Money Question: What Would I Do with a $50,000 Windfall?

What would you do if suddenly somebody gives you $50,000 to invest?

Have you ever thought about it? I never faced such a question before until last week Lazy Man at Lazy Man and Money brought it to a group of bloggers as the question for the weekly Money Question series (here are Part II, Part III, and Part IV). The exact question look like this:

Where is the single best place to invest a $50K after-tax windfall now? Assume the following: you don’t need the money for at least 10 years, you’ve already max out 401k and Roth IRAs. Pretend that the windfall came under a couple conditions… 1) You can only invest it in one area. 2) If your investment doesn’t make 6% a year you lose it all.

Since 6% annual return isn’t a rate that requires some extraordinary effort to achieve, I can play the money fairly safe.

Right now, I don’t have any big plan (like owning my own business) in my mind, but if I could get a windfall of $50,000 or even $100,000, then I will use the money as part of the down payment to get a bigger house. Now that we have two children, our three-bedroom townhouse is kind of small. Though they can still share a room for a while (we have two daughters), we will have to buy a bigger one at some point and the extra money can definitely help. We’d love to get a single house with basement so the children can have space to play. Also, both my wife and I like to play table tennis a lot. We could setup a table in the basement for ourselves and that’s like dreams come true.

Will I get 6% return from the house? I don’t know for sure. But I think the fast growing population (there are projections that the US population will add more than 40 million in the next decade) will give the housing market the support it needs for sustainable growth.

I know that I am supposed to make only one investment, but if there’s any money left after we buy the house, I plan to invest it for the future. Actually, I already have a target and that’s Vanguard Total Stock Market Fund (VTI). I don’t mind to invest in a lump sum as it’s almost impossible that the market will be down in the next 20 or 30 years. Thus, if the money is available, making a lump sum investment is the best choice for the long term. Also, since the fund covers the entire US stock market, I will get the maximum diversification with a single fund, which is also very cheap.

It’s not a very exciting plan, but I feel I can get a healthy growth with it. If I really want to try my luck with something dramatic, then I can make an one time investment into an international funds such as iShares MSCI EAFE Index (EFA) or Vanguard FTSE All-World Ex-US ETF (VEU).

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4 Responses to “Money Question: What Would I Do with a $50,000 Windfall?”

  1. goldfish |  Jun 06, 2007 at 2:18 pm

    Sun,

    Can you help me understand the second condition? “2) If your investment doesn’t make 6% a year you lose it all. ”

    Thanks,
    goldfish

  2. hustler |  Jun 06, 2007 at 10:16 pm

    50K to invest…damn..If it ain’t my money, I am hitting Vegas with 50K on one hand of BlackJack.

  3. Q at $1 Million to My Name |  Jun 07, 2007 at 5:18 pm

    Invest invest INVEST! $50,000 today would jump my retirement savings years ahead – put a spreadsheet together and calculate how much MORE money you’ll have in 30 years if you have just $50,000 more today.

    Here’s a simple example – if you have $10,000 today and invest it at 8% per annum, you’ll have $100,600 at the end of 30 years. If you instead started with $60,000, you’d have $603,700 at the end of 30 years.

    Like I said, light years ahead!