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  • Where to put a few million in cash?

    I am a few weeks away from closing on the sale of my practice. I still plan on working for another 10 15 plus years as I’m still in my thirties. After taxes I will have a few million dollars to invest and with my expected salary and bonus should not have to touch upon any of the sale money until I decide to retire. I still enjoy work but it will be different being FU money!
    I plan on Dollar cost averaging over the next 12-18 months into my vanguard funds which is an 80/20 mix. I’m leaning to a 70/30 mix now though as I don’t need higher reruns to retire.
    Where I would really appreciate the forums help is where to hold cash in the meantime while I am investing in my funds over next year plus?
    I currently use Ally bank savings account to hold a lot of cash before taxes are due, where the savings rate is about 1.6%. Would anyone have any concern lumping all your cash with Ally knowing that only $250,000 is insured? And also I know nothing about Ally banks current financial state. Or would you use a larger bank like BOA even though the rates are pitiful.
    Also what about money markets?
    Cash safety is concern but I guess if the banks fail we all fail!

  • #2
    It depends how much rates, safety and convenience are important to you (and in what order). Most brokerages can use brokerage CDs (FDIC insured) and ladder them to spread the insurance across the institutions while matching your liquidity needs. There are also firms that have excess of FDIC/SIPC coverage in place and offer money markets that will easily cover that for you. Just remember it’s $250k per SSN per institution so multiple bank products (like the CD instance I mentioned) are insured by each of their issuers and save you from opening 8 bank accounts for FDIC.
    Founder, Coastal Wealth Planners: www.coastal-wp.com email: [email protected]

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    • #3
      sorry if you need 18 months to move in your AA is wrong.
      theres no right answer however.
      congrats on winning the game.

      Comment


      • #4
        I would put a big cushion in cash.
        The rest--all in stocks.

        Comment


        • #5
          CDs or high yield savings account but the interest rate is going to become extremely low soon. Given your age and expected retirement, I'd lump sum it.

          Comment


          • #6
            Lump sum is better than investing over time 60% of the time. But these are not normal times. By next year the stock market could be back to where it was a few months ago, or not. By next year the stock market could be down another 30% from today. No one knows as current economic events are unprecedented.

            I am going to take the counterpoint here. In your shoes, I would also invest over time. Best of luck to you!

            One question though, as I am curious. Why did you decide to sell your practice now?

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            • #7
              Thanks for help so far.

              the reason over 12-18 months is the deal gives 90% now and 10% next year. Also the sale almost went through in Dec. 2019 and if I had lumped it then would have lost a bunch at this point in time. Not that I would be withdrawing for some time but still hard to stomach seeing huge loss months after lumping. I had the same investment DCA strategy then as I do today. To me that is just my preference to avoid watching that possible immediate loss vs losing out on gains while cash still on sidelines.

              reason selling now was difficult to pass up on 7.5 times earnings and paying capital gains opposed to ordinary income taxes. Looked at calculations of where I stand in 10 years in continuing current investment deposits vs having all now invested and the difference was dramatic. It was an easy decision.

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              • #8
                What practice did you sell that will net you millions in profit?

                I am a lump sum guy. I put a mid-6-figure lump sum in the market, all equity, in January. You can imagine how well that has worked out. At this weird point in time I would probably do 4 lump sums spaced 2 or 3 months apart. Why? I don’t know.

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                • #9
                  Originally posted by abds View Post
                  At this weird point in time I would probably do 4 lump sums spaced 2 or 3 months apart.
                  We should invent a term for that. Sporadic lump sum investing? Maybe DCA?

                  Comment


                  • #10
                    Originally posted by Brutus1 View Post
                    I am a few weeks away from closing on the sale of my practice. I still plan on working for another 10 15 plus years as I’m still in my thirties. After taxes I will have a few million dollars to invest and with my expected salary and bonus should not have to touch upon any of the sale money until I decide to retire. I still enjoy work but it will be different being FU money!
                    I plan on Dollar cost averaging over the next 12-18 months into my vanguard funds which is an 80/20 mix. I’m leaning to a 70/30 mix now though as I don’t need higher reruns to retire.
                    Where I would really appreciate the forums help is where to hold cash in the meantime while I am investing in my funds over next year plus?
                    I currently use Ally bank savings account to hold a lot of cash before taxes are due, where the savings rate is about 1.6%. Would anyone have any concern lumping all your cash with Ally knowing that only $250,000 is insured? And also I know nothing about Ally banks current financial state. Or would you use a larger bank like BOA even though the rates are pitiful.
                    Also what about money markets?
                    Cash safety is concern but I guess if the banks fail we all fail!
                    If you feel a need to DCA in, why not just lump sum into a less aggressive asset allocation?

                    But if you must DCA, then why not something easy like a Vanguard money market fund (Prime or Muni)?

                    https://www.whitecoatinvestor.com/do...-is-for-wimps/
                    Helping those who wear the white coat get a fair shake on Wall Street since 2011

                    Comment


                    • #11
                      Originally posted by CordMcNally View Post

                      We should invent a term for that. Sporadic lump sum investing? Maybe DCA?
                      Yeah as I re-read what I wrote it sounds pretty stupid. I guess I meant that instead of spread out once every 2 weeks or once every month for 18 months I would personally accelerate time line and also do fewer, larger deposits.

                      Man that still sounds stupid. I’ll show myself the door.

                      Comment


                      • #12
                        Originally posted by Brutus1 View Post
                        Thanks for help so far.

                        the reason over 12-18 months is the deal gives 90% now and 10% next year. Also the sale almost went through in Dec. 2019 and if I had lumped it then would have lost a bunch at this point in time. Not that I would be withdrawing for some time but still hard to stomach seeing huge loss months after lumping. I had the same investment DCA strategy then as I do today. To me that is just my preference to avoid watching that possible immediate loss vs losing out on gains while cash still on sidelines.

                        reason selling now was difficult to pass up on 7.5 times earnings and paying capital gains opposed to ordinary income taxes. Looked at calculations of where I stand in 10 years in continuing current investment deposits vs having all now invested and the difference was dramatic. It was an easy decision.
                        When you say 7.5x earnings, is that net after expenses, gross or EBITDA? My practice was assessed at about 3x gross collections. Just wondering if that's in the same ball park.

                        I recently turned down an initial inquiry from a hospital as I see the mathematics of another 20 years of growth and the valuation of a potential sale at that time - plus I don't want to work for someone else or start over if I can help it.

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                        • #13
                          Congratulations on your practice sale. I am assuming 7.5x NET which is impressive. Have you considered putting some of the money in to commercial RE in a year or two?

                          Comment


                          • #14
                            Originally posted by Brutus1 View Post
                            Thanks for help so far.
                            had the same investment DCA strategy then as I do today. To me that is just my preference to avoid watching that possible immediate loss vs losing out on gains while cash still on sidelines.
                            Congrats

                            Comment


                            • #15
                              Thanks again everyone. I am leaning to some CD’s and vanguard Prime money market.
                              I have a large primary care office with multiple providers.
                              7.5x on Ebitda. Maybe 20 years would be better hanging on to but I didn’t do those calculations. Like the idea of being able to walk away in 10 years and restart simple and smaller, be an employee, or get into teaching more (all on my terms.)
                              real estate is on the horizon. I own my building and we are moving into another building soon for larger space which I will not own, but I plan on keeping the old building and finding a tenant.

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