# Business sold, €4m to invest?



## rcnt_acqtion (30 Dec 2019)

*Age:* 41
*Spouse’s/Partner's age:* 43

*Annual gross income from employment or profession:* 225,000 (+ 50% guaranteed yearly bonus for next 3 years)
*Annual gross income of spouse:* 65,000

*Monthly take-home pay:* €13,000 combined (excluding bonuses). Mortgage payments of €2,065/month lions share of monthly spend.
*Type of employment: e.g. Civil Servant, self-employed:* Both company employees

*Savings: *Currently saving approximately €8k-8.5k/month into demand savings a/c (7 days notice).

*Rough estimate of value of home:* €450,000 (down significantly from original purchase price in 2007)
*Amount outstanding on your mortgage:* €363,000
*What interest rate are you paying? *0.5% tracker

*Other borrowings – car loans/personal loans etc: *No loans or borrowings.

*Do you pay off your full credit card balance each month? 
If not, what is the balance on your credit card? *

No credit card(s).

*Savings and investments:*

From company sale: €4,200,000 currently in low interest demand deposit a/c. Amount reflects after CGT paid on Dec 15 recently. 
Further lump sums are due in 12 and 18 months of a little over €1,000,000 in total (before CGT) as part of phased acquisition payments.

*Do you have a pension scheme? *
Yes, contribute €1,000/month + spouse contributes €500/month (after tax relief)

*Do you own any investment or other property?  *No. And not a fan of owning more property directly; although okay via a wider investment plan.

*Ages of children:  *No children.

*Life insurance:  *Only what mortgage requires + death in service plans from employers


*What specific question do you have or what issues are of concern to you?*

Had recent (last 6 months) change in circumstances (sold company, staying on with new combined entity with much increased pay) and want to start putting lump sum to work + setup some sensible use of available cash from monthly income.

I have gifted (legally and tax paid) some lump sum payments to family to help them out and the lump sum amount above reflects this.

Job is demanding and I also don’t want to be a martyr to the cause in the sense of locking every penny up for decades in the future. 

Over the hard years of growing the company, I promised myself an expensive sports car on company sale and have now ordered that. This was not an impulse purchase. Lump sum above reflects post purchase of car and my current spreadsheet estimates of monthly running costs (tax, fuel, specialised insurance, extended warranty cover (eventually) and servicing) will consume €900/month when annualised over the year.

I don’t plan on moving/selling home (I like where I live) and have been comfortable with repayments over the last 15 years – not really looking to pay it off early.

I don’t plan on massively increasing my monthly minimum commitments from a lifestyle perspective – no fancy watches or bags for us – I value staying grounded – but also when going on trips (plan on taking new car on long road trips), I also want to “enjoy” nice hotels and the like along the way.

I consider myself lucky to be in this position – I spent the last decade while building up the business – in near poverty after bills were paid – but would like to be able to generate extra income (before retirement) from the lump sum and cash that current job is throwing off.

I am starting the process of seeking independent financial advice and am interested in what this communities thought process would be w.r.t. what I should be looking out for when I receive said advice.


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## Brendan Burgess (30 Dec 2019)

OK, with a lump sum of €4m aged 41, your salary of €365k a year is not that relevant. 

So the first thing you should both do is to decide what sort of work you want to do.  You should choose a job which gives you satisfaction, rather than one which maxes your income. 

I think you should tidy up matters by clearing your mortgage even though it's a cheap tracker. I am a great believer in simplicity when it comes to finances.  You are not getting a return of 0.5% at the moment, so it makes financial sense to pay off mortgage. 

You can then decide whether you need mortgage protection any more. Wealth is its own life insurance. If you die early, your wife will be financially fine.  If the life cover is good value because one of you has developed health problems since you took it out, then maybe hold onto it. 

