Based on what you've said and not said, I'm presuming that you (a) have set aside money to handle any income taxes which you'll have to pay, and (b) don't have any immediate plans for how to spend your windfall; and your main concern at the moment is simply where to park the money so that you'll have it available once you figure out what to do with it.

If I'm right about that, your primary concern should be to hedge risks -- that is, to eliminate as many possible ways that your money might vanish. Given that the biggest risks are (a) an asset price crash, and (b) hyperinflation, I'd suggest a diversified portfolio: Keep some money in cash or near-cash assets (bank accounts and cashable GICs), but split most of the money between bonds (or, equivalently, GICs) and stocks. That way, if the stock market collapses you'll have some losses but you'll still hold on to the money you put into bonds/GICs; and if inflation spikes you'll still have they money you put into stocks (since inflation makes fixed-income bonds worthless but proportionally increases the value of stocks).

If you're feeling really paranoid, you might want to split your money between Canadian, US, and European bonds and stocks, just in case something weird happens and the Canadian economy falls apart while the US or European economies don't -- but my impression right now is that the Canadian economy is doing better than the US or EU economies, so I'm not sure that I'd bother with this myself.

Of course, I'm not a real financial advisor, and it's quite likely that there are factors specific to you that I haven't considered -- so really you ought to be talking to an independent financial advisor. Do your own research first, and don't feel that you have to follow their advice -- but listen to what they recommend and the reasons they provide for their advice. Make sure that you're talking to an independent advisor, too, and not just a shill for your bank's funds -- if you need help finding one, I'm sure your lawyer can point you in the right direction (and unlike your bank, your lawyer can be trusted to provide a fair recommendation).

I hope that gives you some starting points for figuring out what to do -- I'd be happy to talk more if you want to send me an email (google me for my email address, and put HN into the subject line so that I know it's someone from here).

1. Eliminate any outstanding debt. Mortgage, credit cards, car loans etc

2. Consider buying a place to live outright. Saving rent or mortgage interest is better than earning the equivalent in interest because it's tax free.

It's a very good time to have spare cash as there are a lot of bargains around. Take plenty of time and do your research.

This is one half of a percent of his net worth. ...which is to say, absolutely trivial.

Right now, the housing market is declining, and this individual may decide that he wants to relocate to a new area.

I am a homeowner. I am HAPPY to be a home owner.

However, I don't think the "buy instead of renting" advice makes a ton of sense for all people.

The argument is that eliminating the rent expense ($2000/month or whatever) by spending $500k to buy a house outright is better than the tax-adjusted potential return on that $500k if invested.

In New York, price/rent ratios are above 40. A $2500/month apartment will sell for over a million. It only makes sense to buy at such a P/R ratio if you expect rents to skyrocket in the near future, and Manhattan rents are already starting to turn back.

The data points I actually know about are in the $2000-3000 range. One of my friends tried to buy his $2800/month apartment and got a quote around $1.5 million.

If I was in OP's position, the last thing I wanted would be carve up a hole in any part of the world and settle there for the rest of my life. Real estate is big investment; while investing in it may be an ok choice for a wage slave, it is not so for those who are eraching financial independence.

So I'm not sure why you'd object to this. Everyone needs shelter, and if you can afford to buy it, you save money.

The owner of the representative property on the market for rent right now is losing money every month if they had a mortgage written in then last few years. Rents are cheap. Renters are still subsidized by bozos who think houses will appreciate, or are desperately trying to make their payments.

I'm not sure how applicable all this is to Canada, however, as their property market never went quite so insane. It will probably bottom sooner and after a shorter correction.

Also, basic things like a house are protected in many circumstances under bankruptcy provisions. This means that owning at least a modest place of your own can give you a platform of security for going about your life that you cannot get any other way.

It may not make a lot of sense on an accountant's balance sheet, but the psychological benefits of it are wonderful. Buying a modest house would be one of the first things I would do in this situation. Especially in a buyer's market like there is now.

In the US at least this isn't always the case. Most joint filers can deduct interest expense on mortgages up to $1MM in value.

If you get $2,500 in reduced taxes and pay $10,000 in interest... :)

PS: One great option is to get US gov bonds that get ~2% over inflation for 10+ years which makes them really safe. (https://www.bernstein.com/public/story.aspx?cid=466&nid=...) Ok, you are still taking a currency risk if your living outside the US but that's fairly safe.

Edit: Think of the first 1 million as 40k inflation adjusted every year for the rest of your life and only take risks when you need to until you have more money to live off of than you need. Risk is something you don't want and buying a house is risk.

Government bonds are a terrible investment strategy. You may barely hold out against inflation (the next 5 years I vey much doubt that will happen) but there's better vehicles. The stock market, for all that it's fallen, historically speaking has never had any 10 year windows that it's shrunk. It will rebound.

If you're going to get a mortgage, it should be a 15yr, fixed-rate.

Government bonds are a hedge, I would still have lot's of stocks, but the goal is to avoid needing to sell stock when the market is down. Normal bonds have higher interest rate until inflation hits or the company goes bankrupt at which point you might not get your principle back.

