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Ask HN: How to Invest $700k USD?

47 points by investthrow ↗ HN
I recently came into ~$700k, and I'm trying to figure out what to do with it. My risk profile is medium (family, middle age), so this isn't play money, but I am confident in my employability. My initial instinct was to follow the default "Put it in the SP500 through a no fee fund" but curious if that advice is still valid or if there are other ideas HN might have.

Using a throwaway account, I've been on HN for a loooong time.

92 comments

[ 4.9 ms ] story [ 167 ms ] thread
jmpman
Max out ibond first for everyone in the immediate family?
listenallyall
MegaMillions jackpot is currently over $1 billion. Next draw is Tues. $700,000 will buy a lot of tickets.
kylecazar
I seem to always be behind you in line when I'm trying to get my protein bar
saagarjha
You’d probably have better returns on taking the $700k to the convenience store and buying that instead
Nextgrid
Out of curiosity, let's say someone wanted to do it, do the lottery companies provide some way of buying tickets in volume such as an API or sending them a huge CSV of the desired number combinations?
listenallyall
I wrote an API for checking tickets for a possible winner. Error rate is better (lower) than six-sigma, that's the gold standard in business and so it is good enough for me.

  <!DOCTYPE html>
  <html>
    <body>
      <form>
       <label for="numbers">Enter numbers:</label>
       <input type="text" name="numbers"></input>  
       <button type="submit" onclick="window.alert('not a jackpot winner')">Submit</button>  
      </form>
    </body>
  </html>
yuppie_scum
Congratulations! First and foremost, pay your taxes.

Get a Vanguard advisor.

Pay your taxes.

REITs or maybe go for a income generating rental property or two.

Oh also make sure you pay your taxes.

smachiz
If it was an inheritance, unless he's in one of the six unlucky states, he probably won't have any tax to pay.

Or he's been given a shit ton of money by that same relative already.

mtmail
They could be any gender
smachiz
Yes, you’re right, thank you.
andrewmcwatters
I’m young so I would have said 100% VTSAX and forget about it, but if you’re middle aged, you might want to consider blending it with VBTLX.
jxi
Except bonds were extremely correlated to stocks during the recent downturn, so that’s not a good hedge. Money market or fixed income type funds is probably better in this environment.
kbuck
FYI, it looks like you've been shadowbanned ever since a rather uncivil comment in 2013. Most of your recent comments are dead, the rest I assume someone hit "vouch" for.
[deleted]
(comment deleted)
rafale
If you are bored with the safe and unsexy options in this thread, and u have a great appetite for risk: Wait until TQQQ (3x QQQ ETF) goes under 10$ and then start a DCA over 12 months. You can easily 50-100x ur investment in 10-20 years. Alternatively look up HFEA strategy. Think big!
jleahy
Or you could lose nearly everything if it goes sour, I think it’s important to point that out.

That’s basically equivalent to betting on options (but wrapped up in a way that looks simple). Always remember XIV.

prottog
3x leveraged ETFs could indeed get wiped out if the market crashes, but XIV and TQQQ will behave differently, since the former holds actual underlying stock of the Nasdaq 100 Index components plus some derivative sauce for triple the leverage, whereas the latter literally only held short positions in VIX futures. And we all know that short positions have unlimited loss potential ;-)

I'd say DCAing into TQQQ is not equivalent to "betting on options" in terms of risk. Obviously "options" is a general term and you can in fact construct options positions to be more or less the same as holding the underlying stock, but when you say "betting" I think it implies a high chance of unrecoverable loss that typically comes from expiring options.

rubyn00bie
This is the way, even with 1-5% of what you have. Especially for the current state of the market. Be shrewd with your entry as the above posts suggests with its under $10 remark, and you’re almost assuredly gonna profit enormously in the medium-long term without ever losing a night of sleep from it.

I’ve been planning on doing exactly this with TQQQ and SOXL myself once they drop another ~40-50%. Though it should be noted I only have a small amount of capital to use compared to the OP (around 1% of the OP).

rafale
In the next 10-20 years, AI is gonna eat the world, just like software did, but 10x of that. We are still in the mainframe era of computing when it comes to AI. Large scale neural network take teams of experts to design and build, and supercomputers to train. All of that is coming to our computers and smartphones in the next decade or two, and it's gonna imprint everything we do and how we live our lives. ChatGPT and stable diffusion are just a glimpse in the future.

