{"id":3336,"date":"2012-09-14T06:14:06","date_gmt":"2012-09-14T13:14:06","guid":{"rendered":"http:\/\/www.wealthfront.com/blog\/?p=3336"},"modified":"2023-03-03T09:48:40","modified_gmt":"2023-03-03T17:48:40","slug":"silicon-valley-new-rich-financial-planning","status":"publish","type":"post","link":"https:\/\/www.wealthfront.com/blog\/silicon-valley-new-rich-financial-planning\/","title":{"rendered":"Managing A Silicon Valley Windfall"},"content":{"rendered":"

Editor’s note:<\/strong> Interested in learning more about equity compensation, the best time to exercise options, and the right company stock selling strategies? Read our Guide to Equity & IPOs<\/a><\/em><\/p>\n

Sudden money \u2013 such as comes with an IPO or an acquisition \u2013 is a good thing, right? Yes, but it\u2019s often accompanied by stress. People who have been working within a constrained budget, steadily paying off college loans and sizable Silicon Valley mortgages, suddenly find themselves with a seemingly limitless number of options for spending their money.<\/p>\n

In this recent Quora post<\/a>, Wealthfront Director of Research Jeff Rosenberger answered the question: \u201cWhat advice would you give to someone who has the opportunity to cash in some of his private company stock in the low seven digits?\u201d Jeff offered a three-step plan.<\/p>\n

Divest your stock<\/h1>\n

\u201cUnless you have an informational advantage that tells you your company stock is meaningfully under-valued and worth accepting the diversifiable risk of continuing to hold, then you should sell it down over time. How long you take to sell it down is something most people really struggle with, so we\u2019ve written a number of blog posts on this topic.\u201d<\/p>\n

Develop a plan for the proceeds<\/h1>\n

\u201cWhile everyone is unique, with his or her own individual situation, there are some clear guidelines,\u201d he wrote.<\/p>\n

He listed the issues and the order in which most people consider them:<\/p>\n

\u2022\u00a0taxes<\/p>\n

\u2022\u00a0rainy day fund<\/p>\n

\u2022\u00a0existing debt<\/p>\n

\u2022\u00a0a real estate purchase<\/p>\n

\u201cAfter the real estate decision, people tend to have varying priorities. Some will focus on economic security and long-term goals like investing for education expenses for their children or retirement. Others will be more interested in philanthropy, making more speculative investments like angel investments or buying new toys,\u201d he wrote.<\/p>\n

Invest to meet your long-term goals<\/h1>\n

Jeff suggested researching the timing and pace of a stock sale with the help of this recent research paper<\/a> from Vanguard. You can also see our thoughts on the topic<\/a>.<\/p>\n

Then, he said, \u201cInvest the net proceeds in a diversified portfolio using low-cost index funds or ETFs across asset classes that you rebalance systematically.\u201d<\/p>\n

\u201cIf you\u2019re interested in learning more I would encourage you to read Unconventional Success<\/em> by David Swensen, who is the Chief Investment Officer of the ~$20B Yale University endowment and A Random Walk Down Wall Street, <\/em>by Princeton economist Burton Malkiel.\u201d<\/p>\n

One final note.<\/p>\n

The questioner asked, \u201cShould I buy gold?\u201d<\/p>\n

The answer, clearly, is No.<\/p>\n

\u201c<\/strong>Buying gold is speculation because it has no rational value. Owning a broad basket of natural resources as part of your overall portfolio will provide a better inflation hedge,\u201d Jeff wrote.<\/p>\n","protected":false},"excerpt":{"rendered":"

Editor’s note: Interested in learning more about equity compensation, the best time to exercise options, and the right company stock selling strategies? Read our Guide to Equity & IPOs Sudden money \u2013 such as comes with an IPO or an acquisition \u2013 is a good thing, right? Yes, but it\u2019s often accompanied by stress. People […]<\/p>\n","protected":false},"author":20,"featured_media":7251,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"inline_featured_image":false,"footnotes":""},"categories":[1374,1282,1278],"tags":[1327,1328,1302,1604,1329,1697,1334,1619,1605,1386,1683,1344],"coauthors":[84],"class_list":["post-3336","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-career","category-investing","category-planning","tag-career-advice","tag-career-planning","tag-diversification","tag-emergency-fund","tag-employee-compensation","tag-financial-planning","tag-ipo","tag-quora","tag-rainy-day-fund","tag-silicon-valley","tag-startups","tag-stock-options"],"acf":[],"yoast_head":"\nManaging A Silicon Valley Windfall | Wealthfront<\/title>\n<meta name=\"description\" content=\"Wealthfront\u2019s Director of Research, Jeff Rosenberger, provides advice on how to plan your finances in the 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