I Sold My Business. How Do I Invest the Proceeds?
A sale turns a business you understood into a pile of cash you have to manage. Here is a 90‑day sequence used by many owners, the structures people choose, and how to judge any proposal you are pitched.
Key takeaways
- Go in three steps: park the money safely, write a plan (taxes, spending, timeline), then invest. Nothing about a $4 million sale needs to be decided in the first month.
- Park within insurance limits: FDIC covers $250,000 per depositor, per bank, per ownership category. Treasury bills and money market funds are not FDIC deposits.
- Size the risk in dollars before choosing a mix. At 60% stocks, an illustrative $4M would have lost about $1.36M in a 2008-style fall of 56.5%.
- Lump sum usually beat 12-month staged investing, in 84.8% of 112 rolling windows (Exent’s data), but staging is a reasonable price for avoiding regret on a life-changing sum.
- Judge any proposal on three numbers: annual fees in dollars, the benchmark it will be measured against, and what it would have lost in 2008 and 2022.
I just sold my business. What should I do in the first 90 days?
- Days 1–30, park: keep the money in safe, liquid places while you get organized. No long lock-ups, no new products.
- Set aside the tax: estimate federal and state tax on the sale with your accountant, and hold that amount separately until it is paid.
- Days 30–60, plan: list what the money must do. Replace your salary? Fund a home, children or a new venture? Over what timeline?
- Note what is not cash yet: earn-outs, seller notes, escrow or holdbacks. They carry risk tied to the buyer.
- Days 60–90, decide a mix and a schedule for investing it, in writing, then start.
Where do I keep the money while I decide?
In places built for safety and access, spread to stay within protection limits. The two protections work differently, so it helps to know which applies where.
| Protection | What it covers | Limit |
|---|---|---|
| FDIC (bank deposits) | Checking, savings, CDs and money market deposit accounts at insured banks | $250,000 per depositor, per bank, per ownership category |
| SIPC (brokerage) | Missing securities and cash if a member brokerage fails | $500,000, including $250,000 cash; not market losses |
Sources: FDIC and SIPC. Money market mutual funds and Treasury bills held at a broker are not FDIC deposits. A common choice is short-term Treasury bills, or funds that own them such as the BIL T-bill ETF; Treasuries are backed by the US government rather than an insurance fund. Details in how much cash to hold.
How do I build a portfolio from scratch with a large lump sum at 58?
Start from what the money must pay for, then pick the mix whose worst year you can live through. Common structures:
- Buckets. One to three years of spending in cash and short bonds, the rest in a long-term mix. Withdrawals come from the cash bucket, so a crash does not force selling stocks.
- A core index mix. A few broad stock and bond funds, rebalanced once or twice a year. See the three-fund portfolio.
- Core plus satellites. Mostly index funds, with a small, capped share for individual ideas.
Then translate the mix into dollars. In Exent’s data, the S&P 500 fell 56.5% peak to trough in 2007–09. A hypothetical 60/40 mix of stocks and bonds, rebalanced monthly from July 2016 to September 2026, grew 9.5% a year against 15.2% for the S&P 500, with a largest monthly drawdown of 20.0% against 23.9%.
| Illustrative $4,000,000 | 100% stocks | 60% stocks / 40% bonds |
|---|---|---|
| 2008-style stock fall (−56.5%) | −$2,260,000 | −$1,356,000 on the stock share alone |
| Calendar 2022 (backtest) | −$728,000 | −$632,000 |
| Largest drawdown 2016–2026 (backtest) | −$956,000 | −$800,000 |
Past data and hypothetical backtests, not forecasts. See the 60/40 strategy page.
Should I invest it all at once or in stages?
Historically, all at once usually ended ahead, because markets rose more often than they fell. In Exent’s test of 112 rolling 12-month windows on the S&P 500, a lump sum beat spreading the money over 12 months 84.8% of the time, by 7.43% of the amount on average.
For a once-in-a-lifetime sum, many people still stage it over 6 to 12 months on fixed dates. It usually costs some return, and buys protection against investing everything just before a crash. Full comparison: lump sum vs dollar-cost averaging.
How do I judge a wealth manager’s proposal?
After a sale, banks and advisers will call. Ask every one of them for the same numbers, in writing:
- Total yearly cost in dollars: advisory fee plus fund and product fees. Illustrative: 1% of $4,000,000 is $40,000 a year.
- The benchmark: which index mix the results will be compared with, matched to the risk taken.
- Drawdown: what the proposed mix would have lost in 2008 and 2022, in dollars.
- Liquidity: anything locked up, with surrender charges or hard to sell.
- Conflicts: whether the adviser is a fiduciary at all times and how they are paid.
A flat or hourly fee can cost far less on a large account; see flat-fee vs percentage advisers and how to evaluate a financial advisor.
How to test a proposed portfolio with Exent
- Upload a screenshot or file of the proposed or current holdings (CSV, Excel, PDF or Google Sheet); no brokerage login.
- Exent replays 2008, 2020 and 2022 on the mix and shows the loss in dollars, next to a risk-matched benchmark.
- Change weights in the what-if simulator to compare two proposals before you sign anything.
Frequently asked questions
Many owners follow three steps: park the cash safely within insurance limits, set aside the tax and write a plan for spending and timeline, then invest in a mix whose worst year they can tolerate. There is no need to decide in the first month.
FDIC insurance covers $250,000 per depositor, per insured bank, per ownership category. Larger balances are often spread across banks or held in Treasury bills, which are backed by the US government but are not FDIC deposits.
Historically a lump sum usually ended ahead of staged investing. Staging over 6 to 12 months costs some expected return but limits the regret of investing just before a crash.
Not necessarily, but many sellers use a fee-only fiduciary planner or tax professional for the first year. Compare costs in dollars: 1% of $4 million is $40,000 a year.
Enough to cover taxes owed on the sale plus one to three years of planned spending is a common structure. The rest can be invested on a written schedule.
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Educational content, not investment advice. Examples are illustrative; past performance does not guarantee future results.