Ask HN: My company is about to get acquired, how do I best manage this money?
10 comments
My honest advice is to do absolutely nothing with it for a few months. Don't move it, don't spend it, don't invest it, don't loan it to friends...and most importantly don't tell anybody about it.
Just give yourself some time to cool off and get over the adrenaline-pumping feeling of "holy shit, look at all that money". This will likely take a while to wear off. Only once you're calm about it should you trust yourself making decisions.
Just give yourself some time to cool off and get over the adrenaline-pumping feeling of "holy shit, look at all that money". This will likely take a while to wear off. Only once you're calm about it should you trust yourself making decisions.
I was in a similar position a couple years ago, and I can pass on the advice that I was given from financial planners/etc.
Much of the advice that can be given is dependent on what you want to do with your windfall. If you do bring in $1 MM or more, you theoretically will have enough to live out the rest of your life in a 4/5-star hotel on a beach somewhere. You could travel for a while, or just hang out, or you could try to turn that cash into something much larger. Personally, I've done all three, with different levels of personal satisfaction from each.
Depending on your age (are you closer to your 20s than to your 60s?), most financial planners will advise putting roughly 50% into higher risk investments (startups, riskier stocks, Forex baskets), and 50% into more conventional assets (real estate, investment funds, etc), with higher allocations to lower risk as you grow older.
I would definitely try to invest a large part of your wealth into assets that pay regular, well defined returns. The most conventional of these are real estate and dividend producing stocks. In real estate, there's small apartment complexes, rental houses, small office buildings, and other commercial properties. Generally, you can purchase these types of assets with a 10% down payment and will see a return of 7-9% over the long term. Generally, you should be able to secure a 30 year mortgage on a property with interest of roughly 3-4%. There are other types of conventional investments that also perform regularly, such as purchasing under-performing small businesses like small tool-and-die shops, or other small manufacturing concerns.
Much of it depends on your taste for risk. For instance, energy and commodity stocks, which can usually pay out good dividends are in freefall at the moment (due to the low price of oil). However that freefall won't last -- a well-timed purchase or sale could mean a 20% gain in a relatively short span. Additionally, Forex baskets are showing extremely great growth at the moment, with the right split between currencies. If you start monitoring these markets, you'll start to get a feel for when the peaks/valleys occur, and can invest accordingly. Generally, it is wise to spread out your higher risk investments into smaller baskets that can be easily changed/converted into other assets. Also, be wary of any investment managers who claim they can beat the market. They likely can't, and if they did before, it was due to a combination of luck, timing, and being in the right place at the right time. I have yet to meet someone who can reliably outwit the market.
If you have a taste for riskier investments, and since you have an engineering background (and are a short plane flight away from most of South East Asia), you might consider joining a small investment fund (or VC firm) that focuses on technology in SEA. There continues to be huge growth all over SEA (Indonesia, Philippines, Malaysia, Singapore, Thailand, etc). Many startups require very small investments ($50,000-$100,000), and you could theoretically invest in 5 or 10 at the same time, with the intention of later selling one at 15-20x and the others either returning less than the investment or roughly breaking even. Attend one of the regional tech conferences as an investor, and find some teams/products that you have confidence in and invest!
If you have an idea for a product or service in any business sector, I would highly suggest starting your own company and "giving it a go." In my experience, these types of ventures tend to have far better returns than any other, so long as you are judicious with your spending, and keep your company small and lean enough until it is able to narrow down on the right product/market segment fit. Once you have found the right product, then you scale like mad.
Remember: there's no reward without risk.
Much of the advice that can be given is dependent on what you want to do with your windfall. If you do bring in $1 MM or more, you theoretically will have enough to live out the rest of your life in a 4/5-star hotel on a beach somewhere. You could travel for a while, or just hang out, or you could try to turn that cash into something much larger. Personally, I've done all three, with different levels of personal satisfaction from each.
Depending on your age (are you closer to your 20s than to your 60s?), most financial planners will advise putting roughly 50% into higher risk investments (startups, riskier stocks, Forex baskets), and 50% into more conventional assets (real estate, investment funds, etc), with higher allocations to lower risk as you grow older.
