Curious what people would do in this situation. What would you do if you inherited $5M on your 30th birthday? Can't say I was expecting it so wondering what others would do. I'm currently an associate at a MM bank and don't own a home. How much would you spend on a home purchase? Would this change your career trajectory? How would you invest it? Any advice or general insights would be appreciated.
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are you a male or female. If ur a male, are you bicurious?
If it were me id decide whether I enjoy banking enough to keep grinding or if I wanted to go do something else. If I were in the city I wanted to be in longterm, id buy a house and put the rest in the market for the next decade. Live off of your comp and allow that to double to $10M. At that point you could pull $400k a year in perpetuity. You’ve made it, don’t mess it up.
Yea. Invest the money in stocks. Create generational wealth
I wouldn’t make an off topic post on the investment banking forum asking for financial advice from anonymous college students, that’s for sure. Maybe I’d hire an accountant or something.
If you’re not interested in his post why exactly are you spending your own free time on NYE to be hateful. Also seems to to be a pattern as a lot of your comments are rude. Get a grip man.
How long do you think that took to type?
Donate it to charity and make the world a better place
If you see how a lot of these charities are run, you would want to keep your money.
You can make the world a better place by educating one brilliant poor child a lot more than by donating to charity.
Right....that's why you spend time figuring out and researching the ones that do a good job.
Tell me about it. How are these charities run ?
A lot are just scams. I've never given more that $100 to a place I couldn't track the spending (and I'm my class's biggest donor. I'd say biggest donor of the millenium, but Colin Jost is an Asshole)
https://www.independent.co.uk/news/uk/home-news/oxfam-child-abuse-haiti…
This is the first that came up on Google for me.
Just invest in higher yield bonds since you can capture some decent gains coming up with the Fed dropping rates while still getting some 5-7% yields
But honestly you could use it to start your own company/fund/family office
Under $100MM for a family office would mean a multi-family office, which is effectively just being a Wealth Management client.
To sustain a Single Family Office (SFO), will tend to require over $1B assets, or the expenses would likely consume much of the annual yield, beyond annual distribution to principal of the family office.
Nowadays, for a fund, you also tend to need much more, in order to generate additional interest, to increase AUM, or the fees would not likely pay off well.
At that point, it's basically an investor, sitting in his own office, managing his own portfolio, which at $5MM would quickly start to eat away at the principal, if doing it full-time, trying to cover expenses, and distributing income to yourself, it likely wouldn't be sustainable, especially if market conditions might require it being tied up for a while, etc.
I think at $5MM, it's more of a nice "personal portfolio" sort of scenario.
I'd retire in Southeast Asia
Depends on where you want to live. If you see your life in US/Europe, you can still buy a house, retire and live comfortably but you probably won't be able to spend without looking at your balance every time, or do more luxurious activities like traveling frequently, flying business class etc. On the other hand, if you were to retire in LatAm or SE Asia which have an abundance of golden visa and residency/citizenship by investment programs, i think you're all set. These programs are getting popular cuz your money goes so much further there, you can easily be top 1% of earners when you take American money there. It depends on where you want to live and what you envision your post-retirement life to look like (and how much you will need to fund that post-retirement life). You also have to account for future expenses like kids' education, a new car, wedding perhaps etc etc.
Just my 2c from what I learned while interning at a wealth management firm. I'm still a student so take it with a whole mine of salt. Best of luck man.
Make passive investments into real estate and still work my day job. I'm not materialistic but believe in creating generational wealth to help provide cushion for at least a generation or two after you. If I have kids, I probably would set aside money for their college education. Would probably put them in top notched private schools too if I can afford it.
god damn I hate being poor. I could easily live off the dividends and interest from 5m so I would retire today
You'd be surprised at how lifestyle creep can sneak up on you. I definitely could have retired off $5M at one point. Now it's not even close, as absurd as that sounds.
Price depends on location. What costs $5M in NYC, will be $2M in Miami, $0.5-1M in Caribbean, $200-300k in SE Asia. If you have $5M right now, you can move out of NYC and live well in Miami/Caribbean or live like a king in SE Asia for the rest of your life.
As in who likes being poor?
If you are currently single and live in NY, you might consider to buy an appartment (2BR) in Manhattan.
If you marry and have kids later, you can move out and rent your appartment easily as long as the location is a hot spot.
Congratulations on the windfall.
When I was younger, I would've been aggressive with my allocation toward risk assets.
Today, I say put half of the post-tax amount into a vanilla basket of diversified passive investments: equity funds, bonds, and multifamily real estate (REITs, or if you have access through a wealth management platform or can go in through something like Titan, the offerings from the megafunds) and half into growth investments that you take the time to research yourself.
To start though, put it all in the basket while you spend time teaching yourself how to invest in growth companies. Once you're ready to begin investing principally, start writing $50k checks until you've done 20 deals.
Over the long run, this will pay you in two ways: financial returns and knowledge. The knowledge you can parlay into a second career with exceptionally attractive time-weighted financial returns.
I'll repurpose a comment I made two years ago to someone in a very similar situation.
Don't feel any pressure to write checks. Your best path here is going to be developing both a network and a reputation. That takes time.
