You get a $500k windfall, how would you invest the money?

Investing
1

How would you guys invest a $500k lump sum amount? What are some investments that would return the greatest percentage back over say, 5 to 10 years?

Some Parameters To Consider

  • I’m in my late 30s and married

  • I don’t own a current home

  • My preference is to remain in the Bay

  • My appetite for risk is not that great. It’s ok if I don’t make much, I just don’t want to loose what I have

  • Some ideas that I have include multi unit income properties, Index Fund long term investing, or buying a primary residence and renovating it

Please be specific in your response:
If you say ‘real estate’, please state which neighborhood, which class of housing, how many units, and what percentage can it grow by annually.

If you say ‘stocks’ or ‘index funds’, then please let me know which specific stocks or index funds.

Would love to know your thoughts…

1 Like
2

If you want to stay, buy a primary home.

3 Likes
3

+1
1st priority

Have a long horizon too!

4

This is the best return, esp when OP wants to remain in the bay. Earlier the best. IMO, assuming no recession in next year, Current low prices will not hold next year.

All other options are not better than this.

2 Likes
5

Everyone has made great suggestions but let’s also examine the risks. Caution: The following is not for the faint of heart. Suppose you buy a home in Moraga or somewhere like that there is a chance the spouse could divorce you and take la casa Bonita. Another downside is that most bay area cities add fluoride to the water (goodbye vegetable garden, goodbye fruit trees unless you like fluoride-laden foods) and the bay area seems more polluted than less crowded areas but I digress. Modest returns would be expected after paying interest and taxes.
An alternative would be to put the money to work for you and not buy a home in bay area. This would provide a much higher return and allow financial freedom. You work with a mentor/expert/partner and acquire acreages in Inland empire, put all the land in partner’s name with side contract outlining equity stakes. Hold for a few years et voilà, 5 year return 150%. Ten year estimated return 300%. The hardest part of this plan is just the sheer boredom, it’s not exciting like toilets, tenants and trash. But that boredom means you have time and energy to live. Live the life you always wanted and do what you want when you want as long as it’s ok with spousie wousie.

6

@Marquis
Your plan sounds like one of those buyinghouse ideas. Do you have concrete examples of where this worked? You seem to be skeptical of everything from primary home, rental property, and even marriage. :joy:. You better come up with better supporting arguments for your investment idea.

5 Likes
7

Yeah, sound advice. Do you expect 2020 to be cheaper than what it is today (Oct 2019)?

8

Yeah I hear you…hopefully a 10% return on the full purchase price of the house. No guarantees, but having a home is important no doubt.

1 Like
9

Statistically, fall is the best time to buy. It’s the time of year when prices are lowest. Who knows with year/year changes. If you plan to stay long-term, focus on finding the right home. That’s more important than small price variances.

10

Fluroide in water, investing in inland empire, buying in Moraga? Damn, ok, had a hard time following it all. But why buy in inland empire and avoid the bay area?

11

I doubt Marquis follows his own questionable advice. Buying raw land anywhere is for seasoned professionals. I have a piece of 40 acres in the Bakersfield city limits. Been worthless for ten years after being worth $15m in 2006. I lost money in land in Palm Desert, too.
Buy a house first then think about income property.
Raw land is for investors with deep pockets and long time horizons.

8 Likes
12

Inheritance is considered separate property and not community property. If you buy a primary home with inherited money, you can giving your spouse a $250k gift. Make sure that she appreciates your gift.

13

Let’s assume you got a $500k windfall and you do own a primary home.

Where would people invest right now? Stock market has been running for awhile. Housing has slowed.

14

Not anywhere near civilization in SFBA for homes. Possibly a shack on a Santa Cruz mtn hillside lot with no utility service. In south Bay, one can get an entry level condo. Oakland C class neighborhoods start at that price and get lower in D class.

Stockton, one still can purchase a home while supplies last.
Possible a C class SFH neighborhood in Sacramento blue collar neighborhood.

1 Like
15

I hear you on long term ownership. If you are planning on holding for the long term then the small dips don’t account for much. Long haul!

16

Yeah that’s what I’m also wondering. Let’s say you’ve got the house covered. Where else would you dump your money? Long term low cost index funds?

17

I guess the default would be to average into low cost funds. And that would be fine — especially if you have a 15 year time horizon.

But the way I’d structure it is I’d take 20% and put it in a few high-risk assets like Bitcoin several years ago.

I wonder what others would do with a 15 year time horizon.

18

I am in similar situation,recently sold a home, paying down part of my other high rate loan, refinancing to lower rates now.

But have some more balance to invest further.

I made good amount of money from real estate, but now moving out of it as the hassles are not worth the return and liquidity issue. Decided not to invest in real estate.

Since I am comfortable with stocks/etfs, I do swing trading and also wherever possible investing (holding long).

Following is mandatory, read daily one hour for analysis (not the hyped cnbc,cnn,msnbc…etc) and do some homework during weekends.

Most of the above news agencies write positive story when market goes up and negative story when stocks coming down They are following market, but not really doing any service to individual investors.

Some reliable, but yet individual needs to filter, news are from wall street journal or financial times, or barrons (all these 3 are paid service). To some extend, you can also depend on Bloomberg (they are not 100% right, but write some speculative news and mislead).

Read one and only book (easy) intelligent investor, no need to buy/read any other book except (hard) Margin of Safety (only when you are comfortable with intelligent investor).

My number one suggestion, whatever best stock it may be, do not buy when RSI is above 50. Do not buy Fear of Missing out, you will get your chance soon when Market dips.

Start with simple ETFs like VOO (if you are comfortable with stocks/etfs)

5 Likes
19

Get your home in the Bay Area, or make an exit plan. If you can’t stomach the exit plan, buy the home. Things are “down” right now, so a “good” time to buy.

1 Like
20

I would also make sure I had a minimum of a 1 year safety fund (CD) after buying the house…

2 Likes