Owning your home ties you to that location and selling property can be a major issue. If you are living off your savings then having a single investment with 30% of you money tied down is a huge risk. If your single and there is a 20% chance you will move in the next 10 years buying a house is a bad investment but feel free to run the numbers in your area including: tax, the high cost of buying and selling, the loss of liquidity, maintenance costs, appliances etc.

Actually, with $1 million in the bank, if you walk away from the mortgage, you bet your ass the bank will come after you to collect on what they can't get from the value of the home. It's going to be hard to declare bankruptcy when you have that kind of cash lying around.

At least over here in europe that's a very lucrative option as long as you choose (i.e. can afford) an area that's likely to grow in popularity over the foreseeable future.

Wait until the market bottoms out, then maybe if a deal is just too good to pass up invest in some real estate. And only then if you have good indications that the market not only bottomed out but will rise in the foreseeable future.

Why, prices are down after all? Ofcourse one could wait for bottom out but if you judge your object by market value instead of by common sense then you can pretty much wait and gamble on lower prices for ever. An interesting object may just not be available anymore when the market shows indication for recovery...

From what I can see the stream of bad news is far from ending, there will be a lot more unemployment before this is over and that means that real estate prices - including those in Canada, which were, especially around the bigger cities somewhat inflated - are going to fall further.

The American auto industry is far from 'rescued', it remains to be seen if all of the big three are going to come through at all. This will have a tremendous impact in all the supplying industries, and quite a bit of that mess will trickle down to Canada. Another potential problem is that the US, Canada's biggest partner in trade has a tendency of using NAFTA to protect American interests in times of trouble, one more reason to be very careful where and when you invest your money.

If you are putting your own money where your advice is, in other words you are right now borrowing every penny you can get to sink it in the Canadian real estate market then I still have two properties there that are pretty much unsellable that might interest you.

Seriously, imho it's harsh and the bottom has not been reached by a long shot.

That would seem to me to be the textbook definition of "the right time to buy".

I still have two properties there that are pretty much unsellable

By unsellable you mean "priced too high"?

Just remember that somewhere down there is the perfect time to do the opposite of everyone else and make a killing. I wouldn't run out and invest 100% of your assets in real estate because you think you've found the magic moment, but in a diversified investment strategy, don't ignore it altogether.

No, I literally mean unsellable because the market in that area has dried up. I know the difference between 'priced too high' and 'unsellable'. It doesn't bother me much because I'm well-off enough that I don't actually need to sell, if the right buyer comes along it will move, until then it is no skin of my back.

Keep in mind that you are giving somebody else advice on what to do with their money here, if you want to spend your own cash on real estate then of course you are free to do so. Real estate agents are going out of business for the first time in years, these are not normal market conditions.

GM, Ford and Chrysler stock is down too, that does not mean you have to go out and rush to buy in because it is sure to rise again.

This recession thingy could be long, it could be short. Right now most of the smart money says it's going to be fairly long, and that we probably have not reached the bottom yet.

Anybody that claims otherwise is probably trying to sell you some stock they bought or a property they need to get rid of.

When there has been a good solid month or two without any mass lay-offs, talk of rescue packages and major businesses folding that would be a good time to start thinking about this, right now it is much too early.

Those who try to get in at the bottom invariably find that it wasn't the bottom yet. You could easily lose your shirt with an investment strategy like that.

Well, there is a different school of thought too: Those who wait for the bottom to be hit will never be able to realize when it was hit. It's fairly easy to tell whether the market is in a downward spiral or is in boom. But I don't think anyone can ever tell if we have hit bottom unless we are already bouncing back. Same goes with the peak, you can't pinpoint it until we find ourselves in downward cycle.

Even then you can't tell, because it might just be a temporary thing on the way down. Look at the three or so fools' rallies in the Japanese stock market in the last decade or so, for example.

I am not advocating any type of loan or leverage to "get into real estate". I just think that if you're looking to park any large amount of money, you shouldn't ignore outright owned real estate (especially the income generating variety) as part of the diversification strategy just because of the recent panic surrounding this one area.

Around here "unsellable" real estate actually means "real estate that can't be sold for enough to pay off the mortgage debt from the previously inflated prices." I've made several rational offers that were turned down for this reason. I've even heard that term tossed around by the very agent that refused my offer. "We just can't seem to sell anything these days, no one is buying! This stuff is just unsellable."

The people who lose the most shirts buy at the top when everything seems roses and sell at the bottom because "its not a good time to be in the market right now".

As for parking a large amount of money safely, that's a tough job and nothing to advise other people on unless you are aware of the risks and the potential fall-out from giving such advice.

I didn't realize that there was a different connotation to 'unsellable', apologies for that. The properties I was referring to were bought with cash, no bank involved so I'm not worried in the least. One is being lived in by an elderly couple, as long as they're alive they'll have shelter, it's a huge improvement from where they came from and even if the market was good I wouldn't sell it just because of that.

