Author Topic: Managing 8 figure portfolios  (Read 5870 times)

scottish

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Managing 8 figure portfolios
« on: December 16, 2017, 03:01:50 PM »
Just for the record, I don't have an 8 figure portfolio.   But I am curious whether this should be managed differently.

One case to consider is where you have built your wealth through a business.   For example, if you have a business based on rental properties, as your net worth grows you could look for economies of scale (and other things that you can do with more capital) to grow your business even faster.   I think I understand the scenario where you re-invest in your own business.

But suppose that you've become wealthy through a passive investing approach, i.e. perhaps you've been buying index ETFs for a long time and you now have a very large net worth.    Or perhaps your business has done well and you want to make long term passive investments rather than re-investing to grow the business.

Many people (who don't have much net worth at all) think that this level of wealth is best managed by a professional.   But it seems apparent that a professional would love to get his claws into a big portfolio so they can siphon off lots of fees.    Your broker is not your friend, and neither is your financial adviser.

so... what would you do if you had 10M USD in liquid assets to invest?   Stay the course with index funds?   hire a pro?   Build your own portfolio to track the index?

ILikeDividends

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Re: Managing 8 figure portfolios
« Reply #1 on: December 16, 2017, 03:08:00 PM »
But suppose that you've become wealthy through a passive investing approach, i.e. perhaps you've been buying index ETFs for a long time and you now have a very large net worth.

I would say that the tried-and-true engineering maxim, "don't fix it if it ain't broke," would apply.

Personally, I'd probably take some risk off, and spread it around to various FDIC-insured savings accounts.  I could live quite comfortably, even with the paltry interest returned on that kind of sum.

I'd probably run out of banks, before I ran out of money.  So then I'd start laddering 10 year treasuries, until I got tired of doing that.
« Last Edit: December 16, 2017, 03:18:21 PM by ILikeDividends »

seattlecyclone

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Re: Managing 8 figure portfolios
« Reply #2 on: December 16, 2017, 03:16:52 PM »
I'd leave at least half of it in index funds. Maybe with the rest I'd dabble in real estate development in my neighborhood or investing in early-stage tech startups, both rather risky things that seem like they'd be fun to try if I had some money I didn't need.

Llewellyn2006

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Re: Managing 8 figure portfolios
« Reply #3 on: December 16, 2017, 03:54:15 PM »
If we had an 8 figure portfolio I still wouldn't let a financial adviser near it. Not a chance. We'd still manage it the same way as we do our current one but the numbers would be bigger.
« Last Edit: December 16, 2017, 03:55:46 PM by Llewellyn2006 »

Financial.Velociraptor

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Re: Managing 8 figure portfolios
« Reply #4 on: December 16, 2017, 04:07:42 PM »
Eight figures is a middle zone (hard to believe).  At 9 figures, people start to set up "family offices".  These are staffed with professionals in tax, estates, trust, law, and family management.  They develop a 'family constitution' to ensure intergenerational wealth is not squandered.  They also develop expertise in investments that have an intergenerational holding period.  It's the same approach university endowments use to earn long term superior returns by investing in productive farmland, forestry, and mining projects with 70 to 80 year pay back periods.

A family office costs about a million a  year to properly staff so you usually don't see anyone try it until 9 figures as a greater than 1% fee drag kills long term returns versus just indexing with 60/40 equity bond split.

See https://smile.amazon.com/Family-Fortunes-Build-Wealth-Years/dp/1118171411/ref=sr_1_1?ie=UTF8&qid=1513465612&sr=8-1&keywords=family+fortunes+bill+bonner for a discussion of intergenerational wealth and FO.

At 8 figures, you might use more insurance, especially whole life insurance as a savings vehicle for heirs that is estate tax exempt.

scottish

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Re: Managing 8 figure portfolios
« Reply #5 on: December 16, 2017, 05:26:51 PM »
raptor, thanks for that book, it looks good.    This is exactly the stuff I'm curious about.


neil

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Re: Managing 8 figure portfolios
« Reply #6 on: December 19, 2017, 12:24:25 PM »
If I got 10M or even 100M rich off index funds, it would seem like shifting money into less familiar territory would actually risk my decision making messing with the process - which was the point of index funds to begin with.  I also think if you became this wealthy organically you wouldn't fall into such traps that, say, lottery winners do because you pick up information related to increasing levels of asset wealth over time.

