Investing

Investing a $1 million windfall

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  • Jun 13th, 2016 3:15 pm
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[OP]
Newbie
User avatar
Jun 9, 2016
13 posts

Investing a $1 million windfall

Hi all!

I have been lurking these forums for quite some time and now the time has come to make my first post.

I'll try to keep this as short as possible. Some details:
I am 24 years old.
Due to the way the last 5 years of my life have worked out, I have no university/college degree.
I plan to go to university for a STEM degree (science/tech/engineering/math). This will take me roughly 4-5 years to complete. I have already been accepted to a good program and a good Canadian school.
I have recently been blessed with a roughly CAD$1 million windfall.
My income is $0 right now, so my tax bracket is the very lowest.
I have no debts, no obligations, no dependants, no family.
I need roughly $2500-3000/month to run my expenses till I graduate (roughly 3% on a million). Additionally I would like to at least be beating inflation (roughly 2%). In total: 5% ROI on a million dollars.
To reiterate, until I complete my degree, 3% per year of INCOME (not CAPITAL GAINS) and a total ROI of 5%+ is all I need.

I have been following the other thread in this forum, posted by christmaspi, titled "How would you invest $2 million inheritance". It has been of great help and now I feel I should get some more specific/tailored advice.

Now some questions/ideas of mine:
1) Blue-chip, Canadian, dividend-eligible stocks? I could get 3-4% of income quite easily from this. Any capital gains is just extra.
2) Is it really advisable to invest in equities at this point? The S&P500 is almost back at all time record highs...
3) Money managers/financial advisors? Or should I just be investing by myself in securities like index funds on discount brokerage platforms?


Please help!
Thank you all,
dumbfoundead6666
44 replies
Sr. Member
Aug 15, 2013
825 posts
410 upvotes
Guelph
dumbfoundead6666 wrote: I am 24 years old.
I have recently been blessed with a roughly CAD$1 million windfall.
My income is $0 right now,
I have no debts, no obligations, no dependants, no family.
Can you be kind enough to share with us how you managed to pull of all that?
Deal Addict
Sep 6, 2010
1935 posts
699 upvotes
Vancouver
dumbfoundead6666 wrote: Hi all!

I have been lurking these forums for quite some time and now the time has come to make my first post.

I'll try to keep this as short as possible. Some details:
I am 24 years old.
Due to the way the last 5 years of my life have worked out, I have no university/college degree.
I plan to go to university for a STEM degree (science/tech/engineering/math). This will take me roughly 4-5 years to complete. I have already been accepted to a good program and a good Canadian school.
I have recently been blessed with a roughly CAD$1 million windfall.
My income is $0 right now, so my tax bracket is the very lowest.
I have no debts, no obligations, no dependants, no family.
I need roughly $2500-3000/month to run my expenses till I graduate (roughly 3% on a million). Additionally I would like to at least be beating inflation (roughly 2%). In total: 5% ROI on a million dollars.
To reiterate, until I complete my degree, 3% per year of INCOME (not CAPITAL GAINS) and a total ROI of 5%+ is all I need.

I have been following the other thread in this forum, posted by christmaspi, titled "How would you invest $2 million inheritance". It has been of great help and now I feel I should get some more specific/tailored advice.

Now some questions/ideas of mine:
1) Blue-chip, Canadian, dividend-eligible stocks? I could get 3-4% of income quite easily from this. Any capital gains is just extra.
2) Is it really advisable to invest in equities at this point? The S&P500 is almost back at all time record highs...
3) Money managers/financial advisors? Or should I just be investing by myself in securities like index funds on discount brokerage platforms?


Please help!
Thank you all,
dumbfoundead6666

HAhahahhaha what is the word the kids call this?
Jr. Member
Nov 30, 2015
166 posts
31 upvotes
Toronto, ON
Not sure where you are going to school, but if its in a Uni town like Waterloo, Kingston or London than consider purchasing a home with the purposes of collecting rent from your fellow classmates and for your own use during the course of your education. I would still mortgage with 20% down if you can for leverage. Something I wish I had the funds to do when I went to school. Also I would not worry about the volatility or levels of the market if you plan to hold long-term, rather whether you can get the 3% income you need from your investments. If you intend to use the assets to say purchase a property right after you graduate than I might be very careful with equities and potentially consider HISAs or GIC`s.

