Author Topic: New to investing  (Read 1600 times)

lsp86

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New to investing
« on: June 01, 2018, 08:54:43 PM »
Hey Mustachians !

I am in my early 30’s and just netted 2m from selling my stake in the family business. This windfall was somewhat expected so for the last 2 years Ive been reading and listening to everything I could get my hands on. Now with the money in my brokerage account there is considerably more anxiety than expected. Im terrified of investing the majority of the money into index funds and take a possible 50% hit in 1st few years. Trying to time the market is for fools…I know..I know…but just taking a step back and looking at where we are in this bull run it seems very risky.

My thinking is dollar cost average out these funds over the next 3 years is ideal. Yes, maybe ill miss out on some juicy late cycle returns but I potentially can avoid a major dip and have the ammo to take advantage of a buying opportunity.

Any thoughts/idea/concerns would be so helpful.

A couple things should be known:
– currently own a small gourmet food business (finally making a profit!)
– draw 60k a year
– no current investments in the public markets
– Already used some of the money to invest in Broadmark( hard money loan fund), a decent size position in two privately traded REITs, Broadstone Net Lease and Blackstone’s BREIT. These are conservative low leverge, evergreen funds that will be held indefinitely.
– planning on investing in a Multifamily value-add deal with an experienced Syndicator thats gone multi-cycle without losing investors money. ( they are hard to find)
« Last Edit: June 01, 2018, 08:56:28 PM by lsp86 »

MDM

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Re: New to investing
« Reply #1 on: June 01, 2018, 09:10:50 PM »
lsp86, welcome to the forum.

A couple of articles you might appreciate:
http://www.schwab.com/public/schwab/nn/articles/Does-Market-Timing-Work
http://awealthofcommonsense.com/2014/02/worlds-worst-market-timer/

Have you already dealt with tax implications from windfall?

lsp86

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Re: New to investing
« Reply #2 on: June 01, 2018, 09:19:23 PM »
Thanks the links, MDM

Yes, taxes have been taken care of.

shinn497

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Re: New to investing
« Reply #3 on: June 01, 2018, 09:59:56 PM »
What are your goals? Not with this money, but in life? Have you thought about what makes you happy and what makes you anxious?

How would you assess your own behavior? Are you prone to impulse and emotion? Or do you follow plans?

Where are you drawing the 60k from? The windfall? Your business?

Can you tell us more about the family business? Is it something you feel passionate about? Do you want to pursue anything similar? Off the top of your head,

What are your needs in life? How are your expenses? Do you budget? Do you have a family? Do you want to save for kids'? Retirement? Do you have to clear things with a spouse? etc.

What are your values? How do you feel about debt? Are there any types of investments you don't support and never will? How much control do you want over your money?

Fwiw, you don't have to answer these but the more you do the better picture we, and also you, can have over your finances. It is important to know yourself when dealing with money since everyone's assumptions and philosophies are different.

cap396

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Re: New to investing
« Reply #4 on: June 02, 2018, 05:59:03 AM »
I think your plan to dollar cost average over three years is a good plan, especially if it reduces worry and allows you sleep at night.

lsp86

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Re: New to investing
« Reply #5 on: June 02, 2018, 07:49:59 AM »
What are your goals? Not with this money, but in life? Have you thought about what makes you happy and what makes you anxious?

How would you assess your own behavior? Are you prone to impulse and emotion? Or do you follow plans?

Where are you drawing the 60k from? The windfall? Your business?

Can you tell us more about the family business? Is it something you feel passionate about? Do you want to pursue anything similar? Off the top of your head,

What are your needs in life? How are your expenses? Do you budget? Do you have a family? Do you want to save for kids'? Retirement? Do you have to clear things with a spouse? etc.

What are your values? How do you feel about debt? Are there any types of investments you don't support and never will? How much control do you want over your money?

Fwiw, you don't have to answer these but the more you do the better picture we, and also you, can have over your finances. It is important to know yourself when dealing with money since everyone's assumptions and philosophies are different.


Thanks Shinn498 for the thoughtful response. Those questions are deep :)   Im going to need to do some soul searching and go over all this. The sale of my family's business has been a real eye opener. Some of my family members who have put in 60+ hrs/week over the last 20 yrs in hopes of a mulitmillion dollar windfall are now looking around and saying "now what". If anything the money has brought more anxiety and stress and made them really question if all those sacrifices (less time with kids, minmal friends and community,etc) was worth it. I guess money isnt everything as cliche as it sounds.

MustacheAndaHalf

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Re: New to investing
« Reply #6 on: June 02, 2018, 09:15:08 AM »
I'd advise caution with investments you can't exit easily.  Doubly so for those that require agreement between family members... or other families.

Your fear of the 2008 crisis happening again exactly as you invest is irrational.  Unfortunately vivid events really stick in your brain, despite the odds being very distant.  You should run simulations and look at historical data until you're convinced how rare that one -50% event really is.  Other crashes were much milder.

If this money is "enough" for you, there's a second consideration: why are you trying to grow it?  You should aim to preserve it.  That means a significant allocation to bonds.  When a market loss of -25% occurs, if you are 50/50 stocks/bonds, bonds historically won't fall sharply like stocks.  So the loss might be closer to half that, or even less if bonds move opposite stocks.  And after that kind of drop, you can rebalance: you sell bonds and buy stocks, then wait.  You're looking at market crashes but ignoring the recovery that typically follows a crash.

