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Send it to me, I'll take care of it for you ;)

Here is what I would personally suggest, having encountered a similar scenario once a long time ago...

Find a place to park about $4.9M in a CD, Money Market account, or similar ultra low risk location. Don't get too hung up on getting the absolute best interest rate, just find a place that will give you easy liquidity (ie: DON'T make a 5 year investment right now).

Then, buy and read the following books: "A Random Walk Guide to Investing" - Burton Malkiel "The Only Investment Guide You'll Ever Need" - Andrew Tobias

(and/or any equivalent titles that catch your interest).

Then once you have a good/better understanding of financial investments interview some financial advisors and talk to them in depth about how they plan to manage your assets. Ideally you're looking for something more along the lines of a "wealth manager" vs. a financial advisor.

Killing a year finding the right investment approach while your money makes even a very low percentage rate is, for a 20 year old, a better approach than rushing out and making possibly a bad investment that incurs a big loss, or has tax liabilities you don't fully understand.

In the shorter term, you should find a good local CPA-for-hire and make sure you understand any possible income tax issues. In some (many) cases, if you will owe a large income tax return you will need to pre-pay or make estimated payments. Not doing so can take a big bite out of your ass later (ref: portion above about keeping funds semi-liquid).

BTW, congrats on your success. Take it slow and don't be tempted to believe you know what you're doing or can repeat this easily (learned advice ;) ). You have much time and luxury to plan your next move, and no matter what anyone tells you, you are not missing out on the investment opportunity of a lifetime in the next 24 months and do not need to make any rash decisions.

At the same time, you should sort of off-handedly tell family and friends that you locked in to a great investment and in 5 years or so will be able to access some of the funds. This proactive approach is better than having to say no to all the outreaches for "help" and "personal investments" that tend to come with a large chunk o' cash.

CD rates are at 1% and are only FDIC insured up to $250K. I'm not convinced any bank will let you buy a $4.9 million CD. Although I'm sure brk is as smart as anyone I wouldn't take tips from random people on the internet.

Whenever these types of questions appear I find them a bit hard to believe. The anonymous OP suddenly has $5M in cash? There's just a un-cashed check for $5M hidden in the sock drawer? Where is the money now? As soon as you show up at a bank with more than $100K you're going to be swarmed with people suggesting various things to do with your money. Hasn't the OP already had to deal with all the tax and legal surrounding a transaction like this? He or she should be familiar with a flotilla of financial professionals by now.

You can buy 20 CD's or buy a CDAR, which is a pass-through instrument that aggregates CDs at multiple banks to get it all under FDIC insurance.


Personally, I think you'd just be better off buying government bonds from your favourite world leaders.

Based on past experience, nobody will bother you.

Yeah. Unless you're going to Mom's Bank of Sheboygan, $5m isn't that big of a deal. I only have experience with 7 figure sums in corporate accounts, but even the bank teller at the supermarket isn't wowed by that.

If you tell a bank you have $5m to to put in CD's they'll wet their pants alright, but it won't be security they call. It'll be their boss to gloat. (Unless maybe you bring it in in $100's in a duffel bag.)

I'm with you about it smelling a bit fishy, but on this site I take people at face value.

That said, there's plenty of places you can invest in AAA securities that pay much more than 1%. Split across several of these the capital should be safe until he finds a better place for it.

Credit ratings are BS. It's as if we didn't learn anything from watching the disaster that occurred when the world believed AAA-rated MBSs were sound investments. Don't let someone else tell you what investments are "safe".

That sounds impressive and popular with all the 'the market doesn't work/they're all corrupt' type of outrage currently doing the rounds, but the failures of ratings companies to correctly rate highly complex debt instruments doesn't make them all useless.

The fact remains there are a lot of simple, understandable securities which the ratings companies are across and have a long history of payments to look back on. I'm talking about corporate bonds where you can assess the creditworthiness of the company, government (non-US) bonds of stable and credit-worthy nations that pay much more than 0-1%

The other brk seems like a pretty decent idea if brk's advice regarding buying large CDs is incorrect:


You can buy Tbills directly from the Treasury at http://treasurydirect.gov/ Lower rates than a CD, but safer if you are worried about your bank going belly up (if you own a Tbill, the US Govt would have to go bankrupt for you to lose your money).

Just be careful with wealth advisers. I have heard more than one story about people losing their inheritances and stuff because of advisers. Also people who lost 100K+ by investing in the stock market by themselves.