The other is technically 'up for sale', but with the market being in the dumps it hardly matters, just pay the property tax and stay put. It was bought to be lived in, not as a speculative object, and through circumstances I now find myself on the other end of the globe. Oh well :)

I agree with you that those who bought on speculation at the top of the market are the ones that will be hit hardest, in stock market terms, they're the sheep or the pigs (the joke goes something like this: There are three kinds of people active in the stockmarket, bears, they hope things will get worse, bulls, who hope things get better and pigs, they get slaughtered).

If you have a long term strategy and you have money that is completely unencumbered then it is possible to buy in a falling market, as you already mentioned there is intrinsic value in land. Even so, investing right now is basically saying that you know better than everybody else, and while I applaud you for doing it yourself I don't think you should tell people to follow you down that road unless you have a fairly solid guarantee that it will work out for them.

The OP will be in the possession of anywhere from 1M to 1.3M after taxes, if he just pays off his mortgage or buys a house to live in and very carefully salts away the rest he/she will be able to spend a small fraction of that when the market hits bottom, and then it will still be multiple years before it will pay out, if nothing unforeseen happens in the meantime.

You don't want to take it? Of course not, because the price you want for it (your ask) is higher than my bid, and my bid is probably not even the best bid (someone who has seen it will almost certainly offer you $2).

"market dried up" is a shorthand for "the inside bid is fairly low", which is basically what noonespecial said and you disagreed with.

Correction: right now is just about the worst time in the last 3 decades to already have invested in real estate.

Most of the smaller investors I know who have cash to spend instead of struggling for survival are snapping up some incredible bargains. Even though values are way down, the rental market is relatively strong, at least in the areas I've looked at. I have friends buying large fully-occupied cash-flowing apartment complexes in metro areas for forty cents on the dollar. The difficulty is mainly in financing the deals, not finding them.

I suspect the reasoning for that is because the long term prospects of owning property for rent are not as rosy as they seems, once your renters start defaulting you have a real problem.

A slump in the housing market usually also depresses the rental market, but that lags behind quite a bit.

On a positive note, it may be preferable to own any kind of object with intrinsic value over cash.

You have the time, the money and the inclination. Of 100 homes that are 800K, one of them might go for 400K cash money right?

Well, if they don't you still have the money. They've got a property they want to offload.

LOWBALLING, it's the new commando.

In general, if you are not in a rush to buy, you have a tremendous advantage over sellers. With $2M in the bank, the OP should feel no rush to buy a place.

The other thing is that if, for instance, you buy a house and haven't owned a house before, it's a significant lifestyle change.

That can be great -- it was for me, but there will be a lot of maintenance. I've been lucky enough to have parents in-law who have helped with (um ... done) all of my renovations.

I do sometimes pine for the apartment / condo + mattress + kickass computer lifestyle, but less and less now that my house is set up.

Just to give you an idea why this matters. First, a decent house in Vancouver area would cost you from 800k and up. Something for 400k is going to be in the area that few people would like to live. Second, spending cash on a real-estate during recession periods is the biggest no-no. These are the money that are hard to get out, leave alone getting them out without substantial losses.

Debt first, a nicely funded Roth IRA, 401k, 6 months or so of living expenses in a money-market account then park the rest in a mix of stock market funds with a nice 10+ year track history. This is THE time to buy stocks and real-estate.

This guy does it right: http://www.daveramsey.com/etc/cms/baby_steps_2867.htmlc

Mortgage's have tax benefits, and if you have a mortgage at the prime rate, then your money is likely more valuable invested elsewhere, while you pay the mortgage.

High interest credit cards are another story.

$2M is absolutely enough to find a "full time" money manager - there are many private wealth management folks with minimum asset levels of 250K or less.

Make sure your adviser is a VALUE INVESTOR, especially one who suggests investing in low-cost index funds. Almost no "active" managers beat low cost index fund performance in the long term.

Next, get a job and let that $2M grow.

You MUST read it as well, it's regarding "Sudden Wealth Syndrome" and may be you should consult Stephen Goldbart and Joan DiFuria.

Having too much money can be a problem : http://inhome.rediff.com/money/2009/feb/18having-too-much-mo...

What is The Sudden Wealth Syndrome? : http://www.mmcinstitute.com/sws.html

http://www.mmcinstitute.com/who.html

I had a loosely similar experience, and here are a few things I would recommend based on what I did, and wish I had done:

Tell as few people as possible, preferably just your immediate family. Resist the urge to talk about it with friends and associates. This includes offering to buy every acquaintance drinks or dinner. Pretend nothing has changed.

Designate a percentage as money you will not touch... ever. Find a financial planner, which you trust, and have them help you identify low risk investments. Then, forget about this portion.

I don't know how old you are, but assuming you are not at retirement age, begin considering your next move. Consider options that don't require 2mil to get started. ;)

This doesn't mean you can't take a well-deserved break, but don't talk yourself into early retirement. This may be more difficult than it seems, so seek motivation in this area wherever you can find it. The fact is, 2mil is certainly nice, but if you stop now, you'll go through it quicker than you think. Treat it as a cushion, not a windfall.

