They say you have a 1 in 10,000,000 chance of winning the lottery.

Well, today is my lucky day, because I just won – yeah baby!!

Okay….maybe I didn’t actually win.

We’re just going to pretend I did for the sake of this post.  :)

I once had a client ask me,

“Jeff, if you had a million dollars, how would you invest it?”

I’m not one who is usually into playing these games of pretend.

How to Invest a Million Dollars

Sure, as a kid, I loved to pretend that I was He-Man and that the big cardboard box in our basement was Castle Grayskull.  “I have the power!”  <<<He-man quote.  Fellas, don’t pretend like you don’t remember that! Haha….

But those days of “pretend” are long gone. That is, until today.

Today’s post is merely for the fun of it.

I’m pretending that I hit the jackpot and walked away with a cool mil.

For this pretend exercise, we’ll say that I’m netting a million dollars, and I have all of it to invest.

Just so we’re clear, this is not investment advice, so don’t take it as such.  And just in case that isn’t clear enough, read here.  You have been warned.

How would I invest a million bucks?

In going through this pretend exercise, I’ll also try to walk you through it as if you won the money, too.  At least in the beginning.   After the first couple steps, then it’s all me.    Let’s begin….

Hello Mr. Check!

The big day arrives, and you finally receive your check: a big, fat $1,000,000.  You drool over the zeros and the commas.  You’ve never seen a bigger check in your entire life.

You take a second to breathe it in.  You want to whisper nice things to the check, like, “Oh, check, you’re so amazing”.  Don’t worry, no one’s watching.  I’d probably do it too. :)

Did you know you might be able to actually retire with $1 million? While it’s better if you have some time to invest the money instead of using it for retirement, it’s actually possible to retire with $1 million. Take a few minutes to read my case study right here on [Case Study] Can You Retire Early with Only 1 Million Dollars?

Even after you read that though, you may wonder if 1 million dollars is really enough to retire on. After all, the people in that case study actually had other assets in their favor. You may be wondering if you can actually retire with 2 million dollars! Well, I wrote that case study too. Check it out on Forbes: Can You Retire With $2 Million?

After reading through these case studies, you’ll understand why it’s so important to make sure you invest the money to keep up with inflation – especially if you’re a long way from retirement. You’ll also want to learn about some strategies to lower your risk . . . more on that in a little bit.

So what’s the first step?

Step 1: Nothing

how to invest one million dollars step oneOkay, so here’s the first thing you do if you were to obtain $1,000,000 (or any large amount of money for that matter).  Nothing.

What do you mean nothing?  

I mean nothing.  

You sit on it.

You sit on it for at least three, preferably six months.

People tend to make rash decisions when they’re hit with a windfall of unexpected money.  Most people’s tax refunds are spent before they’ve even got it.  We don’t want this to happen with the $1,000,000.

Need a place to park all that cash so you won’t do anything to it?

The first place I would look to is a group of Certificates of Deposit (CDs) or an online savings account. Going with CDs helps put an additional barrier between you and making a poor decision, because you are penalized for any withdrawals from the CD before it matures. An online savings account gives you more flexibility at the risk that you will withdraw the money to go on a spending spree.

You can get the highest interest rates for Certificates of Deposit and Online Savings Accounts at online banks, like our favorites Capital One 360 and EverBank. (And since they are online, you should be able to bank with them no matter what state you live in. Or decide to buy your mansion in. Whichever.)

I was once referred to a couple who received a $1.5 million dollar settlement.  I told them the exact advice above.   Did they listen?  No!

Within the first 3 months of getting the money, they bought a brand new home, 2 new cars, gave their church $50k (I’m cool with this one and you’ll soon see below), gave several different relatives $10k a piece, AND they quit their jobs.   I was floored.   We are NOT going to do what this couple did.

Step 2.  Let’s Talk Debt

You have debt; we’re going to pay it off.  Are we going to pay off all the debt?  Not necessarily.

You’ve been lucky to lock in a 30-year mortgage at less than 4% in the last couple of years, there’s no sense paying that off.  That’s cheap money.

We could talk about making double payments at a later time, but for the mere sake of paying off your principal, I don’t think it’s necessary.

Credit card debt gone.  Department store card gone.  Student loan debt…..  That’s a tough one, too.  I’m leaning more towards paying it off.  I’ll let you decide.  Any other debt that has double-digit interest rates, gone.  Pay it off and be done with it.

