
Sold my dipshit company for $5m, where to invest? - to_the_top
Hey, I recently sold my dipshit company for $5m cash and I have spent some money buying real estate only about $400k (an office for myself, for 200 and commercial unit (not rented out yet)) and invested another 500k in stocks/bonds (with my inv broker).  I am having a hard time finding good RE brokers who can find other properties for me (they all send me the same MLS listings, no private deals) and my investment broker is only able to provide me with 4-5% return, my own portfolio of 300k is doing better then his and I am new at this. So I am wondering, what practical advice anyone can give me so I can safely invest this money to beat inflation and live off of this for the rest of my life. Should I invest more of it into stocks? Should I buy a strip mall? or a strip club? :P I need practical advice investing, most stocks I have looked into for blue chip companies yield around 3%? and I would not want to put all of my money into stocks to make $150k a year off of $5m, with 1% being inflation and being taxed on that. Any sites/books/ideas let me know, I am thinking of doing a real estate course myself just so I can look at my own listings and invest properly into real estate.<p>edit: I am hoping the investments can be somewhat passive so I can focus on a new startup. I am in Ontario, Canada.<p>edit: I am 23, not married, no children :)
======
ChuckMcM
An interesting dilemma is it not? As you're young and inexperienced you are
not unlike the 3 or 4 folks who become millionaires under the California
lottery each year.

So good news and bad news, good news is you have choices, bad news is
commercial real estate is (by some estimates) the next thing to go into the
crapper).

Lets say you had $5M clear to work with. Yes, the 2 - 4% "return" is currently
'safe' money (which is to say treasury bill equivalents) so take $2M and buy a
treasury bill 'ladder', these things are sold by the government quarterly and
you can buy them at all maturities, so you split $2M equally into 40 parts,
buy 10 year T-bills with their 3.5% return and you end up with about $70,000 a
year (in the US at least) which is tax free. (So that is like having a salary
of $110K/year before taxes.)You buy a place to live and if you want, you
create another income stream to cover the taxes for that place.

At that point you've insured you're not going to go homeless or hungry and you
are left with between 1.5 - 2 million to be a bit more speculative with.
Putting .5 - .75M into equities is a reasonable way to capture that growth and
it gives you a way to augment some of your return. If you want to just
"participate" then buying index funds on the S&P 500 can do that with minimal
hassle.

If you go the Angel route you can invite people to tell you how they are going
to change the world and sponsor some of them. I suspect you will learn a lot
doing this, but I would not expect it to be particularly profitable.

You can find another niche, create a company to fill that niche, build it up
and sell it too.

Oh and I don't think you want a 'broker' what you want is a Financial Advisor
(There is a separate certification for them, they don't trade stocks directly
so they generally have less conflict of interest when it comes to fees).

Sounds like a nice problem to have, hope you do better than the Californians
(the Lottery here has depressing statistics about how some very large
percentage of lottery winners have lost it all in 18 months, sad really).

~~~
to_the_top
Solid Advice, I was looking up T-Bills, and I think the return is 1.5%
(<http://www.bankofcanada.ca/en/rates/tbill.html>)

Any advice on which firm to talk to about the financial advisor?

~~~
ChuckMcM
Hmm I used this page: <http://www.treasury.gov/Pages/default.aspx> and went to
the 10yr note and looked at its return. So to be clear, I'm talking about US
Treasury Bills and not Canadian Treasury Bills. If you have a relationship
with a financial institution you can buy them 'directly' (which is to say you
own t-bills as opposed to buy into a fund which invests in t-bills) at $10,000
each. (insert caveat about 'Goldman Sachs' which handles sales of t-bills to
individual investors and takes a cut, grrrr)

I don't have a magic bullet for finding a good financial advisor, mine cold
called me in 1988 when I was at Sun and convinced me to by some California
Municipal bonds. Now going on 23 years later I still consult her for financial
advice. I think its more of a style thing in terms of being able to talk with
someone about what makes sense and what doesn't with investing.

