How to Invest $500,000?

Lsator on 02/01/2017 - 15:31
Last edited 08/01/2017 - 20:49

My mate (best man) just won the Tattslotto ($500k). Lucky bastard, he threw in $2 for quick-pick!

Anyway, he has no idea what to do with the money, except that he wants to invest it wisely. He asked me for my opinion, but I've never been in his situation, so I came to the smartest forum for help =D

I did a little research on ozb and have come across:

  1. Property - Worried the market (Melbourne) is in a bubble or at least close to its peak… so hesitant to suggest.

  2. Shares - Know nothing about this. I've personally lost $$$ in the past.

  3. High Interest Saver Account ING DIRECT - There's a limit of $100,000 so not sure. Any alternative that's 3% but w/o cap?

EDIT: Thanks to Dozingquinn for reminding me to give more details re. mate's life status/situation.

He's in his early 30s, married, no kids -but mentioned that he's thinking about having only 1 in the next 2-3 yrs. Household income 200k-ish (secure).
They don't have a extravagant lifestyle. No debts obviously.

Also already owns a house in the outer west of melbourne $400k

FINAL UPDATE:
Just wanted to thank all the useful/productive posters for their help + some of the amusing ones too. The final strategy chosen is to put $400k into the Vanguard Growth Diversified ETF (wholesale), $50k for an emergency fund, and $50k to go with the redraw on their existing property to purchase an IP in Melbourne.

Financial

Comments

  • payless69 on 02/01/2017 - 15:59
    +5

    Rams 3% needs auto chunck in 200/month
    ME needs a tap a week
    NAB 24 or 36mo still worth looking at
    CBA 36 mo sounds reasonable
    Ing ok remember all guarantee only 250k anyway
    Adelaide bankrupt properties, sooner or later some Melbournites find out about less rain there
    IG for shares, check with market beat before buying

    • sator on 02/01/2017 - 17:21
      +2

      "Adelaide bankrupt properties" - Sounds like a deal. Can't resist closing down/firesales =D
      Can you please elaborate for us Melbournites? =D

      • payless69 on 06/01/2017 - 12:13
        +2

        if you insist staying in Melbourne perhaps invest into a Mandarin course!

        • sator on 07/01/2017 - 16:11
          +1

          Nice jab

    • Matslurpee on 03/01/2017 - 11:43
      +9

      Index fund, Index fund.
      Just find a decent one and you will make more than double what the banks can offer.

      • od810 on 04/01/2017 - 13:35
        +5

        I have to agree with Index fund. Last year I put 10k on Vanguard US Total Market ETF, dividend yield is about 2%, capital gain is about 8% and I bought it at peak price. Stock pick is pain in the ass anyway. None of my stock pick has better return. I'm thinking about selling the whole portfolio and put everything in index tracker. Maybe spare a few grands on penny stock.

        • gorab on 05/01/2017 - 03:04
          +3

          Could you point me in the right direction on the steps to take to enter the Vanguard US ETF's?

          I do currently have an ASX portfolio I'm learning with, but I've got extra funds that I would like to invest for a longer term and would also like to reduce the total risk. Most of my stocks are low to mid-cap companies, Vanguard would be a great new stream. Thanks a lot!!

        • od810 on 07/01/2017 - 14:44

          @gorab:
          Here's the list of Vanguard ETF traded on ASX:
          https://www.vanguardinvestments.com.au/retail/ret/investment…

          I picked VTS because the the management fee is the lowest (0.05%), and it seems the US economy seems to go back to growth stage. Although one of the risky thing with VTS is the underlying asset in USD. So your investment will be subjected to currency volatility. But I do think in the long run it should be ok. Vanguard Australian High Yield could be reasonable as well. One of the thing i focus on is the management fees. Hope it helps :)

        • sator on 07/01/2017 - 16:16

          @od810: Have you guys looked at State Street? Market capitalisation is decent, and their fees are lower in terms of OZ & US Shares ETFs.

          Considering the wholesale growth diversified to try to reduce risk b/c some is invested in property and bonds.

          Any thoughts about how the trump presidency will effect things?

