What are the options to invest my lump sum?

When deciding about how to invest a lump sum, regardless of its origin, a good starting point is to consider the purpose that the funds will serve for your family.

One approach is to use the UBS Wealth Way framework, which begins with a series of key questions to assess what’s most important for the family:

• What do you want to accomplish in your life? What are your short-, medium-, and long-term goals, and how do you define financial success? What are your priorities, and what trade-offs are you willing to make?

• Who are the people that matter most to you? Who do you take care of financially? What more do you want to do for them? Are they financially prepared for the future?

• What do you want your legacy to be? How do you want to make a difference? What portion of your wealth do you want to pass on? What causes do you care most about?

• What are your main concerns? Do you have enough wealth to achieve your goals? How do you decide between spending, saving, and investing? How do you manage financial risk and uncertainty? • How do you plan to achieve your life’s vision? Who do you turn to for financial advice? Do you have a financial plan? How do you track progress?

Answers to these questions are vital to building a purpose-built asset allocation, which can be segmented into three key strategies that aim to align your family’s resources with your financial objectives:

1. Liquidity—to provide cash flow for short-term expenses

When it comes to investing, one of the biggest risks is being forced to sell assets at discount prices during a bout of market volatility. By assessing the family’s cash flow needs over the next three to five years, and setting aside resources dedicated to meet these cash flow needs regardless of short-term market conditions, our goal is to create a buffer between cash needs and market returns.

Funding your Liquidity strategy with low-volatility assets such as cash and bonds—as well as borrowing capacity—can help to reduce the risk that you will be forced to sell assets with high return potential at the wrong time, and can give you the confidence to invest the rest of your wealth with less worry about short-term performance.

2. Longevity—for longer-term needs

These assets are earmarked to satisfy spending for the rest of your lifetime. With short-term cash needs being met by the Liquidity strategy, your Longevity strategy assets can be invested with a focus on long-term growth, with an asset allocation tailored to your risk appetite and your family’s aspirations.

3. Legacy—for needs that go beyond the investor’s own

This strategy is assigned to improve the lives of others, both for your family and for other people and causes that you care about. Your family’s Legacy strategy may include cash flows lasting beyond your lifetime, including philanthropic goals and assets earmarked for future generations.

Given the very long investment time horizon for this portion of your wealth, we generally recommend investing in a growth-oriented portfolio with a heavy allocation to stocks and investment themes that seek to profit from long-term secular trends in society or technology. Because these funds do not have many short-term liquidity needs, you can allocate a greater share of the asset allocation to investments that offer an illiquidity premium, such as private equity funds.