{"id":"2009334461658439688","url":"https://x.com/ankurnagpal/status/2009334461658439688","text":"","author":{"name":"Ankur Nagpal","username":"ankurnagpal","avatarUrl":"https://pbs.twimg.com/profile_images/1501577359228559367/_EXo3LFF_200x200.jpg"},"createdAt":"Thu Jan 08 18:40:41 +0000 2026","engagement":{"replies":74,"retweets":95,"likes":832,"views":1168690},"article":{"title":"How To (Not) Invest Life Changing Money","previewText":"April 20 2020.\nA single wire transfer into my bank account for a completely unfathomable amount of money.\nI had just turned 31 years old, and recently sold the tech startup I had been working on for","coverImageUrl":"https://pbs.twimg.com/media/G-KW-SgWoAA82NH.jpg","content":"April 20 2020.\n\nA single wire transfer into my bank account for a completely unfathomable amount of money.\n\nI had just turned 31 years old, and recently sold the tech startup I had been working on for the last 7 years.\n\nAnd I hadn't the slightest clue what to do with any of it....\n\nLet’s go back in time for a minute…\n\nI only moved to the United States of America at the age of 17 for my freshman year of college.\n\nI knew no one in the country, and I certainly knew nothing about the US financial system.\n\nI soon became absorbed in building startups, and ignored learning pretty much anything about investing until a few months before I sold my business.\n\n## Planning the Acquisition\n\nOne of the smartest things I did was hiring expensive lawyers and accountants to help me structure my holdings prior to selling my company.\n\nThe most significant tax law for startup founders is called Qualified Small Business Stock (or QSBS) and it allows startup founders to pay no taxes on up to $10M when they sell their business.\n\nBut here’s the crazy part - with smart tax planning, you could multiply the QSBS limit to $30M, $40M or $50M by setting up trusts or gifting shares to family members.\n\nFor acquisition planning, here’s what we did:\n\n- I set up a Charitable Remainder Unitrust (CRUT) which is a dual-purpose structure that can multiply QSBS while paying you an annual dividend, with the remainder going to charity.\n\n- I set up a Dynasty Trust for my future beneficiaries, which also served as its own independent taxpayer for QSBS purposes.\n\n- I ensured my core personal holdings were also eligible for QSBS, since I had held the shares for 5+ years.\n\nThis allowed me to multiply QSBS three times, which turned out to be the single most significant factor in my take-home amount.\n\nThere were some sketchier structures suggested to further multiply QSBS like a Delaware Incomplete Non-Grantor Trust (DING) but I passed on setting those up for two reasons:\n\n- It operated in a legal grey area I could not get comfortable with. States like California and New York were starting to make clear they don’t love these trusts, and I didn’t want to take on any additional risk.\n\n- Multiplying QSBS three times somehow felt… enough? Pardon my french, but any more felt a bit like taking the piss out of the system.I may be the only person who feels that way as I’ve heard of founders multiplying QSBS up to TWELVE times.\n\nThe other big benefit of this round of estate planning is it moved some of the wealth I would make outside my estate.\n\nWhen it is time to pass it on to my beneficiaries, this also bypasses estate tax.\n\n## Enter Private Wealth Management\n\nAs soon as we announced the deal, every single money manager found my email address and reached out.\n\nI had not yet received the cash in the bank, but I already had inbound solicitations from JP Morgan, Wells Fargo, Goldman Sachs, Morgan Stanley and all the other usual suspects.\n\nI spent a few weeks interrogating them all and quickly shortlisted three final candidates:\n\n- JP Morgan, they had the best banking services, particularly since they owned Chase.\n\n- Goldman Sachs, the most exclusive and made a lot of promises about protecting generational wealth\n\n- Morgan Stanley, very similar to Goldman Sachs, but I wanted a competitor in the mix.\n\nAfter a short but intense vetting process, I ended up choosing Goldman Sachs as my primary wealth manager.\n\nI chose them for two reasons:\n\n- Their brand was the strongest to me, and since all these products ultimately felt very similar, the stronger brand won out.\n\n- I really liked my relationship manager I was chatting with.\n\nHowever, I was not completely convinced at the utility they provide, so I only decided to allocate half the money I made from the sale to them.