Where and how to make a large sum of money. You are here
By Ellevest Team July 5, Maybe you just sold your house cheers!
Or maybe you got a sweet sign-on bonus at a new job. Or maybe you just came into an inheritance or a life insurance settlement. Or maybe you won a really big scratch-off lottery ticket that came in a birthday card not something to plan around, but we kind of love this one. No matter how you got it, you have a big chunk of cash waiting to be put … somewhere.
Don't tell the world
You might also have a lot of opinionated people giving you a lot of opinionated opinions about what that looks like. Ignore those people and stick the money in a savings account for a few weeks or months until you decide what to do next.
It might also be worth talking through your options with a professional who can help you figure out how this money can best help you hit your long-term goals.
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How to invest a big sum of money toward your goals Historically, investing has been more powerful than just saving up your money in a savings account. OK, cool.
But how should you invest a big chunk of money? Investing all at once vs a little bit at a time You have two options: You could take the whole pile and invest it right away.
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Or you could deposit the money into a savings account and then invest a little at a time, bit by bit. The first method is called lump-sum investing pretty straightforward.
The second method is called dollar-cost averaging.
How to manage recently acquired large amount of money
But the reverse could also happen — you could invest all your money right before a big market upswing. Historically and over the long terminvestment markets have trended upward. So the argument for lump-sum investing is to get your money in ASAP so that it can hopefully start taking advantage of that trend sooner rather than later.
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Even if you were where and how to make a large sum of money invest the day before a downturn, as long as you left your money invested, your portfolio would have the chance to recover as the market recovered. Pros and cons of dollar-cost averaging Dollar-cost averaging basically means investing consistent amounts of money at consistent intervals of time. Dollar-cost averaging is meant to help avoid the risks of lump-sum investing, but you could also miss out on any gains the markets might make during that time.
So which one should you choose? Studies say … use lump-sum investing.
The cost of waiting to invest has, historically, just been too high. The important part is that you invest.
What to Do With a Lump Sum of Money
This is where Ellevest can really help. When you join Ellevest, you'll have access to different investing goals depending on your membership plan.
Search Learning Center Four smart ways to spend a lump sum of money.
Once you've decided which goal or goals you want to use — like building wealth, or retiring someday, or starting a business, or putting a down payment on a house —we recommend a plan to help you get there. It also includes how much money you might deposit initially, and then how much you might add to your goals each month in the future.
If you have multiple goals, you can use the platform to prioritize them and figure out your next steps. No sweat.