        • od810 on 07/01/2017 - 17:51
          +1

          @sator: I was worried about Trump presidency but it turns out ok. 2017 will be interesting year, it's really hard to predict (US economy is strong again but ROW seems not so good). But that's the whole point of investing in indexes right? you are in for the long run. There will be dip and peak here and there but in the long run I believe it will still yield good results (with the exception of ASX 200, the index almost flat after 10 years). I have a look at SPDR and it's relatively good but i just picked VTS because the management fee is ridiculously low

  • NancyCat on 02/01/2017 - 16:08
    +28

    Rule #1: Don't put all the eggs in one basket.

    • xoom on 02/01/2017 - 16:38
      +124

      Lies. All 500k on black.

      • b-t on 03/01/2017 - 23:34

        Really? Black? I was expecting green.

        It's either crazy gains or nothing ;)

      • nobro25 on 04/01/2017 - 01:30
        -5

        But OP is asking how to invest not which Colour to Gamble it on.

        • xoom on 04/01/2017 - 06:25
          +12

          You say gambling.. i say investment.

          You say potato… i say Potato.

        • xoom on 06/01/2017 - 07:02

          @nobro25: its how people pronounce. Potato.

          Some say. Po-tey-to. Others po-tah-to.

          As for "bet on black". Its a wesley snipes thing. Always bet on black.

          Some seriousness for a second. Many people wouldnt know how to invest and the stock market. Also has little to no interest in it. yet they are expected to hedge their bets with their super. My outlay on powerball last night was a few bucks. Will i miss that money. Unlikely since i piss that out just buying random crap here.

          I personally could be better off having access to that money to pay off my mortgage.

          May not be the case for joe bloe next door who will likely piss it down at the pokies.

      • BuyoTheCat on 04/01/2017 - 13:31
        +2

        Black is good. But let me elaborate.

        ** Clickbait banner. Casinos HATE this man for secret of winning money **

        $50,000 on black.
        If you win, another 50,000 on black
        If you lose, double your current bet ($100,000 in this case) on black
        If you win, $50,000 on black
        If you lose, double your current bet ($200,000)

        repeat until Billionaire

        • MelbBargainChaser77 on 05/01/2017 - 01:06
          +10

          only problem is that if he doest hit black after his 1st 3 spins hes down 350k. As an ex casino dealer this is likely to happen. Ive spun 15 reds in a row once

        • notout50 on 05/01/2017 - 11:54

          @MelbBargainChaser77: Same here, and seen 20 in a row!

        • A Banana4scale on 05/01/2017 - 12:04
          +6

          proper Gambler's fallacy that.

        • cannedhams on 05/01/2017 - 13:11
          +5

          Its called a Martingales strategy. it doesnt work.

          https://en.wikipedia.org/wiki/Martingale_(betting_system)

        • BuyoTheCat on 05/01/2017 - 13:18
          +2

          @MelbBargainChaser77:

          Ok. change strategy. instead of black, bet on red. same process

        • MelbBargainChaser77 on 05/01/2017 - 13:20
          +1

          @cannedhams: Table maximums are in place for this exact reason

        • pudgey01 on 07/01/2017 - 13:32

          my brother tried this with $10 chips on red… made it to $150 then all of a sudden 6 blacks in a row… wiped him out, was pretty shocked on that luck let alone 15 or 20 in a row :O

    • Kangal on 02/01/2017 - 17:14
      +9

      What, you want me to go use one basket for every single egg ?
      How do you expect me to gather all the eggs when I've only two hands ??

    • mmd on 03/01/2017 - 16:36
      +8

      Free range or caged eggs?

  • poboy on 02/01/2017 - 16:15
    +26

    There's nothing I like better than giving advice to someone without even the barest information about their life.

    Like all these threads I'm going to have to assume your friend is a 50 something widower with 3 children to 4 women.

    Based on this I recommend property options in outback NT. Once the urban growth corridor expands your friend will make a sizable profit selling to an estate developer.

    • sator on 02/01/2017 - 16:55

      That's a good point! I've added to the post re. his personal status =D Thanks

  • [Deactivated] on 02/01/2017 - 16:27
    +13

    At very least, negotiate a better interest rate with your/his bank manager. Above 250k has negotiating power.