With this thesis in mind, it's clear that (T)QQQ and semiconductor companies are gonna be huge winners in this new augmented intelligence era. One just needs the conviction to hold thru the emotional rollercoaster that leveraged ETFs are.

silisili
Personally, I'd just throw it in safe 4% account for a couple years. I have no faith the stock market isn't going to tumble. Then I'd probably buy real estate if/when it 'crashes.'
JKCalhoun
Is 4% a thing now? Wow, it keeps going up.

I would split the $700K and put half in savings, the other half, as the OP says, in an index fund (Vanguard Admiral shares require $3000 initial purchase).

pasttense01
Schwab Value Advantage Money Fund® – Investor Shares (SWVXX) 7-day yield (with waivers) as of 01/06/2023: 4.27%
tootie
You can put cash in a Vanguard money market. They're over 4% now.
malshe
Marcus by Goldman Sachs is giving 4.3% on CD
wonderwonder
I've always been a fan of paying off the primary residence just for peace of mind. Can get a better ROI but if you're home is secure, everything else kind of just feels easier.
bozhark
If you need the credit exposure, pay it down to ~10% and put enough in an automated account that covers the monthly mortgage.

Almost destroyed me credit paying off a house when it was the only credit line I had at the time.

esoterica
Why would paying off your primary residence give you more peace of mind than having $700k in liquid investments? You can’t use your paid off house to buy food or pay medical bills.
9front
If your primary residence is mortgaged you're paying interest that compounds to a lot of money diminishing your $700K sitting under the mattress. Pay off the house and save + invest the interest you'd pay each month. That will afford a lot of food and doctor's visits later.
esoterica
Who said anything about putting $700k under your mattress? Which is going to generate more income, investing the entire $700k or investing your mortgage interest?
rgmerk
I get the emotional appeal, but if the OP (or anyone else) has a home loan locked in with super-low interest rates the last thing I would be doing is paying down a home loan early.

At the moment, you could do extremely low-risk things like buy US treasury bonds and come out well in front of where you would be by paying off a home loan early.

ethbr0
The thing with paying off your primary residence is that it's really only effectively different if you remain living there.

Versus money in the bank is money in the bank.

PS: For god's sake don't pay off your primary mortgage if you have a low rate fixed loan.

more_corn
I’d buy property. Or better yet buy land and build housing.

It’ll generate a couple thousand a month. It’s low risk, generates income, easily transferable to heirs.

tootie
It is not at all low risk. Real estate prices are in free fall and managing property is a full-time job.
UncleEntity
The question is if they are in free fall because they were way overpriced (due to artificially low interest rates) and the market is correcting or if there’s some fundamental shift in the economy that is making housing obsolete?
tootie
Not really relevant. I'm responding to someone saying it's a surefire investment. I'm saying it can be volatile. If the reasons are unclear all the more reason to be wary.
sathomasga
> I've been on HN for a loooong time.

And you’re asking random users for investment advice?

mtmail
There have been interesting threads in the past with similar "how to invest" questions. HN might have a larger than usual amount of company founders or FAANG-level salaried employees.

That said I think https://old.reddit.com/r/personalfinance/ is usually more relevant and they have a wiki for various investment ranges.

ozim
I would say he seems smart enough that he is looking for inspiration on non obvious directions ;) which is far from seeking advice.
fsloth
“Random HN users” is a set that includes quite a a lot of financially literate individuals. In the past HN has been pretty solid in providing sane inspiration and references for investment strategy.
ellis0n
Looks like a scam because their downvote me for nothing. Reported to admins. Probably I know who is it.
0xEFF
bogle heads 60/40, rebalance when bands are broken and forget about it otherwise.
reducesuffering
"Put it in SP500 via $VOO" is valid advice. An extra 10% - 40% of that into US total bond market $BND will go quite a ways to de-risking. So will another 20% in $VXUS for international stock market exposure.

I would personally recommend 50% $VTI, 20% $VXUS, 30% $BND. bogleheads.org for the reasoning why.

Flatly ignore anyone recommending 3x leverage HFEA gambling addict nonsense. Listening to them, your portfolio would be down 62% to $260k this year, worse than 09 great recession.

javanissen
Read the articles on Bogleheads.org and the r/personalfinance Reddit wiki on managing windfalls. Do not feel the need to invest this money until you understand your options and have a baseline understanding of your risk tolerance. In middle age I suspect putting it 100% in stocks might exceed your risk tolerance: a balanced portfolio of stock index funds, treasury bonds, I bonds, maybe paying down debts, and maybe liquid cash reserves in FDIC-insured high-yield savings accounts is probably more appropriate.
nextos
I would suggest something similar. Read about permanent portfolios, i.e. investment strategies that balance different things that exhibit low correlation (e.g. stocks, bonds and real estate).

