Liquidity event, what to do with the money?
Hey all. Will soon have around $800k cash. Not sure how to deploy it. Was thinking of just throwing it all at a low cost S&P500 index fund, but market seems very hot right now (understand that timing the market isn't wise, but would appreciate insights here).
One idea was to put it all into 1 year US gov notes, yielding around 5% at the moment which looks nice.
Thank you in advance. Before anyone asks where I got the money, I'm actually posting on behalf of a family member who has asked me for advice.
the only real option:
The answer is in your question.
Personally I would divide the amount in 3, and invest 1/3 today, 1/3 in 1 month and 1/3 in 2 months. So that if there is a black Swann tomorrow you lower your entry price.
All of it in the S&P500.
Once done, forget it and come back in 5 years.
Are your entry periods here arbitrary for the sake of discussion or do you believe deploying all of it in ~2 months is the most optimal? Have a sizeable quantum would like to deploy as well (not as much as OP). Struggling to bite the bullet due to how high market is ATM and not wanting to impair my cost base immediately.
This 2 months period is what I do with my own money (ie when I receive bonuses). It is not very scientific but here is my reasoning:
1) Time value of money. You need to invest ASAP. Ideally, you lump sum everything today (that is proven to be the best strategy, check out all the reports on that topic (google "lump sum vs DCA”)).
2) The fact that I am scared of doing a lump sum today (if there is a crash tomorrow). That’s why I spread it over 2 month, just to protect myself if some shit happen
Regarding your second point "The market is too high, I need to wait for it to go down / a crash is coming”: you need to stop thinking that way / I had the same issue and it took me time to control my emotions. You need to be robotic and act according to a plan regardless of what is happening in the market. Also, normally the S&P500 has multiple all time highs every year, just check the graph. It only goes up in the long term, it is not a crypto
How do you have 800k liquidation at such young age ?
if you read the end of the post I mention that I'm writing on behalf of a family member
I'd put it in the market (or at least have a set-in-stone plan about X immediately, Y at a future day, Z at another future day as someone above recommended). I got a one-time mid six figure pay day last year and put it in the 5% t-bills. Meanwhile the S&P is up 25-30%. Could have about $100K more if I had just bought SPY. I am now reallocating chunks into index funds every couple weeks.
I've had a few exits/larger liquidity events now and I think the best thing they can do if the money is meaningful to them is to leave it alone for at least 30 - 60 days. Just buy some T-bills and chill.
Think about it. Let the brain process the exit.
Then speak to relevant tax advisors etc and decide on what you want to do next.
You speak to your tax advisor after getting paid? Shouldn’t you do that before getting paid?
You should do it well before getting paid, but I mean structure for your go-forward lifestyle. Some forms of investments make way more sense depending on your goals and tax implications. Also a very different advisor usually.
I don't know how meaningful $800k is for the person that received the $, but if they're young, they are probably rolling it into their next thing...not sitting on it or retiring on it, right?
all-in in Solana
If you want to play it risky a little bit - Solana. To preface I’ve been in it since 12$ a coin, trading north of 150$ now. So your returns might not be as big, but I think it has a shot of going above 200$ this year.
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