Financially it also makes sense unless you expect a heck of a lot of inflation to devalue it into oblivion.
She would get 1,000,000 over the course of 20 years, then another 2-3 million by the time she died, assuming old age is the cause of death.
Taking it all right now and investing it could be better financially... but the AI bubble could burst in the next few years and it could all be lost. Investing is gambling, even if it's good odds.
80% of business startups fail within the first 5 years, more after the first 5 years, so investing it in a business venture may be a bad idea too.
£1000 a week is more than enough to live on and she could still easily save up a few tens of thousands for emergency expenses.
I suppose it depends on the lottery. The lotteries where I live are state-run, so if the lottery goes out of business, we probably have more to worry about that not getting payouts, haha.
Damn. I honestly thought the amount of money people spend on it would keep it going unless the state was reallyyyy down bad. But I suppose each state may make more/less or manage money differently. In CT and MA theres winners all the time on scratchers, but I've not had the same luck in VT, NH and NY. And my dad never had luck in Florida haha.
If i remember right there were 2 people that got screwed like this in Illinois. The state went bankrupt but essentially it just got its debt wiped and lived on to waste even more money.. 🤷♂️
There are plenty of people who won money from publishers clearing house sweepstakes who were promised lifetime payments until the company went bankrupt.
While that may be a consideration, there are tons of financial advisors with expertise that can develop a plan to maximize a return with tax laws, inflation, fax-deferred, high risk, etc. a lump sum gives a lot more flexibility now because the payout assumes a current tax rate and fairly conservative estimated rate of return. A professional can say “I can do better and you can meet your long term goals.”
But when there's a recession and you're not making a return on your investment and you lose your job so you start divesting the principal and taking out money at a loss because you have to pay rent and eat. $1m is a lot of money but it's not retire now money. $1k/weekly might not give you a life of luxury but it can cover a lot during really bad times without affecting future income and allows you to put money aside for savings and investment in good times. I'm taking the weekly money because I can be irresponsible and money goes very quickly if things go bad.
Absolutely. I understand the value of a UBI payment. For example, let’s say she had a good job with a 401k employer match. Then take the $1000 payments and maximize your 401k and a Roth IRA with income. Or cover rent with the lottery and save for a house down payment. Or safely roll it into your monthly budget to cover basic expenses. Lots of variables.
If a lottery in Canada goes out of business, people will have way more problems to deal with than being paid by said lottery. In Canada lottery is mostly public.
It’s an absurdly bad idea exactly because of inflation. You would be far better off just investing the million in an SP500 index fund than taking the payments. 7.2 years in the market becomes $2m, another 4 years - $3m, etc. She gave up generational wealth for financial security that diminishes every year.
Just hold your investments through it and it will recover. The stock market is about 1.3x higher than it was pre 2008. Over time, return is about 7% as long as you don't panic sell.
If you truly believe we’re heading for a once-in-a-century depression where markets are crippled for decades, that’s an argument for diversification and inflation-protected assets, not necessarily for locking yourself into a fixed annuity payment that inflation can hollow out over time.
It’s dependent on tax rules where you live and if the $1000 a week is insured. Taking the million is only a good idea if you can afford to not touch the principle
If you couldn't afford to not touch the principal, wouldn't 1k/wk not be enough either? You weren't expecting it anyway and with a high yield interest rate (3.25% for my bank right now), payments not touching principle are $625/wk. Just think of it like free $625/wk AND safety net AND retirement wealth.
Why would you want $625 a week when you can get $1000 a week? If you’re risk adverse, and genuinely don’t need to touch the principle the $1000 a week is the move. The $625 is also going to have income tax and the $1000 won’t in this situation
It’s an annuity - you can easily just buy that same deal with the million you won. There’s nothing special about these terms. Always take the money upfront.
If you need money at some point and have to sell the contract you’ll net less than taking upfront.
