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Ask HN: Just cashed out for 2M. What now?
148 points by newseller on Feb 19, 2009 | hide | past | favorite | 216 comments
I'm posting this from an anonymous account, for obvious reasons. I just sold my company and have 2 million dollars in the bank. What now? I basically have nobody to consult. It's a business I bought for 90k that just kind of swelled up really fast, and I'm really not set up to manage this kind of money. I'm canadian, the economy seems to be going to hell down south and I'm sure it's gonna hit here soon and I have no idea who to take advice from.

My bank is trying to get me to put all my money into money market mutual funds while I wait, my accountant tells me I should diversify, get some cashable GICs while I wait, and start looking into stocks, as well as investing in insurance companies since they usually guarantee your investment (so long as they don't go bankrupt). I used to just put all my money into a high interest savings account at ING and collect the 3% (which is good enough for me to live on at this point).

Any advice to offer? Any good reading (canadian-specific would be good)? Any good software for mac to manage all this? :)




The $1M-$10M range is difficult -- it's more than most people know how to manage themselves, but it's not enough to allow you to hire someone to be your full-time money manager.

Based on what you've said and not said, I'm presuming that you (a) have set aside money to handle any income taxes which you'll have to pay, and (b) don't have any immediate plans for how to spend your windfall; and your main concern at the moment is simply where to park the money so that you'll have it available once you figure out what to do with it.

If I'm right about that, your primary concern should be to hedge risks -- that is, to eliminate as many possible ways that your money might vanish. Given that the biggest risks are (a) an asset price crash, and (b) hyperinflation, I'd suggest a diversified portfolio: Keep some money in cash or near-cash assets (bank accounts and cashable GICs), but split most of the money between bonds (or, equivalently, GICs) and stocks. That way, if the stock market collapses you'll have some losses but you'll still hold on to the money you put into bonds/GICs; and if inflation spikes you'll still have they money you put into stocks (since inflation makes fixed-income bonds worthless but proportionally increases the value of stocks).

If you're feeling really paranoid, you might want to split your money between Canadian, US, and European bonds and stocks, just in case something weird happens and the Canadian economy falls apart while the US or European economies don't -- but my impression right now is that the Canadian economy is doing better than the US or EU economies, so I'm not sure that I'd bother with this myself.

Of course, I'm not a real financial advisor, and it's quite likely that there are factors specific to you that I haven't considered -- so really you ought to be talking to an independent financial advisor. Do your own research first, and don't feel that you have to follow their advice -- but listen to what they recommend and the reasons they provide for their advice. Make sure that you're talking to an independent advisor, too, and not just a shill for your bank's funds -- if you need help finding one, I'm sure your lawyer can point you in the right direction (and unlike your bank, your lawyer can be trusted to provide a fair recommendation).

I hope that gives you some starting points for figuring out what to do -- I'd be happy to talk more if you want to send me an email (google me for my email address, and put HN into the subject line so that I know it's someone from here).


This is good advice. Also:

1. Eliminate any outstanding debt. Mortgage, credit cards, car loans etc

2. Consider buying a place to live outright. Saving rent or mortgage interest is better than earning the equivalent in interest because it's tax free.

It's a very good time to have spare cash as there are a lot of bargains around. Take plenty of time and do your research.


If you're looking at $2k/month for a mortgage vs. $2k/month for an apartment, then the tax savings (at a hypothetical 33% tax rate) are MAYBE $8k per year.

This is one half of a percent of his net worth. ...which is to say, absolutely trivial.

Right now, the housing market is declining, and this individual may decide that he wants to relocate to a new area.

I am a homeowner. I am HAPPY to be a home owner.

However, I don't think the "buy instead of renting" advice makes a ton of sense for all people.


Where did he say mortgage? This guy has $2M in the bank.

The argument is that eliminating the rent expense ($2000/month or whatever) by spending $500k to buy a house outright is better than the tax-adjusted potential return on that $500k if invested.


In the long-term, you can expect the tax advantages of ownership to be priced into the housing market. This is one of the reasons (rampant speculation is another) price/rent ratios are so absurdly high. Fair value, without the tax benefits, would be a ratio of 9-12, given the costs of ownership and the illiquid nature of an owner's position. With the tax breaks, the fair value's higher, but it still doesn't make sense to buy at a P/R ratio of 20+, especially since rents are also likely to drop across much of the country.

In New York, price/rent ratios are above 40. A $2500/month apartment will sell for over a million. It only makes sense to buy at such a P/R ratio if you expect rents to skyrocket in the near future, and Manhattan rents are already starting to turn back.


How do you calculate rent, there? $2500 * 40 = $100,000 ...


$2500 * 12 * 40 = $1,200,000


But grandparent said:

In New York, price/rent ratios are above 40. A $2500/month apartment will sell for over a million.

And $1,200,000 > $1,000,000! The first sentence implies the second, but not vice versa... am I the only one to stumble on this?

To me, it sounds like saying "I have over 20 cats. I have more than a dozen cats!".


Price/rent ratio almost certainly varies by neighborhood and general price level. What I meant to say, and should have said, is that price/rent ratios are mostly over 40. The specific data point that followed was one case of that.

The data points I actually know about are in the $2000-3000 range. One of my friends tried to buy his $2800/month apartment and got a quote around $1.5 million.


I strongly object to 2:

If I was in OP's position, the last thing I wanted would be carve up a hole in any part of the world and settle there for the rest of my life. Real estate is big investment; while investing in it may be an ok choice for a wage slave, it is not so for those who are eraching financial independence.


Most people want to have some sort of permanent address. If you can afford to buy a home outright, it's cheaper than paying the bank interest, or paying someone else to live in their property.

So I'm not sure why you'd object to this. Everyone needs shelter, and if you can afford to buy it, you save money.


Housing will not bottom until around 2012. Buying now is stupid any way you slice it. You are buying a depreciating asset for no good reason. Furthermore, municipalities all around the country are set to jack property taxes through the roof.

The owner of the representative property on the market for rent right now is losing money every month if they had a mortgage written in then last few years. Rents are cheap. Renters are still subsidized by bozos who think houses will appreciate, or are desperately trying to make their payments.

I'm not sure how applicable all this is to Canada, however, as their property market never went quite so insane. It will probably bottom sooner and after a shorter correction.


This is probably true overall, but not true for every location you could possibly want to live. I doubt Manhattan is going to get cheaper.


Manhattan is one of the biggest bubbles of all. I actually have some short positions betting on that. NYC real estate is going to crash over the next two years.


Buying a house is important for reasons that are not financial at all. It simply feels good to know that you have basic shelter with no overheads to pay.

Also, basic things like a house are protected in many circumstances under bankruptcy provisions. This means that owning at least a modest place of your own can give you a platform of security for going about your life that you cannot get any other way.

It may not make a lot of sense on an accountant's balance sheet, but the psychological benefits of it are wonderful. Buying a modest house would be one of the first things I would do in this situation. Especially in a buyer's market like there is now.


> 2. Consider buying a place to live outright. Saving rent or mortgage interest is better than earning the equivalent in interest because it's tax free.

In the US at least this isn't always the case. Most joint filers can deduct interest expense on mortgages up to $1MM in value.


If you look at the amount of interest you pay vs. the amount you can actually deduct and the total taxes you pay, it's far, far more expensive to have the mortgage with the tax credit than to simply own outright.

If you get $2,500 in reduced taxes and pay $10,000 in interest... :)


Your forgetting about the return you could be getting. If your mortgage is 6% and your making 7% then keeping a mortgage is a good idea. The other option is to get a 7 year interest only loan with zero or 3% down and walk away if you get under water. With 1+ million in the bank you can trash your credit ratting with little issue so let your bank take the risks.

PS: One great option is to get US gov bonds that get ~2% over inflation for 10+ years which makes them really safe. (https://www.bernstein.com/public/story.aspx?cid=466&nid=...) Ok, you are still taking a currency risk if your living outside the US but that's fairly safe.

Edit: Think of the first 1 million as 40k inflation adjusted every year for the rest of your life and only take risks when you need to until you have more money to live off of than you need. Risk is something you don't want and buying a house is risk.


With the interest only loan, wouldn't you need to make sure that you had non-recourse debt, or that the property was bought with a business entity that protected your 2 million in case of default? Are most mortgages (I'm specifically thinking in the U.S.) non-recourse in the sense that the property is the only collateral? Or is there still a way for the bank to come after your personal assets? I'd want to be 100% sure of the answers to these questions before betting on being able to walk away if the house loses value.