Good luck!

The only way to get that is by taking significant principal risk ("junk" bonds or equity investments). 30 year US treasury bonds are only yielding 3.54%, and everything less than 3 years is <1% [1]. The highest yielding US$ CD I could find [2] was 4.3%, and the highest CDN$ GIC looks to be 4.3% [3].

Also, remember inflation - it really eats into it.. Let's say you're 30 and expect to live to 75. Even with a modest 2.5% inflation rate, your effective income will be <1/3 of what you started with by the end.

[1]http://www.ustreas.gov/offices/domestic-finance/debt-managem... [2]http://beta.bankrate.com/funnel/cd-investments/cd-investment... [3]http://money.canoe.ca/rates/gics_5.html

http://finance.yahoo.com/q?s=jnk

Muni bonds are at about 7 with much less risk:

http://finance.yahoo.com/q?s=CEV

http://www.bankrate.com/brm/rate/mmmf_home.asp

Also, in the long run money market accounts and CDs tend to not even make up for inflation.

That doesn't mean it's not possible to retire on $2M, especially if you are middle-aged and don't have dependents. If you are young, live in a relatively affluent area in North America and are yet to start a family, forget about it.

(Of course, what is "typical"? In 2007, what we saw in 2008 certainly wouldn't have been seen as typical.)

Suggestions kindly

BTW, contrats. Nice job!

And also congrats on your sale!

Which would be fine as long as you aren't at all concerned about the very real possibly of hyperinflation. Be sure to pick your currency wisely.

http://www.videonewslive.com/view/288549/peter_schiff_on_200...

http://www.naturalnews.com/019659.html

For instance, the SPY index fund currently trades at $80. Suppose you want inflation protection for it going above $100 by December 2010, and you want to protect $250k of your money.

You could buy SPY calls at a strike price of $100 expiring in December 2010. The cost of those call options would be about $8 per share. To hedge $250k, you'd need 3100 options, which would cost $25k. If the price rises into the $100-$108 range, you'd start recovering that cost. If the price exceeds $108, you'd start turning a profit. If the price popped to $175 due to hyperinflation, your profit would be ($175-$100-$8)*3100 = $208k. (BTW, options are sold in contracts of 100, so for 3100 shares you'd buy 31 contracts.)

Honestly, though, I don't see this as a good idea right at the moment. The market has been volatile lately, which drives up the price of options. IMHO, inflation is not likely to pick up in North America for at least 1.5 years, so you would need to buy 2011 options, which raises the price even more. If I were going to hedge inflation, I would wait until the current stage of the collapse had reached a lower plateau, some time had elapsed for volatility to decrease and option prices to go down, then buy before inflation expectations build and drive up the cost of call options.

Whatever you do, never use the various "ultralong" funds for buy-and-hold hedging. They are strictly for short-term trading. (Well, you can do buy-and-hold, but you have to wait for the price to bottom out, and pray that the fund manager doesn't burn up all the money with failed trading strategies.)

Warning: I am not a professional options trader. This is not investment advice.

That is, for his ($175-$100-$8) * 3100 equation, you are only leaving 8 * 3100 on the table, as opposed to 100 * 3100 if you were to buy and hold.

"(Well, you can do buy-and-hold, but you have to wait for the price to bottom out, and pray that the fund manager doesn't burn up all the money with failed trading strategies.)"

With index investing at least you won't have to rely on a fund manager too much.

http://en.wikipedia.org/wiki/Stagflation

FWIW, if you know where you want to live for the next ten years or so, buy a place outright for cash. Worst case scenario, if house prices continue falling you've still got a roof over your head mortgage free.

It's probably worth putting some of your money in gold too as a hedge.

I'd certainly agree with the 'play' money idea as long as your family circumstances allow.

you'll need it to pay the IRS + state their 50% (if for example, you are a california resident). oddly enough lots of people forget about this simple fact. depending on how the deal is structured, there is a good chance that your tax bill is $1 million. oh by the way they then adjust your next year's taxes upwards and want quarterlies...so leave some money for those (you will get most of it back since your gain is non-recurring)

but still, you're a millionaire.

edit: whoops! i see you say you are in canada. well i suppose the tax situation is likely comparable....

To counteract the current market insanity, I would strongly consider buying some inflation indexed government bonds (called TIPS bonds, in the US) with my 'safe' money. In case of inflation they could help, with no real risk (short of the collapse of the government). I know most people are worried about deflation, but I still have nagging inflation worries.

As for the risky stuff, I think Detroit real estate, corporate bonds, and some dividend issuing stocks are seriously undervalued right now. I personally put a little into NRF, which is issuing ~30% dividends per year (at its current stock price). Detroit real estate isn't likely to recover soon, but I think over the next two decades or so you could potentially make a killing.

The point is to be exposed to good "black swans": far out-of-the-money options, or biotech and YC companies, for instance. These could potentially give you a very large return. In theory this would be already priced in, but too many people assume models which don't allow for very large returns.

