Have spent too much time obsessing over how to handle this, so reckoned I’d ask WSO. Over the past few years, I’ve personally built up a $3M USD net worth which is mostly liquid assets. Currently at a MM pod (was on the sell side for a few years before this) - doing well but have the itch to try something else given the unique position I am in. Here are the specifics (cash on cash returns where applicable):
- $3M net worth comprised of $1.7M cash in a taxable brokerage, $1M retirement assets ($750K in a tax-deferred IRA, $250K in Roth), and $300K home equity
- My TC has averaged ~$650K annually
- Completely self made (no inheritance, paid my way through school, saved a lot)
- Built most of this wealth consistently over time through some good real estate deals during COVID, company stock doing well, and by being a good trader in my PA
- Personal trading strategy has involved making leveraged trades in ideas where I have a high degree of conviction, notably in index funds or commodities. I have grossed about $1.2M in P&L (before taxes) over the past 24 months with this strategy. Started with a base of $400K. Have had some bad periods but this helped me build a process/risk limits that have consistently worked
I have had too many ideas about how to handle this and don’t think I have the right context or experience to build something that will last decades. My question is this - I have a long time horizon here given my youth, what should I do with my wealth to maximize my (1) future net worth and (2) quality of life? Would love to hear from anyone else who has been through something similar.
Well what are your long-term goals (FatFire ?????)
Well, I think this is one of the reasons why this question is so hard to answer. Could keep working and comp will invariably go up / can save more over time. But my ultimate goal would be to run my own $, provided the risk is not too great…
If you think "comp will invariably go up" with time, you still haven't understood how MM funds work.
Probably should have said “comp likely to increase” instead. I’m aware of the bad odds of surviving at a MM and the distribution of outcomes (I’ve experienced both ends of the spectrum over the past few years.
I feel like such a loser. I turned 31 recently and only have ~$2.5m, not including my home equity. I just saved in index funds and a couple of stocks but nothing fancy. I just hope I’ll be able to retire some day.
You arguably are doing just as well
idk man only 2.5 million at 31? you will never retire.
No man I’m a failure. I wanted to work in HF but I couldn’t even accomplish that.
is this sarcastic, i can't tell. so you have $3-4mm at 31, including equity, and you call yourself a loser? that is excellent by almost any stretch
A little over $3m, but most of the liquid assets are in index funds and ETFs. So I barely count that anymore since it’s not a stretch to see 50% or more of that wiped out in a downturn, probably even more. I consider myself closer to broke than financially secure.
WSO is for finance professionals, not minimum wage workers buddy. (Youre doing better than me)
Definitely loser territory for sure. Conservative estimate is you have $5MM at 40? and $10MM at 50? $20MM at 60?
I wish I was as optimistic with returns going forward, after adjusting for inflation. I would like the opportunity to retire by around 50 just in case AI takes my position out. Do you think that’s a realistic target age to step back?
Buy a small business and lose all the money
Haha I am not one of the 2+2+2 banking/PE/MBA losers who are dumb enough to think my excel and ppt skills mean I am qualified to run an HVAC business
These people always get run over and end up going back to work in a job they could have gotten before MBA
God dude HVAC fucking prints money. Met some ppl who are in it and making stupid $$$ but are kinda retarded. Insane
iunno man, my friend owns a small 20 person commercial repair company (not exactly HVAC) and he's killing it. i'm talking $3mm ebitda as the sole owner.
congrats on the success so far. why not stay at the MM? you have downside protection (the $3m can compound to $10m by the time you are in 40s) and if you put up a lot of PNL or make PM the upside is huge.
It’s something i’m considering longer term. Have always chased some promotion or exit opp which has kept me motivated. Now, being at a MM pod is it, right? Have been on the buy side for a few years now and don’t have that same carrot in front of me (except the illusion/dream of potential high comp - but as the other poster said this isn’t invariable). Definitely has required a change in mindset / thinking that has ironically made me a better investor
Dump excess funds into vanguard total stock market index. Never withdraw money until 60. Retirement secured with almost zero chance of failure.
Considering taking half a million of what I have cash and doing this.
Separately, any thoughts on hiring an advisor to handle some of this for me?
Dude, dollar cost averaging into vanguard is literally fool proof way to retire early with wealth. It’s such a basic life hack.
You know why people on this site or across America won’t do it? Cause you cannot get rich quick using this strategy and Americans are loathe to delay gratification. Look at this thread and all the retarded ideas being thrown around. When you’re like us, and going to earn a lot for your career, why not take any risk of ruin out of your retirement?
Now, in terms of a financial adviser, I used to think it was asinine for anyone with a net worth of less than $10mm to get an advisor. Because unless you need serious estate planning and tax sheltering ideas, why pay for the advice to invest in the S&P 500 and never sell for 30 years?
But I’ve come to understand that some people might be a high earner but they freaking hate managing or investing their money.
So if you really want an expert to help, I would suggest you getting a financial planner. Not an advisor. The planner is a fee only expert who can review your financial every so often for a flat fee. Whereas the advisor charges you per AUM and is always incentivized to churn your account.