You should maximise your pension contributions.  There is a debate about whether you should risk it being more than €2m when you retire. But I assume that is not an issue for you yet.  Given that you might well stop paid work, I think you should probably max the pensions until you get to a fund of around €1.5m.   

Your objective now as you have enough to live on is to preserve your wealth rather than to maximise it. 

Cash is risky - it can be wiped out by inflation or by a bank collapse.  Both seem unlikely, but no need to take the risk. 

The best long-term least risk objective is a diversified portfolio of equities. 

So both your directly owned wealth and your pension fund should be in equities. 

My own preference is for a diversified portfolio of about 20 directly held  shares in very large companies. 

Others will recommend an ETF. I just don't like the tax consequences of great wealth being held in ETFs. 

Brendan


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## Brendan Burgess (30 Dec 2019)

When you have a plan set out, then you should sit down with a Chartered Financial Planner and pay a fee for advice. 

You should not seek advice from a wealth manager in one of the banks or the stockbrokers. They will just want to sell you stuff.

There are not that many CFPs around, but a few have contributed to Askaboutmoney and would be a good starting point

Steven Barrett 

Marc Westlake

Eamon Porter


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## rcnt_acqtion (30 Dec 2019)

Thank you Brendan for your insights. Greatly appreciated.


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## lledlledlled (30 Dec 2019)

Brendan Burgess said:


> OK, with a lump sum of €4m aged 41, your salary of €365k a year is not that relevant.
> 
> So the first thing you should both do is to decide what sort of work you want to do.  You should choose a job which gives you satisfaction, rather than one which maxes your income.
> 
> ...



Would a couple of Investment Trusts be an option?  Taxed like equities, but gives the diversification of ETFs? 

In the unlikely event of me having 4m to invest, given the high values of equities at present, I think I'd buy a mill of stocks per year for 4yrs. You'll probably lose out on some market gains by Cost Averaging in this fashion but I think that is a price worth paying to reduce the impact of a potential stock market collapse in that period.


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## Andrew365 (30 Dec 2019)

I would not rule out speaking with a Private Wealth manager at a stockbroker or bank. You essentially have enough to live a comfortable life without having to worry about working. As Brendan pointed out, spend sometime to figure out what you would like to do. In the industry you are in is it possible to operate as an independent consultant? You have also built a successful business, which is a skill in high demand.


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## rcnt_acqtion (30 Dec 2019)

fwiw, love my job and planning on sticking with it for foreseeable. There are also some incentive's to do so financially – i.e. I now own a % of the acquiring company and want to execute on its growth plan for now. Plus, we were acquired by our main international competitor – so that is a lot of fun 

I agree that right now, getting big into equities with a pending stock market "correction" is scary. But trying to double-guess the market is also so tricky.

Thanks all for the suggestions - it will be useful to benchmark with what various advisors say and also lets me research and ask more probing questions. I feel very grateful (especially at this time of year) to have this "problem".


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## Palerider (30 Dec 2019)

Congratulations, whatever you do remember the quiz show ' the weakest link'...contestants could get all questions right but unless somebody shouted BANK  they made no money.

You shout BANK now by putting a sum away, a large sum in cash, and don't go near it, that will give you confidence if or when stocks dive, having cash is also a strategy, one that is often overlooked.

Ring fence the capital, make a prisoner of a chunk of it....and then go get advice, have fun with it as well..enjoy it, you earned it....live long and prosper.

The harder you work the luckier you get, nah not really, good for you and your family, congratulations, we need more entrepreneurs like you.


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## Brendan Burgess (30 Dec 2019)

I thought about this a bit more as someone told me about the programme about Garech de Brun losing all his money and having to sell Luggala.

It's probably worth doing the following exercise now. Identify all the mistakes people with sudden wealth make and take steps to avoid them.

1) People get carried away by their own brilliance.  So they invest a good part of their money in a new business to give them something to do. The business fails and they lose all their money.

1 B) The new business idea is so good that they borrow lots of money to invest in it and lose all their money and end up with a huge debt which they can't pay.

