanent pay cut.

Retire-Canada

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Re: 3 million dollar question
« Reply #15 on: February 10, 2016, 10:01:30 AM »
You could say, "Having 3 million must be great, huh? Imagine how much better it will feel to have 4 million, 5 million, etc. You can do that if you let it grow in index-fund investments. Here, read these posts by MMM and jcollins."

Just my opinion, but if you are not satisfied and able to live on $3M  invested plus whatever else you might have for income than I'd say that there is no value for $XM that will lead to satisfaction.

YoungInvestor

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Re: 3 million dollar question
« Reply #16 on: February 10, 2016, 11:53:21 AM »
1) Buy the corvette.
2) Stick the rest in good  low cost diversified funds, live off the income.
3) Enjoy the corvette.

3M is plenty to live on. 2.9M is also plenty.

One Noisy Cat

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Re: 3 million dollar question
« Reply #17 on: February 10, 2016, 06:09:30 PM »
If possible, wait on buying a little red Corvette (or any other major, non-essential purchase). If it's really a good idea now, then it will be a good idea six months from now.  It's okay to fulfill one major fantasy wish, if that's what he truly wants.

Putting in a bank, with low Bernake-Yellen rates, isn't good. Get low fee index funds (primarily stocks but also high grade corporate) and live well at 3% SWR.

arizonawildcats

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Re: 3 million dollar question
« Reply #18 on: February 10, 2016, 08:45:26 PM »
The corvette purchase should run around $65,000 or 2.1% of his windfall.   I see nothing wrong with splurging a little.   

As others have mentioned, he has “won the game”.   It’s going to be very important to understand risk tolerance.   The Vanguard model portfolio allocations helps educate investors on risk vs. reward based on historical data. 

https://personal.vanguard.com/us/insights/saving-investing/model-portfolio-allocations

If he takes a conservative 3% withdrawal rate, it should provide around $88,050 (even after the corvette purchase).  At 3%, there is a high probability the portfolio will continue to grow.   

Jeremy E.

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Re: 3 million dollar question
« Reply #19 on: February 10, 2016, 09:14:37 PM »
If I were you, I would suggest to him that he invest all except 4% of it, in a combination of the following
Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX)
Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX)
Vanguard Total International Stock Index Fund Admiral Shares (VTIAX)
Vanguard Total International Bond Index Fund Admiral Shares (VTABX)
Vanguard REIT Index Fund Admiral Shares (VGSLX)
Rental Properties
Starting his own business, with an amount he's willing to risk (this could be buying a corvette and renting it out on turo, he would still get to use it when he isn't renting it out)
then take up to 4% out per year(or an average of 4%)

If it were me, I would do a combination of start my own business with $200,000($75,000 of that going into an emergency fund for the business), build 2 or 3 rental houses or duplexes for $150,000-$250,000 each, add $15,000 to my personal emergency fund for the rental houses, and put the rest into VTSAX.

« Last Edit: February 10, 2016, 09:16:12 PM by Jeremy E. »

Johnny Aloha

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Re: 3 million dollar question
« Reply #20 on: February 10, 2016, 11:05:55 PM »
My advice:

1.  Don't take advice from strangers over the internet, especially if you have no idea about their qualifications and experience.

2.  Consult a CPA and attorney to structure the holdings wisely.

3.  Consult (on a flat-fee-only basis) or hire (on a percentage basis) a true asset management firm if he can't control his emotions -- psychology is the name of the game at this point.  A good asset management firm will talk him of the ledge of stupidity, hopefully.  Note: there are only a handful of good asset management firms, but he has the resources to get through their doors.

johnny847

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Re: 3 million dollar question
« Reply #21 on: February 10, 2016, 11:33:53 PM »
My advice:

1.  Don't take advice from strangers over the internet, especially if you have no idea about their qualifications and experience.

2.  Consult a CPA and attorney to structure the holdings wisely.

3.  Consult (on a flat-fee-only basis) or hire (on a percentage basis) a true asset management firm if he can't control his emotions -- psychology is the name of the game at this point.  A good asset management firm will talk him of the ledge of stupidity, hopefully.  Note: there are only a handful of good asset management firms, but he has the resources to get through their doors.

Self contradiction!

Johnny Aloha

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Re: 3 million dollar question
« Reply #22 on: February 10, 2016, 11:38:08 PM »
My advice:

1.  Don't take advice from strangers over the internet, especially if you have no idea about their qualifications and experience.

