What to do with $500k
A friend of mine was a victim in a large lawsuit in the news rn, and after fees, he’s looking at $500k in his pocket for the settlement, as well as potentially another $500k after another injury lawsuit settles.
He wants me to tell him what to do with the cash. He is in his 40s and unemployed, so I told him to just put it away in and accrue interest.
However, he insists on me giving him a better idea, offered to pay me, and really wants to do “something hands on” with it where he can create a job for himself, like buying a business, but I assume acquiring anything at that low of an EV would potentially be a horrible business.
Another idea I suggested was househacking a multifamily property on an FHA loan to give him a place to live.
If you guys were in my shoes, what would you do with the money? I am in my 20s and feel pretty naive with all the above ideas.
Put it all on red
Call a real wealth manager (e.g., Colony type, not some JP Morgan PWM hack or some "1% and I'll rebalance your 60/40 every year" chump) and put it in the Swensen mix. Get a couple p.p. of real returns per year.
Instruct your friend to get a job that isn't tightly coupled to his capital base. For him, disconnecting risk between employment and capital base is prudent.
He is a felon and cant really find employment, hence why he wants to create something to do with the capital.
I used to work in demolition and we did a lot of work with hazardous materials. Because it was such a shit job it was open to anyone with a heart beat and I worked with a fair few felons. There are industries that will take anyone. That being said I think the real question isn’t his criminal background it is what is his work ethic. With 500k he could set himself up as a landscaper, or a small scale machinery rental/operator or even something like concrete cutting and polishing. There are a lot of niche ways to make money that don’t require any real background but to make any of these work you need to be willing to put yourself out there and work.
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SBA loan and buy a small biz within an industry he's passionate about.
yeah, he could easily buy one of those business that needs a plug and play operator, Then you could be more hands on if he wants that.
Can you give some examples?
Honestly, just DCA into VOO. Not sexy or exciting or glamorous, but it'll probably end up the best for him financially and mentally in the long run. Over time this will grow to cover his kids education, down payment on a house, couple cars, etc. He can essentially eliminate most of the middle class financial stressors by just investing this in a relatively less sexy way.
Alternatively, down payment on a house now (if he's at that stage already) and then the rest in VOO.
You don’t even need to DCA. Doesn’t matter in the long run. Multiple studies on the topic
Yeah I agree with you - I think DCA just makes people feel psychologically a little bit better so that’s why I recommend it. But I agree - time in the market beats timing the market.
He needs to get set up with a super simple dividend / interest bearing portfolio that you can’t fuck up. Just maximize the income and treat the principal as money he can’t ever withdraw. And then just work a low stress normal job and keep building / saving.
Build a net lease portfolio
At 500k, buying a business without experience is the fastest way to hit zero. Better put the money in a high-yield savings account or treasury bonds until he finds a stable job.
If the second settlement isn’t a direct cash payout and he’s getting annual payments, tell him to check Annuity Freedom to see how things work with their hardship-type programs. I went to them when I needed liquidity for a down payment on a property, and they helped me understand my options without getting burned on fees. It’s safer than jumping into a business he doesn’t really know.
At 40 and unemployed, the most important thing is not to lose the money in risky businesses. The multi-family property idea is the most solid for a start.
Invest
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