What should I do with an inheritance?

[Engineer93]

Hey everyone, this is my first post on MMM and am looking for some help.

Just a little background.  I'm 23 years old and make 60k a year.  I'm already maxing out my 401k, IRA and HSA.  I'll probably buy a house in the next 3ish years.

So, my question.  I was given some stock from a relative about a month ago and I'm not sure what to do with it.  The stock is in two companies and worth about 250k.   What are your opinions on what I should do with it? Thanks!

[Captain Cactus]

First off, I am sorry for your loss.

What are the two stocks?  Do they produce dividends?

Unless they're Enron, consider just holding them and pretending you never got them.  Over the decades they will likely grow and compound many times.  You could then put the inheritance to use in 20 years, or give them to your grand kids (as an inheritance?).

[seattlecyclone]

I would sell the stock and invest it in a mutual fund (or three) that meets your desired asset allocation. $250k is too much to leave in two stocks, especially when you're just starting out. Don't worry about capital gains taxes either; your cost basis should be equal to the value of the stock on the date of your relative's death, so any gains should be minimal.

[2Birds1Stone]

First off, I am sorry for your loss.

What are the two stocks?  Do they produce dividends?

Unless they're Enron, consider just holding them and pretending you never got them.  Over the decades they will likely grow and compound many times.  You could then put the inheritance to use in 20 years, or give them to your grand kids (as an inheritance?).

With all due respect this is horrific advice.

Unless this is a target date fund (which I highly doubt), and if it is indeed stock for two individual companies then I would IMMEDIATELY think hard about your asset allocation and throw it into a highly diversified ETF portfolio of a Total Stock Fund and a Total Bond Fund.

On one hand you are young and can afford to be aggressive, 75% stock/25% Bond might be a good target. If you are risk averse you can go 50% Stock/50% bond. MUCH less volatility with a nice growth considering this is "found money" if you want to set it and forget it while limiting downside risk this $250k at 50/50 stock/bond will be enough to retire on by 60 :)

Congrats you won the game, get rid of those individual stocks ASAP. Those can drop HARD and FAST

[ditheca]

I agree that holding the stocks would be a mistake. 

When you choose an investment, you're make a trade-off between the risk (of losing money )and the reward (of getting back more than you put in).  Investing in a specific company dramatically increases the risk, but doesn't typically increase the reward.  Unless you are convinced that TSS and SNV are the next Google/Apple, sell them immediately and pick an investment with the same reward but far less risk.

To invest in a market index fund, you just need to believe that the entire economy will continue to grow... which is a historically safe bet.

[mrpercentage]

I highly suggest that you buy a Tesla S. Maybe add a Norton Commando for good measure.

Personally if I was given that much I would sky dive from the stratosphere. I have always wanted a reason to wear a space suit and I like the long rides.

[sol]

There are people on this forum who will tell you to sell it all and buy their hot stock tip.   Apple maybe?  Is that still a thing?  Other people will recommend hookers and blow.

I've lost all faith in this community as a source of financial advice for issues like this one.  Not enough carefully considered opinions, too many loudmouthed nutjobs.

There are good sources of information on the internet for people like you.  Random strangers on this forum aren't necessarily one of them.

[mrpercentage]

Random strangers on this forum aren't necessarily one of them.

The problem is most of the random strangers on the internet would have them fire their financial advisor too. I swear most are self promoting or adversing monkeys. I am sure of it.

[MDM]

TSS and SNV.  Honestly I had never heard of either of these before a couple months ago.  They do produce dividends at about $600 a quarter.

Sorry for your loss.

See http://www.morningstar.com/stocks/XNYS/SNV/quote.html for why you probably don't want to invest in individual stocks, unless you were born in Lake Woebegone and are one of the wunderkinder who are far above average at market timing.  Hint: you probably aren't, but don't take it personally as 99.some number of 9s percent of people aren't.

Definitely see https://www.bogleheads.org/wiki/Managing_a_windfall - it probably applies well.

[Cyaphas]

One of MMM's recommended reads:

http://jlcollinsnh.com/2011/06/14/what-we-own-and-why-we-own-it/

[Drifterrider]

I'll probably buy a house in the next 3ish years.

Why would you wait three years to buy a house?  Not sure if you are staying in the area?  Houses too expensive?  Enjoy renting?  These are things to consider.