To give you an example, I was waaaaaaaaaaay over invested in tech in the 90's.
My advisor told me I was, but didn't push me to do something different. 2000
may not have had a y2k bug disaster but it was financially painful for me.

Some folks might blame their advisor for not being forceful enough and getting
me out of tech, but I don't roll that way. I heard what she had to say, we
talked about the pros and cons, and I went with 'let it ride for one more
roll' (a reference to the game of craps).

I was less forgiving of a recommendation for a fund manager who turned out to
be a total turd. But I'm a big believer in Iacocca's comment that if more than
half your decisions are good then you are ahead of the game. So advice for
looking for an advisor:

1) Interview them, ask them the 'hard' questions, like "did you suggest to
anyone to invest in Madoff's schemes?" (note either 'no' or 'yes' has good
follow up questions, "No? It was such a great return why not?", "Yes? Even
when the returns were out of line with other investments?")

2) Know that the wider the diversification the closer to the mean you will
get. If the S&P 500 has a return of X% and someone tells you they can
guarantee you > 1.5X% return, then you know they are not being truthful :-)
Doing about 50% better than the S&P 500 occasionally has sort of emerged for
me as a good razor for becoming suspicious. (note that 'banks' make there
boatloads of cash on volume, not because they beat the S&P by 50% but because
they beat it by a small amount but on a lot of other peoples money, and
FedRsrv money but that is a whole different rant)

3) Check for compatibility. Everyone is different in how they interact with
each other, and money, like sex, is one of those things that often has some
really strong notions that were burned into ones brain at an impressionable
age which color the way you look at everything. Risk averse? Risk seeking?
Money as a tool? Money as a game score? Do they define themselves by how much
money they manage? Do you? Its perhaps the hardest thing to get right.

------
pclark
Love to hear your "dipshit company" story. Do a post?

~~~
sagacity
Yes, please do!

Edit: Added: I'm sure many here would benefit from this.

~~~
to_the_top
i will do a post on it soon.

~~~
sagacity
Will look forward to it, thanks.

Also, if you do this via a new thread, make sure you post the URL of that
thread here, so that people can track from here. :-)

------
rbranson
Until you figure it out, immediately dump half of it into a Vanguard 500 Index
fund (VFINX). Vanguard's management fees are tiny (one quarter of one percent-
ish). No other risk investment will do you better than the S&P 500 as it's
compound annual growth rate has been 8.92% since 1897. Also, getting in and
out of the fund can be done in $100 increments and there are no fees for it,
so your money stays in a pretty liquid state.

~~~
dstein
With this much money you obviously don't want to be dropping the whole lot
into the market at one point. If this were 2009 it would've been a great
decision, but after a 2-year bull run that looks like it's petering out I'd
probably opt to keep most of it in cash/bonds/money market until you have a
better plan for the money.

~~~
rbranson
Perhaps over a 3-year span. However, over 10-20 years, you can't beat the
market. Even if you try to predict the ups and downs, the odds are pretty
stacked against you. The only funds that have been able to beat the market
over a non-trivial span of time have been pyramid schemes.

------
latj
How old are you? Are you married? Have Children?

I would suggest moving to New Zealand. They are looking for new citizens. You
can buy a big ranch for nothing and live in paradise for the rest of your
days.

Or, if you have young children, you could move to northern Europe- Sweden or
Finland. Your children are very likely to receive quality healthcare and
education.

Or, if you really have to stay in the U.S., I would invest a fraction of your
nest egg in ammunition. Really. This stuff lasts forever and only goes up in
value. Gold is almost useless to me.

Or, you could buy the abandoned house next door to me in St. Louis, MO. In the
past it housed a hoarder and a grandmother of drug dealers. It has gone many
weeks without a door and has been empty now for months. If you buy this house,
I cannot promise to feed you for the rest of your life, but if you still live
in America, are honestly trying to feed yourself, and are unable too- I will
help you find something to eat.

Let me know.