Unless you work for like citadel or have inside information, you will never ever beat the market average over a long period of time. The only investors who do, 99% use inside information.
Diversify ~$500k of the $1.7m across crypto - mainly BTC, with some ETH and XRP. Put another $500k in the IRA - Uranium, Gold, Cybersecurity, and Broad Market funds (Domestic and Interntional both). Then... upgrade the house? Just chilld an profit dude! You are way ahead of the pack.
BTC is gonna get exposed massively if tether blows up.
One rule I have is to never invest $ into something I don’t understand lol
Will have to read up on all of these!
recommend this video on BTC to gain an understanding
Buy crypto at the top of the 4 year cycle, sure - great idea.
BTC is massively exposed to developments quantum computing. It is not a technological revolution, it is not innovative and no one actually uses it as a means of payment or transfer.
Additionally, its risk-adjusted returns (once you correct for its insane volatility) aren't even exceptional.
Brother, you are infinitely more successful than 99% of us on here. There are a select few users on this site who are probably positioned to give guidance, but outside of them I would disregard the rest of the feedback.
I dont have anything to add other than to say congrats, you have to be more successful than 99.9999% of Americans
Thank you sir. Yeah, seeing through the noise is tough. Nobody in my personal life is able to give me the right guidance
4x in 2 years on the PA, which is forming half your net worth (hoping you didn't actually pay taxes on it...)? Just know with that risk 1/4th in 2 years is also possible.
I would take the gains and run (invest in a loss harvesting product then rebalance into indexes). Focus on work where you have scale & your upside is asymmetric.
Yeah this is the advice I would give as well. Derisk your PA and then go chase something with asymmetric upside. It's kinda like you gave yourself a mini trust fund... why are rich kids willing to go after bigger, riskier career bets? It's because they have the safety net to fall back on, which you now do to.
This is the kind of advice I came here looking for. I agree and have already begun derisking the PA.
This is absolutely the wrong forum to ask this question on lol
Where would you ask the question?
I can't tell you what the best strategy for you is, but I have a similar net worth and I can tell you what I'm doing. I invest in real estate, but I also work in real estate, so I'm biased and know what I'm doing. I buy run down multifamily properties, renovate them, and rent them out. I can generate 10%-20% cash on cash return. I really like this strategy because 1.) 10%-20% CoC return is pretty solid (not including appreciation) and can generate meaningful income to live off of 2.) I can pass the properties down to my kids 3.) I immediately create value post renovation 4.) I can claim depreciation against my property and have other tax strategies like 1031 exchange 5.) I can get lines of credits against my properties for liquidity.
Incoming BB analyst working in real estate – can I PM?
Qualified to give advice on this, personally and professionally.
As others mentioned, the whole question is what your cash burn is over the next couple of years/ financial goals and your career confidence. If you expect a decent cash outlay (like a house) be more in cash. Otherwise, just broad asset exposure.
While on one side, your returns sound quite good, they seem to indicate some looney/ reckless personal trading that could have gone really poorly if you were in a different market. I don’t know what sort of high conviction trades you had, but that sort of shit in your life savings is a recipe for disaster in a black swan event or on a long timeline. Keep the reckless trades at work don’t double up on risk in your personal life too. You are absolutely playing with fire and worse, you have developed conviction you aren’t. The mix of early career success and the causual manner in which you explain the money you made makes me think you are the guy who will lose 50% in the next 5 years.
If you don’t believe me, crack open a history book and read about the people way smarter than you at LTCM. So many strategies seem so shrewd and clever when they were just selling vol with extra steps.
The advice for everyone is straightforward, broad-based investing across asset classes to accumulate over time. If you are a long term investor, inflation is the killer since 2% (let’s be honest it’s 3% going forward) means 10 years of inflation makes you lose purchasing power by 25%.
If you want to speculate more, have an option book on the side. But frankly, the math just isn’t much different for a moderately wealthy person or even a large family office—your goal should be to own all assets to protect against inflation and over time assets grow because the game is constructed that way.
Now the sketchy part with that is US market valuations are undeniably without a question in bubble territory now. So you have a debate on should you underweight the US or are you the guy who thinks you want to ride it all the way up and down and over time that seems like a good strategy?
If you want a great book on the topic get off WSO and read and follow Victor Hagenis work (spelling might be wrong idk)
Synopsis is he had 95% of his wealth in ltcm the firm blew up and he had to have a come to Jesus moment where he was like “wait, I was a good trader, but super reckless with asset allocation decisions. What is actually the right way to allocate?”
Spoiler, his conclusion is own all assets and overweight the ones that have historically decent appearing forward returns and underweight the ones that seem overly valued. If you have belief in mean reversion, you probably do some sort of value investing on a long timeline even if that’s as simple as overweighting emerging markets when the US is in a bubble. My one other piece of advice is really considering taxes in the stuff you do. Not all trades are equal. Long-term vs short term capital gains, tax treatment of futures or spx options vs 30 day spy options all make a big difference in post tax wealth accumulation.
