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It is fascinating to see some of the responses here.
First off all $5 million is a good sum but not a lot of money. And if one does not invest it wisely there is nothing left for it to grow. So forget about giving $1 million to family, $1M to charity and $1M to yourself and still hope that the $2M will keep you wealthy forever. It won't.
So the best option is to keep $250-500 K for a rainy day, emergency funds, pay taxes etc. Invest the rest $4.5M in low cost non load indexed funds like Vanguard. Maybe S& P 500, large cap, Healthcare, worldwide etc. You really don't need to pay 1 % assets as management fee to a financial advisor to do this.
Then continue working for a year or two. See what happens to it. As it grows you can take out 4 % each year ( $180-200K) without having the risk of running out of capital. And from that you can give to charity, help relatives, travel etc. This is the way to stay wealthy and secure in your future.
It is fascinating to see some of the responses here.
First off all $5 million is a good sum but not a lot of money.
Well that's simply not true
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And if one does not invest it wisely there is nothing left for it to grow. So forget about giving $1 million to family, $1M to charity and $1M to yourself and still hope that the $2M will keep you wealthy forever. It won't.
I agree about not giving it away however even 2mm with a swr of 3% is around median hh income so while you won't be wealthy you'd be ahead of most
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So the best option is to keep $250-500 K for a rainy day, emergency funds, pay taxes etc. Invest the rest $4.5M in low cost non load indexed funds like Vanguard. Maybe S& P 500, large cap, Healthcare, worldwide etc. You really don't need to pay 1 % assets as management fee to a financial advisor to do this.
Vanguard the originator of low cost investing disagrees with you on advisors not being worth 1%. In fact they concluded that an advisor can be worth as much as 1.5-3% annually net of fees. Investors as a whole left to their own devices typically perform very poorly
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Then continue working for a year or two. See what happens to it. As it grows you can take out 4 % each year ( $180-200K) without having the risk of running out of capital. And from that you can give to charity, help relatives, travel etc. This is the way to stay wealthy and secure in your future.
So if a 4% swr works at the end of this why wouldn't it work at the start?
I am only saying that in the context of the previous postings in thsi thread where people thought they can buy Ferraris and buy condos / penthouses in Manhattan and so on and still have tons left. Ferrari's cost $300-500K and cost a lot in insurance and maintenance. Condos in Manhattan can easily run multiples of $5M and forget about penthouses. But maybe in Little Rock it might buy a lot. On the whole $5M is a good sum but not a huge amount.
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I agree about not giving it away however even 2mm with a swr of 3% is around median hh income so while you won't be wealthy you'd be ahead of most
Yes. But then you want to get returns fro the 5M, not $2M. I want $150K per year, not $60K
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Vanguard the originator of low cost investing disagrees with you on advisors not being worth 1%. In fact they concluded that an advisor can be worth as much as 1.5-3% annually net of fees. Investors as a whole left to their own devices typically perform very poorly
Vanguard is just trying to find another way to skin the cat more and make the descendants of Jack Boogle rich. Seriously what exactly would an advisor do that you cannot do and not part with $100-150K in fees each year. The whole premise of index funds is that you do not try and beat the market since 85 % of the actively managed funds do not do so. But if people want to part with $150K each year just to say they have an advisor, that is OK. Not me or any investor who tries to takes time to educate themselves.
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So if a 4% swr works at the end of this why wouldn't it work at the start?
The reason is that if there is a bad first couple of years you do not want to have a decrease in the invested capital and withdraw 4 % from it. But if things are going well then go ahead and withdraw in the 1st year. I am a little more conservative than you, I guess.
I am only saying that in the context of the previous postings in thsi thread where people thought they can buy Ferraris and buy condos / penthouses in Manhattan and so on and still have tons left. Ferrari's cost $300-500K and cost a lot in insurance and maintenance. Condos in Manhattan can easily run multiples of $5M and forget about penthouses. But maybe in Little Rock it might buy a lot. On the whole $5M is a good sum but not a huge amount.
