How would you invest a million dollars to get a maximum return on
investment? Would you start a business, buy an existing one, invest in
stocks/real estate???
Looking for some creative ideas.

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Clarification of Question by brainchurn-ga on 25 Apr 2005 19:40 PDT

Please provide a thorough answer with supporting details to how to
acheive return numbers posted in your answer.

One the one hand, this seems an easy one.  On the other hand, it's
hard to know how to make the convincing, numerical case for it.

Anyway, take the million and buy yourself a pretty nice house.

Real estate is generally a good investment, and these days, seems just
as secure (to the extent that investments are ever secure!) as the
stock market.

But if you buy a house, you actually get something you need and can
use, while the value of it (hopefully) increases.  With stocks, you
just get...stocks!  They don't even give you pretty certificates any
more. There's no usefulness to them at all, other than as an
investment vehicle.

To my mind, that's a double benefit -- you get the housing that you
absolutely need anyway, plus you have a very solid investment for you
money.

And that's my two cents on your million.  

pafalafa-ga

If this is a purely academic consideration, well, it doesn't really matter.

On the other hand, if this is a serious question about what to do with
your money, you need to sit down and determine several things
1) your risk tolerance- do you need this money to be very safe,
moderately safe, or can you afford to be risky/agressive
2) the type of returns are you looking for- what percentage? Is it
reasonable in light of your answer to question 1?
3) the cash flow profile you're looking for- do you need to receive
periodic payments of interest/earnings, or can you wait to receive a
lump sum when the investment period expires
4) the time horizon you're considering... can the investment expire
when you do, or do you want to pass some on to heirs
5) your liquidity needs... regardless of the other answers, do you
need this money to be fairly liquid if something unexpected happens,
or can you afford to have it irrevokably tied up in the investment
strategy?

These are the kinds of things any competent financial advisor should
talk to you about. Your responses will do a lot to narrow the universe
of potential investments.


As an aside regarding real estate, many indicators show that global
real estate is overvalued. If this is in fact true, one of three
things will happen:
1) the market will not rationalize in your lifetime, in which case it
doesn't really matter
2) the market will rationalize through a quick, significant drop in
real estate prices to bring prices back in line with fundamentals
3) the market will rationalize through a prolonged stagnation in
prices while fundmentals catch up.



All things to consider before investing in real estate.

Fine art only goes up in price.

BC --

The "creative ideas" and "supporting details" are in conflict, unless
someone has a nascent business plan that they're willing to share.

Financeeco has given you an excellent answer.  Modern investment
theory says to invest in a diversified "basket" of stocks and to
buy-and-hold.  This was pretty well established in the popular book
written by Burton Malkiel, "A Random Walk Down Wall Street" in 1973. 
It's been proven by 3 decades of detailed financial research.

Your returns should out-strip real estate, but as Pafalafa says, ya'
gotta have a place to live.

I'd take the $1M and invest it in a diversifed INTERNATIONAL index
fund to minimize the impact of a falling dollar, 25% over each of the
next 4 years.  The balance could be put into short-term Treasury
bills, though perhaps someone can suggest a short-term
interest-bearing bond that's less exposed to a falling currency.

Best regards,

Omnivorous-GA

brainchurn-ga,

Here is what you need to do. Invest in companies that have a dividend
re-investment program. When the dividends are paid reinvest them to
buy more stock.(a dividend paying company, like a mutual fund, will
automatically apply the dividends to the purchase of new shares.) If
you have some time on your side, the compounding interest will kick in
and that million will last you and your children a life time. Heres
how it works. You want to pick 15-20 companies who have a history of:

1. Increasing the dividend payout year over year
2. Companies that have a steady growth chart.
3. and if you can find foreign companies who have a strong growing
currency like Nestle. (a swiss company with a very strong currency)

I have listed several companies that have a good dividend history.

http://www.tompkinsplus.com/ttc2_dividend.html - TMP

http://www.tecoenergy.com/ENNWDvdndsQ100.html - TE

http://www.qualcomm.com/press/releases/2004/040713_div_stock_split.html - QCOM

http://www.pall.com/23390.asp?ln=20633 - PLL

http://www.universalcorp.com/Investor/Investor-Dividend.asp - uvv

http://phx.corporate-ir.net/phoenix.zhtml?c=86717&p=irol-dividends - syy

http://www.corporate-ir.net/ireye/ir_site.zhtml?ticker=BUD&script=11908&item_id='bud_shservices2.htm'
- bud

http://www.citigroup.com/citigroup/fin/div.htm - C

http://investor.colgate.com/drip.cfm - CL

http://www.clorox.com/investors/stockinfo/drip.html - clx

Despite the powerful runup in the major market indexes,
dividend-paying stocks are still a terrific buy, especially given
that, tax-wise, the spurned dividends are now as valuable as capital
gains.

