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first off I didn't win the lottery, just a hypothetical situation, taking the recently 649 winnings of 20million where do you put it?, obviously trying to keep the taxes to a minimal
 

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I'd invest it in a diversified portfolio mostly in stocks and live off the proceeds. A 2% portfolio yield would mean an income of $400K before taxes. Plenty to live on and not touch the principal for a long time.

how much fixed income? would you consider a bond ETF, as far as stocks would you consider an ETF or individual dividend stocks?

you mentioned $400k before taxes which is dividend yield, does one pay tax on 200k (50% capital gain) or the whole 400k because it is a dividend yield? I guess what I am asking is dividend yield considered capital gain (I am still a novice in investment concepts)
 

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I think we need to take one step back. What are your goals for the rest of your life? Do you want to move to Beverly Hills and start living (and maintaining) the high life? Or would you just pay off your now-meager debts, quit your job and continue living as before, perhaps buying a new house and car?

IMHO you should answer these questions for yourself first.

In my own case, I would stop working and simply live off the principal. I see no reason to invest and seek out returns with that much money handed to me, given present circumstances. For an average guy like me, $20 million is far more money than I would ever need over my life. Even if I hand out a couple million to family, that's still $18 million, a tidy sum that would be nowhere near exhausted if I bought a new car and house. I could actually be happy with $1 million.
 

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how much fixed income? would you consider a bond ETF, as far as stocks would you consider an ETF or individual dividend stocks?

you mentioned $400k before taxes which is dividend yield, does one pay tax on 200k (50% capital gain) or the whole 400k because it is a dividend yield? I guess what I am asking is dividend yield considered capital gain (I am still a novice in investment concepts)
Oh, sorry. I'd keep the same portfolio allocation I have and I write about on my blog: 80% stocks and 20% bonds. Both stocks and bonds will be invested in broad market index ETFs / index mutual funds.

The portfolio income will be a mix of dividends, foreign dividends and interest. Canadian dividends are treated favourably but I'm afraid the tax on interest and foreign dividends will be taxed at close to marginal rates.

Come to think of it, with such a large portfolio, it may be better to structure it to be tax efficient by skipping fixed income entirely and investing say 70% in Canadian stocks and the rest in international stocks.
 

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I think we need to take one step back. What are your goals for the rest of your life? Do you want to move to Beverly Hills and start living (and maintaining) the high life? Or would you just pay off your now-meager debts, quit your job and continue living as before, perhaps buying a new house and car?

IMHO you should answer these questions for yourself first.
Agreed. My post should be seen in the context of what I'm implicitly assuming the goals are. i.e. continue to maintain the same or slightly higher lifestyle than present.
 

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runner in the remote chance that you really did win a 20M lottery or inherited the same, won't you please run asap to a top-notch investment counsel. Look for the CFAs, nothing less.

you see, the very rich don't have portfolios that look normal. They hardly need bonds, for example. So all the usual constructs that you've heard about, and which you're trying to apply, aren't relevant.

on the other hand, if you're posting about your own portfolio and it's a normal one, say something between 10k and a few hundred thousand, perhaps you could say so.

no dividend yield is not considered capital gain. It's taxed as dividends. These are not the same thing as distributions from income trusts.

there's another investment student whose thread is nearby in this forum. He or she has received some great advice from spidey & moneygal. If you're actively working on your own circumstances, then the same suggestions could apply to you.
 

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runner in the remote chance that you really did win a 20M lottery or inherited the same, won't you please run asap to a top-notch investment counsel. Look for the CFAs, nothing less.

you see, the very rich don't have portfolios that look normal. They hardly need bonds, for example. So all the usual constructs that you've heard about, and which you're trying to apply, aren't relevant.

on the other hand, if you're posting about your own portfolio and it's a normal one, say something between 10k and a few hundred thousand, perhaps you could say so.

no dividend yield is not considered capital gain. It's taxed as dividends. These are not the same thing as distributions from income trusts.

there's another investment student whose thread is nearby in this forum. He or she has received some great advice from spidey & moneygal. If you're actively working on your own circumstances, then the same suggestions could apply to you.

just started the thread out of curiousity, as far as my own portfolio I have also received some great advice from various posters on this forum and using the search engine, have to say thanks to all the posters (people) for their advice on my portfolio, winning the lottery is well wishfull thinking but it would be interesting

one question humble pie, you mentioned the wealthy do not need bonds, why? wouldn't they be a long term low risk investment for them
 

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I think I just found an answer to my question regarding bonds for the wealthy, bonds create interest income which is something the wealthy want to minimize, correct?
 

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I'm very interested (and somewhat surprised) by the responses from the prominent bloggers.

I expose my money to market, interest rate, and currency risk (among others) only because I risk not achieving my objectives without so. If I had that sort of money, my focus would move away from maximizing returns (while reducing risk as much as possible) and simply getting sufficient returns to do what I want to do. Call me cheap or frugal, but $200,000 per year is good enough for me to live on.