1C) They buy a big property which costs more than €4m so they borrow the balance.  It all goes horribly wrong.

2) They take a huge punt on oil or gold or a particular share  because someone charismatic recommended it strongly.

3) They put it all in cash because they think that cash is risk-free.  Cash is not risk-free. The bank could go bust and inflation could wipe out the value of cash. 

4) They fall victim to scammers who get them to invest in some great scheme and they lose a big chunk of their money.

5) They gamble it away.  I suspect that you are not the gambling type, but worth noting it here for completeness.

6) Drink and drugs.


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## RichInSpirit (30 Dec 2019)

Brendan Burgess said:


> 2) They take a punt on oil or gold or a particular share  because someone charismatic recommended it strongly.



A portion into Gold is what ran through my mind. Maybe 20 or 25% of total.


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## Brendan Burgess (30 Dec 2019)

RichInSpirit said:


> A portion into Gold is what ran through my mind. Maybe 20 or 25% of total.



Gold as part of diversified portfolio is fine, but not anything near 20% or 25%.

Brendan


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## noproblem (30 Dec 2019)

Enjoy a sun break/cruise, safari every 6/8 weeks for ever more. Have a chat with 3 fellas who have just set up their own new wealth company, they featured in The Sunday Indo a couple of weeks ago I think. Max out on the 10 year state savings in An Post, do the same with the 5 year ones. Pick yourself 10 good stocks and put €100k in each.  Then HAVE A THINK ABOUT what the 3 wealth managers tell you to do with some of the remainder. A word of warning however, do enjoy your hard earned reward, tomorrow might never come. Oh, nearly forgot, well done Sir.


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## Brendan Burgess (30 Dec 2019)

lledlledlled said:


> , I think I'd buy a mill of stocks per year for 4yrs. You'll probably lose out on some market gains by Cost Averaging



I really don't like this approach.

What if the stock market rises over the next three years. Do you invest the 4th million then or wait?  If the market rises for the next three years, a crash will be even more likely.

It's best not to try to time the market unless you think that the market is so completely madly overvalued in which case, you should not invest anything in the stock market

Brendan


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## moneymakeover (30 Dec 2019)

Invest in pension
If you are company director you will have advantages in how much you can contribute

Then other pillars of wealth

Property
Stocks. Buy an index each month. Dollar cost average
Cash
Precious metals
Bonds

Continue to pay down the tracker mortgage. That's a good deal for you. Not a good deal for the bank.

If you don't want to own residential property directly, what about small shopping centre/office building and allow property management company to manage it. Why not gear it? Say borrow 50% or 60%?

That's my 2c


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## Brendan Burgess (30 Dec 2019)

moneymakeover said:


> Why not gear it? Say borrow 50% or 60%?



This is so wrong.

Why take on extra risk?

His objective is to preserve his wealth and not to maximise it.

Brendan


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## Brendan Burgess (30 Dec 2019)

moneymakeover said:


> Dollar cost average





lledlledlled said:


> You'll probably lose out on some market gains by Cost Averaging in this fashion



This idea just cannot be killed off









						The fallacy of dollar-cost averaging
					

Don't believe the hype.This strategy is nothing more than a well-constructed sales pitch. A method for getting people to do what a salesperson wants them to...




					www.marketwatch.com
				




_Throughout my career, I have heard financial people talk about "dollar-cost averaging" as if it were a way to cut risk. It isn't. But, because the idea of dollar-cost averaging being somehow good is repeated over and over, people think it must be true. In fact, most financial consultants even believe this nonsensical idea, because frankly, they don't understand finance or math anywhere near the level that they should.

and 


			https://seekingalpha.com/article/4064825-myth-of-dollar-cost-averaging
		

_


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## Gordon Gekko (30 Dec 2019)

Firstly, congratulations.

