How much of my $3,000,000 should be invested and how much should be in secure savings?
I have $3,000,000. How much of this should be invested? How much should be put in secure savings?
It depends. Your financial situation and needs are different from everyone else thus it would be of value for you to have a financial plan done to assess your short and long term needs which can then drive how best to invest your money.
Thank you for the question.
You don't say if you are working or retired. If retired, a general rule of thumb is to have money that you know you will spend in the next 2 years in secure savings and the rest invested for longer term growth. If you are still working, you can leave less in secure savings (say 6 months' of predicted spending) and invest the rest for growth. Hope that helps!
The answer to that question varies for everyone, and it ultimately depends on your personal goals, risk tolerance, and time horizon.
For instance, if you are 65, no longer working, and the only thing you have to fund is your retirement, I would keep some in a savings account for emergencies and necessary spending (food, utilities, etc.), and the rest investing conservatively. At this point in your life, your investment decisions should be made with capital preservation at the forefront of your mind.
As a general rule, the younger you are, the more time you have to save, invest and let compounding work its magic. As you age, your ability to earn slowly drops and the amount of time you have to recover any losses you incur goes down as well. In conclusion, ass you get older, your portfolio should shift from aggressive to conservative.
As an added tip, if you have any debt outstanding, it might not be a bad idea to pay it off in order to limit your expenses.
I hope this helps!
That is all based on your objectives, risk tolerance, time frame and your needs! Just like if a patient walks into a doctor's office with chest pain doctor does a few preliminary tests, xrays, asks a series of family history questions to figure out the problem and find a solution, similarly, a certified financial planner would recommend you to do a comprehensive financial plan first, theen develop an asset allocation based on your goals. That allocation based on factors mentioned, will determine your exposure to different asset classes and how much you should keep in cash.
Keep in mind the inflation risk! If money is not keeping up with inflation, you are losing purchasing power!
Dear I have $3,000,000. How much of this should be invested? How much should be put in secure savings?
The answer to your question is it depends on your age, your goals and life expectations as you move forward.
To have accumulated $3,000,000 at whatever point in your life, you are doing something right, I applaud you.
You have already done a magnificent job securing financial independence.
A). SECURE SAVINGS
Secure Savings placed into your bank as CD, Cash Account or Money Market Account is insured by the Federal Deposit Insurance Corporation (FDIC).
Though this money does not act as an investment or gain value as will an investment account earning low interest rate depending on the bank rate, the trade off is that the money is safe, secure and remains available for you with no or little risk of volatility.
1). EMERGENCY FUND
Make your Financial Plan visual. Write your plan on paper. Dedicate yourself to amass a one year safety net of funds. This long term process will result in a design involving trust to create a purpose of financial security about money and what it is worth long term for your future.
Dedicate yourself to have conversation(s), gain understanding of a strategy to save long term for emergencies. This mind set of mental strength should be strengthened now and ongoing into the future. Learn the financial mindsets of those you share time with make certain you collaborate with like minded individuals so that your plan is strengthened and the focus maintained. A financially fit lifestyle will make a difference in your lifestyle.
SECURE EMERGENCY FUND
An emergency fund will save you in case of emergencies; events unexpected, necessary and urgent expenses though events that must be planned for regardless. Differentiate this fund from any and all cost of living expenses.
An emergency fund is separate from a source of money saved for a home, money for school, money for food and clothing. Such money must be allocated for emergencies only; things that happen in life, not expected but they happen unfortunately; sudden loss of income, sudden illness, something you must do for a family member or friend, a tragedy or disaster does happen. Unfortunate, No one else is going to plan for your emergencies but you.
The amount of money to fund an individual Emergency Account is calculated to be one year of your annual salary or the equivalent to keep you comfortable, safe and secure, pay debts and other living expenses for a period of one year. I recommend always adding additional monies to this account periodically as added extra security for Medical Emergencies. It is best to have more money than less in this Emergency Account.
SHORT TERM EXPENSES
Secure Savings are also be utilized for accumulating monies for short term projects; a home remodel, landscape design, a college eduation ( or two), your retirement, and or a trip abroad or nationally. Placing funds safely and securely into an account with no risk will guarantee for you that the monies will be there when you need the money. Secure Savings provide a low risk alternative to investing. Funds are there, you are not subject to waking up one morning to a bear market where a percent of capital can be lost overnight. The goal is to keep your goals achievable and this includes a plan that maximizes secure savings are part of your plan.
ACCESS TO MONEY
Access to money can prove as a good or bad thing. You have proven with $3,000,000 in savings, you are not someone who will take ready cash and gamble it all on a dream. Having accumulated $3,000,000, you most probably appreciate your efforts getting to where you are and how hard the journey to this point was in day to day determination it took to say no to temptation and to live within your means always focused on a goal.
