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Large Sums of Money
Smart Investing When You Receive a Windfall
By Cara J. Stevens
Hedge funds, investment vehicles that pool investors' money and invest it collectively, are becoming available to individual investors as a non-traditional investment option. The benefit of these funds is that since hedge funds are not as regulated as most other investment options, managers can leverage more sophisticated investment techniques. The downside is that you often need to satisfy a large minimum requirement for investing, and many funds are limited to fewer than 100 investors.
Other non-traditional options include investing in property and new business ventures. The upside is, of course, the high income potential; however, for investments of this sort, you must be extremely well informed about the nature of the business venture itself as well as the market conditions. For any investments, it is vital to get expert advice and learn all the risks and ramifications involved before committing your capital.
Often, people consider charitable donations simply for tax purposes, but financial advisors strongly caution against donating for the wrong reasons. "The first question you need to ask yourself is if you have charitable intent," Hirshman says.
"You should also make sure it's an organization you believe in and are planning on giving to anyway, as deductions could be reduced if you have a sizeable income to report," Freeberg says.
If you are planning on giving, consider setting up a charitable trust. "If you plan on giving every year or providing for a charity in your will, a trust can provide a discounted tax deduction," Freeberg says.
Whether the amount you receive changes your lifestyle or just your comfort level, the best way to enjoy it is to appreciate the security that the amount provides, no matter how you allocate it.
*Last name withheld to protect privacy.