OK the title of today’s post is a bit hyperbole, it’s not aimed at educating someone with an enormous inheritance, but it does offer advice for more modest (and more common) inheritances:
How to invest your enormous inheritance [Elm Wealth] – “Some cheery news is that the question of how to invest, which sounds like the hardest part, need not be solved perfectly. In theory, this would mean finding the blend of risky assets with the best volatility-adjusted return, and comparing it with the “safe” return on inflation-protected government bonds. You would then solve for an optimal split between the two, which would vary with market conditions.
Thankfully, far simpler procedures can produce spectacular results. Our putative 20th-century millionaires just plonked everything in America’s stockmarket, and did very well. Today, we know they could have done even better without much more effort. A simple rule-of-thumb known as the “Merton share” can approximate the optimal split between stocks and inflation-protected government bonds, by comparing their expected returns and volatility.”