NMFN: LC, LE, WI, Inheriting Wealth and Investment Strategies

An inheritance from a family member or friend is an acknowledgement that a special person in your life wanted to plan for your future. If you inherit money, even a modest amount, the first thing you should do is nothing. You need time to deal with the loss of a loved one, and slowly consider your options so you don't make an impulsive decision.

The best thing to do is think carefully before making any decisions about how to use your inheritance. This money isn't part of your budget. You weren't planning on it. Think about what kind of progress you could make toward retirement or college funding goals.

Are You a Risk Taker?

If you've never paid much attention to the stock market, receiving an inheritance provides a great opportunity to educate yourself. One of the basic principles of investing is risk tolerance. Your risk tolerance defines how comfortable you feel with market volatility. Once you have an idea how you handle risk, you can think about what sorts of investments best suit your risk tolerance.

A Northwestern Mutual Financial Network Representative* can help you define your risk tolerance using a tool called the Investor Profile. Through a series of exercises, the Profile helps your Representative identify your risk profile and investment objectives and shows an Asset Allocation Model that may be appropriate for you.

Is Time on Your Side?

Depending upon your current needs, your inheritance can be used to produce immediate income or fund a long-term growth strategy. If you are able to leverage the power of compound growth, you should. Whether that means you begin to live off your inheritance now and allow your current investments more time to grow, or that you sock away your inheritance for use in the future, take advantage of compound interest to grow your investment portfolio.

Investment Vehicles

A variety of choices are available to you. Seeking the guidance of a professional as you make your decisions will prove to be invaluable.

Some beneficiaries decide to use their inheritance to establish a trust fund. A trust is one way to direct your inheritance toward a specific purpose while putting it in a particular investment.

You may also decide to invest the inheritance in mutual funds. A variety of mutual funds exist. Some are comprised of stock from a specific industry. Some are patterned after major indexes. There are many, many others with different compositions. Mutual funds offer varying levels of risk.

Regardless of what you choose to do with your inheritance, you should be aware of what sort of tax consequences your decision will trigger.

Put your inheritance to work for you. By assessing your risk tolerance and financial goals, a Northwestern Mutual Financial Network Representative can assist you in refining your strategy and recommend the vehicles that will help you achieve your goals, all based upon your individual profile.