I would definitely have retained attorneys and accountants at some point because of personal liability and tax benefits making it worth the effort.  I would be willing to listen to suggestions with the general rule of only taking such advice if it is index-level simple and I understand it fully.

Anyway, I'm not sure my SO would let me save $10M.  Once I got around to 1% WR my increased generosity would probably prevent explosive growth of my portfolio.

GuitarStv

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Re: Managing 8 figure portfolios
« Reply #7 on: December 19, 2017, 12:30:08 PM »
This is not a question that I'll ever have to answer.

I need a bit over a million dollars to retire comfortably.  Make it two, heck, even three million to be super comfy.  Extra money at that point will not be a benefit.  I'd be inclined to donate the excess to charities and institutions that I think will make good use of it.  Let them worry about what to do with it.

scottish

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Re: Managing 8 figure portfolios
« Reply #8 on: December 19, 2017, 03:34:14 PM »
I would hire a pro.  The risks are different.  The problems are so different that I don't even know what they are.  Just having a surprise 1% difference is 100,000 dollars at that point.  Could a pro avoid that mistake or help me save it on taxes?  Could a pro help protect the money from sharks who would sue for the money?  Gold diggers? 

Yeah its a different game then I play down here in povertyville, and my ego isn't big enough to think I can win it on my own.  A pro it is.

And not just any pro, I have THE one pro that I would COMPLETELY TRUST if I ever had that kind of money.  But even if I didn't know THE one pro, then any pro would have to do.

I started thinking about the question after reading one too many articles about how the rich manage their wealth.  I thought, "Really?   I bet their financial advisers are pretty comfortable..."

Are the risks different though?   Tax advice I could go for.   A professional adviser who would run the portfolio doesn't seem very appealing to me.   Would this person not have all the same problems you get with a mutual fund salesman or full service stock broker?

It's easy to find stories of people who started with 8 figures.   Trump somehow leveraged 8 figures into a huge collection of hotels.    You can find many articles about professional athletes who had 8 figures of wealth and they somehow managed to disappear it.    What about the people who don't disappear their wealth and who maintain a low profile?

I've started reading the "Family Fortunes" book.  It seems to be based on anecdotes about wealthy families, but it's still fascinating reading.


talltexan

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Re: Managing 8 figure portfolios
« Reply #9 on: December 20, 2017, 07:35:39 AM »
People here criticize Dave Ramsey, but he seems to have about one caller/quarter who asks for advice in managing a windfall of this magnitude. You really do need professionals. If you think about it, you use the professionals anyway, but your moves are big enough that you need them more often.

For example, you

1. are probably going to need to buy a house (realtor; closing attorney), but this house will be big enough that it would require a lot more of the realtor's time.
2. plan an estate (attorney again), which will now be big.
3. set up life insurance and trusts for succession planning,
4. manage some investments, and
5. You'll probably want to be at least a little philanthrophic

Having people help you with these things carries the risks that those people are predators, but it also can impose the kinds of oversight that keep you from blowing through this kind of money.

Car Jack

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Re: Managing 8 figure portfolios
« Reply #10 on: December 20, 2017, 08:07:53 AM »
People who don't know but who like to puff out their chest and use words that impress others will talk about investing in an "endowment style".  This is how the big boys do it so, hey, you get exposure to otherwise unattainable investments, cushy deals and the best pros around, right?

Ok.....who has the biggest endowment going?  Harvard University.  How'd they do this year with the best and brightest doing their thing?  8.1%.  Their cost to have their investments all screwed up was likely bigger than anyone's total investments here on MMM.

I'll stick with my index funds in a 3 fund and get double what they did with lots of safety built in.  I'm at 50/50 stocks to bonds with simple index funds and ETFs. 

ooeei

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Re: Managing 8 figure portfolios
« Reply #11 on: December 20, 2017, 01:12:50 PM »
People who don't know but who like to puff out their chest and use words that impress others will talk about investing in an "endowment style".  This is how the big boys do it so, hey, you get exposure to otherwise unattainable investments, cushy deals and the best pros around, right?

Ok.....who has the biggest endowment going?  Harvard University.  How'd they do this year with the best and brightest doing their thing?  8.1%.  Their cost to have their investments all screwed up was likely bigger than anyone's total investments here on MMM.

I'll stick with my index funds in a 3 fund and get double what they did with lots of safety built in.  I'm at 50/50 stocks to bonds with simple index funds and ETFs.
Agreed.  I am a big enough student of the topic to feel qualified to agree (I actually regularly go to discussion forums with CFOs and endowment investors at my alma mater business school where this has been a panel topic).  Most people on this forum are fully capable of educating themselves to the point where they can do 90% of the legwork to set up a trust document, figure the best tax strategy, and invest efficiently. 

