What Would You Do with 10 Million Dollars?

What Would You Do with 10 Million Dollars?

Over the years, we have spoken to many investors who ask us what they should do with their financial windfalls. There are so many scenarios to consider; should I invest now? Should I wait until prices come down? Should I buy an expensive house? It’s often pretty hard to make the call. Find out today what the best strategy is on ThinkSmart with TMFG.



Rob (00:00):

Hello, this is Rob and Mike from The McClelland Financial Group of Assante Capital Management, and this is Think Smart with TMFG. Mike, today. I thought we would talk about what would you do if you suddenly had $10 million? Have you thought about that before?

Mike (00:22):

The last time I thought about it, I was thinking of buying a Lamborghini. But I’ve grown older now, and I don’t think I want one anymore.

Rob (00:29):

Well you know inflation’s hit because the song, I think it was the Barenaked Ladies had a song a number of years ago when we were young, and it was If I Had a Million Dollars. Well today that million dollars is probably $10 million. That’s how much you would need.

Mike (00:43):

Yeah. A million dollars doesn’t solve your life problems anymore, does it?

Rob (00:46):

No, it doesn’t, but 10 million can solve a lot of problems. And I thought about this. I was out for a walk recently. And I was thinking, we went through a period where, for whatever reason, there was a lot of clients and potential clients with $10 million that was like a windfall. And so I thought it was interesting just to review some of the options that they had available to them, and what some of them may have done and may not have done.

Rob (01:16):

So I’ll talk about the first one. And this was a potential individual that we were going to work with. And it was a woman, and she had received a $10 million settlement through a divorce. And she had not been the one who had handled money in the family. And so this was relatively new for her. And it was a lot of money, and it was money for life. It’s money that she needed to last for life. And she was very detailed in our discussions. And she did a really deep dive in terms of questioning everything.

Rob (01:56):

But what became really obvious to me was she didn’t want a financial plan. She wanted to know how good our returns had been in the previous 12 months. And this was back last March. And you can imagine returns weren’t that good when you were looking at the 12 month return. But she wanted to find an advisor who had the best returns in the last 12 months. And she didn’t end up becoming a client. But my thought is that’s the wrong question to be asking. It might be one of the questions you ask. What have your returns been like over the years? But it’s probably the least important question in the whole scenario.

Mike (02:40):

It’s probably stage one when you have to start in finance. It seems like the simplest thing. Well, how much money will I make? Once you realize that’s not in anyone’s control, then you have to go into deeper. What can these people do for me? But someone who’s just starting out with finances probably hasn’t got to that point yet.

Rob (02:56):

The other thing we’ve learned is that, if you’re probably choosing a manager or an advisor who’s just had an amazing year in returns, they’re probably going to have a really bad year the following year. So it’s probably a terrible time to deploy that strategy. You also had some situations where you had $10 million. And one of that, I think, was a client who it was a business sale of some sort.

Mike (03:22):

Yeah. I mean, we had interesting scenarios. When people get that piece of money, the big idea is, well, I have $10 million in cash. What should I do with it, right? And should I invest it right now? Should I dollar cost averaging? Should I wait till the markets drop? And there’s these three different scenarios you can do. And I’m almost hesitant sometimes dropping $10 million into the market right now too. So I got to say I’d like to talk gutsy, but I don’t know if I’d be that gutsy with my own money too.

Rob (03:51):

If it was 100,000, you’d be fine with it.

Mike (03:54):


Rob (03:56):

What about a million dollars?

Mike (03:57):

Million dollars? Yeah, I’d probably be fine, but it starts to get a little bit more. But when you say 10 million, this is the rest of my life. Am I going to dump it in today? It’s a tough question. It was interesting. A bunch of years ago, if you remember this, we were at a Dimensional conference. And we went and got to sit down with Eugene Fama. And Eugene Fama advised or worked with Dimensional. And the interesting thing about this day was, the night before he won the Nobel Prize. Remember that? And he was surprised. He didn’t even know he was going to give Nobel Prize. I think he got the call at midnight that he won the Nobel Prize.

