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Large Sums of Money
Smart Investing When You Receive a Windfall
By Cara J. Stevens
Experts agree that you should take care of the home front first. "The moment you acquire money of any amount, it's a good time to make sure your wills are up to date, take care of trusts, family planning and wealth transfer," says C. Robton Perelli-Minetti, a Greenwich, Conn., attorney. "Depending on how much you receive, you might also want to consider changing to a different kind of financial planner who deals with multi-million-dollar clients on a regular basis."
As with any sizeable addition of money to your portfolio, the way your assets will be managed and allocated will change completely, as will your risk tolerance. Your advisor will help you determine how readily accessible you need the funds to be and in turn will help you diversify your portfolio to serve your current and future needs.
Once you and your family are comfortably taken care of, you should plan for your everyday needs. "Calculate your regular monthly expenses to see how much you have available for savings," Freeberg says. "Then carefully select your investments based on their performance issues including cash flow, long-term assets and overall needs." When considering any individual investment, you should always look at it in the context of your overall asset allocation.
Long-term growth options, such as bonds and CDs, offer the security of ensured maturity; however, the growth potential is quite limited. More volatile investments such as stocks have potential to expand your portfolio exponentially over time, but due to innumerable variables they also have the potential to reduce your investment to nothing.