    • sator on 02/01/2017 - 17:18

      Interesting! Good idea. Will let him know. Though anything with higher growth?

      • Scrooge McDuck on 03/01/2017 - 11:39

        anything with higher growth?

        6.25 high yield investments

    • Scrooge McDuck on 03/01/2017 - 11:18
      +1

      Above 250k has negotiating power.

      Source?

      • [Deactivated] on 03/01/2017 - 13:06
        +3

        Everywhere. Term deposit rate sheets often even have a see your bank manager for 100k or 250k+ column. My anecdotes are also of the finest quality. If you are still unconvinced:

        https://www.canstar.com.au/term-deposits/negotiate-interest-…

        or google "negotiated term deposit rates".

        • od810 on 04/01/2017 - 13:37
          +1

          Yeah it's still shit though. Commonwealth Bank give you 20 points on 1mil+ deposit for 9 months term.

      • AlanHB on 03/01/2017 - 15:59
        +6

        Well admittedly it's nothing for the world's richest duck.

  • CLoSeR on 02/01/2017 - 16:56
    +3

    Yep, ask on Ozbargain.

    • sator on 02/01/2017 - 17:02
      +2

      You guys are pretty awesome with ya money. Frugal but smart!

      • xoom on 02/01/2017 - 17:05
        +71

        Are you sure your viewing the same website? You know where 21 year old uni grads are looking to buying 80k car to impress future colleagues and buying random crap before asking if they really need it.

        • sator on 02/01/2017 - 17:25
          +6

          Hahaha, yeah I remember that dude. "Corporate financial superstar"…

          There's always a few idiots, but for the most part =D

          Our only weakness is buying s*** we don't need

        • xoom on 02/01/2017 - 17:42
          +1

          @sator: oh i have a need for it. Right after i bought said random crap.

        • Excelsior on 04/01/2017 - 15:12
          +1

          LOL savage af. Love it.

        • 01011010 on 04/01/2017 - 21:30
          +9

          don't forget the ozbargainer who bought a unit without checking the ceiling height!

        • xoom on 04/01/2017 - 21:34
          +1

          @01011010: What are you talking about. It's perfect ceiling height. For a hobbit.

        • 01011010 on 04/01/2017 - 21:35
          +1

          @xoom: you bought the unit didn't you :)

        • xoom on 04/01/2017 - 21:38

          @01011010: Nope. I am not that tall but im likely going to hit my head on any light fixture in it.

          Also for whoever bought that place. I could have sold them my apartment for that price and it would have been far better. Heck i would have even sold it for 10 to 15k less.

  • [Deactivated] on 02/01/2017 - 17:00
    +9

    which lotto as theres no recent 500k amounts won by anyone in any divison, so I'd love to know what he won it on lol

    • sator on 02/01/2017 - 17:05

      It's around there somewhere. I remember being impressed, but not Holy F***. If it was over 1M, I think i would be too envious to help =D

      • [Deactivated] on 02/01/2017 - 18:21

        nothing I can see for "QLD"

        • psylence on 04/01/2017 - 13:42
          +9

          Called fhe lotteries today and no record of this win another trolling post

        • stonkered on 04/01/2017 - 13:57
          +5

          @psylence:

          Lol, you called the lotteries? Bit of time on your hands?

        • stonkered on 04/01/2017 - 16:45

          @psylence:

          You the man.

        • blighst on 04/01/2017 - 17:19
          +9

          @psylence:

          Just called ASIC and no record of this win another trolling post.

        • imurgod on 04/01/2017 - 21:20

          Sigh…

        • sator on 05/01/2017 - 02:39

          @blighst: Actually not trolling. I don't have that much time, as I'm not retired at 32. Just prefer to not disclose source of fund -not illegal.

          Congrats on your early retirement though! What do you do to reduce boredom? Apart from call ASIC that is =D

        • [Deactivated] on 06/01/2017 - 23:26

          @psylence:Would you be willing to provide me some guidance? I want to turn my life around.

