Forget Splurging: Winners Focus on Investment: It's Taxes, Financial Planners, Money Markets - and Plenty of Stocks
Canning, Eileen, American Banker
As the pop-cultural phenomenon Who Wants to Be a Millionaire starts its second year tonight on ABC, only six of the 1,336 contestants have survived the glare of host Regis Philbin's smile and neckties to take home the $1 million prize.
As with any high-profile windfall, there were expectations that the winners would do something big with their money. They might quit their jobs, or follow a dream, as Diane Sawyer wondered in an interview of the millionaires on Good Morning America two weeks ago.
But $1 million isn't what it once was. In interviews with American Banker, three of the big winners (the other three declined to be interviewed) said they were investing most of their fortune.
The jackpot question is how. Is the money in Long-Term Capital Management II? A brother-in-law's Internet start-up? The Regis Philbin clothing line? Stocks and mutual funds?
The last choice seems to be the final answer from John Carpenter, Dan Blonsky, and David Goodman, the first, second, and sixth millionaires, respectively. These millionaires want to make more money, and they are obviously prepared to take some risks, but they are not speculators.
Name-brand mutual funds like Fidelity and Janus, major brokerage account managers like Merrill Lynch, and blue-chip stocks from General Electric to Pfizer to Berkshire-Hathaway are well represented in the portfolios of the three trivia masters.
Still, they have made some less routine choices too, like investing in a mutual fund devoted to classic risk arbitrage, betting that mergers will be completed. Conspicuously absent from their portfolios are investments in bonds.
While it is a little early to draw any conclusion about how the new millionaires have done with their investments, it is safe to say that with the stock market in the doldrums this year, their performances are not ready for prime time.
As a Internal Revenue Service special procedure adviser dealing with federal tax liens, the 31-year old Mr. Carpenter knows a little more than most people about how fast $1 million can go. He had less than $600,000 to invest after turning over roughly $368,000 to his employer and another $35,000 to state tax collectors in Connecticut, where he lives.
Mr. Carpenter is concentrating on long-term investments. While he won't reveal exact dollar amounts, most of his investments are in large-cap stocks through equity holdings with Merrill Lynch and mutual funds at Fidelity Investments.
His investments at Fidelity are in its Blue Chip Growth Fund and Equity Income II, giving him a relatively conservative balance of growth and income return potential. The payoff, though, isn't there yet. Since the start of the year Blue Chip has had a 3.6% return, and Equity a loss of 4.6%.
Right now I refer to them as those damn mutual funds, he says. There is still a side of me that wants to see things skyrocket.
Mr. Carpenter has taken more chances with Merrill, which has invested his funds with a variety of private asset managers that it chooses as part of its ML Consults program. Clients like Mr. Carpenter can pick asset classes and place some restrictions on them - he has his money invested in large and mid-cap equity, but he bars tobacco stocks from his portfolio.
Still, he has no choice over who specifically manages the funds or what stocks they buy or sell. …