\n\nThe other half I kept for me to invest on my own.\n\nSeparately, I still signed up with JP Morgan’s Private Bank for their banking services. I continue to maintain that their private banking is a great product if you are eligible and does not cost any money at all.\n\nThe Economics\n\nI know the biggest question on everyone's mind is... how much do Goldman Sachs and the other private wealth managers charge?\n\nThis turned out to be a somewhat challenging question for them to answer.. since there are several layers of fees that vary based on the specific products you are invested in.\n\nAfter much cajoling, here's the breakdown I was provided:\n\n![](https://pbs.twimg.com/media/G-KVTIkWQAExoG8.jpg)\n\nIn addition to this, they charged an annual $3,000 management fee for reasons that are still unclear to me.\n\nWhile it felt expensive, I knew next to nothing about personal finance and investing at the time so it felt like a safe choice for a big portion of my wealth.\n\nHere is what they actually ended up doing on the investment side:\n\n- A vanilla approach to standard portfolio theory that broke down roughly into 25% fixed income and 75% public equities. This was after I pushed for even more stock exposure than their original proposal.\n\n- The fixed income was mostly local municipal bonds since they offered a better tax equivalent yield at the time.\n\n- The public equities were in a direct indexed portfolio for tax-loss harvesting for the S&P 500 and a few specific funds for small cap and international funds.\n\n- There was a lot of talk of the alpha they could provide with lucrative private investing opportunities, but with decent insider access to startups and venture capital, I found their deal-flow relatively average (and expensive!).\n\nThe Execution\n\nThe world was a crazy place when I signed my Goldman Sachs contract.\n\nThe market was slowly recovering from the massive fall of March 2020, but fear and uncertainty was everywhere.\n\nGoldman recommended investing the entire lump sum upfront, but I was terrified so we compromised on dollar cost averaging over the course of the next 7 months.\n\nRegardless of how the market did, we bought in on the 15th of every month from May to December 2020.\n\nThis drove me crazy. During the run up to the 15th of every month, I spent way too long monitoring daily market movements and even tried convincing Goldman to wait for a better entry point later on.\n\nBut, they overruled me and dollar cost averaged in every single month.\n\nBy the end of the year, I was fully deployed.\n\n## Ankur’s Fun Money\n\nThe other half was for me to play around with.\n\nI figured... even if I do pretty silly stuff, the 50% being invested by Goldman would cover my ass in case I blew myself up.\n\nHere is roughly how I started allocating the rest of the money I had:\n\nVC Fund\n\nI had started investing in startups a few years ago via the excellent Spearhead program that gave founders up to $1M to invest.\n\nWe got paid carry (aka a share of the profits) on the investments, and it was a pretty sweet deal since we only risked 1% of the capital ourselves.\n\nBut now that I actually had money, I wanted to raise the stakes and deploy my own capital directly.\n\nSo I raised a venture fund of ~$12M in April 2020. The fund was set up largely to amplify my own capital: I charged zero management fees, and was the biggest LP (also known as fund investor) investing almost a third of the capital personally.\n\nI invested in ~50 companies over 18 frenetic months, before deciding to go even bigger and raise a ~$72M second fund.\n\nI also charged no management fees on the second fund, but had to spend considerably more time fundraising and ended up raising money from almost 200 investors (including lots of institutions).\n\nEventually, I started a new startup in 2022, and scaled back by investing considerably and returned 40% of what we raised for Fund 2.\n\nBut that’s a story for another time.\n\nOther Startup and VC Investments\n\nMeanwhile, I was also allocating a reasonable amount of money to other venture funds - particularly, “micro-funds” being run by friends of mine.\n\nI believed (and continue to believe) there’s meaningful alpha in small VC funds that were led by a motivated operator and allocated a good amount of money to those.\n\nI also occasionally invested in startups directly that either didn’t fit into the thesis of the fund — or were an individual SPV (special purpose vehicle) run by someone else on AngelList.\n\nAll in all, I was over exposed to the world of tech startups.