Mom finds $18M in old account

Sarah, a 50-year-old Seattle homeschooler, discovered her forgotten employee benefits account from a tech company had grown to roughly $18 million. She called The Ramsey Show seeking advice on what to do with the unexpected windfall.

One stock is scary and unwise

Dave Ramsey told Sarah that having nearly all her net worth in a single stock is risky. He recommended she offload shares and diversify her investments across multiple assets.

“scary and unwise”

Tax bill could be massive

Selling even a fraction of Sarah's $18M position would push her into the top federal tax bracket. The federal capital gains tax rate is 20%, plus Washington state adds another 7%.

Diversify despite the tax hit

Ramsey was clear that Sarah should diversify away from the single stock as soon as possible, even if it costs her money in taxes. Safety matters more than maximizing after-tax returns.

“If I'm you, even if it costs me some money, I would rather have the safety than I would the extra 20%”

Hire a tax expert to plan

Ramsey recommended Sarah work with a financial planner or tax advisor to minimize her tax bill while liquidating shares. Platforms like WiserAdvisor can match you with vetted professionals for portfolios over $250,000.

Time in market beats timing

Sarah's windfall shows the power of staying invested long-term. The investing principle that time in the market beats timing the market was popularized by Warren Buffett and other experts.

Most investors fail at timing

Most investors struggle to find the right stock at the right time and price. Trying to time the market often leads to buying at peaks and selling in valleys, destroying returns.

Buffett's buy-and-hold approach

Warren Buffett doesn't try to time the market. His philosophy is to buy wonderful companies at fair prices and hold them for the long term, letting compound returns build wealth.

“It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price”

But market downturns are risky

Sarah's set-and-forget approach worked, but it exposed her to massive losses in a market downturn. A safer strategy is regular investing in diversified index funds like the S&P 500.

Index funds offer better security

Low-cost index funds tracking the S&P 500 provide better diversification and wealth preservation than single stocks. They give you a secure foundation to build the rest of your portfolio.

Market downturn could be coming

Goldman Sachs CEO David Solomon warned there could be a 10 to 20 percent market drawdown in the next 12 to 24 months. This makes diversification not just smart, but essential.

“It's likely there'll be a 10 to 20% drawdown in equity markets sometime in the next 12 to 24 months”

Consider real estate investments

Beyond stocks, Sarah should explore other assets like real estate. Monthly rental costs increased in 20 percent of American counties between 2020 and 2024, creating investment opportunities.

Accredited investors have options

Platforms like Bonaventure and Lightstone Direct offer accredited investors access to institutional-grade multifamily real estate with minimums of $25,000 to $100,000. These deals offer tax advantages and passive income.

Lightstone has strong track record

Lightstone, one of the largest privately held real estate firms with $12 billion in assets, has delivered a 27.6 percent historical net return and 2.54x equity multiple since 2004. The firm invests 20 percent of its own capital in every deal.