Author Topic: Trust Fund Mustachian  (Read 5646 times)

pdxbator

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Trust Fund Mustachian
« on: July 22, 2013, 04:11:15 PM »
Hi Mustachios,

I'm a lucky guy in my financial life. I have a paid off house, a job I really enjoy, no debts. My parents unbeknownst to me have led a decently frugal life and had a good business and all of a sudden I'm one of the trust funders (though I believe in all things mustachian).

Here's my question: I'm getting $100,000 a year for the next 15 years. Holy cow I never expected this.

How to invest? Right now I have my family's financial planner involved, but what he's steering me towards are money markets that have some rather high costs(2%). I tried to get into his brain that maybe funds that are less expensive would be worthwhile and he's having none of it.

How should I invest this? Is this a job that I can do myself, save myself all those fees and get similar results over the long-term. I'm 40 and don't plan on needing any of this until retirement (~60?).

matchewed

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Re: Trust Fund Mustachian
« Reply #1 on: July 22, 2013, 04:26:52 PM »
It's your call. If I were in your shoes I'd probably put the first 100k in either a high yield savings account or T-Bills. After that the remainder I would split in whatever equity/bond mix you're comfortable with using index funds.

If you really want to pay for professional advice go with a fee only financial planner (can be found at www.napfa.org). But I'm not sure what extra advice they can give you beyond what you can research for yourself in the next couple of months/years.

smalllife

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Re: Trust Fund Mustachian
« Reply #2 on: July 22, 2013, 04:32:26 PM »
I'm 40 and don't plan on needing any of this until retirement (~60?).

Why wait? Unless your spending is out of control it sounds like you are more than set to leave the hamster wheel.


amha

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Re: Trust Fund Mustachian
« Reply #3 on: July 22, 2013, 04:36:26 PM »
Use FutureAdvisor! http://www.futureadvisor.com

If you enter your age, income, risk tolerance, etc., they'll automatically generate a portfolio of low-cost index funds for you. I use it---it's really awesome. (Lots of well-designed charts and graphics.) A financial planner/advisor is expensive and overkill---you'd be paying a lot of money and not really getting much more than what you could get for free from sites like this (or by reading a book or two).

velocistar237

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Re: Trust Fund Mustachian
« Reply #4 on: July 22, 2013, 05:40:49 PM »
Sounds like your family's financial planner is not a good fit for you. I recommend opening a Vanguard account and setting up whatever asset allocation strikes your fancy. Open a Traditional IRA, too. (I assume this is all taxable income.) Check out the Boglehead wiki. You could make better investing decisions than 90% of financial planners by following that wiki.

Reepekg

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Re: Trust Fund Mustachian
« Reply #5 on: July 22, 2013, 06:35:01 PM »
Think of it this way: With that amount of money, you are a professional capitalist. The only job you need to be good at is managing your money.

What that implies is that you should put in the time to educate yourself and acquire the skills necessary to be a professional-quality (or better! ha) financial planner for your own money.

dragoncar

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Re: Trust Fund Mustachian
« Reply #6 on: July 22, 2013, 06:40:27 PM »
A lot of this really depends on specifics of the trust -- is it tax free, who is executor, what are the terms (revokable), etc.  If it were me I'd definitely manage it myself.   As others have said, the details depend on your particular investment goals.  For whatever your advisor sets up, I have a feeling there would be lower cost alternatives with the same risk profile.

What do you invest your "other" money in?  Also, what led you to this site?

KingCoin

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Re: Trust Fund Mustachian
« Reply #7 on: July 22, 2013, 07:34:18 PM »
How to invest? Right now I have my family's financial planner involved, but what he's steering me towards are money markets that have some rather high costs(2%). I tried to get into his brain that maybe funds that are less expensive would be worthwhile and he's having none of it.

Money market funds are yielding about 0.10% right now, so if you're paying 2% either upfront or on an ongoing basis, you're getting seriously scammed.  I'd consider this a major reg flag for this financial planner. How is he getting paid?

Your first order of business should be to pick up 4 or 5 personal finance and investing books and read them. A Random Walk Down Wall Street by Burton Malkiel and The Intelligent Asset Allocator by William J Bernstein are probably good places to start. A financial adviser or a bunch of randos on a message board can tell you what to invest in, but at the end of the day, you need to understand what you're invested in and why.

In the meantime, an appropriate investment could be a low cost, "autopilot", target date fund like:
https://personal.vanguard.com/us/funds/snapshot?FundId=0305&FundIntExt=INT
This will invest in a generally appropriate blend of stocks and bonds given your retirement horizon.
http://www.bogleheads.org/wiki/Vanguard_Target_Retirement_Funds

Your precise investments are going to depend on your risk tolerance, financial situation, and current assets.

