What to do after a windfall :

[frugal]

Hi friends,

What would you do after a big windfall ?

- Buy land
- buy real estate
- invest on ...

or would you put all it on the PP ?

Regards.

[ochotona]

To be honest, my mentality is similar, we live on about 50% of our income, so every two weeks I get a windfall. All of my new money is going to cash (Ally Bank, I-bonds), high quality Government and Corporate bonds less than 5 years duration, and gold on the dips. I am buying zero additional stocks at this time, but holding my current stake.

So the short answer... I'm buying 3/4 of the PP pie with new money. Not the whole pizza.

Real estate... do you live in a cheap or expensive part of the country? I'm not buying in urban areas - even parts of Texas where I live are bubbly, like Dallas and Austin. And darn it, we've been in a slump here in Houston and I can't believe how much housing has gone up. How is it that so many people I know are out of work, but housing keeps climbing? Oh, right... bubble.

Pay your debts? Pay off your house? Fund children's college?

Stocks and real estate may go on sale in the next few years. Investing is the only activity where when things go on sale, everyone runs screaming out of the store.

[Libertarian666]

Send it to me. I'll be very appreciative!

[frugal]

To be honest, my mentality is similar, we live on about 50% of our income, so every two weeks I get a windfall. All of my new money is going to cash (Ally Bank, I-bonds), high quality Government and Corporate bonds less than 5 years duration, and gold on the dips. I am buying zero additional stocks at this time, but holding my current stake.

So the short answer... I'm buying 3/4 of the PP pie with new money. Not the whole pizza.

Real estate... do you live in a cheap or expensive part of the country? I'm not buying in urban areas - even parts of Texas where I live are bubbly, like Dallas and Austin. And darn it, we've been in a slump here in Houston and I can't believe how much housing has gone up. How is it that so many people I know are out of work, but housing keeps climbing? Oh, right... bubble.

Pay your debts? Pay off your house? Fund children's college?

Stocks and real estate may go on sale in the next few years. Investing is the only activity where when things go on sale, everyone runs screaming out of the store.

hi

nice.

Mr. Harry Browne would put it all in the PP, I guess.

All the pizza.

You are timming the market.

Regarding real state, I think I prefer to have money than problems. But we should diversify more...

[ochotona]

Yes, I am a market "timer". There was a huge difference in how much real estate you could buy in 2010 vs 2007. People knew it was overvalued. They were just willing to ignore facts.

[dualstow]

If the windfall were US$250,000, I’d probably do something like ocho. I don’t have a windfall every two weeks, but I also find it hard to buy new stock right now. It’s cash and equivalents until cash hits the upper rebalancing band.

If the windfall were, say, $2 million, then pp. The whole pizza. I’d be set for life.

[frugal]

Yes, I am a market "timer". There was a huge difference in how much real estate you could buy in 2010 vs 2007. People knew it was overvalued. They were just willing to ignore facts.

hi

market timer with PP?

What is your portfolio?

[frugal]

If the windfall were US$250,000, I’d probably do something like ocho. I don’t have a windfall every two weeks, but I also find it hard to buy new stock right now. It’s cash and equivalents until cash hits the upper rebalancing band.

If the windfall were, say, $2 million, then pp. The whole pizza. I’d be set for life.

hi

nice hair!

Can it be:

60% CD
10% PP
30% certificates of government

Is this safe?

Regards

[dualstow]

hi

nice hair!

I miss your smiling HB avatar, my friend.

Can it be:

60% CD
10% PP
30% certificates of government

Is this safe?

I’m afraid I know nothing about Portugal except Carmen Miranda, large sardines, and a cool leather bag that my dad brought me.

Even so, 10% pp seems quite small, especially when the other 90% is non-stock.
25% of 10% in stocks (or gold) will not save you. Might as well have an all-treasury portfolio.
...or, are you also timing?

[frugal]

hi

nice hair!

I miss your smiling HB avatar, my friend.

Can it be:

60% CD
10% PP
30% certificates of government

Is this safe?

I’m afraid I know nothing about Portugal except Carmen Miranda, large sardines, and a cool leather bag that my dad brought me.

Even so, 10% pp seems quite small, especially when the other 90% is non-stock.
25% of 10% in stocks (or gold) will not save you. Might as well have an all-treasury portfolio.
...or, are you also timing?

bro,

what do you mean save me?

From inflation?

PP is always the best...

Regards!

[dualstow]

From inflation, yeah. But again, I don’t know anything about your country’s bonds, etc.

[frugal]

From inflation, yeah. But again, I don’t know anything about your country’s bonds, etc.

Hi!

ALL WEATHER portfolio has more Comodities.

Can be a way to diversify.

It is not for me.

[dualstow]

So why only 10% in perm.port.?

[frugal]

that is another question my friend that I will post now



thank you !

[ochotona]

It’s cash and equivalents until cash hits the upper rebalancing band.

That's the right way to play it. New money 100% to cash until it spills over the 35% level. Then let nature make the decision.

[dualstow]

It’s cash and equivalents until cash hits the upper rebalancing band.