I would definitely try to invest a large part of your wealth into assets that pay regular, well defined returns. The most conventional of these are real estate and dividend producing stocks. In real estate, there's small apartment complexes, rental houses, small office buildings, and other commercial properties. Generally, you can purchase these types of assets with a 10% down payment and will see a return of 7-9% over the long term. Generally, you should be able to secure a 30 year mortgage on a property with interest of roughly 3-4%. There are other types of conventional investments that also perform regularly, such as purchasing under-performing small businesses like small tool-and-die shops, or other small manufacturing concerns.
Much of it depends on your taste for risk. For instance, energy and commodity stocks, which can usually pay out good dividends are in freefall at the moment (due to the low price of oil). However that freefall won't last -- a well-timed purchase or sale could mean a 20% gain in a relatively short span. Additionally, Forex baskets are showing extremely great growth at the moment, with the right split between currencies. If you start monitoring these markets, you'll start to get a feel for when the peaks/valleys occur, and can invest accordingly. Generally, it is wise to spread out your higher risk investments into smaller baskets that can be easily changed/converted into other assets. Also, be wary of any investment managers who claim they can beat the market. They likely can't, and if they did before, it was due to a combination of luck, timing, and being in the right place at the right time. I have yet to meet someone who can reliably outwit the market.
If you have a taste for riskier investments, and since you have an engineering background (and are a short plane flight away from most of South East Asia), you might consider joining a small investment fund (or VC firm) that focuses on technology in SEA. There continues to be huge growth all over SEA (Indonesia, Philippines, Malaysia, Singapore, Thailand, etc). Many startups require very small investments ($50,000-$100,000), and you could theoretically invest in 5 or 10 at the same time, with the intention of later selling one at 15-20x and the others either returning less than the investment or roughly breaking even. Attend one of the regional tech conferences as an investor, and find some teams/products that you have confidence in and invest!
If you have an idea for a product or service in any business sector, I would highly suggest starting your own company and "giving it a go." In my experience, these types of ventures tend to have far better returns than any other, so long as you are judicious with your spending, and keep your company small and lean enough until it is able to narrow down on the right product/market segment fit. Once you have found the right product, then you scale like mad.
Remember: there's no reward without risk.
And the question with real estate is whether to leverage. And that would depend on if you want to spend the rental income now (like a retirement) or aim for higher capital appreciation (but back to work!)
after taxes he will take home just $1+mm, far from enough to live out the rest of hist life in a 4/5-star hotel on a beach somewhere. u need at least $10mm for that
If you scratch 4/5 star hotel and replace it with "fairly nice property" there's plenty of parts of Asia where he could live well off the interest on $1m for the foreseeable future.
Honestly if you are talking about considerable amount of money you should seek out to first and accountant (He will save you more money that he will charge) he will figure those things out cause even if you research on that a lot, my personal feeling is that you might do mistake that will catch up to you in the future.
For the were to invest it, well no one can answer that for you it depends on your attitude towards risk and where you are in your life. If you 25 no family and looking to risk more to (hopefully) earn more then invest back in yourself and start your own but if you have a family and looking to work in o a more steady environment, wait a bit because with over 100K in your bank account, you will get calls from portfolio managers! : ) Those guys will know who to invest your $$ better and at a risk level your will be comfortable with.
An personal opinion, fix everything with an accountant an then relaxe a take the time to answer those questions they will affect a lot how you will live your futur!
For the were to invest it, well no one can answer that for you it depends on your attitude towards risk and where you are in your life. If you 25 no family and looking to risk more to (hopefully) earn more then invest back in yourself and start your own but if you have a family and looking to work in o a more steady environment, wait a bit because with over 100K in your bank account, you will get calls from portfolio managers! : ) Those guys will know who to invest your $$ better and at a risk level your will be comfortable with.
An personal opinion, fix everything with an accountant an then relaxe a take the time to answer those questions they will affect a lot how you will live your futur!
I'd hire a therapist first because the greatest threat to your money is you.
A lot of issues will crop up about your values, relationships, and life goals. Think of the therapist as someone who can help you know yourself, design your life, and above all, use your fortune as a tool to get what you really want. I say this having sold my first co at 32 and banked $10M.
A lot of issues will crop up about your values, relationships, and life goals. Think of the therapist as someone who can help you know yourself, design your life, and above all, use your fortune as a tool to get what you really want. I say this having sold my first co at 32 and banked $10M.