In your shoes (which I'm not):  If I liked the area and intended to stay I would probably start looking for a house now.  Rates are still low and with the potential of having a large down payment you might get very good rates.  I would also view a house as not only someplace for me to live but as a potential rental should I move on.  Depending on the cost of houses in your area, and other factors asked, I might consider cashing in enough of the stocks to buy a house outright.  I'd need a lot more information to make that determination.

I didn't look up your stocks.  What is their long term (10 years or more) history?  Is the price stable, do they have a long history of paying dividends?  Are they likely to be seriously impacted but the current oil roller coaster?

In my opinion the worst thing you can do now is to be in a hurry to do something.  Unless you have reason to believe the value of your stocks will crash and not recover, take a break.  Explore your options.  Give yourself time to think.

Good luck.

[ShoulderThingThatGoesUp]

These are two financial companies headquartered in Columbus, Georgia. To me that means they're probably related, so it's kinda like you have stock in one company. Sell and invest in a Vanguard, Schwab, etc. low-cost broad-market ETF.

[2Birds1Stone]

There are people on this forum who will tell you to sell it all and buy their hot stock tip.   Apple maybe?  Is that still a thing?  Other people will recommend hookers and blow.

I've lost all faith in this community as a source of financial advice for issues like this one.  Not enough carefully considered opinions, too many loudmouthed nutjobs.

There are good sources of information on the internet for people like you.  Random strangers on this forum aren't necessarily one of them.

Was my advice off base?

[Ftao93]

There are people on this forum who will tell you to sell it all and buy their hot stock tip.   Apple maybe?  Is that still a thing?  Other people will recommend hookers and blow.

I've lost all faith in this community as a source of financial advice for issues like this one.  Not enough carefully considered opinions, too many loudmouthed nutjobs.

There are good sources of information on the internet for people like you.  Random strangers on this forum aren't necessarily one of them.

Was my advice off base?

I don't think so.   I believe rolling this over into a blended fund and leaving it alone for ages would be a huge win. 

Then again I didn't have 2 dimes to rub together until I was 35, and at 40 I still have a long way to go.  I'm no genius, just a humble geek who has seen the error of his ways.

However, if you're making 60k a year (not sure what the OP is actually spending), maxing out all of your accounts, and THEN you get a windfall from a dearly departed relative?  I'd certainly put it away in a 'target year' fund at this age.   Even if we have some huge crash, or 2, there's still time for that 250k to turn into a couple of million on it's own by the time it's needed.  It's still liquid if needed, so even siphoning off a bit when that dream house comes along would still make a lot of sense.

[Proud Foot]

I would definitely sell to get out of those two investments diversify your holdings through an index fund.   

You mentioned wanting to purchase a house in the next 3 years.  Is there any reason you wouldn't want to use part/all of this money to make the purchase?

[PhysicianOnFIRE]

There are people on this forum who will tell you to sell it all and buy their hot stock tip.   Apple maybe?  Is that still a thing?  Other people will recommend hookers and blow.

I've lost all faith in this community as a source of financial advice for issues like this one.  Not enough carefully considered opinions, too many loudmouthed nutjobs.

There are good sources of information on the internet for people like you.  Random strangers on this forum aren't necessarily one of them.

Was my advice off base?

I don't think that was directed at you specifically. Your advice was very reasonable, and I agree, holding 2 dividend stocks as the bulk of your investments is very unwise. Unload them now (with minimal tax implications since the cost basis was stepped up) and do something sensible with them.

I would also recommend the OP read the Bogleheads wiki on managing a windfall

Best,
PoF

[sol]

Was my advice off base?

You're advice seemed fine to me, for most people in most circumstances.

But one of the things I have learned by conversing with people here is that even good advice can go bad.  People can have weird circumstances I would never have considered that can make the usual answers really bad ideas, and they compete with a bunch of really bad answers anyway, so I'm not so sure this forum is as helpful as I once thought it could be.

Do your own research, people.  I consider myself pretty savvy and even I have given people unintentionally bad advice here.

And if you're not smart enough to stay away from all of the market timing and hot stock tip threads here?  "A fool and his money..."

[Captain Cactus]

I don't expect that I'll ever be in your shoes (receiving a $250,000 inheritance), but I would likely donate some % to the charity of my choice and put the rest in VTSAX.  Yes, I know that is not what I wrote in the post above, which is just one (of many) options.

Best wishes-