Author Topic: Thoughts/Help-Took crypto profits; cash heavy  (Read 1090 times)

41918

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Thoughts/Help-Took crypto profits; cash heavy
« on: September 06, 2021, 07:27:02 AM »
So I did pretty well in crypto. I have approximately $1mm to invest/repurpose after taxes. This is about 25% of my NW. Something about all the turmoil right now and new stock market highs every week for what seems like forever gives me pause. I do believe inflation is on the way and the fed with have to raise rates. Most likely stagflation and lower stock prices. I already have stock market and investment real estate exposure. No debt. Divorced 43 yo dad of 1. Plan to work part time (30 hrs a week) for the next 10 years until my daughter is out of college and to stay busy. I’m lucky I have a great paying job that’s flexible. So the question is what should I do with this cash? My plan right now is to sit it on the sidelines the rest of this year, re-evaluate and then very slowly average into VTI et al. over 2022/2023. I just don’t know where to invest right now. I still have crypto exposure btw. Never in my life have I been this confused. My gut says go in very slowly with this money. Real estate in Texas right now is nuts so that’s not appealing and I already have good exposure. Thanks for opinions.
« Last Edit: September 06, 2021, 07:36:12 AM by 41918 »

Psychstache

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Re: Thoughts/Help-Took crypto profits; cash heavy
« Reply #1 on: September 06, 2021, 07:39:39 AM »
Just invest it and focus on your health and your daughter. Ignore the noise.

@RWD

ender

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Re: Thoughts/Help-Took crypto profits; cash heavy
« Reply #2 on: September 06, 2021, 07:39:58 AM »
What's your goal with your $4M net worth?

What annual spending do you have?


41918

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Re: Thoughts/Help-Took crypto profits; cash heavy
« Reply #3 on: September 06, 2021, 08:36:50 AM »
What I do Iím doing it slowly. One etf I like a lot is QUAL. Focus on low debt quality companies with low fees. My Fire number is probably 6mm with plenty of cushion. I want to work for another 10 years. Iíll basically be living off my salary while investing a little and letting my nut grow.

MustacheAndaHalf

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Re: Thoughts/Help-Took crypto profits; cash heavy
« Reply #4 on: September 06, 2021, 08:42:55 AM »
I suspect stagflation isn't as certain as you expect, but you could buy commodities if you want to guard against inflation.  If you bought right before the market drops of 1973-74, you still recovered in 1975-76.  Same holds for the dot-com crash: hold for 3 years before, the you're still ahead even after 3 years of drops.

Stocks will likely do fine despite inflation, but you could also diversify to commodities (oil, gold, etc).  Commodities never pay a dividend or produce other goods, which is why they don't seem that great compared to stocks.  So I've dabbled with less than 1% of my portfolio, but never ramped it up more.

You might also take a look at TIPS, which are inflation-adjusted government bonds.  Unfortunately, when everyone knows about a risk to climbing rates, TIPS are priced accordingly.  You could also aim for short-term bonds: whenever rates climb, you don't wait that long before buying new bonds.

41918

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Re: Thoughts/Help-Took crypto profits; cash heavy
« Reply #5 on: September 06, 2021, 09:06:15 AM »
Since Iím ahead some part of me wants to take about 250k and short Tesla and few other absurdly valued stocks into late 2022. Ha! May do that as a hedge.

ender

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Re: Thoughts/Help-Took crypto profits; cash heavy
« Reply #6 on: September 06, 2021, 09:11:11 AM »

JAYSLOL

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Re: Thoughts/Help-Took crypto profits; cash heavy
« Reply #7 on: September 06, 2021, 09:23:53 AM »
How much of the other NW is still in crypto?  Despite the big crypto win, are you a relatively disciplined investor?  The big risk is you pick something too conservative like bonds/commodities heavy and end up pulling all out and throwing it back in crypto because you canít stand the slow gains, or you pick 100% equities and get spooked at the first sign of economic trouble and throw it all back in crypto again.  Now if it were me planning to work for another ten years and with that big a NW, Iíd definitely go 100% stocks and then never look at it for ten years. 

Since Iím ahead some part of me wants to take about 250k and short Tesla and few other absurdly valued stocks into late 2022. Ha! May do that as a hedge.

This kind of statement makes me think youíre going to have a hard time investing traditionally.  The easiest way to create a small fortune by making bets in the market is to start with a large fortune.  Focus your time and energy on things that matter now that you have enough money that having more money wonít make you any happier. 

maizefolk

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Re: Thoughts/Help-Took crypto profits; cash heavy
« Reply #8 on: September 06, 2021, 12:22:22 PM »
How much of the other NW is still in crypto? 

This does seem like a key question. Of the remaining 3M of your net worth can you give us a rough sense of the breakdown between stocks/real estate/crypto/cash-and-or-bonds?

The other question I'd have is how much you can afford to lose and still be on track to support yourself with a 30-hour-a-week job plus FIRE once your daughter leaves for college? My advice would probably be different if you're looking at a $20k/year burn rate vs a $200k/year burn rate.

RWD

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Re: Thoughts/Help-Took crypto profits; cash heavy
« Reply #9 on: September 06, 2021, 01:45:07 PM »
Something about all the turmoil right now and new stock market highs every week for what seems like forever gives me pause.
@RWD


Being cautious about the stock market is for people that can't afford to temporarily lose money. With $4 million you could go 100% stocks and ride out any storm without ever relinquishing your millionaire status. And since you're planning on working another decade anyway (gotta run up the score, huh?) a near-term downturn has absolutely zero effect on you. And if the market doesn't go down then you'll find yourself with much more than your target $6 million (likely $10+ million). Basically you've already won several times over.