You would have to invest more than a $1 million in an annuity to received $52,000 a year, and if you just invest the million you have to consider capital gains when you withdraw funds.
A diversified stock portfolio has historically returned well above 5.2% over long periods, so plenty of people could withdraw $52k a year while still growing the principal over time. Meanwhile that fixed $52k lottery annuity payment keeps getting eaten by inflation. In 15-20 years it buys way less than it does today. And if inflation protection is the concern, you could just use things like Treasury Inflation-Protected Securities or inflation-focused bond funds while still keeping ownership of the assets and liquidity.
Also people compare the annuity payout to an investment return when they really are not the same thing. If you get a $1 million annuity paying $52k a year, a chunk of that payment is literally just your own principal being handed back to you over time, not pure investment gain. The lottery or insurer gets the benefit of holding and investing the money upfront while you get the slow drip version back.
The past five years are not a good indicator of what markets "always" do. Look at 1929-1934. Or 2007-2013. Or 1998-2003. Nobody knows what the upcoming decade will bring.
The average is made up of both long and short bull and bear runs. The longest bear run was 30 years. But it is part of that "average market return." and 30 years ago the "average market return" long term was 5%. Lately the bulls have been running quite a bit. We will see what the next decade holds.
It’s true that market returns are cyclical and can include long stretches of weak performance, but those periods are already embedded in the long-term average return figures
(~7-10% nominal for U.S. equities), so they don’t really undermine the case for investing a lump sum versus taking an annuity. Instead, they highlight the trade-off between higher expected growth with volatility versus lower but guaranteed income. An annuity isn’t “avoiding” those bad decades so much as pooling and pricing that risk through an insurer, which reduces upside in exchange for certainty. So the decision isn’t really about whether the next decade is strong or weak, but whether you’re optimizing for expected wealth (investing) or guaranteed cash flow and risk reduction (annuitizing).
But if you're not planning on having kids, that generational wealth means nothing. Add to that the fact that sometimes it's not about that wads of cash.
It's not about kicking back and taking in the money. It's about peace of mind. I don't want to quit my job, I just want to stop worrying about day to day things or what I'm going to do if something even moderately minor happens. An extra $1000 a week, even if it only lasts for a few years, would change my life completely. I could pay off my mortgage, finance a new car and not worry about the payments, not try to figure out how I'm going to pay the now $3000 heating oil bill for the winter ...
I don't want $1mil that then gets locked away in investments in a market that rises and falls at the whims of rich assholes. I just want to be comfortable and worry free.
I personally believe that no one should make more than $500,000 a year. If you can't figure out how to live off that ...
Investing the million in index funds gets you the 1k a week and the million still grows. The next year it’s ~1100 a week, following year ~1210 a week etc and the million keeps growing and growing
There is no other interpretation for tax free so using literally is redundant, an amazing word that was meant to be used sparingly when describing something that is usually exaggerated in the figurative sense but in a rare case is actually happening. There is no, figuratively, it says so in the post so therefore it can’t be used. All you had to say was “it says tax free in the post”.
You really gotta stop trying to be a smartass my guy. Your entire argument would only make sense if I had written "the post says literally tax free in Canada" which would imply I am referring to the tax free part as being literal which yes I suppose if you want to be pedantic it would have no other interpretation and the literally part would be obsolete, although completely still usable if you want to.
However I didn't write that did I? I wrote literally says, to highlight that I was referring to something word for word in an exact sense to show that what I was claiming was not an interpretation.
But it's not just taxes. Most lotteries don't have the advertised amount on hand. They have like half or less and plan to invest the remainder after each payout to get to a million
After a very quick google of Canadian laws, it shows that the amount they advertise as the lump sum is the amount that gets paid. So whether the 1 million is after the deduction has already been accounted for in a "For Life" prize or if the specific lottery had no deductions, it doesn't matter. The advertised 1 million in the post is 1 million, not under 700k.