Honest Abe

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Re: Trust Fund Mustachian
« Reply #8 on: July 22, 2013, 07:53:25 PM »
Another thing to think about.. Do you have a will? If you have children you may want to consider seeking out advice related to what should happen if you do not survive to see disbursements to be sure they are looked after. (Sorry to be so morbid, but $1.5mil is a lot of lettuce and such things are important..... Anyhow, Congrats!!)

Iron Mike Sharpe

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Re: Trust Fund Mustachian
« Reply #9 on: July 23, 2013, 11:46:01 AM »
Also see if your library has the Bogleheads Guide to Investing.

Read it.  Then figure out your asset allocation plan and open up an account at Vanguard and buy your Index funds.

aj_yooper

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Re: Trust Fund Mustachian
« Reply #10 on: July 24, 2013, 12:20:38 PM »
Congratulations on your good fortune!  Since you are a Mustachian-type, I would go for a tax and financially efficient plan of investments. 
Give Vanguard a call at 800-523-7734.  They have certified financial planners available who have simple fees and no interest in selling you high priced junk.  You could fill a Roth for you and a partner(if you have one) each year and put the rest in a taxable account.  In 7-10 years,  you probably will be financially independent.

Since your home is paid for and you like your job, and are on this site, I am assuming you have an emergency fund, 401k, Roth, and maybe a taxable account already, plus a simple will and are using all beneficiary conveyances possible.  Personally for me, I would be looking to invest in simple funds now, like a Total Stock Market Index and a Total International Index to get started, say in a 2:1 ratio.  Each year you could build out a little complexity to improve your diversification and reduce your risk.  If you have a 401k, Roth, 529?, taxable account, they could be used as vehicles. 

I love the William Bernstein books, especially The Investor's Manifesto.  The Bogleheads site would also be a good place to get more information on investing and advice regarding positioning your moneys.  Bernstein does private clients, but you have to have $5M in investments.  I don't think you need a 2% charge on your money from a financial adviser.  Be mustachian and DIY and build up your investment and financial muscles.  Best wishes to you.  Keep us informed.


oldtoyota

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Re: Trust Fund Mustachian
« Reply #11 on: July 24, 2013, 12:36:57 PM »
My good friend is a trust funder and uses BOA. However, I don't see why Vanguard could not do this. You'll soon be at the at the Voyager (or higher) level, which will reduce your costs and costs can be a hindrance to performance.

Have fun with it all!

aj_yooper

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Re: Trust Fund Mustachian
« Reply #12 on: July 25, 2013, 07:27:32 AM »
It's your call. If I were in your shoes I'd probably put the first 100k in either a high yield savings account or T-Bills. After that the remainder I would split in whatever equity/bond mix you're comfortable with using index funds.

If you really want to pay for professional advice go with a fee only financial planner (can be found at www.napfa.org). But I'm not sure what extra advice they can give you beyond what you can research for yourself in the next couple of months/years.

Are you going all risk averse mat chewed???  OP probably has the EF covered and he has a paid for house.

Good on the no need for the expensive planner. 

Go for the equity/bond allocation on index funds.


matchewed

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Re: Trust Fund Mustachian
« Reply #13 on: July 25, 2013, 07:47:45 AM »
No not personally risk adverse, but if I didn't know much about investing I'd stay conservative until I understood the risks behind the investments better. I wouldn't want to get suckered in my first year. So I guess I'm conservative until I know more would be a better way to put it.

pdxbator

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Re: Trust Fund Mustachian
« Reply #14 on: July 25, 2013, 09:52:54 AM »
Thanks everyone for your input.

I have been browsing the bogleheads wiki which I didn't know about so is a great plus. I've also purchased a few of the recommended books on how to go about doing some investing myself. I'm pretty conservative in investing and don't need any of the money any time soon so am looking at the long-long-term.

Though I would love to retire now like Mr Money himself, I like my job for the most part (healthcare) and the benefits are pretty good.

J

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Re: Trust Fund Mustachian
« Reply #15 on: July 28, 2013, 12:49:30 PM »
Though I would love to retire now like Mr Money himself, I like my job for the most part (healthcare) and the benefits are pretty good.

Sounds like you're in the rare position of actually getting to prove your answer to the question "would I keep working this job if I could quit and retire comfortably tomorrow?".  If you genuinely like your job that much, by all means keep it.  Don't feel like you have to retire early just because you can.  You can keep working and saving your income, and living like a mustachian, and if you have a huge surplus you can always start getting more charitable.