Although it may seem like a bit of a pipe dream, for some lucky few of us, winning a lottery or a grand money prize can happen and is a direct ticket to changing your life forever.
However, no amount of money is eternal, especially if it is used unwisely. It is very easy to get caught up in the amount that you have and choose to spend rather than save, and lose rather than invest wisely.
So, how do you know how to invest a large windfall? Well, despite your evident luck, it would be foolish to rely solely on that to keep you going for the future. If you want this money to be truly life-changing, then it will have to keep you comfortable for life.
Here are a few tips to help you to decide where to invest a large sum of money.
Invest in the Stock Market
Possibly the first and most obvious course of action would be to invest your money in the stock market. If you’ve been reading Project Financially Free regularly, you’ll know that there are plenty of options available when it comes to investing in the stock market.
Now, it is essential not to invest everything, because as is the case with all investments; the stock market is not a sure thing. As you know, markets change every day, and big investments in what may appear to be a sure thing can fall flat.
That being said, a wise investment can increase your money while simultaneously protecting it from inflation and taxes.
It is also important to note that you are far more likely to see long-term results the longer you stay invested in certain companies. Despite any apparent success, the chances are that their stock prices will rise and fall multiple times over the years. As an investor, you will have to be prepared to handle the more difficult times in order to reap the benefits of the plentiful times.
That is yet another reason why investing in multiple companies or stocks is a better idea – for example, you could do worse than invest in a well-regarded ETF, if this is the route you want to take.
Investing in different fields of interest is also a good idea. Say that electric vehicle sales hit an all-time low. In that case, having invested all of your money only in companies such as Tesla would mean that you will lose a lot, possibly even everything. However, investing in different sectors such as fashion, home entertainment, security, etc, will mean that should one or more fall on hard times, the chances are that a different investment, or more, will help you to pull through. Ideally, you should only invest a certain amount in the stock market, leaving the rest for other vocations. If you do decide to invest in the stock market there are two broad options when it comes to investing style: passive investing through platforms like Nutmeg or Wealthify where you choose your risk level and they do the rest. Or active investing where you actively choose which stocks or funds to invest in. If you decide to go down the active route make sure you take advantage of platforms offering free stocks to get you up and running.
Invest in Property
There are multiple benefits to owning properties other than your own, one of which is using them for rental income. This is a great way to invest money in yourself without having to rely on something over which you will have very little control, such as the stock market. It’s a great passive flow for cash.
No matter what is happening in the world, people always need a place to stay, live, work, host events, etc. Letting out a property for rent will require some work on your part but will nearly always guarantee a steady income for you.
Your job will be to find the right locations, build or buy the properties, and make sure that they are always up to standard. Depending on what they are being used for, that could mean investing in a cleaning services company, a maintenance team, etc. However, whatever you invest will be returned to you with a profit. It may be worth hunting down a property management specialist to help you along the way.
Of course, before investing in anything, you will have to take the time to calculate what exactly you could expect as a return on your money and whether or not the investment will be worth the potential income. This could take some time and will require some knowledge about the current property market (and so should at best be looked over with you by a professional).
However, investing in the right kinds of properties, in the right areas, and at the correct prices can be a very good way of ensuring that your newfound money is put to work without you having to go back to work full-time!
Invest in Your Pension
Although many of us tend to make lists of all the things that we would like to buy if we ever become rich, such as yachts, mansions, fast cars, and beautiful holidays, very few of us consider putting some to the side, as a pension fund. Pensions, by comparison, can seem pretty boring – but without them, you could be pretty stuck when you come to retire.
To recap briefly (if you’re a regular reader), what exactly is a pension fund? A pension fund is a stock of money that companies, employers, unions and private individuals send to financial intermediaries. Pension managers, in turn, can use these funds to typically invest in the stock market on behalf of their contributors. However, many people prefer to just let their pension money accumulate, locked away until they reach retirement.
Best of all, these funds are not subject to capital gains tax. The idea behind pensions is that they provide a fixed amount of money for everyday people upon their retirement. Investing in a pension fund is an excellent way of helping to ensure that when it is time for you to retire, that you know, you will have a steady income to keep you going. Of course, it is always wise to invest in a professional company that can better guarantee your financial security. Without a pension fund, your windfall is at the mercy of any attractive bits and pieces you fancy spending it all on along the way. If you are a younger lottery winner, this is all the more at risk of disappearing before you retire.
Of course, winning the lottery or any other kind of big money prize should be a time for celebration and even a little bit of dream spending; however, it is also a singular opportunity to turn your life around for both you and any loved ones.
The only true way to ensure that the money will serve you well for as long as possible – and that you can still be comfortable even if we somehow lose it all – is by investing your money wisely. Finding the right investment areas can take some time, and nothing is guaranteed to work, but a bit of research and professional help can go a long way.