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If from the Coinbase IPO, you just got out of lockout and you're new to that amount of money. You're probably still near 100% invested in Coinbase and need to d

If from the Coinbase IPO, you just got out of lockout and you're new to that amount of money. You're probably still near 100% invested in Coinbase and need to divest into something more diversified and less volatile than Coinbase before you can sit on your hands and look at the number in your brokerage account as if it was real retirement grade money. Plus you'll need to pay a ton of taxes on the capital gain. So don't chill out too much. Divest out of Coinbase, continue life as before and get used to the money. Take your time before changing everything and increasing your spending levels. In a year or so, hopefully you'll have diversified and your head will have cooled from the new money, and you'll be more leveled and realistic about what this money enables you to do, and how to handle your life going forward. As far as I can tell, it seems like a large (20-50) percentage of people who have a large windfall... end up losing it all because they don't take the time to learn how to handle it. Good luck and happy birthday!

qPM9l3XJrF 5y ago
What are the most common reasons for losing it?
- tonyedgecombe 5y ago
  I'm guessing lifestyle inflation, divorce, bad investments ...
- qqqwerty 5y ago
  The number one reason for folks who won the "IPO lottery" is they fail to cash out/diversify their stock, and at some point in the future the stock price drops dramatically. For example, during the 2001 tech boom/bust a lot of tech companies went bankrupt in a very short period of time. As a result a lot of tech employees saw the value of their stock/options drop to zero (effectively). The speed in which the bust happened caught a lot of people off guard. It is generally a good idea to move at least some of that money into a diversified portfolio as soon as possible. But folks often put this off because they don't want to pay the cap gains taxes and/or they think the stock will keep climbing.
  - laurent92 5y ago
    I guess I did the right thing: Atlassian IPOed in 2015 at $21, despite everyone suggesting to cash out, I wasn’t interested, and I sold only since 1 year between $180 and $320, and kept 1/3rd. BUT it keeps climbing, $480, so you aways feel like you’re missing something, whether you sell or not. There is no right way of doing it, you’ll never sell at the top. At least the right moment is when you can use the money for a project.
    - gryn 5y ago
      sell half, keep half (or whatever ratio you're comfortable with)? that way if thing go bad they are not as bad as ending up with nothing and if they get better you still benefit a little bit.
    - prox 5y ago
      My econ teacher always said to keep the money invested you want to lose. Couldn’t you take out a sum, but keep investing a sum you dare to lose?
      - OJFord 5y ago
        Hence GP says 'diversify'. If you weren't an employee, or were one with no related stock in the company, would you buy so much, invest ~everything, in that (or any) one company? No? Well, don't treat holding differently to buying. It's the same, modulo fees & tax.
      - amelius 5y ago
        My econ teacher taught me nothing about personal finance. Is this normal?
        prox 5y ago
        I dunno, got taught in Europe, got micro, meso and macro in different years, and sometimes semesters. My econ teacher was also a bit weird in a good way, a real character with a lot of knowledge. Ofcourse I didn’t do anything with it, wish I had.
mkleinstadt 5y ago
Not to mention that there's a nonzero chance of Tether bringing down the entire crypto ecosystem (temporarily) within the next year, Coinbase stock included
- akuji1993 5y ago
  I'm trying to figure out crypto right now, could you explain why you believe this? Or link somewhere where I can read about it?
  - XorNot 5y ago
    Tether has been extremely opaque in what assets they hold to ensure the 1:1 USD/Tether peg. It's been observed that at least as one point they definitely didn't have enough USD-equivalent for it, and they've been issuing new Tether at quite a clip since then with flow on effects to the BTC market. Now if they actually had this financing in place, this would all be fine - but nobody can find a proper accounting of who they're doing business with at the scale they claim to be doing business, beyond the observation that none of the big US players seem to have any business with them - so what assets are actually backing tether? https://www.forbes.com/sites/nicholasgans/2021/05/13/tether-releases-breakdown-of-its-reserves/ https://www.forbes.com/sites/nicholasgans/2021/05/13/tether-... Note that the vast majority is "commercial paper": basically short term loans to companies with relatively risky backing. The problem is that's all we seem to know: no one knows from who they've been buying these. It might be large US companies with 50 year histories, or it might be Chinese property developers at risk of bankruptcy (at which point international debtors will be the first to lose their money).
    - Traubenfuchs 5y ago
      Tether is just one of many cryptocurrencies -wouldn‘t its implosion lead to people pulling out and investing their money in other crypto, hence consolidating the market and making every other coin rise?
      - CircaSurvive 5y ago
muzani 5y ago
There's a Ask HN thread, maybe a few, of people who hit it rich and later lost it. The common theme is it's easier to make lots of money than it is to keep it, which is a little unintuitive.
- gitfan86 5y ago
  The scenarios where that can happen: 1. Bad budgeting or lack of diversification. "95% of my money was in Enron" 2. Confirmation Bias. "I build a successful company once, I can do it again, but this time with my own money" 3. Hedonic Treadmill. "Flying commercial is so annoying, I'm going to fly private, and figure out how to pay for it later"
  - deleted 5y ago
    [deleted]
- benjaminwootton 5y ago
  Do you have a link to this one please? Sounds interesting!
  - muzani 5y ago
    https://news.ycombinator.com/item?id=20521902 https://news.ycombinator.com/item?id=20521902 The good stories are around the middle.
- ebanana 5y ago
  thanks for sharing, storing thst up in the noggin
- davidajackson 5y ago
  Is it really unintuitive? Most Americans only save about 7% of their income IIRC, wouldn't it make sense that they would mismanage most windfalls by default? In recessions, this number jumps up dramatically, proving that it's mismanagement that contributes.
OJFord 5y ago
> As far as I can tell, it seems like a large (20-50) percentage of people who have a large windfall... end up losing it all because they don't take the time to learn how to handle it. I agree with all your advice, but I think that^'s impossible to tell. The vast majority of people successfully and sensibly handling such things are (partly as a result or even 'input' of it) not talking about it.