~~~
hsmyers
Same advice excepting location--- I'd suggest Ireland instead, hide out until
the world stabilizes (if it ever does).

~~~
dmc
Ireland has a huge cost-of-living, awful healthcare, and is terribly run.

It's a good place to house a corporation(the tax is very low) but for living
in... You'd want to be very secure, financially.

------
eunomad
One of my friends just buys lots and lots of gold. I think it depends on your
goals and what you want to achieve. In your prior post about selling, you said
you wanted to pursue something bigger. Taking that into consideration, you
would want to keep away from real estate in today's market where it is flooded
and then you have to remember that owning real estate also requires management
of the assets/upkeep etc.

Since Africa is having a meltdown and the Iran just took some war ships
through the Suez, I would say military companies would be a good investment
right now. Also, I would look to companies that help Americans forget their
troubles such as entertainment, food etc.

There is a really cool Vodka company in Alaska, Alaska Distillery, that might
interest you. They have a cool product and want to expand internationally.
They make Salmon Vodka which is a niche product. There are three partners and
maybe you can buy one out.. (I don't have any ownership in this company) They
have amazing sales that are strong and steady and they have a great leader
running the company.

You don't have to buy stocks on the stock market, you can find a stable
smaller company with good growth and invest money in it without too much risk
and get a nice income in return.

------
gte910h
If you're looking for longterm investments that are active, franchise
businesses (7-Elevens, Dunkin Donuts, etc) are remarkably stable. Magic
Johnson is a _huge_ investor in these for this reason (and has a line of
theaters)

Generally speaking, diversification is very very important.

Even though bonds, stocks, or other items might be doing poorly at the moment,
diversification protects against a precipitous loss. So get some of each sort
of security, some real estate, some counter cyclical stock (aka invest in
companies that do fine in down markets). Make sure you get very comfy with
your insurance agents as well: Liability and Errors and Omission insurance are
very important now, as you're a target. Make sure you're properly covered on
all your properties and that you use limited liability mechanisms with all
your business ventures. Be very careful you understand what actions as a board
member/fiduciary officer are not covered by the policies.

Additionally, keep more than you'd think is useful in a cash/near cash
account. Opportunities arise quickly. The ability to write a 200k check this
afternoon can make you many times your 5m sometimes.

A very serious aside:

At the same time, be _very_ careful of deals with ??? in the plan, especially
with people related to illegal drugs. If you're not sure what your money is
going, it might be going to normal wasteful stuff, or it could end up related
to drugs.

This is a good way to find everything of yours frozen, and you finding things
getting seized (I looked at some of your old comments is why I mention this
point, having known people who have had run ins when in a position like
yours).

~~~
JSig
Your note on diversification reminds me of a video I recently saw from Eric
Sprott. In it he said the following.

"I focus in on things. I get deep into things that I like. I dont worry about
diversification. I think it was Warren Buffet who coined the term
'diworsification'. I dont belive in diversification. For example on the long
side of our funds we are well through 70% into precious metals. For me, I am
probably into 70-80% gold. For me it does not bother me because I know that is
the place where I have to go."

He is a man of conviction.

~~~
gte910h
Depends on life goals. If your primary goal is to amass further wealth, large
bets on single items/industries can pay off very well. However, if your goal
is to not lose wealth, then diversification is a very good strategy. The OP is
in the latter school with these particular investments.

Additionally, I find it ironic you bring up Buffett: Berkshire is diversifying
out of insurance :D

[http://www.financialexpress.com/news/warren-buffett-
scouts-f...](http://www.financialexpress.com/news/warren-buffett-scouts-for-
buys/755525/)

>Foremost, though, was his acknowledgment of the need for Berkshire to expand
its non-insurance businesses, a broad collection that most prominently
includes the railroad Burlington Northern and the electric utility
MidAmerican.

~~~
jsarch
Expanding on your advice: when diversifying it helps to not throw darts. It
may be best to not have investments only in tech, auto, health, etc., but it's
quite another to randomly choose a company or two in different sectors.