\n\nIndividual Stock Portfolio\n\nI had not invested in stocks before this but took this time to give myself some capital to buy stock names directly.\n\nI bought ~50 companies, including a few very large positions in tech names, and kept doubling down as the market hit all-time highs in 2021.\n\nWhile I let Goldman index the market, I figured I could take on more risk, particularly in an area I fancied myself as knowing more than them.\n\nTime would tell my stupidity here.\n\nHome\n\nI bought my home in 2020.\n\nThis was not strictly an investment - ultimately, I believe owning your home is primarily a consumption purchase.\n\nAnd consequently, my primary goal was to own a place that gave me joy versus optimizing for the best return on my investment.\n\nBut I did spend a reasonable amount on it — particularly, because I did not take out a mortgage even though mortgage rates were very low at the time.\n\nWhile this may seem like an irresponsible financial decision, the idea of having no debt was very appealing to me.\n\nCommercial Real Estate\n\nI signed up to be a limited partner in a Qualified Opportunity Zone Fund set up by a very close and dear friend of mine.\n\nThis was largely a play for tax alpha — by investing in a qualified opportunity zone fund, you can defer capital gains taxes until 2027. Additionally, if you hold onto the properties for 10 years, you get an automatic step-up in basis aka your gains up to that point are tax-free.\n\nWe found that most opportunity zone funds out there were fairly terrible products with outrageous fees, so we decided to spin up our own and I was more than happy to defer some taxes.\n\nWe deployed the fund in a few residential properties in Bushwick, NYC.\n\nCrypto\n\nMy friends will tell you that I’m not a big crypto guy. Never have been, likely never will.\n\nBut I roughly allocated a few percentage points of my net worth towards crypto.\n\nNot necessarily because I believed it would be worth something… but, as a hedge: What if the Bitcoin bros turn out to be right and we have to live in their world?\n\n## Performance\n\nFast forward to today. \n\n(Quick note: This article was originally written in January 2025, so all the numbers are ~1 year old at this point)\n\nIt’s been almost 5 years since I deployed this capital. We’re no longer in a zero interest rate environment and the S&P has since averaged an 18% annual return!\n\nHow did Goldman Sachs and I do in this time period?\n\nGoldman Sachs\n\nThe Goldman portfolio has performed relatively well with a 10% IRR, growing by 54% over this time period.\n\nThe primary reason has been the incredible run the S&P 500 has been on, more than doubling my initial investment and averaging an IRR of 18% annually (!!).\n\nThe power of indexing really shone through. I would have never thought to buy any Nvidia stock in 2020, but by indexing the S&P, it’s grown into one of my largest positions in any asset.\n\nEvery other category of the portfolio underperformed big time:\n\n- Fixed income was a disaster relatively, growing only 4% annually.\n\n- Small cap growing only at 7% also hurts, particularly because the fund Goldman put me in had an expense ratio of 1.5%! This underperformed all the small cap indices.\n\n- International did decent at an 11% IRR.\n\nHere’s the complete breakdown:\n\n![](https://pbs.twimg.com/media/G-KVr-LXIAI8aI4.jpg)\n\nThis total is net of the fees they charged.\n\nWhile it’s easy to glance at this performance and see how much it lagged the S&P, it’s worth noting that a portfolio like this is also likely to outperform the S&P in down years.\n\nAnkur\n\nAt first glance, I slightly outperformed Goldman by growing my money ~80% in that time period, which works out to an IRR of 14% annually.\n\nWhile that sounds impressive, that is still underperforming the S&P 500 in the same time period (on a partially illiquid portfolio too!)\n\nA few important caveats on the methodology here as well:\n\n- I’m relying on third-party valuation data for most of the private assets that is likely dated quite a bit.\n\n- I’m using Zillow estimates for my home which is notoriously all over the place.\n\n- For projects like the commercial real estate, we’re just about now getting into monetizing them so the IRR should increase substantially.\n\nWith that said, I somewhat believe these cancel each other out, and directionally this breakdown is as accurate as we’re going to get until the venture funds mature:\n\n![](https://pbs.twimg.com/media/G-KV1b5XIAAzSAY.jpg)\n\nSome observations that immediately jump out to me:\n\n- I suck at picking stocks.I massively underperformed the S&P and the single biggest reason was chasing tech names too aggressively in 2021 and 2022, as every asset kept falling… and falling… and falling.