While one man revels in the glory of winning $232.2 million in the Super Lotto, most of us can only dream of having that much cash (less tax) in hand and being faced with the task of deciding how to invest it.

The lucky gentleman last month purchased his winning ticket at a Shell Service Station in Mandeville, Manchester at the $150 split price option offered in the game. He won $232.2 million from the September 27 $387 million jackpot because of the split price purchase.

Imagine you were him.

Prepare yourself mentally for sudden wealth, the opportunities it will present and the challenges which may arise — afterall, it is often said that more money leads to more problems, which appears spot on when one considers the many hard luck stories among lottery winners culminating with a lot of them ending up broke.

How you invest your windfall will likely determine whether you will be financially secure for a lifetime or be the subject of one of those sad documentaries on E! Entertainment Television.

Having a mansion in the hills is one of your life-long dreams. You want to clear your mortgage, buy a car, enrol your child into a prestigous university et al. Additionally, your riches may attract family members, friends, charities and even strangers asking for financial gifts and loans — a well documented ingredient for financial misfortune of multi-million dollar lottery winners.

The wise thing to do before distributing your winnings is to see a wealth management expert, paid to give you advice on how to handle your money. Sunday Finance sought the expertise of three wealth management advisors — Mayberry Investment’s Erica Crawford-Bryan, VMWealth’s Colando Hutchinson and JMMB’s Roy Reid — each creating their own imaginary profile of the lottery winner and telling us how they would advise him to invest his millions.

Erica Crawford-Bryan – Vice President Sales and Client Services, Mayberry Investment Limited

Let us assume that the winner is an average Jamaican who is not a savvy investor. A rule of thumb for investment purposes is that between five to 10 per cent should be kept in cash on hand. In keeping with Financial Services Commission requirements for pension funds as to the percentage that can be invested in equity, of 20 per cent we can maintain 15 per cent of the winning in equity and divide it between the junior and main market. In the long term, historically, equities give the highest returns.

Jamaicans are ardent believers in real estate and we are going on the premises that the winner is an average person who has little or no investment experience — they will want to do capital purchases such as real estate. They can receive income from real estate that can be invested on fixed income instruments.

In maintaining long term purchasing power the US dollar portfolio can create diversification in currency, different countries and sectors that theses funds can be invested by way of Global bonds. These bonds will provide consistent income streams and possible capital gains.

The Jamaican dollars that will be used for fixed income can be for medium to long term which will enable the investor to take advantage of any opportunity that may come up while getting a higher rate of return on his JMD than holding same in a commercial bank.

Ensuring that this sum of money is a foundation for a higher standard of living is critical to enjoying your new found wealth. While we don’t know who the winner is or what their financial goals are, we did decide to present a very general way to allocate the winnings. Here is the breakdown:

Junior Stock Market Equities $13,920,000

Main Market Equities $16,240,000

US dollar demoninated bonds $58,000,000

JMD dollar dominated bonds $19,720,000

US dollar Mayberry managed fund $5,800,000

Cash $11,600,000

Real estate $104,400,000

Charity/Donations $2,320,000

Total $232,000,000

Colando Hutchinson – Manager, Asset Management, VMWealth Management

Based on the assumption that the investor is a 40 year old employed husband and father of 2 children between 7 and 14 years old, we would recommend that he uses no more than 15 per cent to improve his family’s lifestyle (approximately $25 million in personal assets such as residential real estate and motor vehicle). The Super Lotto winnings of $232.2 million would be reduced to $174.15 million after taxes and a further $25 million for immediate lifestyle needs, leaving $149.12 million for his investment portfolio.

We also assume that his risk appetite is moderate and that his time horizon is 40 years, that is, 20 years to retirement and another 20 years in retirement. The liquidity needs of the portfolio will be mainly to provide cash flow to cover living expenses over and above his regular income and lump sums to cover the education of his children. Based on his investment return objectives, risk appetite, time horizon and liquidity needs and given the size of his holdings his priority should be capital preservation first and revenue generation second. Based on these assumptions we recommend his investment portfolio be allocated as follows:

Five per cent is kept in cash to provide for living expenses and funding for emergencies that may arise.

Bonds provide an anchor to the portfolio and, if held to maturity, also preserve capital. Bonds also provide regular streams of cash flow that could be used to cover living expenses. These bonds will be held in USD to provide a hedge against currency depreciation and local inflation. They are also relatively liquid and can be sold whenever the need arise.

Stocks have proven over the long term to be a good inflation hedge and dividends and capital gains are tax free. While in the short term stocks may seem risky, they have proven over the long term to have higher potential returns than other asset classes. Based on the large size of his portfolio and our assumptions of the time horizon of 40 years, the client is also in a position to assume the risk return tradeoff that results from the exposure to equities.

Real estate historically has a low correlation with the other asset classes discussed and therefore a 15% exposure is recommended to achieve diversification benefits. The most cost effective way to get this exposure without actually holding the physical asset is through real estate investment trusts (REITs), which are available locally and abroad.

Roy Reid – Manager, Client Portfolios & Investment Strategies, Jamaica Money Market Brokers

At JMMB, we believe in assessing our clients along the bases of risk tolerance, return objectives and their investment time horizon. This happens as a result of getting to know that client and building and maintaining a relationship which ensures that the portfolio recommended is one that has his/her best interest at heart.

As we do not know the extremely lucky individual who will now have these funds to build out an investment portfolio, generic projections will be provided. There is the possibility that the $232 million winner is an entrepreneur, or has entrepreneurial aspirations, and as such will need to channel funds from this windfall to invest in that enterprise. Typically, we would also like to know about this individual’s current portfolio holdings and where his assets are concentrated. In terms of debt, it may be in the winner’s best interest to liquidate whatever debt he has, depending on its carrying cost and the nature of those obligations. No doubt as well, the individual may recognize that they will inherit new friends and family members who may try to position themselves with some expectations of partaking in this windfall. The winner may therefore need to decide upon a set portion of said funds allocated to this possibility. At JMMB, this diversified portfolio will provide the client with opportunities for:

o Long-term capital appreciation and tax efficient investment options through its exposure to equities and real estate. The real estate portfolio can also be a source of income by way of rental for the investor depending on how the investor chooses to structure this investment

o Consistent income generation from its bond holdings. This income generation will occur at fixed intervals and will be hard currency denominated

o Hedging currency risk by exposure to commodities and hard currency investments

o Access to liquidity for one-off, recurrent and emergency expenditure by way of its cash holdings (JMMB Sure Investor and SaveSmart investments)

o Being socially aware and responsible by sharing of good fortune with the less fortune with charitable donations

The portfolio is deliberately structured in this way, to ensure that this lucky winner will have a financially secure future.

At JMMB, we are looking forward to the opportunity to engage this very lucky individual in building out an investment portfolio specific to their financial objectives and with their best interest at heart.

Cash $6,960,000

US$ Bonds $116,000,000

Equities $46,400,000

Real Estate $53,360,000

ETFs $9,280,000

Total $232,000,000