Unsolicited advice ;-):

* Tech: ARMH over MSFT over FB (phones/tablets need to be low, low power and P/E of FB seems egregious)

* Auto: VLKAY over F over GM (100MPG TDI trumps "made in USA" trumps bankruptcy)

* Health: ILMN (NGS is the next $100BB market <http://bit.ly/fYehBI> )

(OP: I'd be more than happy to be a "trial run" for your angel investing. ha!
;-)

------
gopi
I am in a similar situation but i was so parnoid and keeping most of my money
in a treasury money market fund for years. Now i am slowly trying to get into
a 50/50 diversified bond-equity portfolio slowly in the next 2-3 years (via
dollar cost averaging).

To all the curious people there are a lot of lifestyle success like this
(which you wont read in techcrunch) from seo/ppc affiliates to viral websites
to SaS companies, you just have to search for it.

------
nickbp
The best thing you can do right now is taking a good 3-6 months to figure out
what you want to do with this money, framed in terms of what you want to do in
your life. Just park the money in a safe place (eg money market fund, treasury
bills) and work things out. There's no need to rush into things, the money
will still be there when you know what you want to accomplish with it.

After you've done that, you should have some idea of when/whether you plan to
use the money, and how comfortable you are with losing some of it. To be
honest, you're probably best off just choosing a reasonable mix of
stocks/bonds/cash which reflects your goals/needs, then going on with your
life. 5mil sounds like a lot, but in investment-land it's not an unusual
amount for a family to have saved for retirement. You would be well off to
check out the Bogleheads wiki and forum at <http://bogleheads.org>. The forum
would be an excellent place to post any questions you may have.

With regard to specific allocations, here are some example mixes between
stocks and bonds, and how those behaved over 40 years. It's not the best
chart, but it should give you some idea. Note that the author is subtracting
out an annual 1% management fee from those returns, which is completely bogus.
Go with good index funds and you'll be paying 1/15th of that.
[http://www.fundadvice.com/images/stories/fundadvice_images/f...](http://www.fundadvice.com/images/stories/fundadvice_images/fine_tuning_full.pdf)

Also, if you ultimately decide that you really want to get into real estate,
you might want to consider REIT mutual funds/ETFs, rather than buying
individual real estate properties and the risk/maintenance that comes with
them.

------
chopsueyar
Look for an "exclusive buyer agent" in your area for real estate.
<http://www.naeba.org/>

There are many good deals in residential and commercial properties (used for
rental income and a store of value).

If you are interested in the southwest Florida area, check out
<http://truesarasota.com>. Call and ask for Bill. Mention what you wrote
above. He will take good care of you.

You may want to try one or two residential rental investments and see if you
prefer residential or commercial. It really does depend on your strengths and
having a trustworthy network of people (handymen, estimators, inspectors,
plumbers, electricians, etc).

Rent out your commercial unit ASAP. Get some revenue, at least to offset the
taxes. Collect first month's, last month's, and a security deposit equal to
the month's rent for your commercial property.

When a commercial tenant breaks the lease, you may be responsible for removing
any materials and heavy equipment the previous tenant has left. This takes
time and money and you cannot rent the space again until it is taken care of.

You may want to reconsider a personal office and use a home office instead.
There may be better tax benefits to that situation, while generating
additional rental revenue for your newly vacant office. Build a new detached
home-office/garage.

You also have enough money to buy enough solar panels to never have an
electrical bill (provided your house is not too large). There are many tax
incentives for this, too. Not paying for electricity seems like part of a good
strategy to beat inflation. This may also work for your commercial properties.

Congrats on your success.

------
iworkforthem
Last time, I check real estate is about location, location, location. Every
place has its own demographics and its own legislations. I dun know any
books/sites can teach you all that.

I am familiar with how the real estate operating in Singapore, but across
Malaysia & Indonesia, it's a very different case. The same is with you. You
have to be there to know how people does business there.