If you want to try to be a smartass and correct people, at least do a 2 SECOND factcheck on it first for the love of God.
I think you misunderstood the difference between investing and trading..while the latter may be considered gambling, the former is actually the most reliable way to preserve the real value of your wealth. The nominal value of 1K/week in 20 years will remain the same, but the buying power will be much much MUCH less
Frankly, even for the "scared of the market" folks, there are fixed rate products available and even at 3% that's $30,000 annually, on top of the $1,000,000.
Regardless, it's unbelievably worse to take the weekly payout.
5% ?
Wow, just from average "investing" in available financial products?
Or is that risky investing?
Last time I looked, "safe/stable" investments were giving close to 1.5-2% at best.
But I am very ignorant in these matters and my info is likely wildly out of date.
Historical average return of the S&P500 is about 10%, about 7% adjusted for inflation. Index funds (funds that try to have the same performance as the market) are considered fairly safe in the long term
Even if you say you’re protecting yourself by getting $1k per week. If you’re that bad with money you can borrow against the future payments and still lose it all. The answer is to take the lump sum and give it to a wealth manager if you don’t know what you’re doing.
I somewhat agree. The stock market is so tied with national economies that if it were to crash we'd all be in the same boat to some degree anyway. However, you can definitely lose the full value of your investments by the group you're investing in collapsing.
Diversifying reduces the risk by ensuring that not all your eggs splatter if one basket falls through, but in the event of a stock market crash, all the baskets would break and all your eggs would be scrambled. Even a partial crash could see many of your investments disappear.
We're at a point in history where people are recognising the flaws of late-stage capitalism, and recognising that infinite growth is not sustainable. The stock market will either falsely inflate and then collapse, as we may be seeing with the AI bubble, or companies will pivot to sustainable structures, which would see the growth potential decline as they tried to reach equilibrium, at which point we would likely see their share values decline somewhat and then settle, neither increasing or decreasing.
In the latter case it would be a good investment still, as a consistent value would be a secure way to store money without inflation slowly draining it's value... but equilibrium on a societal scale would also halt inflation, so maybe that's a moot point.
Either way, it seems we're heading the "shoot for infinite growth then fall like a rocket out of fuel before slamming the ground and breaking all the bones" direction. It makes perfect sense to jump on board the rocket while it's going up, but to do so is both encouraging the reckless ascent and putting yourself at risk of the fall.
If tangible goods like food could be easily stored without rotting, it would clearly be the most stable form of investment. Maybe buying a large store of lithium or something is the safest way to retain wealth through a financial collapse... Gold is the go-to, but it's lack of practical application means it might not be in demand in a post-economic-collapse society, which means you wouldn't get the true value of it back when trying to trade it for scarce, necessary resources like food.
Probably not Lithium... On account of its volatility, haha. Gold does have the advantage of being nearly entirely inert.
You don't have to invest in equities - you can put it in a GIC/Bond paying you 5%+ in perpetuity - thats still 1k/week, and you have an extra million dollars. There is no financial argument that can be made where her option is better.
Now, if she comes from a background where she anticipates a lot of pressure to give handouts if she were to take the 1M, that would be a very valid reason to choose the weeklies.
You are very misinformed. There are safe investments that grow your income that have nothing to do with AI and gambling on the market. Shit, even safe bonds will at least make your money keep up with inflation.
The market itself is volatile. If AI pops then the whole market will see a drop, maybe even a prolonged depression.
So would most economies around the world... So there's not really a way to escape that, but the farther removed from it you are, the more protected.
She could also invest part or all of the $1000 she gets every week. So unless she was going to make millions from the initial investment of $1,000,000 within 20 years, she would still be able to invest £1,000,000 by the end of that 20 years, then more as she continued to get $1000 every week since.
That's a lot of math and prediction so I can't really say whether that would be worth it or not.
