
Ask HN: $500k cash – what to do with it? - nomdesign
I&#x27;m 30, married and planning to start a family next year. I want to work hard now in exchange for better financial stability later. However, I rather spend my time on learning how to use money to make money, than taking on a job. Although if I have to, I can make a decent salary. I have ~$300k in mortgage, no other debt, monthly expense is ~$5000 (includes mortgage, tax, utilities, food, entertainment, etc). Assume I am the sole bread winner. No other assets. Able and willing to take a reasonable amount of risk. Parents can take care of themselves financially, only dependent is spouse and future kids. Thanks!
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nicholas73
I'm assuming that you have limited investment experience, which is why you're
asking this on HN, thus having fallen upon a windfall through inheritance,
company stock options, etc.

My personal opinion: do nothing. Do nothing. DO. NOTHING.

This amount of money is psychological destabilizing, but even that will be
nothing compared to when you are risking it. You have no idea how you will
react if you start losing money (you might increase risk - that's how people
blow their fortunes).

If you're really looking for financial freedom, use the cash to take time off
a job and start working on your own business.

If you are interested in investing because you are interested in investing
(unlikely if you haven't dabbled in that already), then start small. Take 25k
and start buying stocks or whatever. Do not go big - it takes years of brutal
experience to get even decent at investing.

This is life changing money - in other words, your life has already changed.
You don't need to multiply it to change your life. It's not worth risking it
all. Go small, and just take time.

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strick
Simplest: 100% VTSMX

Conservative: 60% VTSMX, 40% VBMFX

I would do: 50% VTSMX, 30% VBMFX, 15% Lending Club, 5% YCombinator funds on
fundersclub or wefunder.com (split over next 4 summer and 4 winter classes)

This is a great site:
[http://www.mrmoneymustache.com/](http://www.mrmoneymustache.com/)

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oldspiceman
Why do you choose VTSMX over VTI? VTSMX expense ratio is 0.17 bps while VTI is
0.05.

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vespergo
look at the charts, its simple. VTSMX > VTI even after that expense ratio.

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oldspiceman
Read about ETFs. They are the same as mutual funds without the fees.

Kids cost more than you think they will.

See if your bank will let you make a yearly lump sum payment on your mortgage
directly on the principal. They do up here in Canada. If they don't, ask
another bank if they will and then tell your bank you're willing to switch.

Managing money is not difficult. The more time you put into it the more money
you will lose.

Be careful taking financial advice. People fall into two camps: fearful or
optimistic. There are many more fearful people than optimistic people, even
though the equity market has an upward tendency.

When purchasing investments, be wary of good sales people, they are the ones
who will screw you the hardest. The geeky guy you don't trust is likely giving
you good advice. The good looking guy who makes a lot of sense and who you
just like for some reason... Run!

~~~
greenyoda
_" Read about ETFs. They are the same as mutual funds without the fees."_

ETFs do have expenses - nobody is going to manage them for free. They're just
incorporated into the share price, so their long-term returns will be slightly
less than those of the underlying basket of securities they hold. ETF's
expense ratios are generally lower than those of traditional mutual funds.[1]

However, with many mutual funds, you can reinvest the dividends and
distributions for free, but to do that with an ETF would require paying a
brokerage commission each time.

[1] [https://en.wikipedia.org/wiki/Exchange-
traded_fund#Costs](https://en.wikipedia.org/wiki/Exchange-traded_fund#Costs)

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Kanbab
$500,000 isn't too much. You would be fortunate if you can turn the $500,000
into $5000/mo in income, thereby covering all of your current monthly
expenses. Once you have all that free time, you'll probably want to start
spending more money though.

You can earn the 12% a year by investing wisely in rental properties. That
would be 12% in net income, which doesn't include any future appreciation (or
decline in price). To achieve those numbers, you will most likely want to buy
your rentals with a mortgage, so I hope you have a W-2 or other steady taxed
income for the last 2 years, because thats what you'll need to qualify for
_most_ loans, but not all.

By leveraging your $500,000, you can buy $2,000,000 worth of assets in real
estate. YMMV.

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pbhjpbhj
Where are you? What's the interest rate on your mortgage - any investment
needs to beat that to be _financially_ a better choice.

