What would be the best way to invest a million dollars for both income and long term growth?

Question

Let's say you won the Publishers Clearing House Sweepstakes and got the million dollar grand prize. What would be the best way to invest it to not only produce an income for yourself, but also to make the principle grow to build a legacy for future generations.

I understand the concept of diversification, but picking stocks seems kind of like a crap shoot. Taking it to a finacial advisor may be better, but they often appear to be wrong plus they charge commisions. Mutual funds seem like a good idea as long as the loads aren't too high. Tax free municiple bonds seem like an idea that is worth looking into.

Any ideas are welcome. I'm not looking for professional advice (although that would be great). I'm just looking for opinions and ideas that may have worked for other people in the past. Any horror stories about disasterous investments are welcome too.

Answer 1

Sorry to say this, but with $1 million windfall, you have to seek professional guidance. The first professional you would need to contact would be a lawyer. You need to get an estate plan in place to protect your assets. The second professional you would need to seek is an accountant. She will let you know what your tax consequences are for your prize. The third professional you should seek is a financial planner. There are different types of planners: there are those who work for brokerage firms and are paid based on what they sell you, and there are fee based planners who charge you for a consultation and make recommendations on investments.

Any easy out on the third step? Go to a financial website like Schwab, Fidelity, Vanguard, etc. and complete their risk tolerance questionnaires. Based on that, you could set up a diversified portfolio of index funds, which are no load, low expense and would give you the advantage of professional management without the subsequent commissions.

If you need to find a professional financial planner, there are websites which can tell you who is a Certified Financial Planner. Interview several to find who "fits" you. It's almost like picking a doctor-you need to agree with them personally and professionally in order to develop a trusting relationship.

Good luck!

Answer 2

Well this is definitely not the slickest answer you are going to get, but it would definitely work and keep you from doing anything silly that may leave you broke.
So you take 1,000,000 (after taxes) and divide it by 12. That leaves about 83,300 dollars per month right? Ok skim off the 3,300$ for each month and use the 39,600 that will leave you with to pay off as much of your accumulated debt as possible. Hit the high interest suckers first.

Then take the 80,000 for January and find the highest yield 12 month CD you can find. CD's are about the slowest way to compound interest available, granted, but they are about rock steady and we are working with amounts that as far as I know should be FDIC covered. The 12 month CD also keeps you from spending the money on a lark, and you are dealing with enough cash that you should be able to negotiate a pretty good rate with a reasonable bank. Put the money in and wait.

Then do the same for each months cash and so on till you hit December. I hope you put the second quarter money in a 3 month cd, the third quarter in a 6 month and the fourth quarter in a 9 month, but hey its your cash. Once you hit January again you will get a check for somewhere in about 4 grand if you stuck with a 5% rate compounded once (sucker) then you will get a lovely 4 grand paycheck every month for the rest of your life (less taxes). All the fun of spending money like you are working and retiring anyway, none of the panic over the stock market taking a hit or an economic recovery killing your bonds. Slow, steady and eternal wellspring of cash.
Cheers.

Answer 3

Heads are going to roll soon. I would stay away from the stock market and invest in hard assets. Real estate and other limited resources. Keep a chunk of money to curb inflation and buy some gold and silver. Wait for a good opportunity to invest in an office or apartment (a lot of headaches) building to generate cash flow and appreciation. Hedge against the dollar as it continues to devalue.
Tax free municipal bonds - No good unless you have institutional type of money i.e. superrich
Mutual/ETF funds - decent, takes the brain work out of it plus you can get some good returns
Stocks - you can only analyze so much. then its up to the market which as we all know is not efficient (based on emotions). Make money by going against the "current".
Financial advisors aren't experts, they're salesmen. They just push whatever they have to for that month.
Don't speculate on land unless you have great information.
Cons- large upfront capital requirement since you can't leverage entirely.
CD's suck.
If you've got the resources..... build an empire that will last a couple of generations by establishing a family trust!

Answer 4

There is no way to "invest for both income and long term growth" in the current environment. Back in 1984, you could buy a 30-year Treasury bond at a current yield of 12-14% and watch it appreciate all the way to 2003. It was possible because interest rates were high (meaning, bonds were cheap) and dropping (meaning, bonds appreciated). Right now, interest rates are low and rising, so there are no easy ways to make money anymore. You have to either speculate or keep to niche markets (mortgage IOs, for example) or invest overseas.

Answer 5

I would open a CD account and put all my money into it and earn interest. On a 5% return, you will earn $50,000 a year. That's a lot of money.

Answer 6

stocks that pay dividends