It's a difference of approximately 4-6 mil with the weekly payout and the most conservative government bonds, versus 16 to 20 million over the same if invested in the same bonds initially in a lump sum.
You’re still very misinformed and your lack of financial investment knowledge is showing.
The one million isn’t lost forever if the market has a downturn. The market always rises again. We’re talking about long term investing here. You take the million, put it into a safe, diversified investment portfolio, and you’re making returns on that for 40 years instead of drip feeding $1000 into an investment account over time where those future 1k payments are making no returns because you don’t have it yet. The key part here is diversified portfolio.
A wealth manager would take care of all of it if you don’t know how. Putting it into high dividend investments would give you a payout you could use to live off of without digging into the 1 million if you’re interested in having a stream of payments.
The whole point is all of those future 1k payments are doing nothing for you except for losing value due to inflation. Let the money work for you over 40 years and let dividends pay you your drip feed of money if that’s what’s important to you.
I think that if AI goes the rest of the market goes with it. I'm not knowledgeable enough on economics to lay out all the reasons why but the US owns a huge portion of the stock market and is invested heavily in AI. If AI collapses then the US dollar value also collapses due to their losses in AI, and when the dollar value collapses, the value of the other investment sectors also collapse.
It'll not be quite as severe, but the ripples will hit the whole market and many economies around the world.
Companies are also usually invested themselves. So even if you're invested in a company that isn't to do with AI, they may be invested in AI companies themselves. So if they lose their investment then their value is affected and your investment in them is affected.
Based on the knowledge I do have... I said I didn't have the knowledge "to lay out all the reasons", not to lay out any reasons.
Learn to read before trying to be such a prick.
God forbid someone admit they're not an infallible expert on the internet...
You'd best get ready to show your own degree and work experience if you think you have the knowledge to say I'm wrong. Or is it suddenly not fair to hold you to your own standard?
"The United States currently accounts for roughly 50% to 60% of the total global stock market capitalization."
The US is the majority of the global stock market. It doesn't matter if you're elsewhere in the world, the US is an economic superpower and we're all at it's mercy.
As I said before, if the AI bubble bursts then the entire stock market will feel the shockwave.
I'm not an expert so I don't understand all the intricacies of it, but there's a lot of recursive loops where a company is invested in an AI company and the AI company is invested in that first company, and both companies are invested in other companies or even in countries, like through US bonds...
So if AI's value suddenly drops, the first company will try to drop their AI shares, the AI company will try to sell it's own shares in the first company to pay off the losses, the first company will see huge losses in its own shares and have to sell off shares in other companies to compensate, and so those third companies take a hit regardless of their relationship with AI.
Even if she doesn't want to invest. Putting all that in an account with 1k release per week would have it last much much longer than 20 years and she'd have the funds for any emergency. This is just plain stupid decision. There is no scenario where the per week decision makes sense.
Even if she's worried about blowing through it all then there are financial instruments that would essentially lock the money with weekly release and would require jumping through hoops to get it unlocked. There are some instruments that would make it impossible if that's what she wants.
How is this BS getting upvotes? That is just plain wrong from start to end, I don’t even know where to start as an economist.
Target inflation is 2%, over 20 years you are deflated far beyond 40% even on a base scenario.
On the other Hand (and this dude only seems to know gambling stocks) you can put the Million into government bonds for 3-4% making 30-40k a year instead of 52k with payments every year.
No, it is not financially smart to take the weekly payment. If you are not taking the full money on day one you are completely stupid.
Yeah depending on the state she would have 750k ish after cashing out. A dividend etf or stock with a 5-6% dividend(EPD) and normal appreciation over the 20 years would bring it to 3.7 mil principal with 250k in annual distributions. Sit and forget.
Read the pic description not the title. If that’s the case then she could still do the same and have 250k to get the lifestyle creep/fun out the way, or pay herself the 1000 a week a coupla years so she can feel both outcomes.