So called Pros just have basic training and access to research tools you can easily replicate.  If 8 figure wealth will suddenly make you too lazy to look up a sample trust document or to gather your asset documentation so you can prepare the needed materials, it is unlikely you get 8 figures, as hard work and smarts are the #1 way it happens.

Sure, it is always good to have a second set of eyes and you want an attorney to review and file, but just throwing your life to them seems ill advised to me.  A legal mistake by an attorney cost my FIL his life savings after a bad investment deal was not filed for proper bankruptcy and he became legally liable to creditors he never knew existed (partner stole from their store).

Trust, but verify.

Obviously just throwing it blindly to a pro isn't a good idea, but having a professional to help make decisions with is probably a good idea. We just went through some very minor "estate planning" having to do with Medicaid for my girlfriend's family, and hiring a professional firm saved them around $40k for the cost of $10k. Could we have done it ourselves? Somewhat, if we knew exactly what to do. The problem is, we didn't even know some of those rules and exceptions existed before talking to the pros.

I'd imagine there are plenty of weird loopholes and regulations once you get up in the multi millions for investments, taxes, and estates. I think it would likely be worth hiring a professional to consult with who knows those regulations well. The estate tax kicks in after around $5 million per person ($10 million per couple), and the rate can reach 40%. Say you have $20 million between you and your spouse, that means around $4 million disappears to taxes the day you both die if you haven't planned properly. That's just one thing off the top of my head I know about.  There are other things like farmland deductions for property with a certain amount of livestock or whole life insurance exemptions that are less well known and may be advantageous in certain situations.

I would be curious to see how Harvard's portfolio does in "bad" years as well. Them posting a mediocre return this year doesn't necessarily mean their long term return is bad. They may also have made a conscious decision to try to limit volatility since they are regularly withdrawing from the endowment (and to prevent donors from flipping out). Once you hit a certain point reducing risk becomes more important than chasing returns.
« Last Edit: December 20, 2017, 01:20:47 PM by ooeei »

soccerluvof4

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Re: Managing 8 figure portfolios
« Reply #12 on: December 20, 2017, 01:21:52 PM »
It would be a great problem to have to figure out. If I get close I will let you know what i find out but don't hold your breath. Had I not made the mistakes I made in my 30's and early 40's I believe I would of got there but if I do now chances are I probably be to old to give a damn.

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Re: Managing 8 figure portfolios
« Reply #13 on: December 20, 2017, 02:00:25 PM »
The estate tax is something to consider. I wonder how many other gates like that are out there though? Managing $1M so far hasnít been different from managing $10k.
I wonder how truly different managing $10M or $100M would be?

talltexan

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Re: Managing 8 figure portfolios
« Reply #14 on: December 21, 2017, 07:13:50 AM »
I would hire a pro.  The risks are different.  The problems are so different that I don't even know what they are.  Just having a surprise 1% difference is 100,000 dollars at that point.  Could a pro avoid that mistake or help me save it on taxes?  Could a pro help protect the money from sharks who would sue for the money?  Gold diggers? 

Yeah its a different game then I play down here in povertyville, and my ego isn't big enough to think I can win it on my own.  A pro it is.

And not just any pro, I have THE one pro that I would COMPLETELY TRUST if I ever had that kind of money.  But even if I didn't know THE one pro, then any pro would have to do.

I started thinking about the question after reading one too many articles about how the rich manage their wealth.  I thought, "Really?   I bet their financial advisers are pretty comfortable..."

Are the risks different though?   Tax advice I could go for.   A professional adviser who would run the portfolio doesn't seem very appealing to me.   Would this person not have all the same problems you get with a mutual fund salesman or full service stock broker?

It's easy to find stories of people who started with 8 figures.   Trump somehow leveraged 8 figures into a huge collection of hotels.    You can find many articles about professional athletes who had 8 figures of wealth and they somehow managed to disappear it.    What about the people who don't disappear their wealth and who maintain a low profile?

I've started reading the "Family Fortunes" book.  It seems to be based on anecdotes about wealthy families, but it's still fascinating reading.

It is possible I was wrong.  You've made me think twice, especially in light of all the pro athletes who lose their wealth even though they had a pro manage it.  And Donald Trump, I'm pretty sure he was billions in debt at one point with the absolute best and brightest managing his money right?


