June 03, 2023
Read time: 2 minutes

A Wealth² reader emailed me recently with an interesting question:

“If you came upon $500,000 today, how would you invest it?”

That’s certainly a lot of money.

But it’s also not nearly enough to retire on, no matter where you live.

So I gave the question a bit of thought.

Here’s how I’d allocate $500K:

High-yield Cash Account ($100K)

I’d move all $500K to my existing Betterment account.

Here’s why:

  • 100% liquid (I can access it at any time)
  • $2 million in FDIC insurance
  • 4.5% interest rate

$100K would stay here permanently.

About a year of living expenses (+/- a couple of months).

Over the next 3-6 months, I’d invest the remaining cash as follows:

Public Equity Index Funds ($100K)

I’ll go in order of risk.

The S&P 500 has historically returned 7% per year (after inflation).

I view public equities as a low-risk, low-return piece of my portfolio.

Everyone should have some exposure to public equities, particularly if they won’t need the capital for 10+ years.

I prefer low-fee index funds that offer broad market diversification.

My favorite is Vanguard Total Stock Market Index Fund Admiral Shares (VSTAX).

I don’t believe in active stock picking or timing the market.

Keep it simple, always.

Real Estate Syndications ($150K)

I’ve written an entire primer on investing in real estate syndications.

They offer:

  1. Strong long-term growth
  2. 100% passive income
  3. Inflation hedge

Given where we are in the economic cycle, I’d favor recession-resistant forms of commercial real estate.

Specifically, value-add multifamily.

I’d put $50K into 3 deals with 3 different Sponsors (to diversify GP risk).

Small Business Acquisition ($100K)

For 99% of people, I believe there is no better way to build wealth than to use other people’s money to buy cash-flowing small businesses.

I am personally building a portfolio of “boring” SMBs.

Like Berkshire Hathaway, just much smaller.

With $100K, I’d look to acquire a $1 million business.

I’d follow a similar financing structure I outlined in a recent thread (but would not require outside investors):

If done correctly, this would be the highest cash-on-cash return in my portfolio.

One good deal at this scale could easily generate 6-figures of annual income.

Enough for most folks to step away from their day job.

Moonshots ($50K)

I’d earmark 10% to “moonshot” opportunities.

Things like Bitcoin (circa 2015).

Or perhaps a seed investment in a friend’s start-up.

In short, capital I’d expect to lose.

But that also carries potentially life-changing upside.

I wouldn’t rush these investments.

I’m looking for truly unique opportunities with lots of risks, but even more upside.

Final Thoughts

There you have it.

$500K allocated as follows:

  • Cash: 20%
  • Public Equities: 20%
  • Real Estate Syndications: 30%
  • Small Business Acquisition: 20%
  • Moonshots: 10%

A balanced mix of risk, liquidity, and growth potential.

Let me know if you agree with this allocation (or what you would do differently).

Simply hit reply.

See you next week,


PS: forward this along to someone who has 100% of their net worth in stocks!

📈 May 2023 Recap:

Here's a quick update on the latest numbers for the Wealth² Newsletter.

  • Subscribers: 2,941 (+1,030 v. April)
  • Open Rate: 56%

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