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Investing a Large Sum of Money: What to Do, What NOT to Do, and How to Invest for F.I.R.E.

Amon and I talk a lot about investing - mainly because investing is such a vital piece of the F.I.R.E. journey. Not only that, but Amon and I think that investing is the KEY to achieving financial independence. I’ve made our stance on investing pretty clear so far: For us, index funds and ETFs are the way to go! But this method of investing isn’t the only way to reach your financial independence goals, especially if you have a large sum of money to work with.

So let’s get into this! Have you found yourself with a larger chunk of money? Maybe you recently came into an inheritance? Maybe you received an uncharacteristically large tax return? Maybe you have an investment that just spurs a lot of money that you came into all at once? Whatever the reason, if you find yourself in this situation and if you focus on investing your large chunk of money the right way, you may find that you can really build up your wealth. But if you invest it the wrong way, you risk not only losing that money but additional money as well.

So what do you do when you have a large lump sum of money waiting to be invested? What is the best way to invest that money? Well, I’m going to cover three main avenues through which you can invest lump sums. But, first - let me explain a couple of things you generally do NOT want to do!

What NOT To Do

1. Don’t Just Hand Your Money Over Blindly to Someone to Manage

Typically, you don’t want to give your money to someone else to manage without first understanding how to invest yourself. You NEED to get your financial literacy up so that you can fully understand what is being done with your money. If you don’t, best case scenario: You could end up paying higher than necessary fees; worst case scenario: You could be taken advantage of.

This is not to say that everyone will jump at the opportunity to swindle you, but you should try to minimize this risk when at all possible by maintaining your financial literacy, and by making sure those who are managing your money KNOW that you know what you’re talking about. If you have even just a general idea of what should be happening, then you’ll be able to more easily spot when something isn’t right with your money. Financial literacy is KEY!

2. Don’t Rely on Others’ to Make Your Financial Decisions

Don’t rely on others to help make financial decisions for you if they don’t know anything about your finances. You shouldn’t be asking people what to invest in or how you should be investing if those people have no idea about your personal financial and life goals, long-term investments, or any other money that you might have. So make sure that, first and foremost, YOU understand your own goals and let that guide your decision-making.

3. Don’t Buy Liabilities Disguised as Assets

I have a perfect example of what I mean by this: Timeshares! Let me make this absolutely clear: We do not view the majority of timeshares as real estate investments. Instead, we view them as liabilities . . . and they are notoriously hard to get rid of! If you buy a timeshare, don’t be surprised if it follows you (or even your heirs) around for the rest of your/their lives. Now, of course, timeshares are just one example. Just be on the lookout for liabilities disguised as assets . . . and stay far, far away!

4. Think Twice About Investing In Individual Stocks

If you are new to investing, I would encourage you to think twice about investing in individual stocks. I know, picking and choosing stocks you’re passionate about can be exciting, but this strategy will STRESS YOU OUT. If you do something like this without having the experience or research in place before taking that action, it can be essentially like gambling. If you’re new to stock market investing, you probably don’t know nearly enough yet to know how to select stocks that you can be legitimately confident in. And even if you do have a lot of knowledge and experience in investing, it is really hard to pick winners every time, if not impossible. So for peace of mind, I recommend starting off slow.

In our case, the majority of the wealth Amon and I accumulated has been in index funds and ETFs. Time and time again, these investments have proven to provide us the most efficient and consistent return in the market!

Okay, so now that I’ve gotten the things you should NOT do out of the way . . . let’s go over some of the things you might want to consider doing!


1. Become Financially Literate

First things first: You must become financially literate. Read books, listen to podcasts, watch YouTube videos, take our Stock Market Investing course - do whatever you need to do to learn as much as you can about investing, finances, and how to deal with your money . . . and do it now! You need to do this as soon as possible so that when the opportunity arises and you suddenly come into a large sum of money, you have the knowledge you need to make the best decisions for you.

2. Set Long Term Goals

If you have a goal that is far off in the distance, you have something ready in the wings for you to put that money towards. Just knowing what you want to put your money towards is powerful because it allows you to make well-informed decisions with confidence beforehand so you can get your money working for you as soon as you get it.

3. Know Whether to Pay Off Debt or Invest

When money comes into your life, you want to be able to know the best way to direct it. If you need help determining if your money would be better spent paying off your debt or investing that money, check out our Youtube Video: INVEST OR PAY OFF DEBT? - How You Can Do Both!

In the video, we talk about things to consider, including:

  1. the amortization schedule on your debt;

  2. how much debt you have left;

  3. how much interest you’re paying on your debt; and

  4. the different investment options you have available to you.

Finally, if you decide to use a large sum of money to invest, here are three different options to consider:

How to Invest Large Sums of Money

1. Investing in a Business

Investing in a business is one of the best ways to turn money into even more money. Using this money to start a business and to invest in yourself is a great idea, but before you do, make sure you have a solid business plan. Don’t just take all your money and throw it into a business that hasn’t been tested because doing that is one way to lose it all. What you want to do is prove that your business actually works and because this usually doesn’t require too much money, you may only need to dedicate a portion of your lump sum towards testing.

So, to be clear, while investing all your money into your business may be a great idea, you need to take it slow to minimize risk. You should first only put a bit of money towards ensuring the business has a solid business plan, model, and has been tested. And then when you’re more confident in it, you can use the rest of the money in the future, once your business starts to grow and flourish.

Another option available to you is to put the money towards supporting you while you transition from your regular job to this full-time business.

2. Investing in Real Estate

Amon and I love this option because we built a great portion of our wealth off of our real estate investments, and we used a lump sum of $20,000 to get started. Using that money allowed us to buy the right property at the right time and grow our wealth significantly. Amon and I lived in and flipped houses, but there are many other real estate investment options out there as well. You can buy, renovate, and AirBnB mobile homes/RVs; you can buy a rental property and build a passive stream of income; you can purchase commercial real estate . . . there are so many opportunities in real estate if that’s what you want to do.

3. Investing in the stock market

There are two different methods to investing in the stock market: (1) “lump-sum,” in which you make one large payment towards an investment, or (2) “dollar-cost averaging,” in which you make multiple smaller payments towards an investment over a longer period of time. So which should you do when you have a large amount of money sitting around?

Well, according to a Vanguard study, people who took the lump-sum approach actually saw better results than dollar-cost averaging because of the greater amount of time the money spends in the market. That said, if you’re risk-averse and anticipate pulling money out of the market if it ever dips too low, then psychologically speaking, it might be better to use the dollar-cost approach. In other words, whether you are better off lump sum investing a large amount or money or dollar cost averaging it into the market depends quite a bit on your own risk tolerance level and how you respond to fluctuations in the market. So, assess your level of risk tolerance and decide the best strategy for you!

So these are my thoughts on how to invest a large sum of money. Notice that none of these options involves any kind of “get-rich-quick” scheme. None of these three options are going to double your money overnight. The journey to financial independence takes time, even with large sums of money. But every large lump sum of money is nevertheless an opportunity to move you closer towards your F.I.R.E. goal!


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Hello, We’re Amon & Christina

We’re former federal government employees that focused on saving, making, and investing money so that we could grow enough wealth in our investments to never have to work again.

And, guess what? We did it! At the age of 39, we reached financial independence, quit our jobs, and . . . we retired!

So, if you’re interested in learning how to save, make and invest money on the road to financial independence and retiring early (i.e., F.I.R.E.) - this site is for you!

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