Can you produce evidence that the best and brightest in any field are willing to work for Donald Trump?

YoungInvestor

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Re: Managing 8 figure portfolios
« Reply #15 on: December 21, 2017, 09:33:31 AM »
For the first 70%:
I'd negociate 500 free trades with a broker, buy the top 500 "clean" companies (I wouldn't want any weapons or fossil fuels money at that point) worldwide, equal weight, and be done with it. Reinvest half of dividends and live on the rest/give part of it away.

20% in a Treasuries ladder of some sort.

10% for projects which I personally want to be involved in or with social impact.

scottish

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Re: Managing 8 figure portfolios
« Reply #16 on: December 21, 2017, 06:17:15 PM »
I would hire a pro.  The risks are different.  The problems are so different that I don't even know what they are.  Just having a surprise 1% difference is 100,000 dollars at that point.  Could a pro avoid that mistake or help me save it on taxes?  Could a pro help protect the money from sharks who would sue for the money?  Gold diggers? 

Yeah its a different game then I play down here in povertyville, and my ego isn't big enough to think I can win it on my own.  A pro it is.

And not just any pro, I have THE one pro that I would COMPLETELY TRUST if I ever had that kind of money.  But even if I didn't know THE one pro, then any pro would have to do.

I started thinking about the question after reading one too many articles about how the rich manage their wealth.  I thought, "Really?   I bet their financial advisers are pretty comfortable..."

Are the risks different though?   Tax advice I could go for.   A professional adviser who would run the portfolio doesn't seem very appealing to me.   Would this person not have all the same problems you get with a mutual fund salesman or full service stock broker?

It's easy to find stories of people who started with 8 figures.   Trump somehow leveraged 8 figures into a huge collection of hotels.    You can find many articles about professional athletes who had 8 figures of wealth and they somehow managed to disappear it.    What about the people who don't disappear their wealth and who maintain a low profile?

I've started reading the "Family Fortunes" book.  It seems to be based on anecdotes about wealthy families, but it's still fascinating reading.

It is possible I was wrong.  You've made me think twice, especially in light of all the pro athletes who lose their wealth even though they had a pro manage it.  And Donald Trump, I'm pretty sure he was billions in debt at one point with the absolute best and brightest managing his money right?


Can you produce evidence that the best and brightest in any field are willing to work for Donald Trump?

I'm sure there's another thread somewhere for picking on Donald Trump!

chasesfish

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Re: Managing 8 figure portfolios
« Reply #17 on: December 21, 2017, 06:33:54 PM »
I'm enjoying this thread.

I have this from a few perspectives, one is from a client who recently asked me "What does someone do with this much money" because he was a blue collar, fourth generation business owner staring at that much money.  The second perspective is from someone who's trying to hire me and in this exact situation, either for his personal family office or in his business which basically represents private capital.

Financial Velociraptor is correct in that they mostly setup family offices, or have a fractional family office.  That person is more of an employee and less of a money manager.  The people who come into this level of wealth often have specialty skills/experiences in business and want to put that to use via direct investments into privately held businesses or real estate they are familiar with.   A well run "family office" will have a chunk of their money in stock/bond investments, indexed or not, then have the rest for less liquid investments.  Not necessarily hedge funds.

One basic example is the restaurant business.  Notoriously risky, operator risk, site risk, trend risk, ect.  I work in a city that has a significant number of wealthy individuals who made their money in the restaurant and entertainment space.   If a young restaurant has 3-5 locations and a proven concept, they'll get "backed" by one or more of these family offices.  The capital placement looks like a loan at 6% interest, then when its paid back the investors retain 10% ownership.  The investors may also get the ability to be advisers as their hobby.  This is all done with money that is above and beyond the family office's safety net.

Personally, I'm putting in just over a year above and beyond my FI number to have a small pool of money to hobby into alternate investments.  For me, that'll be private placements with or through people I already know.  Nothing concentrated, but a few $25,000 to $100,000 investments piggybacked with people I know will be enough to keep me mentally stimulated and engaged in business without it being a full time job. 

PaulMaxime

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Re: Managing 8 figure portfolios
« Reply #18 on: December 21, 2017, 10:02:47 PM »
It's the same. I'm low 7 figures but I don't see much changing with another zero on the end of my statements. Certainly don't want to buy hedge funds or invest in someone's crazy restaurant or some of the other things you hear about "wealthy" people doing with their money.

