Earlier this month, I announced the M-Network’s new Ask the M-Network feature. In brief, we’ll do our best to provide feedback on personal finance questions (several members of the network answer each one). We are not financial professionals, so this is not professional advice. It’s our opinions as people who write about personal finance.
Today, I’m answering the following question from Mr. CM:
I am 67, retired, only debt is $400,000 mortgage on a $2 million home. Just got $75,000 and want to know what to do with it. I want to MAKE money not lose it. I don’t want to pay my mortgage down, I don’t want to put it in the bank, I don’t want to buy mutual funds. So what do I do to make money? Thank you.
Normally, we’d have specific ideas written by several members of the network. In this case, however, we came to the consensus that there isn’t (unfortunately) much we can offer. Some of the safer ways to earn money have been ruled out. One thing we agreed on is to make sure that you figure out exactly how much you owe in taxes and put that aside before doing anything with the rest of your money.
The basic rule of investing is that higher returns come with more risk. A CD doesn’t have a very high risk if it’s insured by the FDIC, but it has a lower return than a stock or mutual fund might have. You might earn 15% (or 3% or 8%) on the stock/fund but you might lose everything.
From what you’ve said, you’re not willing to take bigger risks (like mutual funds) and you don’t want to use the safest (FDIC-insured) investments. Since you’re a retiree, we understand why you wouldn’t want to take big risks, they’re not advised for people of your age (though generally someone at 67 will still have a certain percentage invested in stocks or mutual funds).
The options you haven’t ruled out are (basically):
CDs? (not sure if they counted as part of the bank)
Direct Business Investment
If bought wisely, the first two generally have lower risk and lower returns (better than none!). The second three generally have very high risk and possibly higher returns. I would not advise taking the latter three in your situation.
There’s just no sure way to make much money with that $75,000. FDIC-insured CDs at a bank are the closest thing you have to guaranteed earnings. It’s not exciting or a high rate of return, but it’s more than the original $75,000 and may even keep up with inflation.
Since it’s such a large sum, you may want to take this problem to a fee-only financial planner. Emphasize to the financial professional that you’re looking for ways to make money with it, but don’t get your hopes up too high. Unless you’re in the position to take a risk, you can’t expect high earnings. They may be able to help you pick out some of the safer bonds which have slightly more risk and slightly higher earnings than CDs.
I’m sorry that we’re unable to offer more, but there are never fully-safe investments and in times like this the pickings are even slimmer. Since you’re retired, you’re also limited by time-frame so investing with “40-years-down-the-road” in mind isn’t much of an option.
Again, none of this is professional financial advice and should not be regarded as such.