Yes. But then you want to get returns fro the 5M, not $2M. I want $150K per year, not $60K
Vanguard is just trying to find another way to skin the cat more and make the descendants of Jack Boogle rich. Seriously what exactly would an advisor do that you cannot do and not part with $100-150K in fees each year. The whole premise of index funds is that you do not try and beat the market since 85 % of the actively managed funds do not do so. But if people want to part with $150K each year just to say they have an advisor, that is OK. Not me or any investor who tries to takes time to educate themselves.
The reason is that if there is a bad first couple of years you do not want to have a decrease in the invested capital and withdraw 4 % from it. But if things are going well then go ahead and withdraw in the 1st year. I am a little more conservative than you, I guess.
Actually vanguard's study predates their advisory business but surely that wouldn't actually matter to you right? The fact is the average investor does a terrible job at managing their investments and where advisors add value is through discipline, planning, asset allocation, and tax planning. You can tell me people can do this on their own but the fact is either they don't or don't do it well. If you need a quick look Morningstar tracks investor returns vs that of the fund they invest in. It's a very common issue and why there value despite the low cost do it yourselfers preaching go it alone.
Would you pay 50k in fees 1% of 5mm if your net returns were higher by 75-150k?
Would you pay 50k in fees 1% of 5mm if your net returns were higher by 75-150k?
No advisor is going guarantee to improve my return by $75-150 K (let me know if you know of one) but all of them will guarantee that they will decrease my capital by $50K in fees each year.
Your advise is just like any other Financial advisor whose predominant interest is how much he makes, not how much you make. I would rather pay a fee only advisor $2K for 2-3 hours of advise and no dipping into my capital as asset management fees. Give me the advise and allow me to manage it myself. If I don't come out ahead it will be the same as him trying to do the same to my funds.
Sorry I was burnt by the commission advisors touting load funds earlier on in life and I naively invested some with not so good results. Luckily I realized it soon and I have avoided them like plague since then. If others want to spend the money on management fee that is their choice. Not mine.
No advisor is going guarantee to improve my return by $75-150 K (let me know if you know of one) but all of them will guarantee that they will decrease my capital by $50K in fees each year.
Your advise is just like any other Financial advisor whose predominant interest is how much he makes, not how much you make. I would rather pay a fee only advisor $2K for 2-3 hours of advise and no dipping into my capital as asset management fees. Give me the advise and allow me to manage it myself. If I don't come out ahead it will be the same as him trying to do the same to my funds.
Sorry I was burnt by the commission advisors touting load funds earlier on in life and I naively invested some with not so good results. Luckily I realized it soon and I have avoided them like plague since then. If others want to spend the money on management fee that is their choice. Not mine.
You can't guarantee your returns either but I don't think you've understood the actual point and the reality behind the vanguard study. You also can't tell me what you don't know about tax planning, estate planning, drawdown strategies or whatever else. Your alternative of using a fee only could work but only to the degree you use them every time before you make a change or contemplate making changes. In reality then too what you don't know can still bite you
You can't guarantee your returns either but I don't think you've understood the actual point and the reality behind the vanguard study. You also can't tell me what you don't know about tax planning, estate planning, drawdown strategies or whatever else. Your alternative of using a fee only could work but only to the degree you use them every time before you make a change or contemplate making changes. In reality then too what you don't know can still bite you
I have a CPA and an estate lawyer for estate planning. Will not get that from the Financial advisor.
I can't guarantee my rate of returns either but I can guarantee I won't be out of $50-100K each year in mandatory asset management fees, whether the portfolio is doing well or not.
Let us agree to disagree on the need for a financial advisor who takes a cut of your assess.
I have a CPA and an estate lawyer for estate planning. Will not get that from the Financial advisor.
I can't guarantee my rate of returns either but I can guarantee I won't be out of $50-100K each year in mandatory asset management fees, whether the portfolio is doing well or not.
Let us agree to disagree on the need for a financial advisor who takes a cut of your assess.
You don't have to make up numbers to try and make your point better. I don't know any 5mm clients paying 2%
Well studies show over and over again investors make bad choices when managing things themselves and cost themselves a lot of money. No one guarantees anything but in reality it repeats itself over and over again
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