I'd suggest picking an allocation other than 100% stocks/risky assets.  Treat this money as providing a possible retirement whenever you want it, and protect it using safer assets like bonds or bond funds.  Also with $2MM in assets, you probably want tax-exempt bonds.

shinn497

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Re: New to investing
« Reply #7 on: June 02, 2018, 08:58:22 PM »
What are your goals? Not with this money, but in life? Have you thought about what makes you happy and what makes you anxious?

How would you assess your own behavior? Are you prone to impulse and emotion? Or do you follow plans?

Where are you drawing the 60k from? The windfall? Your business?

Can you tell us more about the family business? Is it something you feel passionate about? Do you want to pursue anything similar? Off the top of your head,

What are your needs in life? How are your expenses? Do you budget? Do you have a family? Do you want to save for kids'? Retirement? Do you have to clear things with a spouse? etc.

What are your values? How do you feel about debt? Are there any types of investments you don't support and never will? How much control do you want over your money?

Fwiw, you don't have to answer these but the more you do the better picture we, and also you, can have over your finances. It is important to know yourself when dealing with money since everyone's assumptions and philosophies are different.


Thanks Shinn498 for the thoughtful response. Those questions are deep :)   Im going to need to do some soul searching and go over all this. The sale of my family's business has been a real eye opener. Some of my family members who have put in 60+ hrs/week over the last 20 yrs in hopes of a mulitmillion dollar windfall are now looking around and saying "now what". If anything the money has brought more anxiety and stress and made them really question if all those sacrifices (less time with kids, minmal friends and community,etc) was worth it. I guess money isnt everything as cliche as it sounds.

Shinn497. Shinn498 is still in development.

Honestly. I don't want to advise you.  Personal finance is personal. It is emotions, behaviour, and values based. A lot of the "advice" I see tossed around often comes with certain assumptions that are not always so apparent. This is why I err to pose questions and have you think a lot about what your own feelings are. No one is going to care about your money as much as you so please think carefully when deciding.

lsp86

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Re: New to investing
« Reply #8 on: June 02, 2018, 09:23:36 PM »
What are your goals? Not with this money, but in life? Have you thought about what makes you happy and what makes you anxious?

How would you assess your own behavior? Are you prone to impulse and emotion? Or do you follow plans?

Where are you drawing the 60k from? The windfall? Your business?

Can you tell us more about the family business? Is it something you feel passionate about? Do you want to pursue anything similar? Off the top of your head,

What are your needs in life? How are your expenses? Do you budget? Do you have a family? Do you want to save for kids'? Retirement? Do you have to clear things with a spouse? etc.

What are your values? How do you feel about debt? Are there any types of investments you don't support and never will? How much control do you want over your money?

Fwiw, you don't have to answer these but the more you do the better picture we, and also you, can have over your finances. It is important to know yourself when dealing with money since everyone's assumptions and philosophies are different.


Thanks Shinn498 for the thoughtful response. Those questions are deep :)   Im going to need to do some soul searching and go over all this. The sale of my family's business has been a real eye opener. Some of my family members who have put in 60+ hrs/week over the last 20 yrs in hopes of a mulitmillion dollar windfall are now looking around and saying "now what". If anything the money has brought more anxiety and stress and made them really question if all those sacrifices (less time with kids, minmal friends and community,etc) was worth it. I guess money isnt everything as cliche as it sounds.

Shinn497. Shinn498 is still in development.

Honestly. I don't want to advise you.  Personal finance is personal. It is emotions, behaviour, and values based. A lot of the "advice" I see tossed around often comes with certain assumptions that are not always so apparent. This is why I err to pose questions and have you think a lot about what your own feelings are. No one is going to care about your money as much as you so please think carefully when deciding.

Haha please excuse the error Shinn497

I think you are right. Humans are complicated and the variables are endless. Unfortunatley there is no perfect one size fits all asset allocation or strategy



talltexan

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Re: New to investing
« Reply #9 on: June 04, 2018, 08:19:31 AM »
I'd advise caution with investments you can't exit easily.  Doubly so for those that require agreement between family members... or other families.

Your fear of the 2008 crisis happening again exactly as you invest is irrational.  Unfortunately vivid events really stick in your brain, despite the odds being very distant.  You should run simulations and look at historical data until you're convinced how rare that one -50% event really is.  Other crashes were much milder.

If this money is "enough" for you, there's a second consideration: why are you trying to grow it?  You should aim to preserve it.  That means a significant allocation to bonds.  When a market loss of -25% occurs, if you are 50/50 stocks/bonds, bonds historically won't fall sharply like stocks.  So the loss might be closer to half that, or even less if bonds move opposite stocks.  And after that kind of drop, you can rebalance: you sell bonds and buy stocks, then wait.  You're looking at market crashes but ignoring the recovery that typically follows a crash.

I'd suggest picking an allocation other than 100% stocks/risky assets.  Treat this money as providing a possible retirement whenever you want it, and protect it using safer assets like bonds or bond funds.  Also with $2MM in assets, you probably want tax-exempt bonds.

This is an excellent post.