If I Inherited a Large Sum of Money

If one were to inherit a large sum of money, it would be very tempting to spend it frivolously on material goods or vacations. However, it would be more beneficial in the long run to make sure to do research and come up with a plan on how to invest it in such a way that your wealth would grow. There are short term and long term investment options, both of which can be useful. Short term options, such as certificates of deposit and money market funds, are a good place to keep your money when you need to put it away for just a short amount of time, and are low risk, low reward. Long term options, such as stocks, bonds, and mutual funds, require money to be put away for a longer period of time, pose a greater risk, but also offer a much greater reward than the short term options.

The state of one’s portfolio, or the collection of all of their investments, depends on the age of the person. Someone who is younger would benefit more from investing in long term options, because they can afford to part with that money for a longer amount of time. This will make their portfolio more high risk. Older people, because they are close to retirement, will want to be able to liquidate their investments in the near future, and would be more likely to choose short term investments.

The most common and safest short term investment is a savings account. It gives a small amount of interest with no risk of losing money. It also will not help gain much money, however. A money market fund will give a slightly higher return. A money market fund is like a mutual fund, (which will be discussed later) except it is much more short term. The most lucrative short term savings option is the certificate of deposit. When you take out a certificate of deposit, or CD, you put away a certain amount of money for a certain amount of time, and do not get that money back until the time expires. You do, however receive interest payments much higher than that of a savings account.

The most common long...