Just because you paid off the debt does not give you the right or permission to go out and charge more debt.  You just won a million dollars for pete’s sake; why would you need more credit cards?!

Need help with developing a debt payoff plan? Check out our post on the top 11 personal finance software. One free product to look at from that list: Ready for Zero. You really shouldn’t need a piece of software to help you pay off your debt when you’ve just been handed a check for $1,000,000… but just in case, it doesn’t hurt to take a look.

Step 3:  Boost up your emergency fund.

As you have a large influx of cash, why not keep at least 18 to 24 months of monthly expenses in a high-yield Money Market account? Think of it as the Ultimate Emergency Fund. Best places to hold that huge sum? Online banks like Capital One 360and EverBank. Or, you might throw it into a Certificate of Deposit with Discover Bank.

It’s probably more cash than you’ve had in your entire life sitting there doing nothing, but that’s okay.  You’ve now turned a new leaf.  It’s a new you, so enjoy it.

Step 4: Give it Away

You’ll notice that I didn’t refer to myself in any of the above.  That’s because other than a mortgage and a car note, we have no debt.  If I had $1,000,000 to invest, I would not have any debt to worry about being paid off, plus our mortgage is a 15-year 3.375% and we’re making extra payments.  I’m not in a hurry to pay that off.

Our emergency fund currently is between 12 and 18 months for household expenses.  Once again, I’m okay there.  So, what do you do?  Now, this is more for me and my background, so don’t feel like you have to oblige, but the first thing I would spend out of the million is give 10% straight to our church, otherwise known as a tithe.

Yes, I would write a check for $100,000 to our church straight off the top.  You might call “BS” on this.  You might think I’m just saying that to be sound like a good Christian.  If I was writing this post a year ago, it would be hard for me to try to argue that.  You can even watch this video, where a couple of years ago I thought a client of mine was nuts for wanting to keep tithing while trying to pay off debt.

In the past year, my wife and I have finally, and I mean finally, started tithing where we give 10% of our gross income to our church.  It took us awhile to finally grasp the concept, but we’ve finally got it.

Would it be a hard check to write?  Uhhhh, YES!!! But I believe that our church and God’s will can do much more with it than I could.

Step 5: Peer to peer lending.

This might come as a shock to many readers, especially because I’m a “financial planner.”  Maybe you think I would buy stocks, maybe you think I would buy mutual funds.  I would, but I would actually start with peer to peer lending.

How much?  A very good chunk.  I would put $250,000 into both Lending Club and Prosper, splitting them in half, so $125,000 a pop.  I initially started a lending club account back in 2008, and to this day I’m averaging about 9%.  Not too shabby.

At the beginning of 2013 I opened new accounts with them both with the sole purpose of seeing which one would perform better.  I called this my “Prosper vs. Lending Club Experiment” and the results have been interesting.   You can see who’s winning so far here.

So for the sake of diversification, I would try both.  Sitting on 8% to 9% yield with very little volatility, or as some planners refer to it, standard deviation, is pretty hard to beat.  If you are interested in a more technical breakdown head over to my review of Lending Club and Prosper review to see how you can leverage their offerings to your benefit.

Step 6: Bonds, bonds, and more bonds.

To say that this interest rate environment has been an interesting one over the last couple of years is an understatement.  Trying to get a high yield on a bond these days is about as realistic as trying to get an In-and-Out Burger in the Midwest.  It ain’t going to happen!

Instead of assuming that interest rates are something to brag about, I thought I would tackle this area of investing as if interest rates were somewhat normal.  If you’re curious, I define “normal” as you can go out and get a one-year CD paying you something north of 3%.

In that case, I definitely would have a larger percentage of municipal bonds, the tax-free kind, in my portfolio.  In addition, I would also add some short to intermediate corporate bonds, some mortgage-backed securities, and perhaps some bank loans and convertible bonds as well, but I’d allocate about $250,000 to this piece of the pie.

What type of bonds would I buy?  Frankly I’m lazy, so I wouldn’t do the time or research to choose individual bonds.  It’d be too much of a headache.  I lean more towards the mutual fund side of things.  There are a lot of good mutual fund bond funds that have done really well over the last several years.  Just to diversify, I would also consider buying some bond ETF’s.