droprock

"I'd take the $1M and invest it in a diversifed INTERNATIONAL index
fund to minimize the impact of a falling dollar, 25% over each of the
next 4 years."

I haven't looked up this 25% figure myself, but it is bogus wherever
it came from.  If a US dollar was equal to a Euro 4 years ago and it
lost 25% every year then now it would take more than $3 to buy 1 Euro.
 I know the dollar has lost a little value but 2/3rds of its value is
not gone I assure you.

Looking at market indicators in the past 4 years is not a great
strategy anymore because their are so many people doing it that the
market has already adjusted for those indicators.  To be a great
investor you need to be good at predicting what those indicators will
do in the near future.  Will the US dollar continue to lose value,
will it flatten out (that's my guess) or will it regain some of its
lost value?

First thing first, that no one seems to catch: to maximize return on
investment you need to first consider the level of risk you are
willing to take. Based on that then you can appropriately find the
proper investment. What's the risk; as to say you could potentially
lose the $1mil if all fails with also the possibility of making $50Mil
if it succeeds...

First, I would post such a question where the insatiably curious could
browse, study and answer,...

Then, some of them will post fiendishly clever ideas like a
documentary for the "Discovery Channel" that is also a high tech
research project for telerobotic mining or "free" energy or
unconventional optics or fossilization, etc.

Or you could focus on "people capital" and try to mount a campaign of
Truth, to actualize the 18-39 year old's who are disserved by the
mirage. "People capital" is less about speculation and more about
actualizing the world. "People capital" is probably a bargain these
days, especially because the third world seems to be filled with folks
in rabbit cages; I would be inclined to only hire from another country
if I could get the person out of it. I delivered pizzas with a guy who
had a degree in nuclear physics; I know a 19th century literature and
architecture expert who lives out of a shopping cart.

A little of this depends on if you have a religion. If you're an
avowed atheist, you're going to pay your brother/sister to give you a
few eggs to grow a foetus you can harvest some spare kidneys from,
etc. Who's to say four kidneys don't work better? A service you should
start, if not one you can afford.

Some would say the enigmae in this experience are so pernicious and
dreadful that it can't be real.

I like to think you can find an 18 year old or two, offer them a place
to live and work and make the next "Incredibles" for $70K. Sponsor a
scriptwriting contest with a $5 entry fee and see what happens. If
your goal is something pure, you may pass on a lot of things that
don't go anywhere, like financing financing with financing. Some very
gifted minds don't need much, they need a good secretarial service
perhaps.

Start Trek memorabilia!

How'd that get there?!

What I would do with it and what you should do with it are two
seperate answers.  Your age, goals, risk tolerance, and what you KNOW
are important.  The S&P 500 has returned 13% average annual returns
since it has been tracked.  Assuming this money is post tax...Buy a
house if you dont already have one, and hold onto it for 30 years. 
Dont get suckered into a $500,000 glorified trailer like this new
generation of buyers is.  Buy a good property in a great location that
you can get for a good deal...Sounds tough, and it is.  If you dont
understand real estate dont try to be Trump.  You will lose your money
like alot of people are about to when this market goes bust.  a 5%
annual increase in your home price could mean 20% Return on investment
if you put 20% down.  Buy individual stocks in good companies with
relavant prodcuts/services, good management that make money.  Invest
in companies that you think will be good comapnies 20 years from now. 
If you dont understand equity markets dont invest in them (this
includes the practice of blindly dumping your money in mutual
funds)...
with that said you should buy a couple of books and read/understand
them before you touch any of that money...
"The Wall Street Journal Guide to Understanding Money and Investments" $12.95
"The Art of the Deal" Donald J. Trump  $14.95
Read the wall street journal every day for 3 months.

Formulate your own plan and dont take advice from anyone who has a net
worth less than yours!!!

or you could just gove me the money and feel really good about yourself!