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Sold my dipshit company for $5m, where to invest?
41 points by to_the_top on March 1, 2011 | hide | past | favorite | 61 comments
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.

edit: I am hoping the investments can be somewhat passive so I can focus on a new startup. I am in Ontario, Canada.

edit: I am 23, not married, no children :)

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).

I have problems with your advice. 1. Treasuries are not tax free. 2. Technically the 10 year is a T-note.

3. This is not a risk free strategy. Interest rate risk is your biggest problem here. Although the Ladder will work in the current environment (interest rate anticipation), their is a good risk of higher inflation that could happen rather quickly. You will be screwed if your in fixed payment securities. The Bullet may be a better strategy here.

To the OP. I would never listen to investment advice on the internet. Finance is complicated and easy to mess up. That said, I would invest in some options in your position, if you choose to play the markets. Don't do this unless you know what your doing however. Also be careful with financial advisors. Some, but not all are the chiropractors of the finance world. The CFA designation is viable here.

You will probably be able to find better returns outside of financial markets, but it all depends.

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?

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.

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

Here is another post where OP talks more of dipshit company.


Yes, please do!

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

i will do a post on it soon.

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. :-)

I'm guessing it's that three things or something startup that recently sold itself to the domain speculator.

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.

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.

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.

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.

> a fraction of your nest egg in ammunition. Really. This stuff lasts forever and only goes up in value.

It lasts a long time if kept air conditioned in a climate controlled area. It doesn't last as long in humid regions or warm/highly temperature variant regions. This goes double for types of ammo that are not as tightly formed in their casing.

Also, is there a good secondary market? Seems like something that would be hard/liable to cause criminal prosecution for selling, if you accidentally sold to the wrong dude.

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

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.

Isn't Ireland experiencing total economic collapse at the moment?


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.

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).

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.

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


>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.

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! ;-)

Thanks for your help, I have considered buying a franchise but as you may know: 1. Good locations are taken 2. Priority generally given to current owners 3. It is a business I would have to overlook on a consistent basis (However a hotel investment I think would be okay in this sense, but again, good Hotel franchises are way more expensive plus again good locations are taken, and I do not want to work in the Boonies)

Again with the diversification: I'd be more inclined to buy several 350k stores than 1 multi-million dollar hotel. The added benefit is you do not need to be as involved as you think, as you can hire middle management pretty easily at that level. (I grew up in a 7-Eleven store, which was purchased by a guy in a similar situation to you, along with several other ones from prior owners).

Second, you can talk to far away yet successful chains and offer to be the "anchor" locally. Find a Vancouver chain, for instance, and convince them to open stores in Toronto, etc.

Also, remember there are tons of chains out there, including ones that don't have offices/aren't mainly associated with their offices. I mean, for instance, stuff like Deco, which is a lot of "on site" window repair (Full disclosure: I have a indirect relationship with them, but I say their name more because I'm an American who knows few Canadian businesses than any particular knowledge of Deco).

I would not be surprised to find out there is a Canadian office of business affairs who'd help point you towards franchise opportunities.

Lastly, you can purchase them from people who already own them (with most franchises). I know that's how my family got out of their 7-Eleven store. In this economy, I'm sure there are people looking to sell. If you look hard enough, you may find one who is doing so due to hardship rather than due to poor performance.


All that said: I say all the above because franchises are stupidly good at maintaining wealth. If you want passive and are willing to risk inflation issues, I'd go to with passive.

Also, you may want to buy some USD right now if you're all in CAD. USD swung down due to oil price issues. Oanda is cheap for large currency transactions according to my banker friend (flat fee as opposed to %). RBC also has free CAD->USD conversion for Canadians IIRC.

Then again, this might be permanent, and speculation is never a great way to gain security.

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.

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...

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.

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.

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.

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

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?


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.

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.

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).

I strongly recommend "Unconventional Success" by David Swensen (http://www.amazon.com/Unconventional-Success-Fundamental-App...). 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.

> 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?

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.

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

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!

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.

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.

Check out http://www.sanfranmag.com/story/best-investment-advice-youll..., 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.

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.

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

Read some good books. start with this one: http://www.amazon.com/Intelligent-Investor-Definitive-Invest...

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

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.

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.

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

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.

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?? :)

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.

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



Max Klein?

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.

Buy Facebook shares on SecondMarket.com.

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

And the rich get richer...

what do you guys think about covestor.com?

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

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