Weekend reading: Think first if a windfall flies into your life

What caught my eye this week.

A lot of people daydream about what they’d buy if they won the lottery. This chance to fantasize is probably the most tangible benefit of a lottery ticket.

Not me, though.

I appreciate this is almost-too on-brand – but I daydream about how I’d invest it.

I’ve told friends and family they wouldn’t even know if I won the lottery. I’d simply scale up my investing, and maybe slack off the little paid work I still do.

Eventually they’d see me spending more – hopefully on experiences we can share, as much as mere ‘stuff’. But nobody would know it wasn’t just from my portfolio finally paying off.

Nope, as a closet/Bohemian investor for decades, a run-of-the-mill lottery jackpot (low seven-figures say) would first just make for some chunky extra entries in my return-tracking spreadsheet.

In it to win it

Perhaps you think this is desperately sad?

Fair enough. But do consider the surprisingly terrible track record of lottery wins ruining lives.

Against that danger, I believe my strategy of turbo-charging my existing way of life with an extra million or two – rather than racing to build a hot tub on my shed or to buy a pet tiger – has psychological merits as well as financial ones.

Indeed, you should be careful what you do if you receive a windfall of any size.

That’s because a significant lump sum has the potential to compound meaningfully for the rest of your life – with all that possibility for more freedom and independence – while at the same time a big windfall can easily implode your current cozy way of life like a fiery meteor landing in your living room. Upsetting all your arrangements and generally freaking you out!

Anyone who gets a big lump sum out of the blue has had one of life’s luckiest financial breaks.

But it can cause – and may come with – mental issues that need to be worked through, from guilt at sudden wealth, to sadness about where the money came from (the death of a parent or spouse, for instance).

It could be you

For these reasons, Advisor Perspectives this week also urged doing nothing fast if you’re fortunate enough to get a windfall:

Whatever the situation, I always tell clients who receive a windfall to do nothing for an entire week. Absolutely nothing. They must give themselves time for the reality of their new circumstances to settle in.

That’s because windfalls are usually the result of something that has happened. And that, in turn, can trigger our emotions.

Stepping away from the fray and doing nothing is underrated in many areas of investing. This is another one.

Now you might think that as a regular Monevator reader you’d be a rational Vulcan if a life-changing lump of dough was suddenly bunged into your financial oven.

And perhaps you would be, long-term.

But in the short-term we’re emotional creatures. Which can make you temporarily crazy. And once you go the wrong way, things can escalate.

So let’s have some fun…what would you do if you won a million pounds?

Buy a boat? Abandon a life of frugality and speed past the Jones’s? Start betting on risky growth stocks to aim for ten million? Spread the lot across a dozen (FSCS-protected!) bank accounts to ensure you were set for life, at least if you ignore inflation?

Share your fantasies in the comments below. And have a great weekend.

From Monevator

Can you smell financial bullshit? – Monevator

Best savings accounts rates – Monevator

From the archive-ator: Why your house is an investment, and an asset too – Monevator


Note: Some links are Google search results – in PC/desktop view you can click to read the piece without being a paid subscriber. Try privacy/incognito mode to avoid cookies. Consider subscribing if you read them a lot!1

UK house prices hit record £289,099 but market set to cool… – Yahoo Finance

…and house-building has already slowed to May 2020 levels – Reuters

Why it could soon cost over £100 to fill a car with petrol – BBC

UK to see slowest growth of developed nations – BBC

Covid infections rising, third wave of 2022 predicted – Guardian

Treasury’s failure to manage rising interest rate risk has ‘cost’ £11billion, claims think tank – NEISR

Taser-maker Axon abandons plans for an armed drone after its ethics board resigns – NBC News

Is the global housing market heading for a downturn? [Search result]FT

Products and services

How to pay off ‘buy now, pay later’ debts with Klarna, Clearpay, and Laybuy – Which

Open an account with InvestEngine via our affiliate link and get £25 when you invest at least £100 (new customers only, T&Cs apply) – InvestEngine

How will the government’s Universal Credit mortgages and new Right To Buy work? – ThisIsMoney

Ground rent on new leaseholds to be banned from 30 June – Which

How to make your expensive petrol go further – Guardian

Tesco Clubcard Plus review: is it worth £7.99 a month? – Be Clever With Your Cash

Raisin platform launches four new Best Buy savings accounts – ThisIsMoney

Homes for sale with an orangery, in pictures – Guardian

Comment and opinion

Why one passive investor says it’s time to eschew the Chinese market – Humble Dollar

Money is emotional, but personal financial advice rarely accounts for that – Vox

Solve life backwards – Of Dollars and Data

History tells us UK interest rates will go up and up [Search result]FT

Can we get more positive about getting old? – A Teachable Moment

Facing the fear of running out of money in retirement – Compound Advisers

Growing up poor messes with your mind – Get Rich Slowly

Cash flow is not always king in real estate – Banker on FIRE

Complacency – Indeedably

The problems with market-cap-weighted index funds [Nerdy]Advisor Perspectives

Crypt o’ crypto

An investor’s guide to crypto [Research, PDF]SSRN

Do connections pay off in the Bitcoin market? [Nerdy]Alpha Architect

Private equity ‘liquidity laundering’ mini-special

Cliff Asness asks whether private equity really rewards you for illiquidity risk – Institutional Investor

Avoid funds that just conceal the underlying volatility – Aleph blog

Naughty corner: Active antics

Short-term performance is everything – Behavioural Investment

UK small cap stock-picking legend Simon Knott retires after four decades – The AIC

The most shorted stocks on the UK market – Morningstar

Everything investors need to know about risk parity [Podcast via YouTube]Validea

Biotech returns: 30 years of disappointment – The Evidence-based Investor

Extremely successful? Extremely lucky! – Enterprising Investor

The work-life struggle continues mini-special

Four-day week could be within reach for British workers – Guardian

What is life like when we subtract work from it? [On sabbaticals]The Atlantic

Staff still not up for returning to the office… – NPR

…even as some studies suggest remote work might be hitting a wall – Axios

Kindle book bargains

The Dealmaker: Lesson’s From a Life in Private Equity by Guy Hands – £0.99 on Kindle

Think Like A Rocket Scientist by Ozan Varol – £0.99 on Kindle

Stuffocation: Living More With Less by James Wallman – £0.99 on Kindle

Creativity, Inc. by Ed Catmull – £0.99 on Kindle

Environmental factors

After years of expansion, the world has passed ‘peak agricultural land’ – BigThink

Wild mammals are making a comeback in Europe, thanks to conservation – Our World in Data

Off our beat

Once in a lifetime – Morgan Housel

What one chap has learned about growing old as he approaches 60 – Guardian

Kermit the Frog imagined in various movies by the DALL-E AI [Images]via Twitter

In the future, every business will be a Ponzi scheme for 15 minutes – Dror Poleg

The world began getting rich 200 years ago in England. Why? – Vox

This week’s confidence vote showed the merits of the UK’s unwritten constitution – Prospect

How harmful is social media, really?- The New Yorker

Design expert says new tube map with Crossrail is garbage – offers reworking, via PostImage

And finally…

“Stock prices express the collective expectations of investors, and changes in those expectations determine investing success.”
– Michael Mauboussin, Expectations Investing

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What would you do if you won the lottery? Plus the week’s good reads…
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