Here's enough information to be dangerous: http://www.sandiegopredatorylending.com/?p=33


Most private mortgages in the USA use the house as the only collateral, however if you put less than 20% down most banks require some form of PMI to reduce their risk. This is a large part of why the housing bust has hit banks so hard, also many of the company's selling PMI went bust so the coverage became worthless.


If you invest and get 7% interest, after taxes you may get 1-2%. If you have to get 12%+ things look a lot different. Also, investing is risky, debt anchors you and keeps you from trying new things. At that point, you're gambling your house away. That behaviour is exactly what caused the Great Depression.

Government bonds are a terrible investment strategy. You may barely hold out against inflation (the next 5 years I vey much doubt that will happen) but there's better vehicles. The stock market, for all that it's fallen, historically speaking has never had any 10 year windows that it's shrunk. It will rebound.

If you're going to get a mortgage, it should be a 15yr, fixed-rate.


If your interest is tax deductible then you are only paying taxes on the 1% that's above the interest.

Government bonds are a hedge, I would still have lot's of stocks, but the goal is to avoid needing to sell stock when the market is down. Normal bonds have higher interest rate until inflation hits or the company goes bankrupt at which point you might not get your principle back.

Owning your home ties you to that location and selling property can be a major issue. If you are living off your savings then having a single investment with 30% of you money tied down is a huge risk. If your single and there is a 20% chance you will move in the next 10 years buying a house is a bad investment but feel free to run the numbers in your area including: tax, the high cost of buying and selling, the loss of liquidity, maintenance costs, appliances etc.


1+ million in the bank you can trash your credit ratting with little issue so let your bank take the risks

Actually, with $1 million in the bank, if you walk away from the mortgage, you bet your ass the bank will come after you to collect on what they can't get from the value of the home. It's going to be hard to declare bankruptcy when you have that kind of cash lying around.


When you get the loan you can usually limit your liability to the actual house.


Right! It's like paying a dollar to save 25 cents.


That's exactly what interest-only loans are, heh.


In addition to 2: You may even want to consider buying an apartment building where other people live.

At least over here in europe that's a very lucrative option as long as you choose (i.e. can afford) an area that's likely to grow in popularity over the foreseeable future.


right now is just about the worst time in the last 3 decades to invest in real estate, everybody that I know (including people in Canada) that are heavily into real estate are trying to unload.

Wait until the market bottoms out, then maybe if a deal is just too good to pass up invest in some real estate. And only then if you have good indications that the market not only bottomed out but will rise in the foreseeable future.


right now is just about the worst time in the last 3 decades to invest in real estate

Why, prices are down after all? Ofcourse one could wait for bottom out but if you judge your object by market value instead of by common sense then you can pretty much wait and gamble on lower prices for ever. An interesting object may just not be available anymore when the market shows indication for recovery...


It's amusing to see how you think that the bottom has already been reached.

From what I can see the stream of bad news is far from ending, there will be a lot more unemployment before this is over and that means that real estate prices - including those in Canada, which were, especially around the bigger cities somewhat inflated - are going to fall further.

The American auto industry is far from 'rescued', it remains to be seen if all of the big three are going to come through at all. This will have a tremendous impact in all the supplying industries, and quite a bit of that mess will trickle down to Canada. Another potential problem is that the US, Canada's biggest partner in trade has a tendency of using NAFTA to protect American interests in times of trouble, one more reason to be very careful where and when you invest your money.

If you are putting your own money where your advice is, in other words you are right now borrowing every penny you can get to sink it in the Canadian real estate market then I still have two properties there that are pretty much unsellable that might interest you.

Seriously, imho it's harsh and the bottom has not been reached by a long shot.


"everybody that I know (including people in Canada) that are heavily into real estate are trying to unload."

That would seem to me to be the textbook definition of "the right time to buy".

I still have two properties there that are pretty much unsellable

By unsellable you mean "priced too high"?

Just remember that somewhere down there is the perfect time to do the opposite of everyone else and make a killing. I wouldn't run out and invest 100% of your assets in real estate because you think you've found the magic moment, but in a diversified investment strategy, don't ignore it altogether.


A falling market is not the textbook definition of the right time to buy, it is the right time to hold off on buying.

No, I literally mean unsellable because the market in that area has dried up. I know the difference between 'priced too high' and 'unsellable'. It doesn't bother me much because I'm well-off enough that I don't actually need to sell, if the right buyer comes along it will move, until then it is no skin of my back.

Keep in mind that you are giving somebody else advice on what to do with their money here, if you want to spend your own cash on real estate then of course you are free to do so. Real estate agents are going out of business for the first time in years, these are not normal market conditions.

GM, Ford and Chrysler stock is down too, that does not mean you have to go out and rush to buy in because it is sure to rise again.

This recession thingy could be long, it could be short. Right now most of the smart money says it's going to be fairly long, and that we probably have not reached the bottom yet.

Anybody that claims otherwise is probably trying to sell you some stock they bought or a property they need to get rid of.

When there has been a good solid month or two without any mass lay-offs, talk of rescue packages and major businesses folding that would be a good time to start thinking about this, right now it is much too early.

Those who try to get in at the bottom invariably find that it wasn't the bottom yet. You could easily lose your shirt with an investment strategy like that.


Those who try to get in at the bottom invariably find that it wasn't the bottom yet.

Well, there is a different school of thought too: Those who wait for the bottom to be hit will never be able to realize when it was hit. It's fairly easy to tell whether the market is in a downward spiral or is in boom. But I don't think anyone can ever tell if we have hit bottom unless we are already bouncing back. Same goes with the peak, you can't pinpoint it until we find ourselves in downward cycle.


>But I don't think anyone can ever tell if we have hit bottom unless we are already bouncing back.

Even then you can't tell, because it might just be a temporary thing on the way down. Look at the three or so fools' rallies in the Japanese stock market in the last decade or so, for example.


I am taking my own advice as to real estate with my own money. Buying land right now seems a good thing to do. GM stock not so much. GM could disappear tomorrow. The land will still be there even if it reduces in value even further.

I am not advocating any type of loan or leverage to "get into real estate". I just think that if you're looking to park any large amount of money, you shouldn't ignore outright owned real estate (especially the income generating variety) as part of the diversification strategy just because of the recent panic surrounding this one area.

Around here "unsellable" real estate actually means "real estate that can't be sold for enough to pay off the mortgage debt from the previously inflated prices." I've made several rational offers that were turned down for this reason. I've even heard that term tossed around by the very agent that refused my offer. "We just can't seem to sell anything these days, no one is buying! This stuff is just unsellable."

The people who lose the most shirts buy at the top when everything seems roses and sell at the bottom because "its not a good time to be in the market right now".


So, kudos to you, I hope that works well for you! :)

As for parking a large amount of money safely, that's a tough job and nothing to advise other people on unless you are aware of the risks and the potential fall-out from giving such advice.

I didn't realize that there was a different connotation to 'unsellable', apologies for that. The properties I was referring to were bought with cash, no bank involved so I'm not worried in the least. One is being lived in by an elderly couple, as long as they're alive they'll have shelter, it's a huge improvement from where they came from and even if the market was good I wouldn't sell it just because of that.

The other is technically 'up for sale', but with the market being in the dumps it hardly matters, just pay the property tax and stay put. It was bought to be lived in, not as a speculative object, and through circumstances I now find myself on the other end of the globe. Oh well :)

I agree with you that those who bought on speculation at the top of the market are the ones that will be hit hardest, in stock market terms, they're the sheep or the pigs (the joke goes something like this: There are three kinds of people active in the stockmarket, bears, they hope things will get worse, bulls, who hope things get better and pigs, they get slaughtered).

If you have a long term strategy and you have money that is completely unencumbered then it is possible to buy in a falling market, as you already mentioned there is intrinsic value in land. Even so, investing right now is basically saying that you know better than everybody else, and while I applaud you for doing it yourself I don't think you should tell people to follow you down that road unless you have a fairly solid guarantee that it will work out for them.

The OP will be in the possession of anywhere from 1M to 1.3M after taxes, if he just pays off his mortgage or buys a house to live in and very carefully salts away the rest he/she will be able to spend a small fraction of that when the market hits bottom, and then it will still be multiple years before it will pay out, if nothing unforeseen happens in the meantime.


I suspect parent meant "priced too high" which you are just thinking of as "market dried up". Here's an example: I'll give you, sight unseen, $1 for each of them (US or CA, your choice).

You don't want to take it? Of course not, because the price you want for it (your ask) is higher than my bid, and my bid is probably not even the best bid (someone who has seen it will almost certainly offer you $2).

"market dried up" is a shorthand for "the inside bid is fairly low", which is basically what noonespecial said and you disagreed with.


right now is just about the worst time in the last 3 decades to invest in real estate

Correction: right now is just about the worst time in the last 3 decades to already have invested in real estate.