The only thing that has changed for me as my portfolio has grown is the size of positions I purchase.

Another thing that has changed for me is as my portfolio grows, I'm more willing to take a few greater risks because I have a greater cushion.

This means that I was able to leave my job at a large tech company and go to a promising startup. It's worked out well but if it hadn't I have FU money to fall back on so why not?


Mighty-Dollar

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Re: Managing 8 figure portfolios
« Reply #19 on: December 21, 2017, 11:36:03 PM »
If you've got a billion dollars then you can afford to hedge against a total economic collapse. $100,000 of gold is like nothing to a billionaire.

Reader

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Re: Managing 8 figure portfolios
« Reply #20 on: December 22, 2017, 02:49:01 AM »
just for comparison sake, the world's biggest sovereign wealth fund at $990B does 30% bond and 70% internationally diversified stock.

https://www.ft.com/content/6ae01b5a-9151-11e7-a9e6-11d2f0ebb7f0

i suspect there is little value to be had in adding risk to your portfolio when you have a 7 to 10 figure portfolio by hiring pros, or putting money in investments you do not have a deep or intimate understanding of.

chasesfish

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Re: Managing 8 figure portfolios
« Reply #21 on: December 22, 2017, 05:41:25 AM »
@PizzaSteve No great stories, always been on the very boring side of finance loaning to entrepreneurs.  Since Iíve done it long enough, plenty of those early stage clients are now in the eight figure NW club.  Surprisingly almost none of them have really been changed by the wealth, but thatís probably a function of me staying in touch with the ones I like.  The only thing thatís probably changed is theyíre all much more difficult to access now due to the number of solicitors after them.  The thing about that level of success is itís usually tough to fly under the radar, lawyers, accountants, and finance people gab too much.

scottish

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Re: Managing 8 figure portfolios
« Reply #22 on: December 22, 2017, 01:21:22 PM »
One basic example is the restaurant business.  Notoriously risky, operator risk, site risk, trend risk, ect.  I work in a city that has a significant number of wealthy individuals who made their money in the restaurant and entertainment space.   If a young restaurant has 3-5 locations and a proven concept, they'll get "backed" by one or more of these family offices.  The capital placement looks like a loan at 6% interest, then when its paid back the investors retain 10% ownership.  The investors may also get the ability to be advisers as their hobby.  This is all done with money that is above and beyond the family office's safety net.

The folks placing capital into a restaurant business - do they know the restaurant business really well?   Or do they just like the idea of owning a restaurant?

I know the software business pretty well.     I find it very risky though - I can't imagine placing capital with a technology startup company.   There are so many things that have to be well done, and it only takes one or two errors to fail (or languish without succeeding...)

chasesfish

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Re: Managing 8 figure portfolios
« Reply #23 on: December 22, 2017, 03:39:07 PM »
They're usually experienced in the restaurant business or only investing in operators with five or more proven locations.  Just an example I've seen recently.

Once a private business proves its concept and has a capable management team that can scale, raising capital becomes pretty easy.

talltexan

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Re: Managing 8 figure portfolios
« Reply #24 on: December 28, 2017, 06:49:11 AM »
I would hire a pro.  The risks are different.  The problems are so different that I don't even know what they are.  Just having a surprise 1% difference is 100,000 dollars at that point.  Could a pro avoid that mistake or help me save it on taxes?  Could a pro help protect the money from sharks who would sue for the money?  Gold diggers? 

Yeah its a different game then I play down here in povertyville, and my ego isn't big enough to think I can win it on my own.  A pro it is.

And not just any pro, I have THE one pro that I would COMPLETELY TRUST if I ever had that kind of money.  But even if I didn't know THE one pro, then any pro would have to do.

I started thinking about the question after reading one too many articles about how the rich manage their wealth.  I thought, "Really?   I bet their financial advisers are pretty comfortable..."

Are the risks different though?   Tax advice I could go for.   A professional adviser who would run the portfolio doesn't seem very appealing to me.   Would this person not have all the same problems you get with a mutual fund salesman or full service stock broker?

It's easy to find stories of people who started with 8 figures.   Trump somehow leveraged 8 figures into a huge collection of hotels.    You can find many articles about professional athletes who had 8 figures of wealth and they somehow managed to disappear it.    What about the people who don't disappear their wealth and who maintain a low profile?

I've started reading the "Family Fortunes" book.  It seems to be based on anecdotes about wealthy families, but it's still fascinating reading.