Spend a year simply talking to founders. Tell them that you're new to angel investing and just want to learn by being helpful. Become a force multiplier for them. Do portfolio support for free: help them refine job descriptions, trawl LinkedIn for strong candidates for the roles they have open in Greenhouse or Lever, send them snippets of great books or podcasts discussing a topic relevant to one of the things they're tackling (partnerships strategy, scaling a distributed company, fundraising from corporate VCs, whatever) ...
All this will begin to make you familiar with the problem set founders experience. This is valuable because it will immediately show up in any conversation you have with someone you want to invest in. It's also valuable because you will be able to discern which founders are strongest, as in better equipped to perform against that problem set. This is really the thing that matters most at the investment stage where your checks are going to generate worthwhile absolute returns.
Separately, if you are intentional about the area you dedicate your time to, you will begin to develop an understanding (and eventually, thesis) of one or two specific spaces.
A few years of this will give you that valuable network and reputation. You'll know a bunch of people working on cool companies, and those people will always be talking about their company or other companies they are a fan of (whose product they use and love, or the founder is a friend of theirs, or they're in the portfolio of the same fund). Those people will know you, so any time you decide to say "Well hey, I'd love to talk to X", they're happy to make it happen.
Now you can transition to actually writing checks. You might feel you know a few worthwhile companies just from that initial exercise. You could start wading in there, but the other path is to move up-market where you can buy into 'safer' deals and test your thesis with de-risked companies.
You can find all kinds of cool companies through Angellist syndicates.
I'm talking here about Series B or Series A. You have to know going in what the opportunity set is: you probably won't see a $150k syndicate for a great company doing a $3m seed led by First Round or BoxGroup. What you will see are $10m A's or $20m B's with a $500k syndicate open, and that's what I'm suggesting focusing on.
Use your first five checks to figure out what your sweet spot is. Do you like Series A where there's a product you can look at and customers to speak with? Do you like Series B where the focus is operationalization? Do you like seed where it's really about deep people diligence, or a sense of the market potential? When you feel like you've found your lane, park in it and increase the volume.
One mechanical suggestion would be to do all of this from the start through an entity. It can be as simple as an LLC. This gives you optionality for the future.
If this goes well and a couple years in you've got an attractive hit rate with some good markups, there is zero reason you can't become a syndicator yourself. You can obviously do this through Angellist and open it to the public, but I'm sure your career has led you to meet a bunch of older guys with money. I guarantee you everyone is looking for cool stuff to do. If you have people who are happy to invest through you, you can use Angellist purely for the mechanics and skip its marketing function.
The interesting thing here is whether you end up wanting to pursue this as a career. You're fortunate to be in a financial position that a lot of really sharp, skilled people in venture are working their hardest to get to.
If you want to raise a microfund, the ideal ingredients are a million dollar GP commit plus the ability (deal knowledge, relationship set, thesis or vertical familiarity, etc.) to invest plus a track record of founders and other investors who can say you're smart.
Many of the seed funds you see today were hacked together by people with less money than you have, and they did it in an era where there was way less capital sloshing around the private markets. So if you like this and do well with it, you have the option of formalizing it as your new career.
So, to recap, you have a blank slate that you can paint any story with. Build a network. Make a few investments, ideally in the same space. Talk to as many people as you can, all the time. Constantly meet founders. Use all the people you meet to introduce you to others. Once you're in a company, email the VCs in the deal, meet them, learn from them, and ask for introductions to cool people or recommendations on stuff to learn more. Keep your eye open for how to bring people who don't have the same access you do into your deals.
After 3-5 years, see how your deals are performing and decide whether the work of raising money from other people is something you're willing to do. If yes, congrats, you now can leverage other people's capital to generate wealth for yourself .. while you conduct the activity that continues to multiply your own wealth.
Good luck man.
Are you typing that by hand or are you using some voice recognition software, which I believe you mentioned some time ago in a previous post?
I use the voice thing, then I read it to check for where I can be smarter in syntax or need to apply formatting.
One needs to be very passionate about angle investing to do this plan. Not critiquing what you wrote, rather stating that if one doesn't have the mentality and skills for what you're describing it would be a great way to lose money.
Sure, I agree. Two comments:
I would posit that one needs to be very passionate about anything in order to generate any superior outcome.
It's impossible to write a primer on how to create and hone the mentality and skills without delivering a novel, so I tend to skimp on what seem to me to be obvious caveats (that you should ignore this path if you have no interest in future-facing industries; you should be remarkably slow and methodical in accumulating knowledge and relationships before writing a single check; you need to be risk tolerant to understand that some money will be burnt as tuition on your path to success in such an endeavor; you shouldn't dedicate the entire sum of your capital to this strategy, but rather it should be an allocation within your overall portfolio) in favor of providing an overview on how you can create a flywheel effect for yourself that sets you up for eight or nine-figure outcomes over a multi-decade period. I have done it.
Very interesting post. If you got book recs let’s hear ‘em. Been on this forum since I was 18. Know you’re a legend.
I'm happy to share recommendations, do you have a specific prompt?
This has to be a troll. This moron is encouraging someone in their 20s with just $5mm to get into VC? Wtf?
