For most people, a billion US dollars is such a huge amount of money that they can’t exactly visualize how massive it is. According to Forbes Magazine, there are 2,153 billionaires in US dollars in the whole world. Given that the global population is at 7.53 billion people, these billionaires make up fewer than half of the 1% of the 1% of the 1% percent. Thus, don’t be surprised if you can’t quite grasp the sheer enormity of that amount.
Still, it’s interesting to think about what to do with 1 billion dollars, even if only for the sake of theoretical exercise. Who knows, life may spring a billion bucks on you when you least expect it, so might as well be prepared just in case. Don’t forget that in October 2018, a solo winner scooped up the Mega Million jackpot worth a whopping 1.5 billion dollars.
Of course, if you win a billion dollars, it’s tempting to splurge on everything you’ve always wanted to try but could never afford to before. But a billion dollars is still a finite amount of money. If you don’t want to go broke after several years and if you plan to secure the future of your children and grandchildren, you should consider investing. Luckily, it takes money to make money, so a billion dollars can go a long way with proper management.
First things first
Before you can start investing, make sure to do these three crucial steps:
1) Keep it a secret.
2) Get lawyers and financial advisers.
3) Choose the lump sum payment.
4) Pay off all your existing debts.
Steps 1, 2, and 4 are obvious. The fewer people who know, the fewer freeloaders will hover around you. It’s also safer for you and your family. As for hiring professionals, they’ll be there to help you make sound decisions about your sudden windfall, especially if financial literacy isn’t your strongest suit. Lastly, it’s no use investing money while your debts are still ballooning. Get them out of the way, then you’re good to go.
But step 3 isn’t as obvious. Wouldn’t it be better to take the annuity option and receive a fixed amount every year for the next 29 years? It would, if you’re the type of person who’ll blow through the money. With annuity, you’ll be set for life. You can squander one year’s payment and still look forward to getting the same amount the following year. But if you’re serious about investing, you can make the money grow bigger in a shorter time.
If you already have a billion dollars, your goals are to make the money work for you, live off of interest alone, and maintain your riches. To do so, invest in the following:
1) Index funds
Index funds gives investors exposure to the whole equity market in the US while minimizing risks. The Vanguard Total Stock Market ETF — one of the world’s most well-known index funds — have low fees, so you can passively invest large amounts of money for the long term without worrying about high processing rates.
2) Direct equity
With a billion dollars, you can afford to play the financial game a little more aggressively by investing in stocks. But don’t go beyond 3% for every stock investment. A high-yield market also happens to be high-risk.
2) Real estate
Investing in properties require a significant amount of money, but that won’t be a problem if you have a billion dollars. Buy a couple of commercial real estate properties in big cities and rent them out on decades-long leases. Or buy residential properties in cash while pre-selling, and then sell them at their full price after turnover.
You’ll need cash for unexpected expenses, from real emergencies to irresistible splurges. For whatever scenario, keep around 25 to 50 million in places that you can easily liquidate, such as short-term investments and even savings accounts, which still earn interest.
Whatever you do, don’t put all your eggs in one basket! Diversifying is the key. When in doubt, listen to your financial advisors. A billion dollars is just money. Real wealth is knowing you’re secure financially for the rest of your life.