There are some important points:

- You are in a great position
- You have a very long investment time horizon
- It’s the wrong financial decision, but I’d clear the mortgage for the psychological benefit alone
- You have neglected your pensions; the contributions should be maximised at 25% of earnings / €115k for 2019 and subsequent years and they should go 100% into whatever global equity option the schemes allow
- I would put the maximum (€240k?) into State Savings
- I would keep a further €540k in cash; that would leave you with €780k in cash or near cash which would represent 5 years’ worth of net income (i.e. €13k per month x 60 months)
- I would invest €1m into a portfolio of European Real Estate Investment Trusts (REITs) rather than invest in direct property; I would include some iRes to get a little Irish exposure
- I would invest the balance, i.e. circa €3m, in a diversified global equity portfolio
- I would ensure that my investments are subject to CGT rather than fund exit tax

Based on the above, you would be debt-free, you would have large incomes in your own right, you would 5 years’ worth of net income in cash, and you would have €4m in real assets which should grow substantially over your investment time horizon.

The key, however, is educating yourself and your spouse around investment risk and your own behaviour. In particular, how you might react in the face of volatility. Your portfolios could fall by 10% almost immediately. Or 20%. Or even 40%. But the key is your time horizon. It is your friend and, together with your strong income and large cash buffer would allow you to ride out even a 2008/2009 style crash and harvest decent returns over time.

Anyways, that is what I would do for what it is worth.


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## Fella (30 Dec 2019)

Nothing much to add that hasn't been covered , if it was me I wouldn't rush into doing anything. 
The second thing is remember your the guy that made 4 million , your going to be getting advice from financial experts , but I'd probably pay more to sit down with you for advice than I would to sit with a financial advisor . Your obviously a very capable individual , congrats on your success . 

I have nothing against financial advisors but I'd be fearful with that amount on the line , I'd certainly educate myself as much as possible first and get at least 3 opinions , tiny percentage fees on that kinda money could really add up , so I'd rather pay for someones time per hour than give them a percentage.

All the best and congratulations ,nice to see hard work paying off .


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## Brendan Burgess (30 Dec 2019)

Gordon Gekko said:


> The key, however, is educating yourself and your spouse around investment risk and your own behaviour.




That is a really good point.

There probably is an opening for a course in how to manage sudden wealth. 

Or as most won't attend a course, a good book or website on the topic.

edit: I googled it and there are plenty of tips online. I have not read them yet, but for example: 



			https://www.planningtowealth.com/blog/2018/6/2/suddenly-wealthy-financial-planning-tips-for-managing-a-sudden-inheritance-or-windfall
		


Brendan


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## RedOnion (30 Dec 2019)

Brendan Burgess said:


> This is so wrong.
> 
> Why take on extra risk?
> 
> His objective is to preserve his wealth and not to maximise it.


Sometimes you have to roll the dice! Taking a tax free 8k per month, the money will only last 40-odd years. You've got to leverage to have any chance of losing it all quickly!!


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## LS400 (31 Dec 2019)

rcnt_acqtion said:


> I have gifted (legally and tax paid)





rcnt_acqtion said:


> I don’t plan on moving





rcnt_acqtion said:


> I don’t plan on massively increasing





rcnt_acqtion said:


> I consider myself lucky





rcnt_acqtion said:


> I am starting the process





rcnt_acqtion said:


> I also want to “enjoy”





rcnt_acqtion said:


> I value staying grounded



Look, I accept I know diddly squat about... all that stuff, but couldn't help notice there was no "We" here, So while everyone here is congratulating you, helping you as to how you can seek enjoyment from your wealth, it was for that reason I found it quite sad to be honest. I admire those who has made a success of themselves as much as the next person, and really like to see people enjoying the fruit of their labour.

But, I just didn't get the, we would love to do this and do that etc. Maybe its my read on it, and that its not the case at all.   I say that because your road trip adventure sounds brilliant, but only if these moments are shared with a loved one, Pal etc or just co-pilot.. and, I am available and can read maps!!