50% down on $2mm apartment, invest the rest and reinvest the dividends. reassess every 5 years.
Everyones situation is different, but to me 5MM is WELL into the 'fuck you money' range, and that is what I would do if I woke up in your shoes tomorrow.
Id consider if I wanted to live in NYC (answer almost assuredly would be no unless you really enjoy working and want to stay for a few more years). In reality I would move to a medium to low COL with a great outdoors scene, and buy cash a moderately nice property (~500k). But with 5MM you could retire today in San Diego or Hawaii or someplace if you wanted to. Base this on your interests. Do you like skiing? Hiking? Beaches? Need to be in a tech hub? Walkability? Cool vs warm climate? Etc.
Then I would plot out a business or non-profit to start because you need SOMETHING to motivate you and give you purpose so you dont just destroy yourself. The good news is there are plenty of low capital intensive businesses you can do alone for the start (service economy like your own agency, tech/website work, media, etc.). Where I am different is I would have no ambitions of this being some massive $XMM exit one day or that this would scale to make me have a dozen employees down the road. Remember - you already made it financially, so this is just something that has low cost, moderate growth potential, and you can manage it yourself. I dont care if you decide to make a travel blog detailing your new adventures, you will have the time and capacity to cash flow this or at least distract you. But I would start working almost daily at local co-working type places just to get more connected to the community, get out of house, etc. and in time see where it takes me.
That OR buy a lowish effort single franchise like a small gym (ex: Anytime fitness) to open and run in town. Goal is to make some money but again just have something to do that you believe in. I love fitness so for you it may be different. That said, that would be more capital intensive and require a bit more up front work so would be something I would only go into if serious.
In summary, you can slave away still in cold and brutal NYC taking the subway to work 60+ hours a week to add digits to your digital bank account. Or you can bike from your beach townhome to coffee shops a few days a week to blog about how to break into finance or whatever topic you are an expert in, and then go surfing at 2pm. I know which one I'd choose.
I happen to enjoy my job enough to not feel compelled to leave if I inherited a windfall. At least that is what I think- maybe in actuality if the carrot of comp didn't look so tasty, I would not be interested.
Anyway- I'm right about your age. I'd put $4m in index funds with the idea that this money just grows in the background for the next 35+ years. I'd want it to be the seed money for a family fortune, with the aim of building power and influence to advance ideals I hold strongly. If you think about 7% compound growth for 35 years- that is a significant number. The other $1m I'd set aside for angel investments or other investment opportunities that come my way.
I'd upgrade my lifestyle insofar as I would no longer be saving ~50% of my post-tax income. I'd likely do some upgrades to my home, dress better, join a nicer country club, increase my vacation budget from low single thousands to high single thousands. Modest stuff. I expect my income to grow substantially over the next 10 years, so I'd continue to pursue that but with less of a focus on savings and more of a focus on spending what it takes to brush shoulders with influential people (joining a nicer CC, for example). Not prestige for prestige's sake, but with an agenda of accumulating power to help push society in what I consider the right direction.
You'd set aside 1mm for angel investments that come your way? Horrible horrible advice.
Index fund investing is great for the common man (and as I mentioned, I'd put the majority towards that), but there are real money-making opportunities out there if you a) know the right people, and b) have material amounts of money to invest. The fact you don't know this suggests that you have neither.
No one wants to bring you in on an opportunity if you're just going to invest IRA contribution limit levels of money. If you actually have some capital, the whole landscape changes. I have a family member who is in the medical field and owns his practice- He has increased his profits far above the underwriting case and will likely expand the practice. I'd invest in that. I have executive level coworkers who have business ventures on the side, and I'd want some cash available for opportunities to get in on those if I could. Real Estate is another avenue.
Look into PWM advisors tailored towards fairly high net worth individuals. Otherwise what I'd do at age 30:
- 60% stocks
- 30% RE
- 10% alternatives
Don't really need fixed income but if you really want it cap at 10%. This is assuming you want to work, which I do for many more years to come. That said I'd get way more bold about career moves because of the safety net. 1000000% though I'd quit banking and move on to something with 55hrs max weekly workload
Sorry for your loss.
As for me, I would spend the money on hookers and cocaine
He didn’t say he lost anything.
Aren't cash inheritances based on someone passing away and leaving their money to you?
If not, my bad on assuming
If you set it up right, you might not have to work the rest of your life. Buy a small home so you can stop paying rent, then save almost all your income for the next two to three years and retire.
While investing in privately-held technology companies at Seed, Series A/B, etc. sounds sexy, I think you are much better off investing in much less sexier businesses/industries as an owner-manager.
Do a Google search (or ChatGPT, if you prefer) for "entrepreneurship through acquisition" or "search funds" which means buying a small business (annual revenue between $5M-$15M with cash flows between $500K-$3M) and running it as CEO. It is a radically different career path / lifestyle than working at a bank or any traditional corporation because you get to lead an organization as CEO, make decisions that matter, and have the flexibility to work in a way that suits you best.
Searching for a suitable business to acquire is a full-time job (impossible to do a successful search part-time) and most searchers typically budget 2 years for it. Given the inheritance you have, you can easily afford to forgo a salary for 2 years.