Most of the smaller investors I know who have cash to spend instead of struggling for survival are snapping up some incredible bargains. Even though values are way down, the rental market is relatively strong, at least in the areas I've looked at. I have friends buying large fully-occupied cash-flowing apartment complexes in metro areas for forty cents on the dollar. The difficulty is mainly in financing the deals, not finding them.


> The difficulty is mainly in financing the deals, not finding them.

I suspect the reasoning for that is because the long term prospects of owning property for rent are not as rosy as they seems, once your renters start defaulting you have a real problem.

A slump in the housing market usually also depresses the rental market, but that lags behind quite a bit.

On a positive note, it may be preferable to own any kind of object with intrinsic value over cash.


Well, then lowball. Why not use the downturn to your advantage. Make incredibly low offers for anything you want. Make 100 offers and entertain those that seem okay or are willing to get out of it.

You have the time, the money and the inclination. Of 100 homes that are 800K, one of them might go for 400K cash money right?

Well, if they don't you still have the money. They've got a property they want to offload.

LOWBALLING, it's the new commando.


The problem with 2) is that it's really easy to get up-sold. It may be better to just take a year cooling-off period.

In general, if you are not in a rush to buy, you have a tremendous advantage over sellers. With $2M in the bank, the OP should feel no rush to buy a place.

The other thing is that if, for instance, you buy a house and haven't owned a house before, it's a significant lifestyle change.

That can be great -- it was for me, but there will be a lot of maintenance. I've been lucky enough to have parents in-law who have helped with (um ... done) all of my renovations.

I do sometimes pine for the apartment / condo + mattress + kickass computer lifestyle, but less and less now that my house is set up.


#2 might make sense for if you are in States, but it doesn't yet make sense in Canada. The real estate is going kaput and pretty rapidly, but the prices are nowhere near their low point .. they are more like only half way down.

Just to give you an idea why this matters. First, a decent house in Vancouver area would cost you from 800k and up. Something for 400k is going to be in the area that few people would like to live. Second, spending cash on a real-estate during recession periods is the biggest no-no. These are the money that are hard to get out, leave alone getting them out without substantial losses.


This is outstanding advice. Interest you gain is taxed while interest you owe is not. There's also risk involved. Debt at 8% costs you far more than investments at 15%.

Debt first, a nicely funded Roth IRA, 401k, 6 months or so of living expenses in a money-market account then park the rest in a mix of stock market funds with a nice 10+ year track history. This is THE time to buy stocks and real-estate.

This guy does it right: http://www.daveramsey.com/etc/cms/baby_steps_2867.htmlc


It's not necessarily true that you want to pay of your mortgage.

Mortgage's have tax benefits, and if you have a mortgage at the prime rate, then your money is likely more valuable invested elsewhere, while you pay the mortgage.

High interest credit cards are another story.


He doesn't need a full time money manager, there are capital management firms that work based on a % of the total portfolio (not on trades, so they are motivated to grow your investment). They put your money into a larger portfolio they manage and you pay institutional transaction rates. I have used Ferguson Wellman for more than 15 years for this and been very satisfied: they are a category of firm to investigate to manage a portfolio.


Don't manage your money yourself!!!!!

$2M is absolutely enough to find a "full time" money manager - there are many private wealth management folks with minimum asset levels of 250K or less.

Make sure your adviser is a VALUE INVESTOR, especially one who suggests investing in low-cost index funds. Almost no "active" managers beat low cost index fund performance in the long term.

Next, get a job and let that $2M grow.


That is the worse advice I have ever heard. To the original poster- Nobody will care more about your own money, than you. Take responsibility for your wealth and enjoy it. Getting ahead and staying ahead involves responsibility and confidence in yourself. You will learn from mistakes and will be better for it. Personal finances and money management are important skills that are always overlooked. Based on your initial question, you already seem to have the right attitude. You will see fears of hyperinflation and fears of massive deflation in credit. There are some good economic blogs out there such as Mish's (http://globaleconomicanalysis.blogspot.com). Read a few highly rated books from Amazon. Personally, if I had $2m I would buy land, physical gold, and hold on to my currency in various banks (and physically). Remember, $2m in the bank means that your bank probably is loaning out $1.8m of it (fractional reserve banking).


I just read this article yesterday - what a timing!!!

You MUST read it as well, it's regarding "Sudden Wealth Syndrome" and may be you should consult Stephen Goldbart and Joan DiFuria.

Having too much money can be a problem : http://inhome.rediff.com/money/2009/feb/18having-too-much-mo...

What is The Sudden Wealth Syndrome? : http://www.mmcinstitute.com/sws.html

http://www.mmcinstitute.com/who.html


Congratulations!

I had a loosely similar experience, and here are a few things I would recommend based on what I did, and wish I had done:

Tell as few people as possible, preferably just your immediate family. Resist the urge to talk about it with friends and associates. This includes offering to buy every acquaintance drinks or dinner. Pretend nothing has changed.

Designate a percentage as money you will not touch... ever. Find a financial planner, which you trust, and have them help you identify low risk investments. Then, forget about this portion.

I don't know how old you are, but assuming you are not at retirement age, begin considering your next move. Consider options that don't require 2mil to get started. ;)

This doesn't mean you can't take a well-deserved break, but don't talk yourself into early retirement. This may be more difficult than it seems, so seek motivation in this area wherever you can find it. The fact is, 2mil is certainly nice, but if you stop now, you'll go through it quicker than you think. Treat it as a cushion, not a windfall.

Good luck!


Keep in mind that $2M will generate over $100,000 a year in interest. So it is definitely possible to retire forever on this amount of money.


Uh, how? That's a 5% rate of interest.

The only way to get that is by taking significant principal risk ("junk" bonds or equity investments). 30 year US treasury bonds are only yielding 3.54%, and everything less than 3 years is <1% [1]. The highest yielding US$ CD I could find [2] was 4.3%, and the highest CDN$ GIC looks to be 4.3% [3].

Also, remember inflation - it really eats into it.. Let's say you're 30 and expect to live to 75. Even with a modest 2.5% inflation rate, your effective income will be <1/3 of what you started with by the end.

[1]http://www.ustreas.gov/offices/domestic-finance/debt-managem... [2]http://beta.bankrate.com/funnel/cd-investments/cd-investment... [3]http://money.canoe.ca/rates/gics_5.html


Junk bonds are yielding about 13 percent right now, but there's a huge default risk:

http://finance.yahoo.com/q?s=jnk

Muni bonds are at about 7 with much less risk:

http://finance.yahoo.com/q?s=CEV


You can negotiate your own rate when you have a large sum.


Right now it's more like 2.5%, or $50,000 a year before taxes.

http://www.bankrate.com/brm/rate/mmmf_home.asp

Also, in the long run money market accounts and CDs tend to not even make up for inflation.

That doesn't mean it's not possible to retire on $2M, especially if you are middle-aged and don't have dependents. If you are young, live in a relatively affluent area in North America and are yet to start a family, forget about it.


Running Monte Carlo simulations with typical stock/bond returns and volatility, the max safe withdrawal rate is usually put at 2%-4%. This really depends on how you factor in inflation.

(Of course, what is "typical"? In 2007, what we saw in 2008 certainly wouldn't have been seen as typical.)


Here's the conventional advice. Start with it all in cash, in some form you feel is sufficiently safe from disasters. Gradually over a couple years bleed it into some combination of stocks (by default in a low-cost index fund) and bonds. The usual rule of thumb is to put your age percentage in bonds. I.e. at age 30 you should have 30% bonds.


This is a little un-related, but the more I read HN and actively listen the more I think of a y-combinator like org in Nairobi Kenya. Ideas are many but angels scarce.

Suggestions kindly


Brilliant! My advice is to stay in cash (or equivalent). Have patience. Wait 2-4 years and see what happens with the economy. Forget about the cash in the bank (I'm assuming you're well below normal retirement age). Set aside an amount of "play" money. Go play golf or hike Kilimanjaro or whatever works for you. Ignore "advisors" who tell you that you should invest in such-and-such. After some time, you will find things that interest you and that is what you should work on / fund. Invest in / spend time on things you love.

BTW, contrats. Nice job!


I'm not saying rush into any investments. But waiting 2-4 years is the wrong move if you are looking to get in the market. A lot of very good stocks are on serious discount either right now or in the coming months. No one knows when the economy is going to stop declining and turn around (some economists are pointing to under two years). Be smart, do your research and try not to miss out on some money making opportunities.

And also congrats on your sale!