Make sure you max out your RRSP and TFSA allowance first before anything else.
Banned
Mar 11, 2016
2081 posts
867 upvotes
socialmindset wrote: Not sure where you are going to school, but if its in a Uni town like Waterloo, Kingston or London than consider purchasing a home with the purposes of collecting rent from your fellow classmates and for your own use during the course of your education. I would still mortgage with 20% down if you can for leverage. Something I wish I had the funds to do when I went to school. Also I would not worry about the volatility or levels of the market if you plan to hold long-term, rather whether you can get the 3% income you need from your investments. If you intend to use the assets to say purchase a property right after you graduate than I might be very careful with equities and potentially consider HISAs or GIC`s.

Make sure you max out your RRSP and TFSA allowance first before anything else.
Have to agree if you are planning to spend 4+yrs in the same University town...a princ residence with rental income might be a great choice ...its not for everyone, but in the right city might be worth considering
[OP]
Newbie
User avatar
Jun 9, 2016
13 posts
socialmindset wrote: Not sure where you are going to school, but if its in a Uni town like Waterloo, Kingston or London than consider purchasing a home with the purposes of collecting rent from your fellow classmates and for your own use during the course of your education. I would still mortgage with 20% down if you can for leverage. Something I wish I had the funds to do when I went to school. Also I would not worry about the volatility or levels of the market if you plan to hold long-term, rather whether you can get the 3% income you need from your investments. If you intend to use the assets to say purchase a property right after you graduate than I might be very careful with equities and potentially consider HISAs or GIC`s.

Make sure you max out your RRSP and TFSA allowance first before anything else.

I will be in a university. I have thought about that option and may do it.
I do not intend to use the assets to purchase property post graduation... But you have a good point. It may be best if I set a little loose change aside to be used a down payment post-graduation.
[OP]
Newbie
User avatar
Jun 9, 2016
13 posts
Fjr2005 wrote: Have to agree if you are planning to spend 4+yrs in the same University town...a princ residence with rental income might be a great choice ...its not for everyone, but in the right city might be worth considering

The one issue I have with rental properties is that, I actually have done this before, that too in a university town, and dealing with tenants, late rent, property damage, etc, is quite a huge hassle. Not at all a 'couch potato' type of investment. Even if I were to be living on the property, I can't literally control what other tenants do to the property...
Temp. Banned
Aug 7, 2011
6623 posts
991 upvotes
Vaughan
dundeal wrote: Can you be kind enough to share with us how you managed to pull of all that?
gwplant wrote: HAhahahhaha what is the word the kids call this?
Really guys? He seems legit, and he's asking for advice. Don't be a complete douche.
[OP]
Newbie
User avatar
Jun 9, 2016
13 posts
squadz wrote: Really guys? He seems legit, and he's asking for advice. Don't be a complete douche.
Haha! Thank you. Yes I really do need serious advice.......
Member
Dec 13, 2014
375 posts
131 upvotes
Hampstead, QC
Ill give you advice that I gave the other guy:
For the time being hold on to cash and buy 25% gold. You answered your own question. Markets are overvalued and extremely dangerous. European Banks are rolling over, Brexit, artificially low interest rates creating a massive bubble in risk assets, etc....we are living a financial experiment where things are actually very very bad.
You have been given a blessing, have enough money to finish your education and pay your bills. WAIT and do not invest. There is absolutely no need to be invested...and believe me, that is what all advisors and 99% of posters will tell you to do.
Deal Fanatic
User avatar
Dec 14, 2010
6394 posts
7691 upvotes
1. Sure, but you need to learn how to invest before buying a bunch of companies. Define your criteria to when buy and sell. Since your goal is growing income, buy should be done with valuation in mind, while sell should be done when the business no longer meets your requirements or are taking more risks than you're comfortable with.

2. Of course it is, there is always a bargain to be found. While the market is overvalued, there are undervalued or fairly valued companies that presents a good opportunity today. However, this might not help if you don't know how to evaluate them or monitor their results. In your case, I'd invest in companies elegible for Canadian dividend credit, since these are taxed lower than foreign dividends. Also, make sure to populate your TFSA first. Stocks that pay interest mixed with dividends could go there, to minimize your taxes.

3. I cannot comment on money managers / advisors, but if you don't know how to invest, then they might be a better option than investing blindly - which becomes gambling. Indexing might be the other alternative, however I'm not sure if there are suitable products that provides a consistent income, like dividends would.

In sum, you'll have to become more familiar with the investing process to succeed at meeting your goals. Including having the proper temperament if yor stocks tank 50% right after you bought them, due to a market crash.