Mike (04:29):

And we’re all sitting in the room with him, with this guy who won the Nobel Prize the day before. And we all have to ask him questions. And it’s a room probably with about 20 of us, right? Something like that. And I remember asking him the question, because at that time we had a client who had a bunch of windfall money coming in that time too, and I said, “Well, if you have a client with a bunch of money, should they invest it right now? Or should you dollar-cost averaging over a period of time?” And Eugene Fama is such a brilliant person, and he doesn’t have emotions. There’s no emotion. No, his EQ level is probably zero. And his IQ level is probably whatever it can be, 170 or over that.

Mike (05:10):

But he said back to me, he said, “If I have two advisors, and they both have the right strategy to get me through the rest of my life, and one wants me to start it right away, and the other one wants to make me wait to put it in place, who’s the better advisor?” He left it that. And it always stuck with me. The person who’s willing to put you in the right strategy right away is always the better advisor than someone who’s going to make you wait. Why would you make someone wait? He said, “You don’t know where the markets are. So why are you going to make someone wait to be in the right strategy?” Then they’re going to be in the wrong strategy for a longer period of time.

Rob (05:44):

So $10 million is a lot. And I guess I always look at your different options that are available. One of the options is that you can go buy a big thing. So maybe you go buy a house. So maybe you go and buy a $5 million house, right? That still leaves you five million. But you bought a $5 million house. What would be wrong with that strategy?

Mike (06:08):

Oh, just you’ve used up your capital. I mean, that’s the problem you find with most people that win lotteries. There’s that statistic I can’t remember, but it’s a large percentage of people that win lotteries go bankrupt because they buy things with their capital that they can’t afford to maintain with their income.

Rob (06:23):

So if you use the math, and we’ve looked at this a number of times, it probably costs 2% a year over time to maintain your house. And so 2% on a $5 million house is $100,000 dollars a year, and that’s an after tax expense. So that’s a lot just to maintain the house. And remember, you’ve already spent five million. You’ve only got five million left. And of that five million, even if you use that 4% rule, that’s only generating 200,000. You’ve got 200,000, and your expenses on your house alone are 100,000. So you’re almost house poor by doing that strategy.

Mike (07:05):

Well, you get into that, remember a long time ago, we dealt with a family office that dealt with very high net worth families. I remember they had rules over what people could buy. And I remember off the rules were boats and airplanes, right? Because they were easy to say I can afford, but the maintenance and upkeep on those things were just unreal.

Rob (07:23):

I actually think it was yachts.

Mike (07:24):


Rob (07:25):

And airplanes.

Mike (07:26):

Airplanes. And I think there was something they mentioned about women in there too in the whole thing. And just not only women, and spouses, they were very protective of people giving away money to other halves.

Rob (07:37):

I had an interesting situation, another potential client. And again, there was $10 million. And what was interesting is the husband and wife had very different risk profiles. And I caught onto it. And they never became a client, but I heard eventually what happened, and they couldn’t come to an agreement in terms of the risk they were willing to take with that money. And so the husband was aggressive and put it into the market back in March of 2020. The wife was so conservative that she couldn’t put a dollar into the market and she stayed in cash the entire time. Now come out, whatever, 18 months later. And the five million of the husband’s has gone up probably 40% over that time period. And the wife’s five million has lost probably 4% because of inflation.

Mike (08:34):

And now you’re frozen too. How are you going to invest it now? It’s way worse than it was before that. That’s the thing that no one realizes. Once the markets do go up, it’s very difficult to get into the markets.

Rob (08:44):

What about a strategy where you say, I’ve got that 10 million. I’m going to wait for the market to correct. Why wouldn’t you do that? Maybe the market corrects, and it’s down 25% or 30%, like it was last March. Wouldn’t that have been a good time to take that 10 million and put it in?

Mike (09:02):

The thing that people don’t realize is the headlines that are going on during that correction. And there’s nothing positive that says, “This is the bottom.” And you think after the fact that there’d be something that said, “This is an awesome time to invest. Look how low the markets are.” No, the news is it’s gone down 25%. This is just the beginning. It’s going to go down another 25%. This is going to be another 1929. That’s the headline you got to fight against. And people don’t realize that beforehand, what up against your nerves.