Across the board, one thing I find some similar is that money move when
investing in property quite a lot. Investors tends to seek out undervalued
properties, buy in.... rent it out.... hold for a few years and sell.

Example... A few years ago, properties are hot in China, Hong Kong, etc..
Government come in... and it is no more.. Now it's going back Europe and USA
again.

Take time to understand the location, why does the property make sense. Who
does it make sense to? Financially how will it make sense for you in the next
3-5 years timeframe.

------
k00k
Dude, you can't call your company something funny like "dipshit" and then not
tell us what it was! That's just evil.

------
sagacity
Congrats on the sale first!

Have you thought about setting aside, let's say 5 or 10% of it for (angle)
investing in a few promising startups?

HTH

~~~
to_the_top
I don't think I can become a angel investor yet, but I will be using some of
the money to fund my own future ventures though.

------
brudgers
To understand real-estate and its development, I recommend the Urban Land
Institute [www.uli.org].

With "only" $5 million, you probably don't have enough to make a big enough
impression on the commercial side to get preferential treatment. Real estate
is similar to startup investing in that there are relatively tight communities
of investors who do deals together. In my opinion, there is little reason to
seek a real-estate license if your goal is to invest - commissions are just a
line in your _pro forma_. What is valuable is insight into the market - not
the conventional wisdom which floats around among agents.

------
flashgordon
Mate first of all congratulations. While I cannot give you advice on how to
invest your money, I would just caution against marketing your company as a
"dipshit company". What is that hinting about your buyer and your product?
Again I am guessing by "dipshit" company you actually mean a company that you
felt was not adding any value and you found some one gullible enough to buy
it. If you had a more positive connotation then my sincerest apologies!

But congratulations once again (another person I am not jealous of :D).

------
amurmann
I strongly recommend "Unconventional Success" by David Swensen
([http://www.amazon.com/Unconventional-Success-Fundamental-
App...](http://www.amazon.com/Unconventional-Success-Fundamental-Approach-
Investment/dp/0743228383/ref=sr_1_1?ie=UTF8&qid=1298992329&sr=8-1)). The book
reads a lot like a text book, but everything he sais just seems to make sense.
The man is CIO at Yale university. SO he should know what he is talking about.

~~~
anamax
> The man is CIO at Yale university. SO he should know what he is talking
> about.

Yale's endowment lost 30% in 2009
<http://www.nytimes.com/2009/09/11/business/11harvard.html> .

Heck - even the stuff that I barely pay attention to did better than that.