It is possible I was wrong.  You've made me think twice, especially in light of all the pro athletes who lose their wealth even though they had a pro manage it.  And Donald Trump, I'm pretty sure he was billions in debt at one point with the absolute best and brightest managing his money right?


Can you produce evidence that the best and brightest in any field are willing to work for Donald Trump?
Sometimes the best and the brightest have a need to prove themselves and also I have observed they can tend to over think things.  Consulting with experts is a good idea, as discussed.  In my area, I used to be one.  That said, no one can predict the future and DT took high risk, high payout bets (with some hedging using OPM (other people's money)).

Anyway, met DT in 1984.  Some good stories there. Sure Chases fishes has some too.  Understand the temptation for 'fun' backing high profile restaurants and stuff.  Not sure the risk premium pays off.  Our family has been killed in restaurants, though commercial real estate has done well as long as the managers are watched closely.  RE guys tend to have sticky fingers.

I know that my posts make it seem as though I'm anti-Trump, but I think it's cool that you met him. I fondly recall meeting George HW Bush in the late 1990's, before his physical decline started.

radram

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Re: Managing 8 figure portfolios
« Reply #25 on: December 28, 2017, 07:58:56 AM »

It's easy to find stories of people who started with 8 figures.   Trump somehow leveraged 8 figures into a huge collection of hotels.    You can find many articles about professional athletes who had 8 figures of wealth and they somehow managed to disappear it.    What about the people who don't disappear their wealth and who maintain a low profile?

In hindsight, Trump is TERRIBLE with his daddy's money.
http://fortune.com/2015/08/20/donald-trump-index-funds/


ingrownstudentloans

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Re: Managing 8 figure portfolios
« Reply #26 on: December 28, 2017, 08:05:27 AM »
Posting to follow for when my lottery ticket hits this week ;)

radram

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Re: Managing 8 figure portfolios
« Reply #27 on: December 28, 2017, 08:20:39 AM »
Say you have $20 million between you and your spouse, that means around $4 million disappears to taxes the day you both die if you haven't planned properly. That's just one thing off the top of my head I know about. 

As of the new tax bill, the first $22 million or so is now tax free. There. I just saved you $4,000,000. How much do I get?  PM me if you want my account info so you can wire me the money :)

I am finding this thread very informative and interesting. I find many similarities to the argument of paying a financial advisor about 1%. What do they do for me when I have $1,000,000 that is 10 times better than when I have $100,000? If you have better advice, why the fuck don't you tell it to me now instead of waiting until I have more?

No matter my net worth, I will only pay set prices for work, advice, etc. Their hourly rate will increase as the difficulty of the work increases.
$250 an hour to set up a trust? OK, fine. Don't take 40 hours to do it ad we are a go.

$250,000- $500,000 to set up tax sheltered, multi-generational double blind trusts for my $80,000,000 estate? Lets do it.

ANY percentage of assets under management? NEVER. NEVER. NEVER.

Financial.Velociraptor

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Re: Managing 8 figure portfolios
« Reply #28 on: December 28, 2017, 04:52:14 PM »
Say you have $20 million between you and your spouse, that means around $4 million disappears to taxes the day you both die if you haven't planned properly. That's just one thing off the top of my head I know about. 

As of the new tax bill, the first $22 million or so is now tax free. There. I just saved you $4,000,000. How much do I get?  PM me if you want my account info so you can wire me the money :)

I am finding this thread very informative and interesting. I find many similarities to the argument of paying a financial advisor about 1%. What do they do for me when I have $1,000,000 that is 10 times better than when I have $100,000? If you have better advice, why the fuck don't you tell it to me now instead of waiting until I have more?

No matter my net worth, I will only pay set prices for work, advice, etc. Their hourly rate will increase as the difficulty of the work increases.
$250 an hour to set up a trust? OK, fine. Don't take 40 hours to do it ad we are a go.

$250,000- $500,000 to set up tax sheltered, multi-generational double blind trusts for my $80,000,000 estate? Lets do it.

ANY percentage of assets under management? NEVER. NEVER. NEVER.

Family Office is usually a mostly fixed rate deal.  A 'typical' FO costs about 1 million a year for all the bells and whistles so they are rarely adopted until the 9 figure size.  You'd expect to pay the staff 3% or so annual raises and maybe some incentive bonuses which would increase the pay rate over time.  But you'd be falling progressively further below 1% AUM.