SECURITY OF MONEY
An emergency fund must be safe and secure. Emergency money is not to be utilized whimsically, not "easily accessible". Safety and security is key.
Place funds in an account not utilzed by you on a regular basis. A firm money mindset with a goal for financial independence and a desire for long term security in case of emergencies, key to success. Communication about funding emergencies, consistent discussions regarding your plans for Financial Independence and funding for emergencies must start now and continue through life.
The Quantity of funds in an Emergency Fund should be equal to one year income. The amount of funds can vary however it is always best to have in reality more than less money available to you. Place funds in a simple checking or money market account. Money in either of these types of accounts will be free to remove funds quickly and easily versus accounts incurring a tax consequence if withdrawn early.
CREATIVE STRATEGY TO FORM EMERGENCY FUND
-A first creative strategy to form an emergency fund is to be creative; develop strategies to form an emergency investment fund to include ways for you to work on projects, tasks you otherwise would have farmed out to other people. Sample tasks (cleaning house or washing cars) save money allowing the emergency fund to grow.
-A second creative strategy is to perform side hustles (Uber, dog walking, caring for children, a barista at Starbucks). Opportunities are out there, pick a passion, make money, translate into a stream of income or an entrepreneurial ability you did not think possible. Make it fun, entrepreneurial, present tense!
-A third strategy is to sell things clutter in your life. Be free from encumbrances. Make a strategy, a game.
-See what you can do to rid yourself of clothes, books, belongings, make this an adventure. With the removal of items that were taking up space in your precious life comes time to think of other ways to be creative.
-A forth strategy is budget, budget and budget. Youth are forming FI groups (Financial Independence). They are collectively and individually becoming frugal, more aware, vowing to get rid of debt, live simply, on a crusade to become free from expenses, free from debt.
This takes discipline, mind control. In the end, great values about money are established, a life of freedom and control, a life knowing you have your emergencies covered.
PEACE OF MIND
Whatever strategy you take, the process of frugality and long term money management and control though difficult will assist you to gain greater peace of mind with each and every amount of money you are able to put away.
I stopped Starbucks and an expensive CLAREMONT health club membership. I thought I needed both of these things, I was initially crushed to get rid of the expense. Now, after months, I do not miss these things.
I have come to replace spending "habits" with an ability to save $1000 or more each and every month to put to savings account. Be open to change, be open to talk about money and plan for the security of your money!
You must state your purpose, clearly and with purpose. You must define what you want to do on paper and commit to this plan. Understand your roadmap, your reason for making a plan for financial independence. What will be your changing needs going forward, how do you wish to accomplish your goals starting today.
Never rely on the answers of any one investment professional to rule where your investments go and what will work for you and for your life. Even if logic says that a large percent of your porfolio should be in investment accounts, everyone is different. My New Jersy Scottish hard headed mother acknowledges opportunities in investments. She prefers no risk at this point in her life. Her funds are all in secure savings. Period.
Therefore, how much of the $3,000,000 you choose to put away safe, will be your choice and yours alone.
Make a plan and stick with it. If you are like my mother you will place more funds in Secure Savings.
She will not wake up at any point to subject herself to a market correction.
B). A LIFE OF INVESTING
Investing smartly is the key to meet financial goals. If you decide to invest your hard earned money learn and think first before you make a decision to do anything.
Become well informed yourself in the markets, follow advice of sound trusted Money Managers, Advisors and Investors who have done well in the markets, utilizing skill which translates into long term investing where great money is made despite presence of risk and volatility.
Whatever investment methodology you create; short term secure savings versus long term investment funds with value and growth strategies, a mindset of saving is key toward the attainment of financial independence.
What ever your age, with $3,000,000 available to you, please by carefull and cautious when choosing a strategy, including a seasoned financial mentor, an accountant, dare to seek knowledge, plan, read, learn and patiently construct a wealth plan of action which involves focus, commitment and dedication to the very best and most promising funds and individual stock selections. Continue to empower you. You must be comfortable with the plan. You must personally know and acknowledge the plan and not leave the plan to someone else.
Today, $10,000 invested in a high yielding ETF, Index and or Mutual Fund compound over thirty to fourty years will get you higher interest rate accrual than you would yield in a CD account by far. For an Index Account or ETF based on the S&P Sector the average annualized return over a ten year period is approximately 8-10% annualized. For a CD account or money market account far less. This will be your choice, only your choice.
Over the course of an investment lifetime you will see market fluxuations. Remember all good stocks fluxuate, a natural phenomenon. Make certain you can deal with this volatility. Develop and refine your financial conscious mindset, be sturdy and firm and stoic in this quest.
Make all financial decisions wisely.
You are in control.
All the best to you,
Jan Attard, MBA, RIA, Wealth Accumulation Specialist
Technical & Fundamental Market Analysis
J. Oliver Maxwell, LLC
Tele: # 925-876-1377