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How Should You Invest an Inheritance?

2017 Finances November 2017 Yann Kostic

By Yann Kostic and Tom Zachystal  from the November 2017 Edition

You have inherited a sum of money but have some concerns about how to invest it, as there are many options available to you.

Traditional wisdom would be to invest any large sum of money using a method called dollar-cost averaging, which simply means investing it a little at a time. The idea is that you take on less risk by trickling your money into the market rather than dumping it in all at once.

If you like this option, you would put your entire inheritance in a savings account or money-market fund, and then, over the course of a year or so, invest an equal amount each month in a portfolio of stocks and bonds.

But there is another option for those who would like to get their money working faster. This is to determine an appropriate asset allocation—a mix of stocks, bonds, and other investments—that meets your risk tolerance and helps you achieve your financial goals.

With this option, you would invest the entire inheritance at once based on that mix of assets. Proponents of this approach say your money starts working for you quickly, while not leaving you too conservatively invested for a period of time, as dollar-cost averaging might.

More importantly, and regardless of the approach you choose, your assets, ideally, should be divided between different types of investments, based on your financial goals and your risk tolerance.

Your advisor can help you determine the appropriate asset allocation—one that takes into account the fact that, sadly, no one knows how the market is going to perform.
Note: This material has been prepared for informational purposes only, and is not intended to provide financial advice for your particular situation.

Yann Kostic, MBA and Tom Zachystal, CFP, are Presidents of their respective Assets Management firms, both US-Registered Investment Advisors (RIA). Tom is the San Francisco Financial Planners’ Association President. Tom and Yann cater to US expats in Mexico and worldwide. Comments, questions or to request his newsletter, “News you can use” contact him at, in the US at (321) 574-1 529 or in Mexico, (376) 106-1613.

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