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Have 450k - what's the best way to invest?

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zeek123
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Have 450k - what's the best way to invest?  Reply with quote  

Hello... I'm 33 years old and have about 450k worth of stock options in a company I used to work for. I have the option to sell all or it, or just some of it. I intend to hold onto some of it since the value seems to be going up year after year. However, at some point I'd like to cash some of it out and use it for investing.

Here's my situation
33 years old
92k/year salary
401k is worth about 110k currently
Have about 18k in mutual funds and money market accounts, savings acct
Have about 15k in debt between credit cards, car loan, school loan

My goal:
I need to pay off my debt immediately. So that's a given.
Beyond that, I'm not interested in purchasing any material goods or depreciating assets. I grew up not having a lot money, and I don't care about collecting "things". If I use the money, it must be for something that is going to give some kind of ROI. I've done some investing in stocks, but I don't know a lot about mutual funds, or having some kind of investment portfolio. I wouldn't mind putting a little bit of money in some good long term growth stocks.

However, at the end of the day, what I'd like to do is not have to work a 9-5 anymore. I don't mind the job I have now, however, I'd like to work less and be able to spend a little more time on volunteering and helping other people. In addition, my mother is aging and I'd like to be able to spend more time with her. So, time right now is more valuable than money. Someone had suggested opening a Subway since the franchise fees are relatively low (225-250k), and yearly revenue can result in profits of about 80k per year. 80k per year is more than I need for my lifestyle. However, I'm not sure if this is a good investment or not.

I also have various skills in home remodeling and construction. So, I have debated about going into real estate such as buying distressed properties, fixing them up, and renting to generate a small amount of cash flow and build equity for the long term.

Anyways, I'm looking for some general ideas on how people would actually invest this kind of money. Any thoughts or comments would be great.

Thanks!
-Zeek
Post Wed Sep 23, 2015 4:13 pm
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oldguy
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quote:
I need to pay off my debt immediately. So that's a given.


Why? I've always kept my loans full term - not revolving consumer loans, but the fixed rate, low rate, long term loans. Eg,I never pay cash for a car, I finance it 100%, no down, even the tax & license. My objective is to apply my resources to their highest and best use. And since the generic US stock market has an average longterm return of 11%/yr (tax deferred), that is normally a better choice than using my capital to prepay 4% or 5% loans.

I would consider moving most of the $560,000 into an SP500 Index Fund. That gives you a wide diversification across the generic US & world business/industry. Whenever you narrow that broad approach, you add risk. Ie, if you narrow down to a business segment - say a banking or auto ETF- your add the risk of that segment onto the generic market risk. And whenever you further narrow your focus to an individual company (your options) you add the risk of that company to the risk of that segment, to the risk of the generic market.

As always, risk and return are directly proportional. Eg, your options may be returning 18%/yr - but a single company failure, ie bk, could take the entire $450k in a heart-beat. So you need to factor that risk into your return management equation. Personally, over 30 & 40 year periods, I like the 11%/yr risk level, I just incrementally accumulate, never sell/trade, and let it grow. $10k/yr for 30 yrs = about $2.2M. Your $450k at 11%/yr for 30 yrs = $9.9M. In other words, you've already done the work, all you need to do is leave it alone for 30 yrs. Very Happy

Spending $250k on a Subway sounds like a terrible idea - you will be paying 12 to 15 minimum wage part time workers about $75,000 in wages, plus your half of their SS costs. This works for folks will do anything to get away from the "man", be their own boss, yada. And then they learn that being your own boss actually carries responsibility plus LOTS of min wage work (when one or more of your 12 min wage workers fails to show up, guess who handles the opening?)

Real estate. I was a full-time engineer plus I had my real estate license. I owned 4 SFH for most of a 40-yr period (sold one last week).
There are two categories - landlording and remodeling. I did the former - I bought near-new houses (the first owner had hung the drapes and planted the grass), rented them out for decades, continually refi'd them and invested the equity at 11%/yr. As it turned out, the houses appreciated well, the rental income was steady, but using the equity for seed money and investing it at 11%/yr for decades was where my big money came from. So take that for what it's worth.

I've never done 'flipping' - but I know someone who does. He owns about 15 houses at a time, pays $150k for a house, has crews do interior paint, exterior paint, landscaping, new floors, all new appliances and counters/cabinets. Costs about $25k, take 10 days, hands it off to a realtor, sells in 2 weeks, about $225k. The $50k cash pays $12k to the Realtor, about $15k income tax, and $12k net to him. He takes his $150k and repeats for month #2, and so on for about 10 'turns' per yr, ie, $120k net on that $150k chunk. And he has several of these happening in parallel. He doesn't do any of the labor himself (altho he can strap on the tool belt if needed). In general, that work is worth about $12/hr whether you do it for yourself, or hire it - and in his case (and probably yours) his time is worth way more than $12/hr elsewhere. (Kinda like the Subway - if you buy some min wage jobs you will probably find yourself working for min wage).
Post Wed Sep 23, 2015 6:52 pm
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Brian Smith 1964
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Sell it and invest money in a diversified portfolio  Reply with quote  