This  piece of my portfolio is meant to be the boring part that makes me want to yawn when I think about it.  Plus, this makes the wifey happy because she doesn’t have to worry about me making any stupid stock picks.  Been there, done that, too many times.

Step 7:  Actively Managed Mutual Funds.

Let it be known that I’m not a passive investor.  Indexing is personally something I’m not a big fan of.  Disagree?  That’s cool.  We can have a debate another time. So with $100k, I would allocate it to 10 to 12 different mutual funds.  I anticipate that the allocation will be somewhere in the 60% to 70% stock range, with the rest being in bonds.  Notice how heavy I am in my bonds?  How ironic for a guy in his mid-30s to be so conservative?

Seeing previous younger clients receive big inheritances and how they are more interested in protecting vs. growing is a contributor to me feeling this way.   I’m almost positive I would be just the same with most of the funds.

Another option I would consider is Betterment.  Even though they use passively managed ETF’s, they do make active changes to their portfolio.


Also, when you combine actively managed mutual funds with the power of AssetLock™, you’ll enjoy peace of mind that your portfolio is being monitored not only by your advisor, but by software as well.

AssetLock™ is innovative asset-protection software that lets you experience the markets’ upsides without taking much of the risk associated with active management.

Oh, and did I mention this is not a stop-loss strategy? Stop-loss strategies involve buying and selling at predetermined amounts. Instead, AssetLock™ uses what they call an AssetLock™ Value. The AssetLock™ Value is determined by several factors and uses software to alert your financial advisor to contact you in the event of adverse market conditions.

I am an AssetLock™ approved advisor. As an AssetLock™ approved advisor, my clients can rest assured that not only am I on their team, but I have powerful software backing up my services and shielding them from unnecessary risk.

Take a look at a quick video to learn more how AssetLock™ works.

The Financial Success Blueprint™

By the way, if you’re investing for retirement, you might want to check out The Financial Success Blueprint™ – my very own comprehensive retirement plan review that will help you determine if you’re on track or if you need to make changes.

Here’s what you’ll get:

  • A specific strategy for retiring when you want and how you want – even if you don’t think it’s possible.
  • The special technique I use to help clients visualize what their ideal retirement actually looks like.
  • An easy way to organize all of your investments into a logical framework so you can really see what’s going on.
  • Plus lots more!

Take a look at everything The Financial Success Blueprint™ has to offer and see if it’s right for you!

Step 8.  Stocks

I would buy some individual stocks with part of the money, but I wouldn’t allow myself to be too crazy.  This would be considered my “slush fund” where I wouldn’t be affected if I lost my butt on some horrible stock trades.  Trust me.  It would happen.

If you need a place to trade stocks, I would look at E*TRADE or Scottrade. Both are solid, reputable firms that have good trading platforms.

Step 9:  My Business

Other than peer-to-peer lending, I don’t really entertain any non-traditional investments like private real estate partnerships or any of that type of private equity stuff.  Living in the Midwest, I’m not as exposed to this as someone living in the big city, so that’s why you see a lot of more traditional investments in the portfolio.

The other non-traditional asset in which I would invest is my business.  Whether that be new technologies to help me streamline my financial planning practice, or investing into ways to grow my online business.   If my stock picks end up being dogs, I would definitely shift some of that money over here.

That’s How I Would Invest. What About You?

As of right now, this is how I would invest $1,000,000.  Chances are if you talk to me in three weeks, it would be somewhat changed.  That’s wise, right?  Here’s a bigger question:

“If you had $1,000,000 to invest, how would you do it?”

Love to hear your thoughts.



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Comments | 26 Responses

  1. says

    Great post, Jeff. The reality is that most of us are going to win a million or two in the lottery: it’s our career earnings paid out over the next 20 years. And while it’s not as much fun as one check with a lot of zeroes, the same techniques you advise here will work for one paycheck at a time over 20 years.

    I have a question about P2P lending that might be a separate blog post: How do you scale it up to $250K? It seems like a huge analysis workload– even if you just push the “I believe” button on their spreadsheets. Splitting between LC & Prosper is smart, but that forces you into twice as many loans. Even so you still end up buying a big chunk of the loans you choose– $125-$250 per loan instead of “$25″. And then they’re relatively short-term loans, so every quarter you end up having to reinvest 8-10% of that $250K in new loans. More work. Lots of risk that’s not readily apparent to the retail investor.

