What is the best way to manage and maximize a sudden sum of money?
I have recently inherited a piece of jewelry that I intend to sell for ~$100K. I would like to maximize that money over the course of 10 years. If I were to invest it, is my best option to seek professional advice, engage in independent investing options, or use a new "robo-advisor" like my son uses?
I would initially consult with a CPA for tax planning then with a financial advisor in order to properly analyze your current portfolio for diverisfication within all of your accounts.
By utilizing the services of a financial advisor you would be able to indentify your individual investment goals, time horizon, tax strategies, and risk tolerance. Once that is in place, there are many options to choose from taking into consideration what is suitable for you individually. Also, an advisor would be able to make certain that you are properly diversified in order to minimize any potential downside.
Just to clarify:
- Robo-advisors offer financial services with minimal human intervention. They provide digital financial advice based on mathematical rules or algorithms. These algorithms are executed by software and thus their financial advice does not require a human advisor. The software utilizes its algorithms to automatically allocate, manage and optimize clients’ assets. Most robo-advisor services are instead limited to providing portfolio management without addressing issues such as estate and retirement planning and cash-flow management, etc which are also the domain of financial planning.
- A discount brokerage is a business that charges clients significantly lower fees than a traditional full service brokerage firm but without providing financial advice. Discount brokers typically allow investors as well as consumers of financial services to buy and sell on-line while offering comparatively fewer services and/or support.
- A full service brokerage financial advisor is a licensed financial broker-dealer firm that provides a large variety of services to its clients, including research and advice, retirement planning, tax investing strategies, and much more. Full-service brokers can provide expertise for people who do not have the time to stay up-to-date on complicated issues such as tax or estate planning.
Retaining the services of an experienced financial advisor far out weigh the services of a robo advisor or even a discount firm. There are many variables and personal financial differences that cannot be evaluted by mathematical algorithms. Also, your financial advisor is a trusted advisor available for consulting with you during the ups and downs of the market. Dealing with a small independent advisor will enable you to customize a portfolio specifically for you and your family.
Los Angeles, CA
To Robo - Or Not to Robo... Time and expectations are key. The fact that you are asking questions through a generic forum suggests that the Robo-solution may not be the best answer for you. A Robo-solution may be best suited for someone who already has the answers they need and are simply looking for a particular portfolio implementation tool. Robo-solutions still fall short, at least in my opinion, of providing holistic advice to clients. The fact that you ask a rather general question, without going into detail about your needs (current, near-term, future, etc.) means that you may not fully understand what questions you should be asking - much less the answers to those questions. You could gain this knowledge through education, etc., but you might not be a perfect fit for the Robo solution at this time. Your son, on the other hand, has the benefit of a longer investment time horizon. Therefore he won't be as heavily punished should he fail to make the best investment decisions. His relative youth is a huge advantage to him and allows him the opportunity to save and invest less precisely - making up for certain mistakes as he ages and saves more. You, on the other hand, have fewer years and less opportunity to recover should you make mistakes implementing your retirement plan. In short - If you need answers to your questions, then you should begin your search for a knowledgable professional who can help you find the answers (and the questions) that you need.
It's never a bad idea to look for professional advice. Your investment plan should be coordinated over all of your other accounts, goals, and opportunities.
One of the several problems with 'robos' is that they only really care about what you have to give them, and if they can invest it. Meanwhile, you could replicate what they do in a mutual fund without the cost.
So, I suppose my answer is that you may want to sit down with an advisor before determining what is best. Ten years seems like a long-time, but with investing it is the minimum amount of time I would recommend having. Even so, if you expect to use all of it in 10 years, I wouldn't invest for that entire period.
The first step to determining an appropriate investment strategy is to identify a qualitative goal for the investment, along with a timeline for this goal. You've already mentioned 10 years as a timeline, but what happens in 10 years that you need this money for? If it's for retirement, great. But how much of your retirement is dependent on this money and what is your contingency plan if your investment rate of return isn't enough to fund your retirement needs?
In short, any investment decision is the direct result of significant financial planning endeavors. I'd love to help you, but unfortunately can't answer your question without knowing several additional details. Of course, if you'd like to provide some of those details and want a second opinion, feel free to shoot me a message.
Adam Harding, CFP
If you are not looking for advice beyond where to invest your inheritance, a robo-advisor maybe your best bet. With this option, it is pure investing without anything else.
Where a financial planner comes into the picture is when advice is needed. This advice can be as simple as telling you to stay invested when the stock market drops. It can also be as complicated as working with you and your spouse to "discuss" cash flow opinions.
It really depends on your personal needs and wants. There is no one answer to your question.
One word of advice. When receiving a large sum of money, take a deep breath before making any decisions about how or where to put money. This can be a very confusing time. Some people make regrettable mistakes when deciding what to do quickly with a windfall.