For stocks, an index fund is a fine choice, but I would invest progressively to avoid getting screwed up by wrong timing.

Another idea is to allocate a small part of your portfolio for a fund that has similar ideas to Universa Investments & Taleb, i.e. buys you insurance for tail events.

trelane
Generally, the format is too spend some, save some, and give some.

10% to charity, attend maybe another 10% if you feel like it, save the remainder.

For saving, make sure you have a good emergency fund of 4-6 months of expenses. Then start paying off debts, ending with your mortgage. Whatever you have left, put into a balanced set of mutual funds that have risk according to you tolerance for it. Pretty standard Dave Ramsey advice.

nodesocket
- Pay off any credit card debt or any debt with an interest rate higher than 5% -- excluding mortgage(s).

- Make sure you have enough saved for taxes and hire a good accountant to help you optimize taxes. Lot's of options here, start a LLC, open a SEP retirement account, backdoor ROTH, etc.

- Max out a high yield savings ($250k) into something like Goldman Sachs Marcus (currently earns 3.3% risk free). Here is my referral promo if interested, we each get a interest rate boost https://www.marcus.com/share/JUS-TMY-6QYS

- Split up the remaining into investments. This is your choice, but I'd recommend the majority be an index fund ($SPY) or if you like tech and willing to accept higher risk ($QQQ). The rest you can speculate on individual stocks or cryptocurrencies.

jwong_
What is the magic word to look for an accountant for optimising taxes?

A couple of years ago I set out to do this, mostly by calling accountants and asking if they offered tax optimisation services. Most weren’t accepting new clients. The few that were had no idea on what I meant by tax optimisation, and just wanted to file a 1040 for me.

I was willing to do anything legal in a way that would save me money, including pay an accountant. In the end I just filed my own taxes and gave up on any other optimisation strategies.

nodesocket
Unfortunately like mechanics, there are a lot of just average and poor accountants. Typically you have to ask around (personal network) for ones that work with high net worth individuals. They are the ones that know all the tricks, loopholes, optimizations.

The biggest tax savings I benefited from is starting a company (LLC taxed as S corp). Lots of doors open up then. Though, the LLC has annual fees, taxes as well such as payroll tax, self employed tax, state income taxes (if you live in such a place), franchise and excise taxes. It's a lot to manage and overhead having a LLC, recommend you pay somebody to manage it all.

jwong_
Thanks for the confirmation. I will give it another shot then.

Another reminder for me to start an S-corp, it's been something I've been putting off for the paperwork.

justinzollars
Buy a farm in Iowa. Farms are a good inflation hedge, the land can be rented and the Fed can't print farm land.
esoterica
Farms are just businesses and nothing about them makes them inherently better to own than other businesses. Instead of putting all your money into a single undiversified business that requires work to manually manage just put it in an index fund.
jrockway
Yeah. There are basically companies trading on the stock market that have thought of pretty much every 1 sentence business plan ("buy a farm, the fed can't print farms"). Buying a total stock market fund basically gives you exposure to these ideas, and in general, a lot of the ideas do end up working out, so the collective basket increases in price. If one of the ideas is terrible but 10 of them are good, you still win. If you pick an individual idea and don't actively drive it to completion, then it could be one of the bad ones, and you lose everything.

(If you're going to be actively involved, the equation changes. You might say you're better at programming than anyone you know, and at talking to users, and at selling to large companies. Great! You should start a software company and it will no doubt do better than companies that are made up of people that are only average at those things. The market has a way of cutting down your ego, though.

As for farms, there are lots of people that inherit farms and were born and raised on the farm, but they ain't billionaires. You can hedge against inflation all you want, but all it takes is a swarm of locusts to erase all of your gains on one hot summer day. There is a lot of equipment you need to buy, and hard manual labor you need to do to make the farm more than a park in the middle of nowhere. Everyone knows that people need food, and food grows on farms, and they are there to take a % of your profits. We'll give you a loan on that combine for 8% interest. We'll sell you the best seeds money can buy, for a price. We'll pick up your harvest and drop it off at the market, for a % cut. We'll give you insurance against a freak tornado for a low monthly fee. We'll pay workers compensation when one of your employees decides to dig a hole with a stick of dynamite and blows their hands off. Before you know it, your inflation hedge was siphoned off by products and services. Just sayin', why be the farmer when you can loan someone the farm equipment for a monthly fee?)

justinzollars
How much money did you lose in the last year?
esoterica
Just because your farm is not publicly traded and marked to market every day does not mean the value cannot go down. A rising rate environment is going to drive all asset values down, including farm businesses. It’s not only stocks that went down last year.
justinzollars
It doesn't matter if it goes up or down - or left or right. Its an answer to "how do I park 700k". It produces income, and in an inflationary environment commodity prices go up. So rents will go up. Last year was a horrible year for homes values, but was it for Iowa farms? I'll leave that to you.
leoplct
Now: 1 year bond.