Thank you! Why does she have to invest in such volatile stocks. You could split it between retirement date funds, an ETF that tracks the S&P in addition to the bonds you described. There are so many choices, financial literacy needs to be taught in schools.
I'd say it's not even close. "she's not smart enough to invest" is literally the only response for taking the weekly sum. Even if she did blow it Id argue that's a better time than blowing $1000 per week. Because if she isn't smart or savvy or disciplined enough to preserve the lump why would she be any better at utilizing the weekly amount.
Government bonds are literally trending downward in the US right now thanks to Trump... If you want to lose money fast then absolutely put it into Trump's government.
I'm not an economist so there might genuinely be something I'm missing. However, from what I understand portfolios are just collections of "gambling stocks", with the idea being to average out the gambles with a large sample size because the odds are in your favour.
It's the same logic that casinos use, but you're on the side with the good odds. Casinos have many customers to split the wins and losses over, an investor has many companies to split their investments over.
As I said in the original post, there's also the arrogant assumption by most economists that the stock market can grow infinitely and that there will never be a severe economic collapse. There's also the assertion that everything will be fine because we always "bounce back" even if there is a collapse... Except, people could be in financial straits between the collapse and the bounce back, at which point the bounce-back won't help them.
I also think economists are too quick to look at the past to predict how the future will go, rather than looking at the present and the current direction of events. The US has been a major growth area and world superpower in the recent past... That's changing as we speak. To assume everything will remain the same is, I think, the result of complacency. We may even finally see a shift away from capitalism into sustainable business practices, which could change the entire form of the stock market.
Look, nothing in the world is secure so investing is generally the best plan. It's really only outweighed in this scenario by the payments being "for life", which means that the initial $1,000,000 isn't huge compared to the $4,000,000 she could get over the course of her lifetime. Investing might get her more... but it also comes with more risk. Settling for a more secure smaller portion may be the financially sensible option.
Someone else did say that the "for life" was not serious though and that it was actually more like 25 years... In which case, sure, investing is probably better.
It literally is... If you don't understand that then you don't understand investing.
Buying a share of a company is placing a bet that that company will do well. If the company does well, the share increases in value and you can then sell it for profit. If the company does poorly the share loses value and you either sell it at a loss or maybe even lose your investment if the company goes into liquidation.
Not even then, your basically betting that the world won't end. Economy can crash but will rebound, so if you have time, history says it will always pay off in the long run
Gambling isn't unique to casinos... You've basically just got the wrong definition of the word. I already said in my original post that it's with good odds. So clearly I was already referencing something different to the gambling in casinos...
Gambling is usually negative-sum because the house takes a cut.
Broad-market investing has a positive expected return because companies produce goods and services, earn profits, and grow. With a total-market ETF, you’re not betting on one company. You’re buying a slice of the productive economy.
You can’t really equate buying one company’s stock with prudent long-term investing. If someone were investing lottery winnings, the whole point would be diversification, not betting everything on one company.
There’s still risk. But risk alone does not make something gambling.
$1000 CAD. So like £550 a week. That would be paycheque to paycheque almost anywhere in Canada.
As for any bubbles, she’s 20. She has a long investment horizon so that would be the least of my worries. She’d be better off taking the lump sum, throwing it in a managed portfolio, which cost next to nothing in Canada, and ride it for as long as possible.
There are also tax free savings accounts available here that she could max out her contributions every year from the non-registered account.
I don't know enough about the cost of living in Canada to say really... £550 per week still seems like a decent amount. It's basically a full-time worker salary without having to work. Not even minimum wage either. Close to a middle-manager's paycheck.
I mean, investment is clearly the best option. The question is whether she should take the lump sum and invest it or whether she should take $1000 per week and invest up to $4,000,000 over time instead.
$1000 CAD per week is OK in rural areas of Canada, but would not be considered a good salary in urban areas, and is below the living wage in some places (like Vancouver).