Whatever you decide to do - good luck! If you are up for it, do consider sharing a post in the future of what you end up doing!
I would put it in a 60/40 mix of equity indices and treasury bonds, then quit my job.
Maintain my existing lifestyle for 1 year to let the psychological impact sink in - maintain the same budget, keep my apartment, keep my same plan to go on 4 1 week vacations to normal locations. I'd focus on improving my physical fitness with my free time, and put some serious thought into what I actually truly want to do with my life.
thebrofessor - thoughts on this?
I think he's quit this site, his last post was like 5 months ago
He didn't quit. He said he was experiencing a loss and I think is taking some time off.
Honestly? Just keep working and living life the same way. Keep building your nest egg and do not fall into what lottery winners do when they win $. I wouldn't own a home unless it is in a city that I plan to stay long-term.
I would strongly consider that $5M independent of your current budget. Talk to some licensed professionals (FA, Attorney, Accountant, etc.) before doing anything with the cash.
Congrats regardless. I wouldn't change a thing. I grew up in the ghetto and have heard people who won the lotto only to be broke a few years later.
There is a big difference between 'changing absolutely nothing' and blowing your money like a lottery winning idiot.
With 5M you never have to work again. That being said, work is good for us and has a lot of benefits. So you shouldnt quit entirely, but you have $5M you can now pick how you work, what you work on, when you work, type of work you do, etc.
Unless you absolutely LOVE your job and lifestyle, the idea of sitting on that much money and still getting up at 7am, getting home at 7pm, commuting to work, office politics, all that which comes with it is just a horribly uncreative answer
Amazed at how horrible most of this advice is.
First, give a portion away to charity and or go on a nice trip. Then invest 70% in SPY, and the rest in a bond index. I'd continue working your job and then re-evaluate in a year once your money is put to work. No need to get fancy and invest in VC, search funds, etc. You'll appreciate having a 'simple' portfolio more than you know.
Get life changing money
Dont change your life at all
But hey got a nice trip out of it lmao and you say others advice is horrible?
I mean, $5mm isn't "life changing" for someone working in finance.
It's an amazing safety net, and a lot of money, but if OP were to quit his job and live off the interest of this money, he'd be accepting a vastly lower quality of life than he has now. It's also a question of marginal utility.
Lets assume that OP makes $250,000 a year at his job. Investing his $5mm at 8% probably yields him about the same amount on an annual basis (after tax). Frankly, the extra few hundred thousand dollars isn't "life changing". He can move into a nicer apartment. He can afford a few really nice vacations. But at the end of the day, how does his life change? He's not buying a second home. He's not retiring and traveling the world in style. Realistically speaking, he has the ability to buy a nice home without stretching himself, or he has the ability to not worry about spending anymore at his current lifestyle (e.g. he can fly first class instead of economy when he travels), but this isn't a massive difference. I guess it depends on how you define "life changing," but to me, if it just means that you have all the same routines but you double the number of nice things you do, then that isn't a "change".
You’re an idiot. It’s life changing if you set yourself up on the right way. He’s right…. Keep it simple and don’t change much until you let it sink in and really give your plans some thought. You’re clearly and immature kid and this is exactly why one of the top comments is “why tf are you asking a bunch of kids in their 20s what to do with a $5mm windfall”.
How is this advice any better tha what other people have said? lmao.
Invest in SP&500 fund and chill rest of your life
Personally, I would invest the majority in stock indexes (MSCI world, SP500, Nasdaq, Stoxx 500...) and just forget about it. I guess you have a big salary therefore, it would not be a problem for you paying the mortgage in any way possibile.
I would invest 4m, and with the other mil just buy a home straightaway
First off - congrats!
I'd do three things.
First, I'd set the majority aside and invest for the long-term. This is life changing wealth and you should set yourself up securely. I'm sure you could DIY but with that level of cash asset managers should be fighting over you. Take the stress out of managing your money and go focus on something you like. Or if you do enjoy it, manage your own book. You have flexibility to whatever you want. But invest/save, don't gamble it.
Then set a chunk aside to go do something you've always wanted. Splurge on something. YOLO out. Treat yourself. But don't get carried away. There's always something nicer and more expensive out there. It's easy to get caught up with a life of luxury, but material things are rarely a long-time source of happiness. Know when you have enough.
Lastly, appreciate how fortunate you are and give away something to someone less fortunate or a cause close to your heart.
Keep things simple. Broad market ETFs (100-500 stocks). VOO, VGT, OEF.
DCA in you have so much to deploy.
You’re set for life.
100% I would resign and travel the world for a year. Then dedicate my life to my passions. I do think you need some kind of project vs a purely hedonistic life.
Money wise I would probably put 1/3 in ETFs, 1/3 in private markets (eg Moonfare) and then invest in real estate.
Start a media empire called Prestige Worldwide and then acquire some ships and escorts for the Catalina Wine mixer
My thoughts.
Buy a house for 1.25M or less with all cash
How I’d invest the rest:
50% IVV
15% IWJ
15% IJR
7.5% EFA
2.5% EEM
10% VUSB until spreads widen/rates fall to a point where other fixed income assets make sense
Above is 90% stocks and 10% in bonds. Would be like $400k in short duration bonds after you buy a house, earning 4.5% on that which seems adequate to cover any unplanned cash need while allowing you to not touch the stocks.
