WSOP Windfall... What is a boy to do?!?!

[J.A.Sucker]

Don't buy a hybrid. They are bad for the environment and you'll never recoup the gas savings. Unless you can get one of those sweet HOV OK lane stickers, you're not doing anyone any favors.

As for investment, there was some great advice in this thread; it's really pretty easy.

1. File as a pro and max out the SEP IRA (44K). Take this right off the top and lock it up for 30 years.

2. Buy a house/condo. This really is the best thing to do. Get it for somewhere you want to live and you won't ever have to worry about markets going up or down in the short-term - you have to live somewhere. Throwing away rent is a bad deal in most situations.

There's two possible ways to play out the house thing, depending on what you want to do and where you live. First, you can decide to carry a mortgage and keep your interest high and take the deductions with it. You also get maximum leverage off your money, which is where real estate blows away most other investments. Again, if things go bad, you don't have to move. You can also borrow against your principal - so you always have time on your side. If this is the case, get an interest-only loan, put down 20-30% and pay off the principal on the front-end. If you decide to sell the place in a few years, fine. If not, you'll ownt the place free and clear before most would ever dream of it. The beauty of interest-only is that when things are good (you make another score, let's say), you can dump a huge chunk into the mortgage and get the principal way down. If money is tight, then you have a smaller payment to make until things turn around. This is huge for a gambler. Just make sure the loan has NO EARLY-PAYOFF PENALTIES.

The second school of thought is that you're a gambler and getting some sort of stability is really important, because you never know when things are gonna go bad. There's wisdom in this, too. If this is the case, you want to figure out how to own your first house free and clear as quickly as possible. Once you have that locked up, then you're pretty much done and can never get hurt too bad since you'd have a really small nut and also a source of money to borrow against if things get really bad. While better investments can be made, this security is well worth it for many. It's up to you.

3. Make sure you have a good bankroll in cash. You keep this in a high-yield savings account. It sounds like you already have this covered, but you need to think about how big you want to play. Most people play too big and invest too little, so it sounds like you're on target here.

4. Lock up the remainder of your liquid money (if any) in some sort of index fund, like limon said. Keep the vig low and yield decent and you'll be rich before you know it.

5. When the time gets right, take money and get into the rental market. Become a slum-lord. This is the stone-cold nuts and what I'm striving for.

[Godfather80]

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Hey all,
So I just got 3rd in event 25 of the WSOP and have a rather large (for me) influx of money, we'll say 200k after some purchases. Right now I have it sitting in a Jumbo MMA making 5%. Is that the best place for it? Are there any secrets I should know about? Real estate doesn't seem like a great place to sink money right now so I am looking for alternatives.

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Two chicks at the same time?

[Temp Hutter]

Congratulations on the score.

Find some older (wiser) people that you trust that have done well for themselves financially and seek out their advise. This may be a relative, former employer, friend of your parents or whatever. This is a good start, but research for yourself all the advice you are considering before acting on it.

Temp

[egj]

Mostly reiterating what others have said:

1) Pay off all debt if you have any (sounds like you don't).
2) Max out retirement accounts if possible (IRA, 401k)
3) Invest remainder

For (3), I would tend to invest the majority in stocks; more specifically, mutual funds from Vanguard. Stocks are more volatile than bonds or money market funds, but, at your age, you should be investing for the long run. Plus, as a poker player, you should have the psychological fortitude to handle the ups and downs. But you can invest some in bond or money market funds too. You'll need some money liquid anyhow to pay for daily expenses, poker, etc.

Within stocks, you might want to diversify a bit. Some in domestic stocks, some in foreign; some in large caps; some in small; some in growth; some in value. That kind of thing.

A house could be OK too. It's not clear that anyone can predict the direction of the housing market, so it's difficult to say when homes are overpriced. But if you live in an expensive area, you might need a lot of your $200k just to make a down payment on a decent house, and then you're locking yourself into large payments. Could be putting too much of your eggs in one basket.

Best advice of all might be to educate yourself so you can make your own informed decisions.

Hope this helps.

[Jurollo]

I have a bankroll that is 70+ buyins for the biggest online tournament I would ever play (and those aren't daily or anything) as well as a job which gets me about $3200/mo for expenses. So whatever I do with it will be for strictly an investment and the future.

[bigbootch]

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2. Buy a house/condo. This really is the best thing to do. Get it for somewhere you want to live and you won't ever have to worry about markets going up or down in the short-term - you have to live somewhere. Throwing away rent is a bad deal in most situations.


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Whether he should rent or buy isn't as simple a decision as "I don't want to throw away rent, I need to live somewhere, therefore I should buy." When you buy, you are now "throwing away" assessment, property taxes, etc. And as I mentioned already, purely as an investment, real estate is FAR from being "obviously the best choice."

[J.A.Sucker]

You must not have read my entire post.

[bigbootch]

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You must not have read my entire post.

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I did, my point is the following: the 150k (or however much, depending on what he wants to do with his mortgage, as you pointed out) he would allocate to buying his own place, I argue it's entirely unclear whether that 150k is better put to use somewhere else.

I'm not saying that he should rent and put that 150k in XYZ - I'm just saying that it's not at all obvious what the best thing to do with that money is. And, I argue that it most likely isn't real estate, based on historical lackluster returns, lack of liquidity, high transaction costs, and so on.

If I misread or misunderstood your post, then my apologies, and I would appreciate any clarification.

[NickMPK]

With respect to everyone who is advising that you pay off all debt first, this is certainly true as far as credit cards go. But I have been advised that it is usually a bad idea to pay off student loans early, since these usually have very favorable interest rates, lower than you can easily earn in the market. I don't know if they OP has any of those, but it might be something to consider.

[Kneel B4 Zod]

I think bigbootch is right, the buy vs rent debate is much more complicated than people give it credit for, mostly b/c they don't consider that paying interest and property taxes, like paying rent, is "throwing money away", and they just assume the former is fine "b/c it's a write-off" but they rarely run the #'s to see exactly how much $ the write-off saves them.

also they don't consider that leverage works both ways.

also also they don't consider that we're in the middle of the biggest housing boom since the depression.

also also also (related to above) they don't consider what they could do with their money if it wasn't in a house.

mostly it comes down to your personal situation, how important a house vs. home is and all other personal factors.

and then on top of this, there is the strategy of buying a 2 or 3 family, which is often a better investment than a 1 family.