Investing a Big Bonus
John just got a bonus of $2.5 million after taxes. What does he do with the money? Dave lays three important ground rules for investing.
QUESTION: John in Missouri is debt-free and financially set. He just got a bonus of $2.5 million after taxes. He's a year away from paying off the house but doesn't know what to do with the money. Dave lays three important ground rules for investing.
ANSWER: The first rule is this: Don't put money into anything you don't understand. Even if I said something is a good investment or someone at church said so, don't put money in for that reason. Understand it first. Don't invest just because it sounded good. You're in charge of this money, they are not.
That leads to the second lesson. Go slow. Make sure you are comfortable and your wife is comfortable with what you're putting the money into. Third, you must start studying investments and becoming more experienced about them. Know more tomorrow than you do today. Meet with a certified public accountant to learn from them, but not so they can become your babysitter.
This is a great time to buy real estate. I'm doing it. We always pay with cash and we also buy good growth-stock mutual funds. The market is down and crazy right now, but that's all right. I don't think about this winter when it comes to investing. I think about where the market will be 15 years from now.
Don't feel the pressure to be sophisticated. I've met with thousands of people worth $10 million or more. About 95% o them have a simple investment program. When I was younger, I always assumed that the rich were super smart and had tricks that I didn't know. When I meet them, I learn they are just simple people who worked their butt off and pay cash for real estate and mutual funds. It's all right to be simple; you'll be like the rich if you are.