Don’t do angel investing, or privates, or real estate, unless you find it enjoyable and actually think you can beat a tax-deferred growth of an index ETF and are okay with the added complexity/effort involved. Few people can.
Work to cover your expenses, never sell the equities and let it all compound tax-efficiently until you decide if you want to do something with it.
Missing some Nasdaq index fund here
I’m a value guy + general pessimist so am skeptical that the glory growth days of the 2010s brought about by perpetually lower and lower interest rates are going to be repeated, hence no QQQ. Plus imo IVV gives you enough exposure to that stuff anyway since that’s basically the top of the S&P these days.
One of my college roommates knew he was getting a serious inheritance. After being nicknamed "Mr. Nine Commandments" in college (seriously, one of my other roommates had to pull him aside senior year and lecture him about why it wasn't appropriate to leave freshman girls in the living room when he went to class) he became a Catholic priest.
Only buy a house if you feel like you need one at this stage. I don't think $5M is life changing for many that are working in IB...it just provides an extra sense of security. I would not change my spending materially. I would, however, take more risks in my career.
Most important question that OP needs to consider are what his/her goals are: spending? desired retirement age? etc.
Here's one no one has mentioned: time the market.
Right now the market is in the 95%+ percentile highest valuation ever, by pretty much any valuation metric.
If you can time the next crash / very large correction, which will almost certainly occur in the next 3-5 years if not sooner, you can lump sum invest the $5MM using leverage with an instrument like UPRO for example.
That should set you up nicely to 10x+ the money over the next decade+ and put you solidly in the UHNW bracket while still relatively young.
You'd need a sizeable amount of risk tolerance to give this a run.
It's a no-lose strategy timing stocks today given the previously mentioned nosebleed valuations which offer limited upside and substantial downside.
The market can remain irrational for longer than a rational investor can remain solvent.
Seriously, no investment advice on here, please?
Ok, but assuming I was 100% cash, if I was a long-term investor I wouldn't invest a dime into today's market at current levels, much less $5MM. Long-term returns from here look certifiably dismal. This guy has the luxury to T-bill and chill until stocks come back to planet Earth.
Also. If the market can remain irrationally high longer than a rational investor can remain solvent (unless you're shorting, I'm not even sure what that's supposed to mean), it would make you equally irrational buying into an irrational market while knowing it's irrationally high and it will eventually come down from the clouds :).
Buying today is just another form of market timing -- hoping you won't be the one left without a chair when the music stops playing :)
First of all, I’d say watch Mr Deeds (2002) for a bit of inspiration.
Where did you get it from? If it’s through parents I would assume to ask them about what they would think. If it’s work, maybe consult a PWM.
It depends what you want to do in life in terms of spending it. Have you ever wanted to have enough money to start a new hobby or focus on a passion?
100% in treasury only funds then come up with an actual financial plan with a fiduciary. Don’t listen to a forum for financial advice. My life advice is to not tell anyone (let them assume you have a good job) and if you do get married I’d strongly consider a prenup.
Annuities are great deferred investment vehicles (as long as we’re assuming you’re maxing out your other retirement accounts) that can make sure (depending on choice of annuitization) you don’t run out of money in the long run. A variable annuity will allow you to select fund allocations to meet your investment objectives. In addition to your home purchase, you can maybe start funding a permanent life insurance policy (assuming you have dependents) that can take advantage of tax free loans to avoid capital gains, in case you need to access more cash. Be aware of 7 pay test if you choose to fund insurance products. This comment is meant to provide some alternative products that I didn’t see recommended, not meant to be comprehensive. Take this with a grain of salt.
So here's my two cents:
Firstly, don't tell people about this. People unfortunately get weird around large inheritances.
Secondly, don't do anything rash like quitting your job right away. Personally I would probably stay put for a year to really take time to figure out what I want to do with my life, now that money isn't really an issue anymore.
Once you've actually figured out what you want and what's best for you, you can go with that. Following simple advice like "quit your job and live off dividends to travel the world" may sound enticing, but ultimately may not be what you actually want out of life.
As for what to actually do with the money: again depends on your passions. For me personally it would be at least 50% RE, because I thoroughly enjoy it and you can make amazing returns (mostly due to the fact that it's a much more inefficient market, you can lever up and generate returns by putting effort into research, development of the properties, upkeep, etc.). Angel/VC investments wouldn't be my cup of tea and I don't think I would sleep easy knowing that a chunk of money is in early stage companies that may very well not work out.
One thing I haven't seen mentioned yet: Co-Investing at your firm. A lot of PE firms offer options for Co-Investing to employees where you receive returns before any fees, therefore having a pretty big edge. So if you would enjoy working in PE for a while and can get to a decent fund (doesn't have to be a large one at all. A lot of MM/LMM funds make great returns), this could be interesting.
Some firms also offer "family and friends" type Co-Investing with favourable terms, so if you have some friends at good funds, this may be something to look into.
In any case, good luck!
