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Dr. Don Taylor, CFA, Bankrate.com advice columnistInvesting your lottery winnings

Dear Dr. Don,
How can I insure a $50 million lottery win? FDIC insurance deposits with a bank only insures up to $100,000 per account holder. Will any bank accept a $50 million dollar CD and insure that money?
-- Lucky Guy

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Dear Lucky Guy,
Congratulations on your big win. The first thing I'll suggest is that with $50 million you can afford to pay for advice from a financial service professional. No, Dr. Don isn't prospecting for your business. It's just that you'll need more help than you're going to get in this column.

One way to get Federal Deposit Insurance Corp., or FDIC, insurance on $20 million of the $50 million is to use CDARS, the Certificate of Deposit Account Registry Service. You deal with one bank and CDARS works with that bank to ensure that all of your deposit is FDIC-insured. I've written about CDARS before and suggest that you read that column and also check out the CDARS Web site.

For the balance, U.S. Treasury securities are considered risk-free investments when held to maturity. You do face some price fluctuations day to day with changes in market interest rates, but the government guarantees the face value of the security at maturity.

You can own these securities in a brokerage account or in a Treasury Direct account. The brokerage firm in most cases will be a member of the Securities Investor Protection Corp., or SIPC. The SIPC is much different from the FDIC, but it does provide a measure of protection from fraudulent brokerage firms. Here's what the SIPC says in its brochure, "How SIPC Protects You."

SIPC helps individuals whose money, stocks and other securities are stolen by a broker or put at risk when a brokerage fails for other reasons.

The SIPC doesn't guarantee that your investments won't lose value, it just steps in to protect you from theft of your securities or the failure of a brokerage firm. Investments held as cash are protected only up to $100,000.

If it were my millions, I wouldn't hesitate to invest in U.S. Treasury securities in an account with a national firm, many of the large regional firms, a brokerage account with one of the large mutual fund companies or Treasury Direct.

Finding a home for this money while you're deciding how to invest is one thing. Sticking it in CDs and U.S. Treasuries will protect your principal, but you can do a lot better without taking on a lot of risk, and you're probably going to want to expand your approved list of investments. Municipal securities, for example, can provide tax-exempt income, but alternate minimum tax considerations means you'd want to consult with a tax professional about investing in municipal securities.

Try to get the big picture about what life goals you want to achieve with this money and what you'd like to accomplish with the remainder of the money after you're gone. I'd actually focus on the life goals aspect before getting too deep into the how-to-invest-it part. To that end, the Treasuries and CDs are fine for the short-term.

I wish I had someone to recommend for you on the life-goal side, but I started out telling you that you'd need more advice that I could give you in this column. A life coach seems like a reasonable place to start. Just don't listen to any advice about investing in a life-coach franchise.

To ask a question of Dr. Don, go to the "Ask the Experts" page, and select one of these topics: "financing a home," "saving & investing" or "money."

Bankrate.com's corrections policy -- Posted: Feb. 21, 2006
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