My advice is to stay in cash

Which would be fine as long as you aren't at all concerned about the very real possibly of hyperinflation. Be sure to pick your currency wisely.


What makes you say hyperinflation is a very real possibility? Some inflation? Sure, but thats natural. We don't exactly live in Zimbabwe (So I'm assuming at least).


Some links (not that I necessarily agree, just giving you info):

http://www.videonewslive.com/view/288549/peter_schiff_on_200...

http://www.naturalnews.com/019659.html


Surviving hyperinflation is easy, just hedge against all majors.


Could you explain in noob terms please?


One way is to buy long-dated call options on a broad range of issues: indices, index funds, precious metal funds, commodity funds, etc.

For instance, the SPY index fund currently trades at $80. Suppose you want inflation protection for it going above $100 by December 2010, and you want to protect $250k of your money.

You could buy SPY calls at a strike price of $100 expiring in December 2010. The cost of those call options would be about $8 per share. To hedge $250k, you'd need 3100 options, which would cost $25k. If the price rises into the $100-$108 range, you'd start recovering that cost. If the price exceeds $108, you'd start turning a profit. If the price popped to $175 due to hyperinflation, your profit would be ($175-$100-$8)*3100 = $208k. (BTW, options are sold in contracts of 100, so for 3100 shares you'd buy 31 contracts.)

Honestly, though, I don't see this as a good idea right at the moment. The market has been volatile lately, which drives up the price of options. IMHO, inflation is not likely to pick up in North America for at least 1.5 years, so you would need to buy 2011 options, which raises the price even more. If I were going to hedge inflation, I would wait until the current stage of the collapse had reached a lower plateau, some time had elapsed for volatility to decrease and option prices to go down, then buy before inflation expectations build and drive up the cost of call options.

Whatever you do, never use the various "ultralong" funds for buy-and-hold hedging. They are strictly for short-term trading. (Well, you can do buy-and-hold, but you have to wait for the price to bottom out, and pray that the fund manager doesn't burn up all the money with failed trading strategies.)

Warning: I am not a professional options trader. This is not investment advice.


Why consider active investing at all? Just buy and hold an index fund if you want exposure to stocks.


So that all your money won't be locked in.

That is, for his ($175-$100-$8) * 3100 equation, you are only leaving 8 * 3100 on the table, as opposed to 100 * 3100 if you were to buy and hold.


Oh, my comment was more directed at the fear expressed in:

"(Well, you can do buy-and-hold, but you have to wait for the price to bottom out, and pray that the fund manager doesn't burn up all the money with failed trading strategies.)"

With index investing at least you won't have to rely on a fund manager too much.


"the only perfect hedge is in a japanese garden"

http://en.wikipedia.org/wiki/Stagflation


so how do you do that? :) Can I contact you?


I thought the real possibility was deflation rather than inflation. Either way if I just wanted a way to keep the money safe I'd just buy some gold.


Your mention of Kilimanjaro was too much for me to miss this one. I discovered an old acquaintance of mine recently started up a Kilimanjaro hiking company ;-) http://www.expeditionkilimanjaro.com/ - awesome guy, would recommend traveling with him.


I'd very definitely disagree with the above - I'd say it's pretty certain that most of the West is going to go through a reasonably severe inflationary period, judging by economic history at least. Even if it doesn't, with interest rates so low cash is going to do nothing for you.

FWIW, if you know where you want to live for the next ten years or so, buy a place outright for cash. Worst case scenario, if house prices continue falling you've still got a roof over your head mortgage free.

It's probably worth putting some of your money in gold too as a hedge.

I'd certainly agree with the 'play' money idea as long as your family circumstances allow.


Brilliant! My advice is to stay in cash (or equivalent).

you'll need it to pay the IRS + state their 50% (if for example, you are a california resident). oddly enough lots of people forget about this simple fact. depending on how the deal is structured, there is a good chance that your tax bill is $1 million. oh by the way they then adjust your next year's taxes upwards and want quarterlies...so leave some money for those (you will get most of it back since your gain is non-recurring)

but still, you're a millionaire.

edit: whoops! i see you say you are in canada. well i suppose the tax situation is likely comparable....


canada is probably even worse


If he structured things properly, this is capital gains -- in which case he's probably got $750k tax-exempt and the rest is only 50% income, so his total income tax (federal + provincial) would be somewhere in the $500-600k range depending on which province he's in.


Maybe there are ways to stretch the gains over several years by clever investment?


I'm a fan of the Taleb approach to investing. Put most of your money (~90%, I would say )into bulletproof stuff (Savings Account, CDs, etc), and put a little into risky things. You should be able to get at least 5% ROI on the safe stuff (in the long run, obviously considerably less than that right now), which should guarantee that you'll never fall below middle class, come what may.

To counteract the current market insanity, I would strongly consider buying some inflation indexed government bonds (called TIPS bonds, in the US) with my 'safe' money. In case of inflation they could help, with no real risk (short of the collapse of the government). I know most people are worried about deflation, but I still have nagging inflation worries.

As for the risky stuff, I think Detroit real estate, corporate bonds, and some dividend issuing stocks are seriously undervalued right now. I personally put a little into NRF, which is issuing ~30% dividends per year (at its current stock price). Detroit real estate isn't likely to recover soon, but I think over the next two decades or so you could potentially make a killing.


I don't think that's Taleb's approach. His point is not simply to put a little into things like dividend issuing stocks. These might have a very good historical long-term return, but we cannot assume this will still be true tomorrow.

The point is to be exposed to good "black swans": far out-of-the-money options, or biotech and YC companies, for instance. These could potentially give you a very large return. In theory this would be already priced in, but too many people assume models which don't allow for very large returns.

That said, his main message is not so much how to make money, but rather how not to lose it all.


Under normal circumstances, I'd agree with you. But given the economic craziness right now, I'd say that (some) dividend paying stocks qualify at black swans. At least the market thinks so, because they value the shares so that annual dividends are 30+% of the share price. The market wouldn't allow 30% ROI per year into perpetuity on a non risky investment.

In fact, assuming that the risk free interest rate is at 2%, the Net Present Value of a $1 30% annuity is $15. Which means that the market expects that there is, approximately, a 90% chance of that company going bankrupt in the near future. (Having looked over NRFs books myself, I think that the chance is considerably less than 90%. Which means, I think NRF is undervalued by the market, and hence is a bargain).


I am confused. Why are you asking people what to do with your money when we know nothing about you?

Do you want to just hold on to this money and live off the interest?

Do you want to make more money by working?

Would you like to invest in the stock market?

Are you risk-averse?

Are you willing to move?

Are you charitable?

etc.

Basically, I'm not sure this is the right type of place to ask this question if you are going to tell nothing about yourself and what you aspire to be in life.


I would highly recommend Philip Greenspun's investing and early retirement articles, which explain how he dealt with a similar situation.

http://philip.greenspun.com/materialism/money

http://philip.greenspun.com/materialism/early-retirement/


Here's what I would do if I got 2 millions reais (I am brazilian ;)

- Pay some debt close family members have (parents, brothers)

- Buy an apartment, in the same price range I've been looking for in the last couple months (150k tops). Would not buy something more expensive, "just because I can";

- Put everything else in the bank. 80% in the most conservative investment the bank has. 15% on middle stuff;

- Travel the world for several months, maybe a year;

Then come back, and look at the money again.

I think one of the most important things you should do, is simply to not spend much money in the near term. 2m is lot, but it's not enough to live like James Bond. You can't sustain a lifestyle of champagne with hookers while cruising the Mediterranean on yatches. Not for more than 6 months anyway.

Going for a 600k house also looks dumb to me. Or anything else too expensive that you wouldn't buy if you didn't had the 2m. Like a Ferrari.

You've gotta give time to adapt to your new richness ;) You've gotta understand that you simply aren't used to have a lot of money. Not that I am personally... but I have read stories about lottery winners going to Vegas or blowing all the money on frivolities just because they now can do it. It's the last thing I want to happen to you!

And congratulations :)


Since he's in Canada, 600k would get him an OK house in a good neighbourhood or a good house in a decent/undervalued neighbourhood, not anything great... besides, he would most likely get a mortgage, so he could afford to go even higher than that. 150k would get him hardly anything, unless he lives somewhere in the middle of Saskatchewan.

(I speak from personal experience, I own a loft in Vancouver.)

I agree with your overall point though.


I mostly agree, you don't want to spend less than 500K on a house if you live anywhere near a major city.

But if you live outwards a bit (say, an hour from Toronto or similar) then 400K gets you a massive 3 story house in a quiet neighborhood.

Depends on what you're into.