2.  Consult a CPA and attorney to structure the holdings wisely.

3.  Consult (on a flat-fee-only basis) or hire (on a percentage basis) a true asset management firm if he can't control his emotions -- psychology is the name of the game at this point.  A good asset management firm will talk him of the ledge of stupidity, hopefully.  Note: there are only a handful of good asset management firms, but he has the resources to get through their doors.

Self contradiction!

Exactly my point...

BarbeRiche

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Re: 3 million dollar question
« Reply #23 on: February 10, 2016, 11:42:51 PM »
My advice:

1.  Don't take advice from strangers over the internet, especially if you have no idea about their qualifications and experience.

2.  Consult a CPA and attorney to structure the holdings wisely.

3.  Consult (on a flat-fee-only basis) or hire (on a percentage basis) a true asset management firm if he can't control his emotions -- psychology is the name of the game at this point.  A good asset management firm will talk him of the ledge of stupidity, hopefully.  Note: there are only a handful of good asset management firms, but he has the resources to get through their doors.

+1

Tell a 50 years old who never invested by himself to invest 3 000 000$ in low cost index fund would be pretty optimistic I believe.

I mean, he could spend 100k+/year (+ social security) until he's 80 years old by leaving it in a checking account.  Is the stress/pressure of managing that kind of money worth it?

How would he have reacted starting 2016 with a 200-300k loss?

Jeremy E.

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Re: 3 million dollar question
« Reply #24 on: February 10, 2016, 11:59:56 PM »
My advice:

1.  Don't take advice from strangers over the internet, especially if you have no idea about their qualifications and experience.

2.  Consult a CPA and attorney to structure the holdings wisely.

3.  Consult (on a flat-fee-only basis) or hire (on a percentage basis) a true asset management firm if he can't control his emotions -- psychology is the name of the game at this point.  A good asset management firm will talk him of the ledge of stupidity, hopefully.  Note: there are only a handful of good asset management firms, but he has the resources to get through their doors.

+1

Tell a 50 years old who never invested by himself to invest 3 000 000$ in low cost index fund would be pretty optimistic I believe.

I mean, he could spend 100k+/year (+ social security) until he's 80 years old by leaving it in a checking account.  Is the stress/pressure of managing that kind of money worth it?

How would he have reacted starting 2016 with a 200-300k loss?
this wouldn't work very well because of inflation and the fact that he'll have nothing in 30 years(for if he lives longer, or if he wants to leave money to family or a charity when he's gone), in 30 years the 100k he'll take out will be worth an inflation adjusted $36,000(assuming 3.5% inflation/year)

BarbeRiche

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Re: 3 million dollar question
« Reply #25 on: February 11, 2016, 12:20:09 AM »
My advice:

1.  Don't take advice from strangers over the internet, especially if you have no idea about their qualifications and experience.

2.  Consult a CPA and attorney to structure the holdings wisely.

3.  Consult (on a flat-fee-only basis) or hire (on a percentage basis) a true asset management firm if he can't control his emotions -- psychology is the name of the game at this point.  A good asset management firm will talk him of the ledge of stupidity, hopefully.  Note: there are only a handful of good asset management firms, but he has the resources to get through their doors.

+1

Tell a 50 years old who never invested by himself to invest 3 000 000$ in low cost index fund would be pretty optimistic I believe.

I mean, he could spend 100k+/year (+ social security) until he's 80 years old by leaving it in a checking account.  Is the stress/pressure of managing that kind of money worth it?

How would he have reacted starting 2016 with a 200-300k loss?
this wouldn't work very well because of inflation and the fact that he'll have nothing in 30 years(for if he lives longer, or if he wants to leave money to family or a charity when he's gone), in 30 years the 100k he'll take out will be worth an inflation adjusted $36,000(assuming 3.5% inflation/year)

Absolutely, you're right.

I agree that a big chunk of this money should be invested but my point was that I believe it is a lot of pressure to be dealing with the wildly emotional swings of the market at this point of their life without any experience.

I'm not sure the 1-1,5% that you would potentially save investing in low cost index fund is worth it in this particular situation.

Jeremy E.

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Re: 3 million dollar question
« Reply #26 on: February 11, 2016, 12:38:43 AM »
My advice:

1.  Don't take advice from strangers over the internet, especially if you have no idea about their qualifications and experience.

2.  Consult a CPA and attorney to structure the holdings wisely.

3.  Consult (on a flat-fee-only basis) or hire (on a percentage basis) a true asset management firm if he can't control his emotions -- psychology is the name of the game at this point.  A good asset management firm will talk him of the ledge of stupidity, hopefully.  Note: there are only a handful of good asset management firms, but he has the resources to get through their doors.

