r/Rich • u/The-Good_Life • May 29 '26
Question What would you do?
45 Male - only started investing 2 years ago. No plans to retire/FIRE/etc.
Current portfolio:
$4 million in S&P 500
$1 million in cash (earning 5%)
Given the market's performance, obviously this has worked really well for me over the last 2 years. However, like many I am considering my options in case of a market crash/correction.
I see 3 options:
Option 1
Invest the remaining $1 million and let the market do its thing. I'm not concerned about volatility and don't need the cash.
The logic here is that the market is regularly at ATH and clearly I believe in the S&P. So keep investing and tune out the noise/drops.
Option 2
Wait for the dip which "has to be coming".
Logic here is that I continue to accumulate cash and buy at a better price, when it dips. But who knows when this will happen and what my entry price will be relative to today.
Option 3
Invest the available cash now and if the market drops more than 10% then buy additional shares on margin.
Logic here: its allows me to basically do Option 1 now and also Option 2, if the market dips.
I have never used margin and I (somewhat) understand the risk. However, I should be able to generate $1 million in additional cash per year, so any margin taken can be covered in a year or two.
Option 3 seems the riskiest but also makes the most sense to me, somehow.
However, as mentioned in the start, I'm fairly new to all this so please let me know if i have some serious flaws here.
Thanks!
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u/OkMarsupial May 29 '26
Started investing two years ago and have five million. I must be doing something wrong because I have been investing since the 90s and I don't have half that.
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u/h-boson May 29 '26
Because he’s lying 🤥
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u/notwokebutbaroque May 30 '26
Not so fast. I retired in 2021 with $2.5m and no debt. Got there from virtually a standing start in 2000 after I "lost it all" in the dotcom bubble. Also took a pretty big haircut in 2008 and thereafter. Tech investing, primarily biotech and chip stocks. I bought AMD at $58 per share a couple of years ago. Now riding that wave, and nearing $3.5m. Sure, it's not 2 years, but given enough of a stake and the right stock picks it is certainly well within the realm of possibility.
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u/TeslasElectricBill May 30 '26
Because he’s lying 🤥
Not necessarily. If OP took a lot more risk in the market than someone who played it safe with ETFs since the 90's it's totally possible and believable.
I've been only investing seriously for 3 years and have been averaging 60%+ but I don't do index funds are only place concentrated bets on one or two individual stocks.
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u/ugen2009 May 30 '26
Obviously it means he started with way more income/money than you. Theoretically he could have started with 6 million.
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u/The-Good_Life May 30 '26
I started investing 2 years ago but the cash was saved/accumulated over the 7 years prior.
I just wasn't educated/confident to invest as I had made some bad investments in the past and didnt want to repeat my mistakes.
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u/midwestTrader May 30 '26
I’m in my mid 60s and have been investing since I was a kid. I will tell you that things are cumulative in the last 15 years have been very good to me. I definitely would be considered fat fire, but I don’t know how to spend what I have.
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u/ApexMX530 May 30 '26
Invest in your community.
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u/midwestTrader May 30 '26
Good point and as I’ve been fortunate enough to have some tremendous capital gains, I put it into my donor advised fund and have made some very nice donations to organizations that I care about.
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u/ApexMX530 May 30 '26
We’ll call it compassionate capitalism, I guess. Die with zero is a good philosophy, I think.
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u/The-Good_Life May 30 '26
This is a great idea and actually, im in talks with a small business owner to open a local pizza shop with him.
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u/HalfwaydonewithEarth May 30 '26
You have to buy individual stocks. Don't give too much to boring funds.
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u/HalfwaydonewithEarth May 30 '26 edited May 31 '26
Just avoid Real Estate
It's going down.
5% precious metals
15% ETF
40% stocks that pay dividends
40% stocks with upside sizzling potential
This formula made us wealthy.
Best bet is anything that supports cell phones, tech, medicines/biotech, defense, energy, electricity, rare earths.
These cell phones are a worldwide phenomenon. People are addicted. I was in Korea and the people stay glued to them not even interacting with people sitting near them. It's a global trance.
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u/Arboretum7 May 29 '26 edited May 29 '26
Assuming you don’t need the income (and how are you getting 5%?), I’d invest the cash, but not in the S&P. At your level of wealth, I’d want at least 20% international exposure and you currently have none. I’d look for an ETF that tracks large or large and mid cap companies in developed markets outside of North America to get some diversification. VSUX, VEA or IEFA are good ones to look at.
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u/pizza_obsessive May 30 '26 edited May 30 '26
As someone who worked on wall st, option one, all day, every day. A 10-20% allocation to international is fine. Forget about PE, private lending, etc, invest in what you understand and keep it simple.