    • [Deactivated] on 02/01/2017 - 21:44
      +14

      yeah maybe another Yawn…. Fake OZB post.Oh yeah it is always a mate… funny that hey.

    • ms_caz on 03/01/2017 - 06:59
      +2

      last quick pick i bought cost well over twenty bucks, not $2

    • Wampus on 03/01/2017 - 12:46
      +4

      Op said his mate threw in some money on a quick pick, I'm guessing his 500k is his share of the winnings with others

      • [Deactivated] on 03/01/2017 - 12:47

        still doesn't make sense wampus
        even in the 31 mill draw that just went off nye, the divisions would not of cost $2
        something doesn't add up
        Possibly not tatts qld, who knows

        I smell BS, but thats just my thoughts on it

        I say put your money where your mouth is with proof of a ticket :)

        • sator on 03/01/2017 - 14:51
          +1

          Fine, busted! He actually slept with Wendi Deng (ex-Murdoch) and got paid for it =D

          http://www.dailymail.co.uk/news/article-4074070/That-s-one-w…

        • jackary on 03/01/2017 - 18:22
          +9

          Makes perfect sense. Syndicate shares can be as low as $2 - Division 1 syndicated between 10-20 other winners could easily work to 500k.

          We had a lady in our store buy into a Tatts-run syndicated Powerball ticket (from memory the share was around $4) - and she won 285k. Entirely possible.

          Looking at a sheet of results isn't going to tell you if someone won - not that you really bothered looking:

          Possible winning date:
          19/11/16 SGL Div 1 $518,125

          Source: I'm a newsagent - QLD based not that it matters. It's all bloody Tatts.

        • DWH on 06/01/2017 - 12:16
          +1

          I'd put $50 that the real story is 'Dad gave me $500k, what should I do with it?', and the OP didn't want all the usual 'you're a rich kid' flak he'd get about it.

        • sator on 07/01/2017 - 16:17

          @DWH: =D Lies

        • DWH on 08/01/2017 - 11:49
          +1

          @sator: It's OK if that's the truth. To be fair, it's a much more likely occurrence (especially on this forum). Your friend is very lucky either way =D

    • bchliu on 03/01/2017 - 14:22
      +22

      LOL.. people ask for advice, and turns out to be an authenticity session on whether they did win 500K or not..

      • zwolf on 06/01/2017 - 22:22
        +1

        Exactly. What the hell does it matter if it happened or not, how would that constitute a troll? Ugh. Just want to hear the popular opinions

    • super8 on 04/01/2017 - 02:14
      +2

      Mabey just sold some bitcoin garnered from trading "herbs and spices" via his Google machine?

  • dasher86 on 02/01/2017 - 17:08
    +25

    Tell him to invest it in a holiday with his best mate.

  • xoom on 02/01/2017 - 17:09
    +1

    Powerball is 55m this thursday for nsw. Get your ticket in folks.

    • Diji1 on 02/01/2017 - 18:14
      +7

      Or don't.

      • [Deactivated] on 02/01/2017 - 18:21
        +1

        Why not?

        No point whinging

        Gotta be in it to at least win it

        • SBOB on 02/01/2017 - 19:14
          +11

          statistically, the odds aren't much better when you are 'in it' ;)

        • JIMB0 on 03/01/2017 - 09:39
          +1

          @SBOB: I'd say that you have a better chance of getting struck by lightning than winning powerball.

        • Scrooge McDuck on 03/01/2017 - 11:21
          +12

          @SBOB:

          statistically, the odds aren't much better when you are 'in it' ;)

          On the contrary, they're infinitely better.

        • urzu on 03/01/2017 - 11:27
          +4

          @Scrooge McDuck: don't statistics say that playing lotto to get rich is like flying commercial airlines to commit suicide?

        • Scrooge McDuck on 03/01/2017 - 11:31

          @urzu:

          NFI, but something is infinitely more than nothing.