Yeah I second the point above -- don't tell anyone about this aside from family (that you trust like your parents)
NEVER tell a girl about this until you are married (if you want to get married). You will get screwed over from every way to Sunday otherwise
Tell the dog. They're really good listeners, and good at keeping quiet. It'll make keeping shut easier. Also, at a more macro level: do you really want the girlfriend who hears about your inheritance and goes "ka-ching, new designer stuff?" I've dated that, and am much happier with my current who'd say "great, let's talk about paying off the mortgage and maybe a vacation"
DO NOT DO ANYTHING DIFFERENT FOR 6-12 MONTHS.
Take $2.5mm and just put it in SPY.
Keep the rest in cash.
Build your career no differently than you would have without this money.
There is no rush to buy a house of all things. Do not buy any real estate right now.
Just take your time and see where life takes you. Do not even think about acting like a baller… do this enough and you’ll attract the wrong woman, get her pregnant, and fuck up your life. I’m serious, pretend like you didn’t get any money. This way you can take risks in your career and not feel scared you have no safety net.
This is great news and good luck.
Let's focus on things you NOT do:
- Do not let any of your exes know about it
Anw just buy a house man, all cash, no worry about rent or mortages whatsoever. The rest could be stocks, ETFs, or whatever you feel comfortable with holding long term. Then forget about it and continue working. Or you could use some of the money to establish a side hustle business.
Lend me a fiver bro. Jokes aside, buy a nice property with it and invest the rest in the market - would recommend seeing a wealth manager / financial advisor etc and don't buy stupid shit. Live at your current means and eventually in a couple years once you burn out of IB you can have money via perpuitity and do whatever you want.
Will get monkey shit for this but I think it is worth saying, donate some (even a small amount - $2 a day even) to something you care about, would recommend something local to avoid giving to large multinational charities that will do dodgy stuff with it.
Best of luck bro and congrats! (Don't tell any women you have this amount of money ever that you want to marry - she will fuck you over for it. Maybe whack it in a trust to avoid this etc.)
There’s always the option of giving some to me
I don't follow how you're supposed to retire and travel with 5m off just yield ? Even at like 5% after tax that's what 150-200k? One night at the amanpuri costs like 1-2k
Sorry for your loss.
$5m may sound like a lot, but once you have a family, you may quickly realize it's not that much of a "f*k you" money depending on the quality of life you want and your desire to pay for your (future?) kids' education.
1. Calculate your "f*k you" money. If it's less than $5m, then I have no advice for you. Do whatever you want with your life and money shouldn't be an issue.
2. If it's more than $5m, then you need to invest your inheritance smartly.
2.a. One secure way is public markets. You should have learned all about investment allocation in your series exams. Just those principles would be enough. Depending on how much you need in short term / long term, you can allocate your money into money markets vs. securities, ETFs. Beware: you don’t need to pick stocks or become an angel investor yourself (unless you're passionate about it, and even so, I wouldn't bet my own money on it as I learn how to invest for the first time).
2.b. Another creative way you can invest is: Leave your job. Go to a brand name PE shop with consistent good returns. As an investment professional, they'll let you invest your money with the fund carry-free. Invest $5m (use $2.5m from your inheritance and add at least 100% debt on it, there will be bridge loans available to investment professionals, just ask the firm). Leave, find another PE shop, repeat. Now you have $10m diversified exposure to one of the best retuning asset classes even though you only had $5m to start with. Wait for the investments to do their magic.
3. Beware - buying a home advice is all phycological. If you're not too obsessed with it (and even if you are), try your best avoiding the urge to buy a home. You can keep renting while doubling your money by investing it. Once you've reached your "f*k you" money, then, if you still want, you can buy a home. You will know your needs and preferences better by then anyhow. Without going too much into real estate advice (which is not my area), buying now and renting as your needs change would cost you a significant amount in transaction expenses (we're talking about hundreds of thousands if you buy in NY) and then you'll have to pay taxes on your rental income while still paying property taxes and rent for your actual residence (i.e. returns on your invested capital in that real estate will be far less than returns on any treasury bills, unless you are betting on the appreciation).
Good luck.
Parts of this make no sense whatsoever IMO. Lever up half your liquid NW ($2.5MM) in illiquid PE fund(s), but don't buy a home? You are getting just as much leverage buying a home as you are getting investing as an LP in PE. This guy doesn't have to blow his load and put 50% down on a $7MM condo. He can comfortably put 20% down on a $2-$3MM nice place and let time & leverage work their magic. Refi when rates go down, etc. IMO it would be a huge mistake to not put at least 15% of that money into real estate.
So then put 15% in a nicely diversified securitized real estate portfolio why take geographic and property type (resi) concentration risk? If for tax benefit then I can see up to a 750k mortgage (deduction limit) making sense
Aside from the levering up aspect which is definitely a bit too ambitious/risk loving, I think that the majority of the advice here is perhaps the best around.
