by banknotelover

Created on: April 28, 2009   Last Updated: April 29, 2009

I have never been lucky enough to win the lottery, so I have never won even $20 in my native Singapore's 6 in 45 lotto. But if you are lucky enough to win that one million dollars (or more), I would suggest that you plan what you want to do with that sum of money wisely.

I would definitely suggest that you not waste your money by splurging on restaurants everyday, or buying that new Lamborghini immediately. This is so because if and when you encounter times such as the present, where the economic climate is poor, you may yearn to have that one million back with you to weather the storm. In my opinion, the best way to deal with a large lottery win would be to invest it.

If you win one million dollars in the lottery, if you do not spend it at one shot, inflation would come creeping after you and destroying that one million dollars' purchasing power. And putting it in an ordinary savings account would not be the best way to outrun inflation, given that the officially reported inflation rate in the United States is 4.2% year-on-year. The purchasing power of your one million dollars would be eroded after a couple of years.

As I have stated in the start, I do not advocate spending all your money at one go. This is because the one million can be used in a rainy day. The best way to prevent the purchasing power of your million dollars being eroded quickly would be to invest it.

To know what to invest in, I would advise you to read as many financial books as possible, to arm yourself with knowledge. To quote famous investor Robert Kiyosaki, knowledge is power. I am particularly biased towards Kiyosaki's Rich Dad Poor Dad series, which is great if you are a novice in investing. For me, the best piece of advice I can give you is, always look out for the undervalued asset class of the day, and hold on to it until it gets really overvalued, and then sell. NEVER, I repeat, NEVER buy the hot asset class of the day.

Even if your gardener is asking you to buy real estate or tech stock, you should go and hunt around for something cheap, because the real estate or tech stock would have evolved into a bubble by then. Bubbles always suck currency away from other sectors, so it wouldn't be too difficult to find something cheap (undervalued) to buy.

Then, when the investment you are holding shoots in value to the moon (in other words, becomes overvalued), you should sell it. In investing, do not be greedy. Once you have made a considerable amount, you should sell, before it evolves into a bubble. If the bubble bursts before you sell, you will be in hot soup.

That is all I have to say. To sum up, if you win the lottery, just invest the prize money. What should you invest in? The undervalued asset class of the day. When do you sell? When it becomes overvalued.

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