I agree that spending (wasting?) 150K on a sports car makes little sense from an investment prospective. But what is wrong with buying a house? Its considered an investment. At some point he can hopefully sell it for more then he paid for. Additionally I wouldnt spend the majority of the money on a house, but I want to play devils advocate here.


Nothing, as I said, I would buy an apartment, just because that's what I've been looking for in the last months. So the gist is that I wouldn't change my plans just because now I can buy something 4 times more expensive. If I thought, pre-2m, that a 150k living space was enough for me, a 600k place sounds like a waste of money.

anatoli corrected me on the pricing, but the essence remains: Do not spend the new money on new, used-to-be-expensive things.


You should avoid telling the people you know about this, since everyone will hound you for a handout if they find out. At the minimum under value the thing,

2 mil = you can afford to buy the person a car and you are an asshole for not doing it.

500K = you can tell them no, since you "need" the money to buy a house.


Check this article on HN about the same issue (Ariba founder dealing with $1BB exit):

http://www.rediff.com/money/2009/feb/18having-too-much-money...


Wow. It seems somehow both sad and funny that people are now making a living as professional "wealth therapists". I guess it's just another example of how decadent and wasteful our society has become.


My advice: don't listen to suggestions from random people on the internet (though I like a lot of the suggestions in this thread). Talk to other successful sellers and a diverse selection of wealthy people and find out what they did with their money. Also, Gurbaksh Chahal's book "The Dream" has a good overview of the emotions involved in becoming rich, from the perspective of someone who sold his companies for millions of dollars.


Go to AngelConf!

http://angelconf.com/


I don't think this is really answering the submitter's question, but once he moves past "how do I manage this pile of cash" and on to "what do I do with all this money", I entirely agree with the sentiment -- Canada needs more angels (and VCs, and really everybody else, too). It would be nice if some day the question for Canadian companies was if they would go South instead of when...


the question for Canadian companies was if they would go South instead of when...

And talking of South, real South, I and a few friends have been thinking of a y-combinator like in Nairobi Kenya. Good ideas are many but investors quite scarce


1. Congratulations!

2. Ignore financial advice from random people on the internet (feel free to include me in this category). Also beware advice on complex schemes that will eat you alive with management fees.

3. Spend your time doing what makes you happy.

4. If you need time to think about life and the next project, I recommend heading to Guatemala to check out Tikal and the ATM caves across the border. After that you can head out to the Cayes and drink beer in a hammock until you feel like doing something else.

Misc thoughts:

For everyone besides this guy, #3 doesn't actually require that much money. $20k - $30k buys you time to travel, work on your own projects, and wait for the right opportunity. I spent 2008 doing this and I'm pretty satisfied with that decision.

Also: About six or eight years ago I sat next to the CEO of a successful chain of auto shops on a flight somewhere (I forget where I was going but it was Mark Carr of Christian Brothers Automotive). His advice for this situation: take some of the money and buy a house because you'll always need somewhere to live and bankruptcy laws typically protect the home you live. This helps you get the next thing started and, should it go awry, keeps you off the streets and protects some of your assets.


  > For everyone besides this guy, #3 doesn't actually require that much
  > money. $20k - $30k buys you time to travel, work on your own projects,
  > and wait for the right opportunity. I spent 2008 doing this and
  > I'm pretty satisfied with that decision.
Yes, and there are many nice places out there in the world where you can live on even less than that for temporary rentals. A 4 continent around the world ticket costs about $2000 and be sure to pick a good airlines network for the destinations you want. Or just pick two or three places and stay there 4 to 6 months at a time, or longer.

You can definitely spend time on your future projects while traveling, many places have free wireless internet. We used to hack on BBS systems, so even 512k Internet can let you do a lot of stuff. If connection stops working, go hiking or canoeing or off to meet a pretty girl/guy/whatever you like.

Oh, I second that other advise by inerte:

  > - Pay some debt close family members have (parents, brothers)
Try to minimize the potential emergencies of close ones, you don't need to pay them off completely but get them in a path where they can restore themselves to financial freedom. This is happening a lot already. Beware, don't bail out anybody on mortgage, specially if highly leveraged, they have negative equity, or have interest-only mortgages! There are laws to protect them and your money will get wasted for nothing. Perhaps help them after they file bankruptcy (IANAL.)

Whatever you do, have a good time! :)


I'm glad I read this post.. because even though I wouldn't mind having this kind of money. Peace of mind is worth a lot more to me. My biggest goal in life is to travel so if If I were only to make enough money to accomplish this every other year.. I'd be perfectly fine with my life. Maybe its because I'm only 28.

Also I totally agree with having a home base somewhere.

Congratulations on your fortunes sir as well. I hope you do great things with your new fortune that uplifts your spirit. I know plenty of people in your now current tax bracket that are miserable. Take the year off like this guy suggested travel, gain a new perspective. Gain some new ideas plan them out then get back in the game.. but have an out to do the same thing again 5 years from now.


"Be fearful when others are greedy, and be greedy when others are fearful." -Warren Buffett

I dare you to find many greedy opinions out there today.. Everything I read is decidedly fearful. Full text of the article is at http://www.nytimes.com/2008/10/17/opinion/17buffett.html (I realize its slightly less applicable to Canadians)


I was looking for this exact link for but couldn't remember where it was. I can lay my search to sleep now. Thanks!


a lot of people are talking about "taking time off to think" but not really being more specific than that. This is not just a vacation, this is a vitally important step. Assuming you can make 3-5% off the 2M you are set for life. Now comes something that few people have ever been able to do: actually decide (with a huge degree of freedom) what your time on this earth means to you. It may sound silly now, but you have just been reborn. You are no longer subject to the same rules of life that most are. You are literally a different person, though you may not know it yet. Take things slow, like a baby taking first steps. And don't think that this all involves naval gazing. Look at the other people in your life and what their relationships means to you. They have to start all over with a new You as well. It can be rough on people.

Not taking this seriously is the prime reason new wealth often loses it. Everything else is details.


Congratulations! Invest a little in yourself:

1. Get a good doctor and dentist; commit to yearly full check-ups.

2. Develop a life-long exercise habit that you can perform anywhere. No weights, minimum props. Get help from (i.e. pay) army/special-forces trainer initially.

Now is probably a good time to do this, if you haven't already.


Well, avoiding the deeper money management issue and addressing your savings comment, I don't know what sort of depositor's insurance you have up there, or much about Canadian banks at all (other than that BMO owes me $100) but if it's anything like the US right now, I'd spread it out. I think our FDIC limit now is $250k for individuals, it shouldn't be too hard to find 8 banks. If your banks up there have no government-backed depositor's insurance, I'd take a trip stateside (if that's legal and it extends to foreigners, which again I don't really know).

Putting all of your eggs in one very shaky basket would seem to be a bad plan at this point.

Also, I would float me $200k to help me jump start this Ponzi scheme I have an idea for. I'll give you back $300k in a month.


Something to note, while in the US the FDIC coverage is $250k, that is a temporary limit to help stabilize banking and reassure depositors. Also, for whatever portion you decide to keep in a bank, have the banker talk to you about titling. An account for John Smith is covered up to $250k, but an account for John and Jane Smith is covered up to $500k, and a trust for John and Jane Smith with 3 children is even more.

What I would do is put $1 million away and use the remaining $1 million to buy 11 more $90,000 businesses.


If you ever want to help the most people per dollar spent, take a look at micro-nutrient need in developing countries. Several smart economists ran the numbers and found this is the most cost effective way to help the most people. Check it out:

http://www.copenhagenconsensus.com/


1) Stay liquid (ING or loonies-in-a-shoe-box) 2) Wait until the markets bottoms 3) Buy Minnesota

A year or two from now people with cash reserves are going to clean up.


Bank Of America is going around like a kid in a candy shop picking up banks left and right at prices that a year ago couldn't be imagined. Wasn't it Minnesota that 1/3 of the income was from the government? Not very high growth. :)


Just remember: almost nobody ever picks the bottom of a market right - by definition.


Do absolutely nothing for a year. Assume your life is just as it was.

$2M can really mess with your mind. It's not really enough to live forever. But it is enough to live on for a long time. If you are careful, you could invest it and live on the interest. If you aren't careful, you could invest it and lose it.

But remember, you don't know what is going to happen. It's cash for now. I would suggest you just sit on it for a year. Think. What do you want your future life to be like?

How do you want to live the next 5 to 10 years.

And be prepared to get bored. If you aren't working and learning and doing things, you get bored. Save the money for your next startup. In the meantime, live on the interest and stay liquid until you /know/ what you should do with the money.


1) Buy property in a location you could see yourself growing old in. 2) Take a Permaculture Design Course. 3) Live happily and take trips to places that happily meet your vices.