But hey, your high conviction trades seem like they are working, so maybe you should just lever up and take a look at fartcoin.
Adding too, the quality of life thing is big. The pain of knowing because you were greedy so you lost a ton of money and due to bad luck your shop blew up would be miserable. Play it safe with the money you have and don’t blow your lead. Paired with you continuing to earn in the way you are earning and compounding will make you very wealthy. If you are frustrated that you aren’t “super rich” and can’t help yourself then you should attempt entrepreneurship.
Here is exactly what I would do:
-10% in gold/bitcoin
-15% in tips or safe real estate
-45% in ex-US equities (about 25% in emerging markets)
-30% in US-equities
If you study asset allocation, it’s fascinating how well naive strategies do. Putting just 1/n in all different asset classes is actually quite good in different scenarios.
Now the flip side to the allocation above is you will feel dumb when the S&P rips 30% in a year and your portfolio is only up 20%, but the same will be true when the AI bubble pops and people realize 50+ forward earnings was in hindsight a little optimistic. Again, quality of life says you will be more happy playing it a little safe than getting crushed.
Congrats! Ex the 1.2m of trading PNL, could you talk about your comp over the years on the buyside and how it’s changed? Have you made over 1m?
I’m a bit older than you by 15 years. Keep working and doing what you are good at. But have flexibility in time, so get paid as a contractor (1099) and work remotely. Continue to collect revenue streams from prior businesses.
Wife goes on multiple vacations a year, including a couple for me and family (wife has 1-3 girl friends who also have a lot of time). Makes me feel good that she can take off and see world (she rather travel than have expensive stuff).
Work on business idea on the side that I’m passionate about, but does not cost me much money (so I check my creativity box). Money in index funds. While I made money in real estate businesses, I’m want to reduce surface area of dependency (like dealing with tenants), so just in the market. I have a 30+ year investment horizon.
Goal is for lower stress, a lot of exercise, time with family, college football, see the world, and have fun starting another business. Keep my desires low.
If I were in this position in early 30’s, and still ambitious (remember to fight this trust fund safety feeling), I might consider:
I might say get a part time MBA or full time (you’d be older). Have some fun and learn. Keep building your resume. You can afford it.
Possibility underlying your feeling of uncertainty in a clearly good financial situation for yourself, is maybe how easy it is was for you to get to this position at a younger age. There could be a feeling of imposter syndrome. For me, it wasn’t easy and involved massive risks, but I do think if I thought it was easy, how different I would feel. I think I would have felt that making money was easy and I’d start more businesses and want more and more. Get bigger and bigger. You seem to be someone who is careful and have your desires in check, which is good.
Find wife to tell u how to spend money and what to want to do with this. She will have strong opinions. If not, engage in endless pursuit of external validation through being a hf hingeboi. Both of these will help narrow how you find self worth and find clarity again.
i was born in the wrong country and pursued education in the wrong place
I am very interested in engaging with whoever, can DM or comment on the thread below -> I want candid thoughts.
My background was equity analyst for a long period doing custom individual stock portfolios, and now I am a dual wealth advisor + co-PM on a long only strategy / investor.
I was always curious how the successful HF crowd managed their wealth, as I assumed eventually some of them ended up going to advisors, but on the other hand, they are investors who tend to believe they are geniuses and want to maintain tight control over decisions.
I come as a skeptic to a lot of advisory world - lot of old people paying way too much for a simple asset allocation, and sometimes the allocation sucks. Some young people just need to add VOO ever year
But reality is there is a ton of stuff to do that most people have no idea about. The amount of tax mitigation and deferral that can be done these days is insane, especially on large mag-7 names people are sitting in and want to get back into QQQ or SPX or whatever index, and it can be done without paying taxes now. Don't get me started on stuff like super funding 529s for covering multiple generations and kids on college/school, roth conversion maximization, etc. Trust and estate planning is massive as well - how do you set up your wife, kids, etc. How about if you want access to boutique alts (PE and VC) that aren't wirehouse shit bottom of the stack, and some of the top funds interviewed on invest like the best?
But engaging here is obviously hard. I would like to pursue this client base more strongly going forward (HF people), and I think I have the capability to because I understand the investment analysis and market side fairly well (once had an offer at a HF), I understand the mentality of people who professionally allocate for a living, and I understand the rightful skepticism of paying for anything here. Typically there is a large ROI over the fees from the value created, and if there isn't, I tend to say that
So my ask:
- do you all know HF people who work with advisors?
- would you consider working with one, especially if they can do stuff like a smart financial plan, an options overlay on your portfolio to monetize existing assets / hedge exposures, or have a solution on large capital gains payments / deferral to get out of huge holdings... and then all of the other juicy stuff that comes beyond a smart allocation. In fact, we often can let people keep their existing investment discretion anyways and do the other exciting stuff
Ig this sounded like a pitch but this isn't; just want honest thoughts outside of my bubble
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