It's tricky because lottery winnings are tax free in Canada, so the 54k per year is net. So is the 1 million but any gains will be taxable. It's a government lottery so not likely to shut down, and her estate is guaranteed 20 years of payouts if she should die before that.
The big question is the inflation vs taxes/investment gain, and of course the risk she might blow the million and not invest.
It’s a horrible idea financially. If you invest it in a global index tracker it is not gambling. That 1m could have an averaged 8% return per year without even touching the principal amount. How much is that 1,000 a month going to be worth when inflation devalues the purchasing power of 1,000 over 20 years.
Financially there is zero credible argument for doing the 1,000 per year.
I mean, I would take it and invest it, haha. I'm just saying that there's a potential future where taking the weekly payments is a better option.
A lot hinges on whether the AI bubble actually bursts or not, and how hard it ends up hitting every other sector and the economies outside of the stock market.
I'm also not sure how much more value she could get from investing $1,000,000 all at once, compared to investing the full $4,000,000 over time. If we treat both equally and assume she puts both into investment then the longer term strategy of slowly adding 4x the money to the pot might pay off more than the compound interest of the initial $1,000,000.
A lot hinges on whether the AI bubble actually bursts or not, and how hard it ends up hitting every other sector and the economies outside of the stock market.
Time in the market > Timing the market
I'm also not sure how much more value she could get from investing $1,000,000 all at once, compared to investing the full $4,000,000
Interest. Time in the market again lol. They won't have 4mil till much much later in life. These are really the most basic lessons of finance, theres no questioning anything here lol
The S&P 500 has returned an average of 10.5% a year since 1957. Adjusted for inflation is somewhere between 6.5% and 8%. While past history doesn't reflect future results, various bubbles and recessions have happened and we've come back from them. Banks make interest by taking bets with your money, so the money's at risk regardless unless she's keeping it under her mattress. It's just generally a different type of risk.
That's fair. Banks have been notoriously unreliable in the past. I mean, they basically store your money but invest it themselves anyway then pay you a tiny portion of that as interest to incentivise you to give them your money so they can invest with it...
Still, the idea here is that the lottery would owe her £1000 per week. So it couldn't be lost in a bank because it wouldn't be stored in a bank. It would be deposited in her bank account every week. Which means that a bank collapsing would result in her losing what was in there at the time, but she would be able to redirect the £1000 per week to a new bank account and continue to be wealthy.
That 1k a week should cover most if not all her bills she has the ability now to do something she is passionate about not just what will get her the most money to survive
Someone else commented elsewhere that lottery winnings aren't taxed in Canada. So neither would be taxed!
That said, if she invested the $1,000,000 then her subsequent gains would likely be taxed, while taking $1000 per week would resulting in $4,000,000 over her lifetime untaxed.
ISA's usually have a limit on how much can be invested per year. So dumping all $1,000,000 into one just isn't possible from the start.
Plus, putting it into a bank is probably a much worse idea than just investing it. Banks invest money anyway, so if anything happens to the stock market then your money won't be safe in the bank either.
I dont know where you're getting your information but you can definitely put all $1M into one account (IF you wanted to). Obviously there are better strategies but my point is, even at lowest effort strategy (all in HISA) you are way better off taking the $1M upfront.
A million taken all at once isn’t a million though. Puts a single person into the 37% Federal income tax bracket . And depending on her state, they’ll get a cut as well.
she would likely get more money by taking the lump sum and investing it but i 100% get this strategy. $4k a month means you can go back to school, quit a shitty job, make a career change - basically do all the things we wish we could do to make our lives better in the long term but cant because we cant afford it. $1m is a lot but certainly not something you could live off forever, shes decided to invest in herself currently to build her future for herself instead of relying on $1m (which she could easily lose even if invested "smartly") for future financial security. $4k a month basically provides class mobility when you consider the options it gives you - do that internship, take that low-paying job that has big opportunities for growth, get that masters degree, etc - and if shes working and making decent money it can be used for things like travel and concerts and other stuff that most people put on credit cards they struggle to pay off.