Your in a fantastic situation financially, and I can confidently assume that your in as good a position yourself to be giving advice about success with wealth and managing it as much as seeking it.

Best of luck.


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## gnf_ireland (31 Dec 2019)

Andrew365 said:


> The moral being the OP has achieved wealth, he has more money than his lifestyle needs and has no appetite to massively change. There is zero need to take on the risk of the stock market. Yes, it may rise 20% generating an additional 1million but to what ends?



I would second this statement. The OP has worked hard to get to the position he is in. Why not enjoy the fruits of his labour after the the transition period is up.

OP ask yourself who do you want the extra money for? Its unlikely to be for you or your wife (although I do share the sentiment above re too much use of I and not enough of we). You don't appear to have any children. Its likely you have more money now than you need for the rest of your life - why do you want to acquire more and who is it for (other than the taxman?)

Go enjoy yourself and forget about making more money. You have 100k ever year for the next 50 plus years...  forget about being the richest man in the graveyard - be the happiest !


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## mtk (31 Dec 2019)

I would add to Brendan's excellent list of things to avoid....

divorce could wipe off 50%.

legal changes e.g. death duties hit the british aristocracy.....  a wealth tax is not  unthinkable.

vanity project of some sort e.g. seeking to get yourself cloned in 20 years time


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## hubble (31 Dec 2019)

My guess it that this person is not going to rest on their laurels or go into retirement.  I would say that the person is likely to go for it again and maybe a few times more before retirement. The windfall from the sale are somewhat of a distraction would be my guess.  

I would say interview three to five fee paying advisors and see what their offering is. You could then act upon one or more of their advice.  Let the advisor(s) take over the advising. How the mechanic of the investments would work I do not know.  Does the advisor do this or do you do it yourself? The point is that managing  the money is only a time distraction for this individual.


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## rcnt_acqtion (31 Dec 2019)

Thats a great list Brendan - and a good way of thinking about it. Why make the same mistakes as others, when you could be making a whole set of new ones, eh?



Brendan Burgess said:


> 1) People get carried away by their own brilliance.  So they invest a good part of their money in a new business to give them something to do. The business fails and they lose all their money.



I've seen this happen with a friend! Thankfully it didn't wipe them out but it caused unnecessary hardship. Every business success requires a healthy dose of luck and luck can't be planned for! The fact that my day-to-day isn't changing much (as I'm continuing to do the same job) is actually a great comfort for me. I liked my job because I created the role for myself by starting the company – the goal was never to try and retire early or stop doing what I do in my profession at a practitioner level.



Brendan Burgess said:


> 1 B) The new business idea is so good that they borrow lots of money to invest in it and lose all their money and end up with a huge debt which they can't pay.



I've seen quite a few people do well in Silicon Valley with exits. I think its interesting (and wise) that they never fund their next idea themselves – they still reach out to private equity, venture capital and increasingly (and quietly) family offices.



Brendan Burgess said:


> 1C) They buy a big property which costs more than €4m so they borrow the balance.  It all goes horribly wrong.



Happened to the same friend mentioned in #1 – they are still under water although with a lovely property. I am happy in my high-density apartment in a great area of North Dublin. All my neighbours are hard working and grounded, where as my friend lives in a "ladies who lunch" area of Dublin!



Brendan Burgess said:


> 2) They take a huge punt on oil or gold or a particular share  because someone charismatic recommended it strongly.



I think thats just gambling, to be honest. I like Investment Trusts which long term (> 50 year histories) track records instead! I think I'd be a terrible individual stock picker myself. Too much bias – especially to tech stocks, the only thing I know anything about.



Brendan Burgess said:


> 3) They fall victim to scammers who get them to invest in some great scheme and they lose a big chunk of their money.



