How to invest cash settlement after car wreck?

Bankrate.com

Don Taylor

Don Taylor

Dear Dr. Don,
I'm 23 years old, and have just come into a large settlement from a car accident. I have paid off my student loans and have about $400,000 left. I understand that return of investment is more important than return on investment but have no idea where to start. What should my first steps be?

Thanks,
-- Evan Egregious

Dear Evan,
Your first step should be to determine what you want that money to accomplish. If the intention with the settlement was to compensate you for continuing health care and disability issues, that requires one approach. If you were awarded a settlement for pain and suffering or punitive damages that doesn't have health care or disability-related issues, you might just be looking for an investment plan.

You should indeed be concerned about both the safety of your principal and return on investment. When you invest, you should expect to get your initial investment back and to earn a high enough return on your investment that purchasing power increases over time.

I'd recommend against a do-it-yourself approach to investing this money. Find a financial planning professional who will work with you to establish goals for your money. The approach to investing should maximize the probability that you achieve those goals. I recommend you interview several fee-based financial planners and find one you're comfortable working with to invest this money. The National Association of Personal Financial Advisors, or NAPFA, has more information to help you with the process.

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