The Real Cost of Making Investment Mistakes After a Big Win

A couple who won a large Powerball jackpot lost most of it within a few years by making common investment errors: trusting the wrong advisors, concentrating money in a single investment, and not understanding what they owned. Their story is not unique. Lottery winners, inheritance recipients, and people who sell businesses often face the same pressures and make the same mistakes—and the consequences are permanent.

This is not a story about bad luck. It is a story about how the structure of your investments and the people you trust matter more than the size of your account. Understanding what went wrong in their case can help you avoid the same traps, whether you come into money suddenly or build wealth over time.

Key Takeaways

  • Lottery winners and sudden-wealth recipients often lose money by putting it all into one investment or one type of investment, leaving no room for recovery if that bet fails.
  • Advisors who are not fiduciaries—legally required to put your interests first—can recommend investments that pay them commissions instead of serving your actual goals.
  • Concentrated positions in a single stock or business can feel safe because they are familiar, but they expose you to risk that diversification would reduce.
  • The first step after a windfall should be to separate the money from daily spending, hire a fee-only financial planner to build a written plan, and only then move money into investments.
  • Even experienced investors make worse decisions under the emotional pressure of sudden wealth, so slowing down and getting a second opinion is not a sign of weakness.

How the Couple's Investment Strategy Failed

The couple won their jackpot and took the lump-sum payout. After taxes, they had several million dollars. Within weeks, they began investing based on information from people in their social circle and a financial advisor who was not legally bound to act in their best interest. They put a large portion into a single company's stock, another portion into real estate deals their advisor recommended, and kept some in cash.

The company stock declined sharply. The real estate deals underperformed or required unexpected capital calls. Within five years, their account had shrunk by more than half. They had not diversified across asset types, had not understood the fees they were paying, and had not questioned whether their advisor had a conflict of interest. By the time they realized what was happening, the damage was done.

The core problem was not that they invested. It was that they invested without a plan, without understanding their own risk tolerance, and without the structure that would have forced them to think before acting. Sudden money creates pressure to do something with it when ready, and that pressure leads to rushed decisions.

The Difference Between a Fiduciary and a Broker

A fiduciary is legally required to put your interests ahead of their own profit. A broker or investment advisor who is not a fiduciary only has to recommend investments that are "suitable"—a much weaker standard. A suitable investment can pay the advisor a large commission while being wrong for you.

The couple's advisor was likely operating under the suitability standard. This means the advisor could recommend a high-commission product—say, a loaded mutual fund or a structured note—without disclosing that a lower-cost alternative existed. The advisor was not breaking the law. They were following a standard that allowed them to profit from the recommendation.

When you have a large sum to invest, you need a fee-only fiduciary—someone who charges you a flat fee or a percentage of assets under management, and who has no commission-based incentive to steer you toward any particular product. This removes the conflict of interest. The advisor makes money only if you make money, or at least if you keep your account with them.

Why Concentration in One Investment Is Dangerous

The couple put too much money into a single company's stock. This is called a concentrated position. It feels safe because the company is familiar—maybe they worked there, or they know the business well. But concentration is one of the highest-risk structures you can build, because your entire outcome depends on one bet.

If that company faces a scandal, loses a major customer, or straightforward falls out of favor, your wealth falls with it. You cannot recover by waiting for other holdings to rebound, because you have no other holdings. Diversification—spreading money across different companies, industries, asset types, and geographies—is not exciting, but it is the only mathematical way to reduce risk without reducing expected returns.

A diversified portfolio might hold index funds that track the overall market, bonds, real estate investment trusts, and international stocks. When one piece declines, others may hold steady or rise. The couple's concentrated bet eliminated this protection. When their single position failed, they had no cushion.

The Hidden Cost of Fees and Commissions

The couple did not fully understand the fees they were paying. Some investments charged annual management fees of 1% or more. Others had upfront commissions of 5% or 6%. Over time, these fees compound. A 1% annual fee on a $5 million account costs $50,000 per year—money that could have been invested instead.

Over 20 years, a 1% fee can reduce your wealth by 20% or more, depending on your returns. The couple was paying multiple layers of fees: the advisor's fee, the fund manager's fee, and sometimes hidden fees buried in the fund prospectus. They were not aware of the total drag on their returns.

A fee-only advisor charges a transparent fee—often 0.5% to 1% of assets under management for large accounts, sometimes less. Index funds charge 0.03% to 0.20% per year. The difference between paying 2% in total fees and paying 0.5% is enormous over decades. The couple could have saved hundreds of thousands of dollars by understanding and negotiating fees upfront.