That said, his main message is not so much how to make money, but rather how not to lose it all.

In fact, assuming that the risk free interest rate is at 2%, the Net Present Value of a $1 30% annuity is $15. Which means that the market expects that there is, approximately, a 90% chance of that company going bankrupt in the near future. (Having looked over NRFs books myself, I think that the chance is considerably less than 90%. Which means, I think NRF is undervalued by the market, and hence is a bargain).

Do you want to just hold on to this money and live off the interest?

Do you want to make more money by working?

Would you like to invest in the stock market?

Are you risk-averse?

Are you willing to move?

Are you charitable?

etc.

Basically, I'm not sure this is the right type of place to ask this question if you are going to tell nothing about yourself and what you aspire to be in life.

http://philip.greenspun.com/materialism/money

http://philip.greenspun.com/materialism/early-retirement/

- Pay some debt close family members have (parents, brothers)

- Buy an apartment, in the same price range I've been looking for in the last couple months (150k tops). Would not buy something more expensive, "just because I can";

- Put everything else in the bank. 80% in the most conservative investment the bank has. 15% on middle stuff;

- Travel the world for several months, maybe a year;

Then come back, and look at the money again.

I think one of the most important things you should do, is simply to not spend much money in the near term. 2m is lot, but it's not enough to live like James Bond. You can't sustain a lifestyle of champagne with hookers while cruising the Mediterranean on yatches. Not for more than 6 months anyway.

Going for a 600k house also looks dumb to me. Or anything else too expensive that you wouldn't buy if you didn't had the 2m. Like a Ferrari.

You've gotta give time to adapt to your new richness ;) You've gotta understand that you simply aren't used to have a lot of money. Not that I am personally... but I have read stories about lottery winners going to Vegas or blowing all the money on frivolities just because they now can do it. It's the last thing I want to happen to you!

And congratulations :)

(I speak from personal experience, I own a loft in Vancouver.)

I agree with your overall point though.

But if you live outwards a bit (say, an hour from Toronto or similar) then 400K gets you a massive 3 story house in a quiet neighborhood.

Depends on what you're into.

anatoli corrected me on the pricing, but the essence remains: Do not spend the new money on new, used-to-be-expensive things.

2 mil = you can afford to buy the person a car and you are an asshole for not doing it.

500K = you can tell them no, since you "need" the money to buy a house.

http://www.rediff.com/money/2009/feb/18having-too-much-money...

http://angelconf.com/

And talking of South, real South, I and a few friends have been thinking of a y-combinator like in Nairobi Kenya. Good ideas are many but investors quite scarce

2. Ignore financial advice from random people on the internet (feel free to include me in this category). Also beware advice on complex schemes that will eat you alive with management fees.

3. Spend your time doing what makes you happy.

4. If you need time to think about life and the next project, I recommend heading to Guatemala to check out Tikal and the ATM caves across the border. After that you can head out to the Cayes and drink beer in a hammock until you feel like doing something else.

Misc thoughts:

For everyone besides this guy, #3 doesn't actually require that much money. $20k - $30k buys you time to travel, work on your own projects, and wait for the right opportunity. I spent 2008 doing this and I'm pretty satisfied with that decision.

Also: About six or eight years ago I sat next to the CEO of a successful chain of auto shops on a flight somewhere (I forget where I was going but it was Mark Carr of Christian Brothers Automotive). His advice for this situation: take some of the money and buy a house because you'll always need somewhere to live and bankruptcy laws typically protect the home you live. This helps you get the next thing started and, should it go awry, keeps you off the streets and protects some of your assets.

  > For everyone besides this guy, #3 doesn't actually require that much
  > money. $20k - $30k buys you time to travel, work on your own projects,
  > and wait for the right opportunity. I spent 2008 doing this and
  > I'm pretty satisfied with that decision.

You can definitely spend time on your future projects while traveling, many places have free wireless internet. We used to hack on BBS systems, so even 512k Internet can let you do a lot of stuff. If connection stops working, go hiking or canoeing or off to meet a pretty girl/guy/whatever you like.

Oh, I second that other advise by inerte:

  > - Pay some debt close family members have (parents, brothers)

Whatever you do, have a good time! :)

Also I totally agree with having a home base somewhere.

Congratulations on your fortunes sir as well. I hope you do great things with your new fortune that uplifts your spirit. I know plenty of people in your now current tax bracket that are miserable. Take the year off like this guy suggested travel, gain a new perspective. Gain some new ideas plan them out then get back in the game.. but have an out to do the same thing again 5 years from now.

I dare you to find many greedy opinions out there today.. Everything I read is decidedly fearful. Full text of the article is at http://www.nytimes.com/2008/10/17/opinion/17buffett.html (I realize its slightly less applicable to Canadians)

Not taking this seriously is the prime reason new wealth often loses it. Everything else is details.

1. Get a good doctor and dentist; commit to yearly full check-ups.

2. Develop a life-long exercise habit that you can perform anywhere. No weights, minimum props. Get help from (i.e. pay) army/special-forces trainer initially.

