Best way for a relative to invest $500,000?
When I told my uncle about this site and how thoroughly questions were answered, he got on my case to post this question for him. He is in his mid-50's and currently has $500,000 and is unsure as to how to invest it. Any suggestions? Thanks in advance!
Answers
4085 points
EthanR answered one year ago …
With that amount of money, it is probably best to get some help from a professional from a large brokerage house like Fidelity, where the financial specialists do not work on a commission basis, or for him to see a fee based Financial Planner, who has no axe to grind over where your uncle puts his money.
At his age, his assets need to be diversified and divided between stocks, bonds, and cash. By "stocks", I mean mostly in mutual funds or Exchange Traded Funds (ETF).
The allocation that he chooses will depend upon several things:
1) His tolerance for risk
2) Whether or not he is still working
3) The number of years before he retires
4) His current standard of living
5) The amount of his debt and whether or not he has paid off his home mortgage
He could also have some money invested in real estate, gold, or other hard assets.
904 points
jillybeansisme answered one year ago …
I disagree to some extent with EthanR. I would take into account a couple of things differently.
Is this mid-50s gentleman in good health? What is the average life expectancy of his family members? People live much longer and, therefore, need to plan for their money to last longer. A home is your biggest LIABILITY until it is paid off; however, it is still one of the very few items that is a deduction on your taxes. Mutual funds for the most part do not do much better than the indexes whereas ETFs do. If he owns a home, he is already invested in real estate and wouldn't necessarily want to put all his eggs in one basket.
The money to be invested came from somewhere . . . if it is profit from the sale of a home, what amount will be used for a new home? Yes, it is a great time to purchase property, but you don't want to overextend. I don't understand what current standard of living would have to do with investing the $500,000. If it was money for retirement, then what things are important to the man during his retirement (often times those things change). For example, he might be so busy working now that he has no time to sail the oceans blue and that might be his dream for retirement.
He should be diversified, but that means across many different types of investments. I'm at that half-century mark and I hope to have another 50 to go. I know a portion of my investments are aggressive, a portion are conservative, and the rest are somewhere in the middle. I still am a "long-term" investor (especially with a 22 month old daughter!).
Before he goes to see a financial planner, he has to know his goals, his hopes, his realities and risk tolerance.
When in doubt, READ. Learn about investing. And if he goes to a financial planner, he should check the person out first through every means possible.
699 points
7million7years answered one year ago …
Jilly is on to something, here ... how much does Unc. need for retirement and when. 5 to 10 years can be a short time horizon (believe it or not) for investing in stocks ... but, if that's what he wants to do, stick in a low-cost Vanguard (or similar) Index Fund ... it's what Warren Buffet would recommend and who are we to argue?
If he understands or likes real-estate, now isn't a bad time to buy some income-producing property, perhaps be conservative and only borrow $1 Mill. - $1.5 Mill. against the $500k deposit ... should help to ensure a positive cashflow from the beginning.
Also, lock in interest rates for as long as the bank will allow (I assure you, they won't be upset if you ever want to refinance at a higher rate) as money is on sale (i.e. cheap interest rates) right now!
There's also lots of more risky things that he can try, if he has the appetite ... my father started a finance company at the age of 60; Colonel Sanders started KFC at some old age and Ray Kroc bought McDonalds at 54, I think.
4085 points
EthanR answered one year ago …
The reason that I said current standard of living is a determinant of where to invest the $500,000, is because it could make a difference in whether the uncle invests in growth or in income producing assets. I agree with 7 million that real estate could be one avenue for him, but I think his assets should be diversified.
Read more from EthanR