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« Last Edit: September 14, 2021, 02:09:16 PM by RWD »

41918

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Re: Thoughts/Help-Took crypto profits; cash heavy
« Reply #10 on: September 06, 2021, 02:56:24 PM »
25% investment real estate financed at about 45% ltv
30% stock between investment accounts and retirement
25% cash as discussed
10% crypto
10% home equity, emergency cash and some high end liquid sports memorabilia, gold, guns, etc.

Iím not trying to run up the score. I get bored easily and enjoy what I do. Plus the benefits and medical are nice until my kid is out of college. Truth is Iíll probably just dollar cost average into more stock etfs over the next 15 months or so. Thanks for the responses.

whywork

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Re: Thoughts/Help-Took crypto profits; cash heavy
« Reply #11 on: September 06, 2021, 07:07:16 PM »
I would invest in 60-40 stock bond ratio. When you see a market correction, increase the stock allocation.

Staying away from stocks fearing a market correction has rarely been a good strategy

maizefolk

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Re: Thoughts/Help-Took crypto profits; cash heavy
« Reply #12 on: September 06, 2021, 07:17:28 PM »
DCAing into the stock market over the next year or so as it sounds like you plan to do would only put you at 55% stock allocation which is still reasonably conservative.

DCAing will reduce your average expected return but also reduces the dispersion of outcomes. Sounds like you'd be willing to make that trade off. Good luck.

ChpBstrd

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Re: Thoughts/Help-Took crypto profits; cash heavy
« Reply #13 on: September 29, 2021, 02:19:43 PM »
The correction you were dollar cost averaging to avoid just occurred. Put it all in VTI tomorrow.

MustacheAndaHalf

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Re: Thoughts/Help-Took crypto profits; cash heavy
« Reply #14 on: October 01, 2021, 09:06:47 AM »
So I did pretty well in crypto. I have approximately $1mm to invest/repurpose after taxes. This is about 25% of my NW.
You probably have a sizable gain from the sale of crypto, which you will need to pay taxes on.  And I don't recall exactly, but I think crypto gets worse tax rates.  If you had mostly gains, you will owe significant taxes.  So that could be one place to put the money: paying estimated taxes to the IRS.

If your crypto gains significantly increased your total W-2 earnings, there's some safe harbor provisions.  If it didn't, you need to pay estimated taxes or owe a penalty for not doing so.  You might want to ask some people in the "taxes" area about it.

TheAnonOne

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Re: Thoughts/Help-Took crypto profits; cash heavy
« Reply #15 on: October 01, 2021, 09:52:12 AM »
So I did pretty well in crypto. I have approximately $1mm to invest/repurpose after taxes. This is about 25% of my NW.
You probably have a sizable gain from the sale of crypto, which you will need to pay taxes on.  And I don't recall exactly, but I think crypto gets worse tax rates.  If you had mostly gains, you will owe significant taxes.  So that could be one place to put the money: paying estimated taxes to the IRS.

If your crypto gains significantly increased your total W-2 earnings, there's some safe harbor provisions.  If it didn't, you need to pay estimated taxes or owe a penalty for not doing so.  You might want to ask some people in the "taxes" area about it.

Crypto is just like any other capital gain, there isn't some special crypto tax.

MustacheAndaHalf

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Re: Thoughts/Help-Took crypto profits; cash heavy
« Reply #16 on: October 01, 2021, 10:12:08 AM »
So I did pretty well in crypto. I have approximately $1mm to invest/repurpose after taxes. This is about 25% of my NW.
You probably have a sizable gain from the sale of crypto, which you will need to pay taxes on.  And I don't recall exactly, but I think crypto gets worse tax rates.  If you had mostly gains, you will owe significant taxes.  So that could be one place to put the money: paying estimated taxes to the IRS.

If your crypto gains significantly increased your total W-2 earnings, there's some safe harbor provisions.  If it didn't, you need to pay estimated taxes or owe a penalty for not doing so.  You might want to ask some people in the "taxes" area about it.
Crypto is just like any other capital gain, there isn't some special crypto tax.
I didn't say it was a special crypto tax.  Many years ago I sold crypto, and at the time the IRS didn't know how to treat it, so I recall it was treated as a collectible.  So you couldn't get long-term capital gains rates, but had to use tax rates for collectibles.

But the IRS guidance has gotten much clearer now - after all, they put it right on our 1040s (asking if we have traded/bought/sold crypto this year).  And it looks like crypto asset sales can get long-term capital gains taxes (when held 366+ days):
"Long-term capital gains for a cryptocurrency transaction occur when you sell the asset after holding it for more than a year."
https://taxbit.com/blog/cryptocurrency-tax-laws-in-2021-what-you-need-to-know

clarkfan1979

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Re: Thoughts/Help-Took crypto profits; cash heavy
« Reply #17 on: October 01, 2021, 10:21:17 AM »
From a behavior standpoint large tasks become easier when you split it into smaller steps. I would DCA over 12 months starting on Monday.

There are 252 trading days year. Divide one million by 252 and you get around $4,000. I would set it up to buy $4,000 of VTI per day. The smaller the amount, the easier it should be to execute.

In my personal opinion, based on inflation and the current trend for the government to print money, that last thing that I would want is cash. 

talltexan

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Re: Thoughts/Help-Took crypto profits; cash heavy
« Reply #18 on: October 04, 2021, 08:27:24 AM »
From a behavior standpoint large tasks become easier when you split it into smaller steps. I would DCA over 12 months starting on Monday.

There are 252 trading days year. Divide one million by 252 and you get around $4,000. I would set it up to buy $4,000 of VTI per day. The smaller the amount, the easier it should be to execute.

In my personal opinion, based on inflation and the current trend for the government to print money, that last thing that I would want is cash.

Daily purchases sound...like a lot to manage. What about just buying $250,000 today?