How many of you lost 30% on the investments that you manage?

~~~
nickbp
From the article, it sounds like 'fiscal 2009' must've encompassed late
2008/early 2009, in which case 30% losses would not be abnormal. Otherwise
this line sounds a bit odd:

 _At the end of fiscal 2008, Yale continued to turn in the best 10-year
performance with an average annualized gain of 16.3 percent, which was
followed by Harvard with 13.8 percent._

------
mmk
hi there, a couple tips/ideas \- almost all brokers are not investors, they
get a commission when they sell you investment products - keep that in mind.
\- probably invest 80% in stuff that retains value/grows steadily and 20% in
high risk/return stuff. \- real estate is probably a good investment now. I
would aim for places where a large amount of cash and ability to close quickly
gives you a pricing advantage (ie vs a lot of small deals where other people
bid up the price) \- within real estate, restaurants are poor credit risks
(being hit driven), commercial real estate is down right now, and residential
is down except in select areas like SF. \- residential real estate is counter
cyclical, ie in a boom, its bid up, in a bust, people turn to renting, so it
is a solid investment (assuming the surround location is a stable economy) \-
US stock market in aggregate is going to be flat, due to a structural issues.
\- areas of growth include tech, so buy what you know or emerging markets, so
buy a multinational with solid exposure there. \- other possibilities include
ETFs (like mutual funds) are more liquid, but be careful not all ETFs follow
the intended basket of investments that closely.

good luck, max, mba

------
gw666
I couldn't find the book that I really wanted to recommend in my earlier post.
But now I've found it: "The Only Guide to a Winning Investment Strategy You'll
Ever Need," by Larry Swedroe. It's the book I used to base my investing
strategy on. Its ideas are backed by a simulation of using the strategy
against 35 years of historical data--with long-term results of 9-11%/year.
Highly recommended!

------
d_mcgraw
Check out the book 'The Investment Answer'
(<http://www.amazon.com/gp/product/0982894708>). Its a great place to start
when trying to learn about investing and long term money management. It also
goes in depth on how to select someone to help manage your money.

------
baggachipz
First, tell me how you did this so that I can make that happen. Please.

Second, and I've always said that I would do this, take 2 million and put it
in very safe liquid investments. As a baseline, you can live off the interest
from that money forever. The rest you can treat as "house money" and do angel
investing, real estate speculation, etc.

------
gw666
Check out [http://www.sanfranmag.com/story/best-investment-advice-
youll...](http://www.sanfranmag.com/story/best-investment-advice-youll-never-
get), and optionally read "A Random Walk Down Wall Street." I've been using
these ideas for over two years now and am very pleased with the results.

------
damoncali
Some advice on commecial real estate: find a partner in the business, and I
don't mean a broker, I mean an actual, experienced investor who can do deals
with you.

Levered real estate is no joke, and despite the seemingly simple nature of the
business, there is a ton of nuance that can get you in trouble.

------
gobezu
its surprising no one mentions it but let me tell you where the rush is -
africa

ofc you need to be able to muster the challenges that will come with it but
the return is one that you can't match

investment in agriculture is really one to consider in countries such as
ethiopia with huge arable land available to investors with fees that are
practically negligible and you get a whole lot of incentives including 5 year
tax break please look around just as the chineses, indians and arabs are doing
and cash home instead of continuing the same simple minded real estate, start
up, yadayada rubbish, which is as you really know either exhausted or close to
fold

good luck

------
dbro
Read some good books. start with this one: [http://www.amazon.com/Intelligent-
Investor-Definitive-Invest...](http://www.amazon.com/Intelligent-Investor-
Definitive-Investing-Practical/dp/0060555661)

------
jyan
I am curious--is that $5m after or before taxes, because it really matters?

------
ante73
Make sure you diversify your portfolio. You don't want too much real estate in
it.

Consider adding some municipal bonds. In most cases the income is tax free.
Create a ladder of individual bonds and hold to maturity.

------
DanI-S
This dawned on me the other day: Invest in ski resorts in China. They've got a
rapidly growing middle class, flush with money to spend, and there's nothing
more middle class than skiing.

~~~
RyanHolliday
I don't know that I'd assume there's nothing more middle class _in China_ than
skiing.

------
swampplanet
What a place to be in. I would suggest you look outside of the Western World
namely Central and South America. I'm a commercial broker and that's where I'm
putting my money.

------
mdink
So I know people keep asking this, but I am dying to hear what industry /
niche your dipshit company was in. Obviously you are out now, so no need to
keep secrets?? :)

------
RoyG
Lots of good investment advice; my advice is to guard against losses:

1.) Keep the hookers and blow to a minimum.

2.) If you think you've met 'the one,' be sure to get a prenup.

------
turar
Is there a reason for secrecy around the name and nature of your dipshit
company? Does it have a website?

------
antidaily
Max Klein?

------
ntulip
good real estate deals are hard to come by. i recommend you reach out to the
biggest broker in your area or even outside. but the bank is where the good
deals are. Talk to your banker.

------
zaph0d
Buy Facebook shares on SecondMarket.com.

~~~
to_the_top
I can't I have tried. Only for big time investors. (Even asked my inv broker
at Waterhouse to look into it)

~~~
mrchess
And the rich get richer...

------
woid
what do you guys think about covestor.com?

I'd like to play there with some spare cash...

