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How to invest $300k cash

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  •  ScientistPhysician 
    Participant
    Status: Spouse
    Posts: 69
    Joined: 07/04/2017

    Wife and I recently realized some significant capital gains from sale of stock from a start-up that went IPO. We now have about $300k of cash that we need to invest. This will be almost entirely in a taxable account and I plan to use it to bolster our existing allocations in our robo-advisor account with wealthfront. Realizing that dollar cost averaging is a net loser, I still have a hard time just pulling the trigger in a single shot. Any suggestions or thoughts?

    #180398 Reply
     jacoavlu 
    Moderator
    Status: Physician
    Posts: 1425
    Joined: 03/01/2018

    standard recommendations to start, have an emergency fund, pay off debt probably makes sense, make sure you’re filling all tax advantaged space

    having a robo account complicates things if you invest taxable elsewhere because you have to worry about wash sales

    The Finance Buff's solo 401k contribution spreadsheet: https://goo.gl/6cZKVA

    #180402 Reply
    Molar Mechanic Molar Mechanic 
    Participant
    Status: Dentist, Small Business Owner
    Posts: 261
    Joined: 10/29/2017
    1. Open vanguard account.
    2. Open bottle of wine.
    3. Celebrate huge win with wine.
    4. Give your wife a kiss.
    5. Use wine to ease anxiety over transaction.
    6. Give wife another kiss.
    7. Make lump sum purchase in line with goals.
    8. Drink a large glass of water.
    9. Go to bed.
    10. (redacted)
    11. Go to sleep.
    12. Go to work tomorrow.
     Peds 
    Participant
    Status: Physician
    Posts: 2374
    Joined: 01/08/2016
    Earnest refinancing bonus
    I plan to use it to bolster our existing allocations in our robo-advisor account with wealthfront.

    Click to expand…

    why?

    #180405 Reply
     Peds 
    Participant
    Status: Physician
    Posts: 2374
    Joined: 01/08/2016

    I still have a hard time just pulling the trigger in a single shot.

    Click to expand…

    then your AA is wrong.

    #180407 Reply
    CordMcNally CordMcNally 
    Participant
    Status: Physician
    Posts: 1192
    Joined: 01/03/2017

    Lump sum it. If you don’t feel comfortable with that then DCA over the next 3-6 months.

    “But investing isn’t about beating others at their game. It’s about controlling yourself at your own game.”
    ― Benjamin Graham, The Intelligent Investor

    #180416 Reply
     danesgod 
    Participant
    Status: Spouse
    Posts: 31
    Joined: 09/12/2017

    I agree with the wine.

    I had a similar event in mid-2016, at the time when I was only 1 year into my career. The value was close enough to yours (a bit higher) and my net worth was close enough to zero to call it zero.

    I understood the math about lump sum investing it, but I couldn’t stomach it; going from $0 to hundreds of thousands was too much. So I made a plan to DCA into the market over 8 months (as to incorportate the election and the new year). If I recall my plan was:

    • Save for taxes off the top
    • Immediately fund 2016 IRAs and 401ks (as my wife was in fellowship, we were not able to fully fund two 401ks)
    • Save cash for 2017 IRAs and 401ks (i.e. would be immediately funded in 2017, wife still in fellowship in 2017)
    • Immediately fund 529 (1 year only for State tax benefit and possible move reasons)
    • Save cash for 2017 529
    • DCA the remaining into a brokerage account over 8 months

    After all of that cash saved off the top, we had a lot less to invest DCA-wise. However, if you look at performance, lump sum investing would have been the better performing move. Sometimes you have to invest psychologically. Not sure if it would have been easier for me to invest a lump sum during the 2016 rage bull market or the 2019 volatile market. Whatever you decide, I don’t regret making a plan and sticking to it. I think I even wrote it down so that I’d stick to it.

    #180431 Reply
     bean1970 
    Participant
    Status: Physician
    Posts: 350
    Joined: 07/12/2017

    i’m assuming you paid the taxes already? just checking. IRS is pay as you go, with that amount i would ensure I paid 4th quarter on it if last year (because you said recent)…if this year just pay first quarter on 15 April.

