August 28, 2011 | In: General

What to Do with 1 Million Dollars?

1 million dollars is the magic number for everything. I used to dream about this amount when I was a kid. I used to think that 1 million dollars will buy me anything I want. That was then, and this is now. A million dollars nowadays can barely buy you the house that used to cost $100,000 20 years ago, even with the current deflation in home prices. At best, a million dollars can generate 2 or 3% in low risk countries as interest, which is $20,000 to $30,000 a year, which is not enough to feed anyone. However, a million dollars is still a million dollars, and most people living on this planet don’t have this amount yet. But if you have it, what can you do with it?

Here are some ways to invest your million dollars:

  1. Buy stocks long term: With a historical average return of 10% on the S&P, you can make a $100,000 a year on your million dollars. However, it’s very important to keep an eye on your portfolio at all times, and time your entry into the market.
  2. Day Trade: Day trading can make you a lot of money, but can also result in a lot of needless stress.
  3. Play with oil: I think this would easily be my favorite game if I have a million dollars. Oil is much safer than Gold, and its trends are predictable. Oil goes up, and then goes down, with a long term trend of going up (because of the increase of demand in oil and the inflation). Had it not been for the financial crisis, I think the world was able to cope with $140 oil. If you’re a Canadian trader, or you’re playing in the Canadian markets, then you can play with HOU and HOD.
  4. Play with gold: Most investors think that gold will go up forever, I don’t. I think that gold is a bubble that is going to burst. Obviously, so far I am wrong when it comes to my opinion about gold (I wish I bought when it was at $800). In any case, if you believe the hype about gold, then go ahead, buy some.
  5. Buy real estate: Real estate in the US is relatively at an all time low after taking inflation into consideration. You can buy real estate (especially land, which always keeps its value and which value can increase substantially with time) and then wait a few years until the price increases. You can also generate residual income by renting your real estate (enough to make you the money you need to live large). Just make sure you don’t buy real estate in highly taxed areas.
  6. Create your own business: There’s nothing better in this world than having your own business. Most people don’t start their own businesses because they just don’t have enough money to be independent, but you do! Start your own technology company, start your own service company, just start something! You need to make sure though that your business plan is feasible and realistic, and that you won’t spend your million dollars by just paying for expenses without generating any income to cover these expenses on the medium term.

I think the best idea to apply all the above, step by step, so the excess of money you would generate from stocks, you buy real estate, and the money you generate from real estate, you fund your new business, and from the money you generate from your new business, you fund your new other business. This way you will diversify your investments and you will know the real meaning of Money makes money.

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