I recently received a rather large bonus after one of the portfolio companies that my PE firm held was acquired. In fact, I got it today and it was completely unexpected and way too generous. Now, I need to figure out what to do with it and wanted to see what others here do with their bonuses. I was thinking just putting it in a Money Market for now to maintain liquidity and slowly invest it into a diversified portfolio over the next year. Thoughts?
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what kind of cash are we talking. 10k? 200k? 1mm?
Things I do.
10% to charity Set aside for vacation Invest the rest. I think there's no need to rush into things....I put about half of my bonus into the market right away and then dribbled the rest in. But i'd be looking at invesments for a few months prior.
Go to vegas. Roulette table. One game. No tears. Bet on black. Let it ride...
there was a guy who did it once. doesn't make it any less foolish
If you don't own a place now, put it towards a down payment.
jimbo, how are you able to spend so much time on ibankingoasis?
multitasking, my son.
i was talking to a trader friend who said he's keeping all his money in money market and waiting for the right time. Market's too hot. you really want to wait until it's dead-miserable (when you hear people jumping down from building, it's a good sign).
Say you have a 100k. Than use 10k of your money to buy futures contract worth 100k. Say leverage 3x-5x, so you wont' be stuffed in worst case. And hope for the best.
Or buy Turkey currency and put in their money market.
buy a car with a pussy magnet
where is the magnet, i never found it on my friend's 911
You received a bonus when one of your portfolio companies was sold? Was it an unsolicited sale, or did you hire an investment bank to run the auction? Were you the associate "responsible" for the company's BOD meetings, financial reporting, MD&A, etc.? If you guys used an investment bank for the sale process, and you weren't "in charge" of the portfolio company, than I must admit I'm a bit jealous - that bonus is a pretty sweet deal.
At the fund where I work, everyone gets a bonus when we buy things (regardless of whether you had anything to do with the transaction), but certainly not when they're sold. Of course, transaction bonuses at the associate level aren't anything mind-blowing (range is from $15K to $25K per associate per deal), although it is nice to have an extra $60-100K on top of your base salary and year-end performance bonus.
In response to carfield's comment, perhaps I'm missing something (and I might be, since I'm certainly no expert in trading), but wouldn't putting leverage on futures contracts mitigate the intrinsic value of those contracts (i.e., isn't the net effect a wash)?
i'm no expert of a trading either, so i merely quoted what he mentioned to me. Perhaps I wasn't clear (or misunderstood) but let me try to explain. With your 10k, you effectively be able to have the rights/options of trading something worth 300k (say leverage of 3x). Even for 20% drop, you lost value equivalent to 60k, which is still within the amount of cash.
But for a sudden jump, say like IT boom prior to 2000, let's assume a 100% increase. Your contracts would than worth 600k. So by exercising your rights, you can pocket 300k. (minus premiums of 10k) Am I mistaken?
Please don't attack me if I made a fool out of myself. Again, i'm not familiar with this area yet.
if you have 10k
leverage at 100:1
go short on euro set 100 points stop loss (above 1.3590)
forget about it and wait till end of this summer.
expect to pocket half a million dollars.
Q.E.D.
follow this guys advice if you wish to give away your 10k
he'd be lucky if her only loses the 10
These posts brings forums like this one going downhill. The initial post was a legitimate one asking for advice. Please stop posting these supposely 'funny' entries, as we have had enough of these spoiling the good ones!
you do know the forwards are upward sloping, right?
I know this board is anonymous, but do yourself a favor and don't ever say that your bonus was "way too generous" around anyone who might be in a position to give a shit. As far as you should be concerned, it wasn't enough.
take what you thought you deserved and keep it. Give the rest to me. I deserve it.
this is a fine idea...don't dribble it in just for the sake of it though. wait till you find investments you like. If tomorrow you find a few and want to put 50% of your money to work, great. and if it takes a few months, fine.
Thank you for the advice, Jimbo; when it comes to investing, I tend to be pretty risk adverse, so I usually just invest in index funds for the long-term and money markets when I want to maintain liquidity.
As to the guy who says you should always say that is "isn't enough," that is exactly the attitude that I have seen alienate people from the senior guys at my firm. For Christ's sake, it's a "bonus," as in it's a perk, an extra; they don't have to give you anything. I really think the "I'll never be satisfied" attitude is what leads to so much depression and personal trouble for bankers. Gratitude isn't a sign of weakness.
It's funny how we work in the field of finance but we don't know how to take care of our personal finance. Here's one. Depending on your tax situation, spend 5% on yourself and then dump 95% of it into stocks. Read the following books before you do it:
You cannot go wrong with the Warren Buffet investment style. Do heavy research, and pick only 1-3 companies to be fully invested in. Don't diversify. Don't try to time the market. Have a minimum of 10 year of hold period for your time frame. You won't regret it. Then, every year, check to see if fundamentals have seriously deteriorated. Have an exit strategy in mind.