That's the right way to play it. New money 100% to cash until it spills over the 35% level. Then let nature make the decision.

So, in other words, when nature calls?

[sophie]

Hi Frugal,

Yes, bring back your distinguished-person avatar! Here's my list of what to do with a windfall...delightful question to tackle on a weekend morning.

First things first. I'd remodel my kitchen. That's because I want to do that and have been saving for it, but don't quite have enough in the kitty yet.

Then I'd pay off the mortgage, even though many would say this is not a financially wise thing to do. I don't care. Being debt free is priceless. (Same goes for any other debts you might have.)

The rest gets invested. If it's not that much money I'd pitch it all into the PP, buying the assets in equal proportions. If it's still a large amount, perhaps you could put part of it into your PP (assuming you still have that) and do something else with the rest. Options are:

- buy a vacation home or condo and rent it out on Airbnb, to develop an alternative income source. You get to enjoy it when it's not rented!
- Consider it a "VP" and buy something speculative: a stock or fund, bitcoin, whatever strikes you as something that could go up a lot. Put in auto sell orders if it drops a set amount, like 10%, to keep from losing too much if you guess wrong.
- Consider it part of your core investment portfolio but use a different portfolio strategy. Lots of options on the Bogleheads wiki. Pick one, put it in place, and DON'T CHANGE IT. Constant tweaking will only result in buying high/selling low syndrome.

If it's enough money to allow you to retire and maybe move somewhere you'd rather live permanently, then I'd either go 100% PP or the last option above, and have at it.

Congratulations by the way!

[frugal]

It’s cash and equivalents until cash hits the upper rebalancing band.

That's the right way to play it. New money 100% to cash until it spills over the 35% level. Then let nature make the decision.

hi

history says that it should enter in PP as soon as possible.

So, we don't have to wait for rebalancement

Correct?

Regards

NOTE: my PP friends asked, and I shaved and put a new b&w photo!

[jhogue]

1. I have never met anyone who later regretted paying off their mortgage. Before you do that, though, you should check the implications for future taxes. Also, be prepared for having a change in perspective on all sorts of things once you are finally debt free.

2. I think that buying rental real estate is a highly person thing. Some people enjoy it; some people don't. I would rather tinker with my I bond ladder than wrestle with broken plumbing under the sink.

3. Filling up your Cash to your 35% rebalance band strikes me as a great idea. Like paying off your mortgage, I think it is something you will never regret. It won't make you rich, but it will probably make you feel more secure-- especially when the next big stock downturn happens.

4. If the windfall has come your way because of the death of someone important in your life, reserve some money to do something special or unusual to commemorate their life and passing. It could be a splurge at a fancy restaurant or a cruise to Hawaii. It can make for better memories.

[dualstow]

hi

history says that it should enter in PP as soon as possible.

So, we don't have to wait for rebalancement

Correct?

Regards

NOTE: my PP friends asked, and I shaved and put a new b&w photo!

Nice avatar!
I have to chuckle at the “as soon as possible”, since you’ve been asking since, when - 2012? 2010? But with stocks seemingly high and gold seemingly low, it seems like a great time to enter the pp.
Just my opinion.

[ochotona]

Nice avatar!
I have to chuckle at the “as soon as possible”, since you’ve been asking since, when - 2012? 2010? But with stocks seemingly high and gold seemingly low, it seems like a great time to enter the pp.
Just my opinion.

So if this large windfall immediately triggers a rebalance, then I guess the PP is good for now. 25% is a small stock allocation in the grand scheme of things.

Gold is probably somewhere near multi-year lows. I'm not worried about that. I did worry in early 2015, but almost three years later, not so much. It has just gone sideways, with big swings, at least for Americans. Different in different currencies.

But in Europe, don't they still have negative interest rates for bonds? What happens to bonds worries me if they go from (-) to (+) over a short period of time. I'd expect bondholders to get killed.

As far as cash is concerned... 500 Euro notes? Is is still possible to get them? That's how you have to do it if interest rates are still (-). They don't make it easy do they.

[dualstow]

[金] has just gone sideways, with big swings, at least for Americans. Different in different currencies.

Good point. It’s really the dollar that’s moving around.

[dualstow]

By the way, we don't know that frugal has actually had a windfall, right?
Could be the case, but until that is stated explicitly I will just think of it as another exercise from the frugster.

[Xan]

I expect the next question to be what's the best way to get a windfall, and then which brokerage to use.

[Tortoise]

I'm not buying in urban areas - even parts of Texas where I live are bubbly, like Dallas and Austin. And darn it, we've been in a slump here in Houston and I can't believe how much housing has gone up. How is it that so many people I know are out of work, but housing keeps climbing? Oh, right... bubble.
[...]
Stocks and real estate may go on sale in the next few years. [...]

I'm curious: why do you think the high real estate prices are indicative of a bubble rather than the market's normal price mechanism simply signaling that there are more buyers than sellers right now?

In the years leading up to the 2008 real estate crash, I recall that one of the tell-tale signs that a bubble had formed was the fact that lending standards had gone way down: stated income loans, sub-prime loans galore, etc. Is that currently happening again?