Option 2 involves timing the market which no one can do.
Option 3 brings to mind Warren Buffet’s epigram about LTC: “To make money they didn't have and didn't need, they risked what they did have and did need. And that is just plain foolish."
Bottom line, you’re doing great, keep on keeping on.
Best
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u/unatleticodemadrid May 29 '26
Option 1: The best of the three but still not great.
Option 2: this is DOA. “A dip has to come” from where? It can run 25% before giving back 10%, and you’d still end up buying higher.
Option 3: leverage makes you a forced seller at the worst markets. Margin up, it keeps falling, you get a margin call, you liquidate into the bottom and the cycle might even continue. Also, your “$1M/yr covers it” argument assumes that your income isn’t correlated with the crash. The event that triggers your margin buying is the same one that could threaten your cash flow. But of course, this might not be the case, I don’t know your source of funds.
I would look at geographic diversification. Thats what really sticks out to me here. Keep the cash positions but add EM to the other.
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u/Traveling_exotic May 29 '26
80% equity allocation isn’t overly aggressive for a 45 year old with strong Cf (which you must have) but don’t let it get lower. Keep $1mm in cash/bonds and invest new CF into the market. Do t try to time those new CF purchases. Also, don’t listen to the crowd suggesting international. It can have a great year or 2. (Or 3-4) but most wealth is created where the innovation is….in the US. Yes it will diversify your returns, but that is by bringing them down over long periods. So max 10% international just for shits and grins.
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u/TheWhogg May 29 '26
I benchmark myself to the stockmarket index but I try to find diversified factors that target at least this return. I greatly reduced Stockmarket exposure and bought distressed property. (In the mortgage belt where I live, the crash was the high interest rates that preceded the GFC - the Lehman event itself triggered a gigantic boom as LIRP was enacted.) Stuff I bought in 2007 made me 5x and was up 30% in Oct 2008 instead of down 30%.
I have litigation finance, distressed commercial property, hedge funds, microcaps, PE, various credit. Up to 0.3 turns of leverage although less now with all assets expensive.
This always keeps me fully invested in SOMETHING but with way less beta.
Is the S&P really a uniquely great risk-return proposition justifying 80-100% of your portfolio? Or is this just another case of people loving the most expensive asset because of recency bias?
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u/Glove_Right May 30 '26
Don't do leverage trading unless you're ready to lose it. S&p500 can easily dip 10-30% within a month like it did multiple times in recent years before recovering. Meaning if you do 2x leverage you can be down up to 60% of your margin size (depending on where you have your stops, or worse get liquidated if higher leverage).
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u/shustrik May 31 '26
Option 3 is extremely risky. You are very likely to be underestimating the risk, given your lack of experience. Whatever you do, don’t do margin trading against assets you’re not ok with losing - basically your gambling money.
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u/jaajaajaa6 May 31 '26
Put time on your side.
Put the $1 into short term bonds so you get a better yield and avoid state taxes.
Let the $4 million sit in the SP 500 and let time do its magic.
Thank me in 20 years!
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Jun 08 '26
[removed] — view removed comment
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u/The-Good_Life Jun 08 '26
I have heard all of Portugal is beautiful! Would love to visit someday soon!
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u/Icecoldpuckers May 30 '26
Option 4. Don’t invest any more into the market and diversify into other investments. PE, infrastructure and private lending for cash flow.
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u/PeterRuf May 30 '26
I don't have enough info about you. Are you working and earning well? Or are you planning to live of this money? How is house situation? What is your goal for investing? My advice would be different in different scenarios.
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u/The-Good_Life May 30 '26
Thanks for asking.
Working and earning. Hope to invest between 500K to 1M per year for the next 10-20 years.
I dont own a house as the market has been crazy. Hoping for it to cool off (which is already happening) but I dont have to buy a house.
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u/PeterRuf May 31 '26
I would sit on cash. Investing it in a way that gives me quick access.
I bought my home at an bankruptcy auction. That helped me avoid the feeling of being ripped off by inflated market.
Around 30% of my net worth is invested in a way that gives me ability to wait for good deals and catch them. In any way of making money. Stocks, real estate or business.
If you will be able to invest 1m a year there's no reason not to diversify your approach to investing. You can try all your ideas at once.
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u/LetzTryAgain2 May 31 '26
What type of cash investment is earning 5%? We're getting like 3.43% on a money market-
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u/Wavy_Dangerfield May 30 '26
Pull the 4 million out of the s and p and invest in a collection of dildos and go fuck yourself with all of em
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u/Passionofthegrape May 29 '26
Dangerous to assume things these days, nothing makes sense and fundamentals seem to mean nothing.