Getting access to PE funds to at least coinvest a portion of his money would be a decent idea, while also gaining experience managing wealth. Most major PE funds won't even look at you if you have less than 10-20m investable, so ETFs are probably the safest bet until then. As I mentioned in my comment below, going all-in on VC/Angel Investing with $5m is a really foolhardy adventure unless you are ALREADY familiar with that field and find it to be your lifelong passion. This is just the slightly more sophisticated version of a lottery winner suddenly cutting dozens/hundreds of checks to friends and family to "start businesses" or "buy real estate" that bankrupts him a year from now. Just because we worked for a bank doesn't mean we are financial experts, and I know for a fact that I wouldn't last a day as an actual trader/VC investor despite spending a few years in a BB M&A group.
Similarly, I really wonder how everyone is so obsessed with buying a house immediately. This guy just achieved financial freedom, can feasibly live anywhere in the world, and you want him to IMMEDIATELY buy a house to tie him down? Just because YOU are miserable and stuck paying exorbitant rent to your NYC landlord doesn't mean that this guy should buy a run-down dingy apartment for $1m or more. Reality check: he DOESN'T need to live in NYC or equivalent big city anymore. The whole point of big city is job opportunities and income; when you already have money, it makes far more sense to move somewhere with far lower COL where your money goes further. Even if he intends to work a few more years in the city, it would be far too reckless to burden himself with a house now if he decides to travel the world/settle down elsewhere in just a few years. Only case for buying a house would feasibly be if he's already married, has extended family in a certain area, and is 100% certain he won't leave in the next 5-10 years. Anything less and traveling the world in search of greener pastures is a far better value proposition. I won't even go into further arguments about how housing markets are likely overpriced since I'm no expert at timing the market, but it makes more sense to keep that $1m earning over 5% treasury yield and spending that 50k renting a far nicer apartment in the meantime.
The average person will own 3 homes in their lifetime, and this is a good time for you to get in on it. The nice thing is with 5m you can skip phase 1: shitty starter home, and go straight to a nicer home that actually ticks all your boxes. Besides that, get a good accountant, invest it in a way that maybe you can live on the passive revenue stream sooner rather than later.
"The poorest rich person in America. The world's tallest dwarf. The weakest strong man at the circus"- Succession knows it
If you have $5M and are still considering working, you're a joyless person who doesn't know how to be happy without somebody telling them what to do.
.
First, I'd pay down any debt I have. Second, I'd put the rest in short term money market instruments. Third, I'd buy a small home - 2 or 3 bed flat or house. I won't go big - I'd get something functional in a good area. Then I'll see what training I can get and cover my life while training using the cash. For example, MSc, MBA, PhD - whatever you need, take your time. I'd invest as much in me as I can if I think it's useful. Find a partner! I'd use this period to find a life partner. THIS IS THE MOST IMPORTANT DECISION IN LIFE. The right partner will make my time on Earth a paradise, the wrong one will make it a living hell. I'd try to find a life partner in an environment which automatically filters a lot of the wrong candidates - e.g. academia (although there are some crazies there but most are OK). When searching for a life partner, I'll portray that I am serious but I won't be flashy - expensive watches - guess who you will attract. I NEVER wore my rolex on dates. Then I'd find a job I enjoy. And I'd be picky because I can afford it. At this point, now that I have a job, the rest of the cash goes into MSCI World Index. I should have most of the cash intact at this point anyway - upward of $3MM. Traditionally this has returned at least 7% so this is > $200,000 which given that I have a well paying job and a property should be good extra income. In any case, I'd be looking to spend as little as possible - one does not need much to live well and be happy. In fact, one needs very little.
This is not financial advice.
Really interested in all the perspectives here that everyone's thrown out, given I'm in a relatively similar situation. Almost 30, single, just left IBD, and got handed the reins of approximately $3m cash and $1m house, and definitely questioning what to do next. For the time being, I've really done absolutely nothing different than my usual life (albeit just working on part time remote consulting to fill in the time) instead of suffering through a soulless banking job.
Despite my disdain of Reddit of all places...their fatFIRE subreddit and associated FIRE groups have some very insightful perspectives that really helped me when I was first put in this situation. Perhaps biggest lesson to learn is that "true" luxury fatFIRE really only starts at the 10-20m mark, so while we are on our way there, we do NOT have enough to start living a luxury upper-class NYC suburban life just yet (just the far cheaper equivalent abroad if you choose to go international). There's quite a difference between having 150k annual "fun money", versus 300k or 600k (at 10m and 20m respectively). You CAN quit your job today and retire forever, but it'll be either in a smaller suburban town or abroad, not the high life in NYC. At this stage, I definitely know that I wouldn't subject myself back to 80-100hr workweeks just for that incremental luxury. Your health, time, and happiness are worth far more. However, just know that one bad mistake in business/investment/marriage can easily send you back to the rat race grind, so consistent safety in NOT fucking up a winning ticket is probably more important than ambitious growth.
For my two cents, I think there's very much a diverging path of where you can choose to go next:
1. Retire immediately and do whatever your passion is. If you dreamed of traveling the world (on a modest budget), wanted to work a nonprofit, start a small business, this is the time to do so. However, the caveat is that if you don't have a defined passion, you might quickly find yourself ending up bored/depressed and become a thrill seeker trying to find something that actually engages you. This is a surprisingly common trend among the few trust fund kids that I met in college/IBD, where they genuinely can't think of anything interesting to do and ended up bored with life. I always envied them given I started with close to nothing back in college, but by the time I "made it" (on a much smaller scale), I'm starting to increasingly relate to this emptiness/boredom, and you'll need to dig deep to find out what GENUINELY brings you joy and makes life worth living. Simple answer is always coke and hookers, but anything beyond that is always a mystery.