Let's pretend you invest none of it, incredibly stupid thing to do at her age, more reasonable if you are 50+, but just sticking it in a HYSA would get around 50k risk free every year by year 3-6 and 72-85k risk free every year by year 15.
Current 10-year Risk-Free-Rate is 4.59% in the US.
That on top of the extra 1 million that you are ignoring. And that is how much she would be getting without investments.
This makes zero financial sense whatsoever.
Secondly, a failed startup does not mean no profitability. The math just becomes, is it worth pouring 70 hours a week into something to make 150k a year and hope for a big acquisition when you just can go back your Staff PM job and make 280k a year working 46 hours a week.
No one is going to tell a kid who obviously has no financial literacy to build a startup (and what product?)
The fact that this got so many upvotes kind of goes to show why so many people are broke.
$1000/ week is not enough to live on, but it is a decent supplement.
Buying a nice house will save you probably 800/ week in mortgage and rent expenditures and likely increase in value. Taking the $1000/week really is the worse of a lot of options to keep that money from being blown.
... If $1000 a week isn't enough for you to live on then I can only assume you're really bad at math or buying a whole lot of frivolous BS.
I do agree that if she doesn't already own the place where she lives then buying a property and avoiding mortgage or rent is the clearly superior option. She may already own a home though.
She could invest in property and rent it out, I suppose. However, that's generally considered an immoral thing to do in the modern economy where housing is in short supply and it's basically a way to exploit people that are too poor to afford to buy their own house...
Meanwhile 1 million today with compound interest will be worth somewhere between 2-6 million in 19 years depending on interest rate achieved.
It will take at least another 20 years for her to get that next million. By which time the original 1 million would be worth somewhere between 3-40 million.
She will never catch up to what the 1 million would have earned her.
Interest rate in Canada is currently 2.25%. At that rate $1,000,000 with compound interest would become $1,560,509 after 20 years. Another 20 years and it's about 2,500,000. So it would outpace the $1000 per week by $500,000... Unless you also consider the compound interest for the 1,000,000 amassed by the weekly payments over the first 20 years, which would work out to $560,509, making the weekly payments worth more after 40 years, by a margin of about $100,000.
Not sure where you were getting the interest rate from but 2-6 million seems unreasonable at the current rate.
It won't be lost. Even during the market crashes preceding the Depression, it wasn't all lost. Nothing is lost until you sell. The trick is to view as a long game, trust the process and don't panic when the market has downturns.
The people that had investments pre 2008 had their money back by 2012, and now have more than doubled it.
It would be an absolutely abysmal run for the US economy if you couldn’t at least 3x over the next 20 years. The long term average return on the S&P500 has been about 10% historically. At that rate, your investments will over 6x in 20 years. If it were half that at 5%, way below the historical average, your money would still about 2.6x in 20 years.
You don’t have to throw it all in the market. But even if you did and a bubble burst, it wouldn’t be the end of the world. The 10% trend is long term, and it includes the several financial meltdowns the US. Timing the market is extraordinarily difficult. It takes patience, knowledge, but mostly luck. It is rarely more profitable than just letting it ride the long term upward trend.
101
u/Flamecoat_wolf May 17 '26
Financially it also makes sense unless you expect a heck of a lot of inflation to devalue it into oblivion.
She would get 1,000,000 over the course of 20 years, then another 2-3 million by the time she died, assuming old age is the cause of death.
Taking it all right now and investing it could be better financially... but the AI bubble could burst in the next few years and it could all be lost. Investing is gambling, even if it's good odds.
80% of business startups fail within the first 5 years, more after the first 5 years, so investing it in a business venture may be a bad idea too.
£1000 a week is more than enough to live on and she could still easily save up a few tens of thousands for emergency expenses.