Let’s imagine you’ve got a cool million dollars to invest. How would you do it? It’s a different ball game from investing $100,000 or $250,000. Losing a million bucks could send you spiraling into a deep depression!
Once you’ve got a million in the bank and your house is paid off, you don’t need to take crazy risks. You can live comfortably off low-risk investments. But, if you’re like most of us, you’ll want to grow that money responsibly.
How you invest your million depends on a few things. How did you get the money? If you worked hard for it, you’ll probably be more conservative with your investments. The same goes for if you’re older when you get the money. You don’t want to lose a lot when you’re already winning the financial game.
Also, how much of your total net worth is that million? If it’s a small percentage, you can afford to take more risks. And, the higher your income, the more aggressive you can be with your investments. For this discussion, let’s assume you’ve worked hard for 10+ years and had a bit of luck to accumulate that million.
Most people don’t save up a million in cash and then invest it all at once. Usually, there’s some kind of windfall or liquidity event that triggers the need to invest such a large sum.
Having a million to invest is a big deal. You’ll feel pretty good about yourself for a while. Then, you’ll set your sights on the next financial milestone. For many people with a million-dollar net worth, a lot of that wealth is tied up in their home. So, if you can actually invest a million or more, you might start feeling rich.
With a million to invest, you’ve got options. You could spend $100,000 a year living it up on a Hawaiian beach before you run out of money. Or, you could do what most people would do and invest that money to make even more money. The goal is to have a lifetime of passive income.
Let’s talk about how I recently invested a million dollars. In 2020, I didn’t have a million in cash, but I did have several hundred thousand in cash and a municipal bond portfolio. When I found my dream home, I decided to buy it, which meant liquidating a large portion of my municipal bond holdings. I put down just over a million and borrowed the rest. Today, that down payment is worth around $1.7 million before tax, thanks in part to leverage.
If I could go back in time, I would have taken out a larger mortgage and invested the rest in the S&P 500. But, there were a couple of problems with that plan. I needed a larger down payment to secure the house, and I was afraid to invest a lot of money in a volatile asset that provided zero utility.
Now that interest rates have gone up, I realize that selling my municipal bond holdings was a good move. The bond market increased by 7.5% in 2020, but then decreased by 1.5% in 2021 and 13% in 2022.
So, how would I invest a million dollars today? If you’re someone who wants to earn reliable passive income in a less volatile way, my thoughts might be relevant to you. As a middle-aged person with two kids, my main goal is to have control over my time, not to maximize my net worth. I felt like I had enough money in 2012, which is why I left work with a $3 million net worth.
If you’re still trying to build your financial nut, my suggestions might not be as relevant. But, if you ever have a million-dollar windfall at a young age, you’re set! You’ll want to invest that money wisely.
Here’s how I’d invest a million dollars today:
- Buy another rental property – $200,000 – $300,000 down payment
- Invest in a private real estate fund – $400,000
- Invest in the S&P 500 – up to $200,000
- Buy Treasury bonds or CDs – up to $200,000
- Look for moonshots – no more than $100,000
- Pay down mortgage debt – $0
- Invest in an online business – $100,000
- Invest in venture capital – $100,000
- Invest in continuing education – $5,000
Once you have a million dollars to invest, it’s easier to make millions more. But, I’ve also seen plenty of cases where paper millionaires end up with nothing. It’s perfectly fine to make money slowly. Once you have a lot of money, making money slowly becomes a luxury worth enjoying.
If you’ve come across a huge financial windfall, don’t rush to invest it. Sit on it for a few months while you consider your options. See if having a million dollars changes your spending habits or your attitude toward life. Hopefully, it doesn’t, but you never know until you have it.
So, how would you invest a million dollars today? If you’ve ever had a million dollars to invest, how did you invest the money? I’m looking for as many good ideas as possible. The more I think about it, the more I’m interested in investing in the Fundrise Innovation Fund. The fund invests in artificial intelligence, machine learning, modern data infrastructure, development operations (DevOps), financial technology (FinTech), and real estate & property technology (PropTech). About 35% of the fund is invested in artificial intelligence, which I’m extremely bullish about. The investment minimum is only $10, as Fundrise has democratized access to venture capital as well. Most venture capital funds have a $200,000+ minimum.