My team of accountants (I've always wanted a team... ;)) would help minimize tax liabilities, and I think I'd contribute a lot to charities through trust accounts etc.

2% return is good enough for me.
 

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I think the question of whether the wealthy need/have bonds in their portfolio is not cut and dried. When I was an advisor, the house philosophy was "why expose yourself to risk that isn't required?"
 

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I'm very interested (and somewhat surprised) by the responses from the prominent bloggers.

I expose my money to market, interest rate, and currency risk (among others) only because I risk not achieving my objectives without so. If I had that sort of money, my focus would move away from maximizing returns (while reducing risk as much as possible) and simply getting sufficient returns to do what I want to do. Call me cheap or frugal, but $200,000 per year is good enough for me to live on.

My team of accountants (I've always wanted a team... ;)) would help minimize tax liabilities, and I think I'd contribute a lot to charities through trust accounts etc.

2% return is good enough for me.
The problem with investing $20m in bonds is that after inflation and taxes, it will be hard not to tap into capital. If I instead invest $20m in stocks, I could fairly safely spend the dividends and not worry about outliving capital in my lifetime. Add to it the preferential tax treatment for dividends, I think a strong case can be made for an all-equity portfolio.

If volatility is a concern, I'd add a bit of bonds to the portfolio but I'd personally prefer mostly equities.

Added: I should add that I'm 36 and would aim to invest not just for me but hope to leave an inheritance for the kids. If I were 60 and wanted to consume capital, I might think otherwise. I guess it once again comes back to what your investment goals are.
 

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Crap. I am in the wrong snack bracket here. I honestly think I would have difficulty spending 2% of $20M, even after tax (and inflation). ;)
 

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The first thing I would do is have 2 checks wrote one for me and one for the wife. So when she gives her family a bunch theirs nothing to fight about. I would take 500k and buy some stuff my old boat would be new and a second one that's a little more versatile, suburban for hauling, a yellow corvette.

I would set up a fund with lawyers for my nieces and nephews to borrow for real estate, minimum interest rate and subject to all repo laws.

Then I would hire 2 fp with a 5 year time frame to get my income stream setup. Then I would take the same amount and do the same thing, and the same amount in laddered gic.

Other than that not much would change still retired, wouldn't see any more winters
 

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ah, MG, but the question then becomes Was that house brimming over with mega-millionnaire clients and were you a CFA with many years of experience dealing largely with clients who were persons, families and even whole dynasties with wealth in excess of 10 million ...

it's true that a prudent rule for the elderly piddling rich is to conserve the principal. But i'm assuming that the dynastic rich in every country not only wish but also intend to grow their capital as a priority, and can easily tolerate the concomitant risk.

here is a somewhat extreme example, yet situations like this recur especially with conservative advisors who are not focussed on the special needs of the mega-rich as dynastic families. It's not uncommon in both a trust situation and in an outright ownership situation to see a scenario like this: the managers throw on the bonds and the fixed income products, and little attention gets paid to serious growth. The income accumulates & gets taxed at 100%. The income beneficiaries, who tend to be the older generation, often don't understand what is happening. The managers get away with this blinkered & self-defeating approach by claiming they're avoiding risk, and so far the courts have protected this even though there are cases where the ultimate or capital beneficiaries have sued (next paragraph.)

meanwhile the capital beneficiaries, who tend to be the younger generation but in some cases can even be sophisticated outside charities, are fretting & fuming. Because their chances of inheriting a decently-grown portfolio several years in the future - sometimes many years in the future - are being relentlessly destroyed by a flock of cobwebbed old sheep all nodding over the principal & bleating about the prudent man rule.

frankly i don't see that any of this concerns this forum, and we'd be better off sticking to real-time problems, but in the event that some lucky lottery winner did stumble upon us, we would all serve best by urging him or her onwards to a gluskin sheff or a similar firm. Those CFAs are important, because they are the rank of advisors who are most tightly bound by an ethics code.
 

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Well. Not to divulge all my secrets, but you had to have more than a million in investable assets you'd place in our shop in order to have us consider taking you on as a client. ;)

Also: we tended to do a lot of structured tax planning (i.e., setting up multiple corporations and trusts) for tax arbitrage, and we also used corporately-held life insurance for the same reason.

Finally: all advisors tend to attract similar clients. The shops I worked in were conservative: asset allocators and bond-heavy. But this is relatively rare in the advisory world.

Editing to add that Humble, I take your point, for sure!
 

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If I won 20 million the first thing I would do is enroll my gifted son in the best program money can buy. He's 2.5 and starting to read. Then my next act would be to tell my husband that he can go buy whatever house he wants (probably a new one) as long as it has an office area close to the living area rather than in the basement.

Next I would find myself a derelict multi unit building of my own and sell it off when it was in A-1 shape netting myself a healthy return like I've been making for the landlords I've been working for all these years.

In 10 years I would probably double my money. I really like bringing properties back from the brink. Problem the same guys that got the property that way are never the guys that pay decent money. I just like deals and making money and making it for myself would be much better.
 
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