     

    #180472 Reply
     ScientistPhysician 
    Participant
    Status: Spouse
    Posts: 69
    Joined: 07/04/2017

    Thanks danesgod and others.  Our situations are very similar– the stock was almost our entire net-worth (since we are early career) and I took 50% off the table as soon as the lockout period ends. I may sell another 25% over the course of the next year– I do want to ride some of the upside of this company that was the fruit of my passion and labor and it would kill me if I missed out on a homerun. Basically did everything you elaborated in terms of immediate $$$ management; set aside the expected tax in a 12-month CD that we will pay in April 2020, already maxed all tax-advantaged accounts, including backdoor roths, solo401k, and 529 (though we don’t have kids yet). The robo is my only taxable investment. I realize it may not be popular with many here, but I do like the efficient tax loss harvesting. Ideally, I’d like more exposure to real estate since we don’t have any and would like to diversify. I’ve looked into opportunity zone investments to try to decrease the tax hit form the capital gains, but I agree with WCI and others that in most cases the underlying investment sucks even though the tax treatment is favorable.

    Maybe tonight I will take the collective advice here, pour a scotch and push the button.

    #180478 Reply
    Liked by PhotonsRGR8
     danesgod 
    Participant
    Status: Spouse
    Posts: 31
    Joined: 09/12/2017

    Yea, I had a cash payout for part of mine with a significant tax burden and ISOs that vested over 2 years, so I had forced company exposure. I’ve been exercising and selling them in a tax-efficient manner (1 year from exercise date to get LTCG). IMO its pure luck, but the company has performed well during this time. If your spouse is a MD, I think this is an amazing financial start to a career with stable, steady income, so go for the home run, but realize it could bite you in the ass. You know the company/industry better than anyone on here.

    I can’t say whether I’d DCA or lump sum if I had to do it again, but pick one and forget about it for a few years 🙂

    #180495 Reply
    Zaphod Zaphod 
    Participant
    Status: Physician, Small Business Owner
    Posts: 4917
    Joined: 01/12/2016

    I agree with the wine.

    I had a similar event in mid-2016, at the time when I was only 1 year into my career. The value was close enough to yours (a bit higher) and my net worth was close enough to zero to call it zero.

    I understood the math about lump sum investing it, but I couldn’t stomach it; going from $0 to hundreds of thousands was too much. So I made a plan to DCA into the market over 8 months (as to incorportate the election and the new year). If I recall my plan was:

    • Save for taxes off the top
    • Immediately fund 2016 IRAs and 401ks (as my wife was in fellowship, we were not able to fully fund two 401ks)
    • Save cash for 2017 IRAs and 401ks (i.e. would be immediately funded in 2017, wife still in fellowship in 2017)
    • Immediately fund 529 (1 year only for State tax benefit and possible move reasons)
    • Save cash for 2017 529
    • DCA the remaining into a brokerage account over 8 months

    After all of that cash saved off the top, we had a lot less to invest DCA-wise. However, if you look at performance, lump sum investing would have been the better performing move. Sometimes you have to invest psychologically. Not sure if it would have been easier for me to invest a lump sum during the 2016 rage bull market or the 2019 volatile market. Whatever you decide, I don’t regret making a plan and sticking to it. I think I even wrote it down so that I’d stick to it.

    Click to expand…

    There is nothing wrong with your plan and likely makes little difference long term.

    However, 2016 was a terrible market and very similar to what we’ve been seeing the last several months. Jan-Feb lost 14.3%, then you had Brexit, all the election junk, etc…

    Its a great lesson in why just dumping it in over a short period is great, you’ll remember it differently later on as you adjust to your new normal.

     

    If you do just push the button, maybe try not to even open your account for a year or so. Its the attention that gives one anxiety.

    #180509 Reply
     danesgod 
    Participant
    Status: Spouse
    Posts: 31
    Joined: 09/12/2017

    I agree with the wine.

    I had a similar event in mid-2016, at the time when I was only 1 year into my career. The value was close enough to yours (a bit higher) and my net worth was close enough to zero to call it zero.

    I understood the math about lump sum investing it, but I couldn’t stomach it; going from $0 to hundreds of thousands was too much. So I made a plan to DCA into the market over 8 months (as to incorportate the election and the new year). If I recall my plan was:

    • Save for taxes off the top
    • Immediately fund 2016 IRAs and 401ks (as my wife was in fellowship, we were not able to fully fund two 401ks)
    • Save cash for 2017 IRAs and 401ks (i.e. would be immediately funded in 2017, wife still in fellowship in 2017)
    • Immediately fund 529 (1 year only for State tax benefit and possible move reasons)
    • Save cash for 2017 529
    • DCA the remaining into a brokerage account over 8 months

    After all of that cash saved off the top, we had a lot less to invest DCA-wise. However, if you look at performance, lump sum investing would have been the better performing move. Sometimes you have to invest psychologically. Not sure if it would have been easier for me to invest a lump sum during the 2016 rage bull market or the 2019 volatile market. Whatever you decide, I don’t regret making a plan and sticking to it. I think I even wrote it down so that I’d stick to it.