Also, subscribe to Morningstar and double check your stock picks against their analysis and star rating. I like how they focus discount cash flow analysis, economic moats, business risk, and other fundamentals.
Snoopy...good advice. graham is the dean, always will be. but buffett hasnt written any books.
I faced a similar situation. I didn't have much time to micromanage my account, so what I did was invest in Index Funds. Low expense ration and diversified. I used Vanguard, but here are several out there. Index funds aren't very sexy compared to some of the strategies above, but it worked for me. I've made a very good return since then.
First, Congratulations.
Second, in my opinion, you would be wise to invest 25% of your bonus into an international mutual fund with exposure to asia. I would then live off your bonus until you max your 401K contribution for the year (15.5K). I would then set up an IRA if you qualify and max it out. With the rest, dribble it in as the other poster said above, I like mid cap and small cap funds in the USA.
Unless you really have a passion for stock picking, focus on your day job and stick with funds. (this may be highly controversial to say on this board but I believe in the current investment climate it's hard to lose). We may get to a 25% yearly return for a decent number of funds out there for 2007.
Good luck.
I'd invest in a few index/mutual funds, something like this...
S&P 500 - 30-40% MSCI EAFE - 20-30% Russell 2000 - 10-20% Something else - maybe a mutual fund that agrees with your investing philosophy. For me, I'd pick a global value fund with low fees.
It sounds like you don't have a lot of time to actively manage your account (I don't either), but you could also set aside a small portion to play with on your own and invest in your favorite stocks. If you'd like to do this, you've received from good advice from others on books to read - e.g. graham, buffet, etc.
Also, I second the max out your 401k advice. One additional point re: the IRA - even if you don't qualify for a tax benefit, it may be worth opening an IRA. I opened an IRA without any initial tax break because there's some Bush tax law that allows folks to convert a regular IRA to a Roth IRA starting in 2008 - I'm going back to school so my income will be virtually nothing for a couple of years and converting during my MBA years will minimize my tax burden and allow my IRA to grow tax free until retirement. So, if you have plans to go back to school, this may be helpful to you (and others) too. Check with a financial advisor on this one though.
I have to admit I own a number of oil and oil field service plays at the moment...worth looking into in my opinion.
I'm quite serious about this and I have done this myself.
go to Hong Kong, and open an investment/banking service account like Premier or PowerVantage, SmartVantage with HSBC. They have excellent internet banking site where you can virtually trade anything you like, for normal retail investor. (Stock, fund, gold, bond, currencies, etc...) Once you are physically in HK, you don't need a HK residence to apply. You get your account opened immediately with bank cards, and they can mail statements to US address.
good thing about this is: 1) your capital gain is not taxed in HK (unless you feel conscious enough to let uncle Sam knows you earned $100k on return on investment overseas) 2) You can transfer US$ into your US$ account opened in HK. Even if you wish to exchange to local currency, HK$ is pegged to US$, so no exchange rate risk, if you wish to invest with HK$ also. You can have deposit in 10 other different currency. 3) Security and prudentiality (spelling?) of keeping your money in regulated developped region.
Than you can buy managed funds (or "unit trust" they call it at the bank). Most of the funds can be purchased over the web, and there are literally 300+ funds you can choose, from 10+ different fund managers. Most funds are in US$ so you won't have exchange fees involved. Transactions are executed daily.
I bought India, China, Pacific Funds, and US. In 1 month I'm getting something like 6% return (72% p/a) so it's definitely not bad. You really can't go wrong in this enviornment.
George Soros made 2 billion $ trading the pound in a couple of days with lots of leverage. he could have blown his fund, but rest is history...
my point is april 30rd is the start of another 30 year cycle of dollar bull. today is day three and we've already seen majors falling hundres of pips against the greenback.
I'd invest some of the money.
Alright, I bought my girlfriend and my mom something nice, gave 10% to charity, and put the rest into a money market fund. If I come across a good investment opportunity that I truly believe in, I'll think about it. As I am sure many people here will agree, I really don't have time to do a ton of research on stocks as my job already takes up ~100 hours a week. The last thing I want to do when I have free time is look at anything to do with finance, so I'll trust my Vanguard IRA and the rest of my index funds. I guess I'm just a risk-averse pussy, but I sleep well. Some of you trader guys do impress me with your bravado, but I can't stomach that with my personal finances. Now, if it was somebody else's money, maybe.
you guys ever think about getting a personal wealth manager?
good work tigerrug, and good luck.
Don't forget MBA school if you haven't gotten one or saved any for it.
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