Not that I have the pleasure to be in the situation, but I have always wondered about how someone would go about investing/protecting a large sum of money. For instance lets say a small lottery or such that gets you a $10mil lump sum.

If you just wanted to make enough interest off of it to beat inflation and to get a modest income, lets say about 5%-8% to cover both, then how would go you about investing it?

For example are there places that for a small fee will take your money and open a bunch of $100k bank accounts (so they are still covered by the government) and set them up to put the interest made into another account?

Or would it be better to put the money into a bunch of CD's, or funds, indexes?

 

Not having any experience in socking away large amounts of money, but I imagine it wouldn't be all that difficult to open multiple CDs at the $100K FDIC guarantee amount. I'm sure most banks will let you open multiple CDs at one time without much hassle. Other "safe" places to sock away money can be gov't/municipal bonds, and annuities.

Also, investment houses/brokers need to be SIPC insured, and often times they purchase additional third-party insurance coverage. For instance, Scottrade insures up to $1M in cash, and $25M in total assets (SIPC covers $500K assets, including $100K cash). Obviously, this is not insurance in case of investment loss, but for bankruptcy, etc.

I think alot of HNW people also invest in blue chip stocks paying high dividends. This can be another good way of minimizing investment loss risk while receiving dividend yields comparable to CDs.

 

A savings account isn't investing money, it's storing money. The FDIC is designed to keep poor people from losing ALL of their savings. It's not designed to allow rich people to save large sums without risk.

 

Exactly. Only the oblivious or fearful should have a large portion of their funds in CD's. The exception to that is if you have so much money that you are literally storing it and there is no gain from investing it as even the small 2% gain a year you get after inflation provides all the things you want that money can buy. You would probably not be surprised to learn the above situation is extremely* rare. The wealthiest people are the clients hedge funds are composed of. Most of the wealthy people I know are actually the most "aggressive" investors. But that's only one way to look at it as aggressive and successful can add a couple zeros to your funds.

 

This is actually one of the things my company does. We're in the process of helping a family worth about $20-25M decide which money managers to use. We send out RFPs (Request for Proposal) to some managers describing the client, their needs, goals, etc. The managers return the questionnaire for our review, then we have a series of face to face meetings. Then the family decides whom to use - could be 1, 2 or 3 managers.

 

[QUOTE=sahtt,Dec 3 2007, 05:22 PM] Exactly.

 

Two words:

Goldman Sachs


Show up there and say you have $10M and want to get a decent return and protect the principle.

 

^^ Yeah, pretty much.

 

And what exactly is GS going to do that Schwab can't?

 

I feel sorry for you if you think Schwab has the same capabilities as Goldman Sachs.

http://www2.goldmansachs.com/client_servic...ment/index.html

45% of the Forbes 400 use GS. The other 55% probably have their own investment banking group.