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IMO if you have a net worth under $10M, you don't need materially different financial advice than a middle class worker saving in their 401(k): use low-cost ind

IMO if you have a net worth under $10M, you don't need materially different financial advice than a middle class worker saving in their 401(k): use low-cost index funds. Consider a lazy 3-fund portfolio: U.S. Stocks, International Stocks, and Bonds. Hold those in proportions that match your risk profile (young = more stocks, near retirement = shift into bonds, etc).

mikorym 7y ago
I know this is tangental, but it fascinates me that you could hold a stock that pays <5% dividend yield whereas the bulk of the economic impact is wages, salaries, business with other companies, etc. The assumption that your stock price necessarily should go up I think is an assumption that will change somewhat in the next 50 or 100 years. In this sense, the rich, those with pension funds, but largely the financial managers dictate a lot of what happens in the economy.
Phillipharryt 7y ago
I would disagree. With a net worth in the millions (but still under 10) you should consider investing in property and perhaps even art. These are things middle class workers are not looking into as much. Index funds can't match the potential returns that being a property investor does. It also allows you to turn your wealth into an asset that can be leveraged for further investment. Stocks are how you keep your wealth steadily increasing instead of stagnating, property is how you turn that 5 million into 20. Money managers will help you with this, even getting a trusted real estate agent that is your go-to would be helpful.
- JMTQp8lwXL 7y ago
  You're less likely to make seasoned choices with property. When you buy an index fund, you get everything -- the winners and the losers. Let's say you have $10M and want to put 20% into real estate. $2M will only get so many properties (a handful?) -- they could depreciate, they're highly illiquid, and you could end up buying in the wrong neighborhood (though, say, adjacent neighborhood appreciated much more). It's kind of like throwing darts. No real estate agent 40 years ago would've told you that $300k lots with homes are now worth millions, but a mile away those same sized lots are now worth $500k (this is actually true in my area). The opportunity cost is too high, that you'll make the wrong choice, picking property that appreciates poorly, and had you just stuck with an index fund, you would've done better.
  - Phillipharryt 7y ago
    The evidence is against you. Rich people don't just wack money in the holy index fund of stable returns. Investing in properties is more complicated than buying, waiting, and flipping. With 2 million dollars cash you could probably buy 7 or 8 apartments (leverage is pretty useful), you would rent these out and hope they appreciate, or depreciate by less than the income from rent. It's a very reasonable investment, it just takes capital to begin with, the risk is lower than you think because as I mentioned, you can rent the property which hedges against depreciation. And even in the case of depreciation it can be favourable for tax purposes, you make money through renting and you reduce your taxable income through selling for a loss, it's still a net positive investment. The index fund is the greatest thing to ever happen to casual investors, but with millions of dollars at your disposal you should no longer consider yourself part of that group. They're also not infallible, in the long run they're up but in the short run you can lose a lot of money in them, just like any investment.

mikorym 7y ago

I know this is tangental, but it fascinates me that you could hold a stock that pays <5% dividend yield whereas the bulk of the economic impact is wages, salaries, business with other companies, etc. The assumption that your stock price necessarily should go up I think is an assumption that will change somewhat in the next 50 or 100 years. In this sense, the rich, those with pension funds, but largely the financial managers dictate a lot of what happens in the economy.

Phillipharryt 7y ago

I would disagree. With a net worth in the millions (but still under 10) you should consider investing in property and perhaps even art. These are things middle class workers are not looking into as much. Index funds can't match the potential returns that being a property investor does. It also allows you to turn your wealth into an asset that can be leveraged for further investment. Stocks are how you keep your wealth steadily increasing instead of stagnating, property is how you turn that 5 million into 20. Money managers will help you with this, even getting a trusted real estate agent that is your go-to would be helpful.

JMTQp8lwXL 7y ago
You're less likely to make seasoned choices with property. When you buy an index fund, you get everything -- the winners and the losers. Let's say you have $10M and want to put 20% into real estate. $2M will only get so many properties (a handful?) -- they could depreciate, they're highly illiquid, and you could end up buying in the wrong neighborhood (though, say, adjacent neighborhood appreciated much more). It's kind of like throwing darts. No real estate agent 40 years ago would've told you that $300k lots with homes are now worth millions, but a mile away those same sized lots are now worth $500k (this is actually true in my area). The opportunity cost is too high, that you'll make the wrong choice, picking property that appreciates poorly, and had you just stuck with an index fund, you would've done better.
- Phillipharryt 7y ago
  The evidence is against you. Rich people don't just wack money in the holy index fund of stable returns. Investing in properties is more complicated than buying, waiting, and flipping. With 2 million dollars cash you could probably buy 7 or 8 apartments (leverage is pretty useful), you would rent these out and hope they appreciate, or depreciate by less than the income from rent. It's a very reasonable investment, it just takes capital to begin with, the risk is lower than you think because as I mentioned, you can rent the property which hedges against depreciation. And even in the case of depreciation it can be favourable for tax purposes, you make money through renting and you reduce your taxable income through selling for a loss, it's still a net positive investment. The index fund is the greatest thing to ever happen to casual investors, but with millions of dollars at your disposal you should no longer consider yourself part of that group. They're also not infallible, in the long run they're up but in the short run you can lose a lot of money in them, just like any investment.