+1

Tell a 50 years old who never invested by himself to invest 3 000 000$ in low cost index fund would be pretty optimistic I believe.

I mean, he could spend 100k+/year (+ social security) until he's 80 years old by leaving it in a checking account.  Is the stress/pressure of managing that kind of money worth it?

How would he have reacted starting 2016 with a 200-300k loss?
this wouldn't work very well because of inflation and the fact that he'll have nothing in 30 years(for if he lives longer, or if he wants to leave money to family or a charity when he's gone), in 30 years the 100k he'll take out will be worth an inflation adjusted $36,000(assuming 3.5% inflation/year)

Absolutely, you're right.

I agree that a big chunk of this money should be invested but my point was that I believe it is a lot of pressure to be dealing with the wildly emotional swings of the market at this point of their life without any experience.

I'm not sure the 1-1,5% that you would potentially save investing in low cost index fund is worth it in this particular situation.
What do you mean the potential 1-1.5% potential savings?

He can lose more money in an asset management firm than he can in index funds, many people new to this forum will learn that selling when the market is down is a bad idea, and then not do that, and new people here have varying ages. If HE decides he doesn't think he can handle the risk of the stock market, he should invest in annuities, not in an asset management firm.
« Last Edit: February 11, 2016, 12:44:03 AM by Jeremy E. »

BarbeRiche

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Re: 3 million dollar question
« Reply #27 on: February 11, 2016, 12:44:32 AM »
Roughly difference between average etf cost or asset management cost.




Johnny Aloha

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Re: 3 million dollar question
« Reply #28 on: February 11, 2016, 05:54:03 AM »
If HE decides he doesn't think he can handle the risk of the stock market, he should invest in annuities, not in an asset management firm.

You know that annuities can be equally, or more complicated than, selecting individual stocks to invest in right?  Also, you know that you don't invest in an asset management firm, but rather, you pay them to be the gatekeepers of your wealth?  The trick is to find one that will actually put your interests ahead of theirs.  But the 1-1.5% annual fee can be a bargain for some individuals.

I don't think the standard advice applies in a situation where the individual has limited (or no) personal finance/investing experience and does not have the psychology to implement (and stick with) it.

Will the standard 50/50 vanguard portfolio do him well?  Probably.  Will it be successful over the long term?  Not if he screws it up.

Note: I am not an investment advisor, asset manager, etc ... nor do I use one.  But I think they can play an important role for some people. 

Here's a nice explanation: http://www.joshuakennon.com/thoughts-starting-global-asset-management-firm/


Jeremy E.

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Re: 3 million dollar question
« Reply #29 on: February 11, 2016, 08:08:28 AM »
If HE decides he doesn't think he can handle the risk of the stock market, he should invest in annuities, not in an asset management firm.

You know that annuities can be equally, or more complicated than, selecting individual stocks to invest in right?  Also, you know that you don't invest in an asset management firm, but rather, you pay them to be the gatekeepers of your wealth?  The trick is to find one that will actually put your interests ahead of theirs.  But the 1-1.5% annual fee can be a bargain for some individuals.

I don't think the standard advice applies in a situation where the individual has limited (or no) personal finance/investing experience and does not have the psychology to implement (and stick with) it.

Will the standard 50/50 vanguard portfolio do him well?  Probably.  Will it be successful over the long term?  Not if he screws it up.

Note: I am not an investment advisor, asset manager, etc ... nor do I use one.  But I think they can play an important role for some people. 

Here's a nice explanation: http://www.joshuakennon.com/thoughts-starting-global-asset-management-firm/
I didn't realize that you know him, so you KNOW he has limited investing knowledge and doesn't have the psychology to stick with it. Oh wait, you are just assuming and making an ass out of us. You should know that the reason many people like index funds, is because of the low expense ratios. Hiring an asset management firm that will take 1.5% and then probably put you in a bunch of actively managed mutual funds with a 1% expense ratio each will exponentially decrease your growth. http://jlcollinsnh.com/2012/06/06/why-i-dont-like-investment-advisors/

2lazy2retire

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Re: 3 million dollar question
« Reply #30 on: February 11, 2016, 08:18:45 AM »
If HE decides he doesn't think he can handle the risk of the stock market, he should invest in annuities, not in an asset management firm.

You know that annuities can be equally, or more complicated than, selecting individual stocks to invest in right?  Also, you know that you don't invest in an asset management firm, but rather, you pay them to be the gatekeepers of your wealth?  The trick is to find one that will actually put your interests ahead of theirs.  But the 1-1.5% annual fee can be a bargain for some individuals.