qPM9l3XJrF 5y ago

What are the most common reasons for losing it?

tonyedgecombe 5y ago
I'm guessing lifestyle inflation, divorce, bad investments ...
qqqwerty 5y ago
The number one reason for folks who won the "IPO lottery" is they fail to cash out/diversify their stock, and at some point in the future the stock price drops dramatically. For example, during the 2001 tech boom/bust a lot of tech companies went bankrupt in a very short period of time. As a result a lot of tech employees saw the value of their stock/options drop to zero (effectively). The speed in which the bust happened caught a lot of people off guard. It is generally a good idea to move at least some of that money into a diversified portfolio as soon as possible. But folks often put this off because they don't want to pay the cap gains taxes and/or they think the stock will keep climbing.
- laurent92 5y ago
  I guess I did the right thing: Atlassian IPOed in 2015 at $21, despite everyone suggesting to cash out, I wasn’t interested, and I sold only since 1 year between $180 and $320, and kept 1/3rd. BUT it keeps climbing, $480, so you aways feel like you’re missing something, whether you sell or not. There is no right way of doing it, you’ll never sell at the top. At least the right moment is when you can use the money for a project.
  - gryn 5y ago
    sell half, keep half (or whatever ratio you're comfortable with)? that way if thing go bad they are not as bad as ending up with nothing and if they get better you still benefit a little bit.
  - prox 5y ago
    My econ teacher always said to keep the money invested you want to lose. Couldn’t you take out a sum, but keep investing a sum you dare to lose?
    - OJFord 5y ago
      Hence GP says 'diversify'. If you weren't an employee, or were one with no related stock in the company, would you buy so much, invest ~everything, in that (or any) one company? No? Well, don't treat holding differently to buying. It's the same, modulo fees & tax.
    - amelius 5y ago
      My econ teacher taught me nothing about personal finance. Is this normal?
      - prox 5y ago
        I dunno, got taught in Europe, got micro, meso and macro in different years, and sometimes semesters. My econ teacher was also a bit weird in a good way, a real character with a lot of knowledge. Ofcourse I didn’t do anything with it, wish I had.

mkleinstadt 5y ago

Not to mention that there's a nonzero chance of Tether bringing down the entire crypto ecosystem (temporarily) within the next year, Coinbase stock included

akuji1993 5y ago
I'm trying to figure out crypto right now, could you explain why you believe this? Or link somewhere where I can read about it?
- XorNot 5y ago
  Tether has been extremely opaque in what assets they hold to ensure the 1:1 USD/Tether peg. It's been observed that at least as one point they definitely didn't have enough USD-equivalent for it, and they've been issuing new Tether at quite a clip since then with flow on effects to the BTC market. Now if they actually had this financing in place, this would all be fine - but nobody can find a proper accounting of who they're doing business with at the scale they claim to be doing business, beyond the observation that none of the big US players seem to have any business with them - so what assets are actually backing tether? https://www.forbes.com/sites/nicholasgans/2021/05/13/tether-releases-breakdown-of-its-reserves/ https://www.forbes.com/sites/nicholasgans/2021/05/13/tether-... Note that the vast majority is "commercial paper": basically short term loans to companies with relatively risky backing. The problem is that's all we seem to know: no one knows from who they've been buying these. It might be large US companies with 50 year histories, or it might be Chinese property developers at risk of bankruptcy (at which point international debtors will be the first to lose their money).
  - Traubenfuchs 5y ago
    Tether is just one of many cryptocurrencies -wouldn‘t its implosion lead to people pulling out and investing their money in other crypto, hence consolidating the market and making every other coin rise?
    - CircaSurvive 5y ago

muzani 5y ago

There's a Ask HN thread, maybe a few, of people who hit it rich and later lost it. The common theme is it's easier to make lots of money than it is to keep it, which is a little unintuitive.

gitfan86 5y ago
The scenarios where that can happen: 1. Bad budgeting or lack of diversification. "95% of my money was in Enron" 2. Confirmation Bias. "I build a successful company once, I can do it again, but this time with my own money" 3. Hedonic Treadmill. "Flying commercial is so annoying, I'm going to fly private, and figure out how to pay for it later"
- deleted 5y ago
  [deleted]
benjaminwootton 5y ago
Do you have a link to this one please? Sounds interesting!
- muzani 5y ago
  https://news.ycombinator.com/item?id=20521902 https://news.ycombinator.com/item?id=20521902 The good stories are around the middle.
ebanana 5y ago
thanks for sharing, storing thst up in the noggin
davidajackson 5y ago
Is it really unintuitive? Most Americans only save about 7% of their income IIRC, wouldn't it make sense that they would mismanage most windfalls by default? In recessions, this number jumps up dramatically, proving that it's mismanagement that contributes.

OJFord 5y ago

> As far as I can tell, it seems like a large (20-50) percentage of people who have a large windfall... end up losing it all because they don't take the time to learn how to handle it. I agree with all your advice, but I think that^'s impossible to tell. The vast majority of people successfully and sensibly handling such things are (partly as a result or even 'input' of it) not talking about it.