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How to Invest $10 Million for Income


A $10 million nest egg can last you decades, especially if you make smart investments that prioritize income generation. But with all of the options available, choosing what’s right for you can be difficult. However, just because you have a lot of money doesn’t mean the basics of investing don’t still apply. After all, your ultimate goal is still to retire and live out your life as comfortably as possible. If you have questions about investing or your particular financial situation, consider working with a financial advisor.

What to Consider When Investing $10 Million

Regardless of if you have $10 or $10 million to your name, the rules of good investing remain the same. For starters, you should always have a specific plan in place to dictate the management of your portfolio. More specifically, here are some important investor characteristics to identify about yourself:

  • Risk tolerance: This is perhaps the most important factor in investing, as it will dictate how risky you’re willing to be in the name of stronger returns. For instance, if you’re far from retiring, you might be alright with taking the chance on riskier stocks for a better return. Those close to retiring, conversely, might stick to safer investments.
  • Time horizon: This is roughly when you want to achieve a specific financial goal, which is most often retirement. In other words, decide about when you want to retire.
  • Income needs: Once you quit your job and retire, you’ll start pulling money from your retirement assets. Defining about how much income you’ll need to live on will be enormously helpful when investing.
  • Liquidity needs: This is how easily you can turn your investments into cash, which is very important for some people. Stocks can be easily bought and sold, which make them liquid. On the flip side, real estate can take some time to sell, which makes it illiquid.
  • Investment preferences: You may have certain investments you’re partial to, like certain companies or funds. It’s fine to include them in your portfolio, but be sure to avoid hasty and emotional decisions.

Each of the factors above are incredibly important for long-term investors. Once you have a strong grip on them, you can really begin the investment process. That’s because they should guide you towards which investments make sense for you and your family. You can even use an asset allocation calculator to build out a hypothetical portfolio for yourself ahead of time.

Investing in Mutual Funds

Wealthy investors should consider mutual funds that have high minimum investment requirements. That’s because as a trade-off for having a lot of money, they tend to charge lower fees. Plus, mutual funds help investors generate income from earned dividends on stocks and interest on bonds in their portfolios. A number of brokerage firms offer funds for investors able to meet high minimum requirements.

One of the best benefits of mutual funds is that they’re professionally managed. So in essence, you’re giving your money to a company that uses market analysis and research to invest the money in their funds. This can make it an especially attractive option for anyone with a large pool of assets, as the idea of having professionals choose investments can be comforting.

Investing in Hedge Funds

Having $10 million may give you more investment opportunities than the average investor. This includes being able to invest in hedge funds. A hedge fund is a partnership of investors that use high-risk investing strategies to produce high rates of return.

Hedge funds can include various assets, such as stocks, options, currencies, commodities, bonds and real estate. Since hedge funds leverage borrowed money, they can leave investors with potentially higher returns than are available to most investors, and since they are not subject to the same SEC rules that other securities are, they tend to have more flexibility.

Investing in Dividend-Yielding and Preferred Stocks

How to Invest $10 Million for Income

High-net-worth investors seeking income should also consider securities available to less wealthy investors. For example, dividend-yielding shares pay out a portion of profits to stockholders. This is where the income generation comes into play. Dividend payouts usually occur quarterly, though some occur on a monthly or annual basis. But keep in mind that some dividend payments are non-recurring. While dividends are usually distributed as cash, some companies provide extra shares as a dividend.

You could also purchase preferred stocks, which offer dividend payouts as well. Preferred stock generally comes with a fixed dividend rate. Dividends to preferred shareholders are paid before dividends to common shareholders.

It’s important to note that since you have more capital to work with, your recurring income may be a more substantial amount. For instance, if you have 100,000 shares of a stock that pays out 10 cents per share quarterly, you may receive a quarterly check of $10,000.

Investing in Exchange-Traded Notes (ETNs) and Exchange-Traded Funds (ETFs)

High-net-worth investors who want to minimize risk may want to consider investing in an exchange-traded note (ETN). ETNs can yield significant returns if the borrower is reliable and the market plays along. Instead of an independent pool of securities, an ETN is a bond that’s issued by a financial institution. The company then promises to pay the investor or ETN holder a return on an index over specific period of time. Then, at maturity, the financial institution will also return the principle amount to the investor.

There are three main reasons high-net-worth investors would want to consider an ETN for
income. The first reason is that the issuer promises to pay an exact return on an index, minus expenses. Therefore, the ETN may closely match the returns of a given index yielding a predictable cash flow. While exchange-traded funds (ETFs) may be able to accomplish the same, ETNs come with a little more certainty.

The second reason you may want to invest some or all of your $10 million into ETNs is that they offer niche investing. As the Financial Industry Regulatory Authority points out, “Some ETNs provide exposure to familiar, broad-based indexes, while others do so to less familiar asset classes or newer, more complex, or even proprietary indexes.” This can give investors a chance to profit off sectors they may never otherwise have accessed.

Lastly, ETNs minimize the taxes you will owe. ETNs don’t usually hold any of the assets that are linked to the note. As a result, ETNs avoid the tax implications of trading in and out of an exchange-traded fund or an indexed mutual fund. As an investor of an ETN, you’re not subject to the short-term capital gains taxes that come from those products’ frequent tax events. You only pay taxes once, when you sell the note and profit off it.

Investing in Real Estate

How to Invest $10 Million for Income

Real estate investing can generally be expensive, which means having $10 million in your corner gives you a huge advantage. It’s often not as “hands-off” as stocks or ETFs, but the return upside can be considerable and fairly reliable. Finding real estate to invest in can also be challenging, so it’s recommended that you have someone help you.

If you want to invest in real estate, it can cover anything from houses to commercial buildings to apartments and condos. Wherever the opportunities are or whatever you’re interested in will lead you to your options. Of course, real estate may need some fixing up before you can sell it. However, the idea is that you’re increasing its value in the process.

One thing that scares people away from real estate investing is needing to be a landlord. While this can be daunting, you can also hire a real estate management company to handle those things. In addition, some companies offer pooled real estate investing which takes that part out of it.

Bottom Line

If you have $10 million sitting in the bank, there are plenty of investment options. Most of these options can help you generate income now and in the future. Keep in mind that some investments might work for beginners, while others require more experience and expertise. Each type of investment offers a different level of risk and reward. Investors should consider each type of investment before determining an asset allocation that aligns with their goals.

Investing Tips

  • Consider talking to a financial advisor about how to invest a multi-million-dollar nest egg for income. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors in your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
  • If your investments pay off, you may owe the capital gains tax. Figure out how much you’ll pay when you sell your securities with our capital gains tax calculator.

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