Where to Invest $5 million?

Scott,

My wife and family are in a very fortunate position after selling our business in February this year. We have no debt, own our house valued at $5,000,000, own a beach house valued at $1,700,000, super $1,700,000, and approximately $5,000,000 in cash. We have sourced some advice on how to invest the $5,000,000 to provide an income stream of hopefully around 5 to 6 per cent per annum (they have suggested buying a commercial property and some investment properties). We now have financial advisors all over us like wet dogs. What would you do?

Gary and Helen

Hi Guys,

Congratulations on your success!

To get rich you will have concentrated your risk, and focussed all your effort into one business. However to stay rich you need to do the exact opposite: spread your money across a large number of investments, and take very few risks.

Therefore I’d run away from all the wet shaggy dogs that are trying to gnaw on your juicy assets. They have dollar signs in their eyes. Also, stay away from anyone who is recommending you invest directly in commercial or residential property. Reason being, it’s simply not diversified enough, and if you lose a tenant, you lose your yield!

Look, you’ve earned the right not to have to worry about your money. So if I were you, I’d keep a hefty amount of in cash (for opportunities, and because a $5 million home sounds kind of expensive to maintain!), and invest the rest in a broad mix of shares (local and overseas), via ultra-low cost index funds. The income you generate from dividends should be enough for you to live off without having to draw down on your capital.

Finally, you say that you’ve got got $1.7 million in superannuation, however, the cap is actually $1.6 million per person, so you may have the ability to contribute more. If you can, you should.

Scott