I've come to the opinion that there really is no way around getting a little bit savvy about investing oneself. Until then, I would probably also stick to something fairly conservative. Or at least decide on a basic split into risky and less risky investments.

I'd recommend Ben Graham's "The Intelligent Investor". One doesn't have to buy individual stocks, or follow the strategy proposed in the book, but books like these will keep you from doing something dumb like, say, buying into the S&P 500 when its P/E is >30, and give you some perspective on and a valuable defense mechanism against all the stupid investment advice out there.

The Intelligent Investor is good, however, it's a bit dated. It's from an age when values could be found by carefully checking the companies books (and or paper files) and finding it owned a utility that had a book value worth more than the stock of the owning company.

Even Graham has said that for most people a low cost index fund is the way to go. Competing against a computerized/connected/inside information Wall Street is very hard and because of transaction costs (higher to the individual than the institution) winning stock trading strategies are non-trivial.

However, Claude Shannon (famous computer science guy) was a pretty good investor: http://en.wikipedia.org/wiki/Kelly_criterion

Fortune's Formula http://www.amazon.com/Fortunes-Formula-Scientific-Betting-Ca... details some of Shannon's methods and covers some other interesting stories like LTCM, Mathematician Edward O. Thorp's black jack schemes and later his creation of the one of the first "computerized" hedge fund.

> The Intelligent Investor is good, however, it's a bit dated.

I found this edition helpful in that regard: http://www.amazon.com/Intelligent-Investor-Definitive-Invest...

Each of Graham's chapters is followed by another chapter of interpretation/reflection on his advice in a modern context.

I'm surprised that the ultra conservative advice got voted up on a start up geared website. I would have thought I'd see more risk taking from the users

In the case of being a startup founder, you're risking little to potentially gain a lot. In the case of investing your newly earned fortune, you're risking a lot to gain a little (as a percentage).

The fact that the HN readership seems to be aggressive in the former case and conservative in the latter is not necessarily a contradiction (or, to be honest, even surprising).

The risk involved to start a business is time and money. You take one year off as a high paid engineer your losing over 100K. What if you need to boot strap your business because venture funds aren't available. The risk is low if you coded something on your spare time and somehow got a huge amount of VC funds(CD style investing). Wise investments are key to success of any business. How will you allocate your first millions in VC funds. Are you going to invest in staff, equipment or acquisitions. Sure you will have advisers at this point but it's important to understand the value of investments. If you are not surprised I would imagine you view the majority of start ups as the former kind I mentioned. Spare time and lots of vc money. I don't have any evidence to say that isn't always the case but it would appear odd to me if it was.

It's also a site frequented by people working salaried jobs and moderately successful freelancers who will never, ever see more than perhaps $100,000 in their bank accounts at any one moment for their entire lives.

Thus, we may be thinking of it in terms of "how can I use this money to invest such that I can live off of the interest for the rest of my life, getting the equivalent of a decent salary but without the actual work"? If I got millions of dollars, this would be the first thing I would be thinking about, not about how to risk it all just so I can be another greedy douchebag unhappy with their single-digit millions.

Except the typical startup founder, he now have something to lose.

> I'm surprised that the ultra conservative advice got voted up on a start up geared website. I would have thought I'd see more risk taking from the users

The "conservative advice" is intended to buy him time so he can figure out what he should do.

Note that startups aren't about seeking risk. They're about exploiting cases where the perceived risk is greater than the actual risk. The advice givers think that his perceived risk is currently lower than his actual risk. They're trying to reduce the latter.

I wouldn't consider putting 95% of your wealth in a single place to be particularly non-risky. Certified or not, recent events have demonstrated that diversification is a must nowadays.

Yes, you are 100% correct. What I was trying to say is that overall he is better parking the cash and learning more about how to properly invest a large sum of money vs. just going out to the closest Edward Jones office and plunking down a check.

"killing a year finding the right investment approach while your money makes even a very low percentage rate is, for a 20 year old, a better approach than rushing out ..."

So if you get $5M you should be looking to sacrifice a year from your life? Doh!

It would hardly be a sacrifice, it would be an opportunity to learn about investing and wealth management in a non-rushed manner while you carry on with the rest of your life more or less however you like.

As opposed to sacrificing a year of your life working for a typical salary?

You can spend that year doing whatever you want, just as you could before you got the money. No one is forcing him to invest his money if he doesn't want to.

I started reading Andrew Tobias' book but so far I'm bored with all the penny-pinching tips at the beginning... does it get better?

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