~~~
nomdesign
US. 4.5%, 30 years.

~~~
redtexture
Expenditure reduction could be more important than you have yet considered,
and give you more future flexibility in your financial and emotional life:
assuming you save the money not expended, which is its own learning
experience, life practice and meditation.

You could have a twenty-year mortgage for about a percentage point less
interest, and for a mere 250 dollars a month more payment, a mere 5% increase
of your present monthly expenditure. By paying down the loan 10 years sooner,
you may expend an additional $60,000 over 20 years paying the loan off, and
also avoid later expending $180,000 for years 21 through 30, for a net
reduction of about $120,000 at the end of 30 years (in the variable value
"current-year" dollars).

You also could decide to own the house outright now, debt free, and save a
mortgage expenditure of $1,500 a month for a reduction in expenditure of
$540,000 over 30 years, and still have $200,000 cash reserves today.

Investing a stream of avoided mortgage payments of $1,500 a month -- $18,000 a
year is equivalent to creating a 30-year investment/saving program. Assuming a
not-so-great three percent interest on that program, you would have around
$850,000 in hand at the end of year 30, in future (inflated) dollars. You
could probably do better than that in investment return, and learn more along
the way slowly, with less risk.

All of this points to $500,000 to being not much money, and the rest of your
life activities and financial choices might have a far greater influence on
your possibilities and life flexibility.

The money you could save in expenditure reduction, and equally importantly set
aside for investing, might be a more powerful financial and emotionally
freeing future for you than investing the $500,000 lump sum you have now.

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moocow01
Consider that at least some of that should probably be reserved as the
beginning of a retirement fund... perhaps 150k if you and your spouse are
currently 30? Id look for some sort of reasonably safe financial vehicle to
place that as retirement.

The rest of it depends...

If you like where you live I'd probably get rid of the mortgage and keep the
remaining as an emergency fund. Minimizing living costs gives you a lot of
financial freedom to do many other things and knowing you'll always have a
roof over your head can increase your ability and appetite for trying the
riskier sorts of things (starting a business, investing, etc).

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EleventhSun
Convert it all to Dogecoin.

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gesman
This as well might be the best advice given at this point of time.

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coralreef
You have $500k in cash available after all that?

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mattm
Google Harry Browne - permanent portfolio

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kimcheeme
\+ Depends on how many kids you ideally want. \+ Depends on where you WANT to
live when you have kids \+ Depends on what your profession is (e.g. full-stack
developer or business guy with niche skillset) \+ What's a reasonable amount
of risk to you?

If you are a developer who can just go get another 100k job wherever then you
can take a decent amount of risk (even running your own startup and failing).

If you live in a city like SF or NY and want 2-3 kids, that money can go VERY
fast if you haven't planned well (should be looking into tax-free contribution
trusts for the kids though.)

There's couple of things you can do: 1) Invest in assets (real estate, stocks,
startups, muni bonds) 2) Invest in yourself (additional schooling or
education) 3) Take a gamble and be an entrepreneur 4) Do NOTHING and keep your
powder dry 5) Do a combination of the above

Interestingly enough, I think under the right scenario, you can learn to
invest across assets & start a startup.

I do not recommend investing in startups until you've gone through a startup
and fully realize how hard it is to succeed what kind of "real risks" you are
taking investing in these companies. Plus, seed investing (what you will be
doing) needs enough sample size - most likely min 20k @ 20+ investments and
each having a chance to all go to 0 (very high chance; that's why a lot of
crappy incubators flop).

Investing in stocks, bonds, real estate, etc. --> this can take thousands of
hours to do well but you have to start somewhere in your life. B-school won't
help you, getting a CFA won't help you, investing in these assets also means
understanding the style of investing you're comfortable with. It's also a lot
harder than people think it is at this point of the economic cycle (its was
easy to make money when we were at the bottom of the market and fed juiced the
markets up)... it's much harder to get good returns around this year to next
year. However this also means you may want to play with tranches of 50k and
give yourself 3ins to fk up completely. spending 150k total max loss out of
500k to put yourself into a position to force yourself to learn to invest is,
in my opinion, a pretty cool position to be in, given that you still have a
lot of dry powder left. That allows you to experiment with etfs, individual
stocks options, futures, even day trading --> all of which even if you lose
150k over the next 2 years, it will help you see how that side of the world
works for the rest of your life. And if it's the case that you're going to be
fairly well off one way or another (upper-middle class lifestyle in your 40s),
you're going to have to learn how to invest anyway. Real estate investing in
these times is something I would stay away from (if you're going to do it, I
would spend money on getting some education on real estate and wait for things
to pop in a few years or only buy extremely selective assets - just remember
that being a landlord is a lot more painful than people realize in the
beginning).

Becoming an entrepreneur - You're in a lucky position to self-fund the seed
amount and especially if you're a developer then that seed amount can go a
long ways. If not, you still have the financial wherewithdal to pay for a top
developer for about a year. Even then though I would put a cap on it for $250k
of your own money ($100k in developer expense for a year, $100k marketing
expense, and $50k in living expense. Based on my experience, if you can't get
enough "smart" money funding after you've spent $250k, that's probably not
going to be a good idea b/c what you realize is that there's actually a lot of
dumb "smart" money that just has to put capital to work.

All in all, I would focus on your passion (what interests you the most) and
stick to one thing as the primary way to improve your financial stability and
as a little hobby on the side, dabble in one more thing that you'd like to do
better. (e.g. Do a startup and on the side invest a $50k allocation by
following stocks in your startups' space).

One thing I highly recommend you to think about as a possibility is to spend
50k (10%) and travel around the world for 3 months with your wife. That can
help in almost everything that you possibly want to do (even raising a family)
: )

You'll have enough time to read about a number of things you want to
potentially experiment with while seeing how the world is actually working and
what each place needs; meet some cool people along the way and see how those
people are thinking about the world. Plus, a decent amount of time to relax
with your wife and have many a nights'conversations as to what you guys think
is the right next step to take (under a stress free environment). Also, if
you're going down the startup path - you're probably not going to take any
time off your first 24 months and it'll most likely be the most stressful
thing you've ever done...

My background: I positioned my life to be single, no mortgage, work my ass off
to save couple hundred thousand bucks saved by 27. Would like to think of
myself as having domain expertise in finanical markets. For the past few
years, continued to invest in public markets, decided that B-school was not
worth it for me (have tons of friends who went to top b-school), worked &
failed in my startup with my best friend, and wasted $150k of my savings. The
best thing for my career was failing at my startup - I learned more than any
of my friends who spent the same amount of money going to a top bschool.
Better yet, I realized that even after I failed, that is the space I want to
be in and that I'm actually pretty good at it (just didn't have the right
business concept). Now I'm working with another startup. Prior to startups,
I've traveled to over 30 countries over 6 month period and read every
periodical / book / website on business, investing, startups, etc. Absolutely
one of the best/coolest things I've ever done that provides dividends time and
time again.

Can have a more personal chat if you think that I can help.

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naveen99
Go get a degree: md, jd, MBA. 200k should be enough to take you through school
Buy bitcoin with the rest.