I don't think the standard advice applies in a situation where the individual has limited (or no) personal finance/investing experience and does not have the psychology to implement (and stick with) it.

Will the standard 50/50 vanguard portfolio do him well?  Probably.  Will it be successful over the long term?  Not if he screws it up.

Note: I am not an investment advisor, asset manager, etc ... nor do I use one.  But I think they can play an important role for some people. 

Here's a nice explanation: http://www.joshuakennon.com/thoughts-starting-global-asset-management-firm/
I didn't realize that you know him, so you KNOW he has limited investing knowledge and doesn't have the psychology to stick with it. Oh wait, you are just assuming and making an ass out of us. You should know that the reason many people like index funds, is because of the low expense ratios. Hiring an asset management firm that will take 1.5% and then probably put you in a bunch of actively managed mutual funds with a 1% expense ratio each will exponentially decrease your growth. http://jlcollinsnh.com/2012/06/06/why-i-dont-like-investment-advisors/

Maybe you should read the OP before you become all judgemental

" He's around 50 married with no mortgage has minimal in savings and or retirement" not to mention - "His plan was to buy a new corvette (it's snowing here) and put the rest in the bank.."

Without knowing him this might be a good indicator that he has "he has limited investing knowledge" and might benefit from the comfort of guided investment.
« Last Edit: February 11, 2016, 08:20:44 AM by 2lazy2retire »

Jeremy E.

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Re: 3 million dollar question
« Reply #31 on: February 11, 2016, 10:25:06 AM »
If HE decides he doesn't think he can handle the risk of the stock market, he should invest in annuities, not in an asset management firm.

You know that annuities can be equally, or more complicated than, selecting individual stocks to invest in right?  Also, you know that you don't invest in an asset management firm, but rather, you pay them to be the gatekeepers of your wealth?  The trick is to find one that will actually put your interests ahead of theirs.  But the 1-1.5% annual fee can be a bargain for some individuals.

I don't think the standard advice applies in a situation where the individual has limited (or no) personal finance/investing experience and does not have the psychology to implement (and stick with) it.

Will the standard 50/50 vanguard portfolio do him well?  Probably.  Will it be successful over the long term?  Not if he screws it up.

Note: I am not an investment advisor, asset manager, etc ... nor do I use one.  But I think they can play an important role for some people. 

Here's a nice explanation: http://www.joshuakennon.com/thoughts-starting-global-asset-management-firm/
I didn't realize that you know him, so you KNOW he has limited investing knowledge and doesn't have the psychology to stick with it. Oh wait, you are just assuming and making an ass out of us. You should know that the reason many people like index funds, is because of the low expense ratios. Hiring an asset management firm that will take 1.5% and then probably put you in a bunch of actively managed mutual funds with a 1% expense ratio each will exponentially decrease your growth. http://jlcollinsnh.com/2012/06/06/why-i-dont-like-investment-advisors/

Maybe you should read the OP before you become all judgemental

" He's around 50 married with no mortgage has minimal in savings and or retirement" not to mention - "His plan was to buy a new corvette (it's snowing here) and put the rest in the bank.."

Without knowing him this might be a good indicator that he has "he has limited investing knowledge" and might benefit from the comfort of guided investment.
the investment advisor he might hire probably has a Corvette too. When new people join MMM, we don't tell them to get an investment advisor, we teach them about investing, why should this new person be any different? We should tell him to use a crappy option because he's not smart enough? I don't get it, many people that join the MMM community previously knew little about investing and are now investing intelligently. The point is that investment advisors are a crappy option, they charge a hefty fee to give you generally poor returns. I find the JLCollins article above to be very informative on investment advisors, as well as the addendums.
« Last Edit: February 11, 2016, 10:27:10 AM by Jeremy E. »

2lazy2retire

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Re: 3 million dollar question
« Reply #32 on: February 11, 2016, 10:41:33 AM »
If HE decides he doesn't think he can handle the risk of the stock market, he should invest in annuities, not in an asset management firm.

You know that annuities can be equally, or more complicated than, selecting individual stocks to invest in right?  Also, you know that you don't invest in an asset management firm, but rather, you pay them to be the gatekeepers of your wealth?  The trick is to find one that will actually put your interests ahead of theirs.  But the 1-1.5% annual fee can be a bargain for some individuals.

I don't think the standard advice applies in a situation where the individual has limited (or no) personal finance/investing experience and does not have the psychology to implement (and stick with) it.