Now is probably a good time to do this, if you haven't already.

Putting all of your eggs in one very shaky basket would seem to be a bad plan at this point.

Also, I would float me $200k to help me jump start this Ponzi scheme I have an idea for. I'll give you back $300k in a month.

What I would do is put $1 million away and use the remaining $1 million to buy 11 more $90,000 businesses.

http://www.copenhagenconsensus.com/

A year or two from now people with cash reserves are going to clean up.

$2M can really mess with your mind. It's not really enough to live forever. But it is enough to live on for a long time. If you are careful, you could invest it and live on the interest. If you aren't careful, you could invest it and lose it.

But remember, you don't know what is going to happen. It's cash for now. I would suggest you just sit on it for a year. Think. What do you want your future life to be like?

How do you want to live the next 5 to 10 years.

And be prepared to get bored. If you aren't working and learning and doing things, you get bored. Save the money for your next startup. In the meantime, live on the interest and stay liquid until you /know/ what you should do with the money.

Congratulations anyway

With 2 mil, I would personally:

-Buy a place to live in the 400k range. Housing is probably overpriced right now, but generally speaking the Canadian housing market is not too badly bubbled. I really don't see a Canadian crash coming, but there may be a slight price reduction.

-Put 200k into a high interest account. Easy to access, guaranteed return, etc.

-Put 200k into a new business. But that is because it is what I enjoy doing, if you want to learn to paint, go to school, etc throw the money there.

-Put 200k in the stock market. Canadian financial institutions are amazingly underpriced currently, and so are several commodity based companies.

The remaining million I would use for stability/hedging. Hedge against the Canadian dollar, inflation, etc. I would probably get some professional help from investment banking friends, but this would probably be a combination of US bonds, CDN bonds, gold, etc.

The Canadian economy is currently almost untouched by the current recession. There will be a bad 2-3 years at a minimum coming up so plan for that. I would plan on shifting into the stock market cautiously over a period of time and not throw it all in at once, we could easily see another 50% decline over a few months.

Lastly, I would take a month and travel around before doing anything at all.

If the OP feels he has enough money now, why would he consider the stock market at all? His only concern would be keeping up with inflation. I'd also suggest reading "Fooled by Randomness" before talking to any investment bankers.

Never risk something you actually need for something you don't need. Also, don't convince yourself that you don't really need something you actually do need.

One might be better off buying supplies so that one could survive for a week-long power-outage, say, than playing the market, right now.

A few months ago, an apartment building near me had one of its electrical transformers blow up. The residents had to evacuate that day, and were not allowed back into their building for a few weeks. Some suites were looted.

It made me realize that I was completely unprepared for that kind of scenario. How many people who pride themselves on their retirement plans are equally unprepared for this kind of rare event?

Think about what you would need to be permanently semi-retired. I.e. you don't have to work for anyone else, but you don't upscale your lifestyle. You now have 24/7 sweat equity, independent of your other capital.

The problem with this particular time is that we're in some kind of transitional period. I have no confidence in my ability to predict what the Canadian and US economies will look like in 10-20 years.

I've been very aggressive in paying down my house and contributing to my RRSP. OTOH, I now wish that some percentage of the funds I put into my RRSP had been devoted to disaster preparation. Nothing too extreme -- just another form of insurance.

I.e. an RRSP is preparation that makes sense within our current model of society. I currently have few hedges for scenarios outside that model.

I guess the main thing is to take small steps. It's very hard to scale back your lifestyle once you've scaled it up. If you are mostly content now, then be very careful about up-scaling.

You may have different goals, but for me the greatest luxury is free time to pursue my ideas wherever they take me.

If you want any help getting started on property, give me a shout.

After reading Fooled By Randomness, I don't trust anyone else to manage my money. It helps that my wife and I are somewhat interested in finance. I would definitely go to others for ideas, but not for decision-making.

It's the same kind of "Ah ha" experience that PG tries to create in young techies. You really can run your own business. Well, you really can manage your own money (assuming some minimal interest in the subject).

NOTE: about the CSC: the material is a bit boring for someone coming from an engineering background. I.e. you're supposed to repeat what they want to hear (including some dogma), rather than actually give a nuanced confidenced answer. There are quite a few calculation questions, though.

$2m is enough to retire if your costs are low enough -- even earning a measly 1% a year you'll make 20k per year, which is enough to live on if you live in the right town with the right diet. So put the money in a diversified collection of very safe assets that return a few percent, write yourself a check for the interest you've earned every quarter or so, and then forget all about it.

Meantime, depending on your lifestyle, your time may now be entirely your own. Or you may need little more than a small part-time job to be happy. That time is the resource you should plow into your next venture in life. The only part of your own money you should spend on a startup is the money to hire the lawyer who will construct the corporation that will ensure that your startup cannot touch your personal money even if it is sued into dust.

Amen. The lawyer part is maybe a bit over the top (right direction, though) but I fully agree that if you're thinking about a second startup then you're in the best position to be in. You have all time in the world now and probably enough credibility that investors will listen to your ideas even before you have the usual prototype or "running business" to show.

