The lady who won Thursday will get a lump sum of around $300 million after taxes. Where would a person put that kind of money while they decide how to invest it safely for the long term? Spreading it out over 1500+ bank accounts so that it’s FDIC insured doesn’t seem manageable.
Buy Treasury bills. Huge market, instant liquidity, no credit risk.
How does that work? Do you get some sort of certificates in million dollar denominations or something? Do you have to convert it back to cash before depositing or investing? or do you just go to a broker and say “I want to invest $1 million in fund X” and sign over the equivalent amount in treasury bills"
I think they hold on to the money before you invest it somewhere.
First buy a big mattress…
Why wouldn’t you just put it in a bank? If Bank of America goes down in the time it takes to move it around to where you want it we are all in trouble.
I agree; just deposit the money in one of the big banks. If you’re really paranoid, you can get excess insurance coverage on the deposit.
With that amount of money, why would you invest all, or even most, of it “safely” or put it all in a bank? Diversifying your investments will provide a higher rate of return.
In practice, you dump the entire sum into, say, UBS, who take care of moving the money around where it needs to go and have a team of full-time professionals to do so. You are wealthy now and can afford real financial services.
With that much money, you can really play the lottery.
Quintana is worried about deposit insurance because he doesn’t want to take any risk. Why invest it in a single bank paying near zero interest rates?
This is probably the best answer.
Treasury bills are sold in $1000 denominations but there are trillions of dollars of them outstanding. You can buy as many as you need. You can wire your money to a bank or broker-dealer and they can sell you Treasury bills. T-bills cost little in transaction costs to buy. The bank or brokerage firm will buy them on the open market and sell them to you for a tiny amount more than they paid. If you want cash, you have to sell them but it’s easy to do that too. People describe the Treasury bill market as liquid because there are always buyers for Treasury bills. In fact, the Treasury bill market is the most liquid market in the world.
There are no physical certificates any more, it’s electronic book entry. Open a brokerage account (Fidelity, TD Ameritrade etc.), wire the money in, buy a few T-Bills. It would take a few seconds, $300 million is nothing for that market.
Brokerage accounts are strictly regulated, they are segregated to keep your assets safe. And T-Bills carry no credit risk. Of course, interest rates are vey low at the moment, but you’d still capture a significant amount of interest on such a large amount of money.
Eventually, you might want to invest some of the money in riskier assets to get better returns, but the sensible thing is to park them in T-Bills to get a bit of risk-free interest while you do your research.
Putting all your money in one bank is probably just about the only strategy that might result in you losing all of it, albeit with a low probability. The way to keep such large amounts of money safe is not to put them on deposit at a bank and buy “excess insurance” (from whom?). You simply buy fixed income securities free of credit risk from the US government.
I think the question is what to do with a check for, say, $300 million for the week or two before you set up an account with a brokerage firm. I don’t know if the lottery actually just gives the winner a check or if they work with them to arrange a wire transfer.
Before the $300 million is transferred into an account belonging to you (with or without a physical check involved), it is controlled by the state lottery commission. There is no point during which it exists as a huge sack of gold or pallet of $100 bills that can mysteriously disappear.
The question isn’t where to invest it. The question is where to hold the money temporarily until you figure out what to do with it. Putting it in a big bank like BoA is not zero risk but it’s pretty close when you are talking about a week or two at most. Sure anything can happen. We might all get wiped out by an asteroid in that time too.
Exactly. You just don’t get the money from the lottery commission until they know where to send it, so you have lots of time to set up accounts with major investment banks and such and get some real financial advice rather than the blatherings of idiots on the intrawebs. It’s not like there is a time limit to collect the money. Once you’ve claimed it and they’ve verified the win, you have quite a long time to ponder where to go and what to do with it, investment-wise.
The FDIC only insures bank deposits up to $250,000. Sure, it’s extremely unlikely that a bank like Bank of America would go broke in a few weeks or months’ time, but if it were a small bank, you do have a (remote) risk that the bank could be wiped out and you’d have only $250,000 to show for your hundred-million-dollar jackpot.
There are a number of products available. Sweep accounts. CDARS. IDC Deposits. I’ve not had the fortune to have direct experience with any of them.
Even if the bank fails, I’m not aware of anyone losing everything any time recently. IIRC depositors usually get about $0.70 on the dollar for uninsured assets.
I’d send it to my Vanguard account. Then I’d spend 1/4 of the dividends earned.
I saw a headline online that read, “Mother wins US$758.7m in record single US jackpot, quits job.”
In other news, moon temporarily obscures sun during eclipse, bear scat is found in woods, and Pope declares that he believes in Jesus.
I believe you need a bank account to receive the payment. And being a very large payment you need to inform the bank that it’s coming.