Investing large amount of money. Need help?

Question

Hello, anyways I'm coming into a large sum of money in a few months(low seven figures) and I'm looking for a somewhat high return yet secure investment. Right now I'm looking at rental properties(apartment buildings fourplexes that kind of stuff) though renters are so unreliable especially with the declining economy. I was looking into cds, but the best I could come up with is 4% for a 1 year cd. Anyone have any other ideas?

Security is more important than return, although I'm still looking to get at least 7 percent annually. Any help is appreciated.

Thanks.

Answer 1

You should probably put it into a safe and liquid money market account until you know what you are doing.  The criteria you set up suggest that you should be mainly invested in stocks, where you can get very low-cost diversification using foreign and domestic index mutual funds or the similar  ETFs (Exchange Traded Funds).  You may do fine without an advisor, since you can use index funds and get the same return as the total U.S. or world stock markets; you do not have to beat the market.  At your current level of understanding, this will probably be the best approach.   Spend your time learning more about investing.  Do you really want to invest in real estate, not be diversified, and have the headaches of a landlord or a developer?

Depending on your age and motivation you may be 100%  financially independent at this point and not need to work.  This would suggest that a certain portion of the total should not be in stock funds but should be more liquid to pay your living expenses and to increase the safety of your portfolio.

You should look at asset allocation and probably need some help with this at first.  Be very aware of costs and conflict of interest; you are your own best financial advisor.  If you do not understand an investment completely just walk away.  What I suggest would be better done on Fidelity, T. Rowe Price or Vanguard than at a stockbroker such as Schwab.  They will offer you some general suggestions for free, especially common sense suggestions about diversification, index funds, risk, and asset allocation.  You will get extra attention because of the size of your portfolio.  From the tone of your post, I don't suggest a paid advisor; you are too vulnerable to being ripped off.

Answer 2

While I agree that diversifying is a tool to reduce loss, it is not the only way nor is it for everyone. Warren Buffet does not diversify, on the flip side, he does his due diligence, then puts all his efforts and money into the investment vehicle he has chosen. He also states that for people who are NOT experts in the field they are investing, to use diversification. For those who know what they are doing, diversification is not needed.

With that said, I also agree you need to get a financial planner, CPA, tax attorney on your team right away. Make sure you know how the financial planner gets paid (by selling you annuities, stocks, etc.). If that is the case, he/she has self-interests, and you should proceed with great caution.

You mentioned RE, and I agree with that vehicle 100%. It is how I make 100% of my income. Another mentioned that you should run from RE. That is one person's opinion which most likeley is clouded by all the negative media in the US. The fact is, now is the time to buy, as it is low priced and on sale. Or you can wait until RE is climbing and everyone else is buying RE, that is the time when I will be selling, not buying. Beware that you must have a very good team in place to make this investment vehicle work for you. I believe it is the safest, most profitable, and most tax advantaged investment vehicle you can choose from. Getting 4% in a CD is losing money. You will be taxed on the income, and the 4% return (after tax will be 3% or less) will not even keep up with inflation or the dollar losing value in the currency market. Stocks and mutual funds can provide a better return than a CD, however, you must know what you are doing and you lack tax advantages although you have better liquidity compared to RE. Another option is to use your funds to make loans secured by RE which will provide a nice return along with safety, and without having to spend time managing a RE business (although it is not the pain in the butt it is made out to be).

Good luck and get educated on the investment vehicle you choose before investing a dime.

Answer 3

First of all, if your coming into an amount that's in the low seven figures than you need to sit on it for a while.  Don't do anything risky initially.  Everyone gets investor friendly and jump at becoming a financial wizard when they get a large sum of money.   Remember, money can disappear just as easily as it appeared.  All markets are iffy right now.  Pick a good CD or Money Market.  Careful on buying stocks and absolutely no real estate right now. Find a trusted, conservative, accountant and stay away from anything that's suppose to be a sure thing.  You're not going to get a high return with a sure investment right now.   I tell everyone, if you've got money, save it!  Any interest that you get is money you didn't have.

Answer 4

TALK TO A FINANCIAL ADVISER IMMEDIATELY!!!!!

Do not pass Go, do not collect $200.

Do this today!  Interview as many financial advisers as you can.  As soon as one of them even mentions the word "Annuity" run out of their office like your hair is on fire.  You want to find someone who you feel completely comfortable with.  This person should have a long track record (10+ years is STRONGLY preferred), and should be able to put you in touch with other clients who can vouch for his/her track record.

Consider calling your accountant or lawyer or stockbroker (local only) and asking for some recommendations for financial planners/advisers for a good list of where to start.

After that, call the most successful people you know - start with your doctor, your boss's boss, etc. and ask them who THEY use, how happy they are with that person, and how they got introduced to that person.  Ignore anyone who recommends their brother-in-law.

Answer 5

Don't put all your money in one place, diversify your holdings.  

Call a broker like Charles Schwab, they will give special attention because you are a millionaire client.  

