How to Invest a Large Sum of Money

Sep 12th, 2013 | By | Category: Senior Finances

Your period of collecting McDonalds Monopoly pieces in search of your next free order of medium fries is over. Perhaps you’ve just collected a large inheritance, perhaps you’ve cashed in an annuity or perhaps you’ve just won the lottery. Whatever the case, now is the time to begin making intelligent decisions with that nest egg. According to Reuters, 70 percent of those who come into large amounts of money will lose it all within a few years. How do you avoid becoming one of those people, and live it large without losing big? Investing sensibly is the wisest solution.

1. The Stock Market Never Fails, Except When it Does

Historically, the stock market has always been one of the wisest and safest methods of investment. Though new trends such as the foreign exchange market have come and gone, the stock market has remained one of the best methods of long term investment. However, the keyword there is “long term.” Stocks are virtually useless unless you want to invest for a long period of time, because it goes through some down periods. The stock market can and does fail with regularity: volatility is inherent in the market itself. As The Motley Fool notes, you can actively invest in stocks by selecting them yourself or simply invest passively through a third party.

2. Retirement Investing Isn’t Sexy, But It Is Necessary

Not only does retirement investing allow you to plan for your future, but it also offers you some specific tax shelters. While you definitely shouldn’t invest the majority of your money in your retirement funds, you should invest a good portion of your savings in your retirement funds because this amount of money will not be taxable until you withdraw it. A non-taxable IRA is an excellent way for high-income individuals to save money on their taxes, per Retirement Income Visions.

3. Property Has Been King Since the Days of Serfs

There’s a reason why real estate and property has been a popular investment since well before the days of the Powerball. Real estate has historically been one of the most stable sources of value due to the fact that it is weighted in physical property that exists and will continue to exist. Passive investors can invest in commercial real estate properties or stock in real estate companies, whereas more active investors may be interested in managing their own real estate properties. Some investors decide to become landlords for residential apartment structures while other investors simply become one of many investors in a strip mall or other commercial property. Investopedia notes that real estate investments tend to be more work than other types of investment, but that it can also provide significant rewards.

4. Invest in Businesses With Caution and Fear

Businesses, especially startup companies, are usually terrible investments. While a business may potentially represent a large return on investment, Business Insider points out that 50 to 70 percent of small businesses will fail within a year and a half. If you absolutely must invest in a business, you should keep in mind that restaurants and bars fail at a far higher rate than other types of business.

Image used with permission via Flickr user Ota_photos.

Phoebe Stevens: Phoebe was a financial adviser for one a Wall Street bank until she moved to the suburbs. She has a small clientele base and enjoys sharing what she has learned from them

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