        • SBOB on 03/01/2017 - 11:34

          @Scrooge McDuck:

          true
          but as the odds of winning are so low, I'll round the odds of winning to 10 decimal places and its the same number ;)

        • Scrooge McDuck on 03/01/2017 - 11:41
          +9

          @SBOB:

          Umm actually, the odds of an individual ticket winning the NSW Powerball jackpot are:

          6!/(40!/34!*20!) = 1/76,767,600 = 0.0000000130 to 10 decimal places

          0.0000000130 ≠ 0.0000000000

        • sparkanum on 03/01/2017 - 13:08
          +3

          @Scrooge McDuck: But the odds of having as much if not more money than when you started are much better if you don't buy a ticket.

          Odds of a better than breakeven result in Powerball, for instance, are less than 2% (assuming you buy $2.10 worth of tickets, as per OP).

          Compare that to not buying a ticket and putting the money in a bank account, pretty much 100% (ignoring negative real return, given it'd be negligible over the timeframe we're talking).

          I get that everyone has a different appetite for risk, but personally I value the satisfaction of knowing I didn't waste money on Powerball more than the basically nil probability that I might win lots of money.

        • smartazz104 on 03/01/2017 - 13:18

          @sparkanum: And with all that money you saved not playing lotto, you can… oh wait it just gets absorbed with the usual expenses anyway.

        • Scrooge McDuck on 03/01/2017 - 13:21

          @sparkanum:

          But the odds of having as much if not more money than when you started are much better if you don't buy a ticket.

          Thanks Captain Obvious.

          I didn't call for anyone to buy lottery tickets. I'm merely calling out incorrect claims.

        • sparkanum on 03/01/2017 - 13:29
          -2

          @gokhanh: Oh my God, you're right. I've wasted my life.

          ** Empties bank account to buy lottery tickets **

        • chriise on 03/01/2017 - 17:20
          +1

          @JIMB0: so you're saying there's a chance…?!

        • BuyoTheCat on 04/01/2017 - 13:35

          @JIMB0:

          So If I do buy powerball, it is highly unlikely that I will get struck by lightning.
          Sounds like a cheap way to not die. I'm in

        • [Deactivated] on 05/01/2017 - 04:19

          @gokhanh: Exactly, I'd rather have a cup of coffee than a minuscule chance of winning. On the other hand when my best mate wins lotto I'll be kicking myself. Oh well, you win some, you lose some.

        • dts88 on 05/01/2017 - 22:15
          -1

          @SBOB:

          smart @ss.

          the chances of winning lotto is 50%

          it is either you won, or you dont.

  • Them3lguy on 02/01/2017 - 18:59

    How about managed funds?!

    https://www.canstar.com.au/compare/managed-funds/?profile=Mu…

    • sator on 02/01/2017 - 21:25
      +2

      I remember reading somewhere awhile back that managed funds were not better performing than index funds. Is this still the case?

      • Scrooge McDuck on 03/01/2017 - 11:28
        +3

        Generally, yes.

      • smoo on 03/01/2017 - 16:19
        +1

        Could be worth checking out a Robo adviser like stockspot. Low fees and invest in index funds. They balance your portfolio to the amount of risk you want. What sort of time frame is your mate looking at investing and does he own the house outright? Would be worth paying off instead of paying mortgage interest and tax on investments.

      • mooboy on 03/01/2017 - 17:11
        +1

        Given you know this, I'd say you'd know more than the average Oz-bargainer…

        • sator on 03/01/2017 - 18:02

          I only know snippets. Not sufficient to make large financial decisions with

  • mr fox on 02/01/2017 - 19:56
    +6

    Sitting cash in the bank is a terrible investment. It barely grows above the inflation rate and you're taxed on what growth there is. If he doesn't own a property it makes sense to buy one, he will be protected from a bubble as his capital will be substantial and due to his secure income what repayments he does have won't be a problem (as long as he buys something sensible, ie 700-800k.) Besides property he could buy into the ASX200, with the money split between 200 investments he would avoid the eggs - basket quandary. I am not a financial guru by any stretch of the imagination, my advise is just what I consider common sense.

    • sator on 03/01/2017 - 13:24
      +1

      Fearing the hotly debated property bubble in Melbourne, is it worth buying a place in Adelaide like one of the posters have mentioned?

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