Any hint on how you made it?

Congratulations anyway


Being Canadian...I recommend PC Financial. Their high interest savings is great, and no fees!

With 2 mil, I would personally:

-Buy a place to live in the 400k range. Housing is probably overpriced right now, but generally speaking the Canadian housing market is not too badly bubbled. I really don't see a Canadian crash coming, but there may be a slight price reduction.

-Put 200k into a high interest account. Easy to access, guaranteed return, etc.

-Put 200k into a new business. But that is because it is what I enjoy doing, if you want to learn to paint, go to school, etc throw the money there.

-Put 200k in the stock market. Canadian financial institutions are amazingly underpriced currently, and so are several commodity based companies.

The remaining million I would use for stability/hedging. Hedge against the Canadian dollar, inflation, etc. I would probably get some professional help from investment banking friends, but this would probably be a combination of US bonds, CDN bonds, gold, etc.

The Canadian economy is currently almost untouched by the current recession. There will be a bad 2-3 years at a minimum coming up so plan for that. I would plan on shifting into the stock market cautiously over a period of time and not throw it all in at once, we could easily see another 50% decline over a few months.

Lastly, I would take a month and travel around before doing anything at all.


ING is effectively the same as PC Financial.

If the OP feels he has enough money now, why would he consider the stock market at all? His only concern would be keeping up with inflation. I'd also suggest reading "Fooled by Randomness" before talking to any investment bankers.

Never risk something you actually need for something you don't need. Also, don't convince yourself that you don't really need something you actually do need.

One might be better off buying supplies so that one could survive for a week-long power-outage, say, than playing the market, right now.

A few months ago, an apartment building near me had one of its electrical transformers blow up. The residents had to evacuate that day, and were not allowed back into their building for a few weeks. Some suites were looted.

It made me realize that I was completely unprepared for that kind of scenario. How many people who pride themselves on their retirement plans are equally unprepared for this kind of rare event?


Take a cooling-off period of a few months to relax, and research. During this time, do not buy a home, or any other large purchase (> $4k ?) that you wouldn't have before your windfall. Stay out of the stock, market, except for GICs.

Think about what you would need to be permanently semi-retired. I.e. you don't have to work for anyone else, but you don't upscale your lifestyle. You now have 24/7 sweat equity, independent of your other capital.

The problem with this particular time is that we're in some kind of transitional period. I have no confidence in my ability to predict what the Canadian and US economies will look like in 10-20 years.

I've been very aggressive in paying down my house and contributing to my RRSP. OTOH, I now wish that some percentage of the funds I put into my RRSP had been devoted to disaster preparation. Nothing too extreme -- just another form of insurance.

I.e. an RRSP is preparation that makes sense within our current model of society. I currently have few hedges for scenarios outside that model.

I guess the main thing is to take small steps. It's very hard to scale back your lifestyle once you've scaled it up. If you are mostly content now, then be very careful about up-scaling.

You may have different goals, but for me the greatest luxury is free time to pursue my ideas wherever they take me.


Firstly, congratulations! I was in similar position once I sold Auctomatic and moved to Vancouver (but with much less cash). I'm now doing property in the states. My advice would be, convert as much as possible of your money into assets that generate passive income (i.e. through rental property). You will then have financial independence for the rest of your life, and basically freedom to do what you want.

If you want any help getting started on property, give me a shout.


I saw you on Channel 4 a few years ago when you started Boso at Oxford... Congrats on the Auctomatic sale!


Take the Canadian Securities Course, if you're at all interested in money. I did. It's easy if you prepare. I crammed it over a weekend, and just squeaked by. I've heard of a lot of people failing after cramming, though, so YMMV.

After reading Fooled By Randomness, I don't trust anyone else to manage my money. It helps that my wife and I are somewhat interested in finance. I would definitely go to others for ideas, but not for decision-making.

It's the same kind of "Ah ha" experience that PG tries to create in young techies. You really can run your own business. Well, you really can manage your own money (assuming some minimal interest in the subject).

NOTE: about the CSC: the material is a bit boring for someone coming from an engineering background. I.e. you're supposed to repeat what they want to hear (including some dogma), rather than actually give a nuanced confidenced answer. There are quite a few calculation questions, though.


Go take a vacation and start thinking about your next startup


DO NOT go plow all your money into your next startup. A life mistake.


I cannot upmod this enough.

$2m is enough to retire if your costs are low enough -- even earning a measly 1% a year you'll make 20k per year, which is enough to live on if you live in the right town with the right diet. So put the money in a diversified collection of very safe assets that return a few percent, write yourself a check for the interest you've earned every quarter or so, and then forget all about it.

Meantime, depending on your lifestyle, your time may now be entirely your own. Or you may need little more than a small part-time job to be happy. That time is the resource you should plow into your next venture in life. The only part of your own money you should spend on a startup is the money to hire the lawyer who will construct the corporation that will ensure that your startup cannot touch your personal money even if it is sued into dust.


That time is the resource you should plow into your next venture in life. The only part of your own money you should spend on a startup is the money to hire the lawyer who will construct the corporation that will ensure that your startup cannot touch your personal money even if it is sued into dust.

Amen. The lawyer part is maybe a bit over the top (right direction, though) but I fully agree that if you're thinking about a second startup then you're in the best position to be in. You have all time in the world now and probably enough credibility that investors will listen to your ideas even before you have the usual prototype or "running business" to show.


$2m is enough to retire if your costs are low enough -- even earning a measly 1% a year you'll make 20k per year

Sure, but this makes no sense as a strategy. You could make 20K on the side pretty easily doing whatever it is you'd probably want to be doing anyway (painting, hiking, sailing, playing golf).

Having $2m in cash sitting in the bank might feel awesome but jeez, you need to use it somehow rather than for paying yourself a tiny stipend to live a life you could have lived anyway if you weren't so scared to face some risk.


you need to use it somehow

But you are using it! You're using it to solve your cash flow problems for good. You've given yourself the freedom to do whatever you'd want to be doing anyway, no matter how risky it is, no matter how long it takes for the money to roll in, secure in the knowledge that no matter how unprofitable your next venture is, your worst-case fallback position is "Damn, I'm retired again. How I hate the prospect of sitting on this beach, reading whatever I want, writing whatever I want, until I die of old age!"

The thing about making money on the side is that it's work. It's distracting and requires continuous effort if you have to keep the money rolling in smoothly. How did tptacek put it the other day, in response to the question "How many billable hours are lost on HN every day?"

As someone who often bills hourly, I'll go with $0. Your time isn't fungible; it only commands a bill rate if you can commit to a start time, milestones, and a delivery date. Very few businesses want to pay for your spare cycles.

(http://news.ycombinator.com/item?id=467900)

Now, I realize that there is a class of personalities that cannot possibly follow my advice. They will find themselves unable to motivate themselves when they have the option to sit around playing WoW all day, and yet all that WoW makes them miserable and unfulfilled. So they will be compelled to blow some or all of their $2m at the craps table so that they can feel alive again. Las Vegas was built around such people. I can't possibly dissuade them with my feeble arguments (and blowing the money is surely preferable to being miserable) but I would encourage them to try my plan first.


Keeping a housing/college/retirement reserve allows you to take more risks. Plowing money into a new startup simply magnifies one risk.


Come here in the Philippines. Cost of living is not that expensive -- at least here in Cebu. You can get a house beside a beach and you'll probably live like a king.


100% agree with this, it's the easiest trap to fall in to.

If you have to start another company, use your reputation (one company sold successfully) to leverage a little bit of your capital (less than 50K) to do it again, never commit more than you can afford to lose without batting an eye.


Obviously not, personally I think you should do the second startup with the same starting capital as your first one.

Once is luck, twice is skill.


And less scary


Sarah Lacy?


why're you downmodded?


If I knew, I wouldn't have posted it. Maybe bad reaction to her because of the facebook interview... (did you see that)

Oh well, I've learned not to question why i'm downmodded, haha.


Don't over-think it. Put half in cash and half in 3-5 stocks you think don't suck. You would have to spend a huge amount of time on money management to get better results than that.

When I cashed out, I gave away 10%. Mostly to family, and some to local charitable projects I personally cared about. It can feel good.

Spend your time thinking about what to do next, now that you're not constrained to make an income. Start a new business? Become an international playboy? Go back to school? Up to you.


If you don't own a home then buy one. Buy it as a home, not as an investment, so the smaller the better. If possible, buy a home in an area that has no homeowners' association and associated fees. If you don't, you will eventually regret it. You could buy a "fee simple townhome", which means it's small (condo-size) and has no association fees.