What Should Have Happened Instead

The couple should have paused before investing anything. They should have moved the money into a high-yield savings account or money market fund—something safe and liquid—and left it there for three to six months. This pause serves two purposes: it separates the emotional high of winning from the decision to invest, and it gives them time to think clearly.

During that pause, they should have hired a fee-only fiduciary financial planner to build a written investment plan. This plan would specify their goals (retirement, education funding, charitable giving), their time horizon (how long until they need the money), their risk tolerance (how much they can stomach a decline without panic-selling), and their asset allocation (what percentage in stocks, bonds, real estate, and cash).

Only after the plan was written and they understood it should they have begun moving money into investments. They should have chosen low-cost index funds and diversified across asset classes. They should have reviewed fees and commissions in writing before agreeing to anything. They should have asked their advisor to sign a fiduciary oath.

This process is slower and less exciting than jumping into investments when ready. But it is the process that protects you from the couple's fate.

Red Flags That Signal a Bad Investment Advisor

Several warning signs should have alerted the couple to problems. First, their advisor recommended concentrated positions without explaining the risk. Second, the advisor did not provide a written investment plan or ask detailed questions about their goals and risk tolerance. Third, the advisor recommended products with high commissions or high fees without explaining why those products were better than lower-cost alternatives.

Fourth, the advisor did not clearly disclose whether they were a fiduciary. If someone avoids answering this question directly, assume they are not. Fifth, the advisor pressured them to invest quickly, suggesting that waiting would cost them opportunities. Pressure to act fast is almost always a sign that the advisor benefits from speed more than you do.

Sixth, the advisor did not encourage them to get a second opinion or to work with other professionals like a tax accountant or estate attorney. Good advisors know they are part of a team and welcome outside review. Bad advisors want to be the only voice in the room.

How to Protect Yourself If You Come Into Money

If you receive a large sum—from a lottery, inheritance, business sale, or settlement—follow this sequence. First, do not invest it when ready. Move it to a safe, liquid account. Second, tell no one except your spouse or closest family. Sudden wealth attracts requests for money and bad information from people who smell opportunity.

Third, hire a fee-only fiduciary financial planner. Interview at least two. Ask them directly whether they are fiduciaries, and ask them to put it in writing. Ask for references from other clients with similar wealth levels. Fourth, work with the planner to build a written investment plan before any money moves. Fifth, have a tax professional review the plan to understand the tax consequences of your investments.

Sixth, implement the plan slowly. Do not move all the money at once. Spread investments over several months so you are not buying everything at market peaks. Seventh, review the plan annually with your planner, but do not change it based on short-term market moves or news headlines. The couple's mistake was not investing. It was investing without a plan, without the right advisor, and without the discipline to stick to a strategy.

Frequently Asked Questions

How do I know if an advisor is a fiduciary?

Ask directly: "Are you a fiduciary 100% of the time, or only when managing my investments?" A true fiduciary should say they are a fiduciary all the time and should put it in writing. If they hedge or say "it depends," they are not. You can also check the SEC's Investment Adviser Public Disclosure database online to see if someone is registered as an investment advisor.

What is a reasonable fee for a financial advisor?

Fee-only advisors typically charge 0.5% to 1% of assets under management for large accounts, sometimes less. Some charge a flat annual fee instead. Avoid advisors who earn commissions on the products they recommend. The total cost of your investments—advisor fees plus fund fees—should rarely exceed 1% per year for a diversified portfolio.

Should I put all my money into index funds?

A diversified portfolio usually includes index funds, but not exclusively. Your plan might also include bonds, real estate, and cash, depending on your goals and risk tolerance. A financial planner can help you decide the right mix. The key is diversification across asset types, not concentration in any single investment.

What if I already have a concentrated position from a company I worked for?

Talk to a tax professional and financial planner about a gradual diversification strategy. Selling all at once may trigger a large tax bill. A planned approach—selling a portion each quarter or year—can reduce taxes while reducing your risk. Do not wait for the stock to recover or for a "better time" to sell. The longer you hold a concentrated position, the more risk you carry.

Can I invest the money myself instead of hiring an advisor?

Yes, if you are willing to spend time learning and you have the discipline to stick to a plan. Most people do better with a planner because emotions drive bad decisions, especially with large sums. Even if you invest yourself, consider paying a fee-only planner for a one-time plan review. The cost is small compared to the protection it provides.