Author Topic: Windfall -- need some advice  (Read 1414 times)

Kris

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Windfall -- need some advice
« on: May 16, 2019, 08:18:03 AM »
Hey, all:

I've searched a bit in this forum for advice on investing a windfall, but the last thread I see is from last year, so I kinda want a 2019 perspective.

I'm about to receive a windfall of about $75,000. It's been taxed, so that money is mine free and clear.

We're FI, my husband is retired, but we'll have no real need for this money for a while (years). Should I just dump it in VTSAX? I'm feeling a little paralyzed because it seems to me like a market correction is coming... I know I shouldn't be trying to time the market, but part of me kind of wants to wait for a fire sale... IDK. Thoughts?

EvenSteven

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Re: Windfall -- need some advice
« Reply #1 on: May 16, 2019, 08:34:20 AM »
I would say invest it according to your current asset allocation. If you are 100% VTSAX right now, go ahead and dump it in. If you are 60/40, then invest it accordingly.

Quote
I'm feeling a little paralyzed because it seems to me like a market correction is coming

This is true, a correction is coming. This is true at every point in time forever; there is always a market correction coming. Are you going to be OK if a market correction comes with your portfolio value and asset allocation? If you are FI then the answer is yes, so 75K more certainly won't hurt.

Either congratulations or condolences on your windfall, whichever the case may be.

daverobev

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Re: Windfall -- need some advice
« Reply #2 on: May 16, 2019, 08:34:51 AM »
Revisit your asset allocation. See how your 'pots' stack up.

If you're not in need of the money, it doesn't matter either way really - spend it on eco upgrades to your house and an electric car.

Market timing is market timing though, if your AA says buy 60k VTSAX and 15k bonds (for example)... There is no good reason to do anything else if everything else in your life is already ok.

Kris

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Re: Windfall -- need some advice
« Reply #3 on: May 16, 2019, 08:43:29 AM »
Market timing isn't always a binary action, is it?  You could dump it into bonds, you could (gasp!) pay down a mortgage, you could earn 2.20% in an online savings account from Ally.  You could donate the money.  You could invest in companies that do good. 

Maybe even some Beanie Babies...

Nothing sacrosanct about VTSAX.  It's lovely in its simplicity.  But I wouldn't feel any pressure to dump it all there.

Yeah, i don't really feel a lot of pressure, since we don't need the money. No mortgage, no debt to pay down. We have "too much" in our online savings account already, so putting it in there seems just kinda like a waste. But yeah, I think I might pull back and think about doing some allocation of this windfall into donations and other things that align with our values. Hell, maybe all of it. It's not money we expected, or need.

J Boogie

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Re: Windfall -- need some advice
« Reply #4 on: May 16, 2019, 11:03:50 AM »
I'm feeling a little paralyzed because it seems to me like a market correction is coming... I know I shouldn't be trying to time the market, but part of me kind of wants to wait for a fire sale... IDK. Thoughts?

I think lump sums are a reasonable exception to the "no market timing" rule.

Reason being that dollar cost averaging historically would leave anyone pretty well off and most quite well off. But a lump sum invested during a massive high might not recover.

Personally, I'd put most or all of it in an income type investment like a REIT fund like VNQ until there is a major correction that would make you feel more confident about your timing.

My IPS specifies asset allocation based on the current Shiller PE ratio and calls for heavier REIT weighting during times like these. When speculation is baked into price, I turn to income for certain knowledge that my money is productively invested.

AdrianC

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Re: Windfall -- need some advice
« Reply #5 on: May 16, 2019, 11:24:33 AM »
Personally, I'd put most or all of it in an income type investment like a REIT fund like VNQ until there is a major correction that would make you feel more confident about your timing.
Why would VNQ be immune from a major correction?
Quote
My IPS specifies asset allocation based on the current Shiller PE ratio and calls for heavier REIT weighting during times like these. When speculation is baked into price, I turn to income for certain knowledge that my money is productively invested.

Vanguard REIT Index Fund:
"The current adjusted effective yield is 2.06% as of 04/30/2019. "
https://personal.vanguard.com/us/FundsYieldDisclaimerREITFund?FundId=5123

That's not much income for the risks involved.

Personally, I'd put it into BRK.b and forget about it for 10 years.

PDXTabs

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Re: Windfall -- need some advice
« Reply #6 on: May 16, 2019, 12:25:06 PM »
I would personally put it all in VT.

EDITed to add - but I would dollar cost average if I couldn't stomach buying in one lump sum.
« Last Edit: May 16, 2019, 12:27:43 PM by PDXTabs »

Kris

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Re: Windfall -- need some advice
« Reply #7 on: May 16, 2019, 12:44:14 PM »
I would personally put it all in VT.

EDITed to add - but I would dollar cost average if I couldn't stomach buying in one lump sum.

I can totally stomach buying in lump sum. I will admit I can stomach it less at the thought that the market feels due for a downturn right now.  But DCA seems a little silly in this case.

talltexan

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Re: Windfall -- need some advice
« Reply #8 on: May 16, 2019, 01:28:31 PM »
Was this windfall associated with a person or event you'd like to commemorate?

You could put it in something like Vanguard Wellington with the idea that it pays for celebration dinner every year.

