Windfall gain is the exceptional gain (or exceptional profit) is an unexpected gain in income that could be attributable to a lottery, unexpected inheritance or supply shortage. Exceptional gains are transitional in nature.
Sometimes, when fortune smiles down on you, it is not difficult to get hands on a windfall gain. There are countless ways you can acquire it. It might be from a lottery you took, an inheritance from a dead aunt you never knew, it might be from the game show “Kaun Banega Crorepati…” or whatever. Never mind where you get it.
How to Invest Your Windfall Gain
The main issue is what will you do with such a windfall gain?
Now, the problem here is not how to invest windfall gain to make more money out of it but to maintain it and to make it grow. This is where many of you ‘lucky’ people suddenly get unlucky again. We just don’t know how to handle large sums of money at one time and we get confused a lot. When the confusion overwhelms us, we begin to spend money in the most unproductive manner. Before long, you will find yourself in your old unlucky state.
Therefore, be smart with your money and invest windfall gain smartly. We found following ways to invest your windfall gain. If you follow these investment ideas, you can, of course, stretch your legs and retire early in peace.
2. Invest in Mutual Funds: The tendency to take risk rises when you get a windfall because you did not feel the hardship in making it. To make money many squander their windfall gains at the stock exchange. If you do not have any prior knowledge about the market, do not invest in shares directly. Many will advise you to do it but once you are in it, it is hard to escape the lure and you will end up with nothing. Nevertheless, without taking risks you cannot make your money grow. So, the best option is to invest in Mutual Funds. There are highly respected fund houses like HDFC, ICICI etc. that gives you good returns. These fund managers know what they are doing and definitely knows a whole lot more about the markets than what you do. Therefore, let them do the trading and you can sit back and relax while you get handsome returns.
However, Mutual Funds are highly risky and you must be ready to take that risk. Anyway, this risk is much lower than if you had invested in stocks directly. Plan how much risk you are willing to take for the returns the fund managers are promising and invest only that much into it.
3. Invest in Insurance: Though insurance comes under tax saving schemes, this is added as a separate point in order to emphasise its importance. Taking insurance might not be an investment option but it makes sense when considering it as an investment against unfortunate events. Remember, your windfall gain was good fortune, likewise, unfortunate events might also happen.
Taking life insurance policy alone is not enough. You must also go for medical insurance that covers against diseases and accidents. There are schemes, which insure the health of your whole family too.
The most unexpected and huge expenses are usually related to medical care. Therefore, taking medical insurance will actually see to it that your money is not spent unnecessarily on medical bills. Besides, don’t worry that you will be losing money on medical insurance. There are offers that give you free check ups and treatment if you don’t claim any medical bills. This helps you to be aware of your health and also to maintain a healthy lifestyle.
3. Invest in Debt Instruments: Bonds, Government Securities, Corporate bonds etc. are all debt instruments. The purpose of investing in these instruments is to get continuous and moderate income. Debt instruments are not risky except for corporate bonds. So you can be sure that you will be getting a regular flow of income without being tensed.
Do not invest in long term bonds that might run for 20 or 30 years. Invest in medium term bonds because interest rates keep changing and you need to change your holdings in bonds, occasionally, to bonds that give you lower rates.
4. Invest in Bullion: Gold and Silver are shining like never before. As Indians, we have this penchant for bullion. However, the good news is that you can spend your money on this weakness. Gold has been growing rapidly these last few years and has given abnormal profits for those who were invested in it. Besides, this serves as a store of value and shields your money from inflation and weakness in the economy.
Buy jewellery for you wife and children, but make sure you invest more in gold coins and bars than in jewellery. This is because jewellery costs you more in making charges and sometimes the gold is not pure, so you would not get your money’s worth.
5. Invest in Small Business: If you have the entrepreneurship bone in your body, then use the money to start a business of your own. Study the pros and cons of your venture very thoroughly before starting. In addition, don’t invest all that you got in it. Put in an amount and keep the rest for other investments and as reserve money. Try to get funding from banks or from friends and relatives. Now there are Venture Capitalists who might be interested in giving you the extra funding.
When we get a windfall gain, most of us make entertainment the first priority. The downfall begins there. Once having fun is your priority, then maintaining your money will be an impossible thing to do. So have fun within your limits.
Making the best of the opportunities that providence gives us is what smart people do. A windfall gain is an opportunity to change your life forever. If you play it smart, you can live the rest of your life the way you want. However, if you don’t, then you are going to regret it every single day that you live on this planet.
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