Congratulations you have made it. You and your friends sold the company you have worked so hard to grow in the last few years .
Your bank account got richer by a few millions of dollars. Now what? How should you act and what should you tell the bank mangers now that they call you personally? Investment house representatives are also calling not to mention your friend that just opened a hedge fund.
First, take a step back and ignore all the calls. You must plan your next steps carefully as these investment decisions will influence your entire life or at least until the next exit ..
The investment plan can be made by yourself or accompanied by a family office advisor depending on the amount you received. Family offices in Israel usually work with liquid capital above 4 million dollars. It’s important to say that this is a “ trusted advisor “ position and he or she should stand by your side throughout all the different phases. The financial planing phase, the implementation phase and the investment phase which will last, frankly, all your life .
First stage and most important one is your cash flow needs. You should put in your excel all your day to day expenses. All your bills, rent payment or mortgage payment,etc. as well as all your upcoming major expenses. You want to travel abroad, buy a new car or any other dream you had, write it down. The most important decision is whether you want to buy an apartment or stay in rent .
The amount that includes all your upcoming outflows for the next three to four years, not less, is the first bucket with which you should take no risk and better put in deposit. The interest is very low but you can’t take any chances with this capital. Try to get as high interest as possible in your bank or other banks you compare to.
Now the extra cash you need to invest, that’s the second bucket .
The third bucket, that I will not elaborate on , is your pension plan where it’s most important to plan with a licensed professional pension advisor .
The second bucket is the financial asset you invest in and not needed in the coming years . This bucket splits between :
Liquid financial assets like bonds and equities in any form ( mutual funds, ETFs , investment portfolio)
Non or less liquid financial assets like different investment funds and hedge funds
Real estate investments via fund or directly at local market or abroad
Technology investments in private companies or VCs
The combination of all will be the most important decision for your performance for years to come .This is what professional investors call strategic asset allocation. This decision will take into consideration your risk tolerance and potential liquidity needs beyond the coming few years. A general combination of 15 to 20 % real estate allocation, 15 to 20 % investment funds and all other to liquid financial assets is good allocation but as said should be planned specific for each investor . Technology investment is a personal decision influenced also by your next job in life.
The last bucket that is the most personal one, is your donation intentions, if any. That should be planned with a different advisor, different goals and different personal impact targets.
Sounds complicated? It is , but asking the important questions and making the best financial plan are the most important decisions you’ll make. Those decisions should be done with the most professional advisor you can get, who’s on your side and not on the side of the investment house, bank or the fund managers. Those, professional as they probably are, always seek first the benefit of their working place and only then yours.
Kobi feller is Founder of Feller Wealth Advisory Services, with over 26 years of experience in the capital markets www.Feller-ws.com
Disclaimer: The information above should not be considered as advice or a recommendation to investors. Particular investment objectives, financial situation or needs should be taken into consideration before any investment decisions.