    It’s difficult to assess whether the P2P work & risk are worth the extra yield. Hard choice. 9.6% for extra work and sector risk, or 5-7% in a small-cap stock index ETF… or in a large-cap dividend stock ETF. I don’t have a pat answer.

    • says

      @ Nords That would be pretty difficult to scale up with P2P with that amount. I do know that Lending Club does offer separate portfolios starting off at $100,000 to get in, so I imagine that’s where I would start.

      I wasn’t completely sold on P2P lending 3 + years ago when I first opened my Lending Club account. I’ve been amazed on how my return as been over the last couple years and it’s really super easy to manage. It’s obviously not right for everyone, but I do suggest it to clients even now for those that are comfortable with an online investment.

  2. Matt Oaks says

    Hey Jeff,

    My one question for you is about the debt. Why wouldn’t you pay ALL of your debt off. What are the benefits of still paying your mortgage payment and your student loan payment? Thanks.

    • says

      @ Matt I could see student loans, but I don’t the point in paying off a mortgage when you have a rate in the low 3’s. Especially if I could invest into something and net more even after taxes. But that’s just me…..

  3. says

    For Step 8 (invest in stocks): sure, you’ll have some bad trades, but it’s important to remember that is factored into a diversified portfolio of excellent stocks. If you hold 30 positions of value stocks showing strong fundamentals you’re likely to beat the market overall. If you want long-term growth with part of your million dollars, it’s hard to beat the stock market.

    “In this business if you’re good, you’re right six times out of ten. You’re never going to be right nine times out of ten.” – Peter Lynch

  4. says

    I like your step #1. Wait. I’d also add pray and seek council for tax advice. Not sure if I’d personally go deep with P2P lending as I can’t stomach the idea of charging such high interest rates to others. Overall good advice.

  5. says

    Great advice here. I have had a few financial windfalls, and though I blew through $100,000 before I even turned 21, I did end up doing some more productive things with my next income. I have written 10% checks to church on those windfalls as well, and it was one of the best things I have ever done. So I think it’s great that you have made the decision to give in that manner.

    • fastal says

      Totally agree. One other thing to consider that I’ve discovered by donating a lot of money to religious/charitable causes. God controls every atom of course and donating doesn’t guarantee what I’m going to say I’ve experienced, but it’s more than just placebo or correlation: Things start going really well for you after you start being generous. This rarely takes the form of money just coming from nowhere, more often, from expenses just not happening.

      This is grace, the favor of the Lord, given be design to a faithful giver (sometimes, that is; understand you do not control Him).

      Sure, there’s a psychological component. Once you have the guts to give it away, you’re grasping so much less, you spend less, and realize the rewards of spending (STUFF!) aren’t cracked up to be. No surprise because God intended our minds to be the way they are and molded them that way throughout the universe’s creation.

      I would also say to Jeff, you have a lot of credibility in my book, having obviously figured out that one most important thing, before health, spouse, money and children. Blessings and peace.

  6. says

    Ah, the dreams about what I would do with $1 million. All of your advice is good, but the best is to just wait before spending any money. I would guess the majority of people who receive a windfall don’t do this and then regret it later.

  7. Terry Willett says

    Good advice, especially the ‘parking’ part. If there was a way to keep that windfall out of the papers, I’d do it. Otherwise, every Tom, Dick, and Harry would be at your doorstep.

    Personally, we would continue to tithe to our church and other ministries, although with that amount, we’d need to be selective where to give. We would up our six month reserve to a year-reserve.

    Then, we have two rental houses, so I would pay those off and probably purchase four more – giving us six, with passive income which is taxed at a lower rate.

    Other than our rental houses, we have no debt. I hear what you’re saying about not wanting to pay off a house with that low of interest rate. But, we prefer no debt. Having the rental houses with passive income makese sense to us.

    I’d probably invest some in storage units or in some other income-producing business.

    The rest of the initial cash we’d probably put in a trust to be used to fund Christian ministries.

  8. Sadie says

    Just wondering what you might do if you were single and subject to only the $100,000 FDIC insurance limit – perhaps use CDARs or have 10 accounts at 10 different banks?

    • Nicole Burton says

      Common mistake about FDIC insurance: It’s $100,000 per account type, so you have many account in a bank that are insured up to $100,000 (individual checking, savings, joint checking, trust accounts, etc.). In fact, I think you can have up to $1,400,000 in multiple accounts at one institution and it would all be FDIC insured. Talk to you bank manager for more info.