The reason I say buy not as an investment is because the real estate market hasn't nearly hit bottom yet and won't for another two years. Until then investing significantly in real estate would be a mistake. So buy something modest that you like in an area that you like.

Cash is king right now. Being in Canadian currency is good. Read Nassim Taleb, who presciently suggested years ago that we avoid investing heavily in the stock markets; they're too risky. Instead put ~90% into absolutely safe investments and then bet the remaining 5-10% in long-shot positive "black swans" (e.g, high technology and biotech ventures with long odds but incredible payoffs). Most often you'll lose but, when you win you'll win huge, more than enough to cover your losses. To understand his suggestions, you'd best read his excellent book, "The Black Swan".

And I assume you've split your money into various accounts so that you are insured against any losses should your bank go out of business.


I would put my money into Federally insured bank accounts until I figured out what to do.

While it may be unlikely that ING will fail as a bank, there is no reason to take that risk. Divide your money among banks to stay below the maximum Federally insured limits.

Once you 1) learn what you want to do with the money, 2) get some advice that you can check and challenge, and 3) feel the time is right, move the money to wherever your analysis takes you.

Dividing the money into the savings accounts just buys you time.

ps. Congrats!


Just wanted to chime in to thank everyone for the great and diverse advice. I definitely can't respond to all the overwhelming feedback, so I'll keep it at thanks. This is a great community, and I appreciate all of you. Seems nobody has any good financial software other than quicken for mac, but that's ok. Maybe that'll be my next project. :)

You've definitely given me a lot to research and think about as I approach my retirement. Thanks again!


since nobody mentioned it: make a last will.

As for opinions I'd put maybe 5% in stock indexes (Dow,S&P) as 'risk' and the rest partitioned in bonds and cash in high interest account after talking with a tax specialist. I'd forget about money managers.


Take your time, don't spend what you don't have to, stay away from people giving you 'good advice' (including this one), everything comes to those who wait.

The only concrete advice I'd have for you is spread your money around different banks and currencies so that if something takes a hit you don't lose it all in one go. 2M is way above the usual insured amount.

Oh, and keep quiet about it!


Certainly diversify. It's still an easy amount to handle yourself which is good. My biggest mistake was not diversifying enough. Happily I did get strong advice which I half-heartedly followed, for which I am forever grateful.

By the way, there are plenty of stocks out there paying very handsome dividends. I recently bought some bank stock paying ~ 11% last year, forecast to pay the same again this year. It's up to you though -- investing should be both for profit and personal satisfaction (I tend to invest in companies I'm rooting for, or are doing good in the world).

If I were you, I would simply use something like mint.com (I use the bankofamerica.com aggregator) to keep track of everything, put your money away and enjoy the safety net. In the meantime, get hungry, and try to do it twice.

...and do make sure you treat yourself with something. If it were me, it'd be travelling for a while, but each to their own.


Staggered CDs and Dollar cost averaging.

http://en.wikipedia.org/wiki/Certificate_of_deposit

http://en.wikipedia.org/wiki/Dollar_cost_averaging

Eventually you want to be diversified, but right now, you don't know if you want to put all your money in the market.

So divide your money into 8ths (or whatever, by 8ths right now the US government will insure each $250k in your CDs)

put 1/8 into the market now.

1/8 into a 1 month CD

1/8 into a 2 month CD

1/8 into a 3 month CD

1/8 into a 6 month CD ....

When each CD matures buy more of the market. That way if we haven't hit bottom, yet, you will still be buying on the way down and up.

Unless you are going to spend time studying industries put it all in index funds/etfs. Your market allocations depend on when you need the money, but I have something like

45% Russell 1000

20% EAFE

12% Russell 2000

10% Morgan Stanley bond index

5% REIT index

5% Nat Resources/Commodities

3% emerging markets

This should be translatable into Canadian assets, just not by me.


Invest in startups?


Any advice would really need to based on an understanding of what you want to get from the money, and more broadly from life.

I slightly get the impression from the wording of your question that you don't quite know what you want to get from it, but you feel that you ought to do something (there are plenty of people who's job it is to tell you that you ought to).

I think that unless you know what you want from it, you'll never be able to answer this question. Some options to consider: seeding your next company, angel funding, charity, friends & family, financial stimulus of your local area, etc. - these are all investments of sorts.

If you're just looking for somewhere to park it whilst you decide then make sure you're within FDIC limits on each account...


It seems to me you are asking the wrong people. My father works at an investment company (http://www.hilliard.com/), and usually the people that give you investment advice at banks are the people that couldn't make it at real investment companies.

You need someone whose job is to find out what kind of person you are (risky , etc) and help manage your money for you. There are many people who do this very well, and the good news is that many of the corrupt ones have been washed away in the cleansing fire that is the recent economic situation.

Anyway don't take my advice I'm a college student that doesn't know crap about money. But find someone that has done it for a living.


Mac software: quicken's worked for me. Not fancy, not pretty, but effective.

Talk to a professional about investing & protecting your assets. As you can live on the interest, perhaps the free time is more important than the money for now?

Sounds like a good time to invest in yourself. First: a small vacation (a few weeks, ~$2-5k) to really relax. Next: maybe some school if there were other things that piqued your interest before, but never had a chance to study. If not school, maybe not a bad time to just pick up some books and hedonistically blowing weeks on whatever you want to study :-) If anyone asks, call it market research.

Congrats!


Trip around the world.


I like Eric Janzsen's advise on investing, despite his so bad-looking website http://itulip.com/ . His view:

- No investment is gonna make you rich while we are in recession. - Gold will appreciate in dollars, but just because dollars will actually depreciate.

So, for the following years, if you buy gold and hold it, you won't loose purchasing power, but you won't get rich.

After the recession, Janzsen recommends to buy green energy stocks: http://www.harpers.org/archive/2008/02/0081908


There's plenty of good advice here to think about.. but just think about it for a year. (Software recommendation: none for now)

There's no hurry, but there's plenty of mistakes to be made. Carry on as usual for a while and see if any of the ideas really resonates with you after your mind has settled.

Definitely don't get into a contract with someone to "manage" your money - they typically want 2% annually for it, and it's highly likely they've underperformed money market accounts over the past decade. Many (most?) have lost money over the past decade, at least after expenses.


1. Get a good accountant 2. Be very careful in the stock market right now.


No offense, but I don't believe you. I think you are spoofing HN.

On the very small chance you are telling the truth, I would say diversify your investments and keep your mouth shut. And then start ramblin'


I recommend seeing someone at a bank about setting up a trust. If you are concerned with making sure that the corpus of the trust remains intact, explicitly tell the bank that as there are investment opportunities that are completely appropriate for that. The benefits of a trust are numerous. When I worked as a trust analyst I saw many people who set up a trust solely to protect their money from themselves. It's something you might want to look into if you are concerned with blowing through the money.


I am in Ontario. My advice is:

1) Stay in real cash (not equivelents) until this market turmoil is done. 2) Figure out what you want your next "career" to be. You are in a position to take some risks, but 2million is not that much. You want to give yourself purpose and continue making some money. 3) Do not travel unless you are one to learn other languages: Travel is addictive but does nothing to improve you. Like all drugs, travel should be a reward to yourself, not the purpose.


There is a whole class of financial planners who only work for rich people. They typically want you to have 500k net worth before they'll talk to you. They provide better advice for much less money that the retail mutual fund pushers at banks.

Google Baskin Financial and Doherty and Associates, and ask around for somebody like that local to you. Take meetings with them and discuss their investment strategy and philosophy until you find a good match with someone you can trust.


Pay off any debts you have and set aside some for taxes. Consider some diversification, but keep as much of it as you can (or stomach) as liquid as possible (high interest savings accounts, CDs, or treasuries). There may be some great opportunities in another year or so for those who are still solvent and have a lot of cash-- housing will probably be a lot lower, and so will stocks. Wait until then and you may pickup some of the deals of the century.


I'm reminded of a rotten.com article

http://www.rotten.com/library/culture/lottery-winners/


You need an investment advisor, not recommendations from your accountant or hacker news. ;-) Find somebody with a Certified Financial Planner (CFP) designation. A good CFP may charge you $1k-$3k up front for a comprehensive financial plan, then around 1% of your total portfolio annually if you want him to actively manage your assets. I work in finance and can give you some recommendations if you'd like.


I like mint.com to manage all my accounts, and keep track of my spending (I do all my spending on my credit card, so it's great for budgeting since it can automatically categorize expenditures).

You have a few orders of magnitude more then me, but I imagine it should scale fairly well ;-)


buy some government fixed interest rate, fixed duration bonds (say 1-2 year duration) if they give you a better interest rate than ING.

don't change your lifestyle too quickly. make sure all changes pass two tests: 1) it feels comfortable 2) you think its rational.