J Boogie

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Re: Windfall -- need some advice
« Reply #9 on: May 16, 2019, 01:52:42 PM »
Personally, I'd put most or all of it in an income type investment like a REIT fund like VNQ until there is a major correction that would make you feel more confident about your timing.
Why would VNQ be immune from a major correction?
Quote
My IPS specifies asset allocation based on the current Shiller PE ratio and calls for heavier REIT weighting during times like these. When speculation is baked into price, I turn to income for certain knowledge that my money is productively invested.

Vanguard REIT Index Fund:
"The current adjusted effective yield is 2.06% as of 04/30/2019. "
https://personal.vanguard.com/us/FundsYieldDisclaimerREITFund?FundId=5123

That's not much income for the risks involved.

Personally, I'd put it into BRK.b and forget about it for 10 years.

Yeah, VNQ isn't great. Similar correction risk with less upside.

I don't own VNQ. What I personally hold as ~50% of my invested portfolio is my own 15-20 REIT fund of mostly mid cap REITs, especially ones like AIV and CIO that invest in 18hr cities, but that felt like a little too unorthodox to recommend on this thread on this forum.

Perhaps there is a better income ETF. I don't know. I'd probably buy a solar array and an EV.

Sorry Kris. Don't invest in VNQ lol. But I totally get the aversion to investing a lump sum right now.




nereo

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Re: Windfall -- need some advice
« Reply #10 on: May 16, 2019, 01:59:41 PM »


I'm about to receive a windfall of about $75,000. It's been taxed, so that money is mine free and clear.


The money itself has been taxed, but money is fungible, and you could still use it to your advantage, tax-wise. 
IIRC, you are still working - can you contribute more towards your taxable accounts and use some (or all) of the $75k to meet monthly expenses?  If you were both fully retired with no income I'd say this would be a perfect opportunity to do a Roth conversion.

Otherwise, I'm boring - I'd advise sticking to your AA.  Even if the market corrects the day, what's it to you?  This wasn't money you were expecting or necessarily need for years, right?

Kris

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Re: Windfall -- need some advice
« Reply #11 on: May 16, 2019, 02:52:47 PM »


I'm about to receive a windfall of about $75,000. It's been taxed, so that money is mine free and clear.


The money itself has been taxed, but money is fungible, and you could still use it to your advantage, tax-wise. 
IIRC, you are still working - can you contribute more towards your taxable accounts and use some (or all) of the $75k to meet monthly expenses?  If you were both fully retired with no income I'd say this would be a perfect opportunity to do a Roth conversion.

Otherwise, I'm boring - I'd advise sticking to your AA.  Even if the market corrects the day, what's it to you?  This wasn't money you were expecting or necessarily need for years, right?

Oh, thatís not a bad idea. I am actually self-employed. Have not set up a SEP IRA yet, but this might be a good impetus to do so. Thanks!

AdrianC

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Re: Windfall -- need some advice
« Reply #12 on: May 16, 2019, 06:52:14 PM »
Solo 401k usually better than a SEP IRA.

Plugra

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Re: Windfall -- need some advice
« Reply #13 on: May 16, 2019, 08:01:05 PM »
This is the enduring paradox of the stock market.  You have infinite amounts of data about past performance and history, and you can kick yourself for past decisions ... but in terms of what is going to happen tomorrow you know nothing, the market knows nothing. With every new dollar you invest, the only rational strategy is to decide your AA and invest accordingly.

frugledoc

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Re: Windfall -- need some advice
« Reply #14 on: May 17, 2019, 05:30:34 AM »
Put it all into vanguard all world. I just lump summed a bigger sum than this a couple of weeks ago, but it was money that had been tied up in an alternative investment that had liquidated rather than ďnewĒ money.

Personally I would lump sum any new windfall especially if you donít need the money. If not lump sum then DCA over 6 months but lump if the market drops by x%

nereo

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Re: Windfall -- need some advice
« Reply #15 on: May 17, 2019, 06:30:10 AM »


I'm about to receive a windfall of about $75,000. It's been taxed, so that money is mine free and clear.


The money itself has been taxed, but money is fungible, and you could still use it to your advantage, tax-wise. 
IIRC, you are still working - can you contribute more towards your taxable accounts and use some (or all) of the $75k to meet monthly expenses?  If you were both fully retired with no income I'd say this would be a perfect opportunity to do a Roth conversion.

Otherwise, I'm boring - I'd advise sticking to your AA.  Even if the market corrects the day, what's it to you?  This wasn't money you were expecting or necessarily need for years, right?

Oh, thatís not a bad idea. I am actually self-employed. Have not set up a SEP IRA yet, but this might be a good impetus to do so. Thanks!
No Prob.  This is actually a concept that I learned on this forum several years ago when I was in a similar situation -- was gifted a small inheritance near the end of the year and concluded that I'd put some into a Roth and the rest into taxable accounts b/c "the taxes had already been paid".  After some great and patient posts back and forth I came to understand that it didn't matter that I paid no taxes on that particular chunk of money - my situation still favored a tIRA and increasing my contribution into my 401(k)... because money is fungible.
So - I'm just paying advice forward :-)

Kris

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Re: Windfall -- need some advice
« Reply #16 on: May 17, 2019, 07:22:29 AM »
Solo 401k usually better than a SEP IRA.

Thanks for that. I looked at the two, and youíre right.