Even if that company you own stocks in is doing great at the moment, everything can change at a moment's notice. The golden rule of investing sounds like this "diversify". Of course, you may choose industries that you are familiar with, companies/businesses that are doing great, or countries that seem stable and promising. But you still have to expose yourself to a wide variety of stocks/bonds/shares. To minimize risks and be confident in tomorrow.
Post Tue Sep 29, 2015 12:50 pm
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CFrogg
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Re: Sell it and invest money in a diversified portfolio  Reply with quote  

quote:
Originally posted by Brian Smith 1964
Even if that company you own stocks in is doing great at the moment, everything can change at a moment's notice. The golden rule of investing sounds like this "diversify". Of course, you may choose industries that you are familiar with, companies/businesses that are doing great, or countries that seem stable and promising. But you still have to expose yourself to a wide variety of stocks/bonds/shares. To minimize risks and be confident in tomorrow.


As for the splitting your investments there`s a stadle king of industry of mining minerals and rare-earth metals http://kazspecgeo.com/en/invest/ of course you`ll not have so much profit as in the other investments, but it seems to be much stable than a bitcoin.
Post Wed Feb 21, 2018 5:39 pm
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Benstoke
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Someone had suggested opening a Subway since the franchise fees are relatively low (225-250k), and yearly revenue can result in profits of about 80k per year. C1000-022 exam questions
Post Thu Aug 29, 2019 11:36 am
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Offshore-Wealth.com
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INVESTING ALWAYS COMES WITH RISK  Reply with quote  

Everyone wants to earn a solid ROI, but with banks barely paying 2%, which is hardly worth it given inflation, even at these low rates will eat into your ROI, so combined with the pending collapse of major banks starting all over again, I wouldn't keep any money in any bank, PERIOD.

The federal reserve is pumping hundreds of billions into banking in silence, and it is a bailout which they do not want most to know. Banks are illiquid and the overnight common loan rate between banks went from 1% to 10% because no banks are liquid with cash balances, a sure sign of pending collapse once again. Banks should never have been bailed out last time, and this time I doubt Trump will allow it this time. He wants to end federal reserve ponzi scheme, so banks are not a safe place to put your money in.

Stocks have obviously done very well over the past three years, but like all investments, what goes up always comes back down. We have seen a very nervous stock market due to China fair trade agreement standoff, not knowing who will benefit overall, but if an agreement is beneficial to both, then that should stabilize stock market for a while longer. If the deal is not what Trump wants, then it could be another walk away moment, and stocks will once again crash.

Economy is strong at the moment, so no doubt it is a good time to start your own business, but Subway would not be a logical choice as they are closing more locations than they have been opening over past few years. Simply put, this is a bad sign for any franchise consideration. Every Subway I have visited over the last few years looks like they are barely staying in business, not like it was a couple decades ago where you would see lines at counter. Sign of the times, just too many options for lunch these days, and Mexican restaurants have taken over much of Subways customers is how I see it.

Restaurants are a high risk investment, so unless you are opening a Mexican restaurant, I would not put money in any restaurant at this point in time. So what to do, this is what everyone wants to know. Looking at gold and silver is where I would focus on and have a large portion of your portfolio in commodities which are on the rise after past decade of stability. With pending banking collapses, smart money will be in gold and silver. As far as stocks, go with the high dividend paying stocks which are more long term and recession proof as history has demonstrated. As we have all seen, traditional retail is dying, so Amazon stock is good bet as they are dominating retail market and should continue to do so well into the future. Online business is the future, and most malls will be converted to other uses over next decade, so this will impact commercial real estate markets.

Of course, there is always cryptocurrencies which now amount to over 2400 over past decade. Bitcoin is the gorilla in the market just as Amazon is in the retail market, so worth risking some capital in this market, especially Bitcoin which has done very well for millions over the past decade. Being in it from start, I have done better than any stock or commodity I have invested in, and now with the constant movement, it is a great way to leverage your investment moving in and out of market to capitalize on this constant movement. It is poised for another run up as I see it, so time will tell.

Having seen it all over the years, you have to have a balanced portfolio, so when one goes down, another goes up, and if you can have most of your investments in those vehicles which move up more than down, you will do very well. Starting your own business is the only way to escape your job which most hate, so focus on what you are passionate about, using your experience as a starting point. I have been in my own businesses for decades and never looked back. The major Fortune 100 company I had worked for closed down computer division, so you never know, friends I worked with are bouncing all over the country ever since, not what I wanted and I saw the market changing way before it did where mainframes were being replaced by PC dominance in computer industry.

Success to all,

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Post Sun Oct 13, 2019 3:03 pm
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