    Click to expand…

    There is nothing wrong with your plan and likely makes little difference long term.

    However, 2016 was a terrible market and very similar to what we’ve been seeing the last several months. Jan-Feb lost 14.3%, then you had Brexit, all the election junk, etc…

    Its a great lesson in why just dumping it in over a short period is great, you’ll remember it differently later on as you adjust to your new normal.

     

    If you do just push the button, maybe try not to even open your account for a year or so. Its the attention that gives one anxiety.

    Click to expand…

    You’re right, looking back at early 2016 (when I had fewer investments) it certainly resembles the current market. What I remember is that I got my money in ~June 2016 and the market (pretty much) went straight up until ~Jan 2018. I remember wishing I’d invested it all lump sum. I also remember almost abandoning my plan, watching the Brexit news (and European markets) and thinking about trying to market time that event. Ultimately I remembered that I know nothing about this kind of thing and I was just gambling. So I stuck to the plan.

    Food for thought OP. Also, as you said, in the long run it didn’t matter at all.

    #180521 Reply
     Tangler 
    Participant
    Status: Physician
    Posts: 35
    Joined: 08/23/2018

    lump sum VTSAX, then the wine thing posted earlier

    #180531 Reply
    Zaphod Zaphod 
    Participant
    Status: Physician, Small Business Owner
    Posts: 4917
    Joined: 01/12/2016

    I agree with the wine.

    I had a similar event in mid-2016, at the time when I was only 1 year into my career. The value was close enough to yours (a bit higher) and my net worth was close enough to zero to call it zero.

    I understood the math about lump sum investing it, but I couldn’t stomach it; going from $0 to hundreds of thousands was too much. So I made a plan to DCA into the market over 8 months (as to incorportate the election and the new year). If I recall my plan was:

    • Save for taxes off the top
    • Immediately fund 2016 IRAs and 401ks (as my wife was in fellowship, we were not able to fully fund two 401ks)
    • Save cash for 2017 IRAs and 401ks (i.e. would be immediately funded in 2017, wife still in fellowship in 2017)
    • Immediately fund 529 (1 year only for State tax benefit and possible move reasons)
    • Save cash for 2017 529
    • DCA the remaining into a brokerage account over 8 months

    After all of that cash saved off the top, we had a lot less to invest DCA-wise. However, if you look at performance, lump sum investing would have been the better performing move. Sometimes you have to invest psychologically. Not sure if it would have been easier for me to invest a lump sum during the 2016 rage bull market or the 2019 volatile market. Whatever you decide, I don’t regret making a plan and sticking to it. I think I even wrote it down so that I’d stick to it.

    Click to expand…

    There is nothing wrong with your plan and likely makes little difference long term.

    However, 2016 was a terrible market and very similar to what we’ve been seeing the last several months. Jan-Feb lost 14.3%, then you had Brexit, all the election junk, etc…

    Its a great lesson in why just dumping it in over a short period is great, you’ll remember it differently later on as you adjust to your new normal.

     

    If you do just push the button, maybe try not to even open your account for a year or so. Its the attention that gives one anxiety.

    Click to expand…

    You’re right, looking back at early 2016 (when I had fewer investments) it certainly resembles the current market. What I remember is that I got my money in ~June 2016 and the market (pretty much) went straight up until ~Jan 2018. I remember wishing I’d invested it all lump sum. I also remember almost abandoning my plan, watching the Brexit news (and European markets) and thinking about trying to market time that event. Ultimately I remembered that I know nothing about this kind of thing and I was just gambling. So I stuck to the plan.

    Food for thought OP. Also, as you said, in the long run it didn’t matter at all.

    Click to expand…

    It doesnt make it any easier in the short term. I think its wrong to trivialize these kinds of decisions, even though we know whats most likely best, it doesnt make it any easier to actually do it. So theres no sense in pretending just cause you know, it should be simple and care free.

    #180532 Reply
    fatlittlepig fatlittlepig 
    Participant
    Status: Physician
    Posts: 404
    Joined: 01/26/2017

    lump sum into s&p 500 index fund. 300K is not large enought amt of money to worry about lump sum investment.

    #180556 Reply
    Liked by ZZZ

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