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I have never worked as a financial advisor, but I did work for a while at a large buy-side firm. If I had $50 million, my biggest concern would be keeping that
by wtvanhest 11y ago
I have never worked as a financial advisor, but I did work for a while at a large buy-side firm. If I had $50 million, my biggest concern would be keeping that money safe and lowering volatility.
In the case of $50m, you can fully invest it in the stock market, but you need to be ready for wild fluctuations in your wealth. You also need to make sure the brokerage you gave the money to is reputable, or multiple brokerages. (SIPC only covers up to $500,000). You also may accidently buy overly correlated products without knowing it or may think you are buying low risk (bond funds) only to find out that they had super high duration (risk from insurance rates changing).
You can always put it in banks, but even that can be risky in times of extreme turmoil. During the last crisis, there were about 6 months when people were genuinely unsure whether all major banks would stay solvent. You are only insured to FDIC limits which will not come close to $50m.
You could go with real estate, 100% cash purchase, where you have no debt. (no leverage). As long as you pick a liquid asset class, that is likely safe, but you still need to insure the property and make sure your management team is running it properly which requires a lot of hands on work. You could still lose a lot of money if rates go up etc.
Having $50m is really a mo money mo problems scenario. A robo advisor can't fix it if you don't want 100% stock market exposure. I also don't think expensive advisors fix it either.
- alextgordon 11y agoFor me, the opposite. $50m is about 100x more than I could ever need, so I'd just stick it in $SPY until I die. Volatility is irrelevant as there is no actual risk to life or limb, only the "risk" of numbers going up or down.
- tamana 11y agoIf you really don't care about the money, you could donate it and let it be someone else's concern.
- thatcat 11y agoYou have the money so you don't have to care about the money; if you gave it away, you'd be stuck caring about money again.
- vehementi 11y agoAgreed, it's super weird to see that keep getting mentioned, that you need to minimize the volatility of your extreme fortune. Why? Are you planning to liquidate the extreme fortune in the next 1-5 years? ...
- tomc1985 11y agoJust remember that by doing that, you're betting on the US economy's perpetual growth, as diluted by outside influences (like China...) If increased globalization stands to average global wealth (which it seems to be, except for the 1%) then I'm not sure growth is a good bet, over the long term. SPY, QQQ, etc only go up as the economy goes up...
- mcjon77 11y agoDefinitely agree. IIRC, the biggest yearly loss for the Dow was 52% in 1931. While I would HATE to lose 50% of my wealth, the point is that with $50m I can EASILY ride that loss out and give it time to recover in a few years. Now, if I only had $50k in the market and was planning on using all of it on a big purchase that particular year (e.g. home down payment, child's college tuition), a 50% loss could be devastating. Volatility doesn't seem to have as much power when the potential losses are not great enough to cripple you.
- morgante 11y ago> $50m is about 100x more than I could ever need That's precisely why wealthy investors want to minimize volatility. They don't need their wealth to grow (they already have more than they need), but they definitely don't want it to disappear. Also, I must say that $500k really isn't that much money—it's not even enough to retire.
- deleted 11y ago[deleted]
- wtvanhest 11y agoI made a mistake in this post. I wrote: "risk from insurance rates changing" Which should have been "risk from interest rates changing."