Exflyboy

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Re: Managing 8 figure portfolios
« Reply #29 on: December 28, 2017, 05:41:58 PM »
For me its "if it ain't broke then don't fix it".. That means 80:15:5 stocks:bonds:cash.

I would get out of the rental business though.. I am personally tired of taking care of rentals and it seems the likelyhood of getting sued is greater.

boarder42

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Re: Managing 8 figure portfolios
« Reply #30 on: December 28, 2017, 05:53:16 PM »
This is not a question that I'll ever have to answer.

I need a bit over a million dollars to retire comfortably.  Make it two, heck, even three million to be super comfy.  Extra money at that point will not be a benefit.  I'd be inclined to donate the excess to charities and institutions that I think will make good use of it.  Let them worry about what to do with it.

Over 50% of the time your money will grow to 8 figures following the 4% swr

PizzaSteve

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Re: Managing 8 figure portfolios
« Reply #31 on: January 01, 2018, 11:35:03 AM »
This is not a question that I'll ever have to answer.

I need a bit over a million dollars to retire comfortably.  Make it two, heck, even three million to be super comfy.  Extra money at that point will not be a benefit.  I'd be inclined to donate the excess to charities and institutions that I think will make good use of it.  Let them worry about what to do with it.

Over 50% of the time your money will grow to 8 figures following the 4% swr
Good point.  For example, i would not be shocked to see this site host increasing numbers of 8 figure NW folks if we continue this bull run.  Liking a side gig, investing, living frugal as habit, and 20% gain years will fuel wealth quicky.  Figuring out what to do is harder than one thinks.

if increased spending or gifting is not of interest, there is the real risk a good chunk of mustacians get there.

talltexan

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Re: Managing 8 figure portfolios
« Reply #32 on: January 03, 2018, 02:54:51 PM »

It's easy to find stories of people who started with 8 figures.   Trump somehow leveraged 8 figures into a huge collection of hotels.    You can find many articles about professional athletes who had 8 figures of wealth and they somehow managed to disappear it.    What about the people who don't disappear their wealth and who maintain a low profile?

In hindsight, Trump is TERRIBLE with his daddy's money.
http://fortune.com/2015/08/20/donald-trump-index-funds/

I am no fan of Trump, but it's not fair to expect rich heirs to invest in index funds. If you're already wealthy, and you have a real estate background, of course you'd do that instead.

seattlecyclone

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Re: Managing 8 figure portfolios
« Reply #33 on: January 03, 2018, 04:42:51 PM »
I don't fault him for choosing real estate over index funds. I do fault him for doing way worse with his real estate than he could have done with index funds. Seems like if you grew up around real estate investing and are making a career out of it, you should at least be able to outperform people sitting on their bums ignoring their index investments.

radram

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Re: Managing 8 figure portfolios
« Reply #34 on: January 04, 2018, 06:46:39 AM »
I don't fault him for choosing real estate over index funds. I do fault him for doing way worse with his real estate than he could have done with index funds. Seems like if you grew up around real estate investing and are making a career out of it, you should at least be able to outperform people sitting on their bums ignoring their index investments.
Great reply.

It is even worse than is seems at first glance, as real estate actually outperforms stocks historically. One would argue that it should, since it requires more participation. More risk for more reward. I really feel for the associates from his businesses that have been screwed out of billions in order for him to under-perform an inferior market(stocks) by 400%. Remember, HE has zero bankruptcies. His businesses have what, 4? When you read that word bankruptcy, remember to replace it with the phrase "not paying for services rendered". I can't believe anyone still bids for his jobs. I guess from now on it should be shame on you.

It still amazes me how anyone can even hear "great businessman" and Trump in the same sentence without laughing and feeling like a fool. I bet Trump has a bridge he can sell you. lol.

To end this post at least a LITTLE on topic, lets all agree that if we ever end up managing an 8 figure portfolio, we will pay our bills.


MustacheAndaHalf

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Re: Managing 8 figure portfolios
« Reply #35 on: January 04, 2018, 09:23:25 AM »
According to Portfolio Visualizer, a simulation of the last 40 years shows US stocks and REIT tied, with the REIT having greater volatility.  Not sure which data you're using that shows real estate outperforms stocks.

A $10 million portfolio throws off about $200,000/year in interest & dividends (roughly 2% for both stocks and bonds right now).  I'd aim for the bonds to be tax-exempt, which might be enough to keep those dividends taxed at 15% (qualified dividends are taxed at a special rate, which is why Warren Buffet sometimes mentions that he pays a lower tax rate than his secretary). 

