The five keys to investing the Christmas Lottery Jackpot well

The overflowing joy that invades people who win a great prize in the lottery is intrinsically linked to the anxiety caused by not knowing what to do with money, in the event that the prize exceeds all expectations and is useful for more to plug some holes. Buying a house, buying a good car, taking an unforgettable trip, going shopping without spending limits … Who has never dreamed of doing this after suddenly winning a great prize? But another question also arises, how to spend the prize wisely and without causing disaster in the long run? Pablo Gil, Head of Strategy at the investment agency XTB, answers the five questions that an award winner should ask himself when he has a grand prize.

How should the money be deposited in the bank?

In the first place, as to collect the prize the only requirement is to have the tenth, it is necessary leave a written record of who shares the ticket and the amounts that are played, to avoid that whoever has the tenth collects it and does not distribute it. A simple method is to make photocopies of the tenth, indicate the amount that each one plays and sign it. You can also serve an image of the tenth sent via WhatsApp to the group that shares the lottery. Although it is not a 100% reliable mechanism, if there are problems, both systems will serve as evidence in the event of a trial. It is important to specify the amount that each one plays not only to receive the corresponding prize amount, but also because the taxes are distributed in that same percentage. If the tenth is awarded each participant must collect their share directly, because if one person collects it and distributes it, it could be considered as a donation and is subject to other taxes. What the OCU does not advise is that one person collects the entire prize, without identifying the other participants, since when distributing it it may appear that they are donating the money, which would force the payment of the donation tax.

What percentage does the Tax Agency keep and from what amount are taxes paid?

Of what you win in the Lottery, you will have to pay the Treasury 20% of what exceeds the exempt minimum, which is currently at 40,000 euros. In other words, if you receive a prize of 40,000 euros, you will receive it in full. But if the prize is 60,000, the first 40,000 he receives in full, but for the remaining 20,000 he will pay 20%, that is, 4,000 euros in taxes.

What types of loans should we repay? Is it advantageous to cancel the mortgage on your habitual residence?

The most expensive loans are usually those that we have acquired for consumption, since they have a higher interest rate. In contrast, mortgage rates are usually very low. Therefore, our priority should be the repayment of loans or credits with higher interest rates. But before doing so, it is very important to monitor whether there is any clause that penalizes the partial or total amortization of the loan that we have contracted because in that case it may not be profitable.

Where to invest? At what risk?

Investment decisions are directly linked to our risk profile: conservative, moderate, aggressive. And in addition, we also have to take into account the time horizon with which we invest, because it is not the same to be able to invest with the security of not needing that money for several years to having to have it in a few months. As a general rule, high-risk investments should only be made with money that we really have left over.

Fixed income, deposits, gold or real estate?

One of the best tips that can be given in order to invest our money is to diversify by geographical areas and by type of product. Unfortunately, we live in an environment of “saver’s repression”, that is, where it is almost impossible to find opportunities with low risk and some profitability, such as bank deposits or fixed income were at the time. In an environment of zero percent interest rates and with the debt market so heavily intervened that bonds are often traded at negative rates, the investor with a low risk profile no longer has few alternatives where to put their money. For the moderate and aggressive investor, it would be advisable to study possible investments in the emerging stock market, and of course, have a small portion of your assets in an asset such as gold, which can be a good hedge against future inflation risks. The real estate market is another way to diversify our risk, especially if we take into account that housing is still around 30% below the prices reached during the housing bubble and that interest rates are at historic lows.

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