Its surprising to me that you are thinking about real estate when at this point homes have lost 4-5 years worth of equity gains in the past few months.  

You should definitely consider a mutual fund, a well managed fund will still gain in bad years, but in good years you could make 10-20% on your money with ease.  

Stock in large companies may be a consideration for at least part of your portfolio.  Its riskier, but the returns could be huge.  

The key is to diversify, if you take the time to understand the various methods of investing you can increase your wealth rapidly (10-40%) with such a large amount of money as leverage.

I can assure you, that unless you are an investor FOR A LIVING you should diversify where you put your money.  

Start putting 5k a year in a ROTH IRA, you can invest this money while it is in this account and ALL GAINS ARE TAX FREE!  If you invest 5k in a company through your ROTH IRA and those shares grow to be worth 100k, you do not pay taxes on 95k worth of gains.  Obviously with a ROTH IRA you have to wait till a certain date to take money out without paying a penalty, but this is a very easy and secure way to ensure wealth for retirement.  You can take all the money out at once and put it in your checking and start spending and the government can't touch one red cent.

ALL investors diversify at some level, its what we call "HEDGING" your bets.  You should have a base of extremely low risk investments that have constant dependable gains, even if they are small gains.  This allows you to "A", cover your *** if things go bad with other investments, and "B" offset losses in bad years.  

Also, the credit crisis could be getting worse before it gets better.  There are some big companies hemorrhaging money, billions and billions of dollars because of the credit crisis.  

Another problem with apartments, is that they're work.  You have to spend a lot of your time either fixing things or hiring people to fix things.  And I know you think you can buy something nice with your million dollars but I promise you that you really can't buy jack **** in the way of an apartment building.  If I had 50 million I'd probably do some types of Real Estate, otherwise I have more cerebral and high yield ways to increase wealth.

If you bought a few thousand shares of MSFT, you could sell covered calls on it all day long, if the stock hits the strike you sell the stock and make money, if it doesn't hit the strike, you keep the money from the sale of the option.  Its a very low risk way to make money and all it takes a few minutes of reading and a brokerage...  Also, if MSFT hits the strike and you sell, you can buy another call if you think it will keep going up and then make a killing... or potentially lose the money you paid for the options.  

Finally, anyone suggesting that they know anything about Warren Buffet is an imbecile and should be beaten with a shovel.

Answer 6

I´ve been investing for more than 20 years and trading for almost 14, and I can tell you that if you want to make BIG and FAST profits, I recommend you trading rather than investing, trading can help you to go from rags to rich.

If you are investing, you must have already achieved some degree of financial success, long term stock investing and FOREX can help you become much richer than you are today.

My experiences as a Nasdaq Market Maker, Head trader of several brokerage firms, and currently as a professional trader and private hedge fund manager, I can suggest you that:

We trade because we want quick, short term profits on a consistent basis. We want to cash flow the market. Milk it like a cow.

Make consistent, small, short term gains rather than trying to hit a home run on every trade. Don't ever forget that.

Don't marry a stock, marry the idea of making money trading stocks. That's the only way to do it.

For me "All stocks are equally worthless”

I don't hold on to any illusion that the stock market will continue to go up and provide a nice retirement for me.

I could care less which way the market goes. It's irrelevant to me if the market goes higher, crashes or moves sideways for the next 50 years. I really could care less. Stocks are just four letters with two prices next to them that I use to make a living trading.

Trade ONLY when you have a clear, easy and identifiable advantage, because without a CLEAR EDGE your odds of success are NO better than a flip of a coin… That´s why so many new traders (and investors) lose money.

Take a look at any daily chart of any index or stock and you'll probably see the most volatility and the biggest opportunity for profit during the first Hour of the stock market's opening.

The popular thinking and conventional wisdom is that you should wait about an hour before you start trading.

But if you do, you'll miss the big, fast moves that stocks make as all the amateurs let their emotions out through their

online accounts, usually right after they read some news headline or hear Maria Bartiromo go off about a stock on CNBC.

It's easy to see why trading the open is the market's prime time for profiting from other online traders.

The market's open is very volatile - that is the perfect environment for LARGE, FAST profits.

Learn to trade as a professional Market Maker ,not as an emotionally driven amateur trader or investor with few thousand dollars in an account at Etrade.

There isn't any other time during the day or any stock you can invest in, that can make you 1, 2, 3, 5, 7 or more points

in minutes OTHER than during the first hour the stock market is open. That's why I love trading the open so much.

I trade only when I have an edge and that means "only the first hour the market is open".

If you are a beginning trader, you can give yourself an unfair advantage in the market trading this way.

I can carry on with the advises about how to make money trading, but if you ask me:

"What is the best thing you can do for me?

I will say:

Give yourself a BIG favor and go to this "Top Secret" site and learn how to get the BEST stocks that will make the largest and fastest day trading profits you´ve ever seen, all by yourself...

www.onehourtrading.com

After you review this site you won´t need system, strategy, book, software or mentor to tell you what to do,

you will be able to profit HUGE every day.

Good luck and good trading,

John Fontaine