\n\n- My startup investments will end up doing well.\nThe majority of my investments suck here as well. However, a few winners are likely to win so big that the asset class as a whole will do very well for me.\n\n- Crypto has been on an all-time runWere the crypto bros right all along? Crypto easily outperformed everything else on my list while being fully liquid.\n\nWill my portfolio end up beating the S&P 500 as the startup investments mature?\n\nIt’s possible… but I wouldn’t bet on it.\n\n## Takeaways\n\nWhere to from here?\n\nDespite underperforming the market, I’m generally quite happy with where this whole thing has turned out. My assets have grown substantially, and my knowledge on personal finance and taxes has grown many times over in this period.\n\nIn the last 2 years, I’ve also spent very little time investing or managing any of this to focus on building my startup.\n\nHere are some of my biggest takeaways from this process:\n\nCompound Interest\n\nCompound interest is a beautiful thing\n\nI can sit here and complain about how I underperformed the S&P. Or I can bitch and moan about the fees Goldman has charged me.\n\nBut at the end of the day, my total net worth has grown by ~70% or more than 10% annually since selling my business. This is net of spending money on pretty much whatever I want.\n\nThis is unequivocally awesome and something I am grateful for.\n\nTax Alpha\n\nFinding true alpha on the investing side is incredibly difficult… potentially, impossible.\n\nI tried lots of fun things, and it worked in some cases and failed in others, but netted out worse than indexing the market.\n\nHowever, tax alpha was and continues to be incredibly valuable.\n\nThe net impact of the money saved on QSBS is orders of magnitude more impactful than anything I have done on the investing side.\n\nWhen you save money on taxes, it’s not just the dollars you save today - but the impact of indexing the market with those saved dollars, and seeing those returns decades later.\n\nThis is the foundational insight behind what we’re trying to build with my latest startup.\n\nAUM Fees\n\nI have grown to hate AUM fees on a large portfolio - and as a result, the majority of the private wealth management industry.\n\nThere is no real investing alpha on offer by the large private banks — and to pay ~100bps a year to index the market dramatically chips away at your returns in two separate ways:\n\n- Extrapolating forward those fees on a large base, you net out to paying many millions of dollars in fees paid to asset managers regardless of how your portfolio performs.\n\n- These fees also reduce the dollars being invested, that would otherwise be growing and compounding. This hurts your ending balance even more than what you end up paying!\n\nTo make matter’s worse, the majority of the private wealth management industry does not help you with much more than investment management.\n\nI had to find separate providers for estate planning, tax optimization, tax filing and more. So what am I paying them so much money for?\n\nMy Plan Forward\n\nI found this to not just be a fascinating experiment, but also a way to dramatically level up my knowledge of personal finances.\n\nAlmost 5 years in, I have a much deeper understanding of the mechanics at play and feel substantially more confident in managing my own money.\n\nHere’s what I plan to do moving forward:\n\n- Leave existing assets unchanged.It would be very painful to unwind a lot of what I have set up since I would have to take capital gains on assets that I would not want to.\n\n- Direct index the majority of new assetsI will invest it myself moving forward building my own portfolio that’s roughly 50% large cap, 25% small cap and 25% international. I’m young enough to not care too much about fixed income at this point. I’ll set it up via direct indexing to optimize for tax alpha.\n\n- Keep making fun investments on the sideIt’s not just about maximizing my net worth but having fun along the way. I’ll keep making the odd degenerate gamble on individual stocks, crypto, startups… or maybe even, a cricket team.\n\nI’d love to know what you think of this breakdown!\n\nLeave a comment and I'll do my best to respond to everyone here."},"adhxContext":{"savedByCount":1,"publicTags":[],"previewUrl":"https://adhx.com/ankurnagpal/status/2009334461658439688"}}