Will the standard 50/50 vanguard portfolio do him well?  Probably.  Will it be successful over the long term?  Not if he screws it up.

Note: I am not an investment advisor, asset manager, etc ... nor do I use one.  But I think they can play an important role for some people. 

Here's a nice explanation: http://www.joshuakennon.com/thoughts-starting-global-asset-management-firm/
I didn't realize that you know him, so you KNOW he has limited investing knowledge and doesn't have the psychology to stick with it. Oh wait, you are just assuming and making an ass out of us. You should know that the reason many people like index funds, is because of the low expense ratios. Hiring an asset management firm that will take 1.5% and then probably put you in a bunch of actively managed mutual funds with a 1% expense ratio each will exponentially decrease your growth. http://jlcollinsnh.com/2012/06/06/why-i-dont-like-investment-advisors/

Maybe you should read the OP before you become all judgemental

" He's around 50 married with no mortgage has minimal in savings and or retirement" not to mention - "His plan was to buy a new corvette (it's snowing here) and put the rest in the bank.."

Without knowing him this might be a good indicator that he has "he has limited investing knowledge" and might benefit from the comfort of guided investment.
the investment advisor he might hire probably has a Corvette too. When new people join MMM, we don't tell them to get an investment advisor, we teach them about investing, why should this new person be any different? We should tell him to use a crappy option because he's not smart enough? I don't get it, many people that join the MMM community previously knew little about investing and are now investing intelligently. The point is that investment advisors are a crappy option, they charge a hefty fee to give you generally poor returns. I find the JLCollins article above to be very informative on investment advisors, as well as the addendums.

My reply was more so in response to your smart ass comment - "I didn't realize that you know him, so you KNOW he has limited investing knowledge" when cleary there was evidence to support that assumption - making you the ass not the other poster.

Jeremy E.

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Re: 3 million dollar question
« Reply #33 on: February 11, 2016, 10:45:15 AM »
If HE decides he doesn't think he can handle the risk of the stock market, he should invest in annuities, not in an asset management firm.

You know that annuities can be equally, or more complicated than, selecting individual stocks to invest in right?  Also, you know that you don't invest in an asset management firm, but rather, you pay them to be the gatekeepers of your wealth?  The trick is to find one that will actually put your interests ahead of theirs.  But the 1-1.5% annual fee can be a bargain for some individuals.

I don't think the standard advice applies in a situation where the individual has limited (or no) personal finance/investing experience and does not have the psychology to implement (and stick with) it.

Will the standard 50/50 vanguard portfolio do him well?  Probably.  Will it be successful over the long term?  Not if he screws it up.

Note: I am not an investment advisor, asset manager, etc ... nor do I use one.  But I think they can play an important role for some people. 

Here's a nice explanation: http://www.joshuakennon.com/thoughts-starting-global-asset-management-firm/
I didn't realize that you know him, so you KNOW he has limited investing knowledge and doesn't have the psychology to stick with it. Oh wait, you are just assuming and making an ass out of us. You should know that the reason many people like index funds, is because of the low expense ratios. Hiring an asset management firm that will take 1.5% and then probably put you in a bunch of actively managed mutual funds with a 1% expense ratio each will exponentially decrease your growth. http://jlcollinsnh.com/2012/06/06/why-i-dont-like-investment-advisors/

Maybe you should read the OP before you become all judgemental

" He's around 50 married with no mortgage has minimal in savings and or retirement" not to mention - "His plan was to buy a new corvette (it's snowing here) and put the rest in the bank.."

Without knowing him this might be a good indicator that he has "he has limited investing knowledge" and might benefit from the comfort of guided investment.
the investment advisor he might hire probably has a Corvette too. When new people join MMM, we don't tell them to get an investment advisor, we teach them about investing, why should this new person be any different? We should tell him to use a crappy option because he's not smart enough? I don't get it, many people that join the MMM community previously knew little about investing and are now investing intelligently. The point is that investment advisors are a crappy option, they charge a hefty fee to give you generally poor returns. I find the JLCollins article above to be very informative on investment advisors, as well as the addendums.

My reply was more so in response to your smart ass comment - "I didn't realize that you know him, so you KNOW he has limited investing knowledge" when cleary there was evidence to support that assumption - making you the ass not the other poster.
I was making a play on, "you know what happens when you assume, you make an ass out of you and me." I just don't get the whole "if you don't invest, it's because you're an idiot and shouldn't try because you'll fail" idea, I don't accept it.