I've read the more university educated you are, the more susceptible you are to getting scammed. i.e., its people who think they are smart enough to spot a scam are the very ones that don't. I think this is a worry for anyone. My way of trying to avoid it right now is to:

a] not be greedy and look for unrealistic returns, and

b] be conservative and invest in long established funds or trusts via long established brokers or platforms (such as Davy's in Ireland, for example). Even if that means slightly diminished returns or higher than average costs. Hunting for cheapest possible fees, in my opinion, opens you up to risk.



Brendan Burgess said:


> 4) They gamble it away.  I suspect that you are not the gambling type, but worth noting it here for completeness.



Sure all investing is gambling  But you're right, I'm not the type. The stories I've heard from friends working for bookies and software gambling companies around Dublin would make you very wary of them. The house (almost) always wins!



Brendan Burgess said:


> 5) Drink and drugs.



 I think this is a point not to be overlooked. Drugs are a no for me, but I could reign in some pints a bit. So much of business ended up being "networking", which really is a code-word for sharing a business card and then boozing. One to keep an eye on, it being New Years resolution time and all


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## rcnt_acqtion (31 Dec 2019)

LS400 said:


> all that stuff, but couldn't help notice there was no "We" here,



I'm new to this forum and I guess found myself "filling out the form" in the first person. Don't read too much into it – there is lots of "we" in my life!



LS400 said:


> I am available and can read maps!!



That new car better damn well be able to read its own maps for the cost of it   I"m already impatient for it to arrive and its going to be a long wait until its manufactured and delivered. Still its give us plenty of fun poring over maps planning various adventures.


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## noproblem (2 Jan 2020)

Regardless of what all of you are saying. It's all based on supposition. Pick 10 top stocks right now and no one can tell me they won't go belly up over the next few years, it's happened in the recent past. However, like you good people have said that over a longer period one is better to place their cash in some form of stock rather than just hold it on low deposits, the trouble is and for me it's a gamble, picking the stocks is the stickler, as it is with most ordinary people. One can go to the so called experts but trust isn't too high in that quarter and for good reason. There's an awful lot of plain Jane's and Joe's out there today who didn't do too much spending with their good amounts of lolly during the Celtic Tiger, they let the knowledgeable boys and girls do that and we all know how the story went.
 I understand what Brendan and others are advocating but surely for this year and going forward we might be better off to talk to one another in clearer and simpler terms about investments. If a Doctors kept telling their patients what's wrong with them in Latin terms and explanations it might soon lower the no of people visiting their surgeries, but it wouldn't solve the problems. Not giving out to anyone or any profession. The general public understand savings and investments a bit, but not the high falutin terms sometimes used by  those who sell and advise on products to invest in. A small bit of understanding and simplicity would help many, and some of those "many" can be quite wealthy in both assets and cash terms but not trusting of people they really need to have a chat with. Then again, maybe it's just poor old me. Happy New Year to everyone.


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## KOW (2 Jan 2020)

rcnt_acqtion said:


> *Age:* 41
> *Spouse’s/Partner's age:* 43
> 
> *Annual gross income from employment or profession:* 225,000 (+ 50% guaranteed yearly bonus for next 3 years)
> ...



The only comment I can make is to realize and give yourselves a pat on the back now you have completed the hard part.
 When you started out on your journey you both most probably only wished to be where your at now.
Dont stress because I dont think you can really go wrong unless you did something crazy and that is not going to happen.
Take your time. Pay for good advise if you need to. 
Good luck with all.


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## Brendan Burgess (3 Jan 2020)

Andrew advised to put the balance of the money in a bank deposit. 

I have moved all the posts on the topic to a separate thread: 






						Are bank deposits risk-free in the long term?
					

I have moved these posts from this thread :   https://askaboutmoney.com/threads/business-sold-%E2%82%AC4m-to-invest.215455/  ... the OP has achieved wealth, he has more money than his lifestyle needs and has no appetite to massively change. There is zero need to take on the risk of the stock...



					askaboutmoney.com


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