Quora Answer: How Would You Turn $500,000 into $1 Million, at Low Risk?

The following is my answer to a Quora question: “If you saved $500,000 in cash, and wanted to quickly turn it into $1 million, without tremendous risk, what would you do?” 

There is no such thing as quick and low risk.  And there is no such thing as a guarantee.  What we can consider, however, are options for the best investment strategies.  This is an option that may be available wherever you are, although the numbers may vary. 

The fastest way to turn an estate of $500,000 into $1 million with virtually no risk is actually an insurance policy.  Putting that money in a premium immediately creates an estate close to that amount.  Unfortunately, that means you cannot spend that money on something else, if that was the intent.  However, certain plans allow you to borrow on the policy up to 90% of the paid-up value.  Working with rough numbers here, putting that amount into a single premium paid up policy can create an estate of perhaps $750,000.  You then borrow from the policy 90% of the paid-up value.  In this case, since the premium is $500,000, you can borrow $450,000. 

You can take this amount and invest it further.  Divide the amount into two portions along the 60:40 ratio.  Put the 60% into something of lower risk such as bonds and other debt instruments.  Avoid derivatives and anything leveraged.  Put the 40% into something of higher risk.  The idea is to generate income sufficient to cover the interest of the loan and inflation.  This is the tricky part, and you may require the services of a professional financial consultant. 

The money in the funds should not be static.  If that as the intent, then the entire principal sum could have been put in the fund and look to generate that amount over the course of 15 to 20 years.  A basic investment plan or even an insurance-linked plan will do that.  This is considered low risk.  According to this plan, the funds are to be actively managed to take advantage of the cycles in the market.  Using strategies such as dollar averaging and paying attention to the fundamentals of the market as opposed to trends, you should be able to conservatively pay of the loan, cover the fees, and still generate income enough to reach $1 million between 5 to 10 years depending on your risk appetite.  Please note that you have to be aware of the interest rate of the loan, the type of loan against the policy, and the inflation rate where you are.  You may then adjust the timeline, and investment strategy. 

Another method, and this will only work if you have the contacts, is to put your money into fine art.  There is a specific category of it. The ROI is about 50% over 3 to 6 months depending on the piece.  In this case, you do not even need to have an appreciation for it, or take custody of the piece.  What you are actually paying for is the paperwork certifying the authenticity of the piece.  Leave the piece with the artist for it to be exhibited.  Keep the paperwork very carefully.  Because the piece is exhibited, it generates interest and this increases the price.  Every time there is an enquiry, the exhibitor will inform you of it along with the offer price.  Once it has reached a price you are comfortable with, sell, and repeat the process.  There is a demand for certified fine art by award winning artists because of the tax breaks.  In many places, donating an art piece to the appropriate public institution is rewarded with a tax break of up to 300% for the patron.  This percentage is based on the price of the piece at assessment, not the price when bought.