Maybe a simple 60/40 portfolio with stocks split equally across US and international could work.  But even then, with $3 million to invest in the US stock market, it wouldn't meet the minimum requirement for "institutional class".  So if the portfolio was larger, maybe $20 million, then $6 million could be put in Vanguard "institutional class" funds.  Vanguard Total Stock Market, institutional class, has an expense ratio of 0.02%.

radram

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Re: Managing 8 figure portfolios
« Reply #36 on: January 04, 2018, 06:40:01 PM »
According to Portfolio Visualizer, a simulation of the last 40 years shows US stocks and REIT tied, with the REIT having greater volatility.  Not sure which data you're using that shows real estate outperforms stocks.

Here is one of many sources I found. It agrees with your comment regarding volatility.
https://www.investopedia.com/ask/answers/052015/which-has-performed-better-historically-stock-market-or-real-estate.asp

Quote
"The stock market, as measured by the S&P 500 Index, has had an average annual return of 10.31% from 1970 - 2016. The real estate market has had an average annual return of 11.42%. That is measured by the publicly traded REITS (the NAREIT Equity REIT Index from 1970-1977 and the DJ Wilshire REIT from 1978-2016). To put this into dollar terms, if you would have invested $10,000 in the S&P 500 in 1970, by the end of 2016, your investment would have grown to $1,005,588. If you would have invested $10,000 into the DJ Wilshire REIT index, your investment would have grown to $1,609,932."

I also found this very interesting. So what if it is only 1.11% smaller return annually. What could that possibly cost me? I mean after all, that is what a portfolio manager will charge me, right? Yup, only cost you $600,000!

chasesfish

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Re: Managing 8 figure portfolios
« Reply #37 on: January 05, 2018, 08:41:31 AM »
I love that analysis of stocks vs. real estate.

I'm a huge fan of REITs, but have some concern about their interest rate sensitivity.  I think their slightly higher gains are because of the wild difference in interest rates from the 1970s until now.  I also hate owning a REIT index (fund), because a REIT itself is already a fund, diversified across 100s of individual properties and tenants (hopefully) and I'm adding an additional layer of expenses by paying the fund's expense ratio.

I plan on utilizing REITs plus trying to buy 2+ individual rental units in FI for cash flow diversification

scottish

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Re: Managing 8 figure portfolios
« Reply #38 on: January 05, 2018, 03:43:35 PM »
According to Portfolio Visualizer, a simulation of the last 40 years shows US stocks and REIT tied, with the REIT having greater volatility.  Not sure which data you're using that shows real estate outperforms stocks.

Here is one of many sources I found. It agrees with your comment regarding volatility.
https://www.investopedia.com/ask/answers/052015/which-has-performed-better-historically-stock-market-or-real-estate.asp

Quote
"The stock market, as measured by the S&P 500 Index, has had an average annual return of 10.31% from 1970 - 2016. The real estate market has had an average annual return of 11.42%. That is measured by the publicly traded REITS (the NAREIT Equity REIT Index from 1970-1977 and the DJ Wilshire REIT from 1978-2016). To put this into dollar terms, if you would have invested $10,000 in the S&P 500 in 1970, by the end of 2016, your investment would have grown to $1,005,588. If you would have invested $10,000 into the DJ Wilshire REIT index, your investment would have grown to $1,609,932."

I also found this very interesting. So what if it is only 1.11% smaller return annually. What could that possibly cost me? I mean after all, that is what a portfolio manager will charge me, right? Yup, only cost you $600,000!

thanks for that, I didn't realize US real estate was so competitive.    I need to challenge my assumptions more. 

Zamboni

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Re: Managing 8 figure portfolios
« Reply #39 on: January 05, 2018, 03:56:52 PM »
After interviewing several people, I'd hire a fee-based tax and family trust attorney . . . and I'd buy some umbrella insurance and whatever else the trust attorney suggested after she explained it thoroughly to me. That's it.

For investment decisions, I'd mostly chat on the phone with Vanguard people like I do now, except they'd give me their most experienced people. Maybe I'd even fly up to NY and meet them in person, then catch an opera. Otherwise, I'd do what Warren Buffet suggests for his own family and stick to index funds for the vast majority of the money and just let it sit there and multiply while I passively track it with the spreadsheet to rule them all.

And then I'd go skiing or snorkeling or sit in a sidewalk cafe somewhere with my beloved.