Rob (09:29):

So it is a tricky one. And this is what you learn when you’re in the business. If you said, you know what, I’m going to put it in, and the market’s down 25, you go, you’re so tempted, well, it might go to 30. It might go to 30. And if it goes to 30, that’s even a better time to buy. But what happens? And this happens within two days, it’s suddenly not down 25 anymore. It’s down 20. And now you’re really stuck because it’s only down 20, and you’ve saw it go down to 25. So you decide to wait for it to go down to 25 again. And what happens?

Mike (10:05):

It goes up other five.

Rob (10:07):

It goes up another five. So now it’s only down 15, and you’ve missed your opportunity.

Mike (10:11):

Now you think you’ve lost 10% because you had the opportunity that you-

Rob (10:14):

Exactly. And you’re frozen. And before you know it, a year goes out, the market’s gone back up 40%, and you’re still in cash.

Mike (10:23):

I was meeting with a client the other time, and this was last week sometime, and it was funny that we were talking about taking the emotions out of investing. And they said, “Well, I’ll put in certain amounts.” And they were coming up with things to do. I said, “Well, to take the emotions out of investing, just give me dates.” Said, “What do you mean?” Said, “Just give me the dates for the next… The 30th of each month, we’re going to invest the money. We don’t care what happens.” He said, “Well, I don’t know about that.” Said, “Well, we talked about taking the emotions out investment. That does it. If it’s up, we invest. If it’s down, we invest. No matter what.” Everyone wants to take the emotions out of investments, very difficult for people to actually do it.

Rob (11:00):

So we’re evidence-based advisors. And the evidence says, couple of things. Number one, you can’t time the market. Number two, the market goes up two thirds of the time and goes down one third of the time. So what is the best strategy if you had that $10 million? And you’ve had a client who just actually did the right strategy.

Mike (11:21):

Invest it now.

Rob (11:22):

Invest it when you have the money.

Mike (11:23):

Yep. Markets go up more than they go down.

Rob (11:26):

And especially if it was in a business sale, the business was always up and down in value. And you don’t want to be out of the market because you’re going to get the timing wrong. So if you sold the business, take that 10 million, and invest it in a much more diversified group of businesses then you were in.

Mike (11:42):

Five years down the road, you’re going to know you made the right decision.

Rob (11:45):

So Mike, if you had 10 million, you mentioned the Lamborghini, what would you really do?

Mike (11:51):

I’d probably invest it. After all my experience, I’d probably just invest. It’s pretty boring, but it would work.

Rob (11:58):

I actually think I’m the same. I may go spend 100,000 or something on something that I probably don’t need, but I want. But the rest of it, I would put it in and invest in it. I’d probably, maybe I’d be more conservative and not be 100% equities like I am today, but I’d probably be 100% equities. And the advantage then, even if you could draw that 3 to 4% a year, you’ve now got 300,000 to $400,000 a year worth of spending money. That is a life changer, right? You’re living like the 1% at that stage.

Mike (12:39):

So that being said, buy your lottery ticket.

Rob (12:41):

Buy your lottery ticket, get your 10 million. Sounds like a good plan.

Mike (12:45):


Rob (12:46):

That’s good for today. This is Rob and Mike with The McClelland Financial Group of Assante Capital Management.

Assante Capital Management (13:22):

You’ve been listening to The McClelland Financial Group of Assante Capital Management Limited. Assante Capital Management Limited is a member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada. Insurance products and services are provided through Assante Estate and Insurance Services Incorporated. This material is provided for general information, and is subject to change without notice. Every effort has been made to compile this material from reliable sources. However, no warranty can be made as to its accuracy or completeness. Before acting on any of the previous information, please make sure to see a professional advisor for individual financial advice based on your personal circumstances. The opinions expressed are those of the authors, and not necessarily those of Assante Capital Management Limited.


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