There is a cool website (don't remember the url) where you can be part of bank CD auctions. Usually the majority of winners are banks with 500KCD's, but there is often a few people who win the final scraps with only 10K CD's. Rates were 7+% when I was looking v.s. ing's 4% For a quick safe way to put money in USD it seemed like a very interesting way to go.


Buy shares in companies from which you use and plan to buy products in future and that have good ROE. Be an angel investor. Travel around to every continent on earth once. Start a new company, where you can invest the money again.


If you're not actively managing your portfolio, the biggest thing you can make sure to do is asset allocation a la David F. Swensen. I'd recommend Unconventional Success: A Fundamental Approach to Personal Investment.


actually insurance companies have many rules put in place by the states that will assign the accounts to a different servicing company. but that is US, I am sure Canada has similar rules.

check out coffee house investment strategy, I have been doing this for years (10+) and have fared well in this recession. Less worry and excellent gains. Make sure you always bleed a large sum of money slowly into the market, so you will not be caught at a specific point price-wise.

See: http://kd7yhr.org/bushbo/coffeehouse_investing.md for pointers


Start over.


Buy gold.


Ya, you see a lot of advertisement about buying gold because it goes in opposite direction with the stock market. Maybe that can be a portion of your diversification.


actually that "we buy gold" company is nothing but a huge scam, they give you less money than you would get from a pawn shop


what I meant was for @newseller to look into the possibility of investing into gold.

Typical "buy low (super low) sell high" strategy is probably making "we buy gold" company a lot of money. They even have the money to buy Super Bowl ads.


Gold is seen as safe right now, but that could turn around very quickly if the economy starts to recover or demand fails to keep pace.


http://singinst.org/


You should read some good books and make your own decision. Worst thing that could happen is you are hurt by inflation which can't happen nearly as fast as a stock crash...


As everyone else says, save the lion's share of the money, and act like nothing happened. Ensure that you will never have to work at a job if you don't like it.


I haven't made that much at once before but I have made a considerable amount and I have this one bit of advice. Make sure you don't lose your work ethic.


Invest against the trend. And don't invest everything into one thing, diversify. As a last piece of advice I would suggest to keep some liquidity.


buy gold. bullion if you can instead of futures.

no currency is stable at this point. hyperinflation will wipe out a lot of wealth.


Not to be a bastard, but hyperinflation is a very rare and distinct phenomenon, not just to be thrown around when the economy turns sour. Real hyperinflation is occurring in Zimbabwe, not Canada or the US.


It occured in Poland not that long ago, and there is a chance it will happen in other countries, if oil transactions would switch to another currency I wouldn't be surprised to see such a thing happen to the US dollar. There are some people out there that say that the Iraq war was to stop the US dollar from crashing because Saddam was going to switch to the euro for his oil transactions.

I know that's typical conspiracy nut fodder, but it may have a kernel of truth.


yes, it is rare. hyperinflation occurs in destabilized economies that have too much printed cash relative to physical assets (to oversimplify a bit).

the US govt has printed too much money and keeps going further with stimulus packages and bailouts. the dollar is strong, currently, because it is the default fiat currency of the world. at some point the US will not be able to sell more bonds or the foreign creditors will dump dollars on the market or any number of other things can happen to trigger inflation.

you don't have to agree, but i would bet that hyperinflation will hit.


... Not sure if you're joking or not, but gold is very inflated right now because everyone is panicking and running to it.


using the word 'inflated' assumes that the stock market has overreacted on the negative side. this is not the case, in my estimation.

the significant spread between bullion and future contracts is also telling.


in a hyper-hyper-inflation economy the only "stable" thing would be firearms and LOTS of ammo.


We had hyperinflation in the early 20ies in Germany. The country survived that --- though in a bad shape. At the end of the twenties / early thirties, we had a deflation (like you in America) and the Nazis came.

Choose your poison.


gold is pretty much at it's peak at this point. It can't really go above 1000, so its just a way to freeze your money w/o a chance to grow it, but with a chance for it to lose its value.


It has already been above $1000 before. In the beginning at the month it was at around $900. Now it's at $975, so it's very close to $1000.

How do you know gold is at its peak? With fiat money there is a risk for a high rate of inflation. That doesn't happen with gold.


Sorry, I just typed out a reply to this and deleted it because I can't speak to the details adequately enough for my liking.

The gist of it was that gold is also subject to monetary pressures because its price is a reflection of the fact that it is used as a financial instrument. (In other words, gold's value is tied to the fact that it is used as currency).


One can print more dollars (and that's happening). One can't increase gold supply nearly that easily.


Except one can also retire currency to shore up devaluation at a later date. You can't un-mine gold. Gold's value doesn't directly correlate to supply and demand or it would continuously go down in value. We're still pulling it out of the ground pretty regularly, and as far as I'm aware, nobody is putting it back.


To increase the amount of fiat currency, you just have to print a lot of it. To do that with gold is much harder. Gold is expensive to produce.

If by "shore up devaluation" you think that governments will destroy fiat currency, I think that is unlikely to happen. Do you have examples of that ever happening? Usually more is printed and sometimes so much that you end up with hyperinflation.

With the current cost of gold productions, which are unlikely to change dramatically, hyperinflation of gold is not possible. Gold provides security and the market appreciates that. Yesterday it did top $1000 (again) by the way.


Could you explain why gold can't go above $1000?


1. Get in great shape. 2. Help the poor.


Try having a look at the Motley Fool website.

www.fool.com


Buy lots of gold and silver! But yes, diversify (savings, CDs, stocks, bonds, etc.).


Set aside some money in Kiva.com, it'll be the happiest investment you ever made.


Four chicks at once.


I want bans for everyone who voted parent up (+18 at time of writing).


Or just disenfranchise them.


Do nothing. It'll be everything you knew it could be.


Go all out on gold, you could have 46kg, imagine having your front door made of pure gold!


Even though I wouldn't use the gold to make a front door but if you look at the development of the Gold Price (http://www.google.com/finance?catid=64980108) it doesn't seem that unreasonable of an investment. But I wouldn't put all my money into one thing. Diversifying is key.


fuckin-a


why stop at chicks? why stop at four? i'm assuming newseller is female, of course.

i'm also assuming kbob didn't. can someone explain why the multiples fantasy is owned so much by the male population when it is the females that have much more flexibility and sustainability in this area. however great this situation might be for men, women stand to gain so much more. is it that women don't make such crass comments?


It's a reference to the movie "Office Space." http://www.imdb.com/title/tt0151804/quotes


http://EstablishedMen.com - Who doesn't want to make like Richard Gere in 'Pretty Woman' ?


Talk to Randy Komisar and ask what to do.


Two chicks at once.


Give it to me. I will put it to good use. Promise.


blow it back into another startup


invest in heyzap.com (haha)


Have you considered setting up YCombinator in Canada?


That's a great idea, and I'm not being sarcastic. IMHO startups around here really don't get enough love from anyone. Family look at you like you're crazy not wanting to be a wage slave, so you can afford a tiny apartment in the tenements out by the edges of Scarborough. Lots of government programs will cheer you on for taking the plunge, but few are actually there to help you...


I'd say being a land-owner is a good move for various reasons. Seriously, do you think the situation in terms of foods and water supply is going to get better in the next decade? http://www.kottke.org/09/02/fruits-and-vegetables-getting-le... (I don't say, put all your eggs in one basket.)


Many eggs, many baskets.

Make sure some of your wealth is out of the reach of your government. Bullion stored in switzererland or the channel islands is good for this.

Learn how to hedge with options. Puts were quite cheap before the crash. People who had insured their positions are doing fine. This occurs to remarkably few.


You can invest in development of a family hotel somewhere in Hymalayan trekking areas, like Nepal, Sikkim or West Bengal. Actually you can build two or three of them. =)


Invest in Madoff :D


invest in my startup http://rivals4ever.com ;)


First off, send me some cash. If you don't know what to do with it, give it to me (I'm a fellow canadian, eh).

Next thing would probably be to spread it around in some high-interest bank accounts and make sure you don't go over the insured amount. But I'm not an expert.

Congrats on the sale and good luck figuring out what you're going to do with all that cash.


You could invest in a nice consulting company, http://www.lab305.com, a couple guys trying to get things moving with some very good prospects in the works :) Then we could all be cashing out for another 2 million next year?


This is exactly what you should NOT do!


ouch ;) Of course, i was being facetious. Listen to a wise man like Warren Buffett. Take a certain amount of time, make sure you have a strong financial advisor, and make the money grow. The first million is the hardest, right?




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