'A major ongoing financial burden': $2B Powerball winner buys 3rd multimillion-dollar home, Porsche 911 reports say. Experts call it a mistake — 3 ways to better diversify your portfolio
If you were to win the lottery, what would you do with the money? Perhaps purchase a $50 million mansion, complete with a champagne room and DJ turntables?
That’s apparently what Powerball winner Edwin Castro has recently done, according to USA Today.
The publication reports Castro bought a luxury Los Angeles property for $47 million in September. It’s his third high-value home purchase since he won his $2 billion jackpot last year — he’s also bought a $25.5 million mansion in Hollywood Hills and a $4 million home in Altadena, California.
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And luxury homes aren't the only thing Castro seems to be spending his money on. Apparently, he also got his hands on a sweet set of wheels. According to the New York Post, Castro has been spotted cruising in a $250,000 vintage Porsche 911.
Castro definitely seems bent on enjoying his riches, but despite such a large jackpot win, can one afford to keep spending at such a pace?
Financial observers believe Castro is making big mistakes with his newfound fortune. Experts interviewed by Fortune say that buying up luxury items like fancy cars and houses after a big windfall can put you on a fast track to bankruptcy.
Paul Karger, co-founder of wealth advisory firm TwinFocus, told the magazine that luxury homes often become “a major ongoing financial burden that [can take] several years to sell.”
Simply maintaining a home can cost 1% to 4% of its value annually, which means Castro could potentially spend millions of dollars each year just to hold on to such properties. This alone could take a chunk out of his winnigs.
So if real estate isn’t necessarily the best way to spend your fortune, what are other ways to diversify your investments?
Alternative real estate investments
Buying million-dollar homes may not necessarily be wise for lottery winners, but clearly nobody told Castro about alternative real estate investments. These are investments that get you in the real estate market without having to own a physical property.
Real estate investment trusts (REITs) are one of the ways to do just that. REITs own profitable real estate investments, like apartment buildings and shopping centers. You receive dividends from the rent that they collect – all without the hassles that come with being a landlord.
Read more: Owning real estate for passive income is one of the biggest myths in investing — but here's how you can actually make it work
Artwork investments
Billionaires don’t invest in art just for a pretty picture on the wall, but because it can be a great investment. ArtTactic reported a 64% increase in single-owner sales value in 2022.
Though some art pieces can sell for millions of dollars, you don’t need to win the Powerball to invest. You can become a fractional investor in a classic work of art. It’s similar to investing in a stock: you don’t own the entire painting, but just a share of it. Plus, you don’t have to spend hours scouring galleries for the right piece or store it yourself.
Alcohol investments
It’s said that wine gets better with age. That goes for taste and sometimes value as well, as bottles of fine wine become more rare with each passing year.
It’s possible to invest in wine by purchasing your own bottles — but that requires a place to store them at the right temperature, and wine cellars can cost tens of thousands of dollars.
Since not all of us have won the lottery, there exist wine investing platforms that do the hard work for you. That includes selecting, storing and insuring bottles of wine — and they’ll even suggest good times to sell.
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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
