I Have $1M To Invest — Where Do I Start?

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Although today’s wealthiest people have 12-figure fortunes, millionaires still enjoy elite status. If you have a million bucks to put in play, congratulations — you’re the envy of the investing masses. Everything is about to change, but at the same time, the most important things will stay the same.

Here’s what’s in store for you now that you’re officially a high-net-worth investor.

Get Your Head Straight — You’re in the Big Leagues Now

Before you change your strategy, you need to change your headspace. Your millionaire mindset will play a big role in whether you fail or succeed.

Before You Do Anything, Do Nothing

You might feel a burning desire to turn your $1 million into $2 million as quickly as possible, but rash action can quickly send your net worth in the wrong direction.

“The single best piece of advice I could give is to pace yourself,” said Carmelo Giuliano, co-founder of the venture capital firm Arcanum Ventures. “You have money! Don’t throw it around carelessly and invest in the first idea you have. Take your time, do research and bide your time. Most people would kill to have the dry powder to invest when the perfect opportunity comes along. Be patient.”

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Don’t Search for Solutions if Nothing Needs Fixing

Millionaires don’t invest like commoners. They magnify their returns through derivatives, options and other complex investments reserved only for the monied class, right?

Not necessarily.

“It can be tempting to think that once you have a certain amount of money you should make changes to your investment strategy, but I recommend sticking to the basics,” said Kendall Meade, CFP and financial planner at SoFi. “Thinking that once you are an ‘accredited investor’ or have a net worth over $1 million you need to invest in special investments such as private equity, hedge funds and more. However, the truth is that these investments are not for everyone. They can have a higher risk, higher fees and limited liquidity.”

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Don’t Treat $1 Million Like the Finish Line

There’s no material difference between $999,999 and $1 million. The move to two commas is purely psychological — and the wrong kind of million-dollar psychology can send you to the poor house if you tell yourself you’ve made it to the promised land.

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“It can be easy to relax — to increase spending and decrease savings — once you reach the ‘magic number,'” said Meade. “As your spending increases, you may need to save even more to maintain your lifestyle in retirement so you may need to keep saving and investing.”

Big Numbers Can Be Scary, so Concentrate on Percentages

Losses can appear to be artificially inflated to high-net-worth investors. It’s an illusion — think in percentages.

“When you have a larger amount of money invested, it can be scarier,” said Meade. “If the market goes down 10%, then a person with $100,000 sees a $10,000 decrease while a person with $1 million sees a $100,000 decrease. It is important to keep this in perspective and look at your overall performance. Maintain your investment strategy over the long term and do not get caught up in the daily fluctuations because they will look bigger now.”

Remember, the Fundamentals Never Change

According to Aviva Pinto, CDFA, CDS and managing director of the investment advisor firm Wealthspire, the four primary rules of investing never change “regardless of whether one is investing $100,000, $1 million or $10 million.”

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Stick With the Same Tax-Advantaged Accounts You’ve Always Used

Remember what they told you about getting the full employer match on your 401(k) before you hit the big time? Nothing has changed.

“If you have $1 million to invest, max out your retirement savings accounts first and use these tax-advantaged funds as much as you can every year,” said Steven Holmes, senior investment advisor at iCash. “Establish an IRA if you don’t already have one so you can use it with some of the following investment strategies. Then fund those accounts to the maximum before sending money to your taxable accounts.”

Real Estate Syndicates Offer Big Returns and Special Benefits

Brian Davis, a real estate investor and founder of SparkRental, recommends investors investigate real estate syndications as their net worths grow.

“These passive real estate investments require a high minimum investment, typically $50,000 or more, and they require you to leave your money locked up for at least a few years,” said Davis. “But for higher net worth investors who can live with those drawbacks, they come with enormous upsides.”

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They include:

Get Serious About Diversification

With $1 million in play, you have a lot to protect. Diversification is still the best hedge against risk, but you might consider a more sophisticated strategy than an ETF can offer now that you’re officially a millionaire.

“A prime example is the J.P. Morgan Mozaic IISM Index, which offers a dynamic and diversified asset allocation based on risk parity across 12 rolling futures positions and three commodity futures indices,” said June Jia, a quantitative researcher at GF Securities and owner of Canny Trading. “This allocation covers various asset classes and geographic regions.”

Consider Graduating to Preferred Stock

Preferred shares offer benefits over common stock, like higher dividend payments and first dibs on assets if the company is liquidated.

“Preferred stock is a type of equity that pays a fixed dividend, as well as a portion of any profits earned by the company,” said Ian Rodda, CFO at business development firm Page One Formula. “You can find preferred stocks on the New York Stock Exchange or Nasdaq, and they’re generally considered safer than common shares because they have a fixed payoff.”

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Do Well by Doing Good

Tony Gilbert of the Masonic Medical Research Institute calls social investing through a nonprofit or charity a “win-win” for high-net-worth investors.

“For example, a charitable gift annuity is an investment vehicle that pays the investor while also benefiting the charity of their choosing,” he said. “It’s an arrangement between a donor and a nonprofit organization in which the donor receives a regular payment for life based on the value of assets transferred to the organization. After the donor’s death, the assets are retained by the organization.”

Gilbert’s organization is a nonprofit medical research institute that pioneered the pacemaker and defibrillator, and its work in cardiovascular, neurocognitive and autoimmunity research is made possible by these kinds of social investments.

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