2H 2023: Vanguard high dividend etf (value stocks)

leoplct
Don’t buy stocks before 2H 2023, or until the 1Y US bond yield is greater than inflation. In other terms until the real interest rate is positive.
voisin
What’s your logic here? Negative real interest rates are artificially inflating the market?
raincom
Interesting take, as interest rate = inflation + cost of money
leoplct
Because central banks will increase interest rates until real interest rate will turn positive. Every rally in the meanwhile is just a bear market rally.
ryl00
I'm 51. If it was me, I'd DCA it monthly into a 60/40 index like VBIAX over the next year or two. If the market drops near-term, you can re-assess your appetite/tolerance for risk. If it doesn't, you're easing your way into what should be a decent long-term position.
cletus
There are a bunch of factors here but the key one is: what are your goals? How do you see your next 5/10/20 years?

The point of this is maybe you're intending to retire in 5 years. If that were the case, I wouldn't suggest dumping into the S&P500 necessarily.

Another is: what other assets do you have? Do you own your own home? What do you have in retirement savings? What other assets?

If you have children, live in the US and intend to for the foreseeable future, you may want to divert some funds into Roth IRAs for your children. This could be instead of or in addition to 529 savings plans.

If you come from somewhere else and intend to return to taht country then buying property in that country might make sense.

I would generally say own the house you live in. I don't mean outright. If you have a low interest rate locked in for 30 years there's zero point in repaying it early.

The default option would be to dump it in VTSAX but so much depends on individual circumstances and goals.

astockwell
I recommend considering unusual "investments" like solar panelling your roof: if it costs you $25k outright, but saves you $150/mo 4eva, that's a 7% ROI, better than a lot of more risky investments. Then if you convert your HVAC to be electric-only, your vehicle(s) to electric-only, etc, the effect is additive.
isthisthingon99
I know a guy who did exactly this, and his unique lot allowed him to also use geothermal energy for heating/cooling. Totally off grid, in the middle of a busy town.
ellis0n
I'm from Ukraine. Lets try invest or donate in https://animationcpu.com and Oompas coin. I'm in HN from 2012. I have a 3 investors whom got the profit already.
orbit7
Pay off all debt, have a good safety net, sustainable charity, value investing, crypto is also at low point. Life style design - this is a useful starting resource in that respect: https://tim.blog/4-hour-workweek-tools/
ChuckMcM
As with everything, it depends. What is your risk profile?

The first time I came into some unexpected wealth (from selling stock options) I put it aside to pay for my kids college. In terms of frames of reference, I recognized that "lack of debt" is a big help for new graduates even back then. I had gone through school on a combination of scholarships, grants, and student loans but it cost less back then and when my wife and I got married she had actually saved enough to pay of my remaining student debt (which was < $10K as I recall).

Because we didn't have debt, both working as engineers without kids let us save enough and have a good enough debt/income ratio to buy a house in California. And that was what allowed us to stay in California when she wanted to stay home and raise the kids. So looking back, it was a good call.

An exercise that I often gave my kids and engineers I've mentored is to "project your expenses forward" to get an understanding of your "burn rate" over time, then invest / save to ensure you're above the power curve (not incurring debt to pay a projected cost). Three areas I look at are < 1yr, < 5yrs, and > 5yrs. For the latter I put stuff in equities mostly, for < 5yrs it is a mix of equities and fixed income notes (bonds, CDs, etc) and < 1yr usually CD's. For example estimated tax payments (income and property) in CD's that are 3 month, 6 month, and 9 month maturities, depending on when the money will be required.

My parents put $100K of an inheritance my Dad got into a managed "growth" account, and each year if it had grown > $10K they would take out 10K for a vacation that year. That worked well for them being on fixed incomes.

Another friend of mine invested about $500K in a property in the Sacremento area and rents it out which gives them a steady income. It is more work however.

matthewwelch
If it were me, I’d consider getting residencies for yourself and your family in another country and then buying property there. Potential tax benefits, a second home and a place to escape if some crazy COVID-like stuff ever kicks off again!