2. Find a new interesting career/side business that will keep you occupied. This is suggested a lot by everyone else on this thread, so I'll keep it (somewhat) short. I would heavily advise against jumping all-in on real estate/buying a small business/angel investing unless that is ALREADY something you are very passionate/interested in and have worked with previously (either in college investing class/MBA/your prior PE position etc). Sure, you can choose to start learning about the field with a small 30-50k investment, but you should likely expect that initial check to go to 0 and treat it as a learning experience.
While some people are deeply passionate about this field, I know that I would not want to deal with such businesses in a hundred years, and I'm having enough of a headache trying to dispose of my parents' now empty house (given they decided to retire abroad) and trying to cash out the remaining inventory of a once-functional e-commerce business I have no intention of running. Yes, I could feasibly give myself a 150-200k full-time job operating a warehouse or levering up from one house to a small portfolio, that is definitely not something for me and I'd much rather get rid of it even at a loss. Having interned at a hedge fund and worked in M&A, I know that I'm not cut out for the day trading or investment life, so passive ETFs are probably the way to go for me (unless I someday have enough to be worth dropping into a proper PE fund).
3. As boring as it sounds, take things slow, gradually adapt to your newfound wealth, and consider where you want to go next. Maybe don't quit your job immediately, or perhaps consider moving to something less intensive (partial remote work, a lesser position in existing firm, maybe work in a smaller PE firm where you can co-invest etc).
A common trend is going the digital nomad route if you have any interest in travel/lower cost luxury living. Southeast Asia, Latin America, or a tropical island retreat are all at your fingertips, with your passive ETF income easily covering a luxury lifestyle (within reason). Considering Social Security pensioners can already live decently on sometimes just 20-30k a year, you can certainly live quite well on even a super conservative 100k passive income forever (with up to 3.5-4% drawdown for 200k). I've recently started looking into nomading around Japan, Korea, Taiwan and Thailand/Philippines, possibly spending a month or two at each, since even the "expensive" East Asian countries are surprisingly affordable with a strong USD.
At least from my perspective, I think some of the easiest ways to ruin your winning ticket might involve:
1. Getting married early. The easiest way to go -50% on your equity (aside from going full WallStBets or crypto trading) is to get a quick marriage/divorce. If YOU had the option to get a $2.5m payday and be set for life just from marrying someone, who WOULDN'T kill for that opportunity? Never mention your wealth to any friends/dates, do NOT cohabitate in common law states, and make sure that you hire a good lawyer to handle an extensive series of trusts/prenup contracts before you ever consider taking that next step. Note that just a regular prenup often doesn't hold up in court if you miss even the TINIEST technicality, so unless she has equal or more wealth, an extensive legal trust arrangement to isolate your assets is needed if you actually want to go down the marriage route.
2. Buying a house too early. Unless you are 100% committed on knowing where you want to spend your next 10-20 years (or build up a real estate portfolio), you should definitely travel and explore a bit before you start laying roots. Personally, my inherited house is a huge burden for me that I'll need to spend months sorting out, and I'd much rather be anywhere than here dealing with tenants/repairs. Unless you are already a real estate junkie, you're better off keeping that $1m in the market making a minimum of 5% rates yield versus buying a house at the peak of the market which you need to get rid of in a few years.
3. Do NOT overindulge in luxury early on. If you really want to flex your dream sports car or live in your dream mansion, start off with renting for a week/month to see how it actually feels. You can enjoy your honeymoon phase of excitement and not be stuck with a dead-weight asset that you can't get rid of without significant loss. If you are smart/responsible with your money, you should consider your spending budget at just 150k of "fun money" to throw around on vacations/luxuries/etc a year. This amount of money is "financial independence", but by no means true "fuck you" money by modern depictions: just a few first class flights a year and you've burned through your entire annual allocation. You can have plenty of fun on that budget, but this is by no means a "family office", "waitstaff" or "movie star" lifestyle aside from maybe a few weeks a year while on vacation (although a strong argument for moving to Asia/LatAm is the idea of affording a maid and driver for less than 10-20k a year if you do want a semblance of that lifestyle).
4. When/if you decide to have a family, make sure you have some idea of how your future will look. Yes, you have the money to retire today in luxury abroad, but you will barely be scraping by if you intend to live an upper-class NYC/LA/SF lifestyle. If your future spouse wants a multi-million dollar luxury house in Greenwich and send your kids to Exeter (and later Harvard), $5m will be gone in a heartbeat. Keep in mind you only have a 150k annual "cushion" for expenses if you don't dig into the principal, so unless you are also still holding up a 250k job, you can't afford a 100k+ mortgage, 50k on private school, luxury vacations, and a nanny/maid for another 50k plus whatever other expenses/vices you have. You can pick and choose a few indulgences, but you can't have everything.
For those of you bored or autistic enough to read through to the end, thanks for coming to my TEDTalk and hope to see any further thoughts on the subject.
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