How Would You Invest 1 Million Dollars Today?

A colleague of mine posed an interesting question last week.
He asked what advice I’d give to somebody relatively new to investing that had $1 million to invest right now.
Besides wondering where this guy got the million bucks, I was really interested in the subject. After all, deciding what to do with a few thousand dollars can be hard enough. But one million dollars in fresh cash? That’s a real challenge. Especially in a market that is getting more volatile by the day.

How to Invest 1 Million Dollars 

But whether you’re investing a few thousand dollars or a one million, the strategy you follow should be more or less the same. Obviously you have more flexibility to buy more positions if you’re investing $50,000 or more just due to position sizing. But conceptually, what all investors need is a long-term strategy that works for them.
I’m a big fan of keeping things simple since it’s very easy to get sidetracked with all that happens in the market. For me, simplicity means using ETFs to get broad-based exposure, and then buying individual stocks to add targeted exposure to more specific themes.
This type of strategy solves my requirements for a portfolio that lets me sleep at night but also lets me have a little fun. And it can be easily implemented with mutual funds too just by replacing the ETFs with mutual funds that have similar exposure (and low fees).
A very simple (and low cost) ETF strategy can be used with as few as six equity funds and just a couple fixed income funds. I think Vanguard and iShares have the best mix of ETFs available for this purpose. And both can be bought with no commissions through many online brokers.
For our hypothetic al one million dollar portfolio that stresses simplicity and low cost, I’d start with six equity funds; a U.S. large cap fund, a U.S. mid-cap core fund, a U.S. small-cap core fund, an international developed economy fund, an international emerging market fund and a dividend (or dividend-growth) fund.
This is text book portfolio building by the way. Nothing crazy, nothing sexy and nothing that is going to burn our new investor.
For fixed income, I’d look to an investment grade corporate bond fund and a preferred stock fund, and possibly add in a blended fund too. Again, a mix of iShares and Vanguard ETFs can get the job done here.
I’d go with standard target allocations to all of the above depending on the age and investment horizon.
Now that’s the boring and safe advice.
To add a little fun and punch to this strategy I’d look to include up to a half dozen stocks that fit within the strategy of each equity ETF. With 6 equity funds that means a maximum of 36 stocks, spread out across market caps and geographic locations.
The beauty of this strategy is that it is extremely easy to implement and very flexible. By averaging in over at least twelve months, the target allocation can change to suit the time. And both Vanguard and iShares offer very low cost ETFs that fit the strategy.
Priority number one is to preserve the principal. Priority number two is to grow it.
That’s my advice for learning how to invest 1 million dollars right now. It’s simple, and easy to follow. The most difficult part is to get the million in cash to begin with.

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