You don't want an accountant for this amount of money; you want a financial planner. Find someone who's an expert at managing wealth to grow it safely and conservatively. He/she will work with you to devise a plan, based on your life goals, to make the best use of that money.
Also, don't spend any of it for at least a month.
Also, don't spend any of it for at least a month.
Reduce expenses first, cover cash flow requirements then increase revenues without more risk than you can accept.
Begin by paying off highest interest debt and continue until you run out of money or have paid off all your debt. You always get rid of debt because debt costs you money on an ongoing basis. Better is to make money - which is not just a little better, it's double better. You get to keep cash you would have lost due to interest PLUS you get to make more money by investing.
Next you need to try and make sure you have enough cash flow to continue meeting recurring expenses, or make purchases that eliminate or reduce recurring debt. Buy a house instead of renting, that sort of thing.
After that the general rule of thumb is to invest in the highest-return investments you can find that provide an acceptable level of risk. If you are 40 years from retirement and can accept a very large amount of risk, then you might want to invest part of it in another startup that you think has a good chance of a very high rate of return. You might put part of it in stocks (high to medium risk), bonds (medium to low risk) or money market items like certificates of deposit (low risk, but some of these tie up your money for longer periods of time than others).
Begin by paying off highest interest debt and continue until you run out of money or have paid off all your debt. You always get rid of debt because debt costs you money on an ongoing basis. Better is to make money - which is not just a little better, it's double better. You get to keep cash you would have lost due to interest PLUS you get to make more money by investing.
Next you need to try and make sure you have enough cash flow to continue meeting recurring expenses, or make purchases that eliminate or reduce recurring debt. Buy a house instead of renting, that sort of thing.
After that the general rule of thumb is to invest in the highest-return investments you can find that provide an acceptable level of risk. If you are 40 years from retirement and can accept a very large amount of risk, then you might want to invest part of it in another startup that you think has a good chance of a very high rate of return. You might put part of it in stocks (high to medium risk), bonds (medium to low risk) or money market items like certificates of deposit (low risk, but some of these tie up your money for longer periods of time than others).
[deleted]
First issue is, do you have to cash out your shares? Or can you exchange them for shares in the parent company? If shares, you may want to defer cashing everything, you can slowly sell shares as you need them, keeping yourself in a lower tax bracket (capital gains taxed as normal income in Aus). Or you can borrow against them.
You need a professional financial and tax advisor. Always go independent (not affiliated with a large bank/institution) and fee-based (not commission).
You need a professional financial and tax advisor. Always go independent (not affiliated with a large bank/institution) and fee-based (not commission).
It really depends on which stage in life you are at. Do you currently have a comfortable life (make good income, no major debt)? Then don't change anything, just place your money safely.
Piece of trivia: the first thing people in your situation buy is a new bed.
Piece of trivia: the first thing people in your situation buy is a new bed.
You're going to pay 50% in tax. No way around that.
$2M in Sydney doesn't go that far these days, but if you want hassle free investment, put it into Vanguard.
Otherwise just throw it into a high interest savings account for zero risk.
$2M in Sydney doesn't go that far these days, but if you want hassle free investment, put it into Vanguard.
Otherwise just throw it into a high interest savings account for zero risk.
IANA expert but: http://australiangovernmentbonds.gov.au/etbs/list-of-etbs/
I work for an Australian company based in Sydney. I'm not a founder, I'm just an early employee (engineer #2). I've been here since the start and we've been running for about 8 years. We are in data analysis area, providing analytics service. I've been given some shares when I joined over a vesting period, which is now well over.
Now, it looks like our company is going to be bought by a larger company in the near future. I don't really know the details. But if everything goes well, I might be able to cash in my shares.
Let's say, I will be in possession of $2M (a complete arbitrary number).
My main question is, what is the best way for me to manage this money? Where do I put it? What should I invest in? How will the tax (the Aussie tax system that is) affect me?
I heard that I should create a trust fund, but how does that work? Is there anyone I should talk to?
What should I prepare for? Are there any unexpected things that I should know about when you're all of a sudden given a large chunk of money?
(And how do the answers to my question change if the money becomes larger than $2M)?
Thanks for all your comments.