If you are fortunate enough to win, learn how to invest lottery winnings. When we suddenly come into a lot of money, especially through winning a lottery, we can be overwhelmed and confused as to where to put it or invest it. The first order of business is to not do anything until you seek out the advice of financial advisor. Expect that proverbial over-turned rock to produce any number of shady and dishonest characters to come crawling out who want a piece of your windfall.
- Find a good Financial Advisor. Go to Finra.org to get a background check on any advisor to find out if he or she has any client complaints against them. If so, you don’t want to entrust your money to that person. When you find an advisor you trust, follow his or her advice, but also do your homework and learn of the various investment opportunities you have available so that you can make your own educated decisions.
- Start with stocks. Trading common stocks is the most basic and popular form of investment options. Buying common stock offers an opportunity to outpace inflation and increase the value of your investment based on a company's performance. However, it has it's risks and rewards. The value of your investment will go down if the company under performs. You may sustain a loss even if a company does well due to stock market fluctuations.
- Consider Bonds. There are three types of bonds: government bonds, municipal bonds and corporate bonds. Municipal bonds yield the lowest interest, but are relatively safe and are federally tax free. Government bonds are the safest investment, but don't pay high interest. Corporate bonds usually pay the highest interest rate, but are the riskiest of the three.
- Look into Mutual Funds. When you invest in mutual funds, you're hiring others to manage your assets instead of doing it yourself. The advantage to mutual funds is that you already have a history of performance or track record.
- Evaluate Index Funds. An index fund is a type of mutual fund that is made up of a number of stocks, which represent a stock index, such as the S&P 500. When you invest in an index fund, you're investing in not just one company, but as many as those in the index. You can also invest in a specific index, or sector, such as Energy, Pharmaceuticals or Health Care.
- Investigate other investment options. Look into other investment options, such as Annuities and Options, but be aware that options are much more complicated than stocks or bonds and can be much more volatile.
- Protect you money. However you decide to invest your lottery winnings, remember to seek the advice of qualified professionals and only use a certain percentage of your winnings for investment. Don't gamble with your money. You may have gambled and won once, but don't gamble and lose now.
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