Sure, but this makes no sense as a strategy. You could make 20K on the side pretty easily doing whatever it is you'd probably want to be doing anyway (painting, hiking, sailing, playing golf).

Having $2m in cash sitting in the bank might feel awesome but jeez, you need to use it somehow rather than for paying yourself a tiny stipend to live a life you could have lived anyway if you weren't so scared to face some risk.

But you are using it! You're using it to solve your cash flow problems for good. You've given yourself the freedom to do whatever you'd want to be doing anyway, no matter how risky it is, no matter how long it takes for the money to roll in, secure in the knowledge that no matter how unprofitable your next venture is, your worst-case fallback position is "Damn, I'm retired again. How I hate the prospect of sitting on this beach, reading whatever I want, writing whatever I want, until I die of old age!"

The thing about making money on the side is that it's work. It's distracting and requires continuous effort if you have to keep the money rolling in smoothly. How did tptacek put it the other day, in response to the question "How many billable hours are lost on HN every day?"

As someone who often bills hourly, I'll go with $0. Your time isn't fungible; it only commands a bill rate if you can commit to a start time, milestones, and a delivery date. Very few businesses want to pay for your spare cycles.

(http://news.ycombinator.com/item?id=467900)

Now, I realize that there is a class of personalities that cannot possibly follow my advice. They will find themselves unable to motivate themselves when they have the option to sit around playing WoW all day, and yet all that WoW makes them miserable and unfulfilled. So they will be compelled to blow some or all of their $2m at the craps table so that they can feel alive again. Las Vegas was built around such people. I can't possibly dissuade them with my feeble arguments (and blowing the money is surely preferable to being miserable) but I would encourage them to try my plan first.

If you have to start another company, use your reputation (one company sold successfully) to leverage a little bit of your capital (less than 50K) to do it again, never commit more than you can afford to lose without batting an eye.

Once is luck, twice is skill.

Oh well, I've learned not to question why i'm downmodded, haha.

When I cashed out, I gave away 10%. Mostly to family, and some to local charitable projects I personally cared about. It can feel good.

Spend your time thinking about what to do next, now that you're not constrained to make an income. Start a new business? Become an international playboy? Go back to school? Up to you.

The reason I say buy not as an investment is because the real estate market hasn't nearly hit bottom yet and won't for another two years. Until then investing significantly in real estate would be a mistake. So buy something modest that you like in an area that you like.

Cash is king right now. Being in Canadian currency is good. Read Nassim Taleb, who presciently suggested years ago that we avoid investing heavily in the stock markets; they're too risky. Instead put ~90% into absolutely safe investments and then bet the remaining 5-10% in long-shot positive "black swans" (e.g, high technology and biotech ventures with long odds but incredible payoffs). Most often you'll lose but, when you win you'll win huge, more than enough to cover your losses. To understand his suggestions, you'd best read his excellent book, "The Black Swan".

And I assume you've split your money into various accounts so that you are insured against any losses should your bank go out of business.

While it may be unlikely that ING will fail as a bank, there is no reason to take that risk. Divide your money among banks to stay below the maximum Federally insured limits.

Once you 1) learn what you want to do with the money, 2) get some advice that you can check and challenge, and 3) feel the time is right, move the money to wherever your analysis takes you.

Dividing the money into the savings accounts just buys you time.

ps. Congrats!

You've definitely given me a lot to research and think about as I approach my retirement. Thanks again!

As for opinions I'd put maybe 5% in stock indexes (Dow,S&P) as 'risk' and the rest partitioned in bonds and cash in high interest account after talking with a tax specialist. I'd forget about money managers.

The only concrete advice I'd have for you is spread your money around different banks and currencies so that if something takes a hit you don't lose it all in one go. 2M is way above the usual insured amount.

Oh, and keep quiet about it!

By the way, there are plenty of stocks out there paying very handsome dividends. I recently bought some bank stock paying ~ 11% last year, forecast to pay the same again this year. It's up to you though -- investing should be both for profit and personal satisfaction (I tend to invest in companies I'm rooting for, or are doing good in the world).

If I were you, I would simply use something like mint.com (I use the bankofamerica.com aggregator) to keep track of everything, put your money away and enjoy the safety net. In the meantime, get hungry, and try to do it twice.

...and do make sure you treat yourself with something. If it were me, it'd be travelling for a while, but each to their own.

http://en.wikipedia.org/wiki/Certificate_of_deposit

http://en.wikipedia.org/wiki/Dollar_cost_averaging

Eventually you want to be diversified, but right now, you don't know if you want to put all your money in the market.

So divide your money into 8ths (or whatever, by 8ths right now the US government will insure each $250k in your CDs)

put 1/8 into the market now.

1/8 into a 1 month CD

1/8 into a 2 month CD

1/8 into a 3 month CD

1/8 into a 6 month CD ....

When each CD matures buy more of the market. That way if we haven't hit bottom, yet, you will still be buying on the way down and up.