    • says

      @ John Okay, fine….you got me! I would definitely treat my wife and I to a secluded beach vacation because she totally deserves it with our 3 crazy boys.

  9. says

    Interesting article. My biggest question is about how according to the comment date almost all of the comments could have been written almost two years before the post???

    I have to say that my list would be a bit different than yours, but not necessarily better. Perhaps not at all better, and possibly not nearly as good. But it would be safe and productive for me. As I think you would agree, one of the basic things to do is always understand what you are doing yourself. The next Bernie Madoff could be just around the corner.

    Your giving decision is makes sense to me. And I think it makes cents as well, even though it cannot be our purpose. Indirectly, when we help others our attitude leads to our own prosperity. Perhaps we cannot prove it objectively, but I believe it.

    Good success!

  10. Benjamin Lawson says

    Hmm…a million dollars! I would diversify it all in dividend growth stockes called Dividend Aristocrats, stocks that have been able to increase dividends for over 25+ years.

    I would then use the dividend income to help pay off any debt or help build an emergency fund. I’d never have to sell any of my shares to receive the income. And the income would increase every year to keep pace with inflation.

  11. kat says

    Jeff! I love this idea for a podcast. However I think you really blew it in two ways (1) I am stunned that you – as a dad of 3 – didn’t mention setting a good chunk of the $1 million aside to pay for college!!
    (2) parking the funds is a great idea, but unless you spread that money over the FDIC limits you could potentially lose everything over $250,000 (the current limit) if the bank goes under.

  12. MP says

    I mostly agree with Jeff; however, I would heavily invest in K-20 education, both private, and public, because while it is not first necessary to be educated, in order to possess significant wealth, the un-educated fool, is usually the first, to lose his/her shirt, right? (with a few exceptions). Finally, the only reason why I would wait to spend the money, is if I did not already have a written plan of action, for how to invest the proceeds (and most of us were not planning to win the lottery, or become trillionaires, to begin with, right?) LOL (:

  13. Mike says

    Good advice until the active management part. You prefer underperforming the market(s&p 500 vanguard etf, VOO) 95% of the time while paying 10x in fees? Makes a ton of sense.

    • says

      @ Mike Have you done research yourself on the 95% underperforming the market or are you just basing that off something your read online?

      While I agree there is a lot of crap out there, I’ld rather do the research and find the 10-20% that out perform the market by a considerable margin.

  14. Russ Thompson says


    A few thoughts.
    1. A million dollars at 6% spins off $60,000 a year. Try getting 6% safely these days compared to the 80’s when I would use the same example. Basically it is impossible, a quick search finds 5 year rates at 2%.

    2. COLLEGE: My personal situation; 3 kids, wife insisted on private grade school $3 k yr., and high school 8k yr., do the math. That was the college fund.
    My oldest is in at roughly $40,000 a year my cost that deducts the $12,000 she got as an academic scholarship. Second kid, a senior in high school may go to the state college $24,000 (2015 tuition + room, board etc.) or Vanderbilt $60,000 K year! Vanderbilt would be over a quarter of a million dollars. I’ve still got a third kid behind them. College is a bubble with a diminishing ROI, which will POP. You heard it from me first. But know college makes a million dollars drain like a sieve. By the way I went to that state school in the 80’s tuition was around $9,000 a year.

    3. What will my and my wife’s health care cost when I am 78? I’m in my early 50’s. What if it costs $24,000 a year?

    A million dollars may seem like a lot of money, but when the government is taking taxes at 45% combined state and federal; taxing dividends and capital gains higher, (your only easy passive income source to build) it eats away.

    I have worked since my 20’s to invest in stocks and save, live within my means, keep cars forever, etc. You have to stay in stocks, equities, in order to make a million dollars grow enough just in order to “keep” a million dollars so it will be there when you retire.

  15. says

    Russ Thompson; that sounds stressful – yes I too, am 43 and think about all of those things.. thank you I do not have kids and no future tuition; however, I truly believe when we are at the age to retire it will cost $100,0000 per year just to live a mediocre life. Sadly the years of the 6% cds are gone and when you reach a certain age risk tolerance is low.. I really like this post and am going to examine it more in depth. Thank you..

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