Rod
Deal Addict
Jan 20, 2016
2028 posts
1010 upvotes
Houston, TX
leflower wrote: WAIT and do not invest. There is absolutely no need to be invested...
The best advice! ...if you want guaranteed loss of 10% in 4 years ;) assuming ~2% inflation. That's 100k btw... even worse , -20% including 4*$30000 draw down. Even during great depression 60/40 portfolio didn't have -20% return in 4 years...
You can also short Canadian banks or buy miners ;)

To OP: diversified portfolio with 40‰ bonds, some gold (OK, that was the good advice), some REIT, some preferred shares (for income) and index funds (let say remaining 40%) can work for you. Canadian bond funds itself us paying right now 3.2% in monthly dividends, preferred about 6%.
Such portfolio worked quite well in 2008 downturn.

RRB maybe can provide the required income but will not beat inflation.

Also take a look at dividend portfolio topic by rodbarc - it will give 4-5% yearly dividends and capital appreciation will be as well.
Deal Addict
Sep 6, 2010
1935 posts
699 upvotes
Vancouver
squadz wrote: Really guys? He seems legit, and he's asking for advice. Don't be a complete douche.
He hits a "windfall" and he comes to RFD to figure out how to invest $1M??? come on...if it were inheritance I don't think he would be referring to it as a "windfall" otherwise he is the douche. What other ways is a 24 yr old uneducated going to come into $1M???? Please color me skeptical.
Newbie
Jun 6, 2016
12 posts
Pay someone for advice, you have 1MM. Go fee based broker. Passive indexing.Or all in HVU.TO. It gained 18% today, so you know it's gonna be a good long term bet
Deal Expert
Aug 2, 2001
16748 posts
6971 upvotes
Seek professional advice. You have far too much money, and far too many plans, to just go at it on your own with no experience. Not only do you need to worry about the investment returns, but also the tax implications. At a bare minimum, interview a couple financial planners and start researching their recommendations to learn more about what they are suggesting.
Deal Addict
User avatar
Oct 26, 2008
2474 posts
169 upvotes
gwplant wrote: He hits a "windfall" and he comes to RFD to figure out how to invest $1M??? come on...if it were inheritance I don't think he would be referring to it as a "windfall" otherwise he is the douche. What other ways is a 24 yr old uneducated going to come into $1M???? Please color me skeptical.
I need to ask but why bold the d in windfall?
Penalty Box
Dec 27, 2013
8003 posts
3989 upvotes
Toronto
MarketMakerMike wrote: Pay someone for advice, you have 1MM. Go fee based broker. Passive indexing.Or all in HVU.TO. It gained 18% today, so you know it's gonna be a good long term bet
lol you know what HVU.to even is?
Deal Addict
Sep 6, 2010
1935 posts
699 upvotes
Vancouver
daivey wrote: lol you know what HVU.to even is?
Hahahhah well said was thinking along the same lines....it always goes up right?
Deal Fanatic
User avatar
Feb 19, 2010
6237 posts
2971 upvotes
Si98 wrote: I need to ask but why bold the d in windfall?
Because he thinks the real term is "winfall" and is trying to embarrass the OP. I just love irony.
[OP]
Newbie
User avatar
Jun 9, 2016
13 posts
rodbarc wrote: 1. Sure, but you need to learn how to invest before buying a bunch of companies. Define your criteria to when buy and sell. Since your goal is growing income, buy should be done with valuation in mind, while sell should be done when the business no longer meets your requirements or are taking more risks than you're comfortable with.

2. Of course it is, there is always a bargain to be found. While the market is overvalued, there are undervalued or fairly valued companies that presents a good opportunity today. However, this might not help if you don't know how to evaluate them or monitor their results. In your case, I'd invest in companies elegible for Canadian dividend credit, since these are taxed lower than foreign dividends. Also, make sure to populate your TFSA first. Stocks that pay interest mixed with dividends could go there, to minimize your taxes.

3. I cannot comment on money managers / advisors, but if you don't know how to invest, then they might be a better option than investing blindly - which becomes gambling. Indexing might be the other alternative, however I'm not sure if there are suitable products that provides a consistent income, like dividends would.

In sum, you'll have to become more familiar with the investing process to succeed at meeting your goals. Including having the proper temperament if yor stocks tank 50% right after you bought them, due to a market crash.

Rod

1) I am leaning towards index funds, not specific companies. What do you think?
2) That is very true, however, as you said, only an experienced individual would be able to find such bargains in times of turmoil.
3) Are there not dividend funds? As far as I understand (not much) these are well diversified..?

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