Unless you are going to spend time studying industries put it all in index funds/etfs. Your market allocations depend on when you need the money, but I have something like

45% Russell 1000

20% EAFE

12% Russell 2000

10% Morgan Stanley bond index

5% REIT index

5% Nat Resources/Commodities

3% emerging markets

This should be translatable into Canadian assets, just not by me.

I slightly get the impression from the wording of your question that you don't quite know what you want to get from it, but you feel that you ought to do something (there are plenty of people who's job it is to tell you that you ought to).

I think that unless you know what you want from it, you'll never be able to answer this question. Some options to consider: seeding your next company, angel funding, charity, friends & family, financial stimulus of your local area, etc. - these are all investments of sorts.

If you're just looking for somewhere to park it whilst you decide then make sure you're within FDIC limits on each account...

You need someone whose job is to find out what kind of person you are (risky , etc) and help manage your money for you. There are many people who do this very well, and the good news is that many of the corrupt ones have been washed away in the cleansing fire that is the recent economic situation.

Anyway don't take my advice I'm a college student that doesn't know crap about money. But find someone that has done it for a living.

Talk to a professional about investing & protecting your assets. As you can live on the interest, perhaps the free time is more important than the money for now?

Sounds like a good time to invest in yourself. First: a small vacation (a few weeks, ~$2-5k) to really relax. Next: maybe some school if there were other things that piqued your interest before, but never had a chance to study. If not school, maybe not a bad time to just pick up some books and hedonistically blowing weeks on whatever you want to study :-) If anyone asks, call it market research.

Congrats!

- No investment is gonna make you rich while we are in recession. - Gold will appreciate in dollars, but just because dollars will actually depreciate.

So, for the following years, if you buy gold and hold it, you won't loose purchasing power, but you won't get rich.

After the recession, Janzsen recommends to buy green energy stocks: http://www.harpers.org/archive/2008/02/0081908

There's no hurry, but there's plenty of mistakes to be made. Carry on as usual for a while and see if any of the ideas really resonates with you after your mind has settled.

Definitely don't get into a contract with someone to "manage" your money - they typically want 2% annually for it, and it's highly likely they've underperformed money market accounts over the past decade. Many (most?) have lost money over the past decade, at least after expenses.

On the very small chance you are telling the truth, I would say diversify your investments and keep your mouth shut. And then start ramblin'

1) Stay in real cash (not equivelents) until this market turmoil is done. 2) Figure out what you want your next "career" to be. You are in a position to take some risks, but 2million is not that much. You want to give yourself purpose and continue making some money. 3) Do not travel unless you are one to learn other languages: Travel is addictive but does nothing to improve you. Like all drugs, travel should be a reward to yourself, not the purpose.

Google Baskin Financial and Doherty and Associates, and ask around for somebody like that local to you. Take meetings with them and discuss their investment strategy and philosophy until you find a good match with someone you can trust.

http://www.rotten.com/library/culture/lottery-winners/

You have a few orders of magnitude more then me, but I imagine it should scale fairly well ;-)

don't change your lifestyle too quickly. make sure all changes pass two tests: 1) it feels comfortable 2) you think its rational.

check out coffee house investment strategy, I have been doing this for years (10+) and have fared well in this recession. Less worry and excellent gains. Make sure you always bleed a large sum of money slowly into the market, so you will not be caught at a specific point price-wise.

See: http://kd7yhr.org/bushbo/coffeehouse_investing.md for pointers

Typical "buy low (super low) sell high" strategy is probably making "we buy gold" company a lot of money. They even have the money to buy Super Bowl ads.

no currency is stable at this point. hyperinflation will wipe out a lot of wealth.

I know that's typical conspiracy nut fodder, but it may have a kernel of truth.

the US govt has printed too much money and keeps going further with stimulus packages and bailouts. the dollar is strong, currently, because it is the default fiat currency of the world. at some point the US will not be able to sell more bonds or the foreign creditors will dump dollars on the market or any number of other things can happen to trigger inflation.

you don't have to agree, but i would bet that hyperinflation will hit.

the significant spread between bullion and future contracts is also telling.

Choose your poison.

How do you know gold is at its peak? With fiat money there is a risk for a high rate of inflation. That doesn't happen with gold.

The gist of it was that gold is also subject to monetary pressures because its price is a reflection of the fact that it is used as a financial instrument. (In other words, gold's value is tied to the fact that it is used as currency).

If by "shore up devaluation" you think that governments will destroy fiat currency, I think that is unlikely to happen. Do you have examples of that ever happening? Usually more is printed and sometimes so much that you end up with hyperinflation.

With the current cost of gold productions, which are unlikely to change dramatically, hyperinflation of gold is not possible. Gold provides security and the market appreciates that. Yesterday it did top $1000 (again) by the way.

www.fool.com

Make sure some of your wealth is out of the reach of your government. Bullion stored in switzererland or the channel islands is good for this.

Learn how to hedge with options. Puts were quite cheap before the crash. People who had insured their positions are doing fine. This occurs to remarkably few.