Börse Express – Where to invest $ 10 million immediately

Let’s start with the obvious: If you have $ 10 million and your biggest problem right now is figuring out where to invest it, that’s a nice problem.

There are also a number of very simple, reasonable solutions.

First, you could give your money to a financial advisor to invest it for you. There is always a possibility that you will end up with an imposter and even if you can avoid it, many of these people will take 1% to 3% of your wealth – annually – as a fee for managing your money.

Nevertheless, as my foolish colleague Selena Maranjian emphasized: A good financial advisor can recoup this fee many times over if the S&P 500 outperforms.

K-I-S-S: Keep It Simple, Shareholder

Would you prefer to manage your money yourself? Me too. The good news is that there are many easy ways to invest $ 10 million yourself.

The easiest way would be to put your $ 10 million into an affordable S&P 500 index fund like that Vanguard S&P 500 index (WKN: 921751) to invest. (This also works for people with less than $ 10 million).

Sure, with a big investment like $ 10 million, one of your biggest concerns is that you don’t lose everything with a single bad investment. But that’s just a good reason to go through the index fund.

The S&P 500 includes investments in 500 different companies (that’s about 6% of all stocks traded worldwide), so investing in this one index gives you instant diversification. You also have a very good chance of making a profit.

Historically, the S&P 500 has generated approximately 10% returns over long periods. As long as you don’t need your $ 10 million right away (perhaps withholding just a million or two “for emergencies”), this should be a safe bet.

And assuming that even professional asset managers don’t beat S&P half and outperform half (because that’s how averages work), you have a 50-50 chance in an S&P 500 index fund to do as well as you do yours Would give money to a professional for single stock purchases. By skipping the middleman, you’ll save yourself $ 100,000 to $ 300,000 in fees annually.

Save first, then earn

If you’re ready to take a bit more risk, with the potential to not only save fees but also benefit from dividends, you may want to invest in a low-cost, dividend mutual fund – or directly in a select handful of dividend-paying stocks ,

Depending on how you consult the numbers, experts estimate that reinvested dividends account for 30% to 90% of the stock market’s gains over time. So if you invest in dividend stocks, you can also outperform the S&P 500 by using the largest source for its profits with minimal additional risk.

The inexpensive High dividend yield index ETF from Vanguard, for example, currently brings a return of 3.2% – about 72% better than the 1.9% return of the S&P 500. Even if you subtract the fund’s expense ratio (only 0.8%), it means that investing in this dividend index fund can achieve a 68% better dividend yield than buying the Vanguard S&P 500 index.

The High Dividend Yield Index is not quite as broad as the S&P 500, but it also divides your investment into 400 different companies, which means greater diversification than by selecting a handful of individual shares, be they dividend payers or not could be.

Invest (somewhat) riskier

Of course, it is very unlikely that any one of these 400 stocks will outperform the market. If you can take a little more risk, trying to choose the best assets offers a chance to increase your returns even further.

Because while a 3.2% dividend is certainly better than 1.9%, you can find individual high-quality dividend stocks that pay you even more.

In fact, there are more than 200 stocks with a market cap of $ 2 billion or more that (a) pay twice the dividend yields as the S&P 500 and (b) trade for a P / E below the market average. This combination of high return and low price should be hard to beat – and a recipe for outperformance on the stock market. (A good free stock screener like this from finviz.com can help you with that).

Admittedly, you won’t want to put all of your $ 10 million in the first stock you find. No matter how attractive it looks, diversity is the key to ensuring that a bad accident doesn’t cost you a significant chunk of your capital stock.

In fact, academic studies suggest that up to 50 stocks are needed to roughly duplicate the variety associated with owning only a broad index fund like the Vanguard S&P 500 Index or the High Dividend Yield Index – so be on it prepared to split the $ 10 million into positions of $ 200,000 or less.

You’re going to spend a little more time researching and entering buy orders, right. But with the added certainty that your portfolio is properly diversified, you will sleep more peacefully.